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June 2013

Mary Beard Reviews Claire Holleran's "Shopping in Ancient Rome: Tuesday Hoisted from the Non-Internet from 2000 Years Ago

Mary Beard:

Mary Beard reviews ‘Shopping in Ancient Rome’ by Claire Holleran: The most memorable account of an ancient shopping expedition is found in some comic verses by the third-century BC poet Herodas, who lived in Alexandria, by far the smartest city in the Western world at the time. In his poem a woman called Metro and a couple of her friends visit a shoe shop owned by one Kerdon (‘Mr Profiteer’). As soon as they arrive, slaves bring a bench for the ladies to sit on, while Kerdon tries to interest them in his wares with a pushy sales pitch that mixes extravagant claims for the styles, workmanship and glorious colours of the shoes, with what sounds like a well practised hard-luck story lamenting his life of unremitting toil and all the mouths he has to feed. Eventually every variety of shoe in the shop is brought out – Sikyonians, slippers, boots, Argive sandals, scarlets, flats – before the ladies start haggling about prices and thinking about the footwear they are going to need for an upcoming festival.

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Noted for June 18, 2013

  • Ken Rogoff: Dornbusch's Overshooting Model After Twenty-Five Years, The Mundell-Fleming Lecture: "Now underlying Dornbusch's disarmingly simple result lies some truly radical thinking. At the time Rudi was working on his paper, the concept of sticky prices was under severe attack. In his elegant formalization of the Phelps islands model, Lucas (1973) suggested that one could understand the real effects of monetary policy without any appeal to Keynesian nominal rigidities, and by 1975, Lucas had many influential followers in Sargent, Barro and others. The Chicago-Minnesota School maintained that sticky prices were nonsense and continued to advance this view for at least another fifteen years. It was the dominant view in academic macroeconomics. Certainly, there was a long period in which the assumption of sticky prices was a recipe for instant rejection at many leading journals. Despite the religious conviction among macroeconomic theorists that prices cannot be sticky, the Dornbusch model remained compelling to most practical international macroeconomists. This divergence of views led to a long rift between macroeconomics and much of mainstream international finance. Of course, today, the pendulum has swung back entirely, and there is a broad consensus across schools of thought that some form of price rigidity is absolutely necessary to explain real-world data, in either closed or open economies. The new view can be found in many places, but certainly in the closed economy work of authors such as Rotemberg and Woodford (1997), Woodford (2002), and of course in New Open Economy Macroeconomics. The Phelps-Lucas islands paradigm for monetary policy is, for now, a footnote (albeit a very clever one) in the history of monetary theory."

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Liveblogging World War ii: June 17, 1943

FDR's secretary of war stifles Truman's inquiry into suspicious defense plant:

On this day in 1943, President Franklin D. Roosevelt's secretary of war, Harry Stimson, phones then-Missouri Senator Harry S. Truman and politely asks him not to make inquiries about a defense plant in Pasco, Washington.

World War II was in full swing in 1943 and Truman was chairing a Senate committee on possible war profiteering committed by American defense plants. In the process of investigating war-production expenditures, Truman stumbled upon a suspicious plant in the state of Washington and asked the plant managers to testify in front of the committee. Unbeknownst to Truman, this particular plant was secretly connected with a program to develop an atomic bomb—"the Manhattan Project." When Stimson, one of a handful of people who knew about the highly classified Manhattan Project, heard about Truman's line of questioning, he immediately acted to prevent the Missouri senator from blowing the biggest military secret in world history.

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Monday DeLong-Being-Stupid Self-Smackdown Watch: Expansionary Fiscalists vs. Expansionary Monetarists and the Federal Reserve's Shift from a Time- to a State-Based Policy Rule: Will It End Our "Lost Decade"?

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The Federal Reserve's announcement last December that it was switching from a time- to a state-based policy rule has not REPEAT NOT raised expectations of inflation over the next five, ten, or thirty years. Perhaps this is because Federal Reserve communicators have spent a lot of time telling people that the shift does not mean that the Federal Reserve will tolerate higher inflation. Perhaps it is for other reasons.

This is a powerful empirical piece of evidence that it is much harder to summon the Inflation Expectations Imp than economists like Greg Mankiw had thought. It is a point for the expansionary fiscalists in their debate with the expansionary monetarists.

And it is a smackdown of me for my fit of enthusiastic expansionary monetarism last December, when I wrote: Brad DeLong: The Federal Reserve's Shift from a Time- to a State-Based Policy Rule: Will It End Our "Lost Decade"?.

Here's what I wrote last December:

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Noted for June 17, 2103

  • Paul Krugman: Taylor's Rule on Fiscal Policy: "I just happened to run across John Taylor’s latest… Taylor now says that we should not cite falling spending by state and local governments as a reason for the weak recovery. Why? Because, he says, such spending is endogenous: state and local governments cut spending in line with revenue. Basically, they’re cash constrained; so what can you expect? But wait: Taylor has prominently argued (pdf) that the Obama stimulus… part that involved aid to state and local governments, was ineffective, because the state and local governments just used the money to pay down debt — that is, giving them more cash wouldn’t have mattered. I’m sure that Taylor will come up with some reason these statements aren’t diametrically opposed. But from here it looks like the Taylor rule on fiscal policy is that Obama is always wrong, and that state and local governments are either cash-constrained or not cash-constrained, depending on which assertion is needed to back up that position."

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Joe Gagnon: Saving Abenomics

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Joe Gagnon is right: there is no (good) alternative to Abenomics:

Saving Abenomics: No Time for Cold Feet on QE: Prime Minister Shinzo Abe captured the attention of economists, pundits, and global markets with his bold plans to boost growth and inflation in Japan. Stock prices soared, real bond yields plummeted, and the yen dropped sharply. These trends boded well for Abe’s success. More recently, markets seem disappointed with the details (or lack thereof) on Abe’s structural reforms and the unwillingness of the Bank of Japan (BOJ) to implement its quantitative easing (QE) plans flexibly. In this post I focus on what the BOJ should do to achieve its inflation goal and how that will help reduce the long-run burden of Japan’s large national debt.

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Noted for June 16, 2013

  • Aaron Carroll: The sky didn’t fall before, and it won’t fall now: "One of the things I’m fascinated by is the way history repeats itself when it comes to health care reform. Everyone acts as if what we’re doing is crazy new, as if it’s never been done before. This kind of thinking was the subject of one of my favorite Huffington Post columns (which I encourage you to go enjoy). I think we’re seeing the same thing again with respect to Medicaid and the ACA. Many of the claims about the expansion’s imminent failure involve arguments that aren’t new. In fact, they were the same as those being employed against traditional Medicaid decades ago. So I had awesome college student TIE-assistant Jaskaran Bains look up media coverage of Medicaid when it was passed. See if any of it sounds familiar."

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Rick Santorum: Why Mitt Romney Didn’t Win

Rick Santorum gives a good speech:

Rick Santorum: Why Mitt Romney didn’t win: One after another, [the speakers the Romney Campaign highlighted at the convention] talked about the business they had built. But not a single—not a single —factory worker went out there. Not a single janitor, waitress or person who worked in that company! We didn’t care about them. You know what? They built that company too! And we should have had them on that stage….

