## Will the Supreme Court Decision Hinder Medicaid Expansion, Leaving Millions Of Poor People Without Coverage?

Jonathan Cohn:

Will The Supreme Court Decision Delay Or Hinder The Medicaid Expansion, Leaving Millions Of Poor People Without Coverage?: [W]hat happens if states choose not to expand Medicaid to meet the new guidelines?… As the law was originally written, the entire Medicaid package became an all-or-nothing deal: States that didn't want to meet the new, more expansive guidelines were free to do so. But choosing that option meant forgoing all federal Medicaid money. The Court on Thursday ruled that choice was "coercive."…

[S]tates choosing not to expand coverage give up only the money that would have gone to covering the new populations. Those states would remain eligible for the funds that they already get, to cover people who already qualify for Medicaid under the old guidelines. The practical effect is to change the trade-offs states face…. It takes no intellectual creativity to imagine a Rick Perry or a Rick Scott rejecting the new Medicaid money from Washington—and making a very big show of it.

But sending money back to Washington sounds a lot better than in theory than it works in practice…. For the Medicaid expansion, most states won't pay anything for the first few years. The federal government will pick up the entire cost. And while the federal contribution will decline after that, it will fall only a bit, so that most states are never responsible for more than one-tenth of the cost. That’s a sweetheart deal, particularly when you remember that Medicaid money goes straight into the pockets of local hospitals, doctors, and other health care providers…. [S]tate officials who refuse Medicaid funding are going to get an earful from hospital lobbyists, whose facilities will end up seeing many of these patients regardless of their insurance status. The Medicaid dollars are the hospitals’ best chance to recoup funding for charity care, particularly at a time when they are adjusting to payment reductions designed to push them into more efficiency….

An instructive example may be the history of Medicaid itself. It became law in 1965, as part of the same act that created Medicare. By 1972, every state but one had opted into the program…. The lone holdout was Arizona, which had some special circumstances: Much of its low-income population received coverage through the Indian Health Service. State officials resisted Medicaid for another ten years, but finally gave in (as I recall) because the local hospitals were losing so much money on charity care….

It's important to watch this issue closely and call out Medicaid opponents for what they are doing: Refusing a sweetheart deal that would help their poorest, most vulnerable residents get decent health care, just because they hate Washington…. Eventually, all the states will probably choose to participate in the Medicaid expansion, just as they did with the original Medicaid initiative. But it may take a little time, and a lot of pressure, for that to happen.

## Walter Jon Williams Epubs

Walter Jon Williams:

Year One: It’s been roughly a year since I started making my backlist available in epub formats, so this seems a good time to shuffle through the records and come to some kind of conclusion.

And the conclusion is this:

Thank God for Amazon!

Even if Amazon is yet another megalomaniacal Internet company bent on annihilating all competition and achieving total world domination in its chosen field (250 points!), Amazon has still provided more options for writers than anyone since Gutenberg. The Kindle broke open the world market for ebooks, and created opportunities for people like me, with considerable backlist, to find new readers for their work.

So far I’ve made 11 novels available, along with two novellas and a novelette.   Books are available on Amazon, via Barnes & Noble, and on Smashwords, which distributes to Apple, Kobo, and Sony, among others.  Sales have been growing month by month...

## Buce's Underbelly Liveblogs World War II: June 30, 1942: What Did We Know and When Did We Know It? An Anniversary Footnote

SATURDAY, JUNE 30, 2012: As the Holocaust fades into history, one persistent cloud is the question of who knew what, when.  People of a certain age probably remember stories of the shock and horror that overcame the first Western soldiers when they opened the death camps at the end of the War in 1945.  In the fifties for a time, the chant of "we never knew!  We never knew!" became a kind of bleakly comic tag line.  My guess is that as time passes, the conviction grows that well, yes, Hitler did awful things but if we had known about it we would have done something.

For perspective, here's text from the New York Times for 70 years ago today, June 30, 1942.

A Vast Slaughterhouse: 1,000,000 Jews Slain by Nazis, Report Says

London, June 29 (U.P.)--The Germans have massacred more than 1,000,000 Jews since he war began in carrying out Adolf Hitler's proclaimed policy of exterminating the people, spokesmen for the World Jewish Congress charged today.

They said the Nazis had established a “vast slaughterhouse for Jews” in Eastern Europe and that reliable reports showed that 700,000 Jews already had been murdered in Lithuania and Poland, 125,000 in Rumania, 200,000 in Nazi-occupied parts of Russia and 100,000 in the rest of Europe. Thus about one-sixth of the pre-war Jewish population in Europe, estimated at 6,000,000 to 7,000.000 persons, had been wiped out in less than three years.

A report to the congress said that Jews, deported en masse to Central Poland from Germany, Austria, Czechoslovakia and the Netherlands, were being shot by firing squads at the rate of 1,000 daily.

Information received by the Polish Government in London confirmed that the Nazis had executed “several hundred thousand” Jews in Poland and that almost another million were imprisoned in ghettos.

A spokesman said 10,232 persons died in the Warsaw ghetto from hunger, disease, and other causes between April and June last year and that 4,000 children between the ages of 12 and 15 recently were removed from there by the gestapo to work on slave-labor farms.

The pre-Nazi Jewish population of Germany, totaling about 600,000 persons, was said to have been reduced to a little more than 100,000.

The New York Times, June 30, 1942, as reprinted in the Library of America,  Reporting World War II: Volume I (1995).

## Liveblogging World War II: June 30, 1942

British-made "Matilda" and "Valentine" tanks of the Bryansk Front moving to counterattack as the Nazi summer offensive rips through the Bryansk Front's defenses:

## Clementine Churchill Liveblogs World War II: June 30, 1942

My dear Averell

I do think it is sweet of you in the midst of all our work & pre-occupations to have bought those exquisite handkerchiefs for me. I'm delighted & truly grateful as I was "running short" & one hates to spare precious coupons on handkerchiefs - I don't know why - ? perhaps because they are so easily lost.

And the Ham! The glorious ham! Words fail me.

Love from

Yours ever

Clementine S. C.

## Hoisted from Comments: Coercion of States Edition

Matt writes:

Live by the Technicality, Die by the Technicality: Orin Kerr on the ACA Decision: And that drinking age requirement [that states raise their drinking ages to 21 or have their federal interstate highway funds pulled] was enacted by none other than the sainted Ronald Reagan, and then upheld by none other than Antonin Scalia and William Rehnquist in a 7-2 SCOTUS ruling. Furthermore, it's worth noting that the 21st Amendment has always been held as giving the states the power to regulate alcohol. So unlike Medicaid, it's a federal encroachment on a power explicitly reserved to the states.

## Glenn Hubbard, Behave Yourself!

Romney econ adviser Glenn Hubbard: "It's not that difficult to get government spending back to 20 percnt of GDP." http://huff.to/NOxr3c

Glenn: I worked for the Clinton administration. Throughout the entire 8 years of the Clinton administration--without a single Republican vote to help us when the heavy lifting needed to be done--we reduced the share of federal government spending as a share of potential GDP from 22.2% to 19.3%--by 0.3625%/year.

It was not easy. It was not moderately difficult. It was very difficult. It was brutal.

We did it. We know of what we speak. It is enormously difficult to get federal spending down--and it is much more difficult now, after two additional decades of Republicans blocking almost every single possible sensible cost-saving health-care reform, than it was when we started back in 1993.

Glenn: You worked for the Bush administration. At the end of 2007--before the recession and the consequent demands for spending to cushion the downturn hit--you raised federal government spending as a share of potential GDP from 19.3% to 21.4%. You raised it at a pace of 0.3%/year--and the two years you held high federal office as a cabinet-rank official were slightly worse than the average Bush years.

Glenn: If it is so easy, why didn't you do it?

And if it is--as it is--difficult, why claim that it isn't?

A Man for All Seasons (1966):

Thomas More: May I see that chain Richard?
Richard Rich: Certainly.
Thomas More: It is a fine chain.
Richard Rich: It has pleased His Majesty to make me Justiciar for Wales.
Thomas More: Why Richard, it profits a man nothing to give his soul for the whole world... but for Wales?

