## Barack Obama's Budget Is a Much More Serious Deficit-Reduction Effort than Barack Obama Says

Wen are live at The Week: Nearly everyone, including the White House, has dismissed the president's plan. Nearly everyone is wrong:

The standard Washington insider line on the Obama budget is that it "punts on all the tough choices" — because it proposes no cuts in entitlements, because it fails to embrace the recommendations of the Simpson-Bowles fiscal commission, and because its proposed spending cuts are restricted to that very narrow slice of the budget – 12 percent — that is non-security discretionary spending.

Bizarrely, the Obama administration seems to buy this line of argument: It claims that its budget is only a "down payment" on future tough choices.

But the budget is no mere accounting appetizer. Combine it with the Affordable Care Act and it is pretty much the whole meal — about all that is absent is the fortune cookie that comes at the end.

Why, then, is the Obama administration saying that it is only a "downpayment"? They think, for some reason I cannot quite follow, that it is good politics to say so. I, however, am more interested in what is true. And to call the long-term deficit-reduction measures that the Obama administration has undertaken to date a mere "downpayment" on our long-term problems is simply not true.

If enacted as proposed, the Obama budget would get the United States to "primary balance" — that state in which government spending is no higher than tax revenue. And the budget plus the Affordable Care Act then keeps us in primary balance even with rapid expected growth in medical care costs. As long as the United States remains the center of the world economy and as long as the dollar remains the world's reserve currency, "primary balance" is a perfectly sustainable place to be, for the debt-to-GDP ratio is then stable. At primary balance we’ll still have trillions in debt, but we’ll also be steadily paying it down; there is no longer a crisis even in the long run.

In addition, the Obama budget picks a number of worthy fights with powerful interest groups: those who currently receive money from oil and gas loopholes; those who benefit from the full income-tax deductibility of itemized deductions; those banks that would pay the Obama bank fee, et cetera.

Now simply passing the Obama budget and maintaining the Affordable Care Act should not be the end of the story. We would like to have a debt/GDP ratio less than the 75 percent at which the Obama budget would stabilize things — future challenges will require government responses, and some of them will be expensive. It would be very desirable to have headroom so that we could easily fund a Marshall Plan or fight a World War, borrowing on a large scale to do so.

Moreover, our economy is changing in ways that may well lead government to become larger as a share of the economy than it has been in the past. An older population requires more of a whole bunch of government programs, from public transit (for those who can no longer drive) to income support to, obviously, medical care. As we shift our economy away from bricks-and-mortar and toward information goods, there will be more and more places where markets will need a helping hand to function well. And there is the fact that for a generation we have, relative to other countries, neglected their inventory.

Thus the federal government's appropriate infrastructure, research and development, and health care missions are unlikely to shrink and likely to grow.

It would be a shame to restrict the government’s ability to buy things we want cheaply — like the ability to broker some future Middle East peace accord with foreign aid (as we did for Camp David) or to fund the next wave of biomedical advances here in our country or to properly explore the solar system or, indeed, to have an infrastructure second only to South Korea's and Japan's — because we have put the federal budget in a straitjacket.

Of course, the Republicans in the House are not going to pass the Obama budget.

But if they did, they could then rightly claim to be real deficit hawks. So far, they’ve given no reason for anyone to believe that they are — or ever want to be.

## Aizenman and Pasricha: Net Fiscal Stimulus During the Great Recession

Aizenman and Pasricha:

Net Fiscal Stimulus During the Great Recession: This paper studies the patterns of fiscal stimuli in the OECD countries propagated by the global crisis. Overall, we find that the USA net fiscal stimulus was modest relative to peers, despite it being the epicenter of the crisis, and having access to relatively cheap funding of its twin deficits. The USA is ranked at the bottom third in terms of the rate of expansion of the consolidated government consumption and investment of the 28 countries in sample. Contrary to historical experience, emerging markets had strongly countercyclical policy during the period immediately preceding the Great Recession and the Great Recession. Many developed OECD countries had procyclical fiscal policy stance in the same periods. Federal unions, emerging markets and countries with very high GDP growth during the pre-recession period saw larger net fiscal stimulus on average than their counterparts. We also find that greater net fiscal stimulus was associated with lower flow costs of general government debt in the same or subsequent period.

## Husband E. Kimmel Liveblogs World War II: February 18, 1941

Husband E.Kimmel, C-in-C Pacific Fleet:

From Wikipedia, the free encyclopedia: "I feel that a surprise attack (submarine, air, or combined) on Pearl Harbor is a possibility, and we are taking immediate practical steps to minimize the damage inflicted and to ensure that the attacking force will pay.

## Why Friends Don't Let Friends Ever Support the Republican Party

Ryan Avent:

America's deficit: Outrageous cuts: Here's a fun fact: non-defence discretionary spending was equal to 3.6% of GDP in 1963. It was also equal to 3.6% of GDP in 2008. It is not behind the increase in government spending as a share of the economy over that time period. It has not made government any less affordable. It is not projected to rise substantially in the future.

This is not to suggest that there is no waste in this portion of the government. Without question, there is. This portion of the budget should be subject to close scrutiny, to reform, and perhaps to some cuts (though whether net cuts are justified is far from clear).

To pretend that one can balance the budget with cuts focused on this portion of the budget, or that major cuts to this portion of the budget are in any way desirable, is madness. And yet this is what Republicans are doing. Mr Krugman notes that cuts so far have affected programmes that support food budgets of poor Americans. I've pointed out that proposed cuts would reduce spending on job re-training, despite the country's serious long-term unemployment problem. There's more besides:

With tensions rising, House Republicans pushed through a third long night, hoping to win passage late Friday of more than $60 billion in immediate spending cuts that would severely affect agencies in the second half of this fiscal year.The leadership put the brakes on deep additional cuts, but a school reform program important to President Barack Obama would be decimated by a$336 million reallocation of funds approved by 249-179. The National Endowment of the Arts narrowly lost an additional $22.5 million. And in a blow to the president, Democrats failed to restore$131 million for the Securities and Exchange Commission, facing new responsibilities under Wall Street reforms enacted in the last Congress.

That's right: Democrats were unable to undo cuts to the budget of the commission charged with overseeing behaviour in the financial sector, the responsibilities of which were just overhauled in response to a financial meltdown that very nearly produced an economic depression. And if Republicans are unable to make these cuts law, they're prepared to shut down the government over it.

This is not responsible policymaking. This is not fiscal discipline. This is not a careful, cost-benefit-based analysis of the government's spending priorities. This is a joke. And it's a cruel one.

President Obama isn't out there leading the charge to address long-term fiscal issues in a responsible way, it's true. His budget cuts also focus on non-defence, discretionary spending. The lack of leadership there is disappointing. But his budget doesn't, for the most part, gut valuable programmes in the name of fiscal responsibility. And they absolutely don't excuse this reckless, dangerous behaviour on the part of Congressional Republicans.

## Hoisted from the Archives: Conservatism and Its Absence of Contents

From March 2008:

Conservatism and Its Absence of Contents - Grasping Reality with a Sharp Beak: Jacob Levy thinks he has a problem: he cannot present conservatism attractively in his classes because there are no attractive modern conservatives:

Jacob T. Levy: Tyler Cowen... makes the insightful point that "none [of the 20th century American conservatives] have held up particularly well, mostly because they underestimated the robustness of the modern world and regarded depravity as more of a problem than it has turned out to be."

It's a real problem--one I've often talked with people about in a teaching context, because there's no modern work to teach alongside Theory of Justice and Anarchy, State, and Utopia that really gets at what's interesting about Burkean or social conservatism.... The problem isn't... that the conservative temperament isn't easily reduced to programmatic philosophical works.... One of the problems is that history keeps right on going--and so any book plucked from the past that was concerned with yelling "stop!" tends to date badly to any modern reader who does not think he's already living in hell-in-a-handbasket. This is a particular problem because of race in America--no mid-20th c work is going to endure as a real, read-not-just-namechecked, classic of political thought that talks about how everything will go to hell if the South isn't allowed to remain the South.... Oakeshott has his own version of these problems; doesn't "Rationalism in Politics" end up feeling faintly ridiculous by the time he's talking about women's suffrage?...

I don't see any great answers in the comment thread yet. I guess I might say Schumpeter, Capitalism, Socialism, and Democracy, and Kristol, Two Cheers for Capitalism, but the former isn't really distinctively conservative enough and I'm not sure the latter is a classic.

I say cut the Gordian knot. THERE ARE NO ATTRACTIVE MODERN CONSERVATIVES BECAUSE CONSERVATISM SIMPLY IS NOT ATTRACTIVE. DEAL WITH IT!!

You can see this most clearly if you take a close look at Edmund Burke. Edmund Burke does not believe that Tradition is to be Respected. He believes that good traditions are to be respected. When Edmund Burke in his Reflections on the Revolution in France makes the argument that Britons should respect the organic political tradition of English liberty that has been inherited from the past, he whispers under his breath that the only reason we should respect the Wisdom of the Ancestors is that in this particular case Burke thinks that the Ancestors--not his personal ancestors, note--were wise.

Whenever Burke thought that the inherited political traditions were not wise, the fact that they were the inherited Wisdom of the Ancestors cut no ice with him at all. It was one of the traditions and institutions of Englishmen that they would conquer, torture, and rob wogs whenever and wherever they were strong enough to do so. That tradition cut no ice with Edmund Burke when he was trying to prosecute Warren Hastings. It was one of the traditions and institutions of Englishmen that all power flowed to Westminster. That tradition cut no ice with Burke when he was arguing for conciliation with and a devolution of power to the American colonists. It was one of the traditions and institutions of Englishmen that Ireland was to be plundered and looted for the benefit of upwardly-mobile English peers-to-be. That tradition, too, cut no ice with Burke.