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Noted for June 15, 2013

  • Bob Rob Reich: Much Ado About MOOCs: "Sandel is legendary lecturer, and Justice is rightly one of the most celebrated courses at Harvard…. And yet the San Jose State philosophers are right about the poor quality of JusticeX. It is almost certainly inferior to what the SJSU faculty could offer its students. How can this be?… I signed up for JusticeX with interest and went through most of the course content…. JusticeX is dispiritingly uninventive, seemingly disinterested in experimenting with any of the novel forms of faculty-student and student-student interaction that many online platforms, including edX, make possible…. In creating JusticeX, Sandel chose to do nothing more than upload the PBS video recordings…. No attempt was made to create supplementary materials designed specifically for online learning…. No attempt was made to curate a robust and interactive student discussion forum; instead online discussions consist of hundreds one or two sentence posts by students with scarcely any replies by Sandel, his teaching assistants, or other students. No attempt was made to foster student learning through digital projects, essay assignments, or the kind of written assessment or section discussions that Harvard students experience…. Sandel appeared once, live, to answer questions from JusticeX students. Otherwise, he might not have had any involvement at all. When the San Jose State philosophers… observe that 'purchasing a series of lectures does not provide anything over and above assigning a book to read', they are also correct. What this demonstrates, however, is not the inferiority of MOOCs but a lack of imagination in the case of JusticeX…. The cliché that 'more research is needed' is actually true about MOOCs."

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Tweetweek: June 14, 2013

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Ann Marie Marciarille: What's Competition Got to Do With It? Excluding Anthem Blue Cross from California's Exchange

Yesterday, it was reported that California Insurance Commissioner Dave Jones  has issued a statement recommending that Anthem Blue Cross not be allowed to sell in Covered California's health insurance exchange for small businesses. Insurance Commissioner is an elected Constitutional office in California, so Dave Jones is certainly entitled to have his say, but his decision to single out Anthem -- in light of a reported three consecutive premium hikes his office had deemed unreasonable -- merits more thought for multiple reasons including what it can teach us about exchange operation, what it can teach us about state regulation of insurance, and what it means to promote consumer welfare by protecting fair competition in the exchanges.

The first thing Dave Jones' statement teaches us is that he does not, as Insurance Commissioner, control access to the opportunity to sell in the structured health insurance marketplace the ACA calls an exchange.  Covered California's own governing authority does that.  But Dave Jones knows that, so why expend the effort? The answer relates to the fact that California's exchange is not a completely open one. Not only must a company want to sell health insurance inside the exchange (and meet the statutory and regulatory requirements related to things like minimum essential benefits), a company must be permitted to do so.  And California has chosen not to make its marketplace completely open to any ready, willing, and able seller.  As I have discussed earlier, this is, in part, reflective of a decision to attempt to lower the cost of exchange sold products by limiting access to the exchange marketplace.

What has this got to do with state regulation of insurance? One way to view Dave Jones' decision to speak out from his bully pulpit against Anthem's participation in the small business exchange is to see it as an effort to promote price transparency in health insurance products and as part of an effort to breed some price sensitivity into California's taxpayers. It is Anthem, after all, that chose to announce a 10.6% rate hike in January, a 10.5% rate hike in March, and a prospective rate hike of 7.6% effective July 1st of this year.  Another way to see Commissioner Jones' decision is as an attempt to do indirectly, through public shaming, what California's state specific health insurance law and regulations will not allow him to do directly -- tell Anthem that their rate hikes may not go forward. You see, California, gives its Insurance Commissioner a few valuable things: authority to review medical loss ratios, authority to investigate proposed rate hikes though not necessarily derail them, and a bully pulpit.  By current calculation, Dave Jones has attempted to use all three in his office's struggles with Anthem.

Perhaps the most interesting aspect of all of this is the cry of "unfair competition" and "unfair to consumers" from the sellers of health insurance products and from representatives of the business community that purport to represent the inerests of small business that would like to purchase health insurance products that will have increased in cost almost 30% in a six month period. The argument is that these Anthem products are popular in the small business market and that consumers (unclear whether this is understood as employers or the ultimate health care consumers -- employees) are being deprived of choice if the exchange is not open to Anthem for small business products.

Fair competition law exists to protect consumers. How can it help us here? First, your perspective on this may depend upon whether you think employers are the consumers of health insurance plans or whether you think the consumers in need of protection are the ultimate consumers of the health insurance involved -- employees.  Second, it may be that the open exchange model has visceral appeal as pleas to increase the number of vendors in the health insurance marketplace almost always do. "If we only had more sellers..." and then you fill in the blank. Finally, it may be that the more competitive marketplace may involve levels of competition: first you compete to be able to sell, then you compete against those in the selling arena, then you enter perhaps a second or third round of competition in a sort of reverse auction format.

Both models can lay claim to the laurel wreath of free and open competition. So, it is not just as easy as it might seem to be to claim: let anyone sell, the market will sort it out.  Actually, health insurance markets are notoriously distorted for any number of reasons but chief among them would have to be that the buyer on one level (the employer) is not the consumer (the employees).

If we are to continue to have a health care system funded -- in significant part -- by employer selected and sponsored health insurance (and that is the insurance framework of the ACA), then the clarion call for free and open perfect competition in health insurance markets rings more than a little hollow.  That ship has sailed.

Instead, we can watch California and others attempt to promote their own versions of competition in highly distorted markets. And watch I will. If Dave Jones is able to use his bully pulpit to attempt to police health insurance costs in the exchange, it will be an object lesson to other states.

But noone gets to claim a monopoly on the "fair competition" mantle in this dispute.  It is not that simple but, then, it rarely is.

It  was H.L. Mencken who said: "For every problem there is an answer that is clear, simple and wrong."

Do Tom Friedman and David Brooks All by Themselves Make the New York Times Op-Ed Page a Value-Subtracting Proposition--One That We Would Be Better Off Without?

Dan Drezner makes the case with respect to Tom Friedman:

Man, the State and trust: Thomas Friedman captures the sentiments of a lot of the foreign policy community with today's column.  This passage in particular pretty much sums it up: 

Yes, I worry about potential government abuse of privacy from a program designed to prevent another 9/11 — abuse that, so far, does not appear to have happened. But I worry even more about another 9/11…. If there is one more 9/11 — or worse, an attack involving nuclear material — it could lead to the end of the open society as we know it. If there were another 9/11, I fear that 99 percent of Americans would tell their members of Congress: “Do whatever you need to do to, privacy be damned, just make sure this does not happen again.”… That is why I’ll reluctantly, very reluctantly, trade off the government using data mining to look for suspicious patterns in phone numbers called and e-mail addresses — and then have to go to a judge to get a warrant to actually look at the content under guidelines set by Congress — to prevent a day where, out of fear, we give government a license to look at anyone, any e-mail, any phone call, anywhere, anytime….

