"I'm not Going to Put my Lot in with Economists"

Greg Mankiw:

The Legacy of Bailouts, by Greg Mankiw: Alan Blinder makes the case for more regulation of financial institutions. The key passage:

It will, for example, substantially reduce the profitability of investment houses and, therefore, reduce their scale. But that’s the price you pay for access to a publicly financed safety net.

That is why some economists cringe when Wall Street firms are bailed out. Beyond the obvious equity issues about risking taxpayer money to help rich guys, there is the problem of efficiency. If you start bailing the firms out when they lose, you have to regulate the gambles they take. You can no longer count on the creditors to limit the firms' leverage, as the creditors are counting on Uncle Sam if things go wrong. But the more regulated these firms are, the lower their productivity will be.

The bottom line: The Bear Stearns bailout may have saved the economy from an episode of financial contagion in the short run, but in the long run it will likely leave us with a more regulated and less vibrant financial system.

I disagree. Lack of effective regulation opened the door for this crisis, and if the Fed had not intervened, there was a strong possibility that the financial system would have had a severe meltdown. Maybe not, but the chance was there and it wasn't a chance most people were willing to take.

Suppose we do nothing and there was a meltdown as feared. One need only look back at the aftermath of the Great Depression to see what happens to regulation after such an event - there was a strong regulatory response. Given the choice between a bailout and the level of regulation that comes along with it, and a crash and the much larger amount of regulation that would follow, it's hard to see why choosing the path that, in a probabilistic sense, gives a smaller likelihood of a major crash and a smaller regulatory response would be objectionable. Financial markets screwed up and they know it - that was quite evident this week at the Milken Institute Global Conference - and they accept that more regulation is needed. The choice isn't between no regulation and some regulation, there will be a regulatory response and the question is how large and effective it will be.

The chance that there would be a financial meltdown had the Fed remained passive instead of intervening is why the statement below from Hillary doesn't make a lot of sense. The equivalence she draws between the financial market bailout and lifting the gas tax is false. The Fed intervened to prevent a financial meltdown, and that helped all of us. There were costs, but the benefits - avoiding a large crash - were far larger.

There is no such necessity for a gas tax, the system won't crash and burn if we do not lift gas taxes for the summer, and the calculation is different. With the financial bailout, we had little choice but to accept some costs in order to prevent far larger costs associated with a meltdown. But given that intervention was needed, the policy that was implemented did not have obvious problems, every economist on the planet did not jump up and say there's a better way to do this! Some did, but the objection was to intervening in financial markets at all. Most agreed this was the best way to proceed if they accepted that that intervention was needed, though there were a few voices advocating variations on the policy. With the gas tax, it is just the opposite - there are no economists I know of that support the policy, not one. Even if they support the idea behind it, giving relief to lower income households, they do not support this particular means of addressing the problem:

Clinton Pushes Back on Gas Tax ‘Pushback’, by Matt Phillips:  Hillary Clinton’s sit-down with George Stephanopoulos on ABC’s “This Week,” quickly delved into her plan to suspend the federal gas tax during the peak summer driving season.

Stephanopoulos ... played a clip of Sen. Barack Obama criticizing the plan. Obama quoted New York Times columnist and Princeton economist Paul Krugman’s assessment that the idea is “pointless and disappointing,” and asked the New York senator to name “a credible economist who supports the suspension.”...

“Well I’ll tell you what, I’m not going to put my lot in with economists,” Clinton said, a response in line with some of the populist notes she’s been hitting in recent stump speeches on the gas tax.

She argued that the policy, if designed properly, could be effective. ... “But let’s step back for a minute George. You know, it’s really odd to me that arguing to give relief to the vast majority of Americans creates this incredible pushback,” she said, “When the federal government, through the Fed and the Treasury gave $30 billion in a bailout to Bear Stearns I didn’t hear anybody jump up and say, ‘That’s not going according to the market, that’s rewarding irresponsible behavior.’ We’ve got to get out of this mindset, where somehow, elite opinion is always on the side of doing things that really disadvantage the vast majority of Americans.”

First, people did complain about the bailout - see above for one, and many of the complaints hit directly on her main point, that "I didn’t hear anybody jump up and say, ‘That’s not going according to the market, that’s rewarding irresponsible behavior’." If she didn't hear that, or if none of her economic advisors did, then they aren't listening. That message was loud and clear.

The "if designed properly" part is strange too. Is she saying that as it stands, it's not a good idea, but she's pushing it anyway? Or is she saying that, as she has designed it, it is a good idea? Either way, it's bunk. She also says, "it’s really odd to me that arguing to give relief to the vast majority of Americans creates this incredible pushback." It's not giving relief that is causing the pushback, there are ways to give relief that don't give up on our environmental goals and have better efficiency properties, e.g. a lump-sum rebate to lower income households. The pushback is about the form of the policy, not the idea behind it.

I'll have to vote soon - Hillary or Obama - and mail in my ballot (we vote by mail here). I've had a bit of trouble deciding, but this will help.

Update: See also Brad Delong, Robert Reich, Richard Green, Ezra Klein, Ryan Avent, and Kevin Drum.

Comments

[Bruce Wilder]

Mark Thoma: "Given the choice between a bailout and the level of regulation that comes along with it, and a crash and the much larger amount of regulation that would follow, it's hard to see why choosing the path that, in a probabilistic sense, gives a smaller likelihood of a major crash and a smaller regulatory response would be objectionable."

It might be hard, but well worth the effort.

[donna]

To quote my friend Hoff at Hoffmania:

Since the gas-tax holiday has become the cornerstone of McCain’s and Clinton’s campaigns (Clinton is flooding the airwaves with it), let’s break it down to this extremely easy-to-fathom progression of events. Please feel free to pass it along to your friends who will be voting Tuesday.

Gas drops 18c a gallon (from the tax, not oil company profit).
People drive more.
People buy more gas.
Oil companies win.

Demand goes up.
Supplies go down.
Oil companies raise prices.
Oil companies win.

Summer ends.
Gas goes back up 18c a gallon.
People still have to drive to work.
Oil companies win.

Oh, and all summer long, American bridge and road maintenance crews will be unemployed.

If that’s what you want, vote for McCain or Clinton.

[anne]

Yes and no; China has repeatedly been able to use limited price controls for oil, such as to cover planting and harvest times with important success. Beyond the politics, I am much interested in ways to lower prices fairly for limited times and in limited areas. Prices for oil have been so lowered by using the national reserve, while gas prices have been lowered by setting a ceiling, much against the wishes of a number of economists.

[Mark Thoma]

Whatever the goal, there are almost always better policies to get us there than direct price controls (to achieve equity of efficiency - your choice).

[anne]

Beyond politics; I am much interested in using selected price controls in the energy and food sectors in different countries, and am thoroughly impressed with the success in China and countries imitating China. Selective controls on drug prices have worked wonderfully for Brazilians. Bottlenecks are always a problem, but oversight and regulation and limits in control scope have allowed for success.

[anne]

Mark Thoma:

"Whatever the goal, there are almost always better policies to get us there than direct price controls (to achieve equity of efficiency - your choice)."

Remember when Paul Krugman was convinced the California power crisis was artificial, and a price ceiling was urged and the ceiling solved the problem almost immediately?

What makes price controls in China and Brazil work?

[anne]

Brazil has used selective price controls on drugs to gain what may be the finest-fairest health care system in Latin America.

Remember when oil prices were being artificially driven in winter in the Middle West, and the problem was resolved almost immediately by using the reserve against the wishes of a number of economists?