Even in Reflections on the Revolution in France, Burke doesn't argue that Frenchmen should build on their own political traditions--the traditions of Richelieu and Louis XIV, that is. He argues--well, let's let him talk:

Burke: Reflections on the Revolution in France: We [in Britain] procure reverence to our civil institutions on the principle upon which nature teaches us to revere individual men; on account of their age; and on account of those from whom they are descended.... You [in France] might, if you pleased, have profited of our example, and have given to your recovered freedom a correspondent dignity. Your privileges, though discontinued, were not lost to memory. Your constitution... suffered waste and dilapidation; but you possessed in some parts the walls, and in all the foundations, of a noble and venerable castle. You might have repaired those walls; you might have built on those old foundations. ... In your old [E]states [General] you possessed that variety of parts corresponding with the various descriptions of which your community was happily composed; you had all that combination, and all that opposition of interests, you had that action and counteraction which, in the natural and in the political world, from the reciprocal struggle of discordant powers, draws out the harmony of the universe.... Through that diversity of members and interests, general liberty had as many securities as there were separate views.... [B]y pressing down the whole by the weight of a real monarchy, the separate parts would have been prevented from warping and starting from their allotted places.

You had all these advantages in your antient [E]states [General].... If the last generations of your country appeared without much lustre in your eyes, you might have passed them by, and derived your claims from a more early race of ancestors. Under a pious predilection for those ancestors, your imaginations would have realized in them a standard of virtue and wisdom.... Respecting your forefathers, you would have been taught to respect yourselves. You would not have chosen to consider the French as... a nation of low-born servile wretches until the emancipating year of 1789.... [Y]ou would not have been content to be represented as a gang of Maroon slaves, suddenly broke loose from the house of bondage....

Would it not... have been wiser to have you thought... a generous and gallant nation, long misled... by... fidelity, honour, and loyalty... that you were not enslaved through any illiberal or servile disposition... [but] by a principle of public spirit, and that it was your country you worshipped, in the person of your king? Had you made it to be understood... that you were resolved to resume your ancient [liberties,] privileges[, and immunities]... you would have given new examples of wisdom to the world. You would have rendered the cause of liberty venerable in the eyes of every worthy mind in every nation. You would have shamed despotism from the earth...

Burke's argument is not that France in 1789 should have followed its ancestral traditions. Burke's argument is, instead, that France in 1789 should have dug into its past until it found a moment when institutions were better than in 1788, and drawn upon that usable past in order to buttress the present revolutionary moment. This isn't an intellectual argument about how to decide what institutions are good. It is a practical-political argument about how to create good institutions and then buttress and secure them by making them facts on the ground.

What are good institutions? Burke sounds like Madison: checks-and-balances, separation of powers, rights of the subject, limitations on the state. Burke's views on what good institutions are Enlightenment views--that branch of the Enlightenment that took people as they are and politics as a science, that is, rather than the branch that took people as Rousseau hoped they might someday be and politics as the striking of an oppositional pose. Because he finds that the English past is usable as a support for his Enlightenment-driven views, Burke makes conservative arguments in Reflections. But whenever conservative arguments lead where Burke doesn't want to go--to Richelieu or Louis XIV or the plunder of Ireland or the Star Chamber or Warren Hastings or imperial centralization--Burke doesn't make them and they have no purchase on him. England's inheritance of institutions and practices is to be respected wherever it supports Burke's conception of properly-ordered liberty, and ignored wherever it does not.

For Burke, conservatism is a sometimes useful rhetorical weapon, not a set of principles.

## Why Oh Why Can't We Have a Better Press Corps? Jonathan Weisman Edition

Ezra Klein:

Ezra Klein - A deal based on the Fiscal Commission would include higher taxes: Jonathan Weissman's article that:

the deficit commission's version of tax reform would net $180 billion in additional revenues over 10 years. [Jonathan] Chait notes that$180 billion would mean there's:

nearly ten times as much spending cuts ($1.7 trillion) as higher revenue ($180 billion.)... It's so nuts I'm tempted to assume this story couldn't possibly be correct."

At least as far as the Fiscal Commission's report goes, Chait is right and the number is incorrect. "Weisman said that the Fiscal Commission got $180 billion in tax revenue relative to the baseline over ten years," one of the commission's staff members told me. "That's wrong. The tax reform piece brought in$180 billion in 2020 alone, and $785 billion over ten years."... [T]he idea is to make the Fiscal Commission's report into legislation, not radically change its mix of revenues and spending cuts, and so I'd assume they're still targeting$785 billion.

## David Roberts: The Public Trusts the EPA

DR:

New poll: the public trusts EPA, loves the Clean Air Act, and wants Congress to butt out | Grist: As everyone knows by now, Republicans have launched a massive, coordinated assault on EPA, attempting to block its greenhouse gas regulations, its air and water regulations, and in some cases its very existence.... [T]he Republican attack on EPA is radically unpopular with voters across parties and demographics. The latest evidence comes from a nationwide survey done by the American Lung Association in partnership with polling firm Greenberg Quinlan Rosner.... The public overwhelmingly supports EPA in updating Clean Air Act standards and overwhelmingly opposes congressional efforts to block EPA. When it comes to clean air, the public trusts EPA far more than Congress.

Should EPA update Clean Air Act standards to make them stricter? Fully 69 percent of respondents somewhat or strongly agree, compared to 26 percent who somewhat or strongly oppose... independents line up with Democrats. Where 88 percent of Dems want standards updated, so do 68 percent of independents, compared with 49 percent of Republicans. (Note too that even among Republicans, support for strengthening standards outweighs opposition.)

Yet another key fact: The public does not distinguish greenhouse gas standards from other air quality standards. When asked about four specific regulations, CO2 standards were just as popular (77 percent support) as smog limits, even a hair more popular than vehicle fuel efficiency standards....

Republican agitprop doesn't seem to be having much effect. For instance, take the endlessly repeated point that EPA is "overreaching." Does the public agree? No....

This poll is in line with previous polls, and the conclusion is inescapable: The public likes clean air. They like the Clean Air Act. They trust EPA to set appropriate standards for both conventional pollutants and for greenhouse gases. And they don't want Congress interfering...

## Mitchell Hoffman on Wealth and Rescue

MH:

Review of Economics and Statistics: "Does Higher Income Make You More Altruistic? Evidence from the Holocaust": This paper considers the decision of Gentiles whether or not to rescue Jews during the Holocaust, a situation of altruistic behavior under life-or-death stakes. I examine the role to which economic factors may have influenced the decision to be a rescuer. Using cross-country data, and detailed individual-level data on rescuers and non-rescuers, I find that (1) Richer countries had many more rescuers than poorer ones, and (2) Within countries, richer people were more likely to be rescuers than poorer people. The individual-level effect of income on being a rescuer remains significant after controlling for ease of rescue variables, such as the number of rooms in one's home, suggesting that the correlation of income and rescue is not solely driven by richer people having more resources for rescue. Given that richer people might be thought to have more to lose by rescuing, the evidence is consistent with the view that altruism increases in income.

## The Arctic Melt

dr2chase:

dr2blog: This looks bad: When people say they think the IPCC Climate predictions are too conservative, they’re talking about stuff like this.

From The Copenhagen Diagnosis, via Skeptical Science.

## David Swanson: Colin Powell's Own Staff Had Warned Him Against His War Lies

David Swanson:

Colin Powell's Own Staff Had Warned Him Against His War Lies: In the wake of WMD-liar Curveball's videotaped confession, Colin Powell is demanding to know why nobody warned him about Curveball's unreliability. The trouble is, they did....

During his presentation at the United Nations, Powell provided this translation of an intercepted conversation between Iraqi army officers.... Powell was writing fictional dialogue. He put those extra lines in there and pretended somebody had said them. Here's what Bob Woodward said about this in his book "Plan of Attack."

[Powell] had decided to add his personal interpretation of the intercepts to rehearsed script, taking them substantially further and casting them in the most negative light. Concerning the intercept about inspecting for the possibility of 'forbidden ammo,' Powell took the interpretation further: 'Clean out all of the areas. . . . Make sure there is nothing there.' None of this was in the intercept.

For most of his presentation, Powell wasn't inventing dialogue, but he was presenting as facts numerous claims that his own staff had warned him were weak and indefensible....

A Feb. 3, 2003, INR evaluation of a subsequent draft of Powell's remarks noted:

Page 4, last bullet, re key files being driven around in cars to avoid inspectors. This claim is highly questionable and promises to be targeted by critics and possibly UN inspection officials as well.

That didn't stop Colin from stating it as fact and apparently hoping that, even if UN inspectors thought he was a brazen liar, US media outlets wouldn't tell anyone.

On the issue of biological weapons and dispersal equipment, Powell said: "we know from sources that a missile brigade outside Baghdad was disbursing rocket launchers and warheads containing biological warfare agents to various locations, distributing them to various locations in western Iraq." The January 31, 2003, INR evaluation flagged this claim as "WEAK"....

Powell's own staff had told him the thing was a water truck, but he told the U.N. it was "a signature item... a decontamination vehicle." The UN was going to need a decontamination vehicle itself by the time Powell finished spewing his lies and disgracing his country...