Friedman's… at least he's straightforward…. That said, here's what I worry about:

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NIno Scalia and Justified True Belief: A Puzzle

Elon James White watches Nino Scalia confess that he is unable to believe in molecular biology:

Justice Scalia: Not Down with Science: Justice Scalia’s concurrence in the case on patenting genetic material, Association for Molecular Pathology v. Myriad Genetics, Inc., definitely stood out. Apparently, Scalia doesn’t believe in the science behind the case.

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In Which I Feel Sorry for Ramesh Ponnuru…

Kevin Drum:

Republicans Really, Really Don't Care About Improving Healthcare: Ramesh Ponnuru argues today that Republicans are foolish for hanging their hats on the likelihood that Obamacare will die a fiery death in 2014…. [He says] Republicans need to get busy now coming up with a replacement healthcare plan….

Congressional Republicans have not reached agreement on what should replace Obamacare, let alone a strategy for enacting that replacement. The best option for replacing Obamacare would be a plan that made it possible for almost everyone in the country to purchase catastrophic insurance (and possible for most people to buy insurance that goes beyond catastrophic coverage) by removing the obstacles that government policy puts in the way of that goal. A plan to do that would involve six key steps…

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Health Care Reform: Governor Jan Brewer of Arizona Persuades Enough Republican Legislators to Do the Right Thing on Medicaid Expansion

Mary K. Reinhart, Yvonne Wingett Sanchez, Alia Beard Rau and Mary Jo Pitzl:

Arizona House approves Medicaid expansion, $8.8 billion budget: Five months after Gov. Jan Brewer vowed to expand Medicaid, a bipartisan Arizona House coalition voted early today to approve her high-stakes proposal, along with a budget that gives significant new funding to education and child welfare. The mostly 33-27 votes followed nine hours of debate and vitriolic speeches by conservative Republicans, who lashed out at fellow GOP members and Brewer for teaming with Democrats to steamroll them to approve a key piece of the federal health-care overhaul and the governor's top legislative priority….

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Dear Mr Carney... Memos to the New Bank of England Governor

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Dear Mr Carney…:

Wage settlements are subdued, and more than 2.5 million people are out of work in the UK: thus the top priority for the Bank of England has to be to boost aggregate demand.

With possibilities for expanded government spending blocked by the ideological fundamentalism of the parliamentary majority, the interest rates the Bank of England controls at rock-bottom, and quantitative easing of unknown effectiveness, only one obvious lever remains: the exchange rate.

It is time for the governor to announce that a (somewhat) weaker pound is in Britain’s (short-run) interest--and to make it so.

The Properly-Formulated Bagehot Rule Has Four Parts

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The properly-formulated Bagehot Rule is that in a financial crisis, the lender-of-last-resort:

  1. Lends freely,
  2. At a penalty rate,
  3. On collateral that is good in normal times, and
  4. Institutions that are still underwater get "resolved" immediately and completely.

That was not done in Greece in 2010.

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Underrated Economics Weblogger: Evan Soltas: Thursday Link Promiscuity Weblogging


The U.S. Economy Still Isn't Churning: "My Bloomberg View colleague Matthew Klein just weighed in… saying that the rise in the number of people quitting is a good thing. He's right: Quits show the employee's confidence that he or she can find a better job. There's a counterpoint, though. The rate of labor market 'churn' -- the number of people moving from job to job per quarter -- dropped by 2.3 million during the recession and hasn't recovered…. Low churn means that people may be choosing to hold down jobs that aren't quite right for them…. 8.7 million Americans found a job or left one in April -- down 2 million from pre-recession levels… weak demand for labor… clogs up the cycle of job openings, hires, fires and quits. You have to be brave to leave a job amid high unemployment and little hiring -- but with few quitters, positions don't open up and so the low churn persists…. The Fed is watching the unemployment rate, but its statements indicate it also considers 'additional measures of labor market conditions'. Churn should be one of those. The ultimate task of labor markets is to allocate workers to positions -- and churn measures that directly. That it hasn't improved since the recession means that labor markets are much less healthy than falling unemployment might suggest: Screenshot 6 12 13 1 15 PM

Noted for June 13, 2013

Dani Rodrik: Europe’s Way Out | Erik Loomis: Lead and Schizophrenia | Bruce Bartlett: 'Financialization' as a Cause of Economic Malaise | Mark Thoma sends us to David Ricardo 'On Machinery' | J.P. Koning: Moneyness: Adam Smith's very own Lehman Crisis | Teresa Nielsen Hayden (2004): New times call for new t-shirts | Austin Frakt: The longest ever study of consumer-directed health plans | The Battle of Maldon | Josh Barro: Was Edward Snowden A Good Leaker? |

  • Whack-a-Molonomics Blogging: Hey! Paul! "Hige sceal þe heardra, heorte þe cenre, mod sceal þe mare, þe ure mægen lytlað" (Apropos of Paul Krugman: Hamster-Wheel Economics: "Sad reading from British economic analysts these days — sad, that is, for anyone who likes to believe that evidence actually matters for policy. First, the normally even-tempered Simon Wren-Lewis is angry, with cause: he sees the Dutch central bank calling for more austerity despite the depressed state of the Dutch economy, no prospect of recovery any time soon, no hint of debt trouble — and no explanation except boilerplate…. It was one thing to buy into the austerity thing three years ago… but to roll out the same old line given everything that has happened since is pretty disgraceful…. Martin Wolf is out today with a column explaining that there is no current risk of inflation. He’s right, of course, and presumably what he hears from policymakers and others tells him that such a column is necessary. But my God: we had this debate in full four years ago. The usual suspects issued dire inflation warnings; the Keynesian/liquidity trap types like me insisted that this was all wrong given current circumstances. The events unfolded…. And yet the people warning about inflation four years ago, and three years ago, and two years ago, are still at it, still making the same arguments. And they still have influence! I guess there’s nothing for it but to keep on pounding. But it’s discouraging.").

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It Seems That the New York Times Has Gone Bat----: Why Oh Why Can't We Have a Better Press Corps? Weblogging

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Hunter S. Thompson:

We were somewhere around Barstow on the edge of the desert when the drugs began to take hold. I remember saying something like "I feel a bit lightheaded; maybe you should drive…." And suddenly there was a terrible roar all around us and the sky was full of what looked like huge bats, all swooping and screeching and diving around the car, which was going about a hundred miles an hour with the top down to Las Vegas. And a voice was screaming: "Holy Jesus! What are these goddamn animals?" Then it was quiet again. My attorney had taken his shirt off and was pouring beer on his chest, to facilitate the tanning process. "What the hell are you yelling about?" he muttered, staring up at the sun with his eyes closed and covered with wraparound Spanish sunglasses. "Never mind," I said. "It's your turn to drive." I hit the brakes and aimed the Great Red Shark toward the shoulder of the highway. No point mentioning those bats, I thought. The poor bastard will see them soon enough.