[Mark Thoma]

When markets are ineffective or missing, i.e. when a farmer cannot use credit markets to borrow the money needed to cover fertilizer and then lock into the current high price using futures/forward markets, then other less effective solutions may be pursued, and they may appear to "work". But solving the fundamental problem - lack of effective credit markets - is a better solution.

Again, price controls are not the answer. With food, it distorts the incentive to put more land into production - it delays solving the long-run problem and that is the opposite of what you want. We need to produce more food and if you have price controls, then government has to somehow intervene here too bring more land into production. Better to leave the price high to encourage more supply, then use some sort of rebate to help offset the high food/medical/etc. costs (though market failures in the medical area are another layer to all of this).

Sometimes, as with the minimum wage, a better solution may be politically infeasible. But that doesn't stop us from saying, every time, that this is not the best way to proceed.

Anyway, just because a policy does something that looks positive - it "works" - does not mean it is the best policy. Price controls are rarely the best policy.

[anne]

Mark Thoma:

"Sometimes, as with the minimum wage, a better solution may be politically infeasible. But that doesn't stop us from saying, every time, that this is not the best way to proceed."

No; making sure that workers are paid decently, paid decently by their employer, is what makes a minimum wage desirable, so desirable. Working for a tax credit is not the same as working for a decent wage from General Electric or Burger King and there is a reason Burger King fights so hard against a minimum wage.

[anne]

http://www.democracynow.org/2008/4/29/headlines#15

April 29, 2008

Burger King Refuses to Increase Pay for Farmworkers
By Amy Goodman

In labor news, the Coalition of Immokalee Workers has presented 85,000 petition signatures to the headquarters of Burger King. * The coalition is urging Burger King to pay farmworkers an additional penny per pound of tomatoes picked. Burger King has so far refused the demand, despite similar agreements between the Coalition of Immokalee Workers and Yum Brands and McDonald's. Meanwhile, the Fort Myers News-Press has revealed new information on Burger King's covert attack on the farmworkers. The daughter of Burger King's vice president admitted to the newspaper that her father used her email account to post online messages vilifying the farmworkers.

* http://www.news-press.com/apps/pbcs.dll/article?AID=/20080429/BUSINESS/804280351/1014/BUSINESS

[I'll take the penny-a-pound price control; yes, I will.]

[David]

What now, those elitist economists think their opinion on tax policy is somehow more informed than those of Clinton's friends at the bar? Clearly those truck drivers know more about the cost of high gas prices than the people in the ivory towers with their hybrids.

The remaining intellectuals who stand behind Clinton should certainly reconsider. It's not just an attack on economists, but one on researched policy altogether. You can't make gut-feeling "feels-right" decisions in our complex world, you have to really consider the implications... there's no place for more voodoo-economics, McCain has that area covered already.

[anne]

http://maxspeak.org/mt/archives/002703.html

November 28, 2006

The Economic Thought of the Morally & Intellectually Superior N. Gregory Mankiw
By Max Sawicky

"Here is a question that I would ask any politician: If you could set your ideal policy to help the poor, wouldn't you prefer to expand the EITC [earned income tax credit] and abolish the minimum wage? Any politician that fails to answer 'yes' is either misinformed or engaging in demagoguery."

Among the misinformed or demagogic are these 650 economists, * including five Nobel prize winners, the latter a distinction that has thus far eluded Professor Mankiw.

* http://www.epi.org/content.cfm/minwagestmt2006

Over 650 economists, including 5 Nobel prize winners and 6 past presidents of the American Economic Association, believe that increasing federal and state minimum wages, with annual cost-of-living adjustments for inflation, "can significantly improve the lives of low-income workers and their families, without the adverse effects that critics have claimed."

[Mark Thoma]

I don't see why you would object to policies that would help workers even more. I've been critical of some of the ways in which EITC is implemented, and my concept of social insurance is certainly not limited solely to the employed, or to tax credits, it's a matter of providing the most effective insurance possible. If we can do better than we are doing now, we should.

Let me repeat a post from the past as my position isn't as fixed as it may appear:

