## Washington Center for Equitable Growth

It seems to me that it would be a good idea if I signed on to this Washington Center for Equitable Growth, and tried to drive the conversation to what is important.

Let us try to focus our conversation on what is truly important, for all of our sakes: http://equitablegrowth.org/blog

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## Lessons for Other States from Kansas' Massive Tax Cuts: Live from The Roasterie CXXX: March 31, 2014

Michael Leachman and Chris Mai: Lessons for Other States from Kansas' Massive Tax Cuts: "Kansas is a cautionary tale, not a model.

As other states recover from the recent recession and turn toward the future, Kansas’ huge tax cuts have left that state’s schools and other public services stuck in the recession, and declining further — a serious threat to the state’s long-term economic vitality. Meanwhile, promises of immediate economic improvement have utterly failed to materialize.... Kansas’ tax cuts this year are costing the state about 8 percent of the revenue it uses to fund schools, health care, and other public services, a hit comparable to a mid-sized recession.  State data show that the revenue loss will rise to 16 percent in five years if the tax cuts are not reversed.... Most states are restoring funding for schools after years of significant cuts, but in Kansas the cuts continue.  Governor Sam Brownback recently proposed another reduction in per-pupil general school aid for next year, which would leave funding 17 percent below pre-recession levels.  Funding for other services — colleges and universities, libraries, and local health departments, among others — also is way down, and declining.

Continue reading "Lessons for Other States from Kansas' Massive Tax Cuts: Live from The Roasterie CXXX: March 31, 2014" »

## Monday DeLong Smackdown: Dean Baker on the Inevitability of the Lesser Depression

Dean Baker: Krugman and DeLong on Avoiding Secular Stagnation: "Brad DeLong and Paul Krugman are having some back and forth on the problem of secular stagnation and what it would have taken to avoid a prolonged period of high unemployment.

I thought I would weigh in quickly since I have a better track record on this stuff than either of them.

The basic story going into the crash was that we had an economy that was being driven by the housing bubble... residential construction... $8 trillion of bubble generated housing equity.... Consumption also predictably plummeted. This is known as the housing wealth effect.... When the$8 trillion in bubble generated equity disappeared so did the consumption that it was driving. You can't borrow against equity that isn't there. This cost the economy between $400 billion and$600 billion (@ 3-4 percent of GDP) in annual consumption expenditures.... Some of this gap would be filled as excess inventory of housing gradually faded and the vacancy rates came back to more normal levels. We're getting there, but still have some way to go. Some would be filled by a drop in the trade deficit, which now sits at around 3 percent of GDP, compared to a level of almost 6 percent of GDP before the crisis. The government could fill the remaining gap with additional spending, but our cult of low-deficit politicians is insisting that they would rather keep people from getting jobs, so this ain't going to happen....

The other part of the demand story would be to make more progress on the trade deficit....

There are always things that can be done. The key point is to first understand where we are. And the most important take away is that millions are suffering now not because we are too poor, but we are too rich. We don't need all the workers we have. This provides enormous opportunities for making people's lives better, if we just had the political will.

## The Relevance of Marx?, Or, Is There a Greater Focus in Our Future?: Monday Focus: March 31, 2014

I have long thought that Marx's fixation on the labor theory of value made his technical economic analyses of little worth. Marx was dead certain for ontological reasons that exchange-value was created by human socially-necessary labor time and by that alone, and that after its creation exchange-value could be transferred and redistributed but never enlarged or diminished. Thus he vanished into the swamp, the dark waters closed over his head, and was never seen again.

Continue reading "The Relevance of Marx?, Or, Is There a Greater Focus in Our Future?: Monday Focus: March 31, 2014" »

## Liveblogging World War II: March 31, 1944

Under command of Admiral R. A. Spruance, Commander Fifth Fleet, a powerful force of the Pacific Fleet, including carriers, fast battleships, cruisers, and destroyers, attacked the Western Carolines. On 30 and 31 March, carrier-based planes struck at the Palau group with shipping as primary target. They sank 3 destroyers, 17 freighters, 5 oilers and 3 small vessels, and damaged 17 additional ships. The planes also bombed the airfields, but they did not entirely stop Japanese air activity. At the same time, our aircraft mined the waters around Palau in order to immobilize enemy shipping in the area. Part of the force struck Yap and Ulithi on 31 March and Woleai on 1 April.

Although the carrier aircraft encountered active air opposition over the Palau area on both days, they quickly overcame it. Enemy planes approached the task force on the evening of 29 March and 30 March but were destroyed or driven off by the combat air patrols. During the three days' operation our plane losses were 25 in combat, while the enemy had 114 planes destroyed in combat and 46 on the ground. These attacks were successful in obtaining the desired effect, and the operation in New Guinea went forward without opposition from the Western Carolines.

Suppose that in the area around Euphoric State University in the state of Euphoria there are 1500 workers: 500 potters, 500 baristas, and 500 yoga instructors. On January 1, every worker has $4,000 in cash on hand. produces$4,000 worth of their goods each month, which they then send off to the consignment store which sells their goods for them and pays them (in cash) at the very end of the month. Every worker gradually spends their cash on hand down steadily during the month so that they run out of cash just as the month ends--at which point in time the consignment shop pays each of them $4000. Bearing in mind that everyone's income is someone else's expenditure, suppose that all 1500 workers decide on February 1 that they need to be safer in their financial transactions--that they need to start the month of March not with$4000 in cash but with $4500 in cash: 1. How much do each of the 1500 workers plan to spend in February? 2. How much cash on hand do each of the 1500 workers have on February 28? 3. How large are the payments that each worker receives on March 1, and how much cash does each of the workers have on hand at the end of March 1? 4. How much do you think each of the 1500 workers will plan to spend in March? "5. How large do you think the payments that each worker receives on April 1 will be? ## Principles of Economics: Problems: "Say's Law": Inflation Suppose that in the area around Euphoric State University in the state of Euphoria there are 1500 workers: 500 potters, 500 baristas, and 500 yoga instructors. On January 1, every worker has$4,000 in cash on hand. produces $4,000 worth of their goods each month, which they then send off to the consignment store which sells their goods for them and pays them (in cash) at the very end of the month. Every worker gradually spends their cash on hand down steadily during the month so that they run out of cash just as the month ends--at which point in time the consignment shop pays each of them$4000.

