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December 2012

Right-Wing Grifters at Play: Joe Hagan's Dispatch From the National Review's Post-Election Cruise

The thought of some poor right-wing D.o.a.B.--"Tall, Extremely-Tanned Blonde Kay from Greenwich"--paying good money so she can get investment advice from Kevin "Dow 36000" Hassett is truly dismaying…

Joe Hagan:

A Dispatch From the 'National Review's Post-Election Cruise: It was day five of the National Review magazine’s Post Election Cruise 2012…. Kevin Hassett, a former economic adviser to Mitt Romney…. “Minorities came out like crazy,” said Hassett, sighing. “White people didn’t get to the polls. There are far more African-­Americans voting than they expected.”… Hassett… predicted economic doom under Obama, the most likely scenario being another Great Depression…. That prompted a tall, extremely tanned blonde named Kay, from Old Greenwich, Connecticut, to ask Hassett, the co-­author of the 1999 book Dow 36,000, “So what do we do with our money?” [Hassett] recommended investing in real estate in another country, maybe in Central America somewhere…. How about a Western country? “Okay, if Europe is what you want, go to Poland,” he said optimistically. “Go to Krakow, buy a house for $50,000, and it’s going to be like Paris in a few years.”…

Continue reading "Right-Wing Grifters at Play: Joe Hagan's Dispatch From the National Review's Post-Election Cruise" »

In Which Greg Mankiw Pretends to Be Puzzled...

But I don't think that he is.

I think Greg Mankiw knows why people think that helping George W. Bush create long-term structural deficits in 2003 was a bad thing to do.

I think Greg Mankiw knows perfectly well why people think that now--at the zero lower bound, with the employment-to-population ratio below 57%--larger short-term Keynesian cyclical deficits are a good thing. And I think Greg Mankiw knows perfectly well that there is no inconsistency in arguing that (a) monetary policy is the stabilization policy tool of choice in normal times, but (b) fiscal policy has a use when monetary policy hits the zero lower bound.

Thus I do not believe Greg Mankiw is really puzzled at all.

Joe Weisenthal:

Paul Krugman Changed His Mind On Bond Vigilantes: Anyway, economist Greg Mankiw has called out Krugman (via @dutch_book) for contradicting himself — specifically something Krugman said back in 2003, when Bush was the President, and the deficit was huge, and Krugman was warning about it. Says Mankiw:

 I am having trouble reconciling these points of views.  Has Paul changed his mind since 2003 about how the bond market works?  Or are circumstances different now?  If anything, I would have thought that the fiscal situation is more dire now and so the logic from 2003 would apply with more force.  I am puzzled.

In 2003 the unemployment rate peaked at 6%, the employment-to-population ratio troughed at 62%, and short-term safe nominal interest rates never hit the zero lower bound. In this business cycle the unemployment rate peaked at 10%, the employment-to-population ratio troughed at 56.5%, and the short-term safe nominal interest rate has now been at its zero lower bound for four years and is now expected to remain at the bound for three more.

The rule of thumb has two parts. First, unless you hit the zero lower bound on interest rates the business cycle should be handled by monetary policy, and fiscal policy should be conducted upon "classical" principles: set tax rates and spending programs so that the debt-to-GDP ratio converges to a sustainable target level, where the target takes into account the fact that you will want to run large budget deficits in (a) wars, (b) depressions in which interest rates hit the zero lower bound, and (c) other national emergencies.

Second, when you do hit the zero lower bound, "Keynesian" principles should govern fiscal policy: borrow and spend to boost production and employment as long as inflation expectations remain anchored.

There is nothing to puzzle over here.

So why Mankiw's claim of puzzlement?

Remember the context: Mankiw loved the Bush-era fiscal policies to create long-run structural budget deficits, and worked hard to implement them--the unfunded war and unfunded tax cut and unfunded entitlement policies that did so much to create our structural deficit. Mankiw did his best to join in the process of taking the work that we in the Clinton administration had done in the 1990s to restore America's fiscal balance--work that was very well done, very important, and work that we were and are very proud of--and casually smashing it on the floor.

That was not a good thing to do.

I so understand how people who did not go into private internal or public external opposition to Bush-era economic policies when they were enacted might wish that the analytical case against them were not as strong as it is. But increasing confusion by failing to recognize distinctions about when deficits are appropriate macroeconomic policy and when they are not does not help anybody.

Can We Please Keep Ross Douthat from Writing Again?

Shame on you, New York Times:

Ross Douthat: Bloomberg, LaPierre and the Void: Bloomberg, LaPierre and the Void FOR a week after the Newtown shooting, the conversation was dominated by the self-righteous certainties of the American center-left…

No, Ross Douthat. For a week after the Newtown shooting the conversation was dominated by grief, terror, and sorrow.

What kind of a sociopathic nut writes such a lead?

Why oh why can't we have a better press corps?

Department of "Oh Dear!": Basic Macro Briefing Weblogging

I have been complaining strongly about the failure of Republican economists to adequately brief their political principals.

It looks like it is sauce-for-the-gander time:

Paul Krugman:

Guess Who Still Believes in Invisible Vigilantes: Lots of chatter about the WSJ’s [Republican-sourced] account of how the deficit negotiations broke down…. But here’s a passage that bothered me:

On Dec. 13, Mr. Boehner went to the White House…. The president told him he could choose one of two doors. The first represented a big deal. If Mr. Boehner chose it, the president said, the country and financial markets would cheer. Door No. 2 represented a spike in interest rates and a global recession.

Oh, dear — does the president still believe that failure to reach a Grand Bargain will cause an attack by the invisible bond vigilantes, and that this is the reason we should fear the fiscal cliff?

