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August 2012

Charles Homans: Clint Eastwood's Performance in Tampa

Charles Homans:

[Eastwood's] joke about Obama telling Romney (we can safely infer, I think) to go f&^# himself still crosses a line, though in post-“You lie!” America it’s hard to say where exactly that line is anymore. But as a matter of pure politics—this being a convention, after all—was Eastwood really so terrible?

One of the biggest problems for Romney as a political communicator is the fundamental impossibility of translating the free-floating, inchoate animus toward Obama… into a vocabulary that makes sense…. More base-friendly Republicans have mostly succeeded in translating it into varieties of spittle-flecked rage or outright conspiracism, but it’s hard to see this kind of thing coming across much better with the sliver of voters left to win over in the next two months.

But Eastwood’s performance channeled a gentler, less toxic version…. He embodied the people you would meet on the margins of the early Tea Party rallies: usually older, not terribly politically engaged, unclear on what it was that the stimulus or (later) the Affordable Care Act actually did or didn’t do, but possessed of a deep conviction that things were somehow just going wrong.

Sure, most of what he said was daft—“Closing Gitmo—why close that? We spent so much money on it”—but that’s sort of the point. Eastwood, for all his fame and wealth, did not seem of a piece with the Olympians and successful entrepreneurs parading across the stage earlier in the evening. He came across more like a surrogate for a cranky, bewildered swath of America—one whom the Republicans venerated last night, and liberals and journalists are tearing to shreds today. In a different venue, you might call it a solid performance. 

In Which I Share Paul Krugman's Puzzlement at Ben Bernanke's Jackson Hole Speech

Yes, there are strong reasons to believe that expansionary fiscal policy (supported by monetary policy) or banking policy to deal with the household balance-sheet problem (supported by monetary policy) would be preferable ways of rebalancing aggregate demand. But as long as Boehner, Cantor, Ryan, and McConnell hold blocking positions in the Congress, expansionary fiscal policy is not going to happen, and as long as DeMarco and Geithner hold blocking positions in the bank regulatory structure, aggressive banking policy to deal with impaired household balance sheets is not going to happen either.

That leaves monetary policy: not guaranteed to work, but worth trying.

Paul Krugman:

BMy quick summary: Bernanke in the Hole. Jackson Hole, that is:

  1. Things are really, really bad.
  2. The damage is cumulative; the longer this goes on, the worse the prospects for the future.
  3. The Fed has the power to do a lot to help the economy.
  4. While you can argue that there are costs to action, the case for major costs is quite weak, and in particular much weaker than the case for major benefits.
  5. Therefore, what we at the Fed will do is, um, sit on our hands some more, and think very seriously about maybe, someday, doing something.

The Mystery of Obama Administration Housing Policy

Duncan Black:

Eschaton: The Big Picture: Even if we believe the premise that, say, everything was done with the banksters in mind, it doesn't mean that the banksters, or the subset of them dealing with housing issues, or their lobbyists, really have a big picture sense of what's good for them. You know, their model shows how doing X will give them a bunch of extra money on some set of mortgage securities, but doesn't take into account that throwing millions of people out of their homes might cause them some additional problems.

I don't actually assume that Our Galtian Overlords actually know what they're doing most of the time.


Eschaton: Hope or Hopeless: The administration has been horrible on housing…. I think they've been horrible from the perspective of all of the stakeholders, though thinking, perhaps, of some stakeholders more than others in the process. Happy they're improving, not convinced it's real.

And Neil Barofsky:

Tim Geithner’s principal hypocrisy: Last week the acting director of the Federal Housing Finance Agency, Ed DeMarco… announced that he would not approve the Obama administration’s request that struggling borrowers whose mortgages are backed by Fannie Mae and Freddie Mac receive debt relief through principal reductions subsidized by the Troubled Asset Relief Program (TARP). DeMarco’s refusal was based on his concern that granting such relief would encourage other borrowers to “strategically default”….

This is not the first time this debate is happening – but last time around, Geithner was the one arguing DeMarco’s points…. [N]o one should be fooled that the administration’s entreaties to DeMarco are anything but political posturing…. Treasury Secretary Timothy Geithner, using the same justifications now offered by DeMarco, consistently blocked efforts to use TARP funds already designated for homeowner relief through a principal reduction program that could have a meaningful impact on the overall economy….

Geithner avoided this path to a housing recovery, explaining that he believed it would be “dramatically more expensive for the American taxpayer, harder to justify, [and] create much greater risk of unfairness.” Treasury amplified that argument in 2010, after it reluctantly instituted a weak principal reduction program in response to overwhelming congressional pressure. That program incongruously left it to the largely bank-owned mortgage servicers (and to Fannie and Freddie) to determine if such relief would be implemented. In response to our criticism that the conflicts of interest baked into the program would render it ineffective unless principal reduction was made mandatory (when in the best interests of the holder of the loan), Treasury reinforced Geithner’s early statements, refusing to do so primarily because of fears of a lurking danger: the ”moral hazard of strategic default.” The message was clear: No way, no how would Treasury require principal reduction, even when Treasury’s analysis indicated it would be in the best interest of the owner, investor or guarantor of the mortgage….

