- Underestimating economic potential as justification for inaction - Antonio Fatas
- Is This Some Strange Berkeley Acid Trip I Am on? - Brad DeLong
- Are Commenters on the Tulipmania Rational? - Brad DeLong
- This Will Not Do at All… - Brad DeLong
- Hitting the Ceiling: Disastrous or Utterly Disastrous? - Paul Krugman
- We Are Now At War With Eastasia, I Mean The Deficit - Paul Krugman
- Missing Inflation in the New-Keynesian Stimulus - John Cochrane
- Why Obamacare is Good for Small Businesses - James Surowiecki
- Paul Krugman on Expansionary Creditworthiness Shocks - The Irish Economy
- Harvard Business School Publishing crosses the ‘evil’ academic line - Digitopoly
- 60 Minutes Joins the Disability Bashing Bandwagon - Beat the Press
- The Most Dangerous Jargon Viruses (huh?) - Scientific American
- Making money from the Eagle Ford Shale - Econbrowser
- Complexity & alienation - Chris Dillow
- Boom, Bust, Flip - NYTimes.com
- When Meta Met Data - NYTimes.com
- The Color of Affordable Care - NYTimes.com
Monday, October 07, 2013
Sunday, October 06, 2013
This one is from Brad DeLong's "noted" list:
Hal Varian: the economics of the newspaper business: Thank you... I am an economist by training, and only a part-time journalist, so I want to focus my remarks on the economics of the newspaper business during this period of transition.
1. Printed newspaper circulation has been declining for 50 years...
2. The internet is a superior way to distribute and read news...
3. The basic economic problem facing news is increased competition for attention...
4. Newspapers never made money from news...
5. Offline news reading is a leisure time activity, online news reading is a labor time activity...
6. Ad revenue depends on reader engagement...
7. Tablets give newspapers a way to reclaim some lost audience...
8. The fundamental challenge facing newspapers is to increase the time people spend on their content...
(He explains each point in the longer version.)
From today's links:
Rich People Just Care Less, by Daniel Goleman, Commentary, NY Times: ...A growing body of recent research shows that people with the most social power pay scant attention to those with little such power. ... Dacher Keltner, a professor of psychology at Berkeley,... finds that the poor, compared with the wealthy, have keenly attuned interpersonal attention in all directions, in general, those with the most power in society seem to pay particularly little attention to those with the least power. To be sure, high-status people do attend to those of equal rank — but not as well as those low of status do.
This has profound implications for societal behavior and government policy. Tuning in to the needs and feelings of another person is a prerequisite to empathy, which in turn can lead to understanding, concern and, if the circumstances are right, compassionate action.
In politics, readily dismissing inconvenient people can easily extend to dismissing inconvenient truths about them. The insistence by some House Republicans in Congress on cutting financing for food stamps and impeding the implementation of Obamacare ... may stem in part from the empathy gap. ...
Social distance makes it all the easier to focus on small differences between groups and to put a negative spin on the ways of others and a positive spin on our own...
Since the 1970s, the gap between the rich and everyone else has skyrocketed. Income inequality is at its highest level in a century. ... I fear the expansion of an entirely different gap, caused by the inability to see oneself in a less advantaged person’s shoes. Reducing the economic gap may be impossible without also addressing the gap in empathy.
- Rich People Just Care Less - NYTimes.com
- Shorting Out The Wiring - Paul Krugman
- Financial Literacy, Beyond the Classroom - NYTimes.com
- How Did the Universe Get So Lopsided? - Scientific American
- Obamacare won’t be a job-killing catastrophe - The Washington Post
- The “structural balance” screw-up in European austerity? - Noahpinion
- Governing the World's Greatest Nation - Paul Krugman
- Issues about microfoundations - Understanding Society
- The History of Statistical Terms - Dave Giles
- Estimated Macro Impacts of the Shutdown - Econbrowser
- Truck, barter and exchange - Gavin Kennedy
- ICT and global supply chains - vox
Saturday, October 05, 2013
'Why Do Smart Republican Economists Continue to Claim that ObamaCare Is Causing a Significant Fall in Full-Time Employment'
I set this piece on part-time employment and Obamacare aside to post, but hadn't gotten back to it yet. Fortunately, Brad DeLong did it for me:
Why Do Smart Republican Economists Continue to Claim that ObamaCare Is Causing a Significant Fall in Full-Time Employment Right Now?: Max Sawicky shows up writing for the extremely useful Economic POlicy Institute: Obamacare Isn’t Causing an Increase in Part-Time Employment, in One Chart:
One of the more baffling messages in the current debate over the economy and “Obamacare” is the hue and cry over the trend in part-time employment. The fact is that since the end of the Great Recession, the trend in part-time employment has been down, not up…. The navy blue region show the level of workers who are part time due to “non-economic” reasons (health, child care responsibilities, etc.). The vertical bars denote recessions, from peak to trough.