Continue reading "Department of "Oh Dear!": Basic Macro Briefing Weblogging" »

Noted for December 23, 2012

Worth Reading:

  • Corey Robin: Rimbaud Conservatism

  • Tim Noah: Why Is Ben Bernanke The Only Man In Washington Who Care About Jobs?: "Why is it, [Jared] Bernstein asked… that the only part of the government acting with any urgency to ease joblessness—the economic problem affecting the greatest number of Americans—is the unelected Federal Reserve?… [A]s top earners’ shares of the nation’s income grew, so did their shares of politicians’ attention. And since involuntary unemployment is not something wealthy people typically fear, Congress gave the issue scant attention…. In 1978, Congress formalized the Fed’s new role as macroeconomic poobah by giving it a dual mandate to curb inflation and maximize employment…. The bland official reason Bernanke gave for adopting the so-called “Evans Rule” was transparency…. In a small but significant way, Bernanke is refocusing some attention on the Forgotten Man (and Woman). It’s long past time somebody did."

  • Uwe Reinhardt: Medicare Spending Isn't Out of Control: "It’s the season of holiday cocktail parties, demanding intelligent chit-chat over Chardonnay. In such data-free environments it is always safe to say, “Medicare spending is out of control!” Wise heads will nod, because it is a credo with wide currency…. [T]raditional Medicare, which still attracts about 75 percent of all Medicare beneficiaries, affords its enrollees free choice of providers and therapy. In the jargon of health-policy wonks, it is “unmanaged.” Thus, it would not be surprising if unmanaged Medicare spending were, indeed, out of control…. [But i]n most periods Medicare spending per Medicare beneficiary has risen more slowly than per-capita spending under private health insurance. The exceptions are the period 1993-97, when private managed-care plans appeared to be able to hold down their outlays on health care better than did Medicare, and 2002-7, because there was a jump in spending as Medicare began, in 2006, to cover prescription drugs under the Medicare Prescription Drug, Improvement and Modernization Act of 2003."* Narayana Kocherlakota (2009): Some Thoughts on the State of Macro

  • Democratic House Candidates Now Have A Nearly 1.2 Million Vote Lead Over The Republicans:

Continue reading "Noted for December 23, 2012" »

Back When I Feared the Bond-Market Vigilantes: Maundering Old-Timer Reminiscence Weblogging

Maya and the Vigilantes  NYTimes com 1

I think Paul Krugman gets one partially wrong today…

Paul writes, correctly:

Maya and the Vigilantes: Maya MacGuineas… is the queen of the deficit scolds, having run the Committee for a Responsible Federal Budget, perhaps the most prominent of the many Pete Peterson-backed organizations trying to scare us about the deficit…. As Scheiber points out… her efforts actually make the situation worse. Her stock in trade is denouncing partisanship… but she (like pretty much all the deficit scolds) actually empowers hyperpartisanship by always condemning both sides equally… making excuses for hardliners in the GOP…. [R]emember that CRFB was one of the three deficit-scold organizations that gave Paul Ryan an award for fiscal responsibility. As I’ve pointed out many times, Ryan’s “plan” was essentially a scam: all the alleged deficit reduction came from revenue allegedly generated by closing loopholes, which he refused to specify, and from huge cuts in discretionary spending, which he refused to specify. What he really offered was huge tax cuts for the rich, only partly offset by savage cuts in aid to the poor. But CRFB, in pursuit of the image of even-handedness, chose to pretend that Ryan was a Serious, Honest Conservative, thereby removing any penalty for being, in fact, deeply unserious and dishonest….

I agree. I applaud. Maya MacGuineas spends time giving fire-chief hats to budget arsonists. And this is profoundly unhelpful.

But then I think Paul falls into a degree of heresy and error:

Continue reading "Back When I Feared the Bond-Market Vigilantes: Maundering Old-Timer Reminiscence Weblogging" »

Noted for December 22, 2012

Worth Reading:

  • Susan E. Woodward and Robert E. Hall: Mortgage Brokers and the Three Axes: "Untrained, inexperienced borrowers interact with specialist mortgage brokers in the mortgage origination market. Brokers earn two kinds of compensation, explicit charges the borrower pays in cash and a commission the lender pays based on the spread between the coupon rate the borrower agrees to and the par mortgage interest rate. Both types of broker compensation seem to confuse borrowers. The wholesale lender’s commission is determined by financial dynamics understood by a tiny group of professionals, and the rate sheet that summarizes the possible payments is never shown to borrowers.… With respect to policy changes that might help achieve a more efficient equilibrium, we believe in evidence-based design. Disclosure law has historically been in the hands of lawyers, who designed dense forms that may help absolve their clients of blame for consumer error, but which did little to help consumers find better deals. A new movement to design disclosures that are proven to be helpful, through field experiments, may result in some progress. Whether these forms can overwhelm the persuasion of skilled expert salesmen remains to be seen. We are inclined to believe that simple admonitions, such as “mortgage brokers are salesmen and the only way to get a good deal is to shop and bargain” and “you are more likely to get a good deal if you shop for no-cost loans” are more likely to yield improvements than, for example, trying to teach borrowers enough financial economics to understand the tradeoff between cash and the interest rate."

  • Nicholas Oulton: In defence of GDP as a measure of wellbeing

  • The “Snake Fight” Portion Of Your Thesis Defense.* Bill Black: Let’s Celebrate the Failure of the July 2011 Great Betrayal

  • Bruce Bartlett: How Democrats Became Liberal Republicans

Continue reading "Noted for December 22, 2012" »

Once Again, Our Big Short Term Problem Is Not the Budget Deficit But the Unemployment Deficit Weblogging

Why oh why can't Obama play this game? Suzy Khimm:

The incredible shrinking stimulus: President Obama’s concessions to Republicans on taxes and Social Security have grabbed the headlines, but there’s another big area where the White House has shifted considerably in the GOP’s direction: direct stimulus to revive the short-term economy.