The EITC vs. the Minimum Wage
Here's a study on the Earned Income Tax Credit (EITC) from the Federal Reserve Bank of Atlanta. Some statements that caught my eye:[W]e found that nearly 20 percent of every EITC check ends up with health care providers.The number of eligible persons who fail to claim the EITC is estimated at 25 percent of those currently receiving the credit.The study paints the health care spending as a good thing because it stimulates the local economy, but the fact that almost $1 out of every $5
received goes to health care is notable. As the study says, this is "critical knowledge at a time when the industry struggles to recover the cost of treating higher-risk patients." The low enrollment rate is notable as well since it cuts into the effectiveness of the EITC. Enrollment is not a problem with the minimum wage.Recent discussions about minimum wage legislation have prompted many comparisons of the EITC to the minimum wage in terms of their relative abilities to help low-income households. For example, the CBO just issued areport
looking at this issue. The WSJ's Washington Wire reports:Minimum Wage vs. Earned-Income Tax Credit, Washington Wire: Which does more for low-income families? Raising the minimum wage or sweetening the earned-income tax credit, a cash bonus paid to certain low-income workers? ...[T]he Congressional Budget Office offered this tentative answer, based on the government’s 2005 Current Population Survey. Raising the minimum wage to $7.25: About 18% of the 12 million workers who were paid between the current minimum wage and $7.24 an hour were in families that had cash income below the federal poverty ceiling in 2004. Had all of the workers in that wage range, instead, received $7.25 per hour, they would have gotten about $11 billion in additional wages in that year. About 15% of those additional wages ($1.6 billion) would have been received by workers in poor families. Sweetening the EITC: It depends on how exactly Congress changed the law, of course. Increasing tax credits (and thus cash payments to those who don’t owe any taxes) for childless workers and increasing the credits for families with three or more children, would have cost $2.4 billion in 2004, with workers in families below the poverty line receiving $1.4 billion of that.But CBO cautions there are lots of ifs, ands and buts here. “The analysis is subject to a number of limitations” it CBO said. Among them: “Some
employers of workers already paid at or just above the new minimum wage rate might increase those workers’ wage rates as well” and “the CPS does not contain all of the information needed to compute the EITC, limiting the accuracy of those estimates.”So the answers aren't as clear as many supporters of EITC have implied. Still, purely on an economic basis, I agree that the EITC has the upper hand - it's a better anti-poverty device. But a tool still in its box on a shelf in the shed does us no good and the politics associated with the EITC make it much less likely it would be enacted as compared to the minimum wage.I don't think Democrats should oppose the EITC, but it shouldn't get in the way of what is politically feasible. Do what we can for the poor while we can - pass minimum wage legislation and then, before inflation erodes it away again, let's see if we can't find a way to use both politics and economics in our favor to expand the EITC. I think I can sign onto this
statement by Brad DeLong that he made in 2004:Now I like the EITC. Come the Day of Wrath, my best pleading will be the role I played in 1993 in the Clinton administration in expanding the EITC. But the EITC is a program that uses the IRS to write lots of relatively small checks to tens of millions of relatively poor people who satisfy picky eligibility rules. This is not the IRS's comparative advantage. The IRS's comparative advantage is using random terror to elicit voluntary compliance with the tax code on the part of relatively rich people. The EITC is a good program, but it a costly program to administer, and it is administered imperfectly to say the least. The minimum wage, on the other hand, is nearly self-enforcing: its
administrative costs are nearly nil, for workers (legal workers, at least) have a very strong incentive to drop a dime on bosses who violate it. From a government-administrative and error-rate perspective, it's a very cost-effective program. The right solution, of course, is balance: use the minimum wage as one
part of your program of boosting the incomes of the working poor, and use the EITC as the other part. try not to push either one to the point where its drawbacks (disemployment on the one hand, and administrative error on the other) grow large. Balance things at the margin.Balance things at the margin instead of choosing among polar extremes? What a novel concept, though politicians do have a fondness for polarization. Brad also notes that:[T]he incidence of the minimum wage "tax" falls almost entirely upon the customers of firms that employ minimum-wage workers, and that's pretty much
all of us. It's not as though the owners and managers of firms that employ minimum-wage workers have no other options. So I believe ... the burden of the minimum wage is broadly distributed across all taxpayers.Here's the Atlanta Fed study I mentioned at the onset. It's a localized
study, but because of that it's also very detailed:
EITC Boosts Local Economies, FRB Atlanta: For 31 years, the federal Earned Income Tax Credit (EITC) has been a fixture in the nation's arsenal of anti-poverty programs. In addition to bringing more children above the poverty line than any other federal program, the EITC has become a formidable and efficient generator of economic stimulus for U.S. cities.A newly released study funded by the Nashville Wealth Building Alliance documents the EITC's growing fiscal influence in metropolitan areas, focusing research on Nashville, Tenn. In addition to examining the economic impact of the EITC, the study also performed a geographic analysis to assess the EITC's role in individual neighborhoods, providing useful market data on low-income households for use by anti-poverty program administrators.Defining the local impact of federal programs
The EITC has become one of the top three federal assistance programs, adding millions of freely-expendable dollars to any given region's low-income labor force. The tax credit has boosted labor productivity among its recipients and increasingly replaced their dependence on less efficient state and local welfare administrations. This is good news for everyone, rich or poor. However, most federal studies of the policy's impact fail to quantify these local or regional benefits.A regional "input-output" model, like the one used in this study, details some significant benefits to the local economy when federal money is recycled into local consumer spending. For example, we found that nearly 20 percent of every EITC check ends up with health care providers; the credit's addition of $34 million in annual revenue from low-income clients to local providers is critical knowledge at a time when the industry struggles to recover the cost of treating higher-risk patients.Economic impacts of the federal EITC in Nashville"The State of the Earned-Income Tax Credit in Nashville" is one of only a handful of studies nationwide that takes a detailed look at the impact of these large, efficient monetary transfers on a metropolitan economy. Using taxpayer data from years 1997-2004, the study found a robust economic output response that added to business revenue as well as significant increases in job creation as a result of EITC-supported household expenditures.The EITC also contributed to expenditures on health care, electric bills, big-ticket retail purchases and family outings to local restaurants, thus
generating "multiplier" effects that reverberate through the local economy and become income for other local businesses, employees and governments.Including these multiplier effects, the EITC provided $81.8 million in economic output to Davidson County-Nashville during 2005. Over the 8-year period analyzed by the study, these output impacts totaled $642 million. When the study area was expanded to the Nashville Metropolitan Statistical Area (MSA), the EITC brought in over $1.25 billion in economic stimulus.The multiplier for EITC-recipient expenditures was 1.07: each EITC dollar spent in the Nashville economy produced that dollar plus an additional seven cents in economic output. Even though some EITC dollars are spent on goods and services produced outside the region, local employers and employees benefit nonetheless.Over a third of the local EITC money received is converted to salary and wage earnings for Nashville-area residents, many of whom are low-income and likely eligible for the EITC themselves. Of the 708 jobs (full-time equivalent) in Davidson County that were created by EITC expenditures in 2005, 150 were in retail, earning an average of $31,348; 81 were in accommodations/food services, earning an average of $20,769; and 80 were in other service-oriented business, earning an average of $19,881. EITC benefits also support high-income employment as well; the health/social services industry benefited from $15.9 million in additional industry output and a total of 132 jobs within an average salary of $69,301.In fact, the health care industry was the largest beneficiary from Davidson County with $16 million in additional revenue; in the 8-county metropolitan area, these EITC-dependent revenues rose to $34 million.
Retailers in Davidson County and the Nashville MSA brought in an additional $10.5 and $22.5 million, respectively. The local financial, wholesale and real estate/rental industries registered $5 to $7 million for Davidson County and $11 to $14 million for the MSA.The broader picture suggests EITC has helped smooth consumer spending in Nashville through the economic downturn of 2000-2002. The size and amount of disbursements from year to year proved sensitive to general macroeconomic conditions, tending to expand and contract in opposition to annual changes in economic growth.As illustrated in the graph, Nashville's EITC disbursements declined in the three years following 1997, tracking across-the-board economic gains until 2000 when the Dow Jones Industrial average started its three-year fall. Strong growth in the Nashville EITC from 2000-2002 continued to track heavy losses in the market and flattening U.S. personal incomes. However, personal incomes in Nashville defied expectation and continued to rise (albeit at a slightly slower pace) as if little had happened. Despite mismatches between the EITC and personal income over the eight-year snapshot, in general the credit's counter-cyclical growth has cushioned the softening economy's blow to the region, its low-skilled labor force and businesses that depend on a
healthy middle class.Conclusion
Though the positive economic impacts to cities like Nashville are robust, the EITC remains underutilized. The number of eligible persons who fail to claim the EITC is estimated at 25 percent of those currently receiving the credit. Failure to collect the EITC has cost Nashville an estimated $19.9 million in total economic output. Thus work remains to ensure that no low-income household leaves this credit "on the table."

[anne]

When China uses price controls on fuel to allow for harvesting, there may be all sorts of complaints, but the fuel flows and crops are harvested and farmers are grateful as well they should be and China feeds 1.3 billion.

Why should developing vulnerable China not use price-market controls when such controls are used in agriculture in various forms in America and Japan and Australia and France and Ireland and Spain and Germany....?

Immokalee Workers deserve a penny-a-pound more, and I will risk never being able to eat another tomato to have Burger King made to pay them properly.

[anne]

" 'Well I’ll tell you what, I’m not going to put my lot in with economists,' Clinton said, a response in line with some of the populist notes she’s been hitting in recent stump speeches on the gas tax."

This brings on the "Spunk? I hate spunk," response.

OK though; having argued, I will read all through carefully again and argue against myself. Me, I like spunk.

[Mark Thoma]

If the spunk thing is intended for me, it's misdirected. That is not the motivation behind my response, and I would hope you'd realize that by now.

America should eliminate price supports, not encourage others to mimic them. They don't work as intended.

China would be better off pursuing other solutions, but that is what they can do now within their political and economic system. We are different, at least I hope our political and economic systems are different, and there is no need to copy China's solutions. We can do much better.

[anne]

" 'Well I’ll tell you what, I’m not going to put my lot in with economists,' Clinton said, a response in line with some of the populist notes she’s been hitting in recent stump speeches on the gas tax."

Notice the way in which "populist" is suggestively framed. The note on spunk was meant for George Stephanopoulos, who wishes there were none, but actually increasingly fits all sorts of Clinton critics. Women are not supposed to have this sort of spunk, and I rather like that they do and if such spunk is what populism is about then I am down with it.

[Mark Thoma]

I'm puzzled why you are defending the Clinton/McCain proposal. I would be the first to agree there is fertile political ground here and room for populist appeal, but why not propose a policy that satisfies both the political and economic issues. Why use a dumb economic policy to satisfy the political call?

One can be spunky and propose smart policies at the same time. Wouldn't that give even more support to her?

[anne]

"China would be better off pursuing other solutions, but that is what they can do now within their political and economic system."

Haiti was supposed to be better off turning to trade and leaving off being self-sufficient in food, but I think Haitians would have a tough time agreeing just now, after America used market controls to turn grain production from food to fuel and trade came to mean higher prices than otherwise.