## Did Ruth Bader Ginsburg Peel John Roberts Off the Four New Horsemen by Dint of Intellectual-Rhetorical Mojo Alone?

Amy Davidson thinks so. Here is her analysis of the Switch in Time That Saved RomneyCare:

Ruth Bader Ginsburg, Hero: Ginsburg wrote what would have been the dissent—and a strong one—if Roberts had voted with the four conservatives to throw out the entire health-care law. Instead, her opinion concurred with Roberts when he said that the individual mandate was within Congress’s power to tax—this was the Constitutional loophole he found—but rejected his view that it wasn’t valid under the Commerce Clause, which gives Congress the power to regulate commerce. Ginsburg wasn’t gentle. She wrote that Roberts’s analysis was “rigid,” “crabbed,” and “stunningly retrogressive,” that it “finds no home in the text of the Constitution or our decisions” and made “scant sense.” There was also a mesmerizing dissection of the broccoli question…. Roberts’s view of the Commerce Clause, she wrote,

harks back to the era in which the Court routinely thwarted Congress’ efforts to regulate the national economy in the interest of those who labor to sustain it…. It is a reading that should not have staying power….

[B]y writing a scathing opinion, Ginsburg may at least have done him the favor of showing him what he might have looked like if he had signed on with Scalia: a political opportunist, and almost a fool….

[M]ust we assume that Roberts was the one who came to the aid of judicial damsels in distress and their trusty squire, Stephen Breyer? Or did he find himselfeyeball to eyeball with the senior woman on the court, and blink? Maybe Ginsburg is the one who saved Roberts.

Justice Ginsburg:

"The Broccoli Horrible": A Culinary-Legal Supreme Court Dissent: Consider the chain of inferences the Court would have to accept to conclude that a vegetable-purchase mandate was likely to have a substantial effect on the health-care costs borne by lithe Americans [and hence a necessary and proper part of the ACA]. The Court would have to believe that individuals forced to buy vegetables would then eat them (instead of throwing or giving them away), would prepare the vegetables in a healthy way (steamed or raw, not deep-fried), would cut back on unhealthy foods, and would not allow other factors (such as lack of exercise or little sleep) to trump the improved diet…

## The Switch-in-Time That Saved RomneyCare: Roberts' Last-MInute Desertion of the New Four Horsemen Now Proven Beyond Any Reasonable Doubt

Paul Campos:

On Roberts’ majority opinion becoming the joint dissent: I suggested yesterday that the tone and structure of the joint dissent, and especially the strange semantic treatment of Ginsburg’s opinion — referred to several times by the joint dissent as “the dissent,” which is a locution that only makes sense in the context of a majority opinion discussing a single dissent — provided strong evidence that the joint dissent was actually the opinion of the Court until very late in the decision process.

In fact the opinions in the case are full of evidence that this is precisely what happened. Here is a passage from p. 35 of Ginsburg’s opinion, criticizing Roberts’ opinion:

In failing to explain why the individual mandate threatens our constitutional order, THE CHIEF JUSTICE disserves future courts. How is a judge to decide, when ruling on the constitutionality of a federal statute, whether Congress employed an “independent power,” ante, at 28, or merely a “derivative” one, ante, at 29. Whether the power used is “substantive,” ante, at 30, or just “incidental,” ante, at 29? The instruction THE CHIEF JUSTICE, in effect, provides lower courts: You will know it when you see it.

This passage is discussed in the joint dissent (p.15):

The dissent claims that we “fai[l] to explain why the individual mandate threatens our constitutional order.” Ante, at 35. But we have done so.

Whoops!

## Liveblogging World War II: June 29, 1942

The Nazi summer offensive begins in southern Russia, with Fourth Panzer Army starting its drive towards Voronezh. Close air support from the Luftwaffe also played an important role in this early success. It contained the Red Air Force, through air superioriAs many as 100 German aircraft were concentrated on a single Soviet division in the path of the spearhead.

Fearing that this is the start of a renewed attempt to outflank Moscow from the south, 7 Soviet tank corps (1st, 2nd, 4th, 11th, 16th, 17th, 24th) with 1000 tanks converge on Voronezh for a counterattack...

When Operation Blue, the main German summer campaign, finally commenced in late June, its design also revealed serious weaknesses. Since the Wehrmacht had been unable to assemble the necessary forces by the time Blue was to start, the Army High Command (OKH) designed a complicated, staggered operation in which each phase had a specific goal, thus setting the stage for the achievement of the next step in the plan. The initial phase aimed at seizing the city of Voronezh, just east of the Don, which would allow flank protection to the forces advancing to the east (it also, in the event, sparked furious Soviet counterattacks, since German forces could easily turn north toward Moscow, as anticipated by Stalin)….

At first all seemed to go well, perhaps too well. Timoshenko's disaster at Kharkov had weakened the Soviets precisely at the main point of effort for Operation Blue, while hastily formed and poorly trained Russian formations thrown in to stop the Germans often seemed to dissolve before German eyes...

## Live by the Technicality, Die by the Technicality: Orin Kerr on the ACA Decision

Orin Kerr:

The Volokh Conspiracy » The Conservative John Roberts: it’s important to remember that the entire challenge to the Affordable Care Act was premised on a technicality. Everyone challenging the Affordable Care Act agreed that Congress could enact a single-payer system. Everyone challenging the Affordable Care Act agreed that Congress could enact the same law as it did if it only chose the formal label of a tax.

So the nature of the challenge to the mandate was a bit of a gotcha argument: The major legislative achievement of the Obama Administration should be struck down because of the technical way it was done, even though Congress could have passed the same legislation with a few changes if only the Court had announced [that it wanted] those changes beforehand rather than after.

In part, that was the strategy behind the challenge: Make the challenge so narrow that the challenge really just applied to this one law. The thinking was that this would make it more likely that the Court would strike down the Act. But that also meant that the Court had an easy way to uphold the law, as they could just read the technicalities accordingly.

The result is an opinion that happens to please today’s liberals and annoy today’s conservatives, because the liberal law that was passed and that conservatives hate remains on the books. But the key opinion that leads to that result is not a liberal opinion; rather, it strikes me as a largely conservative opinion that just happens to get to a liberal result.

I will note that it was not a law that conservatives hated until Obama acceded to their demands and dropped the public option from the bill in late 2009. Then and only then did the individual mandate shift from being a proper conservative responsibility principle to being the spawn of Satan.

And I will note that the regulation of "inactivity" was the key to George W. Bush's Social Security privatization effort of 2005: if you were "inactive" and did not establish your own private account, the IRS would force you to pay a "penalty" or make a "contribution". The idea was to force you to engage in commerce via establishing a retirement account with a financial intermediary just as the idea of the ACA was to force you to engage in commerce by purchasing health insurance.

If you agree with me that there ought to be some limits--that the federal government has no business depriving medical marijuana patients of their painkillers on the grounds that their possession of small amounts of home-grown marijuana substantially effects interstate commerce a la Scalia's opinion in Gonzalez v. Raich, and if you agree with me that the federal government ought not to be using the funding for Eisenhower's interstate highway system as a club to force states to take the unconnected-to-highways step of setting their drinking ages at 21--creating out of whole cloth fuzzy legal principles about the illegitimacy of the regulation of "inactivity" and transforming federal grants-in-aid to states into some form of legal entitlement to money is not the way to go about it.

We are moving into a world in which a federal statute is unconstitutional because it overreaches the commerce clause when five justices dislike its substance, and in which an expansion of a federal-state program is illegitimate coercion of the states when five justices dislike its substance. But is this a surprise? We already were in a world in which five justices chose a president on the grounds that presidents of his party had appointed them to the bench.

## The Big Winners from ObamaCare

How many people are we talking about? You might say 30 million, the number of additional people the Congressional Budget Office says will have health insurance thanks to Obamacare. But that vastly understates the true number of winners because millions of other Americans — including many who oppose the act — would have been at risk of being one of those 30 million. So add in every American who currently works for a company that offers good health insurance but is at risk of losing that job… every American who would have found health insurance unaffordable but will now receive crucial financial help; every American with a pre-existing condition…. [U]nless you belong to that tiny class of wealthy Americans who are insulated and isolated from the realities of most people’s lives, the winners from that Supreme Court decision are your friends, your relatives, the people you work with — and, very likely, you….