Bearing in mind that everyone's income is someone else's expenditure, suppose that the consignment shop announces on February 1 that it won't require cash for purchases in the last quarter of the month--that people can settle up by having their last quarter of the month's purchases deducted from their start-of-the-month payment:

1. How much do you think each of the 1500 workers will plan to spend in February?

￼2. How large do you think will be the payments that each worker receives on March 1, and how much cash does each of the workers have on hand at the end of March 1?

1. How much do you think each of the 1500 workers will plan to spend in March?

## Principles of Economics: Problems: Income-Expenditure Framework: Disequilibrium III

Consider an economy like the U.S., only with all planned spending categories in round numbers:

• C--consumption spending on domestically-produced goods--$9 trillion/year • I--business investment spending--$2 trillion/year
• G--government purchases--$2 trillion/year • X--exports of goods and services--$2 trillion/year

1. What is total planned spending E in this economy this year?

2. If the economy is in equilibrium--if people are actually able to buy all the currently-produced goods and services they plan to--what will total income Y be in the economy this year?

￼3. Suppose that less is produced than was planned to spend. What will happen to inventories?

## Principles of Economics: Problems: Income-Expenditure Framework: Income and Expenditure Disequilibrium II

Consider an economy like the U.S., only with all planned spending categories in round numbers:

• C--consumption spending on domestically-produced goods--$9 trillion/year • I--business investment spending--$2 trillion/year
• G--government purchases--$2 trillion/year • X--exports of goods and services--$2 trillion/year
• Y--total projected income--$15 trillion/year 1. What is total planned spending E in this economy this year? 2. Suppose irrational exuberance pushes business investment spending up to$3 trillion/year this year as businesses decide they can spend down their cash reserves. What do you expect to happen?

￼3. Suppose irrational pessimism pushes business investment spending down to $1 trillion/year this year as businesses decide they need to cut back and build up their cash reserves. What do you expect to happen? ## Principles of Economics: Problems: Income-Expenditure Framework: Income and Expenditure Disequilibrium Consider an economy like the U.S., only with all planned spending categories in round numbers: • I--business investment spending--determined by business executives' "animal spirits"--$3 trillion/year
• G--government purchases--determined by politics--$3 trillion/year • T--net taxes and transfers--determined by politics--$3 trillion a year
• X--exports of goods and services--determined by foreigners--$3 trillion/year • C--consumption spending on domestically-produced commodities--determined by households according to the equation: C = c0 + cy(Y - T) • Y--total projected income--$14T

1. Suppose c0 = 0 and cy = 0.6. What is total planned expenditure E = C + I + G + X? Is it equal to planned income? What are people planning to do with respect to their holdings of cash?

2. Suppose c0 = $3 trillon and cy = 0.4. What is total planned expenditure E = C + I + G + X? Is it equal to planned income? What are people planning to do with respect to their holdings of cash? 3. Suppose c0 =$3 trillion and cy = 0.6. What is total planned expenditure E = C + I + G + X? Is it equal to planned income? What are people planning to do with respect to their holdings of cash?

￼4. Suppose c0 = 0 and cy = 0.4. What is total planned expenditure E = C + I + G + X? Is it equal to planned income? What are people planning to do with respect to their holdings of cash?

## Principles of Economics: Problems: Income-Expenditure Framework: Equilibrium

Consider an economy like the U.S., only with all planned spending categories in round numbers:

• I--business investment spending--determined by business executives' "animal spirits"--$3 trillion/year • G--government purchases--determined by politics--$3 trillion/year
• T--net taxes and transfers--determined by politics--$3 trillion a year • X--exports of goods and services--determined by foreigners--$3 trillion/year
• C--consumption spending on domestically-produced commodities--determined by households according to the equation: C = c0 + cy(Y - T)

1. Suppose c0 = 0 and cy = 0.6 and suppose that the economy is in equilibrium with E = Y. What is total planned expenditure E = C + I + G + X?

2. Suppose c0 = $3 trillion and cy = 0.4 and suppose that the economy is in equilibrium with E = Y. What is total planned expenditure E = C + I + G + X? 3. Suppose c0 =$3 trillion and cy = 0.6 and suppose that the economy is in equilibrium with E = Y. What is total planned expenditure E = C + I + G + X?

4. Suppose c0 = 0 and cy = 0.4 and suppose that the economy is in equilibrium with E = Y. What is total planned expenditure E = C + I + G + X?

## Principles of Economics: Problems: Income-Expenditure Framework: Comparative Statics

Consider an economy like the U.S., only with all planned spending categories in round numbers:

• I--business investment spending--$3 trillion/year • G--government purchases--$3 trillion/year
• X--exports--$3 trillionyear • C--consumption spending on domestically-producted commodities--C = c0 + cy(Y-T_ And suppose that the economy starts out in equilibrium with E = Y, with c0 = 0 and cy = 0.6: 1. What is the initial level of total planned expenditure E equals income and production Y? 2. Suppose c0 = 0 rises to$3 trillion. After the economy attains its new equilibrium with E = Y, what is E = Y?

3. Suppose cy = 0.6 falls to 0.4. After the economy attains its new equilibrium with E = Y, what is E = Y?

￼4. Return to c0 = 0 and cy = 0.6. Suppose that I rises from $3 trillion to$4 trillion. After the economy attains its new equilibrium with E = Y, what is E = Y?

1. Return to c0 = 0 and cy = 0.6. Suppose that G rises from $3 trillion to$3.5 trillion. After the economy attains its new equilibrium with E = Y, what is E = Y?

2. Return to c0 = 0 and cy = 0.6. Suppose that taxes T rise $3 trillion to$4 trillion. After the economy attains its new equilibrium with E = Y, what is E = Y?