Which is why it should not be surprising that rather than engage in bold action, such as replacing DeMarco with a recess appointment, the administration has responded with only a letter…. [T]he administration – whether through principal reduction or otherwise – has never prioritized coming up with an effective approach to helping homeowners and reviving the housing market, even when it had a multi-hundred-billion-dollar TARP war chest at its disposal….

This is not a conversion – it is a political convenience. Geithner may well be correct when he wrote in a letter to DeMarco that an effective principal reduction program would “help repair the nation’s housing market” and that the refusal to do so is not “in the best interest of the nation,” but it is his own policies that are primarily to blame for where we are today…. Geithner wrote this week to Demarco: “You have the power to help more struggling homeowners and help heal the remaining damage from the housing crisis.” If only he had heeded his own advice.

Hoisted from the Archives (2010): Is Macroeconomics Hard? No

Brad DeLong: Is Macroeconomics Hard? No: "Math is hard," said Malibu Barbie, famously--and a ton of criticism came down on her for the implicit message that her auditors should go off and do other, easier, things instead and leave the math to the trained professionals. Is macroeconomics hard in this sense? I confess that I do not think so. I think that macro is pretty easy...[1]

Let's go back in time almost two centuries, to the days when--first after the end of the Napoleonic Wars and then in 1825-6--the nascent intellectual community of economists confronted the question of whether the circular flow of economic activity as mediated by the market system could break down and the economy become afflicted by a "general glut" of commodities.

There was no question that there could be a "glut" of particular commodities. An example may make this clear:

Suppose--this is Berkeley, after all--that households decide that they want to spend less than they have been spending on electricity to power large-screen video and audio entertainment systems and more on yoga lessons to seek inner peace. The immediate consequence--within the "market day," as late-nineteenth century British economist Alfred Marshall would have put it--of this shift in preferences is excess demand for yoga instructors and excess supply of electric power. Prices of electricity (and of large-screen TVs, and of audio systems) fall as unsold inventories pile up in stores and as generators spin down and stand idle. Yoga instructors, by contrast, find themselves overscheduled, working ten-hour days, and stressed out--and find the prices they can charge for their lessons going through the roof. Workers in electric power distribution and in video and audio production and sales find that they must either accept lower wages or find themselves out on the street without jobs.

Over time the market system provides individuals with changing incentives that resolve the excess-supply excess-demand disequilibrium and restore the economy to equilibrium balance. Seeing the fortunes to be earned by teaching yoga, more young people learn to properly regulate their svadisthana chakra and teach others to do so. Seeing unemployment and stagnant wages in electrical engineering, fewer people major in EECS. The supply of yoga instructors grows. The supply of electrical engineers shrinks. Wages of yoga instructors fall back towards normal. Wages of electrical engineers rise. And balanced equilibrium is restored.

Thus we understand how there can be a glut of a particular commodity--in this case, electric power. And we understand that it is matched by an excess demand for another commodity--in this case, yoga instructor services to properly align your svadisthana chakra.

But can there be a general glut, a glut of everything?

Some economists early in the nineteenth century said yes--and that the economy was experiencing one, and that the fact that such "general gluts" could manifest themselves was a problem with the market system that economists needed to figure out how to solve. Thomas Robert Malthus was the most prominent of those who protested. He agreed that the then-fashionable economic theory said that a glut in one market had to be balanced by a surplus of excess demand in another. But, he said, so much the worse for economic theory:

Malthus on Ricardo: [A]ccording to [Ricardo's]... theory of profits... the master manufacturers would have been in a state of the most extraordinary prosperity, and the rapid accumulation of their capitals would soon have employed all the workmen that could have been found. But, instead of this, we hear of glutted markets, falling prices, and cotton goods selling at Kamschatka lower than the costs of production. It may be said, perhaps, that the cotton trade happens to be glutted; and it is a tenet of the new doctrine on profits and demand, that if one trade be overstocked with capital, it is a certain sign that some other trade is understocked. But where, I would ask, is there any considerable trade that is confessedly under-stocked, and where high profits have been long pleading in vain for additional capital? The [Napoleonic] war has now been at an end above four years; and though the removal of capital generally occasions some partial loss, yet it is seldom long in taking place, if it be tempted to remove by great demand and high profits; but if it be only discouraged from proceeding in its accustomed course by falling profits, while the profits in all other trades, owing to general low prices, are falling at the same time, though not perhaps precisely in the same degree, it is highly probable that its motions will be slow and hesitating...