Under the Affordable Care Act, employers will be required to provide insurance to workers who work for more than 30 hours a week. This mandate does not take effect for another year. There is no reason why anticipation of it should increase part-time employment in the meantime. And at any rate, such employment has been falling before and after the passage of Obamacare. For more on this, see articles by Jared Bernstein and Paul Van de Water and Helene Jorgenson and Dean Baker. For more on the employer mandate, see this post from EPI’s Josh Bivens.
Yet we have Michael Boskin...[quote]...
And Greg Mankiw:
A Striking Labor Market Fact: John Lott points out the following: "So far this year there have been 848,000 new jobs. Of those, 813,000 are part time jobs.... To put it differently, an incredible 96% of the jobs added this year were part-time jobs."
What are they thinking?
I mean, some employers are going to drop hours below 30 a week once the employer pay-or-play hits. But we won't see that until the February 2015 employment report, and there is no reason for employers to start that eighteen months in advance. It isn't there in the data. And nothing would lead anybody to expect that it would be visible in the data right now.
So why are they claiming that it is?
I should also note that the figure Mankiw cited is wrong.
The NY Times Editorial Board:
Now Republicans Want a ‘Dialogue’: Republicans are now simply flailing. Because they lack any plausible explanation for their irresponsible conduct in creating and prolonging the government shutdown, they are inventing new demands by the hour.
“Defund Obamacare!” they cried at the beginning, stating their condition for reopening the government. Then they moved to delaying health care reform, delaying the individual mandate and repealing one of the health care law’s taxes. Then they started talking about another grand bargain on the budget, tax reform and entitlement cuts. When nothing worked, they simplified their ransom note, saying President Obama and the Democrats had to sit down with them and negotiate something, or anything.
“All we’re asking for is to sit down and have a discussion,” Speaker John Boehner said Friday... Cathy McMorris Rodgers, chairwoman of the House Republican Conference, put it even more broadly, asking for the beginning of a “dialogue.” The real goal of these demands, however, is not an agreement but instead the perception that it is Mr. Obama who is being intransigent, not the House.
The variety of demands at the news conference demonstrated the incoherence of the Republican message, which is now more about saving face than about any specific policy change. ...
A “dialogue,” now? With 800,000 federal employees furloughed, vital government services cut off and the economy slowing? This is a moment for immediate action to reopen government’s doors, not the beginning of a conversation that Republicans spurned when they lacked the leverage of a shutdown. ...
Kevin Drum says:
So Republicans have settled on their messaging, and it's this: Democrats are refusing to negotiate. We keep offering compromise after compromise, but Democrats won't listen to any of them.
Will this work? ... I suppose it has a chance. But it certainly shows a considerable contempt for the intelligence of the voting public. After six months of (a) refusing to meet with Senate Democrats to discuss the budget and (b) gleefully telling anyone who would listen that the shutdown and/or debt ceiling would be their ultimate leverage to force President Obama to agree to their laundry list of demands, you'd think it would be a hopeless task to pretend it was Democrats who wanted this fight all along. Add to that the fact that Democrats have already given in completely to Republican demands on spending levels, and you'd think it would be flatly impossible to pretend that Democrats were the ones refusing to negotiate.
But you never know. The fact that this is a cynical ploy doesn't mean it won't work. ... [L]et's claim that it's really Democrats who are the intransigent zealots! And we'll do it by continually offering the same concession—i.e., nothing—in return for an ever-changing set of demands and pretending that this represents a sincere search for compromise. It's so crazy it could work!
Yes, it could work, particularly if the media -- despite the editorial above -- generally repeats the Republican talking points as though they have validity:
...remember, both sides are equally at fault. Isn’t that what we’re supposed to say under all circumstances?
If Democrats had, say, shut down the government over the Bush tax cut extension, do you think the reporting would have been different -- far more one-sided? I do.