3. Return to c0 = 0 and cy = 0.6. Suppose that exports X fall from $3 trillion to$2.5 trillion. After the economy attains its new equilibrium with E = Y, what is E = Y? "

## Week 10: GDP and Its Fluctuations

Read Essentials, chapter 14 "Aggregate Demand and Aggregate Supply", 15 "Fiscal Policy"

M Mar 31: Aggregate Supply and Aggregate Demand

W Apr 2: Getting to Where We Are:

Section 10:

Paper Assignment

## Morning Must-Read: Eric Rauchway: Going off gold and the basis for Bretton Woods

Eric Rauchway: Going off gold and the basis for Bretton Woods http://emlab.berkeley.edu/users/webfac/eichengreen/e211_sp14/rauchway_econ211_3-31-14.pdf: "Experience is teaching us a counterintuitive lesson: the way to control leads away from stability.

Aim at growth - moderate growth in safer quarters, even if it means a bit of inflation and debt - and we will achieve stability. It is a lesson that our predecessors learned in the Great Depression, and which led them to establish the Bretton Woods system for precisely those purposes. The essential feature of Bretton Woods was a conditional commitment to exchange stability - with conditionality as essential as stability. The commitment was predicated on the Depression-begotten recognition that monetary stability took a back seat to the promotion of widespread prosperity.

Continue reading "Morning Must-Read: Eric Rauchway: Going off gold and the basis for Bretton Woods" »

## Over at the New York Times Room for Debate: Relevance of Marx?

Over at the New York Times Room for Debate:

I have long thought that Marx's fixation on the labor theory of value made his technical economic analyses of little worth. Marx was dead certain for ontological reasons that exchange-value was created by human socially-necessary labor time and by that alone, and that after its creation exchange-value could be transferred and redistributed but never enlarged or diminished. Thus he vanished into the swamp, the dark waters closed over his head, and was never seen again. READ MOAR at the Equitablog

Continue reading "Over at the New York Times Room for Debate: Relevance of Marx?" »

## Things to Read on the Morning of March 30, 2014

1. Atif Mian and Amir Sufi: Measuring Wealth Inequality: "Emmanuel Saez and Gabriel Zucman have preliminary work: http://gabriel-zucman.eu/files/SaezZucman2014Slides.pdf

2. Duncan Black: On Robert Lucas: The E-con: "There are a couple of versions, but this one is basically: We should focus on economic growth because that greatly expands our ability to improve human welfare. But, well, let's not worry about the human welfare part, just the growth."

3. Charles Gaba: California: Suggestions of even larger numbers?: "I included the 80K in 4 days info yesterday but didn't realize the implications of the second sentence until a commentor pointed it out: 'The Covered California exchange said sign-ups have been building throughout the week with about 80,000 people picking a health plan Monday through Thursday. An additional 150,000 households created an online account and started the shopping process in the last three days, officials said.' That's 50,000 households--not individuals--PER DAY who JUST ceated an account for 3 days straight. Pretty sure most of those are actually enrolling even as I type this. I think this final weekend surge is going to be MUCH larger than even I've been projecting. Gotta run for the moment, but I'm going ahead and calling it 6.7 million exchange-based QHPs as of now."

4. Ryan Avent: Interest rates and inflation: Zero forever: "WHICH do central banks hate more: low interest rates or rising inflation? They really, really hate low rates.... Searching the Federal Reserve's website for "reach for yield" returns a nice long list of speeches in which Fed officials warn against the dangers of a long period of low rates. And yet.... Markets think both America and Britain will by 2016 be closing in on nearly a decade of ultra-low rates.... Alone among big rich economies, Japan is now actively trying to raise inflation.... Last November Fed economists published a paper arguing that lifting the inflation target to 3% would rapidly lower unemployment while allowing the Fed’s policy rate to rise higher, faster. The argument does not seem to have swayed the Fed’s monetary-policymaking committee, which continues to project inflation of at most 2% until the end of 2016. Markets reckon prices will rise even more slowly. Not only is the Fed not raising its inflation target, it is tightening while inflation remains well below the 2% target.... Just today we learned that the Fed's preferred inflation gauge rose at just 0.9% in the year to February, down from 1.2% in January.... The rich world's central banks are behaving with a dangerous complacency. Low and falling inflation will retard ongoing recoveries. Perhaps more important, this path forward leaves the rich world with virtually no cushion against future shocks.... I'm not sure how the Fed can expect anyone to take its word seriously when it has undershot its target nearly every month that target has been in place, when its forecasts make clear that it fully intends to undershoot that target for years to come and indeed on average, and when it is busy pulling away support to the economy while inflation falls ever farther below 2%. It's a joke."

Continue reading "Things to Read on the Morning of March 30, 2014" »

## Liveblogging World War II: March 30, 2014

After a number of complicated conferences we were broken down into small parties according to the landing craft we were to join. The training document concerned is entitled Allocation of units to ship and landing craft ( by units) and Landing Table Index. I have it still in my war album.

Continue reading "Liveblogging World War II: March 30, 2014" »

## Evening Must Read: Ryan Avent: Interest rates and inflation: Zero Forever

Ryan Avent: Interest rates and inflation: Zero forever: "WHICH do central banks hate more: low interest rates or rising inflation?

They really, really hate low rates.... Searching the Federal Reserve's website for "reach for yield" returns a nice long list of speeches in which Fed officials warn against the dangers of a long period of low rates. And yet.... Markets think both America and Britain will by 2016 be closing in on nearly a decade of ultra-low rates.... Alone among big rich economies, Japan is now actively trying to raise inflation.... Last November Fed economists published a paper arguing that lifting the inflation target to 3% would rapidly lower unemployment while allowing the Fed’s policy rate to rise higher, faster. The argument does not seem to have swayed the Fed’s monetary-policymaking committee, which continues to project inflation of at most 2% until the end of 2016. Markets reckon prices will rise even more slowly. Not only is the Fed not raising its inflation target, it is tightening while inflation remains well below the 2% target.... Just today we learned that the Fed's preferred inflation gauge rose at just 0.9% in the year to February, down from 1.2% in January.... The rich world's central banks are behaving with a dangerous complacency. Low and falling inflation will retard ongoing recoveries. Perhaps more important, this path forward leaves the rich world with virtually no cushion against future shocks.... I'm not sure how the Fed can expect anyone to take its word seriously when it has undershot its target nearly every month that target has been in place, when its forecasts make clear that it fully intends to undershoot that target for years to come and indeed on average, and when it is busy pulling away support to the economy while inflation falls ever farther below 2%. It's a joke."