China has been among the most successfully growing poorer countries ever these 30 years, and appreciating the scale of growth and learning more of why could be useful for other hopeful developing countries.

[Mark Thoma]

Strategies for developing countries have little to do with the economics of Clinton's gas tax proposal. The proposal is dumb economics no matter what China has done in the past, is doing now, or will do in the future.

[anne]

"I'm puzzled why you are defending the Clinton/McCain proposal."

The Clinton proposal calls for limiting the tax on gasoline and tax the profits made by oil companies from the tax limit. McCain's proposal is simply limiting the tax.

I am defending Clinton's proposal however because I am bothered by the bent among possibily well-meaning environmentalists to tell relatively powerless people that they must suffer for sins that have been forced on them for many years. Being pleased for the sake of conservation that gasoline prices are so much higher, excuses a lack of what would have been relatively conservation for decades.

[robertdfeinman]

Getting back to "regulation". What was wrong with US society in the 70 years after regulation was imposed? The overall economy grew just fine (aided, of course by a succession of wars). The earnings of the middle class expanded helped, to a great extent, by the "regulation" imposed on labor practices and enforced by the NLRB.

And, except for the lunatic policies during the Vietnam war and its aftermath, the stock market and financial sector did well too. (I'll ignore the obvious parallels to the current situation.)

It has only been in the post Reagan era where regulation has been repealed, ignored or legislated out of existence that we have seen a break in these trends. The middle class has not done as well, the lower working classes have fallen behind, jobs have been cut, outsourced or had their benefits reduced.

And to top it all off the financial industry which had been pushing for a relaxation of "regulation" and oversight has now been embroiled in the biggest series of collapses since the South Sea bubble.

The basic functioning of an unconstrained capitalist system is that it leads to monopoly, corruption and excessive speculation. Even Adam Smith understood this.

What firms really want is "regulation" which hampers their competitors. Any regulation or tax policy which treats all firms equitably imposes no net burden on the firms. That's why big firms in heavily "regulated" countries like Germany or Sweden are able to do just as well as those in free-for-all America.

Are those who keep complaining about excessive "regulation" ideologically blind or just disingenuous? I understand the motivation of, say, Robert Rubin, but what's in it for Mankiw?

[save_the_rustbelt]

What would have happened if:

Bear Sterns had been forced into Chapter 11 and supervised by the bankruptcy courts, OR

The federal government had a receivership authority that allowed a take over by the Dept of Treasury for say six months.

I don't know, just wondering.

[anne]

What Clinton is trying to do is show that it matters to her that people are worried about fuel prices. I like it that such a problem matters to Clinton, even if a proper response is not yet there. I'll take a wrong response.

Remember the voter response to a certain governor of California who wanted an increase in vehicle registration taxes and who wound up being sort of like "terminated?" I do.

[2slugbaits]

anne,

I think your comments above are more or less in sync with Sen. Clinton's overall approach to campaigning (and governing???); namely, it's all about having 'tude and showing the world how tough you are. Nevermind that her gas tax proposal is just plain stupid and insulting to anyone who has ever had econ 101, the worst part is that she is essentially lying to her supporters when she gives them false hope. This is the kind of thing that Obama was talking about in San Francisco when he took so much heat for the bitterness charge. Hillary accused him of insulting working class folks. Well I'm sorry, but I find her latest bit of pandergate kind of insulting to voters like me. Just how stupid does she think we are. And won't they be (once again) disappointed when nothing happens and their lives are just as tough after the campaign BS gets put away for another four years?

Six months ago I kind of liked Hillary. But lately she's been doing a pretty good job of reminding us all what it was about the Clinton years that we didn't like. I would have a hard to voting for another four years of Terry McAuliffe and Ann Lewis politics.

[anne]

There we have it, as always, a wretched sickening deceiving cowardly bullying attack. Imagine my surprise.

[anne]

The point is to smash and bash Hillary Clinton, for the sake of smashing and bashing. Me, I am not about to allow cowardly bullies to smash and bash and bully me. Get it?

[Mark Thoma]

No I don't get it, not today.

And I don't think it was intended in that way. It is disappointing that she has chosen to pander to political interests rather than finding a way to actually help people.

[observer]

Anne most of the time I really appreciate your comments. This thread is not making you or Senator Clinton look good. I would advise picking battles that are more favorable.

[bob mcmanus]

Anne, this thread is about bashing Clinton, not about energy policy or helping those who will suffer during the transitions: "e.g. a lump-sum rebate to lower income households." ...Mark Thoma

But Anne is right above at 1:08, as anyone who remembers the Ford, Carter, or Clinton (BTU tax) administrations should realize. You are going to have to sell good energy policy to the people who have gained much of the advantage from bad energy policy, or you will have no energy policy.

You will not sell a substantial decrease in stds of living to the SUV commuter crowd until you offer them some kind of fairness and shared sacrifice by the top, and even from the more energy efficient urban crowd.

You cannot tell the people who buy gas to just suffer.

[bob mcmanus]

Last time we got people who just told the gas guzzlers to just suck it up for the hometeam, that their pain was somehow a moral failing and a just dessert...we got Ronald Reagan.

[david]

The gas tax is a dumb proposal, though not for the markets are best solutions and everything else isn't take of Mark's. It's a bad proposal cause it doesn't give the money to the people who need it, doesn't take care of long term issues -- climate change nor economic struggling, and reinforces idiot right-wing anti-tax rhetoric. There's nothing spunky about it. It's cynical and dumb, done for low reasons, and it's not bullying to point out that it's a cynical stupid counter-productive pander. It represents all the reasons I think Clinton is an inferior candidate who would be an inferior president.

Price controls, on the other hand, I can be a big fan of, and I don't care what economists of a certain stripe think, especially Mankiw, so I understand that kind of talk...

[anne]

Bob McManus:

"You are going to have to sell good energy policy to the people who have gained much of the advantage from bad energy policy, or you will have no energy policy.

"You will not sell a substantial decrease in stds of living to the SUV commuter crowd until you offer them some kind of fairness and shared sacrifice by the top, and even from the more energy efficient urban crowd.

"You cannot tell the people who buy gas to just suffer."

Right, right, right.

[David Robb]

Anne:

Brazil has used selective price controls on drugs to gain what may be the finest-fairest health care system in Latin America.

The finest-fairest health care system in Latin America??? That's not saying much.

Regardless, have you ever been to Brazil? The prices for many products there (including many in the "farmacia") are outrageously high. I paid $19 US for a tiny bottle of eye drops and another $19 US for a two-week supply of saline solution. Many shoes/sneakers cost $100-200 dollars and are customarily paid for in ten equal payments. Forget about consumer electronics - if you have to ask the price, you can't afford them. Forget about imported cars - the government's interference in the economy makes them unaffordable.

Think of the aforementioned prices in the context of a society where the minimum wage is approximately $100 US - PER MONTH!

Brazil does not generally use price controls to control drug costs of expensive (patented) drugs - instead they use strong-arm tactics to wrest control of the production of those drugs away from their inventors.

Here's an article describing how Brazilian "scientists painstakingly replicate brand name drugs and oversee mass production of cheap copies to treat ailments ranging from Parkinson's Disease to AIDS."

Brazil's Drug Copying Industry

Here's another describing "warnings from Brazil that it would disregard Abbott's patent and make a generic version of Kaletra domestically if the company did not lower the price to a level it deemed affordable."

http://www.nytimes.com/2005/10/05/business/worldbusiness/05abbott.html?_r=1&oref=slogin

Abbot backed down in that case and lowered their price.