In his original offer, Obama asked for $425 billion in [short-term] stimulus… $50 billion in infrastructure spending and other stimulus measures; mass mortgage refinancing to boost the housing market; $30 billion in unemployment extension; a $115 billion extension of the payroll tax holiday; and the extension of a host of business tax breaks known as extenders…. In his third offer, reported Monday, Obama dropped his ask from $425 billion to $175 billion in stimulus… keeping the federal extension of unemployment insurance, infrastructure spending and some business tax breaks, but abandoning the extension of the payroll tax holiday, among other major measures.

Yes, Ramesh Ponnuru, You Are Mistaken

Ramesh Ponnuru:

Re: The Serfdom Scare: It has been a long time since I read The Road to Serfdom, John, but I remember it to have argued that central planning was incompatible with a free society, not that “regulatory intervention” per se was. (I may well be mistaken.) In any case, Tyler Cowen goes after that same review with unaccustomed irritation.

And--surprise!--Ramesh Ponnuru is wrong. Hayek thought his thesis was that regulatory intervention was in the long run incompatible with a free society.

Friedrich Hayek, 1956 Preface to The Road to Serfdom, on the effects of the 1945-1951 Clement Attlee government on the United Kingdom:

Continue reading "Yes, Ramesh Ponnuru, You Are Mistaken" »

Liveblogging World War II: December 22, 1942

Chuck Bruns 3d Infantry Division:

Dear Mother, Dad & All,

Here goes some more nothing as nothing is happening. We had a mail call yesterday and the only ones I heard from was you, Lee and Esther Grierson. I know I don’t write to the others but you can tell them what I have to say but tell them to write to me. Letters from home are the best thing you can get from home. You ask if I had received Esther’s money? Yes I received it the first mail call I had over seas. You can send me just about anything you want to as I will get it some day. Would you send me a cheap pocket watch as you can’t buy watches here. Dad can wear my good one until I come home. Here it is only three days until Christmas and it is just going to be another day. I hope you received my Christmas letter & Telegram OK. I guess we will have to have a double Christmas next year. I’m pretty sure I’ll be home by then. The war will over by the end of July or the last of August (I hope) Good by to you all and have them all write to me. I’ll be thinking and loving you all of the time.

Just me “Chick”

And John Boehner Says That His Opposition to the 2009 Recovery Act Was Bullshit...

John Cochrane, Luigi Zingales, Robert Lucas, you others who know who you are, care to join John Boehner in admitting that you were bullshitting when you claimed that shifts in government spending did not affect the level of aggregate demand in the same direction and thus employment and production even in the short run? It's long past time to do so…

Neil Irwin: There Is No Spoon Weblogging--Fiscal Crisis Edition

Neil Irwin:

There is no fiscal crisis. What that means for the U.S.: Here are two numbers to know about the United States and Japan: 1.79 percent and 0.77 percent. Those are the yields on 10-year bonds in those two nations as of Thursday morning, the price their governments must pay to borrow money for a decade. In other words, investors are willing to fling their savings at those two seemingly dysfunctional governments for next to nothing…. Name a country with… a stable political system, a central bank to call its own, and a free flow of capital across its borders… and it has, right now, extraordinarily low interest rates…. [A]round the world there are all sorts of savers--pension funds, wealthy individuals in emerging nations, governments that want to ensure they have reserves put aside in case there were to be a run on their currency--for whom the goal is not so much to get a big yield on their savings, but rather to ensure that they will get their money back when they need it…. There are three points to draw from that.

One is that as the United States looks to reduce budget deficits, it should do so on its own terms…. Second, if there are things we can do with the cheap money the world is flinging at us that would make the U.S. economy more competitive in the longer run, we should take advantage…. The third point… is… there is an unfortunate tendency to treat the size of budget deficits and the level of inflation or unemployment in moral terms. Surely when a nation sins through fiscal irresponsibility and tempts the devil inflation, it ought to receive the wrath of a vengeful god. But that's not how it is. Macroeconomics is not a morality play…

Noted for December 21, 2012

Worth Reading:

  • Noam Scheiber: "what Obama failed to understand is that… he was never negotiating with Boehner. He was always negotiating with the majority of the House GOP…. Making concessions to them didn’t make a deal more likely. It just undermined his own position…. [That's] why going over the cliff always looked more or less inevitable…"

  • Everything You Need To Know About the Economy in 2012, in 34 Charts

  • Paul Krugman: On Not Seeing the Forest for the Equations: "I think [Noah] Smith is missing the point here. Alchemists and chemists used similar equipment…. That didn't make them the same endeavor. New Keynesians and real business cycle theorists both… use similar equations to represent consumer and producer behavior…. [T]his doesn't make them the same endeavor…. [W]hen the financial crisis struck… to a man freshwater economists not only argued against fiscal stimulus--which is a defensible position--but insisted that there was no possible way to justify stimulus, that such ideas had been refuted and that 'nobody' believed in them anymore. The only way to understand these claims is to realize that the freshwater types simply didn't accept the legitimacy of what the New Keynesians were doing--in fact, didn't even bother to read any of it…. [Y]es, the equations in one of Mike Woodford';s papers look a lot like the equations coming out of Chicago or Minneapolis. And a few years ago it was possible to delude oneself into believing that this represented a true convergence of thought. But recent events have proved that it just wasn't true."

  • Kevin Outterson: NEJM Health Law Roundup | The Incidental Economist: "States that forgo Medicaid expansion will lose billions… that would have flowed through insurance plans to hospitals, doctors and other providers…. I predict significant political pressure for governors to not take the Red State Option…. [S]tates will lose billions of DSH funding over the next decade. Loss of some DSH was a tolerable bargain when hospitals were promised near-universal enrollment…. John Graves crunches the numbers and quantifies how much the Red State Option will hurt DSH…"

  • Robert Waldmann: Brad DeLong: I Think Noah Smith Gets One Wrong: State-of-Macroeconomics Weblogging: "I'm going to be very pedantic. do the techniques of modern macro lead Williamson to include that low interest rates must lead to deflation? Yes indeed they do, because one of those techniques is assuming a steady state and another is linearizing around it.The core assumptions of taste and technology do not imply a steady state (let alone a unique steady state). But assuming one is, like assuming rational expectations, standard practice."