## Afternoon Must-Read: Duncan Black: The E-con

Duncan Black: On Robert Lucas: The E-con: "The E-con:

There are a couple of versions, but this one is basically: We should focus on economic growth because that greatly expands our ability to improve human welfare. But, well, let's not worry about the human welfare part, just the growth.

## Two More Worthwhile Reviews of Piketty's "Capital in the Twenty-First Century"

...to add to the twelve I already collected: Ryan Avent, Doug Henwood, Edward Lambert, Dean Baker, Kathleen Geier, John Cassidy, Paul Krugman, Ed Kilgore, Jacob S. Hacker and Paul Pierson, Lawrence Summers, Tim Noah, and Heather Boushey

Continue reading "Two More Worthwhile Reviews of Piketty's "Capital in the Twenty-First Century"" »

## Afternoon Must-Read: Charles Gaba: California: Suggestions of Even Larger ACA Exchange Numbers?

Charles Gaba: California: Suggestions of even larger numbers?: "I included the 80K in 4 days info yesterday...

but didn't realize the implications of the second sentence until a commentor pointed it out:

The Covered California exchange said sign-ups have been building throughout the week with about 80,000 people picking a health plan Monday through Thursday. An additional 150,000 households created an online account and started the shopping process in the last three days, officials said.

That's 50,000 households--not individuals--PER DAY who JUST ceated an account for 3 days straight. Pretty sure most of those are actually enrolling even as I type this. I think this final weekend surge is going to be MUCH larger than even I've been projecting. Gotta run for the moment, but I'm going ahead and calling it 6.7 million exchange-based QHPs as of now.

## Weekend Reading: General John Glover vs. Howe's Attempt to Outflank the Continental Army's Retreat to White Plains

I have ancestors who were with General John Glover and his Marblehead Mariners Regiment during the Revolutionary War. Given that my brother Chris has decided to publicly continue the feud that we descendants of Artemas Ward have been carrying on for 238 years with the too-much-overpraised Virginian with too much political influence who took the army that Artemas Ward had raised, trained, maintained, and supplied that fought the Battle of Bunker Hill and then threw 90% of it away as Howe outfought and outmaneuvered him in New York...

Here General John Glover and his Marblehead Mariners keep Howe from bagging the remnants of the army Ward had created entire as they retreat from Manhattan to White Plains:

Weekend Reading: : General John Glover: October 22, 1776: "You no doubt heard the enemy landed all their army on Frog's Point [i.e., Throg's Neck], the 12th instant...

...leaving only twelve hundred men in New York, and there remained until the 18th, which was Friday. I arose early in the morning and went on the hill with my glass, and discovered a number of ships in the Sound, under way; in a short time I saw the boats, upwards of two hundred sail, all manned and formed in four grand divisions.

Continue reading "Weekend Reading: General John Glover vs. Howe's Attempt to Outflank the Continental Army's Retreat to White Plains" »

## Weekend Reading: Molly Osberg: Inside The Barista Class

Molly Osberg: Inside The Barista Class: "One of the most obscene things I learned as a barista was how eager people are to be liked.

NYU sophomores, the ones with Jansport backpacks in full makeup at 9 a.m., stuttered their orders and shyly complimented me on my nose ring. I semi-patiently listened to innumerable Wikipedia-style monologues about the music I was playing from men in their twenties trying to render their business attire invisible with cultural know-how. I was given zines, mixtape-party fliers, home-recorded chillwave demos.

## Things to Read at Lunchtime on March 29, 2014

1. Paul Krugman: The Skills Zombie - NYTimes.com: "One of the most frustrating aspects of economic debate... has been the preference of influential people for stories about our troubles that sound serious as opposed to those that actually are serious. The reality... our economy is depressed because there isn’t enough spending... we need... something, almost anything, that increases total spending. But policymakers and pundits want to hear about tough decisions and hard choices, and they just recoil from any suggestion that terrible problems might have easy answers. The most destructive example is, of course, the deficit obsession.... Rhe same kind of policy machismo was an important reason so many people who really, really should have known better supported the Iraq war.... This new EPI report is a useful reminder of the extent to which another doctrine that sounds serious retains a grip on discourse — namely, the notion that we have big problems because our work force lacks essential skills. This is very much a zombie doctrine.... The Boston Consulting Group... the only hints of a skills shortage it found were in unglamorous skilled blue-collar work... [in] only five of the nation’s 50 largest manufacturing centers (Baton Rouge, Charlotte, Miami, San Antonio, and Wichita) appear to have significant or severe skills gaps. Occupations in shortest supply are welders, machinists, and industrial-machinery mechanics. Some readers may recall that when we finally had a really clear-cut example of a skill so much in demand that wages were soaring, the skill was … operating a sewing machine.... Yet the skills story just keeps showing up in supposedly informed discussion. Again, I think that this is because it sounds like the kind of thing serious people should say..."

2. David Beckworth: Ad Hoc Monetary Policy: "One of the defining features of U.S. monetary policy over the past five years has been its incredibly ad hoc nature... QE1, QE2, Operation Twist, QE3, and the Evans Rule.... This stop-go approach to monetary policy was politically costly and prevented the Fed from fully utilizing its ability to manage expectations of future nominal growth... the Fed failed to clearly spell out how it would systematically respond to differing states of the future economy.... Now imagine the Fed's monetary stimulus programs during this time had be done in a more systematic and predictable manner... assume the Fed had announced a NGDP level target from the start and said asset purchases will continue until a certain level target was hit.... FOMC meetings would have been more predictable and consequently less important. We would not be hanging on the every word of our Fed chairs. Fed watchers and bloggers would be far fewer. It is true that implementing something like a NGDP level target would have used up a lot of the Fed's political capital.... My reply is that it may have politically cheaper for the Fed to do a NGDP level target than it was to do all the impromptu programs it adopted over the past five years..."

