Month: December 2013

Must-Reads:

1. Mike Konczal: 2013 Financial Reform Went Way Better Than Anyone Expected: “2013 was a not-awful year for financial reform… and compared to where people thought we’d be a year ago, we are in a pretty solid place… tougher holding requirements for capital… regulations of… financial derivatives… advance[d]… the final Volcker would be a pretty good start instead of an incoherent mess…. So what caused it? And how it might apply to future political goals?… The multi-billion dollar trading losses from JPMorgan Chase known as the “London Whale” changed the dynamics…. JPMorgan had been leading the charge against reform…. An intellectual movement that argued high capital requirements would both be an excellent way to stabilize the financial system at a minimal cost to society…. The last reason reform worked in 2013 was the result of insider and outsider actors committed to pushing reform on the agenda. Senator Warren…. The CFTC’s Bart Chilton…. Meanwhile, outside groups kept up the pressure through the democratic rule-writing process.”

2. Rand Ghayad: No, Rand Paul, There’s No Reason to Cut Unemployment Benefits: “Rand Paul says he cares about the unemployed…. So why does he want to end unemployment benefits for people who have been out of work for 6 months or longer? Well, Paul cites my work on long-term unemployment as a justification—–which surprised me, because it implies the opposite of what he says it does…. Paul says… extending unemployment benefits does a ‘disservice’ to the unemployed by encouraging them to stay unemployed for too long. And as a ‘big-hearted’ member of a party that cares about the jobless, he wants to protect them… by cutting their benefits, of course. But Paul misreads my work to try to back up his argument. He says my paper, which shows that companies don’t want to hire people who have been unemployed for more than 6 months, proves his point…. But just because companies discriminate against the long-term unemployed doesn’t mean long-term benefits are to blame. Paul might know that if he read beyond the first line of my paper’s abstract.”

3. Laura Tyson: What Policies Enhance Economic Growth and Distributional Equity?: “Inequality of market income before taxes and transfer payments in the US is similar to that in many other developed countries…. The US does have the most unequal distribution of disposable income after taxes and transfer payments… not because the US has the least progressive tax system… [but] the US has the least generous and progressive transfer system…. The US needs a more progressive and redistributive tax and transfer system…. To combat market-income inequality, the US also needs faster economic growth to boost the pace of job creation and reduce unemployment…. Obama reiterated several proposals to accelerate growth: increasing exports, reforming the corporate tax code, and investing more in infrastructure, R&D, and education. These proposals are both growth-enhancing and equity-enhancing. Yet Congressional approval is unlikely, and overall fiscal policy remains strongly contractionary…. Obama also called for an increase in the minimum wage to combat income inequality…”

Continue reading “Things to Read on the Afternoon of December 31, 2013” →

Laura Tyson: What Policies Enhance Economic Growth and Distributional Equity?:

Inequality of market income before taxes and transfer payments in the US is similar to that in many other developed countries–including those with egalitarian reputations like Sweden and Norway. Britain and even Germany have higher inequality of income before taxes and transfers than the US. Among developed countries, the US does have the most unequal distribution of disposable income after taxes and transfer payments… not because the US has the least progressive tax system… [but] the US has the least generous and progressive transfer system…. Over the last 30 years, US economic policy aggravated rather than ameliorated income inequality. Both taxes and transfers became less progressive as market-income inequality widened…. The US needs a more progressive and redistributive tax and transfer system…. To combat market-income inequality, the US also needs faster economic growth to boost the pace of job creation and reduce unemployment…. In his inequality speech, Obama reiterated several proposals to accelerate growth: increasing exports, reforming the corporate tax code, and investing more in infrastructure, R&D, and education. These proposals are both growth-enhancing and equity-enhancing. Yet Congressional approval is unlikely, and overall fiscal policy remains strongly contractionary…. Obama also called for an increase in the minimum wage to combat income inequality…

Rand Ghayad: No, Rand Paul, There’s No Reason to Cut Unemployment Benefits:

Rand Paul says he cares about the unemployed…. So why does he want to end unemployment benefits for people who have been out of work for 6 months or longer? Well, Paul cites my work on long-term unemployment as a justification—–which surprised me, because it implies the opposite of what he says it does…. Paul says… extending unemployment benefits does a “disservice” to the unemployed by encouraging them to stay unemployed for too long. And as a “big-hearted” member of a party that cares about the jobless, he wants to protect them… by cutting their benefits, of course. But Paul misreads my work to try to back up his argument. He says my paper, which shows that companies don’t want to hire people who have been unemployed for more than 6 months, proves his point…. But just because companies discriminate against the long-term unemployed doesn’t mean long-term benefits are to blame. Paul might know that if he read beyond the first line of my paper’s abstract.