## Ed Balls Draws a Line in the Sand

EB:

FT.com / UK / Economy & Trade - Balls warns King on Bank credibility: Ed Balls, shadow chancellor, has criticised Mervyn King, Bank of England governor, saying he should step out of the political arena and stop tying his credibility to the coalition’s “extreme” deficit-reduction plans.

In an interview with the Financial Times, Mr Balls drew comparisons between Mr King’s stance and the backing lent by the Bank of England to the Treasury’s fiscal hawks during the Great Depression. “The last thing you ever want is for the Bank of England to be drawn into the political arena,” said Mr Balls, one of the architects of Labour’s plan in the 1990s to give the Bank its independence. “Central bank governors have to be very careful about tying themselves too closely to fiscal strategies, especially when they are extreme and are making their job on monetary policy more complicated.”

Mr Balls believes that the governor is risking the Bank’s reputation by endorsing policies that could tip Britain into a double-dip recession and a period of mass unemployment....

Mr Balls said a double-dip recession was a possibility – although “not the most likely outcome” – and argued that Mr King and the monetary policy committee have been right so far to maintain interest rates at 0.5 per cent.

The criticism of Mr King’s allegedly political role echoes that of a number of MPC members who aired their concerns about the “excessively political” stance taken by the governor towards the coalition’s austerity programme...

## Government Should Be the Right Size

Michael O'Hare:

Right-sizing government « The Reality-Based Community: Can the assertion “Government is too big [or too small]” ever mean enough to support a serious conversation, much less a policy decision?  How about “California [or the US; plug in your own jurisdiction larger than a small town] can’t afford [plug in a program]“? What could such  statements mean, or be shorthand for?...

Let’s, then, immediately distinguish a society as a whole, and especially its economy, from the special agency – government – it might decide to task with a larger or smaller set of its productive activities.... If you have loosened the stone libertarian mind-vise enough to admit that there is such a thing as a market failure, and enough intelligence or education to understand that market failure is a technical property of a good or service and implies no rap on markets, you will be OK with the idea that government is exactly the right agency with which to get stuff we want that the market won’t supply (enough of) by itself, and to avoid stuff we don’t want, like pollution, that the market will overproduce. If you have a heart, you will also be OK with ideas like “death by starvation is cruel and excessive punishment for ‘not having been able to save enough to retire on’, even for ‘having been too careless to save enough’, certainly for ‘having been unlucky enough to be smitten by illness or accident’” and you will find government is also well suited to correct some important unfairness and injustice, even when the best it can do along these lines entails some moral hazard and bad incentives. It’s worth noting that absent slavery, every productive activity, whether managed (or obligated) by government or by private enterprise, is in the end carried out in the private sector: public schools are built by private contractors, and government workers are economically just small private businesses with no employees.

As is true at every moment of every year, we have governments doing the tasks they have been given so far, and consuming economic resources to do so. Among those are some tasks a reasonable person might ask not be done at all, like making a second, redundant engine for the joint strike fighter, and tasks others might think better done entirely in the private sector, like building and operating a bridge or a piece of highway.  We also see tasks not being done at all that some claim should be, and would if government were assigned the work, like stabilizing the climate, and tasks (some claim) would be better done by government than however they are being accomplished in the market. We could ask similar questions about everything in and out of the public sector, but for some of them, like whether the army should be shut down and left to the market, it’s hard to get grownups to waste time on the conversation, so the political debate tends to focus on programs at the deliberative margin of the public-private boundary.

The only way a sane person can want to move tasks like these in or out of the government part of society’s productive ensemble is to ask whether doing so will give us more of the stuff we want(physical and other)  than we would have to give up to get it. The fancy name for this test is cost-benefit analysis....

Taxes are too high when there are programs in government that create less value than they use up, and too low when there are programs that would create net value if we assigned them to government.  Government is too big or too small by precisely the same rules.  Trying to make the conversation simple enough for Fox News analysts to rant about by reversing these rules of inference (which actually seem pretty simple to me) is monomaniac lunacy, or cynical mendacity in the service of selling advertising time or getting votes, or both; it’s not politics and certainly not governance.

## The Decline Of The Music Industry

Jay Yarrow:

CHART OF THE DAY: The Death Of The Music Industry: Here is a stunning visualization of the collapse of the music industry from Bain. As you can see, the growth of digital sales is not doing enough to offset the death of the CD. (Chart via Peter Kafka, who spotted it on Flickr.)

## Econ 210a: Memo Question for February 23

The temperate economies settled from northwestern Europe--the United States, Canada, Australia, New Zealand--were all resource rich. So why did they industrialize early? Why didn't they simply become gigantic Denmarks, shipping agricultural and other resource-based products to the European industrial powers in return for manufactures?

## Republicans Lie, All the Time, About Everything: Speaker Boehner's Statistics

Outsourced to David Leonhardt:

Speaker Boehner's 200,000: When I read that John Boehner, the speaker of the House, had said that the federal government added 200,000 federal workers under President Obama, I wondered, “Really? Where?” I’m not aware of any major federal hiring initiatives since January 2009. Ezra Klein asked the same question, and, even better, answered it. It turns out that the 200,000 number is simply incorrect.

First, Mr. Boehner was excluding postal workers, according to his spokesman. Why? It’s not clear.

Second, Mr. Boehner was starting his clock in December 2008, the month before Mr. Obama became president. The Bureau of Labor Statistics conducts its monthly survey during the week that contains the 12th day of each month, so there is no reason to start the clock in December 2008 as opposed to January 2009. On Jan. 12, 2009, George W. Bush was still president.

Finally, Mr. Boehner appears to be an aggressive rounder of numbers. Even if postal workers were excluded and even if Mr. Obama’s inauguration were retroactively moved to Dec. 20, 2008, the federal government has added only 153,000 jobs — not 200,000....

[T]here’s an important underlying issue here. You often hear politicians say that government needs to get out of the way so private companies can start hiring. But government has been getting out of the way, at least in terms of employment. Total government employment — federal, state and local — peaked last May and is now about 350,000 below its level in January 2009. Yet those cuts don’t seem to have spurred much private-sector hiring. So to focus on government employment as the economy’s problem is to misdiagnose the situation.

Here, for the record, is a quick tally of how Mr. Boehner gets to 200,000:

• Actual federal government jobs added since January 2009, mostly in security — Homeland Security, Defense, State and Justice: 57,000.
• Federal jobs added during Mr. Bush’s last month in office: 11,000.
• Postal Service jobs cut since January 2009 (thus boosting the net gain if you exclude the Postal Service, as Mr. Boehner did): 85,000.
• Effect of rounding 153,000 up to 200,000: 47,000.

## Deficit Reduction Plans

UPDATE: Jonathan Chait writes:

Jonathan Chait has an update: Second Update: A couple well-informed readers have pointed out that the Bowles-Simpson commission calls for $180 [billion] in higher revenue in year 10, so it's likely Weisman simply confused this with the 10-year net. Seems correct--certainly Weisman's story as written is wrong about what Simpson-Bowles calls for on the revenue side, and sources assure me that the negotiations are in a very different place than$180 billion of revenue as a ten year total...

Jonathan Chait reads Jonathan Weisman in the Wall Street Journal and writes that he finds Weisman's story:

JC: actually hard to believe. According to [Weisman's] story, the [possible Senate ten-year budget] deal calls for nearly ten times as much spending cuts ($1.7 trillion) as higher revenue ($180 billion.) Do you know how little $180 billion over ten years is? It's essentially nothing. It's one-quarter as much as the cost of extending the Bush tax cuts only on income over$250,000.

Are Democrats Negotiating A Monumentally Stupid Deficit Deal?

Could centrist Democrats really endorse a package that cuts spending by $9 for every$1 of revenue raised?

Check first to see if Chait is correctly reading Weisman. Yep. Weisman says that the Group of Six is following Simpson-Bowles on the spending side and strongly implies that it is going to follow Simpson-Bowles on the tax side as well:

Jonathan Weisman: Senate Deficit Plan Details Emerge: The Senate group's working plan calls for placing separate caps on security and nonsecurity spending, and missing a budget target in one area would not trigger mandatory cuts in the other. The spending targets would follow proposals laid out by the deficit commission, which recommended cutting discretionary spending by $1.7 trillion through 2020. Lawmakers on the spending committees would draft legislation to meet the targets. But if they were not met, automatic, across-the-board cuts would go into effect. The tax-writing committees would be given two years to overhaul both the individual and corporate tax codes, with general instructions to close tax breaks and minimize or eliminate tax deductions while lowering tax rates. The committees would be given a target for additional revenues to be raised by the new code. The deficit commission's version of tax reform would net$180 billion in additional revenues over 10 years...

But centrist Senate and White House sources both say that the $1.7 trillion spending cut and$180 billion tax increase numbers in Weisman's article are simply not comparable, and should not have been compared.

Me? If I were a centrist Democrat, I would start negotiating from a baseline that assumes the expiration of all of the 2001 and 2003 revenue measures and that also imposes an high-income surtax to pay for Medicare Part D, and start the negotiation from there. But that is just me.

Centrists--Democrats and Republicans--should be shooting for a 1-to-1 ratio, not a 9-to-1 ratio.