- Kenneth Rogoff's Hooverismo… - Brad DeLong
- Unconventional monetary policies revisited - vox
- Economic Confidence Plummets - NYTimes.com
- A Time of Testing - Narayana Kocherlakota
- The Virtues of Adding Hoc (Wonkish) - Paul Krugman
- Putin calls professor of Economics a jerk - English pravda.ru
- Would Federal Reserve Research Please Wake Up - No Hesitations
- Exposing flaws in the journal peer-review process - Berkeley Blog
- NBER Recessions vs. Actual Recessions? - EconoSpeak
- NBER Recessions vs. Actual Recessions? (part 2) - EconoSpeak
- Twin debt equilibria, and waiting for the sunspot - Nick Rowe
- Unconventional monetary policies revisited (Part I) - vox
- The Fire-Sales Problem and Financing Transactions - Jeremy Stein
- A Central Bank by Any Other Name Is Still . . . - Liberty Street
- Hapless and Hopeless - Paul Krugman
- Slow Takeoff for Young Workers - Tim Taylor
- US default by any other name - Gavyn Davies
Friday, October 04, 2013
Two of my colleagues have comments on the government shutdown (for more comments from University of Oregon faculty from other departments, see here -- more comments should be added over the next few days):
Professor of practice and senior director of the Oregon Economic Forum
UO Department of Economics
A protracted shutdown creates another headwind to an economy still struggling to regain ground lost during the last recession. Moody's Analytics, for example, estimates that a month-long shutdown would cost the U.S. economy $55 billion. As a result, we will see only slower resolution of pressing problems such as the crisis in long-term unemployment or stagnant median income growth for households. Moreover, the possibility of default on U.S. debt payments threatens the stability of the financial system at its core and could trigger a crisis that leads to another recession, pushing the economy back deeper into the hole. No faction in Congress should find it acceptable to hold the American economy hostage like this for any reason.
George W. Evans
John B. Hamacher Chair of Economics
UO Department of Economics
The partial government shutdown will operate as a perverse fiscal policy, adding negative pressure to a tepid recovery. The reduction in government spending will directly and indirectly act to reduce GDP and employment in the US, with spillover effects on Europe and the rest of the world. Given the weakness of the recovery in the U.S., this is a dangerous “policy.” The chairman of the Federal Reserve has made it clear that there are some adverse fiscal shocks that it may not be possible to offset with monetary policy. A failure to increase the debt limit would additionally test those limits, because it would make conceivable the possibility of default on U.S. federal government obligations, and because default risk would lead to higher interest rates. Both the partial government shutdown, if it continues for a significant length of time, and a failure to increase the debt limit, would increase the probability that the U.S. economy returns to recession. The House of Representatives should immediately pass a “clean” continuing resolution, to end the partial shutdown, and vote a “no strings” increase in the debt limit.
Minimum Wages and Job Growth: a Statistical Artifact, by Arin Dube: In a recent paper, Jonathan Meer and Jeremy West argue that it takes time for employment to adjust in response to a minimum wage hike, making it more difficult to detect an impact by looking at employment levels. In contrast, they argue, impact is easier to discern when considering employment growth. They find that a 10 percent increase in minimum wage is associated with as much as 0.5 percentage point lower aggregate employment growth. These estimates are very large, as John Schmitt explains in a recent post, and far outside the range in the existing literature. But are they right?
As I show in a new paper, the short answer is: no. The negative association between job growth and minimum wages is in the wrong place: it shows up in a sector like manufacturing that has few minimum wage workers, but is absent in low-wage sectors like food services and retail. In other words, it is likely a statistical artifact, and not a causal relationship...
Bad news is good news:
Reform Turns Real, by Paul Krugman, Commentary, NY Times: At this point, the crisis in American governance has taken on a life of its own. ... But this confrontation did start with a real issue: Republican efforts to stop Obamacare from going into effect. It’s long been clear that the great fear of the Republican Party was not that health reform would fail, but that it would succeed. And developments since Tuesday, when the exchanges on which individuals will buy health insurance opened for business, strongly suggest that their worst fears will indeed be realized: This thing is going to work.
Wait a minute, some readers are saying. Haven’t many stories so far been of computer glitches...? Indeed, they have. But everyone knowledgeable about the process always expected some teething problems, and the nature of this week’s problems has actually been hugely encouraging for supporters of the program. ...
The ... glitches ... for the most part, to be the result of the sheer volume of traffic, which has been much heavier than expected. And this means that one big worry of Obamacare supporters — that not enough ... would ... sign up — is receding fast. ...
What we still don’t know, and is crucial for the program’s longer-term success, is who will sign up. Will there be enough young, healthy enrollees to provide a favorable risk pool and keep premiums relatively low? Bear in mind that conservative groups have been spending heavily — and making some seriously creepy ads — in an effort to dissuade young people from signing up for insurance. Nonetheless, insurance companies are betting that young people will, in fact, sign up, as shown by the unexpectedly low premiums they’re offering...