Another article: "Brazil said today that it would break the patent on an AIDS drug produced by the Swiss drug giant Roche."

http://query.nytimes.com/gst/fullpage.html?res=9B0DE2D61431F930A1575BC0A9679C8B63

And another:

Brazil bypasses patent on Merck AIDS drug

Brazil's actions in these cases amounts to "give me the drug at *my* price or I will steal it from you".

Imagine for a moment how well Brazil would be doing if there were no drugs to "copy". Imagine what would happen if the entire market worked this way.

It's fine when a handful of second and third-world countries negotiates a price or even steals a drug that they can't afford otherwise, but if all countries end up doing that, the outcome should be obvious: decreased (and taken to its logical conclusion, zero) production of new drugs. It's very expensive and very risky and very time consuming to create them. If returns cannot be made on the huge investment necessary to produce them, investors and companies simply will not invest in them.

It amazes me how intent some people in this forum are on dismantling the economic system that created the most prosperous nation in history. If you think conditions are so bad for the poor in the USA, go to Brazil and see how the poor live. Check out the prices for goods in the middle-class malls. Go to the state of Alagoas (in NE Brazil) and witness firsthand the 33% illiteracy rate there (and it's much improved from a few dozen years ago). Have you ever seen a starving child with your own eyes? Hell, you don't have to go so far as Alagoas: just go into the favelas in Rio de Janeiro or São Paulo. Be careful - you may not come out alive.

Go to Guatemala and visit the shanty towns on the outskirts of Guatemala City. Better yet, go into the countryside.

Go to China and see how the rural poor live, then visit the eastern cities to see the mass improvements in the quality of life for people now that the government has finally released it's iron grip on means of production.

(BTW, in the long run Chinese price controls have been steadily decreasing, not increasing, notwithstanding very recent trends in 2008 with food prices and continued price controls on a small subset of goods such as oil and electricity).

People in the USA think nothing of spending $25,000 on an SUV but balk at paying $25,000 for a life-saving operation using very expensive technologies that weren't even dreamed of 50 years ago. If you want lower medical costs, stop relying on expensive new technologies and use older drugs and techniques. That's what people do when they can't afford every other category of consumer products. (E.g. when one can't afford a 52-inch color LCD TV, he buys an older 28-inch high-def CRT).

Now people are balking at historically high oil prices and the associated high oil company profits. But when oil prices were a lot lower, and profits correspondingly lower, the result was predictable: lower investment in oil and gas infrastructure. There is a worldwide shortage of oil rigs today, and many existing rigs are nearing the end of their lifespan. World oil production *may* even have peaked while demand continues to increase.

The best answer to this situation is taxing oil company profits at higher rates? Or price controls on oil and gas? Or discontinuing the gas tax and thus stimulating demand???

Dave

[Bupa]

Mark, please vote for the candidate with integrity. Please vote for Obama.

And please limit anne to some reasonable percentage of the comments. She is defending the indefensible. She has become incorrigible and tiresome.

[wjd123]

http://www.currencytrading.net/2008/6-ways-greenspan-caused-the-current-economic-crisis

In the above story "Six Ways Greenspan Caused the Current Economic Crisis" Adam Kritzer argues that some believe that Greenspan's bailout of Long Term Capital Management stoked the fires of moral hazard. Kritzer also argues that Greenspan's aversion to regulation helped the fires to get out of control. So if the bailout of Bear Stearns has once again stoked the moral hazard fires all the more need for regulations to keep those fires contained.

However as the below story by David Rothkopf "They're Global Citizens. They're Hugely Rich. And They Pull the Strings," argues, the powerful decide what gets done. Then shouldn't we overshoot on the regulation front. Aim to bind financial services in the chains of the Ghost of Marley and make them even longer instead of trying to make them fit just right. Doing the latter will insure that regulations won't be sufficient. Starting from a just-right postition allowes voters to more easily believe that any compromise is balanced and equitable.

http://www.washingtonpost.com/wp-dyn/content/article/2008/05/02/AR2008050203311.html?nav=rss_print/outlook

[anne]

"And please limit ---- to some reasonable percentage of the comments. She is defending the indefensible. She has become incorrigible and tiresome.

Notice the bullying viciouness; integrity in bullying.

[Bupa]

you are the bully on this site anne. Please stop being such a bully.

[David Robb]

Oh ... I'd like to add a comment to my previous post (which hasn't been published yet; unfortunately my followup is going to be appear before my main post).

Regarding oil: price controls in the USA during the twentieth century are largely responsible for increased demand and decreased production and exploration and are at least partially responsible for the current mess we find ourselves in today.

Dave

[anne]

"And please limit ---- to some reasonable percentage of the comments. She is defending the indefensible. She has become incorrigible and tiresome.

Notice the bullying viciouness; integrity in bullying.

[Bupa]

Mark Thoma said...

"It is disappointing that she has chosen to pander to political interests rather than finding a way to actually help people."

Well put.

Yet the overbearing bully, anne, continues her unbalanced attacks...even on our gracious host. Stop the bullying, anne.

[anne]

"And please limit ---- to some reasonable percentage of the comments. She is defending the indefensible. She has become incorrigible and tiresome.

Notice the bullying viciouness; integrity in bullying.

[anne]

http://www.cbsnews.com/stories/2008/04/29/politics/main4056059.shtml?source=RSSattr=Politics_4056059

April 29, 2008

Obama took a different view on the issue when he was an Illinois legislator, voting at least three times in favor of temporarily lifting the state's 5 percent sales tax on gasoline.

The tax holiday was finally approved during a special session in June of 2000, when Illinois motorists were furious that gas prices had just topped $2 a gallon in Chicago.

During one debate, he joked that he wanted signs on gas pumps in his district to say, “Senator Obama reduced your gasoline prices.”

OMG!

[wjd123]

Economist are encroaching on Hillary's flower garden and making it hard for her to grow anything. Economist shouldn't be blinded by the logic of economics to the detriment of the logic of politics.

Hillary's gas tax rebate plan is politic not economic. Therefore, she can't sell it the way economist want because passing it may entails not mentioning her true aim. If her true aim is to get a tax hike on the oil companies by using a popular issue that her fellow colleges will have a hard time opposing now and a hard time recinding later, then economist are trespassing in so far as they insist that the logic of economics be applied in Hillary's political garden. Yes, Hillary has to get elected, but she also has to find a way to enact her policies.

Suppose Hillary thinks that the gas tax cut is a loser in the short run but is a winner for her policies in the long run if she can nurture it into a permanent tax on the oil companies and that her pandering now will provide just the political help she will need to keep the oil tax permanent later on, a goal consistent with Hillary's policy programs, than bad economic policy can turn into good political policy.

If it works in making it easier for her to realize a permanent tax increase on the oil companies then it's good political logic. A giveaway now will produce a gift for her policies that keeps on giving.

So economist shouldn't be making blanket statement such as the gas tax is a "loser" or a "bad idea" unless they believe that Hillary is a bad politician. Just say that economically it won't do any good in the short run but leave the political good, if they support Hillary's programs, open.

Economist should stop encroaching on Hillary's flower garden.

[NLS]

Anne, I think everyone gets your drift. But HRC is trying to give $30 to people over the summer and not offering a real long-term solution. Does that matter?

[anne]

Right or wrong, there was no need for vilifying; none. I like both.

http://ap.google.com/article/ALeqM5hLPqTxd4Fe7e5EymHU-kTUgweRDQD90BPHC01

Obama took a different view on the issue when he was an Illinois legislator, voting at least three times in favor of temporarily lifting the state's 5 percent sales tax on gasoline.

