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Tuesday, July 27, 2010


Robert Stavins and Richard Schmalensee are puzzled by conservative opposition to cap and trade:

The Power of Cap-and-Trade by Richard Schmalensee and Robert Stavins: Last week, the Senate abandoned its latest attempt to pass climate legislation... In the process, conservative Republicans dubbed the cap-and-trade system “cap-and-tax.’’ Regardless of what they think about climate change, however, they should resist demonizing market-based approaches to environmental protection...
In fact, market-based policies should be embraced, not condemned by Republicans (as well as Democrats). After all, these policies were innovations developed by conservatives in the Reagan, George H. W. Bush, and George W. Bush administrations (and once strongly condemned by liberals). [gives several examples, e.g. Reagan’s use of cap-and-trade system to phase out leaded gasoline, and George H. W. Bush's use of cap-and-trade system to reduce acid rain] ...
To reject this legacy and embrace the failed 1970s policies of one-size-fits-all regulatory mandates would signify unilateral surrender of principled support for markets. If some conservatives oppose energy or climate policies because of disagreement about the threat of climate change or the costs of those policies, so be it. But in the process of debating risks and costs, there should be no tarnishing of market-based policy instruments. Such a scorched-earth approach will come back to haunt when future environmental policies will not be able to use the power of the marketplace to reduce business costs. ... Market-based approaches to environmental protection – including cap-and-trade – should be lauded, not condemned, by political leaders, no matter what their party affiliation. Demonizing cap-and-trade in the short term will turn out to be a mistake with serious long-term consequences for the economy, for business, and for consumers. ...[full article with added links]...

Mike Rorty is puzzled by Megan McArdle's attack on Elizabeth Warren:

Megan McArdle’s Hack Post on Elizabeth Warren’s Scholarship, by Mike Rorty: So Megan McArdle wrote a long post attacking Elizabeth Warren as a scholar. What’s surprising is how little “there-there” there is to her critique. I would love to see nomination hearings based around how expansive of a definition to use for medical bankruptcies and watching Warren rip the face off of Senators when it comes to empirical methods. I doubt it is going to come to this, but I’ll go ahead and respond. (I’ve been waiting for part two to respond, which I assume may not show up.)
Because that isn’t what this is about. It’s about giving the impression that Warren is a weak scholar. Given that Warren is considered “the leading authority in the country on bankruptcy law,” being called a hack by McArdle, of all people, is something. Especially when we get a gem of a major screwup like this right out the door in the post: ...[continue reading]... 

Jeff Frankel is puzzled by conservative opposition to extending tax cuts for those making less that $250,000 per year:

Will Republicans Really Block Tax Cuts Because They Go Only to Earners Below $250K?: President Obama proposes allowing the Bush tax cuts to expire next year — as they are scheduled to do if nothing is changed — for those earning more than $250,000, but changing the law so as to extend the tax cuts for those earning less than that amount. Republican politicians are opposing the proposal. I don’t understand what they are thinking. Their position doesn’t make sense to me, regardless whether they are thinking about short-term stimulus, long-term fiscal conservatism, good economics, or even pure politics. ...
Jeff Frankel's criticism has more elements than this (and I disagree with his Social Security point), but I want to note this part of his argument:
If you were going after stimulus, and believed that only tax cuts created stimulus, the priority should be in other areas like extending the Making Work Pay provisions for low-income workers, which are also set to expire. This proposition holds regardless whether (i) your idea of stimulus is Keynesian demand expansion (the lower-income workers have a higher marginal propensity to consume), OR even if (ii) your idea of stimulus is purely enhanced incentives to work (lower income workers face overall effective marginal tax rates that are often higher than the rich face, when one factors in payroll taxes, etc.) Alec Phillips of GS US Global ECS Research points out that the amount of revenue (and stimulus) that is at stake in the expiration of Making Work Pay is greater than in the expiration of tax cuts for those over $250,000, and yet the latter question is getting all the attention and the former question is getting no attention. ...
If we want to achieve short-term fiscal stimulus from the viewpoint of good economics, then we should realize that well-chosen spending programs give far more bang-for-the-buck than most tax cuts. ... Examples of well-chosen spending programs include aid to the states (which Republican congressmen have been voting down) so that the states don’t have to lay off firemen, policemen, bus drivers and teachers. Examples of tax cuts with much less bang for the buck include not just those for the rich (e.g., the abolition of the estate tax), but even garden-variety income tax cuts, because they are largely saved. Don’t take my word for it. Martin Feldstein (whose work on taxes and incentives led to the supply side revolution, and who was the Chairman of Reagan’s Council of Economic Advisers) argues that virtually all of the income tax cut that George W. Bush passed in 2008 was saved by households rather than spent, and predictably so, and that government spending would bring more short-term stimulus. ...[read more]...

Brad DeLong is puzzled by Ross Douhat's gig as an opinion writer for the NY Times:

Why Is Ross Douthat on the New York Times's Editorial Page?, by Brad DeLong: Why oh why can't we have a better press corps?
Is there any respect--any respect--any respect at all in which the New York Times would not be a better publication if Ross Douthat were removed, and replaced by David Leonhardt?
I cannot think of any.
Here's David Leonhardt explaining why what the New York Times prints from Ross Douthat on its op-ed page is worse than tripe: ...[continue reading]...

Niall Ferguson is (or ought to be) puzzled by his own arguments:

Matthew Yglesias and Ryan McNealy: Niall Ferguson Debates Himself: I’ve been known to remark on the conservative movement’s strong adherence to Keynesian arguments as a justification for tax cuts in the wake of the mild 2001 recession, adherence that seems puzzling in light of their contrary rhetoric in the wake of the cataclysmic 2008-2009 downturn. Brad DeLong observes that one particularly hilarious example of this is historian-turned-pundit Niall Ferguson who wrote a December 12, 2003 article on the Bush administration that’s in considerable [disagreement] with his contemporary take on things. DeLong requests a Ferguson v Ferguson debate, and with assistance from Ryan McNeely I’m prepared to unveil one. 2003 Ferguson is in boldface, 2010 Ferguson is in italics: ...[continue reading]...

Paul Krugman is puzzled by the editorial process for conservatives:

When I quote someone in my column, I supply the source material, and my copy editor checks, not just to be sure that the quote is accurate, but that it’s not taken out of context. But I guess such rules don’t apply if you’re a conservative.

Tyler Cowen is puzzled by the tone on econoblogs lately (and though I see no need to back off at all, I may have contributed):

The economics blogosphere is getting decidedly testier lately, especially today.

What are you puzzled about?

    Posted by on Tuesday, July 27, 2010 at 12:33 PM Permalink  Comments (49)



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