The Affordable Care Act, by contrast, is fully paid for…. So the law that the Supreme Court upheld is an act of human decency that is also fiscally responsible. It’s not perfect, by a long shot — it is, after all, originally a Republican plan… an awkward hybrid of public and private insurance that isn’t the way anyone would have designed a system from scratch. And there will be a long struggle to make it better….

Which brings us to the nature of the people who tried to kill health reform — and who will, of course, continue…. campaign against reform was its dishonesty. Remember “death panels”? Remember how reform’s opponents would, in the same breath, accuse Mr. Obama of promoting big government and denounce him for cutting Medicare?… [A]ll the old lies and probably a bunch of new ones will be rolled out again…. But what was and is really striking about the anti-reformers is their cruelty. It would be one thing if, at any point, they had offered any hint of an alternative proposal….

Let me add a final word on the Supreme Court.

Before the arguments began, the overwhelming consensus among legal experts who aren’t hard-core conservatives — and even among some who are — was that Obamacare was clearly constitutional…. [F]our justices dissented, and did so in extreme terms, proclaiming not just the much-disputed individual mandate but the whole act unconstitutional. Given prevailing legal opinion, it’s hard to see that position as anything but naked partisanship.

The point is that this isn’t over…. The cruelty and ruthlessness that made this court decision such a nail-biter aren’t going away.

But, for now, let’s celebrate. This was a big day, a victory for due process, decency and the American people.

## Why Did Kennedy Peel Off to the Right?

A lot of people (myself included) thought Kennedy would be in the majority because he upheld the last commerce clause case, Raich, in 2005.

## Jonathan Adler on the Medicaid Provisions of Roberts's Switch-in-Time

Initial Thoughts on the Health Care Ruling: Holding that it would be unconstitutional to terminate existing Medicaid funds to states that refuse to go along with the Medicaid expansion is quite significant, particularly as seven justices joined this result. While the holding here may not go beyond the limits articulated in South Dakota v. Dole, the Supreme Court has not limited the exercise of the spending power to impose conditions on states since the New Deal and, again, seven justices endorsed this result. Going forward, I expect this portion of the opinion to have the greatest practical impact…

I think that Jonathan Adler is likely to be right.

Joint federal-state programs like Medicaid are an awkward beast. The federal government is making the state governments an offer they cannot refuse--"pony up for Medicaid or else", or "raise your drinking age to 21 or I will take away your highway money". (Note, however, that Arizona resisted the offer of Medicaid money for a long time.) Now we have seven justices who say that the federal government cannot do that, or at least that if the federal government has made an offer that cannot be refused, and its offer has been accepted, the federal government cannot then turn all Darth Vader on the states:

I am altering the deal. Pray that I do not alter it any further.

Roberts--and all the other justices save Sotomayor and Ginsburg, including two Democrats--appear to have thus created for the states a version of Charles Reich-like "new property" in the form of entitlements to established money flows from the federal government.

But what kind of entitlement, exactly?

At a formal level, this notion that the federal government cannot alter the terms of The Deal--that it must make a new deal, with consideration, offer, and acceptance--is hard to understand. The federal government could certainly repeal Medicaid entirely. It certainly could start up a new program equal to Medicaid + ACA Expansions and offer states that deal. It sounds as though if the ACA had been structured in this way:

• Title 15: Title XIX of the Social Security Act, as amended, is repealed.
• Title 16: New Medicaid = ACA Expansions + the old Title XIX of the SSA are mereby enacted

that that would, formally, pass Roberts's scrutiny.

Am I wrong in seeing this as a version of substantive due process for states reliant on money flows from the federal government?

## David Bernstein Prints Stuart Buck: More Hints that Roberts Switched his Vote

1. The dissent has a whole section on severability that is completely beside the point except on the assumption that the mandate had been struck down, and now “We” have to decide whether and what to preserve of the rest of the act now that the mandate is gone.

2. Notice also that his response to Roberts is tacked on at the end, rather than worked into the body of whatever he was writing (see page 64 of his dissent). For example, one would have expected Scalia to directly take on Roberts’ application of the Anti-Injunction Act, but his brief section on that act only mentions what “the Government” argues (see pages 26-28).

3. On top of that, Scalia’s sections on the Commerce Clause and the Medicaid Expansion are just as long or longer than what Roberts writes (Scalia wrote 16 pages on the Commerce Clause and 21 pages on the Medicaid Expansion, compared to Roberts’ 16 pages and 14 pages respectively). Yet Scalia never writes in the vein of saying, “I agree with the Chief Justice’s opinion, but write to add a crucial discussion of some complexity.” His analysis agrees with Roberts, and makes essentially the same points in “We” language. There’s no reason for Scalia to do this at such length, unless his opinion is what came first.

## Paul Campos Says That John Roberts Switched His Vote at the Last Minute

Has a second “switch in time” saved nine? That’s the unavoidable impression that a reading of the four dissenters’ joint opinion in the PPACA case leaves…. Rumors had been circulating in legal circles for weeks that Chief Justice Roberts in particular was under enormous political pressure not to be the vote that would overturn the most significant piece of social legislation passed by Congress in decades….

It is impossible for a lawyer to read even the first few pages of the dissent without coming away with the impression that this is a majority opinion that at the last moment lost its fifth vote. Its structure and tone are those of a winning coalition…. But when we get to Page 13, far more conclusive evidence appears:  No less than 15 times in the space of the next few pages, the dissent refers to Ruth Bader Ginsburg’s concurring opinion as “Justice Ginsburg’s dissent.”

There is one likely explanation for this: The dissent was the majority opinion when those who voted to overturn the entire ACA signed off on sending their text to the printer.  In other words, Chief Justice Roberts changed his vote at the very last possible moment….

Another unavoidable conclusion seems to be that the dissenters intentionally left the parts of their text referring to Ginsburg’s “dissent” unchanged. This was a symbolic gesture, intended to reveal, without formally breaking the  justices’ code of silence, what the Chief Justice did to them — and, as they no doubt see it, to the country and the Constitution —  through his last-moment reversal.

Update: As commenters point out, it is true that  Ginsburg does dissent to part of the majority opinion, while concurring with most of it, but it’s also clear that the four joint dissenters are referring to a full dissent, not a dissent in part, as the following passage makes clear:

Finally, we must observe that rewriting §5000A as a tax in order to sustain its constitutionality would force us to confront a difficult constitutional question: whether this is a direct tax that must be apportioned among the States according to their population. Art. I, §9, cl. 4. Perhaps it is not (we have no need to address the point); but the meaning of the Direct Tax Clause is famously unclear, and its application here is a question of first impression that deserves more thoughtful consideration.

The dissenters are saying that construing the mandate as a tax would require them to address a constitutional question that they don’t have to address. But the only reason the Court would not have to address this question is if the majority in fact refused to construe the mandate as a tax – which is exactly what the Court’s majority ended up doing.

In addition, the joint dissenters refer consistently to Ginsburg’s item as “the Dissent.” This phrase makes no sense except in the context of a majority opinion referring to a single dissent.

## Lawrence Solum: Evidence that the Votes Shifted After Conference (Initial Vote to Declare Mandate Unconstitutional)

After a preliminary read of the opinions in the Health Care Cases (National Federation of Independent Business v. Sibelius), there seems to be substantial evidence that the initial vote in conference was to strike down the mandate as unconstitutional.  The opinion of Justice Scalia, Kennedy, Thomas, and Alito looks like parts of it were once a majority opinion.

And there are passages that still read as a majority opinion responding to a dissent by Justice Ginsburg.

For example:

The dissent claims that we “fai[l] to explain why the individual mandate threatens our constitutional order.” Ante, at 35. But we have done so. It threatens that order because it gives such an expansive meaning to the Commerce Clause that all private conduct (including failure to act) becomes subject to federal control, effectively destroying the Constitution’s division of governmental powers. Thus the dissent, on the theories proposed for the validity of the Mandate, would alter the accepted constitutional relation between the individual and the National Government.

Language like this is highly suggestive of a majority opinion.  The reference to the dissent and "we" strongly suggests that the "we" was a majority of the Court.  This suggests that Justice Roberts switched his vote.  There are other conceiveable explanations, but in my opinion, this evidence is very strong indeed.