  • Jonathan Chait explains whyMcArdle Wins Worst Newtown Reaction Award

Continue reading "Noted for December 21, 2012" »

Liveblogging World War II: December 20, 1942

World War II Today: Denis Foreman:

At the end of 1942 Denis Forman was a Major in the Argyll and Sutherland Highlanders, posted to the Shetland Isles, in the far north of Great Britain, closer to Norway than to London. He had developed an interest in the new ‘battle school’ training methods and was intent upon developing his command of men with them. He had an uneasy relationship with some of his senior officers over the issue:

Continue reading "Liveblogging World War II: December 20, 1942" »

Robert Waldmann on Characterizing Outcomes in Economic Modelling

Robert Waldmann writes:

I Think Noah Smith Gets One Wrong: State-of-Macroeconomics Weblogging: I'm going to be very pedantic. do the techniques of modern macro lead Williamson to include that low interest rates must lead to deflation ? Yes indeed they do, because one of those techniques is assuming a steady state and another is linearizing around it. The core assumptions of taste and technology do not imply a steady state (let alone a unique steady state). But assuming one is, like assuming rational expectations, standard practice.


Rehnquist: the Unh-hnh Moment


Rehnquist: the Unh-hnh Moment: Years ago when the world was young, Mr. and Mrs. got to share a party boat with, inter alia,Chief Justice William Rehnquist. After assorted bits of casual conversation and observation  she offered her insight. "He's a menace."... What was news to her was not the substance, but personality: he was si easy-going, genial, modest, low-key: a guy in a baseball cap.... It was a good call.... Mr.Nice guy, setting aside, say, his utter indifference to the horrors of racial discrimation and his near-manic enthusiasm for the death penalty. Also--but this may have taken more careful scrutiny--as manipulative and result-oriented as any judge since his great doppleganger, William O. Douglas. All by way of background for one I hadn't heard until today. It's in the New York Times review of a new biography....

After years of promoting states "rights"--or "federalism"--and scoring some big victories, he surprised court-watchers by writing a decision holding that Congress could force states to give their employees family and medical leave. He may have gone "wobbly", as Margaret Thatcher might have said, from watching the struggles of his daughter, a single mother.


Noted for December 20, 2012

Worth Reading:

  • M.C.K.: Learning from abroad: Don't forget Poland: "If you want to understand why Poland had a good crisis, you need to understand three things…. [T]he zloty was never pegged to the euro…. Of course, the devaluation of the zloty would not have been sufficient to keep Poland out of recession had it not been for an act of flagrant government intervention into the private financial system: the Vienna Initiative… [which] encouraged Western European lenders to maintain their exposures to Central and Eastern Europe…. The last thing you need to understand about Poland is that it practised robustly counter-cyclical fiscal policy…. Poland’s economic performance contains many interesting lessons for those who want to learn from it. But that requires examining all of the evidence, not just what is most convenient."

  • Robert Skidelsky: Models Behaving Badly: "[I]mprecision is one thing; the systematic overestimate of the economic recovery in Europe is quite another…. Two key mistakes stand out. The models used by all of the forecasting organizations dramatically underestimated the fiscal multiplier…. Second, they overestimated the extent to which quantitative easing (QE) by the monetary authorities – that is, printing money – could counterbalance fiscal tightening…. Forecasting organizations are finally admitting that they underestimated the fiscal multiplier…. [T]he evidence emerging from successive rounds of QE in the UK and the US suggests that while it did lower bond yields, the extra money… never reached the real economy…. Before they can do any good, the forecasters must go back to the drawing board, and ask themselves whether the theories of the economy underpinning their models are the right ones."

  • Robert Skidelsky: Keynes said one simple thing… « Keynesians of the world, unite!: "Every British Keynesian would agree with Jeffrey Sachs that the UK needs 'increased infrastructure and educational investments' and that spending cuts should not be the main tool of deficit reduction. But why does Professor Sachs insist on setting out his sensible stall in opposition to what he calls the 'Keynesian model'? Is it the odium theologicum of economics that makes natural allies attack each other? Keynes said one very simple thing. An economy hit by a serious shock to demand may remain stuck in a low investment trap. In these circumstances, the government needs to boost investment spending. Why does Prof Sachs find this so shocking? It’s exactly what he says!"

  • An Audit of the Australian Gun Buyback

  • Felix Salmon: How capitalism breaks the web

Continue reading "Noted for December 20, 2012" »

Jeff Toobin on Robert Bork, 1927-2012

Postscript: Robert Bork, 1927-2012 : The New Yorker:

Robert Bork, who died Wednesday, was an unrepentant reactionary who was on the wrong side of every major legal controversy of the twentieth century. The fifty-eight senators who voted against Bork for confirmation to the Supreme Court in 1987 honored themselves, and the Constitution. In the subsequent quarter-century, Bork devoted himself to proving that his critics were right about him all along.

Bork was born in 1927 and came of age during the civil-rights movement, which he opposed. He was, in the nineteen-sixties, a libertarian of sorts; this worldview led him to conclude that poll taxes were constitutional and the Civil Rights Act of 1965 was not. (Specifically, he said that law was based on a “principle of unsurpassed ugliness.”) As a professor at Yale Law School, his specialty was antitrust law, which he also (by and large) opposed.

Continue reading "Jeff Toobin on Robert Bork, 1927-2012" »

I Think Noah Smith Gets One Wrong: State-of-Macroeconomics Weblogging

If Noah Smith does not want to call what I see as serious and significant deficiencies “failures of technique”, then what does he suggest that I call them?