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Noted for June 12, 2013

Shen Zhihua: Mao, Stalin and the Korean War: Trilateral Communist Relations in the 1950s | Scott Eric Kauffman: In Memoriam Mr. Banks | Rate shock by numbers, part deux: The data doesn’t spell glory or doom for the exchanges | Ashok Rao: On the Generational Discount Rate (and Zero Lower Bounds) | Daniel Altman: Calling Out the Austerians | Pranab Bardhan: Little, Big: Two Ideas About Fighting Global Poverty | Dear Mr Carney … Memos to the new Bank of England governor | Samuel Freeman (2001): Illiberal Libertarians: Why Libertarianism Is Not a Liberal View

  • Mark Thoma sends us to Alan Blinder: Fiscal Fixes for the Jobless Recovery: "Do you sense an air of complacency developing about jobs in Washington and in the media?… The Brookings Institution's Hamilton Project… estimates… the 'jobs gap'… [at] 9.9 million… policy makers should be running around like their hair is on fire…. Fiscal policy… has been worse than AWOL—it has been actively destroying jobs…. Congress could make a good start on faster job creation simply by ending what it's doing—destroying government jobs…. But there's more… a tax credit for creating new jobs…. You might imagine that Republicans would embrace an idea like that. After all, it's a business tax cut... But you would be wrong. Maybe it's because President Obama likes the idea. Maybe he should start saying he hates it…. The fiscal cupboard is not bare. There are things we could be doing to boost employment right now. That we are not doing anything constitutes malign neglect of the nation's worst economic problem."

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Liveblogging World War II: June 12, 1943

Eleanor Roosevelt, June 12, 1943:

The Anzac garden celebration yesterday afternoon was a touching ceremony. This little garden on the roof of the British Empire Building, New York City, is in the shadow of the big Radio City tower. A little reflecting pool symbolizes the Pacific Ocean, and on either side are the little gardens of Australia and New Zealand. A very charming statue of two young people, kneeling back to back, symbolizes the youth of the two nations. The garden is to be rededicated each year to those who died in the last war and in this war to preserve freedom throughout the world. Dr. Evatt was there yesterday and Mr. G. S. Cox, First Secretary of the New Zealand legation.

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Brad DeLong (2009): Generating a Robust Recovery: Hoisted from the Archives from Three and a Half Years Ago Wednesday Weblogginng

Larry Mishel reminds me…

CAP’s rethinking of the grand bargain path is good. Now CAP should rethink their role in putting us on that path: On September 30th, 2009, EPI sponsored a forum, 'Generating a Robust Recovery', on the need to undertake further action to generate jobs. Princeton’s Paul Krugman, Berkeley’s Brad DeLong and EPI’s John Irons were featured in a panel…

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Time for Obama to Pull Back His Out-of-Control Security Apparat

Kurt Opsahl and Trevor Timm:

The NSA’s Word Games Explained: How the Government Deceived Congress in the Debate over Surveillance Powers:

ANDREA MITCHELL: “Why do you need every telephone number? Why is it such a broad vacuum cleaner approach?”

JAMES CLAPPER: “Well, you have to start someplace.”

—NBC Meet the Press, this past Sunday

Concerned about the surveillance of millions of ordinary Americans, last year Senator Ron Wyden asked Director of National Intelligence James Clapper, Jr. a simple question: "Does the NSA collect any type of data at all on millions or hundreds of millions of Americans?"…

DNI Clapper’s answer was simple: "No, sir… not wittingly."

This just is not true. We’ve known for years… and now we know that the Foreign Intelligence Surveillance Court issued an order in April requiring Verizon to hand over all call records…. DNI Clapper’s statement was not the truth.

Continue reading "Time for Obama to Pull Back His Out-of-Control Security Apparat" »

A Legal Demand from the County Palatine of Google...

David Drummond, Chief Legal Officer of Google, writes:

Official Blog: Asking the U.S. government to allow Google to publish more national security request data:

Dear Attorney General Holder and Director Mueller

Google has worked tremendously hard over the past fifteen years to earn our users’ trust. For example, we offer encryption across our services; we have hired some of the best security engineers in the world; and we have consistently pushed back on overly broad government requests for our users’ data.

We have always made clear that we comply with valid legal requests. And last week, the Director of National Intelligence acknowledged that service providers have received Foreign Intelligence Surveillance Act (FISA) requests.

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Nick Eberstadt and the "Takers" Once Again: More Reflections on the General Theory of the Moocher Class

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Today Democracy Journal puts up Nick Eberstadt's complaint about my review of his book, A Nation of Takers, and my reply in response.

This has gone wrong.

Eberstadt--for whom I have the highest respect, and from whom I have learned an immense amount over the years--is disappointed in me, and I am disappointed in him.


Although I disagree with him on a number of policy questions, I also hold Brad DeLong’s scholarly work in high regard. Thus I was pleased to hear he was reviewing my recent book A Nation of Takers: America’s Entitlement Epidemic. I was looking forward to an intelligent, principled, and spirited critique. I was perplexed to find instead an essay [“Shrugging Off Atlas,” Issue #28] that betrayed only glancing familiarity with the real existing text I wrote. I was left to wonder: Did Brad actually read the book he reviewed?

DeLong starts by getting the publisher wrong with his very first mention of the book. A Nation of Takers was not, as he states, published by the American Enterprise Institute (AEI) as part of its “ ‘New Threats to Freedom’ series.” The actual publisher is Templeton Press, of the Templeton Foundation: It says so on the back cover. (AEI has no “New Threats to Freedom” series.)

A little later, DeLong observes that “Eberstadt’s conservative comrade Veronique de Rugy reports that 35 percent of Americans receive some ‘means-tested benefit.’” But on page 130 of A Nation of Takers, I cited Census Bureau data to exactly that effect: “As of 2010, over 34 percent of American households were obtaining means tested benefits.” Why not cite my text—instead of work by a researcher with whom I have never collaborated? Did DeLong just not read that far?

There are findings and assertions in my book that should concern all public-minded citizens. Among them: 1) the federal government has effectively been transformed into an entitlements machine over the past two generations; 2) the explosive growth of entitlement spending in postwar America has coincided with a long-term “flight from work” by adult men; 3) the government’s disability entitlements—from which over 12 million working-age Americans were drawing awards last year—are rife for misuse and abuse; 4) over the past four decades America has increasingly resorted to the device of funding its federal spending—now mainly entitlements—through borrowing, in effect taxing the Americans of tomorrow for our unprecedented levels of current entitlement consumption today.

Your readers unfortunately learn none of this, because DeLong did not bother to describe those arguments, much less evaluate or challenge them, in his 3,000-plus-word review. Did he even know those arguments were there?

Early on, DeLong writes, “We need venture no further into A Nation of Takers than the bottom of the second page….” Taken in context, this sounds like a confession.

I like a good debate—I happen to think public policy and the common weal are promoted through the competition of ideas. More than that: We obviously need a serious national debate on the entitlements question. That is why my book includes, indeed showcases, critiques of my own findings from Bill Galston (on the left) and Yuval Levin (on the right).

It is a shame DeLong chose not to show up for that same debate. It is also a disservice—not least to your readership.

Continue reading "Nick Eberstadt and the "Takers" Once Again: More Reflections on the General Theory of the Moocher Class" »

The New issue of Michael Tomasky's "Democracy Journal"...