1. Melissa Kearney: A New Approach to Making Work Pay: "Senate Budget Committee Chairwoman Patty Murray introduced the '21st Century Worker Tax Cut Act' to establish a new deduction for married couples who are both employed and have young children, and to increase the earned income tax credit (EITC) for childless workers. The Act would implement the policies introduced by two Hamilton Project proposals designed to help 'make work pay' by allowing low- and middle-income families keep more of what they earn.... Thirty years ago, the majority of families with children had only one parent working outside the home.  Today, roughly two-thirds of married couples with children rely on the earnings from two workers to make ends meet. However, the so-called 'marriage penalties' in the tax code, along with income phase-outs for the EITC and spending programs, and additional costs incurred when both spouses work (such as child care) can result in extremely high tax rates on additional earnings by many low- and middle-income American families..."

2. Henry Blodget: Companies Need To Pay People More: "These days, if you suggest that great companies should serve all of their constituencies (customers, employees, and shareholders) and that American companies should share more of their wealth with the people who generate it (employees), you get called a 'socialist'... a 'liberal'... get told that you 'don't understand economics'... get accused of promoting 'wealth confiscation'.... In other words, you get told that anyone who suggests that great companies should share the value they create with their employees instead of just lining the pockets of shareholders is an idiot..."

Should Be Aware of:

1. Josh Marshall: The Christie Way?: "I'm a little confused.... Generally speaking when you throw someone under the bus and you want them to play along, you add as much padding to the process as possible. That doesn't appear to be the Chris Chrisitie way. The main fallperson turns out to be former deputy chief of staff Bridget Kelly. And the 'report' prepared by Christie's lawyer not only places all the criminal liability on her (along with David Wildstein). It also goes out of its way to say that she is, to put it bluntly, emotionally unstable and loose.... Her lawyer thinks the attacks on Kelly's character are a warning shot that they'll tear her apart if she agrees to testify against Christie or his still protected associates. And that does seem like the most likely explanation. But which would you prefer, public character assassination or multiple years sitting in federal prison?"

2. Kevin Drum: John Boehner vs. the Tea Party, Part XVII: "The House Republican leadership needed to pass the annual Medicare doc fix, but they didn't want to raise taxes or cut other spending to pay for it. Nor did they want anyone to be forced to go on record voting for a bill that wasn't paid for. What to do? Answer: * Call a recess. * Huddle up with Democratic leaders and get their buy-in for a quick voice vote. * Do not—repeat: do not—tell tea party types about this. * Get back out on the floor pronto and call up a bill that doesn't pay for the doc fix at all. Just put it on the ol' deficit spending credit card. * Pass it fast before conservative Republicans realize what's going on and demand a roll-call vote. * Hightail it out of Dodge. Martin Longman has the whole story here. It's pretty hilarious. UPDATE: Just to make this even better, the C-SPAN video of the proceedings makes it pretty clear that the voice vote didn't even go in favor of the bill. At least, not by the two-thirds margin required to suspend the rules and pass the bill pronto. Truly banana republic territory."