Noah Smith:

Noahpinion: Macro, what have you done for me lately?: Paul Krugman says the state of macroeconomics is rotten. Steve Williamson disagrees…. On the question of whether macro is divided into warring "schools", I'd say Williamson is 85% right, and Krugman only 15%. Yes, there are some systematic disagreements, but they're not very bitter or rancorous, and everyone uses mostly the same "language". The old "freshwater"/"saltwater" distinction is still there to a limited degree among older faculty, but younger faculty don't seem to see much of a dividing line…. So if collegiality and similarity of technique are measures of a field's health, then macro is doing quite well...

I think that is wrong. It depends, I think, on what you take "technique" to mean:

Continue reading "I Think Noah Smith Gets One Wrong: State-of-Macroeconomics Weblogging" »

Robert Bork Has Died: R.I.P.

"It was a very small [poll] tax, it was not discriminatory, and I doubt that it had much impact on the welfare of the nation one way or the other…"

KENNEDY: Let me go to the issue of poll taxes. The right to vote is the cornerstone of a free society. For decades poll taxes were used to keep poor Americans, often of racial minorities, from exercising the franchise. In Harper v. Virginia Board of Elections, which was decided in 1966, the Supreme Court struck down the poll tax because it deprived poor Americans of equal protection of the laws by barring them from exercising their fundamental right to vote. In its majority opinion the court stated: "Wealth or fee paying has, in our view, no relation to voting qualifications. The right to vote is too precious, too fundamental to be so burdened or conditioned." Judge Bork, is it not true that in your confirmation hearings to be Solicitor General in 1973 you testified that you thought that Harper, and I quote, "as an equal protection case seemed to be wrongly decided"?

You were asked whether as far as the welfare of the nation was concerned the Harper case was correctly decided. Am I correct that you answered, "I do not really know about that. As I recall it was a very small poll tax. It was not discriminatory and I doubt it had much impact on the welfare of the nation one way or the other." And then you were asked about the constitutional issue, and you responded, "I think that is a question of degree. It depends on the size of the poll tax."

Do you remember? Is that accurate?

BORK: AS I recall it, Senator, yes.

KENNEDY: NOW, am I correct that in 1985, in your forward to The Constitution and Contemporary Theory, you again suggested the Supreme Court had been wrong to strike down the poll tax in the Harper case?

BORK: Sir, I am willing to discuss that case, fully, Senator.

KENNEDY: I am just wondering if you have changed your view that the Supreme Court was wrong in the Harper case to hold that poll taxes are unconstitutional?

BORK: I think it was, and I will tell you why, and I have no desire to bring poll taxes back into existence. I do not like them myself. But if that had been a poll tax applied in a discriminatory fashion, it would have clearly been unconstitutional. It was not. I mean, there was no showing in the case. It was just a $1.50 poll tax.

Continue reading "Robert Bork Has Died: R.I.P." »

Hoisted from the Archives: Paul Krugman in 2009 on the Future of Macroeconomics

Where Does Macroeconomics Go From Here?: SEPTEMBER 03, 2009: Paul Krugman has questions:

How Did Economists Get it So Wrong?: Between 1985 and 2007 a false peace settled over the field of macroeconomics. There hadn’t been any real convergence of views between the saltwater and freshwater factions. But these were the years of the Great Moderation — an extended period during which inflation was subdued and recessions were relatively mild. Saltwater economists believed that the Federal Reserve had everything under control. Fresh water economists didn’t think the Fed’s actions were actually beneficial, but they were willing to let matters lie.

But the crisis ended the phony peace. Suddenly the narrow, technocratic policies both sides were willing to accept were no longer sufficient — and the need for a broader policy response brought the old conflicts out into the open, fiercer than ever. Why weren’t those narrow, technocratic policies sufficient? The answer, in a word, is zero.

Continue reading "Hoisted from the Archives: Paul Krugman in 2009 on the Future of Macroeconomics" »

No More Obama Administration Fiscal Cliff Concessions Until the *Real* Republican Principals Show Up at the Negotiating Table

Paul Krugman:

That Old Sick Feeling: Here we go again — or so I find myself fearing. Obama’s fiscal deal offer was already distressing — cuts to Social Security, and a big concession, it turns out, on taxation of dividends, retaining most of the Bush cut (with the benefits flowing overwhelmingly to the top 1 percent). It wasn’t clear that the deal would have gotten nearly enough in return. But sure enough, it looks as if Republicans have taken the offer as a sign of weakness, as a starting point from which they can bargain Obama down. Oh, and they’re not giving up at all on the idea of using the debt ceiling for further blackmail…. [I]t’s feeling a lot like 2011 again, with the president negotiating with himself while the other side enjoys the process. So Obama needs to draw a line…. Yes, this probably means going over the cliff. So be it: it’s less bad than the alternative.

Noted for December 19, 2012

Worth Reading:

  • Pierre-Olivier Gourinchas and Olivier Jeanne: Global safe assets

  • Sasha Issenberg: How Obama Used Big Data to Rally Voters

  • Josh Marshall: On the Road to Peak Stupid: "[T]here appears to be no limit to the appetite for or at least the supply of breezy contrarianism. But when it’s about kids getting shredded by in mass killings it’s even less appealing than it normally is. Which brings us to this now much-mocked article by Megan McArdle. After breezily rejecting all possible steps society can take… Megan McArdle … does have one practical idea: teach the kids to rush the gunman, mid-massacre… 'I’d also like us to encourage people to gang rush shooters, rather than following their instincts to hide; if we drilled it into young people that the correct thing to do is for everyone to instantly run at the guy with the gun, these sorts of mass shootings would be less deadly, because even a guy with a very powerful weapon can be brought down by 8-12 unarmed bodies piling on him at once.' It’s true that in some cases, if a dozen or more people can rush a gunman at once there’s some chance they’ll overpower him. It’s also pretty certain a bunch of those people will get killed. But please don’t conclude by putting this forward as some sensible approach to school massacres after dismissing others as unrealistic or impractical. The whole lump of nonsense makes me wish purveyors of over-cleverness and hack think tank denizen garbage could be sent to a time out."