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Michael Tomasky emails:

Democracy Journal: The evidence has been in for years -- supply-side economics is a failure. But why do so many people still accept it? Partly because in all those years, our side hasn't really developed a compelling alternate theory about how the economy can grow.

Enter middle-out economics, a discourse that sees investment in the middle class, not the top 1 percent, as the true source of prosperity. In our centerpiece symposium, Eric Liu & Nick Hanauer, Neera Tanden, Bruce Bartlett, Mona Sutphen, and other distinguished thinkers propose a coherent and persuasive middle-out program.

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Jeff Zax on Being a Section Leader: Twenty Years Ago Not on the Internet Tuesday Weblogging

Jeff Zax

Hybrids Are Successful Adaptations: I have always been very uncomfortable in the multifaceted role of the section leader. The satisfactions you get from each of the roles are by no means complementary, and for a long time it seemed to me that successfully performing one role meant that the others were sacrificed.

In particular, it's very hard to establish satisfactory relationships with both the professor and the students. What you really want from the professor is patronage. You want him to help you get where he is now. You want him to like you, and you want him to support you. On the other hand, what you want from the students is fear and respect. You want to cash in on all the agony you've gone through to master the material by making sure they suffer. You want them to be in awe of the searing brilliance of your intellect. You want to dominate them, exploit them, pure and simple.

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Liveblogging World War II: June 11, 1943

Premier J. V. Stalin to the Prime Minister, Mr Roosevelt:

Personal and Secret Message:

Your message informing me of certain decisions on strategic matters adopted by you and Mr Churchill reached me on June 4. Thank you for the information.

It appears from your communication that the decisions run counter to those reached by you and Mr Churchill earlier this year concerning the date for a second front in Western Europe. You will doubtless recall that the joint message of January 26, sent by you and Mr Churchill, announced the decision adopted at that time to divert considerable German ground and air forces from the Russian front and bring Germany to her knees in 1943.

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Noted for June 11, 2013

Economic Policy Institute: Generating a Robust Recovery (September 2009) | Kieran Healy: Using Metadata to find Paul Revere | Larry Mishel: CAP’s rethinking of the grand bargain path is good. Now CAP should rethink their role in putting us on that path | Emily Badger: 5 Maps That Show How Divided America Really Is | Ellen Kelleher: Funds of hedge funds fight for survival | Sheila Bair: Everything the IMF wanted to know about financial regulation and wasn’t afraid to ask | Michael Hiltzik: Social Security should be expanded, not cut |

  • Ben Walsh: Counterparties: America’s consistently dissatisfying jobs market: "America’s jobs market seems to have found its boring, dissatisfying comfort zone. The Labor Department announced today that the US economy added 175,000 thousand jobs in May. (Unemployment ticked up a notch to 7.6%.) Matthew O’Brien writes that this is basically the same thing that’s been happening for the past two and a half years…. At the current rate of job creation, employment, on an absolute level, won’t reach pre-crisis levels until late 2014, a full 8 years since the recession began…. The Chicago Fed also projects that a return to full employment (where the unemployed are workers between jobs but still in the workforce) could take another five years, a timetable that, Matthew Klein writes, 'puts the US on track for a lost decade'. Wall Street is rooting for things to get ever so slightly worse, hoping to stave off any decrease in the Fed’s bond buying programs."

  • Noah Smith: Noahpinion: The Zero Upper Bound?: "The Bank of Japan has been buying long-term Japanese government bonds. This has seemed to have the expected positive effects - Inflation is up, inflation expectations are up, growth is up, consumption is up, exports are up, and the stock market, despite a recent drop, is way way up. But here's the funny thing - Japanese long-term government bond yields kept going up…. Richard Koo attributes the rise in interest rates to increased inflation expectations…. But Nick Rowe has another explanation. According to Rowe, the rate rise was due to greater expected growth (nominal growth, so both better real growth and more inflation). As the BOJ's easy monetary policy causes the economy to improve, Rowe says, interest rates will naturally rise; investors are simply anticipating that rise…. To get a Rowe/Krugman type of rapid interest rate rise, I think you'd need a 'good equilibrium, bad equilibrium' sort of model, where Abenomics kicks the economy out of the bad equilibrium very abruptly, and the economy is shocked back to a sustainably higher rate of NGDP growth. But then again, I guess I do kind of believe in that sort of model…. So anyway… are Japanese interest rates rising because of an incipient real economic recovery? Let us hope to Amaterasu that they are not…. At very very high levels of debt-to-GDP, a rate rise is disastrous… a rise in interest rates would still exact a heavy burden on Japan's public finances…. Japan's only hope is to cause the kind of recovery where interest rates stay very low for a very long time. If Japan is living in a Nick Rowe type world, that will prove impossible, and Japan's only options will be stagnation, default or hyperinflation. We should pray with all our might that we are living in a Richard Koo world instead, and that there is an economic policy that will allow Japan to boost growth and inflation while keeping interest rates low…. Very high debt-to-GDP ratios could act as a long-term growth trap… the much-maligned Reinhart and Rogoff would be right. If you get into a high government debt situation, a long periods of very low interest rates and robust real growth is really your only hope for a clean escape."

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Mitt Romney Has Low Reality Testing Indeed...

  • Igor Bobic on how Mitt Romney's ability to grasp reality is really poor: "Former Republican presidential candidate Mitt Romney… pointed to comments made by a "leading Democrat" who thought the former Massachusetts governor defeated an incumbent president one week before the polls closed on November 6. 'I spoke with a leading Democrat, one of the top leaders of the Democratic party and he said, "I thought you had won, one week out,"' Romney told Fox News' Neil Cavuto on Friday. 'This was a very close race. But events occurred. The employment rate dropped below 8% for the first time just weeks before the election. That changed the national mood, the media celebrated that. Had it stayed above 8%, that would have made a difference. But all total, you're not going to spend your time going back and saying, what kind of events could have happened differently', he added. 'I made plenty of mistakes in the campaign. The president made mistakes. No one runs a perfect campaign. The end result was he won, I lost, and you get over that.'" <-- cf. works of Nate Silver

Are There Risks to Abenomics?

In the long-run, Paul Krugman says, responding to Koo and Smith and Rowe, the real interest rate on JGB is determined by the supply-side factors of risk tolerance, time preference, and growth--none of which are affected by Abenomics. In the short-run, Paul says, Abenomics raises expected inflation and thus reduces the short-term real interest-rate on the debt--that is the point of the policy.

Since today's long-term real interest rates are a combination of today's short-run short-term rates and the long-run future's short-term rates, Abenomics unambiguously reduces the overall cost of financing Japan's government debt and thus improves rather than erodes the fiscal position.

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Liveblogging World War II: June 10, 1943

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German Police report on the Katyn massacre:

The work of exhuming, examining and identifying the bodies of Polish officers came to an end on June 7, 1943. In the first place it must be stressed that the Kosogory forest was used as a place of execution of those sentenced to death by the NKVD or the Committee of ‘The Three,’ as early as 1925.

Preliminary excavations undertaken in various parts of the wooded area invariably led to the discovery of mass-graves (‘fraternal graves’) in which the bodies of Russians of both sexes were found. Some of these bodies were carefully examined and it was proved that, without exception, death was caused by a shot in the back of the neck. From the documents found, it appeared that they were prisoners from the NKVD jail in Smolensk, the majority being political prisoners.