And the insurers are probably right. To ... get a description of the typical person Obamacare needs to enroll, just take the description of a typical Tea Party member or Fox News viewer — older, affluent, white — and put a “not” in front of each characteristic. These are people the right-wing message machine is not set up to talk to, but who can be reached through many of the same channels, from ads on Spanish-language media to celebrity tweets, that turned out Obama voters last year. ... Enrollment is probably going to be just fine.
So Obamacare is off to a good start, with even the bad news being really good news for the program’s future. We’re not quite there yet, but more and more, it looks as if health reform is here to stay.
- Ken Rogoff on UK austerity - mainly macro
- Phantom Crises (Wonkish) - Paul Krugman
- Britain should not take its credit status for granted - Ken Rogoff
- Obamacare Isn’t Causing an Increase in Part-Time Employment - EPI
- Macroeconomic Effect of Debt Ceiling Brinkmanship - Treasury Notes
- Thresholds or Dates in Monetary Policy Communications - Cleveland Fed
- Will the Financial Markets Crash Before October 17, or After? - Jeff Frankel
- Some Economic Consequences of the Shutdown - NYTimes.com
- Multipliers are Definitely Still Large - Economic Policy Institute
- Wealth Patterns and Retirement Readiness - Tim Taylor
- Why No Taper? One Man's View - macroblog
- Aggressive Blunderers - Paul Krugman
Thursday, October 03, 2013
Simon Johnson doesn't understand why the business community is so passive about the threat the Republican temper tantrum over Obamacare poses to the long-run health of the US economy:
The Loss of U.S. Pre-eminence, by Simon Johnson, Commentary, NY Times: The United States became a superpower in the 1940s and, 70 years later, stands on the brink of losing that status. It rose to global pre-eminence at short notice, and its decline can occur just as abruptly. This week’s partial government shutdown both reminds us that the United States has reached such a precarious position and shows us exactly how things can now unravel as it approaches the really big confrontation over the debt ceiling. ...
I’m ... pessimistic. The United States won its global predominance in a short period, but based on a long haul of industrial development, productivity gain and fiscal prudence. Now the groundwork has been laid for its decline with political polarization, a longstanding tax revolt and a well-orchestrated campaign to undermine the legitimacy of the federal government. ...
The silence of much of the business and financial elite on the debt ceiling — as well as on the sequester and the government shutdown — is somewhat shocking. This is a group that is usually quite vocal in promoting its self-interest. ...
The Constitution was designed with multiple safeguards to protect the voices of relatively small groups. This is entirely appropriate. But consequently, if a well-financed and highly motivated group of members of Congress decides that the United States should default on its debts, then the United States will default.
If the business elite cannot speak truth to the Republican Party — and persuade its leadership and enough members of Congress to return to a more moderate stand — there is not much hope for the United States in today’s global economy.
Paul Krugman tried to explain this yesterday:
...business types ... suffer...from a triple misconception about our situation.
First, CEOs still talk as if debt and deficits were the central issue of economic policy. They never deserved that place; they certainly don’t deserve it now that the deficit has clearly been falling too fast and the debt outlook is stable for the next decade. Yet they can’t let go of the notion that a grand bargain on the budget — as opposed to an end to destructive austerity — is what we need.
Second, many CEOs are, I believe, genuinely naive about the people they deal with. They believe, for example, that Paul Ryan actually cares about deficits. They haven’t grasped, or refuse to grasp, the reality that the whole thing about deficits was really about using economic crisis as an excuse to tear down the social safety net.
Finally, they’re still trying to position themselves as the middle ground between extremists on both sides, when the reality is that we have a basically moderate Democratic party confronting a radical Republican party that doesn’t play by any of the normal rules. If you insist on thinking of Ted Cruz and Elizabeth Warren as somehow symmetrical figures, you’re already so out of touch with political reality that there’s no way you’re going to have useful influence.
I do sometimes wonder how these guys can be that naive, and some of them probably aren’t — they’re playing class warfare on the sly. But some of them really do seem clueless, probably because thinking about the reality of American politics today would make them uncomfortable — and who’s going to tell the guy in the big office things that make him uncomfortable?
It’s not just Fox News watchers who live in a bubble; sometimes, wealth and power can have the same effect.
On Communication, by Tim Duy: We can get the October FOMC preview out of the way early:
No data + fiscal turmoil = no taper.
No reason to waste much time on the October meeting. Probably true for December as well at this rate. What is still worth spending time on is diagnosing the challenges of the Fed's communication strategy. Sooner or later, that problem will rear its ugly head again.