3. Dean Baker: Krugman and DeLong on Avoiding Secular Stagnation: "I thought I would weigh in quickly since I have a better track record on this stuff than either of them.... We had an economy that was being driven by the housing bubble... directly through residential construction and indirectly through the consumption that followed from $8 trillion of bubble=generated housing equity.... Construction hit record lows following the crash.... Consumption also predictably plummeted.... It was necessary to replace close to 8 percent of GDP..." And: ## Lunchtime Must-Read: Paul Krugman: The Skills Zombie Paul Krugman: The Skills Zombie - NYTimes.com: "One of the most frustrating aspects of economic debate... has been the preference of influential people for stories about our troubles that sound serious as opposed to those that actually are serious. The reality... our economy is depressed because there isn’t enough spending... we need... something, almost anything, that increases total spending. But policymakers and pundits want to hear about tough decisions and hard choices, and they just recoil from any suggestion that terrible problems might have easy answers. The most destructive example is, of course, the deficit obsession.... Rhe same kind of policy machismo was an important reason so many people who really, really should have known better supported the Iraq war.... This new EPI report is a useful reminder of the extent to which another doctrine that sounds serious retains a grip on discourse — namely, the notion that we have big problems because our work force lacks essential skills. This is very much a zombie doctrine.... The Boston Consulting Group... the only hints of a skills shortage it found were in unglamorous skilled blue-collar work... [in] only five of the nation’s 50 largest manufacturing centers (Baton Rouge, Charlotte, Miami, San Antonio, and Wichita) appear to have significant or severe skills gaps. Occupations in shortest supply are welders, machinists, and industrial-machinery mechanics. Some readers may recall that when we finally had a really clear-cut example of a skill so much in demand that wages were soaring, the skill was … operating a sewing machine.... Yet the skills story just keeps showing up in supposedly informed discussion. Again, I think that this is because it sounds like the kind of thing serious people should say. ## Apropos of Roger Pielke, Jr.... and the Cost of Global Warming-Related Natural Disasters: Monday DeLong Smackdown Watch on Saturday Eric Laermans: The Launch of fivethirtyeight.com and Climate Change Disaster Weblogging: (Trying to Be) The Honest Broker for the Week of March 29, 2014: "I can't help but wonder why nobody is pointing out... ...that including costs incurred from natural disasters completely unrelated to climate change (e.g. earthquakes or volcano eruptions) also is a deadly sin against correct data-driven analysis. These non-climate-related disasters add a lot of noise to the data and make it needlessly harder to identify the impact of climate change on the global cost due to natural disasters, unless of course it was the author's intent to muddle the analysis. Touché... In fact, when you look at the data Pielke uses to establish his claim that costs of natural disasters are (a) growing over time but (b) not growing faster than one would expect given growing wealth, you wonder why Nate Silver or somebody else didn't bounce the article immediately. The big enchilada in Pielke's 1990-2013 graph is the 2011 Honshu Earthquake: Conditional on the Honshu Earthquake happening in his sample, it is just pure chance that the Honshu Earthquake happened at the end rather than at the beginning. And if the Honshu Earthquake had happened in, say, 1991, it would have done more damage: the Japanese economy has not grown materially since 1990, and Japanese earthquake safety standards have materially improved. When the shape of one's quantitative argument about the costs of global warming hinges on a huge and damaging earthquake occurring at the end rather than near the beginning of one's sample, one can be said to be doing many things--but not data science... ## Thursday Idiocy on Friday: Here Is the Last Time I Noted the Existence of Roger Pielke, Jr. Joe Romm: N.Y. Times and Elisabeth Rosenthal Face Credibility Siege over Unbalanced Climate Coverage | ThinkProgress: "Dr. Robert J. Brulle of Drexel University, whom the NYT itself quoted last year as “an expert on environmental communications,” emailed me that the piece is “the worst, one sided reporting I have ever seen.” When I called him up, he went further saying: In this article, the New York Times has become an echo-chamber for the climate disinformation movement. Continue reading "Thursday Idiocy on Friday: Here Is the Last Time I Noted the Existence of Roger Pielke, Jr." » ## Over at the Washington Center for Equitable Growth: The Launch of fivethirtyeight.com and Climate Change Disaster Weblogging: (Trying to Be) The Honest Broker for the Week of March 29, 2014 Over at the Washington Center for Equitable Growth: The Launch of fivethirtyeight.com and Climate Change Disaster Weblogging: (Trying to Be) The Honest Broker for the Week of March 29, 2014: I confess that I had forgotten about the existence of Roger Pielke, Jr.--the last trace I can find of him in my Augmented Memory Packs dates to February, 2010[1] when Google sent me off to: http://fabiusmaximus.com/2014/03/25/nate-silver-climate-pielke-66723/ and I read: Nate Silver goes from hero to goat, convicted by the Left of apostasy: Pity Nate Silver. Hero of the Left for his successful take-down of GOP’s election forecasts, shooting down their delusions about Romney’s chances of victory. Good Leftists like Brad DeLong and Paul Krugman heaped praises on Silver, catapulting him into a sweet gig at ESPN. The poor guy thought the applause was for his use of numbers in pursuit in truth, when it was purely tribal. Their applause were just tribal grunts — we good, they bad — in effect chanting: “Two legs good. Four legs bad.” Right out of the box at his new venture, ESPN’s FiveThirtyEight, Silver committed apostasy, and the Left reacted with the fury true believers mete out to their betrayers. He posted “Disasters Cost More Than Ever — But Not Because of Climate Change” by Roger Pielke, Jr.... Since, as I said, I had forgotten about the existence of Roger Pielke, Jr., I was somewhat annoyed at being told that my applause for Silver had just been a "tribal grunt". So I asked: READ MOAR Continue reading "Over at the Washington Center for Equitable Growth: The Launch of fivethirtyeight.com and Climate Change Disaster Weblogging: (Trying to Be) The Honest Broker for the Week of March 29, 2014" » ## Is There Any Sense in Which Quantitative Easing Might Increase Financial Instability?: The Honest Broker for the Week of March 22, 2014 Over at the Washington Center for Equitable Growth: Washington Center for Equitable Growth | Is There Any Sense in Which Quantitative Easing Might Increase Financial Instability?: The Honest Broker for the Week of March 22, 2014: Friday Focus Let us start with Gabriel Chodorow-Reich: Gabriel Chodorow-Reich: Effects of Unconventional Monetary Policy on Financial Institutions: "Abstract: Unconventional monetary policy affects financial institutions through their exposure to real project risk, the value of their legacy assets, their temptation to reach for yield, and their choice of leverage.... High-frequency event studies... show the introduction of UMP in the winter of 2008-09 had a strong, beneficial impact on banks and especially on life insurance companies.... Subsequent policy announcements had minor effects.... The interaction of low nominal interest rates and administrative costs led money-market funds to waive fees, producing a possible incentive to reach for higher returns.... I find some evidence of high-cost money-market funds reaching for yield in 2009-11, but little thereafter. Private defined-benefit pension funds with worse funding status or shorter liability duration also seem to have reached for higher returns beginning in 2009, but again the evidence suggests such behavior dissipated by 2012. Overall, in the present environment there does not seem to be a trade-off between expansionary policy and the health or stability of the financial institutions studied. READ MOAR Continue reading "Is There Any Sense in Which Quantitative Easing Might Increase Financial Instability?: The Honest Broker for the Week of March 22, 2014" » ## Bill To Do Away With All Local Gun Regulations Has New Life In Kansas: Live from The Roasterie CXXIX: March 28, 2014 I wonder what has happened to this? Eric Lach: Bill To Do Away With All Local Gun Regulations Has New Life In Kansas: "The bills backers told the Associated Press that the bill's first priority was making gun laws the same across the state. Local officials who still oppose the updated proposal counter that they are the best judges of local gun measures. “Is it better now than it was? Yeah,” Eric Smith, a lobbyist for the League of Kansas Municipalities, told the Associated Press. “It’s still sausage.” I tell you: when people drop their purses in the local Safeway and the gun goes off and blows out the store's front plate-glass window, too many people who shouldn't be carrying anything are... ## Morning Must-Read: David Beckworth: Ad Hoc Monetary Policy David Beckworth: Ad Hoc Monetary Policy: "One of the defining features of U.S. monetary policy over the past five years has been its incredibly ad hoc nature... QE1, QE2, Operation Twist, QE3, and the Evans Rule.... This stop-go approach to monetary policy was politically costly and prevented the Fed from fully utilizing its ability to manage expectations of future nominal growth... the Fed failed to clearly spell out how it would systematically respond to differing states of the future economy.... Now imagine the Fed's monetary stimulus programs during this time had be done in a more systematic and predictable manner... assume the Fed had announced a NGDP level target from the start and said asset purchases will continue until a certain level target was hit.... FOMC meetings would have been more predictable and consequently less important. We would not be hanging on the every word of our Fed chairs. Fed watchers and bloggers would be far fewer. It is true that implementing something like a NGDP level target would have used up a lot of the Fed's political capital.... My reply is that it may have politically cheaper for the Fed to do a NGDP level target than it was to do all the impromptu programs it adopted over the past five years... ## Things to Read on the Morning of March 28, 2014 ### Must-Reads: 1. Kathy Ruffing: SSI Should Be Strengthened, Not Cut: "House Budget Committee Chairman Paul Ryan’s misleading review of the safety net attacks Supplemental Security Income (SSI) — an important program that provides cash income to seniors, the blind, and people with severe and long-lasting disabilities who have little income and few assets. This vital program aids some of the poorest and most vulnerable Americans and, rather than attack it, policymakers should strengthen it. In December 2013, 8.4 million people collected SSI: 2.1 million seniors age 65 or older, 4.9 million disabled adults age 18-64, and 1.3 million disabled children under age 18. Until the deep recession caused a modest uptick, SSI participation had generally been flat or falling as a share of the population since at least the mid-1990s (see graph). SSI benefits alone don’t lift recipients living independently out of poverty; the maximum benefits for individuals ($721 a month) and couples ($1,082, if both spouses qualify) are about three-fourths of the poverty level. But SSI greatly reduces the number of people in extreme poverty and lessens the burden on other family members..." 2. Steve Randy Waldmann: The Asymmetric Informtion Industries: "Government, health care, education, and finance.... Information asymmetries are unusually difficult to resolve in these industries... even after we have purchased services, we are often unable to evaluate their quality.... Absent reliable markers of quality, we imagine that unreliable self-evaluations are probably better than nothing.... As these are fields in which providers themselves can’t reliably evaluate the quality of the services provided, the rest of us will have a very hard time distinguishing between corrupt practices and natural variability.... We need the “information asymmetry industry”.... But we should acknowledge these are problematic industries for a capitalist economy and a democratic polity..." 3. Ed Glaeser: Raise earnings, but go beyond the minumum wage to do it: "CAN’T AMERICA, and Massachusetts, find a better weapon to combat income inequality than raising the minimum wage? I don’t oppose the efforts of those, including Speaker DeLeo and President Obama, who want to raise the minimum... but I’ll be sad if we once again resort to this hoary policy sledgehammer.... Oceans of ink have been spent disputing the employment effects of the minimum wage.... In my view... no major impact on employment levels is likely.... The good news is that we have had a better way to raise wages for the lowest-paid workers for more than 40 years: the earned income tax credit.... Raising the minimum wage isn’t necessarily wrongheaded. But if we want a better way to reduce inequality and raise earnings for the least fortunate Americans, targeted tax credits and government subsidies are a more creative, fair, and effective course." Continue reading "Things to Read on the Morning of March 28, 2014" » ## Morning Must-Read: Kathy Ruffing: SSI Should Be Strengthened, Not Cut Kathy Ruffing: SSI Should Be Strengthened, Not Cut: "House Budget Committee Chairman Paul Ryan’s misleading review of the safety net attacks Supplemental Security Income (SSI) — an important program that provides cash income to seniors, the blind, and people with severe and long-lasting disabilities who have little income and few assets. This vital program aids some of the poorest and most vulnerable Americans and, rather than attack it, policymakers should strengthen it. In December 2013, 8.4 million people collected SSI: 2.1 million seniors age 65 or older, 4.9 million disabled adults age 18-64, and 1.3 million disabled children under age 18. Until the deep recession caused a modest uptick, SSI participation had generally been flat or falling as a share of the population since at least the mid-1990s (see graph). SSI benefits alone don’t lift recipients living independently out of poverty; the maximum benefits for individuals ($721 a month) and couples (\$1,082, if both spouses qualify) are about three-fourths of the poverty level.  But SSI greatly reduces the number of people in extreme poverty and lessens the burden on other family members....