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Noted for June 10, 2013

Thomas Hungerford: I’d be a damn fool to jump off a cliff | | Ronald Brownstein: Why Republicans Can Get Away With Ignoring Their Problems | Dean Baker: More Thoughts on Job Creation in the Recovery | Ben Walsh: Counterparties: America’s consistently dissatisfying jobs market |

  • Jonathan Portes sends us to Simon Wren-Lewis: Austerity is not even a sensible precautionary policy when we have Quantitative Easing: "I have in the past had… respect for the… argument… for ‘precautionary austerity’: Although there are good reasons why a rapid reduction in government debt is unnecessary, financial markets do not always behave rationally. There is a chance that markets might suddenly panic, and stop buying government debt, forcing up interest rates. As the cost of such an outcome would be very high, macroeconomic policy should do everything it can to avoid it – including reducing debt rapidly - even if that meant deepening the recession…. Jonathan [Portes]’s post also made me wonder whether the precautionary austerity argument was simply wrong…. There is no way the UK (or US) government will ever default… prefer… central bank buy[ing] debt through printing money…. [But if] interest rates got quite high before the central bank was forced to print money, damage could still be done. Quantitative Easing…. Suppose… interest rates on government debt did start rising because the market started to panic, and yet the economy remained depressed and the outlook for inflation was benign. In these circumstances the Bank would buy government debt as part of its inflation targeting strategy…. If you also know that there is a residual buyer who will never panic (the central bank), you can just focus on the fundamentals, which in this case includes how long QE will exist as an option. That in turn depends on the outlook for the economy. So QE is not only the fire engine that will put out the fire, it also reduces the chances of a fire occurring in the first place…. QE… perhaps it has a more important precautionary role, which is to eliminate the possibility of a self-fulfilling panic in the government debt market. But if QE does this, why do we need deep austerity now to placate the markets?"

  • Scott Erik Kauffman: Awful Greek words that apply to “The Rains of Castamere”: "For Aristotle, the superior play is one in which the audience’s sympathies are focalized through a perspective in a way that personalizes the catastrophe. It’s not just generally sad that these Trojans have to die, it’s particularly sad that we’re forced to watch one of them we care about realize he’s about to die. That’s the heart of traditional tragedy: it’s not the catastrophe itself (because the audience isn’t in actual jeopardy), but the sympathetic identification with the character who realizes he’s about to be killed (because that’s something the audience can actually feel) that makes a tragedy effective."

Monday DeLong Smackdown Watch: Paul Krugman on the Confidence Fairy, The Expectations Imp, and the Rate-Hike Obsession

Paul Krugman:

The Confidence Fairy, The Expectations Imp, and the Rate-Hike Obsession: Brad DeLong has a long meditation on policy that, surprisingly, includes some things I strongly disagree with. I guess I should start by saying that when he describes his fairly complacent view of macroeconomics on the eve of the crisis, he’s describing a view that many economists shared — but I wasn’t one of them. Japan’s troubles and the Asian financial crisis destroyed my faith that we had the business cycle under control; I wrote a whole book about the return of depression economics back in 1999.

Agreed: Paul was smart and I was stupid about the implications of Japan and 1997-8 in East Asia...

Krugman continues:

But here’s where I think Brad is getting something wrong now: when he says that: "It is unfair for Keynesians to be making fun of the people who call for austerity by saying 'confidence fairy' when they are making similar expectational-shift arguments themselves." He’s referring to calls for the Fed and other central banks to raise expectations of future inflation as a way to get some traction in a liquidity trap — which is certainly something I and others support. But there are two crucial differences between us and the expansionary austerity types.

First, our expectations argument is a hope; theirs is a plan… those of us hoping to summon the expectations imp want to do so with policies that are at worst harmless…. The austerians, on the other hand, have pushed directly destructive policies — fiscal contraction in depressed economies — in order to achieve their hoped-for shift in expectations. So this is the difference between “Let’s try this possibly ineffective remedy, it might work and in any case won’t do any harm” and “Let’s do the opposite of what standard analysis says we should be doing, just trust me”.

Touché… That is an important difference.


One other thing: Brad takes fairly seriously the calls for higher interest rates to avoid bubbles, or something, essentially because low rates create moral hazard for the financial sector. Can we say that those moral hazard problems would have to be incredibly severe to justify contractionary monetary policy in a depressed economy?

I would say that the argument that low interest rates add to pressure for financial-sector moral hazard is an argument not so much for tighter monetary policies as for much easier fiscal policies--they are, principally, I think, arguments for much easier fiscal policies…

And Paul has an effective and accurate Parthian shot:

And… I don’t think we should ignore the evidence that some people always want higher rates, and just keep changing the justification.

Confusion: High Public Debt Levels and Other Sources of Risk in Today’s Macroeconomic Environment

The theme is: confusion. Confusion on the theoretical level, confusion on the empirical level, confusion on the policy level. I am confused and astonished that that we are here today facing the global macroeconomic situation we face today. Cast me back seven year, ask me then "what are the chances that we will be this far down in the lower tail of global nominal GDP distributions?" and I will answer you that there is only a 1-in-a-100, only a 1-in-a-1000 chance.

The fact that we are here makes me fear that much of what I thought seven years ago was just completely wrong.


Seven years ago, when asked, I said that as far as macroeconomic policy was concerned I was a fairly orthodox neoliberal monetarist. I agreed with Robert Lucas that the problem of depression prevention had largely been solved. But I would go on to say that the problem of ensuring that inflation expectations remained anchored had not been solved--hence central banks needed to set and meet firm inflation targets. And fiscal authorities needed to avoid even a whisper of a hint of fiscal dominance. Fiscal dominance--a situation in which the political system will not let the government raise the primary surpluses it needs to amortize the debt at the current price level--is the thing that most easily undermines anchored inflation expectations. Thus legislators should be prohibited for even thinking about using large debt expansions for any purpose short of total war. And rebalancing an economy in depression should be left to monetary policy. Central banks were able to do that job, with the unfortunate exception of the 1930s. But, otherwise, central banks had proved themselves very capable of boosting nominal aggregate demand whenever they wished to whatever target they wished. That was the implication I drew then from my belief that the principal macroeconomic stabilization policy problem on the inflation and employment front was that of ensuring that inflation expectations remain anchored.

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Charles Stross's James Bond Movie Flowcharts

Charles Stross:

Crib Sheet: The Jennifer Morgue: This success… got my agent's attention. She proposed a sequel, and James Bond was so obvious…. I… realized I had gaps in my movie experience. So I ordered the deluxe 20-DVD boxed set of Bond movies, and with the help of a local film producer and an inordinate quantity of beer, we ran through most of the movies over the next two months…

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Liveblogging World War II: June 9, 1943


F.W. Deakin with Tito and the Partisans in Yugoslavia:

The enemy planes, a motley circus of Dorniers, Henschels, Stukas, and weird flying machines, caught us at dawn in the glades of birch trees just below the summit of Ozren.