## Tom Levenson: Megan McArdle is Always Wrong: Reading Papers Is Hard Edition

Tom Levenson:

Megan McArdle is Always Wrong: Reading Papers Is Hard edition: [P]rofound differences between what she says the research reveals and what in fact you find should you read the stuff yourself... consider this from McArdle:

One of the things the legacy of racism has taught us is just how good dominant groups are at constructing narratives that justify their dominance.  Somehow, the problem is never them.  It’s always the out group.... So while in theory, it’s true that you can’t simply reason from disparity to bias, I have to say that when you’ve identified a statistical disparity, and the members of the in-group immediately rush to assure you that this isn’t because of bias... discrimination starts sounding pretty plausible. When that group of people is assuring you that the reason conservatives can’t be in charge is that they do not have open minds... it starts sounding very plausible.  More plausible than I, who had previously leaned heavily on things like affinity bias to explain the skew, would have thought.

Moreover, what evidence we have does not particularly support many of the alternative theories.... I’d say it’s more consistent with the possibility that they’re disproportionately having a hard time getting hired, or retained.

I quote at length to avoid McArdle’s common dodge when caught in hackery that crucial context has been omitted that would reveal her ultimate wisdom.... But all that aside, look to that last paragraph:

what evidence we have does not particularly support many of the alternative theories (to bias).

The “evidence” at that link is a study by two social scientists, Neil Gross of Harvard and Solon Simmons of George Mason University, titled “The Social and Political Views of American Professors,” distributed in 2007.  A reasonable person would, I think, interpret McArdle’s cite of this paper as claiming that Gross and Simmons’ research supports her statement that the most plausible explanation for the ratio of liberals to conservatives in the academy is bias.

I’m guessing folks know what’s coming next.... So:  does the paper McArdle relies on for her claims of bias state that the academy is clearly overwhelmingly liberal?

No:

Where other recent studies have characterized the American college and university faculty as not simply extremely liberal, but nearly uniformly so.... [W]hile conservatives, Republicans, and Republican voters are rare within the faculty ranks, on many issues there are as many professors who hold center/center-left views as there are those who cleave to more liberal positions, while the age distribution indicates that, in terms of their overall political orientation, professors are becoming more moderate over time...

What does academic faculty actually look like?:

Collapsing the data accordingly to a three point scale, we find that 44.1 percent of respondents can be classified as liberals, 46.6 percent as moderates, and 9.2 percent as conservatives...

Well, maybe that just reflects an aging, embattled cohort of moderation losing ground to ivy-covered radicals.  Or maybe not:

Table 4 shows that the youngest age cohort – those professors aged 26-35 – contains the highest percentage of moderates, and the lowest percentage of liberals.  Self-described liberals are most common within the ranks of those professors aged 50-64, who were teenagers or young adults in the 1960s... in recent years the trend has been toward increasing moderatism...

Is there nonetheless a monolithic culture of opinion in the classroom or on tenure review boards?

What overall conclusion can be drawn from our analysis of the attitudes items? What we wish to emphasize is simply that there is more attitudinal complexity and heterogeneity in the professorial population than second wave researchers have attended to.  It seems to us unlikely that a simplistic notion like “groupthink” – more of a political slur than a robust social-scientific concept – can do very much to help explain...

Finally, is bias really the one best explanation social scientists see to explain the political landscape of American universities?    As discussed in Neil Gross’s paper with Ethan Fosse “Why Are Professors Liberal” (2010 – link at Gross’s webpage), the answer is again (guess!)... No:

For example, Woessner and Kelly-Woessner (2009) find that twice as many liberal as conservative college students aspire to complete a doctorate... conservative students at a major public university regard faculty members disparagingly and do not seek to emulate them in any way... high levels of religious skepticism result not from professional socialization, but from the greater tendency of religious skeptics to become scientists... conservatism, Republican Party affiliation, and evangelical identity are associated with less confidence in higher education and diminished evaluations of the occupational prestige of professors...

There’s lots more, as I’m sure you’ve guessed by now.  But I think y’all get the idea:

There is,  contra McArdle, plenty of research out there on academic political attitudes.  That which she invokes, does not conform to the myth she wishes to advance here.  The specific paper she cites explicitly contradicts the thrust of her argument...

## Where Oh Where Is My Structural Unemployment?

Where oh where are my lots of job openings going begging for lack of skilled workers to fill them?

Where oh where is the upward pressure on earnings in occupations where demand for labor has outstripped supply?

Oh. You say that compensation for hedge fund managers and lobbyists is rising?

## Ethan Pollack and Josh Bivens: An Investment That Worked: The Recovery Act Two Years Later

Ethan Pollack and Josh Bivens:

An investment that worked: The Recovery Act two years later: The Recovery Act, signed into law Feb. 17, 2009... designed to cushion the economy’s free-fall, create jobs, and return the country to economic growth.... The Recovery Act clearly has been effective at providing the economic support for spurring output and employment that was promised by its architects:

• The Recovery Act was enacted at a time when the private economy was contracting by more than a 6% annual rate and losing more than 750,000 jobs a month.  In the first full quarter after its enactment, the Recovery Act had cut average monthly private job losses by more than half and slowed the economic contraction to a -0.7% annual rate.  Private job loss fell again, by a third, in the following quarter and then fell by nearly three-fourths in the quarter after that, at which point the economy was growing at a 5% annual rate. Clearly, the economy and private job market began to recover right when the Recovery Act began to take effect.

• EPI analysis shows that by the end of 2010 the Recovery Act had created or saved 3-4 million jobs, and up to 5 million full-time equivalent jobs.  It had also boosted gross domestic product by up to $560 billion and reduced the unemployment rate up to 1.8 percentage points. (This finding is consistent with analyses by the Congressional Budget Office, the Council of Economic Advisors, and private-sector forecasters.) The process by which the Recovery Act produced positive economic activity is straightforward. The bursting of the housing bubble inflicted a huge negative shock on spending in the U.S. economy. As household wealth evaporated due to plummeting real estate prices, both households and businesses radically cut back their demand for goods and services and demand for new construction dried up.. The Recovery Act helped offset this decline in private-sector demand by boosting public sector purchasing. Many kinds of spending outlays (or tax cuts) could have fulfilled this shock-absorbing function in the very short-run. And indeed, the Recovery Act was a portfolio of various spending increases and tax cuts (a portfolio much more heavily weighted toward tax cuts than most observers realized)... ## Paul Waldmann: Curveball (Bush Administration Incompetence Watch) Paul Waldmann: TAPPED Archive: As you might have seen -- though it wasn't the front-page news it ought to have been -- "Curveball," the Iraqi defector who provided the casus belli the Bush administration was searching for to justify the invasion of Iraq, has now admitted he made everything up. To review: In February 2003, noted motivational speaker Colin Powell went before the United Nations and delivered a terrifying presentation demonstrating that Iraq was brimming with horrific weapons of mass destruction, all poised to launch at the United States and who knows who else, obviously some time within the next 10 minutes or so, and therefore we just had no choice but to invade. Much of Powell's case was built on the allegations of "Curveball," a person who had left Iraq five years before and whom U.S. intelligence officials had never interrogated. He was interviewed by German intelligence officials, who passed them to the Americans while insisting that they were probably bogus, as indeed they turned out to be. But everything he said was assumed by the administration to be 100 percent true -- Powell even showed computer animations of mobile chemical weapons labs, based on Curveball's invented stories. Powell's show included lots of other falsehoods and intentionally misleading claims, from those "nuclear" aluminum tubes to phantom VX nerve gas to nonexistent long-range missiles (there's a good run-down here). Things move fast these days, and 2003 can seem like ancient history to some. But given that the run-up to the war in Iraq was the greatest media failure in decades, I thought this would be a good opportunity to remind ourselves of the tears of joy and gratitude that greeted Powell's U.N. speech. What's important to keep in mind is that a lot of Powell's bogus claims were known at the time to be false or baseless, if reporters had bothered to ask around. But they didn't, because they were so blinded by how awesome Powell was. Think I exaggerate? Let's take a look back: "Secretary of State Colin Powell's strong, plain-spoken indictment of the Saddam Hussein regime before the UN Security Council Wednesday embodies something truly great about the United States. Those around the world who demanded proof must now be satisfied, or else admit that no satisfaction is possible for them." -- Chicago Sun-Times "In a brilliant presentation as riveting and as convincing as Adlai Stevenson's 1962 unmasking of Soviet missiles in Cuba, Powell proved beyond any doubt that Iraq still possesses and continues to develop illegal weapons of mass destruction. The case for war has been made. And it's irrefutable." -- New York Daily News "Only those ready to believe Iraq and assume that the United States would manufacture false evidence against Saddam would not be persuaded by Powell's case." -- San Antonio Express-News "The evidence he presented to the United Nations -- some of it circumstantial, some of it absolutely bone-chilling in its detail -- had to prove to anyone that Iraq not only hasn't accounted for its weapons of mass destruction but without a doubt still retains them. Only a fool -- or possibly a Frenchman -- could conclude otherwise." -- Richard Cohen, Washington Post That's just a small sample, but you see the pattern: Not only was Powell's show presented as settling the matter of whether Iraq had this terrifying arsenal and would use it on us, but if you didn't agree, you were either an Iraqi sympathizer or at the very least anti-American. At that point, the debate over whether we would invade was pretty much over -- the only question was when the bombs would start falling. It may boggle the mind that so much of the case for war was based on the testimony of one absurdly unreliable guy. But that was what passed for "intelligence" during the Bush years. ## Magic Budget Asterisks Watch Paul Krugman send us to Bob Greenstein: Asterisks: The Gall: “I’m very frustrated by the debate in the media over this,” [Greenstein] told [Ezra Klein]. “The whole discussion starts from the following assumption: The president had a fiscal commission, they stepped up to the plate, identified the big changes, and he walked away. The assumption was wrong. Simpson-Bowles was one big magic asterisk. And Paul comments: Indeed. Simpson-Bowles was, essentially, a Disappearing Zonkers Trick. And like the Ryan plan, which I also described that way, it does not deserve respect ## America's Fiscal Problem Is Something We Can Fix Only at the Ballot Box "How close is America to fiscal crisis?" The London Economist asks: "The Congressional Budget Office projects that America's 2011 deficit will be$1.5 trillion, or 9.8% of GDP, and debt held by the public in the 2011 fiscal year will approach 70% of GDP..."