## Joe Gagnon on the Peculiar Case of the Fed in the Nighttime

Joe Gagnon:

RealTime Economic Issues Watch | The Fed Shirks Its Duty: On June 20, 2012, the Federal Reserve… extinguished the last shred of doubt as to whether it intends to achieve its mandated objectives. Despite a substantial markdown of an already inadequate forecast, the Fed did not take any actions that would make it possible to achieve either of its objectives over the foreseeable future…. For more than two years, the Fed has dragged its feet and resisted the obvious need for more aggressive action. At this point it is not clear that the Fed has the tools it needs to get the best possible outcome without help from fiscal policy. Nevertheless, the Fed has considerable firepower remaining. It should aggressively push down mortgage interest rates and state clearly that it would welcome an inflation rate temporarily above its 2 percent target in order to make faster progress on its employment objective. These measures, discussed below, would substantially improve the economic outlook, even if there is disagreement about whether they are sufficient by themselves.

A number of well-known Fed watchers have wrung their hands in despair at this policy paralysis. What lies behind the Fed's inaction?…. Harvard professor Martin Feldstein… argues that the sluggish recovery proves that monetary policy has lost its potency. He has succumbed to the fallacy of the driver who wonders why pressing on the accelerator does not cause the car to speed up as it starts to climb a hill…. Tim Duy… wonders if the uncertainty over the effect of unconventional monetary actions has caused the Fed to be so timid. One thing is certain: Unconventional actions taken to date have not been sufficient…. Surely the lesson must be to take larger steps, not smaller ones. Ryan Avent… suggests that concern about unspecified "costs and risks" is the most likely reason the Fed is not taking more aggressive actions…. Paul Krugman guesses that the Fed is intimidated by Congressional Republicans….

After his dissenting vote last week, the president of the Federal Reserve Bank of Richmond, Jeffrey Lacker, stated: "I do not believe that further monetary stimulus would make a substantial difference for economic growth and employment without increasing inflation by more than would be desirable." The view that unconventional monetary policy will lead to inflation is commonly held on Wall Street. Yet, more than three years after the launch of such policies, inflation remains at or below the Fed's target…. A large majority of the committee projects that inflation will be below target over the next two and a half years. If they assign any weight to their employment objective, they should be willing to accept inflation at least modestly above target in order to get a better outcome on employment….

The best option within the Fed's legal authority is to announce a target range for the 30-year mortgage rate of 2.5 to 3 percent to be maintained for the next 12 months. This target would be enforced through unlimited purchases of MBS guaranteed by the federal housing agencies…. The Administration could help by forcing the housing agencies to stop dragging their feet on refinancing and loan modifications…. Although not a panacea, the above measures are substantial and would be viewed as such by market participants…. Raising expectations of future inflation moderately--in conjunction with a continued commitment to a near-zero policy rate--would lower the real interest rate, providing additional impetus to economic activity….

The main alternative instrument in the Fed's toolkit is foreign exchange….

The best alternative would be to purchase exchange-traded funds of the total US stock market. That would have broad-based benefits, repairing household balance sheets and unlocking consumption and investment. Unfortunately, the Fed is not authorized to buy equities and Congress is not likely to grant it that power anytime soon.

## Nobody Has Any Excuse for Supporiting Dangerous Clown Mitt Romney

To say that Mitt Romney’s response to today’s Supreme Court decision was brazenly dishonest is an understatement:

Obamacare was bad policy yesterday. It’s bad policy today. Obamacare was bad law yesterday. It’s bad law today. Let me tell you why I say that. Obamacare raises taxes on the American people by approximately $500 billion. Obamacare cuts Medicare, cuts Medicare, by approximately$500 billion. And even with those cuts, and tax increases, Obamacare adds trillions to our deficits and to our national debt and pushes those obligations on to coming generations.

Obamacare also means that for up to 20 million Americans, they will lose the insurance they currently have, the insurance that they like and they want to keep. Obamacare is a job killer. Businesses across the country have been asked what the impact is of Obamacare. Three quarters of those surveyed by the Chamber of Commerce said Obamacare makes it less likely for them to hire people. And perhaps most troubling of all, Obamacare puts the federal government between you and your doctor.

## What Next for Health Care Reform?

In the wake of the surprising Supreme Court decision Thursday morning on the constitutionality of the Affordable Care Act, the natural question is: what next for health-care reform?

One piece of background is all-important.

ObamaCare is RomneyCare.

The health-care reform plan that Mitt Romney proposed when he was Governor of Massachusetts and shepherded through the Massachusetts legislature with, as he used to boast, only two dissenting votes is the health-care reform plan that Barack Obama proposed in the first year that he was President of the United States and shepherded through the U.S. Congress with not a single Republican vote in favor. No Republican made audible complaint that RomneyCare was bad policy, or would destroy the economy, or whatnot--as long as it was the signature policy initiative of a Republican governor. When the same policy became the signature policy initiative of a Democratic president, however, every single Republican in office changed their minds.

For the most part, they claimed that they had not changed their minds. They said that when a state government required that people who are likely to wind up in the hospital at some point in their lives by insurance so that the cost of treating them would not fall on other patients or taxpayers, that was Good Small Government, an assertion of the Conservative Principle of personal responsibility people needed to accept responsibility for the consequences of their actions. but, they said, when a federal government requires that people who are likely to wind up in the hospital at some point in their lives by insurance so that the cost of treating them would not fall on other patients or taxpayers, that is Bad Big Government, an assertion of the liberal Nanny State principle that people needed for the government to boss them around, and unconstitutional.

Go figure.

Well, now the Supreme Court--a Supreme Court with a Republican-chosen majority of Thomas, Scalia, Alito, Kennedy, and Roberts--has settled the "unconstitutional" part.

IF (mandate="upheld") THEN:

Now it is time for all Republican officeholders to say that although the Supreme Court is not infallible, it is final, and that they will turn all their energies to making the implementation of what was President Romney's signature initiative when he proposed and implemented it as Governor of Massachusetts and will be President Romney's signature initiative when he implements it as President of the United States into a smashing and total success.

ELSE IF (insurance-provisions="upheld") THEN:

The Supreme Court has just broken RomneyCare. It has taken a delicate balance of countervailing policies that make up a very strong structure when all put together--the mandate to purchase insurance, guaranteed issue, community rating, and so forth--and kicked out one of its foundations. The remaining structure cannot stand, or cannot stand well.

However, the states can make it stand. The federal government cannot, so this Supreme Court says, regulate the interstate commerce that is health insurance to mandate purchase. Never mind that this decision is precedentless and lawless, going against the grain of at least 75 years of judicial doctrine and development. Ever since 1801 when John Marshall seized the opportunity to issue his decision in Marbury vs. Madison there has been precedent and law that the Supreme Court can, when it wishes, act contrary to established precedent and settled law--that the Supreme Court can turn itself into moral guardians seeking justice and political actors seeking the general welfare rather than mere judicial umpires calling balls and strikes. Yes, John Roberts lied about his role in his confirmation hearings. But that is not the point here. The point here is that the structure of RomneyCare--of the health-care reform plan established and advocated by both Mitt Romney and Barack Obama--is tottering, but that it can be fixed. It can be fixed by the states.

Each state should enact, on its own and for itself, the provisions of the Affordable Care Act that have just been carelessly broken by the Supreme Court. If states do this, then they will see themselves following the path of health-care reform marked out by, following the trail broken by health-care reform pioneer Mitt Romney in Massachusetts, and that is a good path, a good trail.

Those states that do not now act to fix the broken core structure of RomneyCare are putting the well-being of their small businesses, sole proprietors, and independent contractors at risk: their individual and small group markets may experience a moral-hazard meltdown. The likely outcome is that the states of the Northeast, the Pacific Coast, and pieces of the Midwest will step up to the plate, and will fix the parts of the ACA that the Supreme Court has broken. They will attach state-level backups to make the RomneyCare system function as designed.

Barack Obama will approve of this.