In low continuous sweeps along the Sutjeska valley they sought to close the crossing to the second group ofthe Yugoslav force now trapped between the Piva and the river line just behind us.

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Noted for June 9, 2013

Nate Silver: FiveThirtyEight's 2012 Forecast - | gselevator | Jean-Philippe Stijns (2005): Natural resource abundance and economic growth revisited | Kina Lillet | Carola Binder: Depressing Slow Recovery Graphs | Charles Wyplosz: Exit strategies: Time to think about them |

  • Barry Eichengreen interviewed by Mark Sniderman: "Another [misleading historical] example, this one from Europe, is the 'lesson' that there is necessarily such a thing as expansionary fiscal consolidation. Europeans, when arguing that such a thing exists, look to the experience of the Netherlands and Ireland in the 1980s, when those countries cut their budget deficits without experiencing extended recessions. Both countries were able to consolidate but continue to grow, leading contemporary observers to argue that the same should be true in Europe today. But reasoning from that historical case to today misleads because the circumstances at both the country and global level were very different. Ireland and the Netherlands were small. They were consolidating in a period when the world economy was growing. These facts allowed them to substitute external demand for domestic demand. In addition, unlike European countries today they had their own monetary policies, allowing them step down the exchange rate, enhancing the competitiveness of their exports at one fell swoop, and avoid extended recessions. But it does not follow from their experience that the same is necessarily possible today. Everyone in Europe is consolidating simultaneously. Most nations lack their own independent exchange rate and monetary policies. And the world economy is not growing robustly. A third 'lesson' of history capable equally of informing and misinforming policy would be the belief in Germany that hyperinflation is always and everywhere just around the corner. Whenever the European Central Bank does something unconventional, like its program of Outright Monetary Transactions, there are warnings in German press that this is about to unleash the hounds of inflation. This presumption reflects from the 'lesson' of history, taught in German schools, that there is no such thing as a little inflation. It reflects the searing impact of the hyperinflation of the 1920s, in other words. From a distance, it’s interesting and more than a little peculiar that those textbooks fail to mention the high unemployment rate in the 1930s and how that also had highly damaging political and social consequences."

  • Aaron Chatterji, Edward Glaeser, and William Kerr: The origins of entrepreneurship and innovation clusters: "For decades, the conventional wisdom among local officials pursuing employment growth was to attract a large firm to relocate. ‘Smokestack chasing’ often leads to zero-sum games where regional governments bid against each other…. The success of ‘entrepreneurial clusters’ in recent decades has challenged this wisdom. Now many policymakers state that they want their regions ‘to be the next Silicon Valley’. This new emphasis on bottom-up strategies has led to extensive efforts to seed local entrepreneurship (e.g. Lerner 2009)…. The move away from chasing smokestacks to fostering entrepreneurship is understandable given the strong correlation between small establishment size and local economic development…. We have reasonable evidence at this stage for the causal role in local economic growth of venture capital investment, breakthrough inventions, and university spillovers. We are making progress towards… [understanding] general entrepreneurship features…. The literature on spatial determinants of entrepreneurship is more established… age structure, local entrepreneurial culture, and physical infrastructure… industry linkages… skilled immigrants…. Perhaps the strongest message provided to policymakers from this work on spatial determinants is the key importance of ‘supply-side’ factors for local entrepreneurship, especially among the local population that disproportionately constitute local entrepreneurs (Michelacci and Silva 2007)…. We also review the varied role of policy in the development of three well-known innovative clusters: Silicon Valley, Boston’s Route 128 corridor, and North Carolina’s Research Triangle Park. A common theme in many of these discussions is the importance of correct baseline business environments, or ‘setting the table’ activities, relative to targeted interventions."

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Ann Marie Marciarille: The Medicaid Gamble: Will Medicaid Survive the ACA?

[Here is a slightly edited version of my remarks at today's panel on NFIB v. Sebelius, Medicaid, and Health Care Federalism -- a panel discussion at the annual meeting of the American Society of Law, Medicine, and Ethics.]

My remarks today on NFIB, Medicaid, and Federalism are focused on the re-invention of Medicaid – by which I mean both the re-invention of Medicaid originally contemplated by the ACA as well as the re-invention effectuated by the Supreme Court.  And so I tip my hand to reveal my perspective that it is not the ACA that is reinventing Medicaid so much as it is the Supreme Court that is reinventing Medicaid. 


In acknowledgement of the ACA’s drafters'  bold attempt to re-invent Medicaid by essentially federalizing it,  while so much of the country’s attention was focused on the arguably less significant individual mandate provisions and accompanying insurance market reforms, and the Supreme Court’s equally bold decision to reign in the Secretary’s enforcement authority, I title these remarks: The Medicaid Gamble: Will Medicaid Survive the ACA?


From my perspective, the attempt to expand Medicaid without building in a fall back provision (say, the equivalent of a federally facilitated exchange for a non-exchange building state) was a tremendous gamble, particularly in light of  the now documented evidence that public support or disdain for  exchange implementation and Medicaid expansion tracks highly ideological voting patterns making those correlates for the individual mandate seem mere partisan affairs by comparison. Not only were we, as students of the ACA,  focused on the wrong provisions of the ACA -- when considering transformative power -- we mismeasured the ideological force of the Medicaid expansion.  


I propose, in my limited time, to address three aspects of health care federalism or health care reform implementation power struggles  that I think are particularly  pressing in light of Medicaid’s current vicissitudes:


1.     What’s up with coercion? As Sara Rosenbaum phrased it so pithily yesterday, the weaponizing of the coercion doctrine and the implications of that for Medicaid going forward deserve some of our time. But my angle on coercion has to do with the history of Medicaid’s origins.


2.     The second is the battle being waged between the federal government and the states over who, if anyone, should expand Medicaid.  I want to say a few words about the battle being waged over what political unit, within a state, should shoulder the burden of expanding Medicaid. This is a battle being waged in California.


3.     My third and final topic will focus on a consideration of what will likely occur in non-expansion states come January 1, 2014. And, I offer a few observations on what will likely occur in expansion states come January 1, 2014.






The immediate challenge before the states will be to determine whether Medicaid expansion under the ACA is gift or Trojan Horse. And that determination may take a while.  Those of you familiar with the rollout of original Medicaid, know that this takes time.  Although 11 states were all in on original Medicaid  by 1967, New York was kicking around legislation that  same year calling for Medicaid’s repeal. Still, 8 more states were onboard by 1970, almost all participating within four years, though Arizona (the final hold out) was not onboard until 1982. I will note that Texas considered exiting the Medicaid program as recently as 2011. But they did not. I  am still uncertain which way that cuts on the coercion analysis.