Continue reading "Morning Must-Read: Kathy Ruffing: SSI Should Be Strengthened, Not Cut" »

## Morning Must-Read: Ed Glaeser: Raise earnings, but go beyond the minumum wage to do it

Ed Glaeser: Raise earnings, but go beyond the minumum wage to do it: "CAN’T AMERICA, and Massachusetts, find a better weapon to combat income inequality than raising the minimum wage?

I don’t oppose the efforts of those, including Speaker DeLeo and President Obama, who want to raise the minimum... but I’ll be sad if we once again resort to this hoary policy sledgehammer.... Oceans of ink have been spent disputing the employment effects of the minimum wage.... In my view... no major impact on employment levels is likely.... The good news is that we have had a better way to raise wages for the lowest-paid workers for more than 40 years: the earned income tax credit.... Raising the minimum wage isn’t necessarily wrongheaded. But if we want a better way to reduce inequality and raise earnings for the least fortunate Americans, targeted tax credits and government subsidies are a more creative, fair, and effective course.

## Little Keynesian Economics Purge on the Prairie Weblogging: Live from The Roasterie CXXVIII: March 27, 2014

Apropos of Little Libertarians on the Prairie, Colander and Landreth:

With the depression in the 1930s that view about the role of the market was changing, both in the academic and the political spheres. With the success of the Western governments in World War II, there was also a change in the view of the role of government. It was within this changing ideological structure that Lorie Tarshis wrote his book. Tarshis’s book conveyed a quite different policy perspective. Tarshis saw the government as an agency through which people acted collectively for the common good. That view of government was combined with a belief that the market needed government assistance to assure full employment. Thus, it was inevitable that a book presenting the new view that questioned the self-regulating nature of the economic system would provoke a reaction.

Continue reading "Little Keynesian Economics Purge on the Prairie Weblogging: Live from The Roasterie CXXVIII: March 27, 2014" »

## Afternoon Must-Read: Steve Randy Waldmann: The Information Asymmetry Industry

Steve Randy Waldmann: The Asymmetric Informtion Industries: "Government, health care, education, and finance....