To help narrow the field, I am going to propose four central problems complicating the Fed's communication strategy:
1.) Unemployment targets. The unemployment rate revealed itself to be a poor choice of a policy variable for two reasons. First, it was the only data for which their forecasts turned out to be too pessimistic. Second, they don't completely understand the dynamics that resulted in overly pessimistic forecasts. Was the rapid drop in unemployment structural or cyclical? Unknown, but they still attached it to not one but two policy shifts; the 6.5% threshold for considering hiking interest rates, and the 7.0% trigger for ending asset purchases. At this point, both numbers are irrelevant, but while Federal Reserve Chairman Ben Bernanke has backed away from the 7% QE trigger the 6.5% threshold remains in the FOMC statement. My suspicion is that they would like to get rid of it, but don't know how. In short, the unemployment targets made the Fed's reaction curve appear more hawkish than actual FOMC policy.
2.) Lack of experience with unconventional tools. Federal Reserve Governor Jeremy Stein's recent speech is a must read for insights into the transmission of monetary policy. Not just once, but two or three times. Importantly:
Again, the existence of this recruitment channel is helpful; without it, I suspect that our policies would have considerably less potency and, therefore, less ability to provide needed support to the real economy. At the same time, an understanding of this channel highlights the uncertainties that inevitably accompany it. If the Fed's control of long-term rates depends in substantial part on the induced buying and selling behavior of other investors, our grip on the steering wheel is not as tight as it otherwise might be. Even if we make only small changes to the policy parameters that we control directly, long-term rates can be substantially more volatile. And if we push the recruits very hard--as we arguably have over the past year or so--it is probably more likely that we are going to see a change in their behavior and hence a sharp movement in rates at some point. Thus, if it is a goal of policy to push term premiums far down into negative territory, one should be prepared to accept that this approach may bring with it an elevated conditional volatility of rates and spreads.
The Federal Reserve is playing with a tool they don't completely understand. I believe they thought that by introducing the notion of tapering in the spring and summer they could minimize bond market volatility. This was effectively an effort to avoid a recurrence of the jump in rates experienced in 1994. Obviously, things did not go according to plan - yields jumped, taking mortgage rates with them. The outcome was a more severe monetary tightening than intended. An ill-timed tightening at that, given that expectations of fiscal relief were only tentative to begin with and may have been dashed by the budget showdown. Simply put, their inexperience with unconventional tools led them to pull the trigger on tapering talk far too early.
3.) Fine tuning. The Federal Reserve appears to believe they can fine tune the asset purchase program with small changes up or down. This seems silly given point two above - you can't fine tune something you don't understand. Just talking about tapering was 100bp+. So who knows what a mere "$10 billion" means? And what is the threshold for small changes? Do we need significant shifts in data, or is being "broadly consistent" with the Fed's forecast sufficient? This point was driven home today by Boston Federal Reserve President Eric Rosengren:
All this means that our fundamental reliance on data in policymaking may result at times in less signaling, before FOMC meetings, about small changes in the purchase program.
Translation: If this was a big change in policy, it would be obvious. But with a small change, who knows? Don't expect much from Fedspeak when we are fine tuning. The problem is that fine tuning might have big impacts, so adequate communication is still important.
4.) Lack of a central voice. I think that the lack of a central voice for monetary policy is a critical failure at the moment. Here I am going to fall back on Rosengren:
I would add that interpreting the data is an important and nuanced matter. The FOMC is a committee, and different participants can and often do have different perspectives on the strength of the incoming data. Some of the indicators the committee must weigh in preparation for policy meetings include data that provide only partial information on an aspect of the economy – so that their import only becomes clear once we have the fuller context provided by other, related data. Also, importantly, assembling a coherent picture of the overall economy is challenging even with complete data, and involves “art” as well as science.
This is not good - the implication is that we cannot rely on individual speakers as policy guides. And possibly worse yet, they know this. How does that influence their own communication strategy? I often wonder if they are using speeches less to signal their opinions to the public, but instead more to signal their position to other FOMC participants. I also wonder if they are unwilling to take a public position for fear of being "wrong" at the conclusion of the next FOMC meeting. Consequently, you get odd communication such as St. Louis Federal Reserve President James Bullard claiming that tapering is possible in October, when such an expectation was completely unrealistic even before the federal shutdown. There is no way that just six weeks from the last meeting you could be confident that the impacts of earlier fiscal tightening had waned sufficiently to justify tapering. So does he really believe that tapering is possible, or does he not know the direction of policy any better than any other public speaker, so he is thus willing to give anything but "who knows?" And you might not know given that we are only talking about "tiny tapers."