Continue reading "Noted for December 19, 2012" »

Why Can't Obama Learn How to Play This Game? Part CCXXVII

MisterMix: Balloon Juice: Chain of Fools:

Even Kevin Drum, who thinks that some kind of compromise is necessary on Social Security, doesn’t like the chained CPI “compromise”:

The only proposal being offered right now is to adopt chained CPI, full stop. As far as I’m concerned, that’s unacceptable, and no Democrat should even think about endorsing it. We can argue all day about whether Social Security needs rescuing in the first place, and if we decide it does, we can then argue about exactly which combination of measures would be fairest and best. But some things should be completely off the table, and passing a package that’s 100% benefit cuts is one of them. It’s ridiculous. This is really a no-brainer.

I’ve refrained from following every twist and turn in the fiscal cliff negotiations, but the dynamics in the House are pretty clear. Boehner’s speakership has one foot on a banana peel and one foot in the grave, so it’s doubtful whether he can deliver votes on anything he agrees to. I’m sure Hey Pauly hey Pauly hey Pauly lets have a ball Ryan and the Tea Party debasers want to starve America’s grannies, but there are still some sane members of the caucus who realize that the only lobby more scary than the NRA, the AARP, will eat them for breakfast like stewed prunes if they cut Social Security. So, at best, what Boehner is offering is part of his caucus to form a coalition with of Democrats, and the minute that vote goes through, the Republicans who voted no will run to the microphones to remind their constituents that they didn’t vote to cut Social Security. Democrats are stupid, but I doubt they’re that stupid.

Also, too: I thought the point of the fiscal cliff was to force Congress to compromise because the cuts in the fiscal cliff are deep and onerous. Maybe chained CPI isn’t deep, but it’s certainly onerous, compared to the other options for fixing Social Security, chief among which is raising the ceiling on the income subject to the Social Security tax.

Can It Really Be the Case That the Obama Administration Is Proposing a Deal That Would Cut Social Security Benefits But Not Raise Social Security Revenues

There are many overlapping ways of looking at the federal budget. One way is to look at revenues and spending in total--the "unified budget". Another way is to look at the health of the various "trust funds"--Social Security, Medicare, etc.--that have dedicated revenue streams coming in and dedicated expenditures going out.

For the Social Security trust fund, over the long-term expected revenues are less than planned payments--which means that either (a) benefits will have to be cut, (b) revenues will have to be raised, or (c ) somebody will have to perform some political heavy lifting in order to beef up the trust fund. Changes to Social Security law should ideally involved moves on all three fronts--some of (a), some of (b), and some of (c ) in order to get the long-term arithmetic of the trust fund into balance.

But now the Obama administration appears to be planning to agree to do just some of (a) without touching (b) or (c ).

Can't anybody in the White House play this game?

Coffee with Stephanie Kelton

As of January 1, 2016, enough time will have passed for us to be able to judge whether the Federal Reserve's policy shift to the Evans rule plus an open-ended $1 trillion a year of balance sheet has been a success or not.

Stephanie Kelton is almost certain it will not be a success. I think it might well work. Mike Woodford is almost certain that it will work. It seems to me that there is an opportunity here for me to lock in a profit of some sort here…

The first stage of this is crafting a bet that Stephanie Kelton would accept for what states of the economy on January 1, 2016 would qualify as success for the Fed, and what states of the economy would qualify as failure. She does expect a better economy in three years--She expects private sector deleveraging to continue at its slow pace And as a result the forces making for balance sheet recession to ebb. Success would, for her, have to count as stronger than expected improvement in the economy given this positive underlying trend.

How should I phrase the bet? And then what bet should I offer Mike Woodford when I run into him by accident in San Diego?

Liveblogging World War II: December 18, 1942

MY DAY by Eleanor Roosevelt:

WASHINGTON, Thursday—The train trip down yesterday was a wonderful opportunity to do much accumulated work. When I arrived here I had time to get ready for a tea, which Mrs. Harry Hopkins and I gave for the nurses and the nurses' aides at Columbia Hospital.

They are using nurses' aides in this hospital with great success. I cannot help thinking that the attitude of the superintendent of nurses in a civilian hospital has a great deal to do with the successful use and development of nurses' aides.

I saw in some magazine the other day, the suggestion that we need to develop better qualified people to help in hospitals. I know of no way to do this except by taking in nurses' aides and keeping them under supervision until they develop skill enough to be given real responsibility.

Continue reading "Liveblogging World War II: December 18, 1942" »

The Debate About Restricting Semi-Automatic Weapons: TBogg vs. Glenn Reynolds


When I’m Called Off, I Got A Sawed Off | TBogg: Professor Glenn  Reynolds… has a few questions for all you skinny-jeans-wearin’ latte-sippin’ emo-emotin’ prefer-our-kids-alive-more-than-dead fancy-pants gun-grabbin city slicker man-card-less metrosexual homoseckshuls…. [T]he Ole Perfesser fired the first Protect The NRA At All Costs volley last Friday by penning an Op-Ed…. Reynolds began his argument by  invoking the words of noted handgun expert William S. Burroughs, whose weaponry CV is limited to shooting his wife in the forehead while drunk…. The law professor then called his second witness: noted academic fraud… John Lott… would love to show you his gun data … but his dog ate his hard-drive after he left it in his other pants with his girlfriend in Canada so, sorry.