Mitt Romney will approve of this too--or, at least, is on record as approving of it. Back in July 2009, remember, Mitt Romney had no objections, neither technical-legal-constitutional nor substantive-policy objections, to a national mandate:

The lessons we learned in Massachusetts could help Washington…. The Massachusetts reform aimed at getting virtually all our citizens insured. In that, it worked…. [W]e established incentives for those who were uninsured to buy insurance. Using tax penalties, as we did, or tax credits, as others have proposed, encourages “free riders” to take responsibility for themselves rather than pass their medical costs on to others. This doesn’t cost the government a single dollar…. Republicans will join with the Democrats if the president abandons his [public option] government insurance plan…

And, back then, as Romney told Tim Russert, he thought that each and every state should enact an individual health-care mandate, which, he said:

is a terrific idea. I think you're going to find, when it's all said and done, after all these states that are laboratories of democracy get their chance to try their own plans, that those who follow the path that we pursued will find it's the best path, and we'll end up with a nation that's taken a mandate approach.

Nevertheless, in spite of both Barack Obama's and Mitt Romney's belief that each state would be well-served by passing an individual mandate to implement the conservative personal-responsibility principle, it is likely that the South, the Praries, scattered pieces of the Midwest, and Texas will fail to fix the parts of RomneyCare that the Supreme Court has now broken.

What can we do? Well, we can pressure the politicians of the South, the Praries, Texas, and their scattered bastions in the Midwest to do their jobs as Americans. Everybody who knows anything about health insurance should say, and say loudly, that those state-level politicians who do not fill in the gaps the Supreme Court has ripped in RomneyCare are destroying the ability of small businesses and solo practitioners and independent contractors to get the health coverage that they need.

Moreover, they should say that these politicians are doing this for short-term partisan political gain.

And maybe then the Republican politicians will become patriots first and partisan obstructionists second--or will at least realize that it is to their electoral advantage not to appear to be the partisan obstructionists they wish to be.

ELSE:

The Supreme Court has just sent us back to square one as far as fixing our broken private health-care system is concerned.

This is truly extraordinary. Five times in U.S. history the Supreme Court has eaten its wheaties and said that in the future the law will, in a major way, be very different than it had been before. The first was Marbury vs. Madison: the Supreme Court's 1803 assertion of the power that it was going to be the final arbiter--that its decisions about what the Constitution meant would be the ones that stuck. And there have been a bunch of others. These are the Supreme Court's Constitutional Moments

In all previous Constitutional Moments, the stakes were political, but the stakes were also large, and the stakes were substantive, and the stakes were fundamental. The issue was about what kind of country we were going to be. Marbury vs. Madison was about whether the Supreme Court was going to be another anti-majoritarian brake on the powers of legislative majorities that were possibly transient. Lochner was about whether freedom of contract--or freedom to exploit--was going to be a core right. The Switch-in-Time-that-Saved-Nine was whether social democracy would come smoothly or would require an economic-regulation constitutional amendment. Brown-vs.-Board-of-Education-of-Topeka was about whether we would remain a country of racial apartheid.

This Constitutional Moment we have just seen is the first one in which the stakes are purely partisan, and purely political. Had Mitt Romney won the 2008 presidential election, every single Republican legislature who voted against RomneyCare when it was proposed by Obama would have voted for RomneyCare when proposed by Romney. And every single Supreme Court justice who has just voted to strike down RomneyCare would have been a comfortable vote for RomneyCare--had it been proposed by Romney. This is the dirty little secret of what just happened: Bush vs. Gore, Citizens United, and now the ACA--we have an out-of-control Supreme Court majority who are all busy violating their oaths as judges as much as they dare. We understand when judges say that the law says X, but justice requires Z, therefore I say Z. We do not understand the judges who have today said that although law and precedent say X, my partisan political loyalties and those alone impel me to say Z.

This Supreme Court is hopelessly broken. It needs to be fixed as fast as possible. And the best way to fix it is to reelect President Obama, and give him a reliable majority in the Senate and a reliable majority in the House to choose judges who will keep to their oaths of office.

## The Krugman-Layard Manifesto for Economic Non-Nonsense

More than four years after the financial crisis began, the world’s major advanced economies remain deeply depressed, in a scene all too reminiscent of the 1930s. The reason is simple: we are relying on the same ideas that governed policy during that decade. These ideas, long since disproved, involve profound errors both about the causes of the crisis, its nature and the appropriate response….

The causes. Many policy makers insist that the crisis was caused by irresponsible public borrowing. With very few exceptions – such as Greece – this is false. Instead, the conditions for the crisis were created by excessive private sector borrowing and lending, including by over-leveraged banks. The bursting of this bubble led to large falls in output and thus in tax revenue. Today’s government deficits are a consequence of the crisis, not a cause.

The nature of the crisis. When property bubbles burst on both sides of the Atlantic, many parts of the private sector slashed spending in an attempt to pay down past debts. This was a rational response on the part of individuals, but has proved to be collectively self-defeating, because one person’s spending is another person’s income. The result of the spending collapse has been an economic depression that has worsened the public debt.

The appropriate response. At a time when the private sector is engaged in a collective effort to spend less, public policy should act as a stabilising force, attempting to sustain spending. At the very least, we should not be making things worse with big cuts in government spending or big increases in tax rates on ordinary people.

The big mistake. After responding well in the first, acute phase of the crisis, policy took a wrong turn – focusing on government deficits in tandem with the private sector. Instead of playing a stabilising role, fiscal policy has ended up reinforcing the damping effects of private-sector spending cuts.

In the face of a less severe shock, monetary policy could take up the slack. But with interest rates close to zero, monetary policy – while it should do all it can – cannot do the whole job. There must of course be a medium-term plan for reducing the government deficit. But if this is too front-loaded it can easily be self-defeating by aborting the recovery. A key priority is to reduce unemployment, before it becomes endemic, making recovery and future deficit reduction even more difficult.

How do those who support the existing approach respond to ours? They typically use two arguments:

1. The confidence argument. Their first argument is that government deficits will raise interest rates and thus prevent recovery. By contrast, austerity will increase confidence and encourage recovery. But there is no evidence in favour of this argument. Despite exceptionally high deficits, interest rates are unprecedentedly low in all major countries where there is a normally functioning central bank. Interest rates are only high in some eurozone countries, because the European Central Bank is not allowed to act as lender of last resort to the government. Elsewhere the central bank can always, if needed, fund the deficit, leaving the bond market unaffected. Experience includes no relevant case where budget cuts have actually generated increased economic activity. The International Monetary Fund has studied 173 cases of budget cuts in individual countries and found that the consistent result is economic contraction. That is what is happening: the countries with the biggest budget cuts have experienced the biggest falls in output. For the truth, as we can now see, is that budget cuts do not inspire business confidence. Companies will only invest when they can foresee enough customers with enough income to spend. Austerity discourages investment.

2. The structural argument. A second argument against expanding demand is that output is in fact constrained on the supply side – by structural imbalances. If this theory were right, however, at least some parts of our economies ought to be at full stretch, and so should some occupations. But in most countries that is not the case. So the problem must be a general lack of spending and demand. In the 1930s the same structural argument was used against proactive spending policies in the US. But as spending rose between 1940 and 1942, output rose by 20 per cent. So the problem in the 1930s, as now, was a shortage of demand, not of supply.

As a result of their mistaken ideas, many western policy makers are inflicting massive suffering on their peoples. But the ideas they espouse about how to handle recessions were rejected by nearly all economists after the disasters of the 1930s. It is tragic that in recent years the old ideas have again taken root. The best policies will differ between countries and will require debate. But they must be based on a correct analysis of the problem. We therefore urge all economists and others who agree with the broad thrust of this manifesto for economic sense to register their agreement online and to publicly argue the case for a sounder approach. The whole world suffers when men and women are silent about what they know is wrong.

Vic Gundotra takes the stage. A small pedestal either is host to a squirrel ghost, or is a new product under a white sheet.

## Remember the Uninsured...

So any chance we can include a mention of the uninsured in our "winners and losers" stories on SCOTUS and Obamacare tomorrow?

## John Holbo Zombie Euthyphro Blogging

John Holbo writes:

Euthyphro Problems and Bad Religion – or – The Imaginary Invalidity: I’m a collector of occurrences of Euthyphro-type dilemmas. Please pardon the excessive use of force that it took to add this one to my collection of argumentative oddities.