The tax holiday was finally approved during a special session in June of 2000, when Illinois motorists were furious that gas prices had just topped $2 a gallon in Chicago.

During one debate, he joked that he wanted signs on gas pumps in his district to say, “Senator Obama reduced your gasoline prices.”

[save_the_rustbelt]

I saw Howard Dean on Fox News.

Apparently he has this really neat plan to attract GOP voters to cross over by insulting all of them, and repeating the word racist in reference to Republicans numerous times.

I am really starting to think McCain could win, not on his own, but with the help of the Democrats self-destruction squad.

[2slugbaits]

anne,

You're quite right to point out that Obama supported a gas tax holiday when he was in the Illinois Senate. In fact, Obama brought it up this morning on Meet the Press. Obama said he voted for it and regrets that he did. He said that it didn't work and everything the economists said would happen did happen. He pointed out that this was another example of how he learns from his mistakes.

[robertdfeinman]

STR:
I didn't see the broadcast, but consider this from Frank Rich today:

There is not just a double standard for black and white politicians at play in too much of the news media and political establishment, but there is also a glaring double standard for our political parties. The Clintons and Mr. Obama are always held accountable for their racial stands, as they should be, but the elephant in the room of our politics is rarely acknowledged: In the 21st century, the so-called party of Lincoln does not have a single African-American among its collective 247 senators and representatives in Washington.

For the sake of argument lets assume that there are a block of "racists" that always vote for the GOP and perhaps some who usually vote for the GOP but haven't had their beliefs on race actually tested. Insulting the first group won't make any difference, they will vote as the always do.

The real question then is are those who haven't had to face race in electoral politics before open to thinking about the subject? If we assume that they are, then what is the best course of action? As Frank Rich and Bill Moyers have indicated in the past few days, there still is racism in this country. So should Dems ignore it or bring it out into the open?

I have no idea on what the best tactic for influencing people is, and apparently neither do the politicians. After all the bulk of the money spent is really aimed at this 5-10% of the electorate that does shift voting patterns. If there was a magic formula eveyone would use it.

[2slugbaits]

anne,

Here's the relevant excerpt from today's Meet the Press interview:

MR. RUSSERT: Why are you against giving taxpayers in Indiana, North Carolina, a relief from federal gasoline tax this summer?

SEN. OBAMA: You're right, Tim, this defines, I think, the difference between myself and Senator Clinton. This gas tax, which was first proposed by John McCain and then quickly adopted by Senator Clinton, is a classic Washington gimmick. It, it is a political response to a serious problem that we have neglected for decades. Now, here's, here's the upshot. You're looking at suspending a gas tax for three months. The average driver would save 30 cents per day for a grand total of $28. That's assuming that the oil companies don't step in and raise prices by the same amount that the tax has been reduced. And, by the way, I have some experience on this because in Illinois we tried this when I was in the state legislature, and that's exactly what happened. The oil companies, the retailers were the ones who ended up benefiting.

MR. RUSSERT: You voted for it, too.

SEN. OBAMA: I did. Exactly. And that...

MR. RUSSERT: When gas was only $2 a gallon.

SEN. OBAMA: And, and that's my point. I voted for it, and then six months later we took a look, and consumers had not benefited at all, but we had lost revenue.

MR. RUSSERT: So you learned from a wrong vote.

SEN. OBAMA: Yeah, I learned from a mistake. And, in addition, what happens is, is that this would come out of the Federal Highway Fund that we use to rebuild our roads and our bridges. And if we don't have that fund, then we're looking at thousands of jobs being lost in Indiana and in North Carolina.

http://www.msnbc.msn.com/id/24445166/page/3/

[Richard H. Serlin]

With regard to your choice for President, I agree with Paul Krugman. The biggest issue is universal health insurance. It is huge in its own right, but because it would be so successful, it would give a clear and massive demonstration to the public that the simpleton Republican ideology that government is always bad, and the unregulated free market is always better, is deeply wrong.

This would generate enormous political capital for the Democrats, and it could easily mean control of the senate with a filibuster proof majority. Remember that after the New Deal the Democrats had such high political capital for their ideals, they were able to usher in a golden age of high and equitable economic growth and social advancement. And, the Republican party was forced to move far to the left (a great description of this is in Krugman's new book, "The Conscience of a Liberal").

The Democrats could use the great political capital that would come from universal health insurance to do great good, for example to have a tremendous increase in action against oil dependence (which would devastate the funding and ability of terrorists) and global warming. In fact, I think the best thing that could happen in combating global warming is to pass universal health care. This would provide enormous political capital to really do big things.

Based on the fact that Obama's program doesn't mandate insurance – which is crucial for evolving towards universal health care, and based on the things Obama has said, I think we are much more likely to get it with Hillary. I also think Hillary is about as electable, maybe more.

Both her and Bill are extremely intelligent and care very much what economists say. This is clearly shown by overall what they say and support. Hillary only said what she said because she thought it would help her get elected. Both her and Bill have clearly shown that they are very willing to say and do smaller bad things in order to get done far larger good things, and I think on net, Hillary would do far more good than Obama.

Obama has been trying to cultivate this image as a great new age compromiser, so on the issues overall he proposes much less improvement than Hillary, and much less improvement than we could actually get through today. The public has been so hurt by simpleminded and plutocratic Republican policies at this point that they will back big and positive change, so the greater positive changes Hillary proposes can overall really be put through. We don't have to settle for the relatively timid new age compromising, not too different from the extreme Republican, positions of Obama.

Especially with so much today that can so greatly help or hurt people, I think the vote should be based on who will do the most net good, not who says the most pleasant things, and I think clearly, from what I've seen so far, that's Hillary.

[tinbox]

Sen. Obama's highly principled (yet very scary) prediction of "thousands of jobs being lost in Indiana and in North Carolina" due to loss of gas tax revenue is very interesting. Forget the gas tax holiday--Why don't we triple the tax and create many more thousands of jobs? Because a vote for Obama is a vote for no change at all in our perfect system of gasoline taxation.

[outsider.com]

Just an observation... I was a journeyman meat cutter in CA. in the late 70"s. I was paid a union wage of about $15/hr. as a retail butcher for Alpha Beta. Across the boarder in AZ. cutters were paid minimum wage, a "right to work state" ( I believe < then $5.00/Hr.) funny thing, round steak cost approx. $2.00/lb in both states. Also, management "suggested!!!" workers clock in 5 minutes before work, out 5 minutes after lunch, in 5 minutes before lunch ended, and 5 minutes after the official work shift closed. = 20 minutes free labor a day (the paremeters permitted by the labor board( 5 minutes either way to be counted for pay). lawsuits countered and won that one (filed by the union). Men died in a strike before I started run over by scabs, in San Francisco I heard.

Please, minimum wage laws protect. Without them (and Unions) you can always be fired in favor of the more desperate. Lets not return to Upton Sinclair's "The Jungle"

[anne]

May 4, 2008

Brad DeLong:

"Friends Don't Let Friends Support Hillary Rodham Clinton Over Barack Obama

"Fortunately for the Democratic Party--but unfortunately for the country--John McCain is worse.

"Expertise...

"Robert Reich writes about Hillary Rodham Clinton's and John McCain's character issues:

" 'I’m not saying HRC is George Bush.'

"I Think Paul Krugman's Support of Hillary Rodham Clinton Has Just Come to an End"

Me, I like spunk.