David Card: Notes on Local Labor Markets:

No, not all of you should read this. Most of you, in fact, should not. But some of you should read, and all should be aware of these lines of thinking…

At Project Syndicate: Brad DeLong: Why Aren’t the 90% More Vocal for Policies That Would Support Them?: Unless something goes unexpectedly wrong in 2014, the level of real per capita GDP in the United States will match and exceed its 2007 level. That is not good news.

To see why, consider that, during the two business cycles that preceded the 2007 downturn, the US economy’s real per capita GDP grew at a 2% average annual pace; indeed, for a century or so, the US economy’s real per capita GDP grew at that rate. So US output is now seven years–14%–below the level that was reasonably expected back in 2007. And there is nothing on the horizon that would return the US economy to–or even near–its growth path before the 2008 financial crisis erupted. The only consolation–and it is a bleak consolation indeed–is that Europe and Japan are doing considerably worse relative to the 2007 benchmark.

Continue reading “Why Aren’t the 90% More Vocal for Policies That Would Support Them?: Project Syndicate: Tuesday Focus (December 31, 2013)” →

Must-Reads:

1. Lena H. Sun and Amy Goldstein: Beneath health law’s botched rollout is basic benefit for millions of uninsured Americans: “Adam Peterson’s life is about to change. For the first time in years, he is planning to do things he could not have imagined. He intends to have surgery to remove his gallbladder, an operation he needs to avoid another trip to the emergency room…. These plans are possible, says Peterson, who turned 50 this year and co-manages a financial services firm in Champaign, Ill., because of a piece of plastic the size of a credit card that arrived in the mail the other day: a health insurance card…. Peterson is among the millions of uninsured Americans who are benefiting from the Affordable Care Act…. ‘I get these messages from acquaintances on Facebook saying, “Let me keep my doctor”‘, Peterson said. ‘Well, what about those of us who didn’t have health insurance before?… I have been walking a tightrope and have had some twists and falls off of it. To not have to worry about this anymore is a tremendous relief’.”

2. Jamelle Bouie: A Minimum Wage Increase is Great, but Full Employment Would be Better: “If we want to make a serious dent in income inequality, then the first step is a genuine push for full employment…. I’m skeptical that there’s any electoral utility to pushing for a higher minimum wage—the single biggest influence on voters is the short-term economy—but there’s no question that this is worth doing. At $7.25, the current minimum wage is at a relative low when you adjust for inflation. The congressional proposal, which would bring the wage to just over $10, is a modest boost that increases the value of the minimum wage to where it was in the 1960s and 70s. As for the GOP argument that this will harm small businesses? If Democrats were pushing for a larger increase—to $15 or $20 an hour—Republicans might have a case…. But it’s worth emphasizing the extent to which raising the minimum wage is a Band-Aid for wage stagnation and income inequality, to say nothing of the entrenched racial inequality that requires its own set of solutions…. If 2013 was the year that President Obama made the minimum wage a priority, then 2014 should finally be the year where he calls on Congress and the Federal Reserve to tackle mass unemployment and provide jobs for every American who wants to work. Since, overall, full employment is more than an important step towards reducing inequality—it’s a necessary one.”

3. Gavyn Davies: The separation principle drives the Fed towards tapering: “A new ‘separation principle’ seems to be emerging, and it explains why the FOMC seems eager to begin winding down its asset purchases in the near future, while relying even more heavily than before on ‘lower for longer’ guidance on forward short rates. This could have important ramifications for markets…. The separation principle was spelled out more clearly than ever before in Ben Bernanke’s speech on communications policy…. Bernanke’s core point is that the Fed’s reading of monetary conditions now distinguishes sharply between two distinct factors, which are the expected forward path for short rates, and the term premium built into long term bond yields. Asset purchases by the central bank are intended to affect the second of these factors, the term premium, but are not intended to give any signal to the markets about the Fed’s willingness to keep short rates at zero for a prolonged period ahead…”