Much of these issues could be eliminated if their was a core group of governors that we could look toward as the basis of a policy baseline. But no such core exists. Bernanke could fill that role, but here I think his desire to treat the FOMC as a university economics department is a disservice to the communications strategy. It is fine if to allow everyone their own opinion behind the scenes, but a central position in public would be helpful, especially given the desire to try to fine tune policy. Bernanke, however, appears to have checked out already, not wanting to provide any of his own benchmarks, perhaps because his days are numbered. Alternatively, Vice Chair Janet Yellen could fill this role, but she disappeared from the public eye in the run up to the race to succeed Bernanke. And we will not hear from her until she is both nominated and confirmed, and realistically that might not occur until next year. So the transition process has robbed us of what is believed to be a critical voice within the FOMC at exactly the time monetary policymakers are contemplating a policy shift. Bad timing, to say the least.
Bottom Line: There is much room room for improvement with the Fed's communication strategy. They might want to get on this given their increasing reliance on forward guidance.
- CEOs All At Sea - Paul Krugman
- The Loss of U.S. Pre-eminence - Simon Johnson
- Why do Republicans See "Uncertainty" as a Drag on Demand... - Brad DeLong
- Learning the Wrong Lessons About Austerity - NYTimes
- In What Sense is the "Adjusted" R-Squared Unbiased? - Dave Giles
- Abandoning dichotomies in science - Magic, maths and money
- Fiscal Policy: How Has Conventional Wisdom Changed? - Tim Taylor
- Real estate-driven exports - vox
- Child labors - The Berkeley Blog
- Long-term barriers to growth - vox
- Gladwell misses some game theory - Digitopoly
- Why have markets ignored Washington risk? - Gavyn Davies
- Capital Flight inside the Euro Area - Liberty Street Economics
- The missing millions - Free exchange
Wednesday, October 02, 2013
Paul Krugman says I told you so:
Health Care Panic, Again: Eduardo Porter is getting a lot of attention for his piece in today’s paper suggesting that what Republicans fear most is that Obamacare might succeed. ... I’m surprised that so many people seem to find this a surprising and new insight. I thought it was obvious. Here’s a column I wrote back in July predicting more or less what is now happening, for exactly the reason Porter gives: GOP panic over the prospect of successful health reform.
And let’s be clear: the health reform fight has always been about more than health reform. Liberals have long viewed health reform as the opening wedge, a sort of proof of concept, in a campaign to strengthen the US safety net and reduce income inequality; that was basically what I was urging in Conscience of a Liberal, which gave its title to this blog.
Conversely, the right has long opposed health reform for exactly the same reason: it might, in the public’s mind, legitimate further government intervention to increase economic security.
But let’s also be clear that these positions are not symmetric. Liberals favored health reform both because it would work and because it might enhance their ability to push for other policies; conservatives were and are determined to kill health reform ... precisely because it would work — because it might weaken the rest of their agenda. ...
So my plot is working, mwahahahaha. Although I didn’t consider the side effect — benefit or cost? — that health reform would drive conservatives stark raving mad.
I think the idea that this is about more than just health reform, it's about stopping Democrats from strengthening social insurance protections and reducing inequality more generally, is an important and correct point. If Obamacare did not exist, I'd guess we'd still be having a fight over the funding of other social programs conservatives want to scale back or eliminate. But it's also important to note that, as Paul Krugman recently explained, at the heart of it all is class warfare:
...many of the rich are selective in their opposition to government helping the unlucky. They’re against stuff like food stamps and unemployment benefits; but bailing out Wall Street? Yay!
Seriously. Charlie Munger says that we should “thank God” for the bailouts, but that ordinary people fallen on hard times should “suck it in and cope.” AIG’s CEO — the CEO of a bailed out firm! — says that complaints about bonuses to executives at such firms are just as bad as lynchings (I am not making this up.)
The point is that the superrich have not gone Galt on us — not really, even if they imagine they have. It’s much closer to pure class warfare, a defense of the right of the privileged to keep and extend their privileges. It’s not Ayn Rand, it’s Ancien Régime.
Despite what conservatives want you to believe, this is not a fight about the role of government. Conservatives have no trouble with government interventions they benefit from. But ask them to give up a dollar to help the less fortunate and it's another story.
How is the government shutdown viewed in Europe?:
Shutdown Spectacle: 'America Is Already Politically Bankrupt': As the United States government shutdown enters its second day, Washington is the target of both ridicule and concern overseas. ...The examples in the article are from Germany, e.g.:
... The overwhelming consensus among the German press is that the Republicans are the most to blame for the gridlock. In a Tuesday commentary, Spiegel Online's Gregor Peter Schmitz dubbed them the "kamikaze party." He attributed the gridlock to America's mercenary political culture...
"It's circumstances like these," writes Schmitz, "that explain why a brigade of Republicans conduct themselves like a bunch of Berlusconis -- as enemies of the state from within who want to cripple the country because that's the desire of their conservative voters at home."