[anne]

http://delong.typepad.com/sdj/2008/05/i-think-paul-kr.html

May 4, 2008

Brad DeLong:

"The terrifying thing is that it is still overwhelmingly likely that HRC economic policy would be better than the economic policy of John McCain..."

I’m not saying HRC is Herbert Hoover.

Me, I like spunk.

[anne]

http://delong.typepad.com/sdj/2008/05/friends-dont-le.html

May 5, 2008

Hillary Clinton is addressing two political issues.

First, Clinton's proposal is a response to John McCain's proposal to cut gas taxes. Clinton has figured out a way to offer the same tax cut to working class voters that McCain is offering while preventing a shortfall in highway funding and a windfall for oil companies.

Second, Clinton is explicitly calling for a tax increase on oil companies, a baby step away from Reagan-Bushism.

Look, there's a certain class of liberal folks who, regardless of what they say out loud, think engaging in democratic politics is contemptible. They are among the people who can't stand Clinton and see her as a lowly pandering politician taking a corrupt position on this gas tax issue. They are also among the people who admire Barack Obama and see him as an agent of "change we can believe in" taking the enlightened position on this gas tax issue.

-- C Mike

[Farrar]

Getting away from election rants for a moment (I've already mailed my Oregon ballot), and getting back to price controls, I'm surprised that nobody has mentioned that price controls worked pretty well during WW2. (Am I the only one old enough to remember?)

Some would even claim that the Nixon price controls would have worked, but that Nixon gave up to soon.

And as Anne has pointed out, the Chinese are not doing too badly with their direct controls.

Even Mark Thoma seems to accept temporary allowances for exceptional circumstances.

But aren't we now entering a period of exceptional circumstances, which may make such direct intervention necessary? Few would pretend that the market economy as it is presently manipulated can assure the necessary transition toward sustainable economic development.

Others -including me - wonder if the US is headed toward a state of economic underdevelopment and whether only vigorous state intervention can change that trajectory.

[save_the_rustbelt]

Robertf:

First, Dean is not running for anything, so perhaps he should leave the campaigning to the candidates.

If Dean wants to pick up moderate and center-right Republicans incendiary rhetoric may not be the way to do it. This is not 1968 or 1978, the world has changed.

[anne]

http://matthewyglesias.theatlantic.com/archives/2008/05/good_to_know_1.php

May 4, 2008

Good To Know
By Matthew Yglesias

I had no idea that the economic interests of oil companies were identical with those of the vast majority of Americans. Good thing we've got Hillary Clinton, Populist Extraordinaire around to tell us otherwise....

[Let us lie together.]

[skeptonomist]

There were not just two choices in the Bear Stearns affair, that is allowing them to go bankrupt or subsidizing another bank to take over.

Bear Stearns could have been taken over by the government in such a way that profit to financiers was minimal. In fact, this is basically what the law for banks in the Federal Reserve system provides (or tries to). Not legal you say, since Bear was not in the system? No less legal than the actual deal allowing Morgan to take over. Why is it in the public interest to bail out financial entities and set them up to do the same thing again?

[Barkley Rosser]

anne,

Obama supports stopping putting oil into the Strategic Petroleum Reserve. This increases supply and should lower the crude price. Is this not a better way to go than a "gas tax holiday," which may simply lead the oil companies to increase the price to offset their windfall profits tax, given the fact that supply will be limited in the summer anyway?

[anne]

The way to go is not vilifying or bullying Clinton.

Brad DeLong:

"The terrifying thing is that it is still overwhelmingly likely that HRC economic policy would be better than the economic policy of John McCain..."

Robert Reich:

"I’m not saying HRC is George Bush...."

Me,

"I’m not saying Brad DeLong is George Bush...."

"I’m not saying Robert Reich is George Bush...."

[Cynthia]

So Hillary thinks that economists are nothing more than used-car salesmen. Now my collar is pretty pink, but it's no so pink to make me think like Hillary. Then again, Obama's push for Illinois to have a gas-tax holiday makes his collar look pretty pink, too!

[Barkley Rosser]

anne,

I did not engage in vilification. Why are you dragging brad delong into a discussion on this blog? I would agree that some here have engaged in unnecessary and inappropriate vilification. Argue with them here. Argue with brad on his blog. In the meantime, you have not responded to my point, and another point here is that a gas tax holiday for this summer is not something the next prez has any say over. It is a pure publicity stunt, utterly worthless.

Cynthia,

Obama supported a gas tax holiday as a state senator in Illinois. Then he saw what a flop it was, and now he opposes any further ones. It is called learning.

[David Robb]

Anne,

Don't you have anything more to say about Brazil?

[Ken Houghton]

Mark,

Anne is correct in that you do yourself no credit conflating the Clinton plan (cut tax here, balance it there--possibly on a longer term basis) with the McCain plan (cut the tax and laugh when the money goes to the refineries).

If you want to vote for a candidate with integrity, try the write-in option. If you want a pandering politician, you have an excellent choice in Obama, who appears on Fox News two out of three weeks; if you want a skilled politician who doesn't have her husband's people skills, vote for Hillary, who is being pilloried for one interview on Bill O'Reilly's show.

But if you're honestly buying into there being no difference between the Clinton and McCain "holiday" proposals, then don't be surprised when McCain wins in November because there is "no difference" between the candidates.

[Mark Thoma]

Ken:

In the whole discussion, I only made one mention of McCain:

"I'm puzzled why you are defending the Clinton/McCain proposal."

For the record, McCain has said he would pay for his proposal with cuts elsewhere (unspecified), anne left that out. So did you. You might not believe he will actually make the cuts, I don't, but he does claim to have a plan to pay for his proposal. It reduces the size of gov while Hillary's would not, so that part is different, but the (promised) effect on the budget is the same.

Here's the full quote:

I'm puzzled why you are defending the Clinton/McCain proposal. I would be the first to agree there is fertile political ground here and room for populist appeal, but why not propose a policy that satisfies both the political and economic issues. Why use a dumb economic policy to satisfy the political call?

This was in reference to the tax cut, not the means of paying for it. The "holiday" part - as you put it - is the same for both pretty much, it's the means of paying for it where there's a difference (new taxes versus cuts in spending).

The pandering I was referring to, though, had nothing to do with any of this, it's her pushing the idea that cutting taxes on gas is the best way to deal with this problem. You can give relief to those who need it (and avoid giving relief to those who don't, something this plan does not avoid) and not compromise on environmental goals in the process (this will make it a lot harder to do raise taxes in the future to offset externalities from energy consumption). Even if you support the goals, this is not the way to go about reaching them.

It's very interesting how - though I haven't even declared who I'm supporting - I'm in the tank for Clinton when I post some of Krugman's articles, or for some of the things I've written, or I'm in the tank for Obama when I post a petition, etc. And all of you are right. I'm supporting Democrats, either of them, and, for the most part, I've gone after McCain and left the Obama-Clinton stuff to others.

Finally, tax cuts don't pay for themselves, and I won't say they do even if it wins votes and elections. Promising people things that economics says won't, or can't happen, is not a line I'll cross (I'm glad Democrats don't have a bunch of hack economists waiting in the wings to support this stuff like the Republicans have with tax cuts). When Hillary decided to take on economists, when she decided to thumb her nose at economists and say it anyway, true or not, I dropped the focus on McCain, and replied. And if she - or Obama - keep it up or do it again, then I may respond once more. And if they get conflated with Republicans for acting like them, too damn bad.

[anne]

"Don't you have anything more to say about Brazil?"

Notice the sneering bullying rottenness.

[anne]

Brazil has used selective price controls on drugs to gain what may be the finest-fairest health care system in Latin America.