We get a bunch of responses.

John Makin laments that "a a fiscal crisis—signalled by sharply higher borrowing costs for the United States government—probably won’t emerge" soon. Stephen King laments that "America's fiscal arithmetic simply does not add up." Scott Sumner laments that "our fiscal regime is becoming increasingly dysfunctional... radical reform would be quite helpful." "The ingredients are in place for a crisis," claims Peter Boone. "America is bankrupt," claims Larry Kotlikoff.

These seem, to me at least, to completely miss the point.

Tom Gallagher, by contrast, seems to me to at least get his finger on a piece of the problem when he writes: "[W]hat the economy could use is a debate over medium-term entitlement and tax changes. Instead what it's getting is a debate over near-term non-security discretionary spending."

What is going on? What is our problem, really?

This shows that America has a large short-term deficit now: we are still in a deep downturn, and as a result revenues are temporarily below trend and spending is temporarily above trend.

This also shows that, as the CBO projects in its current-law extended baseline, when the economy recovers revenues will rise and spending will decline, and from 2015 on the revenue line matches the total primary spending line.

Now our current deficit is not a problem: running a deficit during an economic downturn is healthy and appropriate. Our short-term deficit problem is that our deficit is not large enough given that if congress simply goes on autopilot the revenue and primary spending lines are likely to cross by themselves in four years.

And our long term projected spending and revenue balance is not a problem. There is no imbalance. Or, rather, there is no imbalance if. If the economy and if programs perform as expected, if the U.S. government continues to be able to finance its debt at a real interest rate less than the growth of labor productivity plus the labor force, and if congress and the president do not do anything further to raise spending above or decrease taxes below current law, the United States simply does not have a fundamental fiscal crisis.

The problems are all in the ifs. If people fear that there will be a fiscal crisis they could demand an interest rate premium for rolling over U.S. government debt, and then we would we have a non-fundamental fiscal crisis. Could we have one? Yes: the East Asian economies had one in 1997-1998. Had foreign investors not panic and fled, there would have been no problem. Those foreign investors who did not panic did well. Those who bailed themselves in at the bottom of the crisis did extremely well. But that was no consolation to the East Asian governments that faced the crisis, or to the East Asian workers rendered unemployed by the consequences of the crisis.

However, today there are no signs of any possibility of a collapse of foreign investor confidence in their U.S. Treasury holdings. A non-fundamental crisis is not even a cloud on the horizon.

But there are the other ifs.

The big if is, to put it simply, this: congress will pass something stupid and the president will sign. Congress might never come up with payfors for its recurrent AMT patches. Congress might remove the revenue raising parts of the Affordable Care Act. Congress might remove the cost saving parts of the Affordable Care Act. The Supreme Court might decide, just for the hell of it, to rule that the cost saving parts of the Affordable Care Act are unconstitutional. Congress might pass a big unfunded tax-cut just for the hell of it. Congress might pass a big unfunded spending increase just for the hell of it.

All of these ifs are very real worries.

But none of them can be fixed by legislative action now.

No congress now can cement up the exits to keep some future congress from doing something really stupid.

And dinking around with cuts to non-security discretionary spending right now doesn't do anything to help.

What is the solution to our long-run deficit problem? It is simply this: elect honorable and intelligent women and men to Congress. Elect representatives who will not pass unfunded tax cuts--as the Republicans did in 2001. Elect representatives who will not pass unfunded spending increases--as the Republicans did in 2003. Elect presidents who will promise at the start of their turns to veto legislative acts that do not meet long run paygo requirements. Choose supreme court justices who will not prostitute their high office for the short term political benefit of the party they happen to belong to--as the Republican justices did after the 2000 election.

Gee. I guess our long run fiscal problem is really dire and insoluble.

## Mark Thoma: Barking Up the Wrong Tree: Social Security is *Not* the Problem

MT:

Economist's View: Barking Up the Wrong Tree: Social Security is Not the Problem: Though there seems to be a concerted effort to get people to believe otherwise, Social Security has very little to do with our long-run budget problem.

Let me add: the worries about the long-term deficit--the worries about the unsustainability of our current fiscal plans--are all worries that congress will not stick to PAYGO when it changes current law. If it sticks to current law, then we have a we-are-not-getting-fair-value-for-our-health-spending problem but not a government solvency problem. If tax cuts relative to current law are financed by spending cuts, then we simply do not have a government solvency problem.

## Yet Another Hockey Stick

Joe Romm:

Temperatures of North Atlantic “are unprecedented over the past 2000 years and are presumably linked to the Arctic amplification of global warming” : Study after study finds recent warming is unprecedented in magnitude and speed and cause.  The anti-science crowd keeps trying to debunk one or two old Hockey Sticks, but new ones crop up faster than a speeding puck. Science just published a new one, “Enhanced Modern Heat Transfer to the Arctic by Warm Atlantic Water” (subs. req’d), news release here, “Warming North Atlantic water tied to heating Arctic, according to new study.” I have pulled out the key graph — and it is one heck of a Hockey Stick.... derived from “planktic foraminifers in a sediment core.... This astonishing warming in the past century is clearly not, as the anti-science crowd likes to say, some sort of recovery from the so-called Little Ice Age (see “A detailed look at the Little Ice Age“), which, in any case, is barely noticeable in this data.   The lead author, Robert Spielhagen of the Leibniz Institute of Marine Sciences said, “Such a warming of the Atlantic water in the Fram Strait is significantly different from all climate variations in the last 2,000 years.”  The fact is, over 90% of human-caused warming is going into the oceans — and it is melting ice whereever it goes (see “Deep ocean heat is rapidly melting Antarctic ice“).

Air temperatures in Greenland have risen roughly 7 degrees F in the past several decades, thought to be due primarily to an increase in Earth’s greenhouse gases, according to CU-Boulder scientists. “We must assume that the accelerated decrease of the Arctic sea ice cover and the warming of the ocean and atmosphere of the Arctic measured in recent decades are in part related to an increased heat transfer from the Atlantic,” said Spielhagen.

Here are the abstract and conclusion:

The Arctic is responding more rapidly to global warming than most other areas on our planet. Northward-flowing Atlantic Water [AW] is the major means of heat advection toward the Arctic and strongly affects the sea ice distribution. Records of its natural variability are critical for the understanding of feedback mechanisms and the future of the Arctic climate system, but continuous historical records reach back only ~150 years. Here, we present a multidecadal-scale record of ocean temperature variations during the past 2000 years, derived from marine sediments off Western Svalbard (79°N). We find that early–21st-century temperatures of Atlantic Water entering the Arctic Ocean are unprecedented over the past 2000 years and are presumably linked to the Arctic amplification of global warming….

Although we cannot quantify from our data the variability of previous AW inflow to the Arctic by volume, our temperature data series and the above observational link suggest that the modern warm AW inflow (averaged over two to three decades) is anomalous and unique in the past 2000 years and not just the latest in a series of natural multidecadal oscillations. Both effects—a temperature rise as well as a volume transport increase—introduce a larger heat input into the Arctic Ocean. Although there is no direct contact of the AAWL [Arctic Atlantic Water Layer] with the ocean surface in the Arctic, such an increased heat input has far-reaching consequences. The strong AW warming event in the Arctic Ocean in the 1990s caused a shoaling of the AW core and an enhanced heat flux to the surface , concurrent with decreasing sea ice. Recent oceanographic data from the Laptev Sea continental margin indicate the impact of warm AW-related water masses on the shallow (<50 m) shelf, a feature not observed before in a >80-year time series. The data also provide evidence for a significant heat flux to the overlying shelf waters. Even without any modification of the vertical heat transfer processes, the enhanced temperature contrast between the AW and the surface sea water freezing point (increased from ~5 to 7 K as identified here) leads to an increase in the vertical heat flux of ~40%. Any positive-feedback mechanism will magnify the effect of this flux increase on the ice cover. Complementing the strong feedback between ice and atmospheric temperatures, warming of the AW layer, unprecedented in the past 2000 years, is most likely another key element in the transition toward a future ice-free Arctic Ocean.

## Liveblogging World War II: February 15, 1941

CNO Stark:

Op-30Cl-AJ
(SC) N20-12.   Serial 09330.
NAVY DEPARTMENT
OFFICE OF THE CHIEF OF NAVAL OPERATIONS
WASHINGTON, Feb. 15, 1941.

From: The Chief of Naval Operations

To: The Commander-in-Chief, Pacific Fleet

Subject:      Anti-torpedo baffles for protection against torpedo plane attacks, Pearl Harbor.

1.     Consideration has been given to the installation of A/T baffles within Pearl Harbor for protection against torpedo plane attacks. It is considered that the relatively shallow depth of water limits the need for anti-torpedo nets in Pearl Harbor. In addition the congestion and the necessity for maneuvering room limit the practicability of the present type of baffles.