Jean-Baptiste Say defended the theory. He wrote to Malthus claiming that theory was sound, and that the idea of a "general glut" was logically inconceivable:

Letters to Mr. Malthus: I shall not attempt, Sir, to add... in pointing out the just and ingenious observations in your book; the undertaking would be too laborious.... [And] I should be sorry to annoy either you or the public with dull and unprofitable disputes. But, I regret to say, that I find in your doctrines some fundamental principles which... would occasion a retrograde movement in a science of which your extensive information and great talents are so well calculated to assist the progress.... What is the cause of the general glut of all the markets in the world, to which merchandize is incessantly carried to be sold at a loss?... Since the time of Adam Smith, political economists have agreed that we do not in reality buy the objects we consume, with the money or circulating coin which we pay for them. We must in the first place have bought this money itself by the sale of productions of our own. To the proprietor of the mines whence this money is obtained, it is a production with which he purchases such commodities as he may have occasion for.... From these premises I had drawn a conclusion... “that if certain goods remain unsold, it is because other goods are not produced; and that it is production alone which opens markets to produce.”... [W]henever there is a glut, a superabundance, [an excess supply] of several sorts of merchandize, it is because other articles [in excess demand] are not produced in sufficient quantities... if those who produce the latter could provide more... the former would then find the vent which they required.... You, on the contrary, assert that there may be a superabundance of goods of all sorts at once; and you adduce several facts in favour of your opinion. M. Sismondi had already opposed my doctrine...

As the young John Stuart Mill put it, the core of the argument of Say, Ricard, and their school was that:

There can never, it is said, be a want of buyers for all commodities; because whoever offers a commodity for sale, desires to obtain a commodity in exchange for it, and is therefore a buyer by the mere fact of his being a seller. The sellers and the buyers, for all commodities taken together, must, by the metaphysical necessity of the case, be an exact equipoise to each other; and if there be more sellers than buyers of one thing, there must be more buyers than sellers for another...

Thus a general glut was as impossible as a square circle or a solid gas.

Yet Say changed his mind. By 1829, in his analysis of the British financial panic and recession of 1825-6, Jean-Baptiste Say was writing that there could indeed be such a thing as a general glut of commodities after all: "every type of merchandise had sunk below its costs of production, a multitude of workers were without work. Many bankruptcies were declared..."

The general glut, Say wrote in 1829, had been triggered by a panicked financial flight to quality which had led the Bank of England to shrink its liabilities:

The Bank [of England], legally obliged to redeem its banknotes in specie... [t]o limit its losses... forced the return of its banknotes, and ceased to put new notes into circulation. It was then obliged to cease to discount commercial bills. Provincial banks were in consequence obliged to follow the same course, and commerce found itself deprived at a stroke of the advances on which it had counted, be it to create new businesses, or to give a lease of life to the old. As the bills that businessmen had discounted came to maturity, they were obliged to meet them, and finding no more advances from the bankers, each was forced to use up all the resources at his disposal. They sold goods for half what they had cost. Business assets could not be sold at any price. As every type of merchandise had sunk below its costs of production, a multitude of workers were without work. Many bankruptcies were declared among merchants and among bankers, who having placed more bills in circulation than their personal wealth could cover, could no longer find guarantees to cover their issues beyond the undertakings of individuals, many of whom had themselves become bankrupt...

What was going on?

The answer was nailed by John Stuart Mill in that same year.

Mill's explanation: there was indeed a "general glut" of newly-produced commodities for sale and of workers to hire. But it was also the case that the excess supply of goods, services, and labor was balanced by an excess demand elsewhere in the economy. The excess demand was an excess demand not for any newly-produced commodity, but instead an excess demand for financial assets, for "money":

Although he who sells, really sells only to buy, he needs not buy at the same moment when he sells... there may be, at some given time, a very general inclination to sell with as little delay as possible, accompanied with an equally general inclination to defer all purchases as long as possible.... In order to render the argument for the impossibility of an excess of all commodities applicable... money must itself be considered as a commodity....

Those who have... affirmed that there was an excess of all commodities, never pretended that money was one of these commodities.... What it amounted to was, that persons in general, at that particular time, from a general expectation of being called upon to meet sudden demands, liked better to possess money than any other commodity. Money, consequently, was in request, and all other commodities were in comparative disrepute....

The result is, that all commodities fall in price, or become unsaleable.... [A]s there may be a temporary excess of any one article considered separately, so may there of commodities generally, not in consequence of over-production, but of a want of commercial confidence...

How, exactly, should economists characterize the excess demand in financial markets? Where was it, exactly? That became a subject of running dispute, and the dispute has been running for more than 150 years, with different economists placing the cause of the "general glut" that was excess supply of newly-produced goods and of labor at the door of different parts of the financial system.

The contestants are:

  1. Fisher-Friedman: monetarism: a depression is the result of an excess demand for money--for those liquid assets generally accepted as means of payment that people hold in their portfolios to grease their market transactions. You fix a depression by having the central bank boost the money stock. Eliminating the excess demand for money also brings the goods and labor markets into balance and out of excess supply.

  2. Wicksell-Keynes (Keynes of the Treatise on Money, that is): a depression happens when there is an excess demand for bonds--for ways of moving purchasing power from the present into the future. The workings of the banking system lead the market rate of interest to be above the natural rate of interest which balances the supply of funds saved and the demand for funds to finance business investment. You fix a depression by either reducing the market rate of interest (via expansionary monetary policy) or raising the natural rate of interest (via expansionary fiscal policy) in order to bring them back into equality. Then, with no more excess demand for bonds, the goods and labor markets will also be back in balance and out of excess supply.