Continue reading "The Debate About Restricting Semi-Automatic Weapons: TBogg vs. Glenn Reynolds" »

Noted for December 18, 2012

Worth Reading:

  • Mark Thoma: How to Reduce Political Gridlock and Boost the Economy

  • MCK: Finance: The safe asset shortage: "[A] conversation I had over Twitter with David Beckworth…. We agreed that there are too few safe assets relative to the demand. But where I thought the government ought to issue more Treasury bonds to satiate investors, he thought that the solution was to induce the private sector to 'create; more safe assets. I doubted whether that is possible…. [A] genuinely safe asset… [is] liquid… may sometimes pay investors less than inflation but they always pay out what they say they will…. Assets that only sometimes keep their promises cannot be called safe, however, even if they fool people into believing otherwise for significant periods of time. So, can the private sector issue genuinely safe assets? I don’t see how, since private borrowers always have some default risk…. [I]nvestors in private credit act as if there is almost no risk for long periods of time before suddenly freaking out. When everyone decides to sell their loans at the same time, it becomes very difficult for any individual investor to dump his holdings. Thus, private debt also has a nasty tendency to become illiquid. These are not the characteristics of a safe asset…. The euro crisis can be thought of in a similar way. Greece’s sovereign debt problem spooked investors about Italian debt because, despite the fact that Italy has one of the world’s largest primary budget surpluses and has been steadily lowering its debt/GDP ratio for decades, Italy cannot print its own currency…. One would think that this would be the end of the discussion, but Mr Beckworth has a different definition of 'safe' than I do, which, to be fair, comes from Mr Gorton and his colleagues…. Mr Gorton is well aware of the changing nature of 'safety' and believes that the government needs to play a role. His preferred solution is to have the state make certain types of unsafe assets genuinely safe by regulating and guaranteeing them. Of course, that would mean that the government is the one creating the safe assets…. [I]t seems that there are only two ways to relieve the shortage of safe assets: the government could issue more debt or the government could guarantee private debt… the effect on the government’s balance sheet is the same."

  • Bill Black: The Second Great Betrayal: Obama and Cameron Decide that Banks are above the Law - New Economic Perspectives

  • Mark Thoma: That Terrible Trillion: "Deficit scolds long for 'frickin' sharks with frickin' laser beams attached to their frickin' heads' to use against 'programs that shield both poor and middle-class Americans from harm'"

Continue reading "Noted for December 18, 2012" »

Has Barack Obama Ever Bought a Used Car? Negotiation 1 Edition

I now strongly suspect that Barack Obama has never bought a used car.

The White House staffers talking to Ezra Klein and company about the "austerity bomb" deal. They are all talking about how close Obama's position is to what Boehner is willing to accept. They are not talking about how close Obama's position is to what Cantor and the right wing of the House Republican caucus are willing to accept.

But Boehner is not the principal here--not unless Boehner has declared himself willing to be reelected Speaker with Pelosi's votes if the Republian right bolts, and Pelosi has signed off on such a plan. If Obama makes a deal with Boehner, the next stage is for Boehner to say that while the deal is fine with him, he cannot control his members, and that Obama needs to make additional concessions in order to bring Cantor and the right wing of the House Republican caucus on board.

But now that White House staffers are blathering about how they are close to a deal with Boehner--while Cantor and the Republican right have not given Boehner their proxy--Obama's leverage is slipping away. The smart thing for him to do is to say that he is not the principal either: that Pelosi has been so loyal to him and his policies even at the expense of the jobs of many in her caucus that he needs her approval before he can commit, and her approval will not come until after Cantor and company have shown their hand.

The Crayon Scribble Page That Is the Washington Post Strikes Again!: Federal Reserve Policy

Why oh why can't we have a better press corps?

Mark Thoma does the intellectual garage pickup:

Economist's View: Is the Fed Risking "Dangerous Side Effects"?: What does [Robert Samuelson] think a dual mandate means if not the "twin targeting of unemployment and inflation"? That's not unique to the 1970s…. [Samuelson] is trying to tell the story about shifting Phillips curve due to rising inflationary expectations, but he misses a key part of the story…. [T]he Fed was shooting at the wrong unemployment target (you can find this story in most textbooks, e.g. see Mishkin's text on demand-pull inflation). The Fed was shooting at a 4 percent unemployment target… the natural rate had drifted as high as 7 percent…. Unfortunately, the Fed didn't not realize this…. The fundamental problem… a miscalculation of the natural rate of unemployment… has the Fed made this mistake again? Is the natural rate of unemployment a lot higher than 6.5 percent?… First, the Fed is fully aware of this past mistake…. Second, there has been considerable effort to measure the structural/cyclical/frictional unemployment mix…. We didn't have this type of information in the 1970s…. Finally, there is an inflation threshold of 2.5 percent, a relatively low level of tolerance for mistakes of this type. If the Fed is wrong about the structural rate, we'll see inflation, and if it the projected inflation rate drifts above 2.5 percent, the program will be reversed. I have no doubt that the Fed is serious abut pulling the plug….

Samuelson… is good at playing the Very Serious Person role (inflation is coming!, the debt will cause interest rates to spike!, there could even be "dangerous side effects, including a future financial crisis"!), but the Fed is not risking a repeat of the 1970s, not even close.

Continue reading "The Crayon Scribble Page That Is the Washington Post Strikes Again!: Federal Reserve Policy" »

Can't Obama Play This Game?: This Is a Lousy Fiscal Cliff Deal Weblogging

"Chained-CPI" is code for "let's really impoverish some women in their 90s!" It's a bad policy. It should be off the table. Failing to extend the payroll tax cut is bad policy. It should be off the table. Failing to boost infrastructure spending is bad policy. It should be off the table.

This deal would still be on the table in January. And odds are Obama could get a much better deal than this come January:

Continue reading "Can't Obama Play This Game?: This Is a Lousy Fiscal Cliff Deal Weblogging" »

Liveblogging World War II: December 17, 1942

Joint Declaration by Members of the United Nations:

The attention of the Belgian, Czechoslovak, Greek, Jugoslav, Luxembourg, Netherlands, Norwegian, Polish, Soviet, United Kingdom and United States Governments and also of the French National Committee has been drawn to numerous reports from Europe that the German authorities, not content with denying to persons of Jewish race in all the territories over which their barbarous rule has been extended, the most elementary human rights, are now carrying into effect Hitler's oft-repeated intention to exterminate the Jewish people in Europe.