2.     Certain limitations and considerations are advised to be borne in mind in planning the installation of anti-torpedo baffles within harbors, among which the following may be considered:

(a)   A minimum depth of water of seventy-five feet may be assumed necessary to successfully drop torpedoes from planes. One hundred and fifty feet of water is desired. The maximum height planes at present experimentally drop torpedoes is 250 feet. Launching speeds are between 120 and 150 knots. Desirable height for dropping is sixty feet or less. About two hundred yards of torpedo run is necessary before the exploding device is armed, but this may be altered.

(b) There should be ample maneuvering room available for vessels approaching and leaving berths.

(c) Ships should be able to get away on short notice.

(d) Room must be available inside the baffles for tugs, fuel oil barges and harbor craft to maneuver alongside individual ships.

(e) Baffles should be clear of cable areas, ferry routes, and channels used by shipping.

(f) Baffles should be sufficient distance from anchored vessels to insure the vessels' safety in case a torpedo explodes on striking a baffle.

(g) High land in the vicinity of an anchorage makes a successful airplane attack from the land side most difficult.

(h) Vulnerable areas in the baffles should be so placed as to compel attacking planes to come within effective range of anti-aircraft batteries before they can range their torpedoes.

(i) Availability of shore and ship anti-aircraft protection, balloon barrages, and aircraft protection.

(j) Availability of naturally well protected anchorages within a harbor from torpedo plane attack for a number of large ships. Where a large force such as a fleet is based, the installation of satisfactory baffles will be difficult because of the congestion.

3.     As a matter of interest the successful attacks at Taranto were made at very low launching heights at reported ranges by the individual aviators of 400 to 1300 yards from the battleships, but the depths of water in which the torpedoes were launched were between 14 and 15 fathoms. The attacks were made in the face of intensive and apparently erratic anti-aircraft fire. The eastern shore line of the anchorage and moorings were protected by numerous balloon barrages, but there was no trawler borne balloon barrage to the west. The torpedoes were apparently dropped inside of the nets, probably A/T nets.

4.     It is considered that certain large bays and harbors, where a fleet or large force of heavy ships may be anchored and exposed with a large body of water on an entire flank, should have that flank protected by a series of baffles if the water is deep enough for launching torpedoes. The main fleet anchorage at Scapa Flow, for instance, has an A/T net extending slightly to the north of a line between Calf of Flotta and Cava Island protecting the main fleet anchorage. The depth of water where this net is laid is approximately 17 fathoms. On the other hand constricted harbors, in which practically all available space is taken up by anchorages, and which is relatively deep probably must depend upon other defense measures. It might be possible and practicable to provide in some places, which are not protected by relatively shallow water, anti-torpedo baffles practically surrounding a limited number of berths or large ships, such as battleships or carriers. An extreme example of this is furnished at the present time by the French at Dakar, where double nets surround the Richelieu; she is placed similarly as in a dry dock, and evidently would have to open a section of the net to be hauled clear. The depth of water at Dakar, however, is very shallow.

5.     The present A/T nets are very expensive extremely heavy, their heavy anchors and moorings take up about 200 yards space perpendicular to the line of the net, take a long time to lay, and are designed to stand up under heavy weather conditions. There is apparently a great need for the development of a light efficient torpedo net which could be laid temporarily and quickly within protected harbors and which can be readily removed. It is hoped that some such net can be developed in the near future.

6.     Recommendations and comments of the Commander-in-Chief are especially desired.

(s) H. R. Stark.
H. R. STARK.

Copy to
CinC Atlantic Fleet.
CinC Asiatic Fleet.

## Mark Kleiman Watches the Train Wreck...

MK:

Left hand, meet right hand « The Reality-Based Community: Volokh Conspirator Jonathan Adler makes fun of me for imagining that libertarian principles might not allow the government to spend tax money to protect the planet from an incoming asteroid. Apparently we need an affirmative action program to hire conservative academics in order to cure my gross ignorance of right-wing thought. Volokh Conspirator Sasha Volokh admits that his principles would not allow the government to spend tax money to protect the planet from an incoming asteroid. After all, taxation is a violation of rights, and can only be justified if it avoids still graver rights violations. And the asteroid, not being sentient or directed by a sentient being, can do damage but can’t violate rights. Ergo, it would be illegitimate to use the coercive power of the state to raise money for asteroid defense.

I’m glad that Adler agrees with me – and disagrees with many Tea Party lunatics, including some recently elected to the Senate and the House – that there’s no actual Constitutional question about funding the Department of Education or National Public Radio. That, of course, was my point.

I’m also glad that Sasha is standing by his guns, thus demonstrating that my argument was not directed at a mere straw man, though his objection to spending is philosophical rather than Constitutional.

Sasha worries that his honest and forthright response might confirm me in my belief that “libertarians are loopy.” That’s certainly a reasonable concern. But I would have thought that a bigger concern would be that the conclusion is, in fact, obviously loopy...

## Sean Carroll: Is Relativity Hard?

Sean Carroll:

Is Relativity Hard? | Cosmic Variance | Discover Magazine: Brad DeLong, in the course of something completely different, suggests that the theory of relativity really isn’t all that hard. At least, if your standard of comparison is quantum mechanics.

He’s completely right, of course. While relativity has a reputation for being intimidatingly difficult, it’s a peculiar kind of difficulty. Coming at the subject without any preparation, you hear all kinds of crazy things about time dilating and space stretching, and it seems all very recondite and baffling. But anyone who studies the subject appreciates that it’s a series of epiphanies: once you get it, you can’t help but wonder what was supposed to be so all-fired difficult about this stuff. Applications can still be very complicated, of course (just as they are in classical mechanics or electrodynamics or whatever), but the basic pillars of the theory are models of clarity. Quantum mechanics is not like that. The most on-point Feynman quote is this one, from The Character of Physical Law:

There was a time when the newspapers said that only twelve men understood the theory of relativity. I do not believe there ever was such a time. There might have been a time when only one man did, because he was the only guy who caught on, before he wrote his paper. But after people read the paper a lot of people understood the theory of relativity in some way or other, certainly more than twelve. On the other hand, I think I can safely say that nobody understands quantum mechanics.

“Hardness” is not a property that inheres in a theory itself; it’s a statement about the relationship between the theory and the human beings trying to understand it. Quantum mechanics and relativity both seem hard because they feature phenomena that are outside the everyday understanding we grow up with. But for relativity, it’s really just a matter of re-arranging the concepts we already have. Space and time merge into spacetime; clocks behave a bit differently; a rigid background becomes able to move and breathe. Deep, certainly; inscrutable, no.

In the case of quantum mechanics, the sticky step is the measurement process. Unlike in other theories, in quantum mechanics “what we measure” is not the same as “what exists.” This is the source of all the problems (not that recognizing this makes them go away). Our brains have a very tough time separating what we see from what is real; so we keep on talking about the position of the electron, even though quantum mechanics keeps trying to tell us that there’s no such thing.

RR:

## IAS 107: Revised Schedule

IAS 107: Intermediate Macroeconomics: U.C. Berkeley: Spring 2011:

Introduction:

Tu Jan 18: The Four Branches of Macroeconomics (read ch. 1: Introduction to Macroeconomics).
Th Jan 20: Keeping Track of the Macroeconomy (read chs. 2 and 3: Measuring the Macroeconomy and Thinking Like an Economist).

Growth Economics:

Tu Jan 25: Economic Growth Overview (read ch. 4: The Theory of Economic Growth).
Th Jan 27: Why Is the World So Divergent? (read ch. 5: The Reality of Economic Growth) (problem set 1 due).
Tu Feb 01: Economic Growth since 1800.
Th Feb 03: The Efficiency of Labor/Spurring the Rate of Technological and Organizational Progress (problem set 2 due).

Depression Economics:

Tu Feb 08: Introduction to Depression Economics.
Th Feb 10: INSTRUCTOR SICK Tu Feb 15: The Income-Expenditure Model (read chs. 6 and 9: Building Blocks of the Flexible-Price Model and The Income-Expenditure Framework) (problem set 3 due).
Th Feb 17: The Investment-Savings Model (read ch. 10: Investment, Net Exports, and Interest Rates) (problem set 4 due).
Tu Feb 22: The Central Bank, Interest Rates, and Financial Markets (read ch 11: Extending the Sticky Price Model).
Th Feb 24: The Financial Crisis and the Economic Downturn (problem set 5 due).
Tu Mar 01: Policies to Fight the Great Recession.
Th Mar 03: Price Stickiness (read chs. 8 and 12: Money, Prices, and Inflation and The Phillips Curve and Expectations) (problem set 6 due).

Midterm:

Tu Mar 08: Pre-Midterm Review.
Th Mar 10: Growth-and-Depression Midterm.

Inflation Economics:

Tu Mar 15: Inflation and the Phillips Curve
Th Mar 17: Expected Inflation and the Natural Rate of Unemployment.
Tu Mar 29: Monetary Policy Reactions (read ch. 13: Stabilization Policy). Th Mar 31: From the Short-Run to the Long-Run (problem set 7 due).

Debt-and-Deficit Economics:

Tu Apr 5: The Government's Taxes and Spending.
Th Apr 7: Depression-and-Inflation Midterm
Tu Apr 12: Debt Economics: Crowding Out and Crowding In (read chs. 7 and 14: Equilibrium in the Flexible Price Model and The Budget Balance, the National Debt, and Investment).
Th Apr 14: The Long-Run Budget Problem (problem set 8 due).