  3. Bagehot-Minsky-Kindleberger: a depression happens because of a panic and a flight to quality, as everybody tries to sell their risky assets and cuts back on their spending in order to try to shift their portfolio in the direction of safe, high-quality assets--which, of course, everybody cannot all do at the same time. The excess demand is an excess demand for high-quality AAA assets in particular, not of money (although outside money and some inside money are AAA assets) and not of bonds (some of which are AAA assets, but not all). You fix a depression by restoring market confidence and so shrinking demand for AAA assets and by increasing the supply of AAA assets. Eliminating the excess demand for high-quality assets is eliminated will bring the goods and labor markets out of excess supply and back into balance.

From the perspective of this Malthus-Say-Mill framework Keynes's General Theory is a not entirely consistent mixture of (1), (2), and (3)...

Note that these financial market excess demands can have any of a wide variety of causes: episodes of irrational panic, the restoration of realistic expectations after a period of irrational exuberance, bad news about future profits and technology, bad news about the solvency of government or of private corporations, bad government policy that inappropriately shrinks asset stocks, et cetera. Nevertheless, in this Malthus-Say-Mill framework it seems as if there is always or almost always something that the government can do to affect asset supplies and demands that promises a welfare improvement over, say, waiting for prolonged nominal deflation to raise the real stock of liquid money, of bonds, or of high-quality AAA assets. Monetary policy open market operations swap AAA bonds for money. Quantitative easing that raises expected inflation diminishes demand for money and for AAA assets by taxing them. Non-standard monetary policy interventions swap risky bonds for AAA bonds or money. Fiscal policy affects both demand for goods and labor and the supply of AAA assets--as long as fiscal policy does not crack the status of government debt as AAA and diminish rather than increasing the supply of AAA assets. Government guarantees transform risky bonds into AAA assets. Et cetera...

And then there are, of course, those who never read their John Stuart Mill of 1829, and who never noticed that Jean-Baptiste Say in 1829 had retracted his 1803 claim that a general glut is impossible. They continue claim that a depression is not an economic disequilibrium that can be cured by proper government policy at all--but rather an economic equilibrium that can only be made even less pleasant by government intervention. Think of Karl Marx, Friedrich Hayek, Ludwig von Mises, Andrew Mellon, Robert Lucas, et cetera.

This fraction maintains that in a depression there is no excess supply of goods and labor in any meaningful sense. But, instead, they say:

  1. goods and labor markets are in balance--no government policy to raise employment and production is welfare-increasing--it is just that technological regress has lowered the productivity of labor, and employment is low because real wages are low and workers would rather be unemployed; or

  2. goods and labor markets are in balance---no government policy to raise employment and production is welfare-increasing--it is just that workers have an increased taste for leisure that has raised their reservation wage, and employment is low because real wages are high and businesses would rather not hire; or

  3. goods and labor markets are in balance---no government policy to raise employment and production is welfare-increasing--it is just that previous overinvestment has given us a capital stock that is too large and misallocated, and employment is low because workers cannot quickly be redeployed into jobs in the consumption goods sector; or

  4. goods and labor markets are in balance---no government policy to raise employment and production is welfare-increasing--it is just that workers have mistaken nominal shocks for real shocks, and think that real wages are lower than they are because they misperceive the price level.

It is pretty clear that they are wrong.

Indeed, John Stuart Mill and Jean-Baptiste Say back in 1829 had pretty clear and convincing arguments that this no-disequilibrium fraction is wrong. And Mill's and Say's arguments have not become less clear and convincing in the past 180 years.

I like this Malthus-Say-Mill framework. I think that this framework allows me to at least characterize every position on our current macroeconomic dilemmas that I have heard--like, for example, that the advocates of austerity are convinced that further debt issue by the U.S. government will crack the U.S. Treasury bond's status as a safe asset and thus increase, not decrease, the excess demand for AAA assets and increase, not decrease, the excess supply of recently-produced commodities and labor.

And it is not rocket science.

But it is, however, cutting-edge economics--cutting edge for 1829, that is.

[1] People who, along with me, took Olivier Blanchard's Economics 2410b course in spring 1983 will note how closely this tracks what Olivier was trying to teach us in the three classes--the week and a half--he spent on Lloyd Metzler's "Wealth, Savings, and the Rate of Interest." (The only distinction Metzler is missing that I think is needed is the distinction between safe and risky bonds.) And, of course, Edmond Malinvaud's Theory of Unemployment Reconsidered


Robert Waldmann: Yes. Republicans Lie All the Time. About Everything. Why Do You Ask?

Robert Waldmann:

Robert's Stochastic Thoughts: Edited down from TPM

Sandoval’s office claimed his request for flexibility was not actually a request for a waiver. 

“Nevada hasn’t requested a waiver and has no intention of requesting one,” his spokeswoman Mary-Sarah Kinner told the Las Vegas Sun. “The letter was not a request for a waiver; it was a request to explore the possibilities.” 