The context:

Andrew Sullivan links to a Ross Douthat-Julian Sanchez exchange (that started as a Douthat-Saletan exchange, and concerning which Karl Smith and Noah Millman get words in edgewise, if you care to follow up the links.) Douthat suggests that secular liberalism has philosophical-metaphysical problems…. Sanchez makes the easy but surely correct response: Douthat is writing as though he’s never read "Euthyphro" and doesn’t see how all the same problems are going to arise for his own position, mutatis mutandis. It doesn’t prove anything to dunk secular ethics, but not theological ethics, in this skeptical acid. Either God’s commandments are arbitrary or they make sense. If they are arbitrary – well, that’s hardly an improvement over secular humanism, in the worst case scenario. If they make sense, they make sense. Secular humanists can help themselves to anything that makes sense. They can hold onto the commands but lose the Commander. So, whether the ethical news is good or bad, the news is the same for the secularist and the religious believer.

Douthat’s response is weak (see it below). As Sanchez says, it’s a ‘classic virtus dormativa.’ Here is Sanchez:

If God is the standard, why ought we accept the standard to emulate it?… If the fact that some action will cause suffering isn’t adequate motivation to avoid it without something further, why is the fact that the divine nature abhors suffering (or sin, or whatever we think) supposed to do any better? Why do we imagine someone could (rationally?) greet the first fact with a shrug, but not the second?

That’s bad enough, but I think the problem is considerably worse for Douthat, bad religion-wise…. Douthat is shifting from ‘you need to believe in God to be moral,’ to ‘you need to believe in God to be moral, because you have to have a coherent philosophy to be moral.’ This is meant to sidestep standard Euthyphro-style objections, but ‘you have to have a coherent philosophy to be moral’ is a strange major premise….

[W]hat’s wrong with incoherent philosophy? Is it ‘invalid’ to live your life without a coherent philosophical account that Goes All the Way Down (or, barring that, a coherent philosophical account of why you can get by without such a fundament.) Couldn’t the insistence on philosophical coherence be a sort of hypochondria, in a practical sense? (I mean: yes, it would be nice. But if you don’t have it, does it follow that you are, as it were, sick or dying?)

The belief that it is better to be certain even if wrong (especially if wrong?) than to be uncertain is remarkably common--it is, after all, the core of Alasdair Macintyre's After Virtue and perhaps of Max Weber's "…as a Vocation" essays.

From an economist's point of view, this is incomprehensible: to be certain and to be wrong is to do great damage with probability one. If you might be mistaken, it is surely better to know that you might be mistaken than to be an ignorant and destructive clown.

In the words of Oliver Cromwell before the battle of Dunbar:

I beseech you, in the bowels of Christ, think it possible that you may be mistaken...

It is, indeed, criminal moral and intellectual irresponsibility for anybody like Ross Douthat to imagine that he has special access, better than anybody else, to the Α and the Ω...

## John Quiggin Confronts Once Again the Puzzle of John Cochrane

The facts about inequality in the US, and increasingly in other developed countries, are now so clear-cut that the defenders of the status quo have little solid ground left on which to stand. So, they are mostly confined to arguments that have already been effectively rebutted. As new talking points emerge, it’s become increasingly easy to pick them out before they are fully formed and have a prebuttal ready. That’s the case with data showing that income inequality arises mainly from differences in current incomes rather than from inheritance. As I pointed out a couple of months ago, the absence of large inherited inequalities is a logical consequence of the fact that the distribution of income in the postwar generation was relatively equal.

Sure enough, here’s the prebutted talking point, stated by John Cochrane, who asserts

There are a lot of facts: the widening distribution comes from a skill premium, not inherited wealth.

He goes on with some older points, long rebutted:

It’s new people getting rich, not the old rich keeping more money. It’s pretax income, not the rich keeping more money.  Consumption inequality is much less than income inequality. And so on.

In reality, income mobility is falling not rising, and the tax system has become less progressive not more. And I’ve dealt with the consumption inequality point here and here.

The only answer I can find to the puzzle that makes any sense at all is the simplest one: he's just playing for Team Republican...

## The Bond Market Is Terrified, or the Bond Market Is Broken: Take Your Pick

Project Syndicate: We economists steeped in economic and financial history--and aware of the history of economic thought about financial crises and their effects as well--have reason to be very proud of our analyses over the past five years: that the rapid run-up of house prices coupled with the extension of leverage posed macroeconomic dangers, that the recognition of large bubble-driven losses in assets held by leveraged financial institutions would cause a panicked flight to safety, that to prevent a deep depression required active intervention of the government as a lender of last resort, that monetarist cures were likely to prove insufficient, that sovereigns needed to guarantee each others' solvency, that there were enormous dangers in withdrawing support too soon, that premature attempts to deal with long-run budget balance would worsen the short-run catastrophe and be counterproductive even in the long-run, that we faced the threat of a jobless recovery not from any structural changes but from cyclical factors--on all of these we were right.

Our intellectual adversaries, who said, variously, that there would be no downturn, or that bounceback would be rapid, or that the economy's real problems were structural, or that supporting the economy would produce inflation, or produce high short-term interest rates, that the Confidence Fairy was on the way, or that immediate fiscal austerity would be expansionary--they were wrong, and completely wrong. We were not surprised that they were wrong. (We are, however, surprised at how very few of them have marked their beliefs to market in any sense--how many of them have octupled-down with their reputations underwater, and thrown the dice one last time in the hope that events will, for once, break their way and they can induce people to forget their track record.)

The big lesson is, therefore: trust those who work in the tradition of Bagehot, Minsky, and Kindleberger--Krugman, Romer, Gorton, Reinhart, Rogoff, Rajan, Wolf, Summers, Eichengreen, Blanchard, and their peers. As they got the recent past right, so they are most likely to get the distribution of possible futures right.

But we--or at least I--have gotten three significant pieces of the past four years wrong. Three things surprised and still surprise me:

1. The failure of central banks to adopt a rule like nominal GDP targeting, or it's equivalent.
2. The failure of wage inflation in the North Atlantic to fall even farther than it has--toward, even if not to, zero.
3. The failure of the yield curve to sharply steepen: federal funds rates at zero I expected, but 30-Year U.S. Treasury bond nominal rates at 2.7% I did not.

The first remains incomprehensible to me, and I will not write a column about it until I think I understand it.

The second remains a surprise: even with 1/3 of the American labor force changing jobs every year, sociological factors and human network ties appear to exercise an even stronger influence on the level and rate of change of wages at the expense os balancing supply and demand than I would have credited.

The third, however, may be most interesting.

Back in March 2009, the University of Chicago's Robert Lucas confidently predicted that within three years the U.S. economy would be back to normal. A normal U.S. economy has a short-term nominal interest rate of 4%. Since the 10-Year U.S. Treasury bond rate tends to be one percentage point more than the average of expected future short-term interest rates over the next decade, even five expected years of a deeply depressed economy with essentially zero short-term interest rates should not push the 10-Year Treasury rate below 3%. (And, indeed, the Treasury rate fluctuated around 3 to 3.5% for the most part from late 2008 through mid 2011.) But in July of 2011 the 10-Year U.S. Treasury bond rate crashed to 2%, and at the start of June it was below 1.5%. The normal rules of thumb would say that the market is now expecting 8 3/4 years of near-zero short-term interest rates before things return to normal. And similar calculations for the 30-Year Treasury bond show even longer and more anomalous expectations of continued depression.

The possible conclusions are stark: either those investing in financial markets expect economic policy to be so dysfunctional that current global depressed economy to endure in more-or-less its current state for perhaps a decade, perhaps more; or--even now, more than three years after the end of the financial crisis--the ability of financial markets to do their job and sensibly price relative risks and returns at a rational level has been broken at a deep and severe level, a level that makes them incapable of doing their proper job of bearing and managing risk and channeling savings to risky and entrepreneurial ventures.

Neither alternative is something I would have or did predict, or even imagine.

## Liveblogging World War II: June 27, 1942

At 9 a.m. in Libya, the 2nd NZ Division is laying mines when enemy tanks appear 4,000 yards away, and shell the mine-laying party. The Kiwis finish their job and pull out, and the tanks come no nearer. Instead, the Germans bring up 105mm guns, shelling the New Zealanders while their vehicles move east past the Kiwi defenses, shelling the defenders as they go.