When it came to the Tea Party wing of the Republican Party, the German press was not pulling any punches. "There are fundamentalists within the world's largest democracy: The hardline wing of the Republican Party are once more crippling the United States," writes Nuremberg's Nachrichten. The Tea Party movement, it concludes, "does not engage in democracy, but in dogmatism."
"Here are fundamentalists at work who hold up their country to ridicule to advance their pure doctrine," wrote a commentator in Collogne's Stadt-Anzeiger. "What a tragedy!" ...
Calculated Risk with "evidence of ideology run rampant":
Flying Blind: Data Held Hostage: The Depression led to an effort to enhance and expand data collection on employment, and I was hoping the housing bubble and bust would lead to a similar effort to collect better housing related data. ...
In the early stages of the Depression, policymakers were flying blind. But at least they recognized the need for better data, and took action. All business people know that when there is a problem, a key first step is to measure the problem. That is why I've been a strong supporter of trying to improve data collection on the number of households, vacant housing units, foreclosures and more. Unfortunately that hasn't happened, and in fact there has been an effort to reduce the amount of data collected.
Back in May, the House voted to kill the American Community Survey, a survey that is widely used by businesses and economists. Fortunately that vote was criticized across the political spectrum.
A couple of examples, first an editorial from the WSJ: Republicans try to kill data collection that helps economic growth ...
And AEI's Norman Ornstein at Roll Call: Research Cuts Are Akin to Eating Seed Corn ...
Once again the House is depriving us of data, and right now we are flying blind. In the short term this is a minor inconvenience compared to the widespread suffering related to the shutdown, but once again this shutdown is "evidence of ideology run rampant".
- Can Economists Forecast Crashes? - Dave Giles
- Policy Uncertainty - Econbrowser
- The Economics and Politics of Chaos - Paul Krugman
- Independent monetary policies, synchronised outcomes - vox
- Barack Obama Does Not Understand What His Job Is... - Brad DeLong
- More on the Distribution of R-Squared - Dave Giles
- What They Say Versus What They Mean - Paul Krugman
- The Shale Boom: Interview with Tyler Cowen - Oilprice.com
- Why the Health Care Law Scares the G.O.P. - NYTimes.com
- Modeling Policy When Policy Is Inside the Model - Not Quite Noahpinion
- Beyond stagnation - Understanding Society
- Remember Sequestration? - NYTimes.com
- Blogs review: Navigating the open economy trilemma - Bruegel
- Japan’s consumption tax: a test of modern macro? - mainly macro
- The Gains From Hyperglobalization (Wonkish) - Paul Krugman
- Technology isn't taking all of our jobs - James Bessen
- Mr Weidmann and the Classics - Gloomy European Economist
Tuesday, October 01, 2013
Lydia DePillis at Wonkblog:
Remember when Republicans were worried about ‘economic uncertainty’?: A government shutdown, and the prospect of a default on the national debt, is pretty much the definition of economic uncertainty. Contracts are put in limbo. Future interest rates are unknown. A new healthcare system lies in the balance. And meanwhile, a whole host of issues that businesses need resolved in order to plan several years in advance -- environmental regulation, immigration policy, the tax code -- go almost entirely unaddressed.
These are the conditions brought upon us by a small core of Republicans who can't let go of their opposition to a law their colleagues passed three years ago. And yet, not long ago, many of those same Republicans were declaring that uncertainty is the economy's biggest threat. Let's go to the tape: ...
The Trillion Dollar Coin--or, More Sensibly, 1000 Billion-Dollar Coins--Is the Only Way for Obama to Fulfill His Oath of Office: "I, Barack Hussein Obama, do solemnly swear (or affirm) that I will faithfully execute the Office of President of the United States, and will to the best of my Ability, preserve, protect and defend the Constitution of the United States."
The Constitution tells us that to faithfully execute the office the President shall:
from time to time give to the Congress information of the state of the union, and recommend to their consideration such measures as he shall judge necessary and expedient;
he may, on extraordinary occasions, convene both Houses, or either of them, and in case of disagreement between them, with respect to the time of adjournment, he may adjourn them to such time as he shall think proper;
he shall receive ambassadors and other public ministers;
he shall take care that the laws be faithfully executed, and shall commission all the officers of the United States.
The appropriations are lawfully commanded by Congress--to fail to spend them is, since the budget reforms of the 1970s, to break the law--the repayment of the debt is mandated by the Constitution's Article XIV, as is the limitation of the government's authority to take property via taxation or otherwise to the amount lawfully commanded by Congress.