In August 2011, Sandoval’s Health and Human Services director approached the Obama administration: “Nevada is very interested in working with your staff to explore program waivers that have the potential to encourage more cooperative relationships among the state agencies engaged in economic stimulus through job creation, employment skill attainment and gainful employment activities,” 

I honestly admire Kinner's audacity.

And Ezra Klein on Romney's "I Want Tell You What I Will Do" Speech

Ezra Klein:

Romney’s speech: Where was the policy?: A few thoughts on Romney’s speech.

1. We heard precious little about Mitt Romney’s plans for the country. By my count, Barack Obama’s 2008 convention speech spent 768 words describing his domestic and economic policies. Romney’s speech spent 260 words. There was almost no mention — and absolutely no description — of his budget, tax, health care or Medicare plans.

  1. The only policy idea he described in any detail was his five-point plan “to create 12 million new jobs.” The plan is more domestic energy production, more free trade agreements, more skills development, more deficit reduction, and cutting taxes and regulations. It is difficult to see how these policies — most of which would take some time to work — would address the jobs crisis…. But… they don’t have to. Romney’s target of 12 million jobs over the next four years happens to be the same number of jobs the economic forecasting firm Moody’s Analytics expects us to add even without major policy changes.

  2. Here’s Romney’s theory of why Obama failed: “The President hasn’t disappointed you because he wanted to…. He had almost no experience working in a business. Jobs to him are about government.” But if business experience is the key qualification for a president, why did Romney pick Paul Ryan, who has spent even less time in the private sector than Obama, to be his vice president?

  3. The most devastating line in Romney’s speech: “If you felt that excitement when you voted for Barack Obama, shouldn’t you feel that way now that he’s President Obama? You know there’s something wrong with the kind of job he’s done as president when the best feeling you had was the day you voted for him.”

  4. Perhaps it was just me, but I had trouble following the basic thread….

  5. Romney’s speech included a number of riffs at odds with his policies. For instance: “Nearly one out of six Americans is living in poverty. Look around you. These are not strangers. These are our brothers and sisters, our fellow Americans.” There is simply no way, given the nature of Romney’s budget promises, that programs for the poor won’t be slashed to the bone. Similarly, he spent some time extolling the virtues of NASA, but it’s also hard to imagine that program surviving the 40 percent cut to all non-Medicare, non-Social Security, non-defense spending that Romney’s budget envisions.

  6. The biographical portion of Romney’s speech was very strong….

  7. But there was a glaring omission from Romney’s biography: He made almost no mention of his time as governor of Massachusetts…. There was nothing on his health-care bill, his budgets, his ability to work with the Democrats in the state legislature…

  8. Whoever planned the convention failed Romney terribly. The first night lacked a clear case for Romney, but ended with a rousing argument for Chris Christie in 2016. The second night was better, but the case Paul Ryan made still seemed to fit Ryan better than it fit Romney. And putting Clint Eastwood in prime time to interview an empty chair on the night of Romney’s acceptance speech was an absolute disaster….

  9. Speaking of which, you should read the full transcript of Clint Eastwood’s speech. The Obama campaign’s response also deserves to be quoted. “Referring all questions on this to Salvador Dalí,” campaign spokesman Ben LaBolt e-mailed to reporters…

Ezra Klein on the Lies of Paul Ryan

Ezra Klein:

A not-very-truthful speech in a not-very-truthful campaign: Honestly? I didn’t want us to write this piece. The original pitch was for “the five biggest lies in Paul Ryan’s speech.” I said no…. I wanted us to bend over backward to be fair, to see it from Ryan’s perspective, to highlight its best arguments as well as its worst. So I suggested an alternative: The true, the false, and the misleading…. An hour later, the draft came in — Dylan Matthews is a very fast writer. There was one item in the “true” section.

So at about 1 a.m. Thursday… I sat down to read it again… with the explicit purpose of finding claims we could add to the “true” category. And I did find one. He was right to say that the Obama administration has been unable to correct the housing crisis, though the force of that criticism is somewhat blunted by the fact that neither Ryan nor Mitt Romney have proposed an alternative housing policy. But I also came up with two more “false” claims. So I read the speech again. And I simply couldn’t find any other major claims or criticisms that were true.

I want to stop here and say that even the definition of “true” that we’re using is loose. “Legitimate” might be a better word….

But Ryan’s claims weren’t even arguably true. You simply can’t say the president hasn’t released a deficit reduction plan. The plan is right here. You simply can’t say the president broke his promise to keep your GM plant open…. You simply can’t argue that the Affordable Care Act was a government takeover of the health-care system. My doctor still works for Kaiser Permanente, a private company that the government does not own. You simply can’t say that Obama, who was willing to follow historical precedent and sign a clean debt ceiling increase, caused the S&P downgrade, when S&P clearly said it was due to congressional gridlock and even wrote that it was partly due to the GOP’s dogmatic position on taxes.

Oh, and here’s one we missed: “You would think that any president, whatever his party, would make job creation, and nothing else, his first order of economic business. But this president didn’t do that. Instead, we got a long, divisive, all-or-nothing attempt to put the federal government in charge of health care.” The stimulus — which was the administration’s major job creation package — came before health care. It was their first priority. That’s simply inarguable.