Topics

Tu Apr 19: Topics.
Th Apr 21: Topics (problem set 9 due).
Tu Apr 25: Topics.

Final:

Th Apr 28: Final Review
Th May 12: 8-11: FINAL EXAM

## Mark Thoma: The Bush Tax Cuts and the New Normal for Unemployment?

Mark Thoma:

Economist's View: "What Is the New Normal Unemployment Rate?": Justin Weidner and John Williams of the San Francisco Fed attempt to estimate the increase in the unemployment rate due to structural factors. They find the increase is relatively modest.... [A] large part of the problem is cyclical, not structural and it is expected that "significant labor market slack will persist for several years." That calls for more aggressive policy from Congress, but that is unlikely to happen.

The unwillingness of Congress to provide more help can be traced in large part to the shape of the budget when the crisis hit. With the tax cuts and the increase in government expenditures for wars and other things during the Bush administration, the budget was in poor shape even before the crisis hit. When the crisis did hit, the poor shape of the budget led to an initial stimulus package that was much too small, and there was very little follow up when it became clear that the initial stimulus was insufficient. Now, although the the economic limits have not been reached -- helping the unemployed would have little impact on the long-run budget problem -- it appears that the political limits have been reached and more help for the unemployed is all but out of the question.

Thus, while the Bush tax cuts did very little to spur economic growth, they were costly, and those costs go beyond the hole in the budget caused by the cuts. The resulting budget problems also limited our ability to respond to the recession, and all of the additional struggles that households will endure because we were unable to give them the help they need are part of the Bush tax cut legacy.

## The Tech Bubble Was a Good Thing

I agree with Tim Duy here. We got a lot of business-model development, a lot of fiber installed, and a huge amount of social surplus created by the tech bubble--the only thing missing were the returns to investors.

Tim Duy:

Economist's View: "The Upside of the Tech Bubble": I think [Felix] Salmon goes a bit far when describing the tech stock bubble of the 1990s:

The NYSE is place for algorithms and speculators to make bets on financial assets. It last funneled real amounts of money into the broader economy during the dot-com boom, leaving behind a lot of Aeron chairs and little else.

I have gone back and forth on this topic.... But when you scrape away the detritus, you find the building blocks of all the technology that is increasingly integrated in our everyday life. The bubble-driven intensity of activity in information technology almost certainly accelerated its development and adaptation. Many news ideas were explored; some failed, some succeeded. The successes, however, outweighed the failures, leaving productivity much higher as a result (that this productivity has not translated into higher real wages, however, remains a disappointment).... [T]he tech bubble was a wild ride, but I am wary about declaring it an absolute failure of the capital allocation process.

## Kate Sheppard: Republicans in South Dakota Legislature Call to Legalize Killing Doctors, Nurses, and Receptionists

Kate Sheppard:

South Dakota Moves To Legalize Killing Abortion Providers | Mother Jones: A law under consideration in South Dakota would expand the definition of "justifiable homicide" to include killings that are intended to prevent harm to a fetus.... The Republican-backed legislation, House Bill 1171, has passed out of committee on a nine-to-three party-line vote, and is expected to face a floor vote in the state's GOP-dominated House of Representatives soon.

The bill, sponsored by state Rep. Phil Jensen, a committed foe of abortion rights, alters the state's legal definition of justifiable homicide by adding language stating that a homicide is permissible if committed by a person "while resisting an attempt to harm" that person's unborn child or the unborn child of that person's spouse, partner, parent, or child.... Jensen did not return calls to his home or his office requesting comment on the bill, which is cosponsored by 22 other state representatives and four state senators....

The original version of the bill did not include the language regarding the "unborn child"; it was pitched as a simple clarification of South Dakota's justifiable homicide law. Last week, however, the bill was "hoghoused"—a term used in South Dakota for heavily amending legislation in committee—in a little-noticed hearing. A parade of right-wing groups—the Family Heritage Alliance, Concerned Women for America, the South Dakota branch of Phyllis Schlafly's Eagle Forum, and a political action committee called Family Matters in South Dakota—all testified in favor of the amended version of the law...

## A Republic, If You Can Keep It...

Back in nineteenth-century western Europe--back when the laboring classes and the dangerous classes did not have the franchise--the material interests of the laboring classes and the dangerous classes entered the political calculus through revolutionary threat: D'Israeli and Gladstone and Napoleon III and Bismarck and company were extremely anxious to produce broad-based economic growth lest 1793 come again.

And today? How do the material interests of America's laboring classes and dangerous classes enter the political calculus today?

Matthew Yglesias:

Yglesias » The Base and Bloggers:One of the most important facts about present-day American politics is that poor people have essentially no political “voice” in Washington. They do, however, vote. And they’re also human beings with moral worth and interests who count. What often winds up happening is that you get liberal bloggers, whose opinions about things are easy to find out since we publish them on the Internet, used as a generalized proxy for a huge swathe of the electorate. Hence this kind of thing from Michael Shear [of the New York Times]:

One liberal supporter who listened to the [conference] call described it as “mostly boring,” an indication that the president’s base was not particularly upset about the budget. During the call, Mr. Plouffe also offered some comfort to the bloggers by suggesting that Mr. Obama is not interested in big reductions in Social Security.

As a colleague of mine snarks, “because if one thing is indicative of how poor people feel about cuts, it’s white upper class bloggers.”

Right. As best I can tell the electoral base of the Democratic Party continues to be low-income people and racial minorities. Obviously better-off white people with idiosyncratic ideological motivations also play an important role in progressive politics on a practical level. But I often thought during the health care debate that poor people would be saying:

hell no I’m not going to give up this Medicaid expansion so you can hold out indefinitely for a public option.

Conversely, the political tactics of calling for an overall discretionary budget freeze while insisting on investments in energy, infrastructure, and education has a lot of merit but it necessarily entails taking the hammer to programs that subsidize consumption for poor people. I kind of doubt that all that many LIHEAP recipients eagerly downloaded the budget yesterday morning and then blogged about it in the afternoon and got on a press call in the evening.

## Berkeley Friday Afternoon Political Economy Colloquium: Friday February 18, 2011: "Austerity" in the Context of the Global Economic Downturn

DRAFT Colloquium: Spring 2011: Fridays 2-4 PM

Sponsored by the Blum Center on Developing Economies, the Political Economy Major, and the Institute for New Economic Thinking through the Berkeley Economic History Lab

February 18, 2011: "Austerity" in the Context of the Global Economic Downturn

Topic:

For nearly 200 years economists from John Stuart Mill through Walter Bagehot and John Maynard Keynes and Milton Friedman to Ben Bernanke have known that a depression caused by a financial panic is not properly treated by starving the economy of government purchases and of money. So why does "austerity" have such extraordinary purchase on the minds of North Atlantic politicians right now?

Panel:

• Chair: J. Bradford DeLong, UCB Economics
• Speaker: Joseph Lough, UCB Political Economy
• Speaker: Rakesh Bhandari, UCB Interdisciplinary Studies

Location: Blum Hall Plaza Level
Time: 2:10-2:40: Panelists. 2:40-3:10: Discussion. 3:10-4:00: Reception.

Let me speak as a card-carrying neoliberal, as a bipartisan technocrat, as a mainstream neoclassical macroeconomist--a student of Larry Summers and Peter Temin and Charlie Kindleberger and Barry Eichengreen and Olivier Blanchard and many others.

We put to one side issues of long-run economic growth and of income and wealth distribution, and narrow our focus to the business cycle--to these grand mal seizures of high unemployment that industrial market economies have been suffering from since at least 1825. Such episodes are bad for everybody--bad for workers who lose their jobs, bad for entrepreneurs and equity holders who lose their profits, bad for governments that lose their tax revenue, and bad for bondholders who see debts owed them go unpaid as a result of bankruptcy. Such episodes are best avoided.

From my perspective, the technocratic economists by 1829 had figured out why these semi-periodic grand mal seizures happened. In 1829 Jean-Baptiste Say published his Course Complet d'Economie Politique... in which he implicitly admitted that Thomas Robert Malthus had been at least partly right in his assertions that an economy could suffer from at least a temporary and disequliibrium "general glut" of commodities. In 1829 John Stuart Mill wrote that one of what was to appear as his Essays on Unsettled Questions in Political Economy in which he put his finger on the mechanism of depression.

Semi-periodically in market economies, wealth holders collectively come to the conclusion that their holdings of some kind or kinds of financial assets are too low. These financial assets can be cash money as a means of liquidity, or savings vehicles to carry purchasing power into the future (of which bonds and cash money are important components), or safe assets (of which, again, cash money and bonds of credit-worthy governments are key components)--whatever. Wealth holders collectively come to the conclusion that their holdings of some category of financial assets are too small. They thus cut back on their spending on currently-produced goods and services in an attempt to build up their asset holdings. This cutback creates deficient demand not just for one or a few categories of currently-produced goods and services but for pretty much all of them. Businesses seeing slack demand fire workers. And depression results.

What was not settled back in 1829 was what to do about this. Over the years since, mainstream technocratic economists have arrived at three sets of solutions:

1. Don't go there in the first place. Avoid whatever it is--whether an external drain under the gold standard or a collapse of long-term wealth as in the end of the dot-com bubble or a panicked flight to safety as in 2007-2008--that creates the shortage of and excess demand for financial assets.

2. If you fail to avoid the problem, then have the government step in and spend on currently-produced goods and servicesin order to keep employment at its normal levels whenever the private sector cuts back on its spending.