From all the occupied countries Jews are being transported in conditions of appalling horror and brutality to Eastern Europe. In Poland, which has been made the principal Nazi slaughterhouse, the ghettos established by the German invader are being systematically emptied of all Jews except a few highly skilled workers required for war industries. None of those taken away are ever heard of again. The able-bodied are slowly worked to death in labor camps. The infirm are left to die of exposure and starvation or are deliberately massacred in mass executions. The number of victims of these bloody cruelties is reckoned in many hundreds of thousands of entirely innocent men, women and children.

The above-mentioned governments and the French National Committee condemn in the strongest possible terms this bestial policy of cold-blooded extermination. They declare that such events can only strengthen the resolve of all freedom-loving peoples to overthrow the barbarous Hitlerite tyranny. They reaffirm their solemn resolution to insure that those responsible for these crimes shall not escape retribution, and to press on with the necessary practical measures to this end."

Brad DeLong: Are Your Wages Set in Beijing?


This is I think an argument from my old teacher Richard Freeman, about how in the eighties and nineties effectively 2 billion workers were added to the potential global manufacturing work force. Developments in communication and trade, the coming of the container, the coming of the Deng Xiaoping policy reforms in China, reform in India, confidence these policy changes would persist--all these meant that businesses all around the world wondering where to locate manufacturing could be confident that they could if they wanted to, if it made sense, draw on a labor force that was 2 billion bigger than it had been in the 1970s.

In that context, the fact that the United States had a lot of highly-skilled manufacturing workers who had an immense productivity edge was no long an effective factor in world production. Thus the claim is that an awful lot of the rise in inequality in the United States between 1980 and today is the result of this global pressure on the American economy.

Back in the mid 1990s when I was working for the Clinton Administration, I wrote a bunch of memos about how this was then nonsense--that is, it was simply too small to matter.

Since the mid 1990s, this factor has become significantly larger.

Continue reading "Brad DeLong: Are Your Wages Set in Beijing?" »

DeLong Smackdown Watch: Paul Krugman Says That I Make the Story too Complex Weblogging

Paul Krugman:

Inaction is the Greatest Risk: Inaction is the Greatest Risk (Wonkish) Brad DeLong is exasperated with people who insist that the Fed's modest moves toward more support for the economy are "risky", but cannot explain why in any intelligible fashion…. It is just bizarre to angst about how the Fed might "distort" markets that are already hugely distorted.

But my first take on the nature of that distortion is a lot simpler than Brad's.

Continue reading "DeLong Smackdown Watch: Paul Krugman Says That I Make the Story too Complex Weblogging" »

Noted for December 17, 2012

Worth Reading:

  • Daniel Froomkin: Defying Gravity

  • Joe Nye: Immigration and American Power

  • Menzie Chinn: vs. the Hax of the Heritage Foundation

  • * Karen Hughes*: "And if another Republican man says anything about rape other than it is a horrific, violent crime, I want to personally cut out his tongue."

  • Margot Sanger-Katz: "To form the board, its 15 full-time members will need to be confirmed by the Senate, a daunting prospect given GOP opposition to IPAB. But post-election nominations are almost certainly in the works if Obama wins, and senators would be wise to let some of the nominations go through. If the board fails to make recommendations when required, its power is transferred to the secretary of Health and Human Services. Instead of 15 'unelected bureaucrats' calling the shots on Medicare policy, the country will be left with just one."

Continue reading "Noted for December 17, 2012" »

Libertarian Automatic Weapons Safety

One Hundred Thirteenth Congress of the United States of America


Begun and held at the City of Washington on Tuesday, the fifth day of January, two thousand and thirteen

An Act Entitled The Firearms Responsibility Act of 2013.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,


(a) SHORT TITLE.—This Act may be cited as the "Firearms Responsibility Act of 2013


Section 1: Liability

(a) If any firearm is used to inflict death or injury on five or more people on any single day

(b) All present and past owners of that firearm shall jointly and severally be strictly liable for all legal damages arising from any and all uses of that firearm.

(c ) Should any of the present or past owners liable under the terms of this act be a corporation,

(i) The corporation's present and past officers shall jointly and severally be strictly liable for all legal damages arising from any and all uses of that firearm.

(ii) The corporation's present and past directors shall jointly and severally be strictly liable for all legal damages arising from any and all uses of that firearm.

(iii) The corporation's present and past plurality shareholder shall jointly and severally be strictly liable for all legal damages arising from any and all uses of that firearm.

DeLong Smackdown Watch: Cosma Shalizi

Cosma Shalizi comments on Brad DeLong : Economists on the Ineffectiveness of Fiscal Policy; Sh@t Is All F@#^ Up and Bullsh@t Weblogging:

More elaborately: our gracious host would really like to be just a little bit to the left of a technocratic center, and to debate those just a little bit to his right about optimal policies within a shared objective function, and pretending that it is a technical and not a political discussion. But because shit is fucked up and bullshit, and because everyone at all on the right has spent forty years (at least) doing their damndest to make sure shit is is fucked up and bullshit, even the smallest gesture in that direction is not so much reconciliation as collaboration. And so our host has sads. (So, for that matter, did Uncle Paul, before he learned to relish their hatred.) The realization that this applies to economists --- that much of the discipline is not a branch of science or even of dialectic, but merely of rhetoric (and not in an inspirational, D. McCloskey way either) --- cannot come too soon. Whether someone who still assigns Free to Choose to callow freshmen, in 2012, is really in a position to complain about the absurdities of Casey Mulligan is a nice question; but recognizing that half your erstwhile colleagues were always mere ideologists is a step in the right direction.

Can't Obama Learn How to Play This Game?: Secretary of State Edition

You would think that it would have penetrated his mind by now that to name sitting senators or governors to cabinet-level jobs is to be a loser--to run substantial policy risks for little relative gain. If John Kerry wants to be Secretary of State, let him wait for his senate term to expire…