One shell splinter wounds Gen. Freyberg in the neck -- his 30th scar -- and Brig. Lindsay Inglis has to take over.

The 21st Panzer Division surrounds 2 NZ from the north, while 15th Panzer drives south of Minqar Qaim. The reliable but battered 50th Northumbrian Division counterattacks from the north to open a corridor to the Kiwis, but runs into superior German fire. The 9th Durham Light Infantry is completely destroyed. But 1st Armored Division, south of Minqar Qaim, holds off 15th Panzer all day.

British Gen. "Strafer" Gott, commanding 13th Corps, exhausted from the retreat, orders 13th Corps to pull out. Gott is out of touch with the situation, and believes 2 NZ Division has been destroyed. 1st Armored can withdraw, which denies 2 NZ its armored protection on the southern flank. The message reads, "It's all over. The New Zealand Division doesn't exist."

Inglis shows this message to the groggy Freyberg, who, despite his wounds, is livid. He believes (rightly) that Gott, ignorant of the situation, is leaving 2 NZ to die.

At 8 p.m., Inglis summons his officers and reveals that the division is surrounded. The only possibility is a breakout to the east. 4 Brigade will attack by bayonet, and the rest of the division will drive through in a solid column. The division will have to use every vehicle it has, even water carriers, to break out.

Zero hour is 10:30 p.m. Brig. Howard Kippenberger assembles his 5 Brigade, packing his trucks to the limit. Men squeeze onto Bren carriers and anti-tank gun portees. 4 Brigade attacks the enemy at Bir Abu Batta, the 28th Maori Battalion leading the assault. In the battle, 4 Brigade destroys 1st Battalion of the German 104th Infantry Regiment.

During the battle, Capt. Charles Hazlitt Upham, a Christchurch farmer in the 20th Battalion, leads an assault on German positions. For his exceptional valor, Upham receives the Victoria Cross. It is his second of the war, and Upham goes down in history as the only combatant to twice earn the decoration, thus making him the British Commonwealth's greatest single soldier.

Upham will later be captured by the Germans, and be sent to... Colditz prison (from which Airey Neave escaped, mentioned earlier). He will return to New Zealand after the war, refuse honors and knighthoods, and quietly tend his farm, march in parades, and help the families of wounded veterans until his death in 1994.

During the battle, 5 Brigade runs smack into enemy tanks, and a small and spectacular battle results, the night filled with tracer, shot and shell. Freyberg himself, head swathed in bandages, jumps out of the front of his truck, and, in his squeaky voice, remarks, "My God! Another Balaclava!"

Another high-ranking officer hops out of his truck to fight. Kippenberger later writes:

For a few moments we ran on amid a pandemonium, overtaking and being overtaken by other frantic vehicles, dodging slit-trenches, passing or crashing into running men, amid an uproar of shouts and screams. I recognized the men as Germans, pulled out my revolver and was eagerly looking for a target when suddenly there was silence and we were out running smoothly on level desert. We were through.

## Aaron Bady on the Insanity of Nino Scalia

I also enjoy the fact that Scalia cites 19th century anti-"coolie" hysteria as establishing the legitimacy of immigration restriction.

## Martin Wolf: What Should Spain Have Done in the Mid-2000s?

Martin Wolf:

What was Spain supposed to have done?: In January 2004, I attended a property conference in Switzerland….I argued that a number of European countries, the UK being one, had dangerous property booms. The most dangerous of all, I suggested, was Spain’s…. This remark led to a heated altercation with a Spanish property developer. I understood why he was so angry. But he was wrong, of course. The Spanish property sector created a huge boom and a huge crash. The big question is what the Spanish authorities should (or could) have done about it.

One answer is that they should have tightened fiscal policy, since they could do nothing about the monetary policy of the eurozone, which was wildly unsuitable for their economy, prior to the crisis (far too loose then and far too tight now). Maybe so, but Spain’s fiscal performance looked pretty good…. In 2008, the IMF, among the world’s most independent and respected official institutions, thought that Spain had run a substantial structural – or cyclically-adjusted – fiscal surplus in 2004, 2005, 2006 and 2007. Now it thinks this had in fact been a substantial structural deficit…. [T]here was no obvious reason why Spain should have run a tighter fiscal position before the crisis. It had an official seal of approval for what it was doing. In a boom, just about everybody misunderstands what is happening.Those who do not are Cassandras and so tend to be ignored….

What else could the Spanish authorities have done? Well, they could have tried to curb bank lending directly, via rapidly falling loan-to-value ratios or direct curbs on lending. There are two reasons for wondering whether this would have worked. First, it would have been desperately unpopular in Spain…. Alternatively, they could have tried to make their banks more robust. But they did in fact try to do so, with their famous policy of dynamic provisioning. It was controversial at the time, though a good idea. The problem, as we can now see, is that it was nothing like enough….

Spain did not run irresponsible fiscal policies, as Germans believe….

[H]ow could Spain have prevented this crisis, which was unambiguously generated in the domestic private sector and fuelled by private sector capital inflows? If it could not have prevented the crisis, how can it bear some deep moral fault? Surely, a far more sensible – indeed moral – approach would be to recognise that this is more misfortune than misdeed and offer Spain the help it needs to adjust its economy to the post-crisis reality….

In my view, Spain made only one big mistake: joining the euro. Without that, it would probably now look more like the UK: yes, the economy would be in serious trouble, but its exchange rate and its long-term interest rates would both be far lower. After all, its fiscal position is even now no worse than the UK’s, as I note in my blog post here. But reconsidering that choice is no longer possible. Now it needs help to survive the crisis. Will Spain get enough of what it needs? I doubt it.

## Convergence: 1960-2008

There are four key facts you must know about the economic history of post-WWII world:

1. The world as a whole is much richer than it was two generations ago: since 1950, average worldwide growth of 2%/year in GDP per capita adds up--say 3.5 times as rich as it used to be.

2. Looking across nations, the world is a more unequal place than it was two generations ago: your typical gap between one nation's standard of living and another's is larger.

3. The average gap between a random nation's standard of living and the U.S. standard of living is the same as it was two generations ago.

4. The average gap between a random person's standard of living and the U.S. standard of living is the same as it was two generations ago--for two of the countries that have done well over the past generation are China and India, which together are 40% of humanity.

## Yes, Niall Ferguson, Econ 101 Is Worth a Great Deal

Paul Krugman, June 25, 2012:

Economics, Good and Bad: Jonathan Portes quotes a three-year-old piece from Niall Ferguson I mercifully missed, ridiculing me as the “man from Econ 101” who believed, foolishly, that huge government deficits could fail to raise interest rates in a depressed economy. Indeed, that is what Econ 101 said – and it has been completely right. Basic IS-LM macro also said that under these conditions printing lots of money would not be inflationary, and that cutting government spending sharply would cause the economy to shrink. All of this has come true.

So Econ 101 has done just fine – and perhaps more to the point, it has made successful predictions “out of sample”….

So why the sense that macroeconomics is a mess? I’d say that it’s essentially political. The type of macroeconomics Portes and I do offends conservative notions of how things are supposed to work in a capitalist society, so they reject the theory no matter how well it performs, and throw their support behind other views and other people no matter how badly they get it wrong. As a result, all the public hears are arguments between dueling economists (some of them not knowing much about economics). That’s a big problem – but it’s not a problem with the economics, which has, once again, been spectacularly successful.

The other thing I’d like to say is that the notion that microeconomics is in much better shape is questionable, to say the least. I mean, it’s not as if the assumptions underlying standard micro theory are, you know, true – utility maximization? Really? Micro is consistent in a way macro is not, but for the most part it’s best viewed as a metaphor that’s helpful as long as you don’t take it too seriously.

But isn’t there a lot of solid empirical work in micro? Yes – and in macro too. The difference is that for the most part there isn’t as much of a politically-based determination to deny the empirical results in micro. Yet even there, when it comes to areas where there are strong political stakes, like health care economics, you see the persistence of politically convenient views no matter how strong the contrary evidence…

Niall Ferguson, June 14, 2009:

How Economists can Misunderstand the Crisis: Borrowing is forecast to be \$1,840bn - equivalent to around half of all federal outlays and 13 per cent of GDP. A deficit this size has not been seen in the US since the second world war…. It is hardly surprising, then, that the bond market is quailing. For only on Planet Econ-101 (the standard macroeconomics course drummed into every US undergraduate) could such a tidal wave of debt issuance exert "no upward pressure on interest rates".