Continue reading “Things to Read on the Evening of December 30, 2013” →

Back in the 1920s Edward Filene–among other things, founder of what was the Twentieth Century Fund and is now the Century Foundation–argued that America did not need any variety of European “socialism”. Without bureaucratic rules to bind them, America’s large, efficient corporations would create lots of jobs. And because the large, efficient corporations of America would would find themselves in a labor-scarcity environment and so would provide for their workers as a result of market pressures better outcomes than what the workers of Europe had to gain through the ballot and the threat of the bullet–high wages, reasonable hours, pensions, sick days, health insurance (cough). Edward Filene’s vision did not rule America in the remainder of the twentieth century, but it did have a powerful influence on what America became.

Now David Frum is here to ring the curtain down on Edward Filene’s “Welfare Capitalism” and its impact:

Continue reading “David Frum on the Death Knell of “Welfare Capitalism”, and Where We Should Go Next” →

Mike Konczal: 2013 Financial Reform Went Way Better Than Anyone Expected:

2013 was a not-awful year for financial reform. If you aren’t terrified of jinxing even the smallest good news, you might even say it was pretty good. The multi-year implementation of 2010’s Dodd-Frank bill made several final advancements this year, and compared to where people thought we’d be a year ago, we are in a pretty solid place. Last year, nobody thought that banks would face tougher holding requirements for capital, that regulations of the financial derivatives markets would advance, or that the final Volcker would be a pretty good start instead of an incoherent mess. Yet that is what appears to have happened in 2013. So what caused it? And how it might apply to future political goals?… The multi-billion dollar trading losses from JPMorgan Chase known as the “London Whale” changed the dynamics…. JPMorgan had been leading the charge against reform, arguing that the effort was over-harsh and destructive, and that Wall Street had already cleaned up its act on its own…. An intellectual movement that argued high capital requirements would both be an excellent way to stabilize the financial system at a minimal cost to society…. The last reason reform worked in 2013 was the result of insider and outsider actors committed to pushing reform on the agenda. Senator Warren…. The CFTC’s Bart Chilton…. Meanwhile, outside groups kept up the pressure through the democratic rule-writing process.

Tyler Cowen: On the future of Dogecoin, BitCoin, and other cryptocurrencies of the non-realm: “An email query from Brad DeLong reminds me of this old Bart Taub paper, “Private Fiat Money with Many Suppliers” (jstor):

A dynamic rational expectations model of money is used to investigate whether a Nash equilibrium of many firms, each supplying its own brand-name currency, will optimally deflate their currencies in Friedman’s (1969) sense. The optimal deflation does arise under an open loop dynamic structure, but the equilibrium breaks down under a more realistic feedback control structure.

There is also Marimon, Nicolini, and Teles (pdf) and the work of Berentsen., all building on Ben Klein’s piece from 1974.  This literature has been read a few different ways, but I take the upshot to be that a) a monopolized private fiat money might be stable in supply, to protect the stream of future quasi-rents, and b) private competing fiat monies will not be stable in overall supply, for reasons of time consistency and also the competitive erosion of available rents.  In other words, when it comes to the proliferation of cryptocurrencies, the more the merrier but not for those holding them.

Continue reading “A Pick-Up Mini Internet Symposium: **More Than** Five Posts on BitCoin Triggered by a Question from Adrienne Jeffries of The Verge…” →

Lena H. Sun and Amy Goldstein: Beneath health law’s botched rollout is basic benefit for millions of uninsured Americans:

Adam Peterson’s life is about to change. For the first time in years, he is planning to do things he could not have imagined. He intends to have surgery to remove his gallbladder, an operation he needs to avoid another trip to the emergency room…. These plans are possible, says Peterson, who turned 50 this year and co-manages a financial services firm in Champaign, Ill., because of a piece of plastic the size of a credit card that arrived in the mail the other day: a health insurance card…. Peterson is among the millions of uninsured Americans who are benefiting from the Affordable Care Act…. ‘I get these messages from acquaintances on Facebook saying, “Let me keep my doctor”‘, Peterson said. ‘Well, what about those of us who didn’t have health insurance before?… I have been walking a tightrope and have had some twists and falls off of it. To not have to worry about this anymore is a tremendous relief’.