Information asymmetries are unusually difficult to resolve in these industries. A substantial fraction of people who buy a low quality house, car, or stereo eventually come to notice that. This makes it possible for new purchasers of these goods to manage their information problem by researching others’ experience and seller reputations. But in the four industries I’ve described, even after we have purchased services, we are often unable to evaluate their quality....

Note that these problems are not just a matter of bad actors. These industries face intrinsically difficult information problems. We can condemn a used car salesman who finesses odometers, but we can’t condemn the surgeon who thinks he is a god.... Absent reliable markers of quality, we imagine that unreliable self-evaluations are probably better than nothing.... As these are fields in which providers themselves can’t reliably evaluate the quality of the services provided, the rest of us will have a very hard time distinguishing between corrupt practices and natural variability....

We need the “information asymmetry industry”.... But we should acknowledge these are problematic industries for a capitalist economy and a democratic polity. Forecasts that they will dominate, or prescriptions that we should specialize in these sectors to exploit alleged comparative advantage, should be greeted unenthusiastically. I hope that Timothy Geithner takes note.

## Things to Read on the Afternoon of March 27, 2014

1. Tony Atkinson and Salvatore Morelli: The chartbook of economic inequality: "Inequality – long ignored – is now centre stage.... This column introduces the Chartbook of Economic Inequality, a summary of long-run changes in economic inequality for 25 countries over more than 100 years.... Public discourse has started to openly debate the economic implications as well as the legitimacy of increasingly powerful elites seizing a growing share of the national pie year after year. These concerns, led the Managing Director of the IMF, Christine Lagarde to indicate the need for “addressing inequality and building inclusive growth” as one of three ‘milestones’ of the future global economy, in her October 2012 Annual Meetings Speech in Tokyo.... Researchers and scholars have also began to single out inequality as one of the structural causes of the recent financial crisis. This has led us to compile the Chartbook of Economic Inequality..."

2. Paul Krugman: Data as Slogan, Data as Substance: "what would real data-driven reporting look like?... Charles Gaba’s ACASignups.net. Gaba, a website developer, realized that nobody was systematically keeping track of enrollment data for Obamacare, and has turned himself into one-stop shopping.... And he really fills a need: when you read news reports on Obamacare, you can tell right away which reporters have been reading Gaba and know what’s happening and which reporters are relying solely on official announcements--or, worse, dueling political spin. For the record, Gaba’s take on the program so far is fairly optimistic: he projects 6.3 million... by March 31.... The main point is that he’s filling a niche by using a lot more data than the mainstream media. That’s what we thought Nate Silver would be doing, and maybe he eventually will. But for now, Gaba is the model."

3. Noah Smith: fivethirtyeight.com Needs to Step Up Its Game: "I'm a big Nate Silver fan, but let me join the chorus... looking at his new 'data-driven' blog site... it's barely data-driven at all! For example, take this post about how climate change is not increasing the cost of natural disasters.... Let's focus on the idea that this post represents 'data-driven' journalism at all. It doesn't. The 'data' in the post consists of one annual time series with a sample size of 23. That's too small to do any sort of statistical analysis on, but then again, the post doesn't do any statistical analysis. It shows a trendline, and from that trendline it draws broad, sweeping conclusions.... Every newbie blogger and his dog draws a trendline and extrapolates it--and if the blogger is worth his salt, he'll at least have the common decency to qualify his extrapolation with 'if this trend continues', which Pielke does not. Furthermore, Pielke's analysis is just sloppy. What happens if you strip out earthquakes, tsunamis, volcanoes, etc. from the data? What if you extend the trend back 40 years? How does the recent trend compare with the trend from before climate change started significantly affecting global temperatures?... And the economic theory behind the conclusion is even sloppier... costs of mitigation... variance... people [are] risk-averse..."

Continue reading "Things to Read on the Afternoon of March 27, 2014" »

## Jared Bernstein Sees "Green Shoots" That the Technocratic Dialogue on Issues Like Fiscal Policy Is Actually Starting Up Again...

Jared Bernstein: A Weird Mo(u)rning re Fiscal Policy: "I spent a few hours testifying yesterday in what has to be one of the strangest places on earth right now:

the US House of Representatives.... Good, earnest, and honest people on both sides trying to figure out how to get out of the terribly damaging morass in which they’re stuck.  But the dysfunction seems Sisyphusian.... The Financial Services Committee['s] Republican chair, Rep. Hensarling, had a debt clock running the whole time on a screen.... The witnesses–three R witnesses [David M. Cote, Douglas Holtz-Eakin, and Alice Rivlin] and yours truly–actually agreed on quite a bit. We all thought that:

• the only way to achieve a sustainable budget path is not just through spending cuts but through higher revenues as well.  The other witnesses were all about “lower rates, broader base,” but I was a bit surprised to hear them all endorse revenue needs, much to the chagrin of their hosts.
• faster growth is essential, and there was some consensus–not complete–that premature fiscal tightening has been damaging to the recovery so far.
• there’s been little evidence so far that the elevated debt/GDP ratio is having a negative effect on anything, though one of the witnesses claimed it was a drag on hiring. *the path to fiscal sustainability runs through reducing the growth of health care spending, something on which there’s evidence of recent progress....

It was odd to see general agreement among the witnesses and so much obvious distance between the members.  It gave the whole thing a theatrical, going-through-the-motions flavor....

I am significantly less sanguine then Jared is. As I see it, the Republican members of Congress are still in the business of root-and-branch opposition to anything Obama proposes, and if their traditional witnesses will not provide rationales for such root-and-branch opposition then they are going to go and find new sets of witnesses. From my perspective, Douglasville Seton and company have singularly failed to educate their masters, and have spent too much time trimming and trying to minimize disagreements between what is and what their masters would like to think is. And I think that by acting thus they have not served the country or themselves well.

But it is very nice to see that Jared is significantly more hopeful than I right now...

Continue reading "Jared Bernstein Sees "Green Shoots" That the Technocratic Dialogue on Issues Like Fiscal Policy Is Actually Starting Up Again..." »