Of course, Mr Krugman knew what I meant. "The only thing that might drive up interest rates," he acknowledged during our debate, "is that people may grow dubious about the financial solvency of governments." Might? May? The fact is that people - not least the Chinese government - are already distinctly dubious. They understand that US fiscal policy implies big purchases of government bonds by the Fed this year, since neither foreign nor private domestic purchases will suffice to fund the deficit. This policy is known as printing money and it is what many governments tried in the 1970s, with inflationary consequences you do not need to be a historian to recall.

No doubt there are powerful deflationary headwinds blowing in the other direction today. There is surplus capacity in world manufacturing. But the price of key commodities has surged since February. Monetary expansion in the US, where M2 is growing at an annual rate of 9 per cent, well above its post-1960 average, seems likely to lead to inflation if not this year, then next. In the words of the Chinese central bank's latest quarterly report: "A policy mistake… may bring inflation risks to the whole world."

The policy mistake has already been made - to adopt the fiscal policy of a world war to fight a recession. In the absence of credible commitments to end the chronic US structural deficit, there will be further upward pressure on interest rates, despite the glut of global savings. It was Keynes who noted that "even the most practical man of affairs is usually in the thrall of the ideas of some long-dead economist". Today the long-dead economist is Keynes, and it is professors of economics, not practical men, who are in thrall to his ideas.

About that "bond market… quailing"? In June 2009 10-Year Treasury interest rates had recovered from their panic lows, but were still far below their average levels for the 2000s. Ferguson simply did not know what he was talking about:

About that "the price of key commodities has surged since February"? Yes. Oil prices had recovered from their panicked lows. But if the sunup in oil prices in 2007-8 had not generated inflation when the global economy was at full employment, why would anybody who knew what they were talking about expect a recovery a third as large to generate inflation in 2010?

About that "[m]onetary expansion in the US, where M2 is growing at an annual rate of 9 per cent, well above its post-1960 average, seems likely to lead to inflation if not this year, then next"? How well do you think that worked out for Ferguson?

One would think--after such a catastrophic intellectual failure--that Ferguson would be a little bit quieter in stridently putting forward opinions on issues where he has not done his homework. One would imagine that he would be busily marking his beliefs to market, figuring out where he went so completely and catastrophically wrong and how he needs to change his views of how the world economy works.

One would think that there would be some apologies from him to all the people whom he misinformed…

But playing for Team Republican means never having to say that you are sorry.

## Liveblogging World War II: June 26, 1942

In the spring of 1941, the Navy was looking to replace its F4F "Wildcat" (also manufactured by Grumman) in light of new developments in the field of aeronautics, and the worsening military situation both in Asia and in Europe. On June 30, 1941 the Navy ordered the prototypes XF6F-1 and XF6F-2. They were to have the Wright R-2600-16 engine, producing 1,700 horsepower, on the -1 and a Wright 2800-16 fitted with a turbo-supercharger on the -2. Immediately after the first flight of the XF6F1 on June 26, 1942, the craft was mysteriously redesignated the "XF6F-3" and the engine was changed to the Pratt-Whitney 2800-10 producing 2,000 horsepower. The reason for the mystery became evident only after the war.

Up until the time of the first flights of the XF6F-1, very little reliable information was available on the Japanese "Zero" fighter (Mitsubishi A6M Zero-Sen) except that it was fast, agile and shot down an alarming number of Allied aircraft. As happened on many occasions during WWII, Lady Luck was about to change all that. At the very time of the first flight of the XF6F-1, a curious incident was occurring 2,500 miles (4,023 km) away on a small island known as "Akutan" in the Aleutian chain….

A Navy PBY, making a routine patrol, happened to pass over tiny Akutan Island and one of the observers aboard happened to notice a dark speck on the tundra below which appeared out of place. The pilot took the "Catalina" down to have a closer look. The speck turned out to be a Japanese aircraft, and even though it was upside down, it was almost immediately identified as a Zero. The radioman sent the coordinates and within hours a Navy recovery team was on the way to investigate. On arrival, the recovery team found the dead pilot, Flight Petty Officer Tadayoshi Koga still hanging in his seat harness. Koga had had engine problems and tried to land the plane on the flat tundra of the small island with the wheels down. The wheels dug in and flipped the Zero on its back, snapping F.P.O. Koga’s neck in the process. The Zero was almost undamaged, even the engine looked to be in good shape aside from a broken oil line.

The Zero was dismantled and shipped directly to the Grumman Aircraft factory in California where it was reassembled and flown. The information gleaned from this fortunate incident put the finishing touches on the Hellcat. It was found the XF6F-1 was marginally slower than the Zero, thus the change from the Wright R-2600 to the Pratt-Whitney Double Wasp R-2800 with an output of 2,000 hp (1,493 kW) for take-off and 1,975 hp (1,474 kW) at 17,000 ft (5,182 m). This engine boosted the Hellcats top speed to 375 mph (604 k/hr), 29 mph (47 k/hr) faster than the Zero. No other unfavorable differences between the two planes could be found and the Hellcat was deemed ready for production. The finalized version of the XF6F-3 was almost identical to the production F6F-3 and Grumman shifted the assembly line into high gear.

In terms of size, the Hellcat was the second largest single engine fighter of the war, being ever-so-slightly smaller than the Republic P-47 "Thunderbolt". At first glance, the F6F appeared too big to operate safely from a carrier. But The Grumman Iron Works had a great deal of expertise in building carrier aircraft. The US Navy wanted a much faster plane carrying heavier loads over far greater distances. The only way to achieve all three goals was the obvious way; design a larger aircraft. There was room for a more powerful engine, room for more armament and for extra fuel.

In order to keep the take-off and landing speeds at a reasonable level, Grumman made the wings proportionally larger than most aircraft (including the Thunderbolt) to reduce wing loading. In fact, the Hellcat had the largest wing area of any single engine fighter of WWII at 334 square feet (31 square meters) as opposed to 300 square feet (27.8 square meters) for the P-47.

## Ryan Avent Downgrades Ben Bernanke

[T]he contradictions in the Fed's statements and the extent of its outright failure are painfully obvious. A few points:

First, the Fed is no longer content to simply aim for an inflation range that includes its 2% target as its higher limit (all while missing wildly on the employment side of the mandate). In new economic projections released with the June policy statement, the Fed projects an overall inflation rate of 1.2% to 1.7% in 2012 (with core inflation coming in between 1.7% and 2.0%). The Fed's projections, recall, are based on FOMC members' assessment of "appropriate monetary policy". The extention of Twist is not designed to push 2012 inflation back to a range that includes 2%, in other words; it's simply necessary to keep it within the 1.2% to 1.7% window…. [T]he unemployment rate has been at least 2 percentage points above the FOMC's estimated natural unemployment rate for nearly 4 straight years while inflation has scarcely wandered more than a half percentage point away from target since late 2009. Fed members claim that the 2% target is not a ceiling, but inflation has been below 2% much more often than it has been above it over the past 4 years, inflation is projected to be at most 2% in 2013 and 2014, and inflation is projected to be substantially below 2% in 2012…. [T]he Fed has gone from merely failing at its job to aggressively failing at its job.

Second, it is difficult to pin blame for this on anyone other than Chairman Ben Bernanke…. The question, of course, is why he wants it this way…. [Perhaps] Mr Bernanke has no confidence that he can do more. That would be a stunning revelation, if true. It would cut against economic theory, against his own impressive academic work, against his comments as Fed chairman, and against the FOMC's policy statement, not to mention recent experience….

None of us know precisely what is going on in Mr Bernanke's head. Maybe someday we'll all find out. But we don't actually have to know what the chairman is thinking to subject him to appropriate accountability. We have explicit policy directives set for the FOMC by the government: the dual mandate. And we have an explicit policy goal which the FOMC determined for itself to be the best way to meet those policy objectives: its 2% inflation target. Set aside for now the question of whether that determination is correct. The FOMC is persistently failing to meet its objectives, and an accountability moment is long overdue.