Given Arizona Governor Brewer’s relative haste to be all in on Medicaid expansion this time out of the gate, I have been wondering if there are lessons that may be learned from Arizona’s  journey to participation in original Medicaid.  I  discern three possible lessons:


Lesson # 1  The cost of uncompensated care – however you slice and dice it – is  a budget buster. Arizona’s interest in original Medicaid participation seems to have roughly correlated with the exponential growth in indigent care costs born by the state (rising from $50 M in 1974 to $125 M in 1980).  Although these numbers seem almost unbearably quaint by our standards, this represented significant money to Arizona in the 1970's and 1980's.  Mind you that Arizona, in the mid-1960’s was insulated from the indigent care costs of some its poorest citizens because those same individuals were  then eligible for free or reduced price care through the federally funded Indian Health Service. So, let that be part B of the first lesson: cost shift to the federal government where ever you can and for as long as you can while you sort  this out.


Lesson #2 When all was said and done, financial exigency coupled with the argument that Arizonans were still taxed for the program in which they chose not to participate, seems to have ruled the day.



Lesson #3  Arizona, to this day, operates what it describes as its state Medicaid program under a section 1115 waiver originally bargained in the 1980’s.  I can find no mention of federal funding on the front page of Arizona's Medicaid web portal. 


Maybe these lessons are old hat.  Maybe better historical grist is to be found in the 1997 rollout of the CHIP program, you say?  Then you could look at the work of Ian Hill at the Urban Institute. Perhaps. But we may want to reach back beyond CHIP’s rollout and analogize to a rollout that – unlike CHIP—does not allow states to impose waiting lists or impose enrollment limits to curb costs.  This is what makes the ACA Medicaid expansion a gamble, in part, -- neither of these options are available.


Ultimately, chastened by the cost of uncompensated indigent care, Arizona came onboard with original Medicaid.  And, Arizona’s governor at least, does not seem eager to be a poster child for “health care reform done right, outside the ACA.”


At one point there were other fleeting candidates for that role but the interest, now, has coalesced around “health care reform done right, inside the

ACA.” Arkansas is the current leading contender, though HHS’s provisional approval of a premium support program or privatized Medicaid expansion won’t really mean much until we see what the actual terms of the plan are.  What we do know – as Sidney Watson so ably outlined yesterday --  “cost effectiveness” (the sina qua non of Medicaid premium support programs) may be in the eye of the beholder, especially in light  of the recent invitation to the states to apply for 1115 waivers that broaden that phrase to include incorporating imputed savings from reduced churning in the non-privatized Medicaid eligible population and in the invitation to factor into the analysis reductions  in commercial insurance rates offered in the exchanges as products of increased competition. 


I don’t know what “cost effectiveness” will mean anymore, though I do think it will be interesting to try to calculate whether the value of increased insured lives in some state exchanges will enhance insurance rate competition and, arguably, benefit all exchange purchasers, not just Medicaid premium funded purchasers.  The antitrust scholar in me would like to see that. Because if the CBO is even close to accurate that it will cost the federal government $6,000 a year to cover another individual American under Medicaid expansion but $9,000 a year to cover the same individual (with the wrap around coverage and premium subsidies necessary to make the commercial insurance “Medicaid-like”), there are going to have to be some mighty interesting offset calculations ahead. 





While much of our attention is directed at the federalism arena sparring between the states and the federal government, I think not enough attention has been paid to the sparring between and among political units within the states over the Medicaid expansion. 


Take California, for example.  For several decades, California has worked hard at unwinding its statewide safety net. The full story would talk about county by county variable standards for public assistance or the incredible inconsistency with which MediCal applications were processed in California but today I just want to focus on the state’s forcing (dare I say coercing?) of the counties to assume responsibility for medical indigents.  Seen from one perspective, California has perfected devolving the apparatus of the welfare state to the political unit closest to community life.  Seen from another perspective, unevenly burdened counties (particularly those with high populations of uninsured Californians or undocumented Californians such as the 198,000 undocumented individuals living in San Diego County alone, roughly 6.5% of the total population) stagger under county indigent expenses that only serve to emphasize the truism that California is simultaneously our richest state and our poorest state. 


This means that, for Medicaid expansion to be funded in California, the counties will have to transfer money to the state. Fearful of bankrolling Medicaid expansion for the working poor while still being left to serve the merely poor and definitively undocumented, the counties are hanging tough.  And that is what all the newspaper coverage about the Gov. Brown’s negotiations with the counties to fund Medicaid expansion have been about. Nicole Huberfeld has spoken, with dismay, of the state “ownership” of Medicaid.  County "ownership" of Medicaid anyone?




What will happen on January 1, 2014?


In some places, the bridge to January 1, 2014 is already being built – not just the obvious example of Massachusetts, but  groups like the 500,000 early Medicaid enrolled (wait for it --- wait for it --- on a county by county basis) in California for example.


In October of 2013, the exchanges will open– whatever forms they take – the navigators, non-navigator assistance personnel, and just about every other insurance counselor you know -- including yourselves --- needs to be braced for the biggest outpouring of those in need of insurance counseling we may ever see in our lifetimes.  I do not see this as a failure of the ACA in particular except insofar as it is health care reform grafted on our byzantine health insurance system.  We are all of us woefully unprepared to understand our  health insurance system and the complexity of selecting the appropriate insurance products for ourselves. Think the rollout of Medicare Part D, only cubed.


But the real confusion will mount when Medicaid expands in some places and not in others. The American public is not aware that a mere state line may separate them from government funded health insurance.  When this does begin to percolate into public consciousness we will have a natural experiment in border effects.  Conventional wisdom is that, but for certain very specific disease groups, Americans do not migrate to attain health insurance. If there ever were a fact pattern to test that truism, I believe we’ve found it.


The confusion may likely peak when so many newly insured -- as they did in Massachusetts -- decide they are ready for their closeups.  By this, I mean the real gamble of the ACA may have been that we have sufficient provider supply to serve all of the newly insured. Our self-manufactured primary care provider shortage as well as our shortage of Medicaid accepting specialty physicians may show us up as the biggest gamblers of all on January 1, 2014.




All of this makes me want to know what  the cicadas will think about health care reform and  Medicaid expansion the next time they arise?  ]Well, if we’re talking those  synchretized 17 year cycle East Coast cicadas – I haven’t a clue. But if we’re talking the Missouri Brood Cicadas – on a three year cycle (but split into three evenly sized non-synchretized broods, so that one brood is always singing in the trees), I am confident Medicaid expansion will be back before the Missouri legislature again next session and possibly the session after that.  Like Missouri Brood Cicadas, we just can’t stop ourselves.










"If Not for You Meddling Hurricanes!" Mitt Romney as Scooby-Doo Villain Weblogging

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Josh Marshall sounds pretty amazed:

If Not You Pesky Hurricanes, It All Woulda Worked!: Romney: “I wish the hurricane hadn’t happened when it did because it gave the President a chance to be presidential and to be out showing sympathy for folks.”…

That's not a slanted paraphrase. That's a quote.

Josh goes on:

It’s easy to say that this makes Romney some sort of massive egotist who only sees the world through the prism of his own self-interest. I don’t think we can say that.

Methinks a normal person would, by now, have said: "Golly. I'm so humiliated! That's really not what I meant to say! I apologize!"

Has Mitt done so?

Josh's conclusion:

What I do think we can say is that Romney has a deep predilection to say stupid or clueless things that was always gonna make the president thing a tough sell.

I'm more inclined to think that we really did dodge a bullet on this one…