After rereading Ryan’s speech, I went back to Sarah Palin’s 2008 convention address. Perhaps, I thought, this is how these speeches always are. But Palin’s criticisms, agree or disagree, held up. “This is a man who has authored two memoirs but not a single major law or reform — not even in the state Senate.” True. She accused Obama of wanting to “make government bigger” and of intending to “take more of your money.” That’s not how the Obama campaign would have explained its intentions, but the facts are the facts, and they did have plans to grow the size of government and raise more in tax revenues. Palin said that “terrorist states are seeking nuclear weapons without delay” and “he wants to meet them without preconditions,” which was true enough.

This has been a central challenge during this election. The Republican ticket, when it comes to talking about matters of policy and substance, has some real problems – problems that have nothing to do with whether you like their ideas. Romney admits that his tax plan “can’t be scored” and then he rejects independent analyses showing that his numbers don’t add up. He says — and Ryan echoes — that he’ll bring federal spending down to 20 percent of GDP but refuses to outline a path for how well get there. He mounts a massive ad assault based on a completely discredited lie about the Obama administration’s welfare policy. He releases white papers quoting economists who don’t agree with the Romney campaign’s interpretations of their research.

All this is true irrespective of your beliefs as to what is good and bad policy, or which ticket you prefer. Quite simply, the Romney campaign isn’t adhering to the minimum standards required for a real policy conversation….

I don’t like that conclusion. It doesn’t look “fair” when you say that. We’ve been conditioned to want to give both sides relatively equal praise and blame, and the fact of the matter is, I would like to give both sides relatively equal praise and blame. I’d personally feel better if our coverage didn’t look so lopsided. But first the campaigns have to be relatively equal. So far in this campaign, you can look fair, or you can be fair, but you can’t be both.

Many other people working at the Post whom I have dealt with--Clay Chandler, Ruth Marcus, Jonathan Weisman, Dana Milbank, Glenn Kessler, and Lori Montgomery come immediately to mind--resolve the tension between looking fair and being fair by being careful to know as little as possible about policy substance, so that they have little idea of what actually "being fair" would be.

To his and their credit, Ezra Klein and his stable and Greg Sargent (and earlier, Dan Froomkin) are different. They recognize that being fair will lead to constant attacks by Republican hacks, and deal with it.

Continue reading "Ezra Klein on the Lies of Paul Ryan" »


Garance Franke-Ruta:

Clint Eastwood's Unbelievable Republican National Convention Speech: Anyone who says that contemporary national political party nominating conventions are too heavily scripted these days has got to watch this video of Clint Eastwood ad libbing to an empty chair at the GOP convention. The Washington Post has helpfully posted the full transcript of his remarks:

Continue reading "Eastwooding..." »

I Gather Mitt Romney's Speech at the RNC Did Not Go Well...

Gideon Rachman watches and twitters the RNC so I can do other things. His summary:

Gideon Rachman (gideonrachman) on Twitter: Gideon Rachman ‏@gideonrachman We just had 2 hours build-up about what a warm, inspiring guy he is; and Romney disproves it in 25 minutes. Nice balloons, tho'.

This guy's a zombie.

Will Romney do it?. Perhaps not: gets off to a flat and awkward start. Bored already. Ooh, some demonstrators. Drowned out by USA chants.

Rubio is good: making the zillionth American Dream speech. But it sounds fresh.

Eastwood performance, really weird. He is riffing and rambling and, inter alia, to commit Romney to immediate withdrawal from Afghanistan

Huge roar, I thought it was Romney. But its just Clint Eastwood, sounds a little hoarse. Hope he produces 44 magnum

Romney has strong support among practitioners of skeleton bobsleigh. Captain of Miracle on Ice hockey team, also getting huge reception.

Gingrich and wife doing weird double act at convention: 2 people speaking alternate sentences makes for a lousy speech

After Rice, Ryan comes across as callow and uninspiring. Also has a weird smirk and watery eyes.

My God; a sensible, intelligent, speech at the GOP convention. Its a first. What could Condi Rice be thinking?

Band at GOP convention playing "Signed, sealed, delivered"; same song Obama used in 08. But GOP not using Stevie Wonder version.

George W appears at GOP convention, but only on film. Palin totally absent and unmentioned.

Ron Paul tribute film at GOP convention stresses his small gov views. Ignores his opposition to foreign wars, Pentagon spending.

My report from Tampa. Ann Romney passes her audition | The World |

Joint Brad DeLong-Martin Feldstein Smackdown Watch: Another Interaction Effect Feldstein Misses That Makes It Even More Arithmetically Impossible for Romney to Keep His Promises

We are still waiting for the correction of the arithmetic error in Martin Feldstein's Wednesday Wall Street Journal op-ed.

Everybody is entitled to their own opinion, but not to their own facts--or to their own special rules of arithmetic.

And I missed this. Eliminate itemized deductions for the >$100K crowd, and you don't raise taxable income on a 2009 basis by $640B because they claim the standard deduction. The right number is not $640B but $450B, and multiply that by 24% and you get $108B--barely over half of the $191B that Feldstein had initially claimed.