There are two ways in the absence of a debt-ceiling increase for the President not to break the law:
Find some other debt of the U.S. government--like, as Bob Rubin did, the debt of the U.S. government to the Federal Employees' Thrift Savings Plan--where the Trustee will not complain if the government does not pay its debts for a while, and then have the government not pay its debts for a while.
Mint the damned coins already.
(2) look strongly preferable to me--the exercise of the government's not paying its debts to people who can't gain standing to sue and then saying that unpaid debts by the government are not part of the debt subject to limit has always seemed ugly.
From an economic standpoint, yes, this could avoid some very bad economic consequences. But I'm less sure of it from a political standpoint, i.e. that the public would understand and endorse it. I suspect that's true of the administration as well, and politics generally seems to trump economics when push comes to shove within the administration.
Hilary Wething at the EPI:
What We Mean When We Talk About Middle-Out Economics: Paul Krugman and Mark Thoma have been discussing (see here and here) the views of the (increasingly influential) very rich on this fall’s fiscal debate. They hypothesize that rising inequality has led to exorbitantly large incomes for a select few, and that these select few don’t understand the value of social insurance because they reap little-to-no benefits from programs like Medicaid, and SNAP, for example. The top 1 percent, after all, rarely realize the benefits of social insurance, since the likelihood that they experience unexpected income losses to the extent that they fall below the middle class living standards is slim. More often, social insurance benefits those who may be in the middle and lower classes, and experience unexpected income losses (like a lay off). Complaining about insurance simply because you don’t think you will need it is a pretty pithy argument, but let’s ignore that for now.
Thoma and Krugman go further, noting that rising inequality seems to have confirmed the top one percent’s notion that they are the indispensable economic engine of the U.S. economy, who take risks and work the hardest and should justly reap the benefits. They push for lower taxes (even though their current tax rate is one of the lowest in history) because they don’t think anything should impede their productivity, and they demand respect for being the “job creators” in society. In the context of this fall’s showdowns over the federal budget and the debt ceiling, not only is this take wrong, but it is totally divorced from the reality the broad middle-class faces—a reality of high joblessness from an anemic recovery, and meager wage growth over the last 30 years.
President Obama and others like to frame economic policy as growing the economy from the ‘middle-out.’ Last week, my colleague, Josh Bivens and I published a paper arguing that the fiscal policy debate this fall needs go beyond rhetoric and put actually improving middle-class living standards front-and-center. We attempted to explore what, if taken seriously, a ‘middle-out’ approach would look like.
A ‘middle out’ approach to fiscal policy would first and foremost focus on creating jobs and ensuring a full recovery from the Great Recession. Relative to other recessions, government spending in recent years has been steeply contractionary... had it just matched typical growth during previous recoveries. Further, had the historical average of public spending been replicated in the current recovery, roughly 90 percent today’s output gap would be closed and there would be 5 million additional jobs. ... At the very least, fiscal policymakers should repeal “sequestration”...
After addressing the jobs crisis, a ‘middle out’ approach would then work to reverse the rise of inequality... [S]ocial insurance programs so many of the very rich despise: these programs (particularly Social Security and Medicare) have been among the only sources of real strength for middle-class Americans in recent years and hence should not be on the chopping block in this fall’s fiscal showdowns. Middle-out economics should focus on preserving key areas of strength for middle-class living standards, and these social insurance programs are one such area.
- A Sew-Sew Labor Market - Paul Krugman
- No Tapering Soon if the Fed Looks at Labor - Edward Lazear
- Facts and Challenges for Forecasting and Macroeconomic Modeling - NBER
- Three Budget Battles, Three Different Economic Risks - Real Time Economics
- Henry Aaron Calls For Obama To Ignore Debt Ceiling - EconoSpeak
- Should Slowing Trade Growth Worry Us? - Paul Krugman
- The “Not So Great” Re-Coinage of 1696 - Liberty Street Economics
- Zero Lower Bound and Long-Term Yields - FRBSF Economic Letter
- How a Debt-Ceiling Crisis Could Become a Financial Crisis - NYTimes.com
- The Shocking Cost to Taxpayers of a Shutdown - Fiscal Times
- Where the Good Jobs Are—and Why - owenzidar
- Solution to the Regression Trick - Dave Giles
- Opening Up the Credit Box - Jared Bernstein
- The Push for Universal Pre-K - NYTimes.com
- Tugging on the Fed's Cape - The Weekly Wonk
- The Rut We Can’t Get Out Of - NYTimes.com
- Tax evasion and incidence - vox
- Tax-policy procyclicality - vox
- The US Transportation Sector - Tim Taylor
- Lessons From a Famous Bet - NYTimes.com