3. If you fail to avoid the problem, then have the government create and provide the financial assets that the private sector wants to hold in order to get the private sector to resume its spending on currently-produced goods and services.

There are a great many subtleties in how a government should attempt to do (1), (2), and (3). There is much to be said about when each is appropriate. There is a lot we need to learn about how attempts to carry out one of the three may interfere with or make impossible attempts to carry out the other branches of policy. But those are not our topics today.

Our topic today is that, somehow, all three are now off the table. There is right now in the North Atlantic no likelihood of reforms of Wall Street and Canary Wharf to accomplish (1) and diminish the likelihood and severity of a financial panic. There is right now in the North Atlantic no likelihood at all of (2): no political pressure to expand or even extend the anemic government-spending stimulus measures that have ben undertaken. And there is right now in the North Atlantic little likelihood of (3): the European Central Bank is actively looking for ways to shrink the supply of the financial assets it provides to the private sector, and the Federal Reserve is under pressure to do the same--both because of a claimed fear that further expansionary asset provision policies run the risk of igniting unwarranted inflation.

But there is no likelihood of unwarranted inflation that can be seen either in the tracks of price indexes or in the tracks of financial market readings of forecast expectations.

Nevertheless, you listen to the speeches of North Atlantic policymakers and you read the reports, and you hear things like:

“Obama said that just as people and companies have had to be cautious about spending, ‘government should have to tighten its belt as well...’”

Now there were—and perhaps there still are—people in the White House who took these lines out of speeches as fast as they could But the speechwriters keep putting them in, and President Obama keeps saying them, in all likelihood because he believes them.

And here we reach the limits of my mental horizons as a neoliberal, as a technocrat, as a mainstream neoclassical economist. Right now the global market economy is suffering a grand mal seizure of high unemployment and slack demand. We know the cures--fiscal stimulus via more government spending, monetary stimulus via provision by central banks of the financial assets the private sector wants to hold, institutional reform to try once gain to curb the bankers' tendency to indulge in speculative excess under control. Yet we are not doing any of them. Instead, we are calling for "austerity."

John Maynard Keynes put it better than I can in talking about a similar current of thought back in the 1930s:

It seems an extraordinary imbecility that this wonderful outburst of productive energy [over 1924-1929] should be the prelude to impoverishment and depression. Some austere and puritanical souls regard it both as an inevitable and a desirable nemesis on so much overexpansion, as they call it; a nemesis on man's speculative spirit. It would, they feel, be a victory for the Mammon of Unrighteousness if so much prosperity was not subsequently balanced by universal bankruptcy.

We need, they say, what they politely call a 'prolonged liquidation' to put us right. The liquidation, they tell us, is not yet complete. But in time it will be. And when sufficient time has elapsed for the completion of the liquidation, all will be well with us again.

I do not take this view. I find the explanation of the current business losses, of the reduction in output, and of the unemployment which necessarily ensues on this not in the high level of investment which was proceeding up to the spring of 1929, but in the subsequent cessation of this investment. I see no hope of a recovery except in a revival of the high level of investment. And I do not understand how universal bankruptcy can do any good or bring us nearer to prosperity...

I do not understand it either. But many people do. And I do not understand why such people think as they do. So let me turn it over to the first of our speakers, Joseph Lough, to try to provide some answers.

## Paul Krugman: There Is No Structural Shift to Cause Unemployment

Paul Krugman:

Who's Unemployed?: Larry Mishel emails me to second my concern about Charles Plosser’s blithe assertion that unemployment is about shifting workers out of construction. As Larry points out, the BLS provides data on the previous employment of the unemployed. There were 7.7 million more unemployed workers in 2010 than there were in 2007; of those extra 7.7 million, only 1.1 million had previously been employed in construction.... [H]ere’s the increase in unemployment 2007-2010 by industry of previous employment. See the structural shift? Neither do I. As others have noted, basically unemployment doubled for every industry, every occupation, every state. Where are the sectors/occupations/regions gaining jobs? Nowhere to be found. There’s nothing structural about it.

## Scott Lilly: John Boehner's Big Earmark

SL:

No, He Wouldn’t—Would He?: Leaders of the new majority in the House of Representatives promised to cut spending and eliminate earmarks. But House budget legislation filed Friday night contains a provision that looks very much like an earmark that would benefit the hometown and congressional district of Rep. John Boehner (R-OH), above.... [B]uried deeply in these 359 pages of ugly surprises is a provision that would mean one community in America would do a lot better than all of the others. The legislation added an estimated \$450 million for a particular bit of defense spending that the Department of Defense did not ask for and does not want.

The item is a down payment that would obligate the federal government to future payments that could well be three or four times the increased spending added to this particular piece of legislation, with a big portion of the funds flowing to two cities in Ohio—Cincinnati, where Speaker of the House John Boehner (R-OH) grew up, and Dayton, the largest city in his congressional district. The money will go to pay the costs to General Electric Co.’s General Electric Aviation unit and the British-owned Rolls Royce Group for their development of an engine for the new Joint Strike Fighter aircraft—money that looks, feels, and smells very much like an earmark.

Should the Department of Defense end up paying the two companies to develop the engine it is hoped that they will then buy significant numbers of them for the aircraft. The problem that the Pentagon has with this plan for using tax dollars is that they already have an engine for the plane—an engine that was decided on when the contract for production of the plane was agreed to 10 years ago. But that does not deter union leaders, company executives, and local government officials in Dayton and Cincinnati from arguing their case....

The Pentagon insists GE’s second engine isn’t needed, that it has no use for it, and that further development is a waste of money. But the engine’s supporters in Congress—and Evendale, where GE employs more than 7,000—beg to differ...“It’s a huge issue. There’s a lot at risk here,” said Gary Jordan, president of United Aerospace Workers Local 647.

The increased funding added to the new House budget bill was done in a manner even more “stealthy” than the plane that the would-be engine hopes to power. It is believed to be mixed in with much larger spending totals in one or more of the bill’s military research and development accounts. Appropriations Defense Subcommittee Chairman Rep. C.W. Bill Young (R-FL) conceded to Reuters on Friday that "the bill that we're going to deal with next week has the money in it," referring to the GE-Rolls Royce engine...

## Paul Krugman: Expansionary Fiscal Policy Was Never Tried

Paul Krugman:

The Great Abdication: What is Obama saying here? The important thing, I think, is that he has effectively given up on the idea that the government can do anything to create jobs in a depressed economy. In effect, although without saying so explicitly, the Obama administration has accepted the Republican claim that stimulus failed, and should never be tried again. What’s extraordinary about all this is that stimulus can’t have failed, because it never happened. Once you take state and local cutbacks into account, there was no surge of government spending....

[T]he failure of the stimulus that never happened has become conventional wisdom — which is what I feared would happen, two years ago, when I was tearing my hair out over the inadequacy of the original plan.

Yes, I know, it’s argued that Obama couldn’t have gotten anything more. I don’t really want to revisit all of that; my point here is simply that everyone is drawing the wrong lesson. Fiscal policy didn’t fail; it wasn’t tried.

## Mark Thoma on the Rhetoric of Social Insurance

Mark Thoma:

Economist's View: "Medicare Recipients Against Handouts": People believe they paid for programs such as Social Security and Medicare. They put in contributions each month, the government saves that money somewhere, somehow, and when they use these programs they aren't consuming from "government," they are consuming their own contributions.... [T]he people answering this question are actually answering whether they've consumed services they didn't pay for in one way or another. The answers reflect the fact that most people believe that anything they get out of the system is far less than what they put into it (though in many cases that isn't actually true).

So it's true that people want the budget cut, but only the parts where people are forced to pay for "underserving" recipients of these government services. The feeling is that they get up every day and do what's needed to support themselves and their families. They go each day to jobs they hate, hate, hate, hate with a passion because that's how life is, and they don't appreciate seeing their hard-earned money taken away and given to people who don't even try, people who could work if they wanted to, but rely on the system instead.

Now, I happen to think that is a very wrong view of the circumstances of the typical aid recipient, but true or not I do think it is the source of the opposition to many social programs. People don't object to Social Security and Medicare because they believe they paid for these programs in full, or close to it. Same for disability, food stamps, and other programs. They paid into these programs for years, just like medical insurance, and now it's their turn to consume some of the funds they put in. They won't object to that even if you point it out to them, it's the people who consume without contributing that raise their ire and cause objections to these programs. It's the "handouts" that are the problem.

Thus, I don't think the key to getting more support for these types of programs is to show the individual that they consume many services themselves. They'll simply say yeah, I know, I paid for them, so what? It's showing them that their neighbors are deserving.... There is a need for social insurance. I had hoped this recession would show people that it can happen to anyone, that high moral character is not enough to protect you from the vagaries of the market system. One day a job can be gone, morals or not, savings can evaporate as a result, and all those years of doing the right thing -- putting a little away each month for the future -- provides little protection against financial ruin when there are no jobs to be found.

Don't get me wrong. I think it's good to make people aware of the amount of government services they consume, and that such awareness could help some in getting support for social insurance and other programs.... But I really do think the key to more widespread support is to make people aware of the need... and the fact that insurance -- by it's very nature -- means that those people unlucky enough to need it will often consume more than they put in.... That's how insurance works and we shouldn't resent those unlucky enough to need it.

The key here is to overcome the belief that the majority of people using these services are "gaming" the system to get handouts they don't deserve. If we are going to successfully defend the social insurance system, it is this belief that must be countered...