Hoisted from Comments: Joint DeLong-Feldstein Smackdown Watch: klingedp said...

Another (huge) item missing in the analysis is that people who itemize deductions forgo the standard deduction. If you got rid of itemized deductions, those people would then take the standard deduction.

For my family (AGI over $100K) the change would be from itemized deductions of around $20K (since we have a very small mortgage)to a standard deduction of $11,600. I would assume the difference between itemized deductions and standard deductions would be larger at higher levels of income, primarily due to mortgage interest, but not considering the impact of the switch to standard deductions also overstates the tax revenue that could be produced. Unless, of course, Romney also expects to do away with the standard deductions too.

Liveblogging World War II: August 31, 1942

World War II Day-By-Day: August 31, 1942:

Battle of Alam Halfa, Egypt. Despite the attention of the RAF and Allied artillery, Rommel’s tanks make it through the minefields by noon and then turn North to attack what Rommel thinks is the Allied lines rearguard area. British General Montgomery has prepared a dense screen of anti-tank guns and tanks (firing from hull-down positions in an anti-tank role) along the Alam el Halfa ridge. The Panzers, confused when the British tanks refuse to come out and fight as they have done previously, are stopped cold by the massed British anti-tank fire as well as pre-ranged artillery from the sides. Rommel loses 22 tanks and 2 of his senior commanders (Afrika Korps commander General Nehring is wounded in an air raid and 21st Panzer Division’s General von Bismarck is killed by a bomb). British losses are 21 tanks.

Continue reading "Liveblogging World War II: August 31, 1942" »

Tax Policy Center: Feldstein’s Analysis Confirms TPC Findings That It Is Arithmetically Impossible for Romney to Keep His Tax-Policy Promises

We are waiting for Martin Feldstein to correct the headline, the subhead, and the text on his Wall Street Journal op-ed. He needs to correct the arithmetic error that makes his $191B maximum possible revenue number, and state that it is not mathematically possible but mathematically impossible for Romney to keep all of his tax policy promises.

Remember: Glenn Hubbard, Greg Mankiw, John Taylor, and Niall Ferguson did themselves no good by doubling down when caught out.


Samuel Brown, William Gale, and Adam Looney bring the refreshments:

TaxVox » Blog Archive » Feldstein’s Analysis Doesn’t Refute TPC Findings, It Confirms Them: [W]e showed that any revenue-neutral tax reform that included Governor Romney’s specific tax cuts and that met his stated goal of not raising taxes on saving and investment would cut taxes for households with income above $200,000 and would therefore necessarily have to raise taxes on taxpayers below $200,000… even when we considered an unrealistically progressive way of financing the specified tax reductions, and even when we accounted for economic growth and revenue feedback…. Romney economic adviser Martin Feldstein attempts to contradict our finding… [but] confirms our central result…. [I]n Feldstein’s article, taxpayers with income between $100,000 and $200,000 would pay an average of at least $2,000 more….

Feldstein [also] employs several questionable assumptions that understate the revenue loss of Governor Romney’s tax cuts and overstate the revenue gains from reducing tax breaks and deductions…. Feldstein’s version of the Romney proposals would not be revenue-neutral; instead it would result in large revenue losses. Specifically:

  1. He assumes that each dollar of itemized deductions lost by households with income above $100,000 would generate 30 cents in revenue. However, the Romney plan has a maximum tax rate of only 28 percent and most households with income above $100,000 would face an even lower rate on some or all of the additional income from eliminating deductions.

  2. He assumes that taxpayers earning more than $100,000 who currently itemize would lose not only their itemized deductions but also their ability to take the standard deduction. Normally, taxpayers have the option of itemizing their deductions or taking the standard deduction. If the standard deduction were retained… and denying itemized deductions was assumed to raise revenue at the… [real] marginal tax rate of 24 percent under Romney’s plan, Feldstein’s proposals would fall about $70 billion short of revenue-neutral, even if taxpayers don’t change their behavior. However, JCT and Treasury estimates consistently show that the revenue generated by eliminating such deductions would be even lower because taxpayers would change their behavior….

  3. Feldstein does not offer a specific way to pay for the costs of repealing the estate tax…. The estate tax raised $21 billion in 2009, and the JCT, CBO, and Treasury have consistently estimated that estate tax repeal would not only lose revenue but could actually lose more revenue than the listed estate tax revenues, because it would create opportunities for tax avoidance.

Taking the estate tax and other effects into account, Feldstein’s proposals come up at least $90 billion short of revenue-neutral….

Feldstein['s]… analysis reinforces our central finding…. Romney’s tax proposals… [cut] taxes on households above $200,000 and thus requiring net tax increases on households with less income…. Either taxes must rise on those with income below $200,000, or tax preferences for saving and investment will have to be reduced, or revenues will be cut, or promised tax cuts for high-income households will have to be reduced. Trade-offs exist and solutions are possible, but tax reform cannot do everything….

Finally, the debate over what is or isn’t possible distracts from the more important question of what the Romney plan actually is. The governor could settle this issue quickly simply by describing how he’d pay for his tax cuts.