[anne]

http://delong.typepad.com/sdj/2008/05/expertise.html

May 4, 2008

I'm tired of losing. If pandering with high-polling ideas that are revenue-neutral is necessary to win, I'd say go for it. Many workers in the exurbs *must* drive to work and are hurting from high gas prices. Empathy, anyone?

-- MaryLou

[anne]

http://krugman.blogs.nytimes.com/2008/05/05/is-obama-misrepresenting-what-i-said/

May 5, 2008

Is Obama Misrepresenting What I Said?
By Paul Krugman

I don’t have a link to the ad itself, but apparently there’s an Obama ad * citing something I said about McCain’s gas tax holiday as a way to attack Hillary Clinton.

I did not say that the Clinton proposal would increase oil industry profits. If the ad implies that I did, it should be retracted.

The Clinton proposal is financed by an excess profits tax. At worst, it sends money in a circle. In practice, it would probably reduce oil industry profits at least slightly, since the rise in the pre-tax price of gasoline probably wouldn’t wipe out all of the tax cut.

I was very clear when I wrote about the Clinton proposal ** that while I didn’t think it was good policy, it was not the same as McCain’s, and relatively harmless. If the Obama people are suggesting otherwise, they’re being deliberately dishonest.

* http://facts.hillaryhub.com/archive/?id=7493

** http://krugman.blogs.nytimes.com/2008/04/29/gas-tax-follies/

[anne]

Cynthia:

So Hillary thinks that economists are nothing more than used-car salesmen. Now my collar is pretty pink, but it's no so pink to make me think like Hillary. Then again, Obama's push for Illinois to have a gas-tax holiday makes his collar look pretty pink, too!

[Clever; pink collar Japan just finished a gas-tax holiday.]

[anne]

"Six months ago I kind of liked Hillary. But lately she's been doing a pretty good job of reminding us all what it was about the Clinton years that we didn't like."

Me, I liked those years lots, lots, lots.

[anne]

Mark Thoma was entirely fair in criticism of me, of Clinton, as always. I never for a moment thought otherwise.

[anne]

http://krugman.blogs.nytimes.com/2008/05/06/gas-tax-hysterics/

May 6, 2008

Gas Tax Hysterics
By Paul Krugman

OK, this has gone overboard.

Hillary Clinton’s proposed gas tax holiday is not, in my view, a good idea. But the furor over what is, when all is said and done, a small and temporary policy proposal is entirely disproportionate. What’s going on?

Part of it, clearly, is the fact that many people in the media really, really want Obama to win and Clinton to lose — read Kurt Andersen * — and have seized on the gas tax as their latest proof that she is ee-ee-vil.

But there’s also something going on with economists, a phenomenon I recognize wearing my other hat: the tendency to place excessive weight on issues where professional judgment differs from lay opinion.

The classic example is free trade versus protectionism. Economists are justly proud of the close reasoning that produced the classical case for free trade, and love to skewer dumb protectionist arguments. I’ve done it myself.

But all too often, economists then become like the little boy with a hammer, to whom everything looks like a nail. Because protectionism is an issue on which they believe they have some special insight, they inflate its importance, and make free trade versus protectionism THE crucial issue in economic policy — which it isn’t. Trade barriers are a minor issue for the United States today; even small wrinkles in health care policy, like overpayment to Medicare Advantage plans, probably matter more to public welfare than all the trade restrictions now in place.

Yet economists talk much more about trade than they do about health care policy, because they think they know something about it in a way the laity don’t.

The gas tax holiday is in this category. Economists really do know something about tax incidence that the laity don’t. So when a presidential candidate says something that conflicts with economistic wisdom, it becomes THE MOST IMPORTANT ISSUE EVER. Except, you know, it isn’t.

There’s a lot of troubling stuff in both Democrats’ proposals. Mandates aside, Obama is seriously low-balling the cost of health care reform, and promising way too much in middle-class tax cuts. Clinton’s numbers don’t quite add up either, though she’s probably closer to the mark — and both Dems are towering figures of responsibility compared with McCain. Amid all this, the gas tax holiday is a real issue, but a small one; don’t let economist’s tendency to overemphasize their areas of expertise distort your view.

* http://nymag.com/news/imperialcity/46658

[Barkley Rosser]

anne,

Hmmm. Not answering me because I am being too reasonable? So, I repeat:

1) Is not Obama's proposal to stop putting oil into the SPR more reasonable than Hillary's gas tax holiday?

2) Is not a proposal for this summer before she (or McCain) become president (and which will not pass this Congress) simply a gimmicky publicity stunt of no consequence?

3) If oil and gas prices keep going up, does not Mary Lou need to face the music and either a) start car pooling, b) get a hybrid, or c) move closer to work?

Barkley

[anne]

Must love Obama's proposal, must love Obama's proposal, must love Obama's proposal, must love Obama's proposal, must love Obama's proposal.

Must face music (rock or rap?), must buy pool, must learn to swim, must hunt for camel-horse, must buy camel-horse-car, must buy new house.

[hari]

@ Mark -

It's funny to note how you can get screwed by professional belief in efficacy of economic thinking or whatnot.

In defense of Anne and wjd123, let me say (what I've said elsewhere) there is a *great* divide between economic thinking and the political process. Political economy can deal with some of the issues but not the theoretical ones.

Politics is not constrained, like economic thought, with fundamentalism. I've instituted an Incomes and Price Control Authority to insulate the sovereign from poaching from outside. Nixon did the same, in 1970s, when OPEC oil prices quadrupled...he even took the dollar off gold standard! DO you think his decisions were based on economic fundamentals?

No, you guys are more than *confused* about the funnctioning of a political process and economic advisory role (input) in policy making. Invariably, in the final analysis, all decisions are *political* by their nature. Economics may be used sometime to substantiate it or not.

What the media is doing with HRCs oil gambit is playing its own *gotcha* game -the people who are affected by gasoline prices at the pump understand what HRC is doing for them - that's all that counts for the sovereign.

The economic profession has been more or less a culpable prisoner of its own *inflationary* ideologues and whatnots. US financial mess today is a sobre reflection of that kind of economic thinking over time. Not long ago, free market capitalism was their unconditional dogma! What happened all of a sudden to bring about a change in thinking...?

[Barkley Rosser]

anne,

That reply is beneath you, I fear.

[pcle]

Anne at 7.08 with her quote of Krugman has the best post of
this whole thread. She has picked up the underlying key point of this unbelievably overhyped gas tax shift - its really about the pysche of the profession, not the substantiveness of the issue.
Eeconomists have crawled all over this because
"Economists really do know something about tax incidence that the laity don’t. So when a presidential candidate says something that conflicts with economistic wisdom, it becomes THE MOST IMPORTANT ISSUE EVER. Except, you know, it isn’t."

[paine]

"promising way too much in middle-class tax cuts"

paul willst thou NEVER learn
neolimbo budget constraints be damned

cut the savage pay roll taxes

[paine]

" the more regulated these firms are, the lower their productivity will be "

value added its not just counting bails of real stuff per minute
its revenue ie
bails of real stuff per minute
times price
if a reg cuts a rent stream down
it reduces revenue
ie value added per head
in this case
producers surplus per head
ie
rent per head

value passed all the way thru to the consumer in lower rentless pricing
more consumer surplus

implication of mank's card trick
value of consumer surplus
to mephisto greg=zero

ps
unless its dead
as in
a reg's distortion (correcting a bigger distortion)
creates
dead weight loss

[paine]

mark glad to see u
down here
in the trenches
sorry its so taffy pullish

says...

Hillary's shameless pandering and anti-intellectual rhetoric disqualifies her IMHO