Avik Roy Says: Dave Weigel Is Right: Paul Ryan Is a Big Liar

Avik Roy:

Paul Ryan Son Obama's Fiscal Record at the Republican Convention: I asked my liberal friends on Twitter to send me an itemized list of Ryan’s alleged lies…. Dave Weigel of Slate compiled a useful list….

Charge #1: Paul Ryan accused Obama of cutting Medicare by $716 billion, but Ryan’s own budget preserved those cuts….

It’s true that Ryan’s budgets in 2011 and 2012 preserved Obamacare’s cuts to Medicare….

Charge #2: Paul Ryan criticized Obama for ignoring the recommendations of the Simpson-Bowles deficit commission. But Ryan voted against those recommendations himself….

It’s true that Paul Ryan voted against the Simpson-Bowles recommendations….

Charge #3: Paul Ryan blamed Obama for Standard & Poor’s downgrade of American government debt from AAA to AA+, but Paul Ryan is actually to blame because he resisted tax increases that would have closed the deficit….

I suppose it’s true that you can blame Ryan and the rest of the GOP for opposing trillions in tax increases….

Charge #4: Paul Ryan opposed the stimulus, but he lobbied for stimulus grants that went to his district….

We can debate the merits of the stimulus…. It is also true that Ryan did seek some stimulus money for his district after the law was passed. Ryan had initially said that he had not taken any stimulus money, but was forced to correct that record…. In addition, Ryan voted for a similarly misguided temporary stimulus package under President Bush….

Finally, Weigel and a number of other commentators complained about the Janesville General Motors plant that Ryan cited in his speech. Ryan pointed out that Obama promised that, under his administration, “this plant will be here for another hundred years.” But it closed in December 2008, before President Obama was inaugurated, and didn’t reopen under President Obama’s GM bailout, which is the focus of Ryan’s criticism. As this is a health-care and fiscal blog, I’m going to let others argue about that one.

Liveblogging World War II: August 30, 1942

John L. Smith:

[On] August 20… the Long Island catapulted Smith and the other F4F pilots toward Guadalcanal. About 1600 the Marines on Guadalcanal heard airplane engines, and were delighted to look up see the American Dauntlesses and Grummans coming in. At this time Henderson Field was a raw, muddy strip about 3500 feet long and 150 feet wide with crude revetments bulldozed around it. The Marine fliers landed without incident. Working through the night, a Navy maintenance unit, CUB-1, serviced and refueled the planes, as the Marines' own ground crews were still on ship. Without proper facilities, the enlisted men of CUB-1 had to hand-pump the fuel directly from 55-gallon drums.

About noon the next day, Smith and his division of four planes had their first aerial combat….

In virtually all of the air defense missions at Guadalcanal, the Wildcats stayed close to base. Barrett Tillman's Wildcat Aces of World War 2 describes the range and payload limitations of the F4F which made this the best tactic….

Smith's most memorable mission took place on August 30, 1942. At 5AM, the Marine pilots ate breakfast, and waited in the Ready Room for word from the coastwatchers that Japanese planes were on their way. No word for four hours. Finally, word came that flights of Bettys and Zeros were on their way. Both the Marine and Army pilots scrambled. The Army pilots flew P-400s (export versions of the Bell P-39 Airacobra, without oxygen equipment) and had to stay below 12,000 feet. The Marine Wildcats climbed to 15,000 feet as rapidly as possible. Smith was rubbernecking all around, trying to keep an eye on the Army pilots below, while scanning up above for Zeros.

Suddenly the radio crackled, "Zeros over us! Jumping us!" He saw twenty plus Zeros shooting up the P-400s. He and the other Marines roared down the 3,000 feet to join the fight. Smith picked a Zero and closed on it, until within 700 feet. The enemy plane filled the gunsight, and Smith opened up. The gunnery pattern converged on the Zero, which flashed into a yellow ball of fire. Victory number 6! The Zeros downed several P-400s and the Wildcats downed several Zeros; the remaining ones scattered. Smith and his division scanned for Bettys. He spotted a Zero emerging from a cloud. He followed and closed in from behind. In seconds, he fired and pieces of the Zero flew backward. It flamed and blew up. Victory number 7!

Smith had 2 kills in less than five minutes, but his mission was to stop the bombers. As he continued to scan, another Zero appeared at 12 o'clock, heading right at him. The Jap's wings flickered first; Smith replied, as the two planes close at 500 knots. Both kept on firing and neither gave way. Finally, the Zero began to smoke and pieces flew off. The plane exploded! Smith rammed his stick forward and dove just underneath the burning fighter, which plunged down toward Henderson Field. Number 8 for Smith!

He looked around. Both he and Lt. Kendrick were hit by many pieces of the last aircraft. Smith descended, trying to meet up with Kendrick, so they can go into the field together. He got down to 800 feet, along the north shoreline, but still couldn't find his wingman. Instead there were two Zeros which apparently had been strafing the field. Attacking two maneuverable Zeros at low altitude with a single Wildcat was