Things to Read on the Morning of January 18, 2014

January 18, 2014

Must-Reads:

  1. Josh Barro: David Brooks Is Wrong About Inequality: “David Brooks has a column about inequality today and it’s wrong… in a way that helps explain why conservatives have no idea how to talk about inequality. Brooks… attacks the ‘primitive zero-sum mentality’ that holds ‘growing affluence for the rich must somehow be causing the immobility of the poor’…. [But] while growing affluence for the rich isn’t causing low and moderate incomes to stagnate, they are to a large extent results of the same forces. There is a zero-sum tradeoff between the two, so a zero-sum mentality (primitive or otherwise) is called for…. Because of the declining marginal utility of money, a more unequal distribution of the returns to economic growth is undesirable, all else being equal. The question is, is all else equal? Have there been economic changes in the last four decades that make greater returns to capital necessary for innovation and growth? Or is the shift in returns just an artifact of policy choices on taxes, trade, inflation, and intellectual property that we can reverse without sinking the economy? I think the answer is probably ‘some of each’. But ‘some of each’ means there are a lot of policy choices that can and should be made to reduce inequality in a zero-sum manner.”

  2. Jan Hatzius Stresses U 6 Unemployment Business Insider Via Matthew Boesler, Jan Hatzius: U-6 Unemployment: “Is it really possible that the unemployment rate reaches 6.1% by the end of 2014 but the first hike does not occur until early 2016, as we currently forecast? We still believe that this is the right baseline forecast… ‘optimal control’ considerations and the possibility of a temporarily depressed neutral rate provide reasons for keeping rates lower…. But… observable measures which do not depend on our ability to measure the structural participation rate… confirm that there is still a significantly larger amount of slack than implied by the 6.7% unemployment rate on its own. In particular, the U-6 measure of underemployment… still stands at 13.1%, which historically is consistent with an official unemployment rate of 7.5-8%. The behavior of wages also points to a large amount of slack…. Our inflation forecast only calls for a very slow acceleration that still leaves the core PCE index at 1.7% in early 2016. If this is the right call, we think a hike before early 2016 is unlikely…”

  3. Kevin O’Rourke: Deflation in the euro zone: The euro zone needs a history lesson: “Europe’s policy-making elite… [has chosen:] to preclude any form of debt mutualisation; to have individual debtor countries pay off their existing debts; and to have them adjust macroeconomically via austerity and deflation. In Münchau’s words, ‘If you look at this with a knowledge of economic history, this is an awe-inspiring set of choices, to put it mildly’. He’s right…. The gold standard turned out to be hostage to the exogenous evolution of prices. Over… 1873-96, the declining price trend exacerbated the public finance problems of the periphery to breaking point. After 1896… inflation made convergence and steady participation in the gold zone much more attractive…. The pernicious effects of deflation on debt sustainability were further in evidence in the interwar period…’

  4. Uwe Reinhardt: The Real Health Care ‘War’ on the Young: “A common theme among critics of Obamacare has been that it basically is a war on… young… men… Chris Conover… John Goodman… Avik Roy…. Now, one certainly can have misgivings over community rating on actuarial grounds…. But the authors cited above do not base their case on purely technical, economic grounds. Language such as ‘the greatest generational theft in world history’ or ‘a war on the bros’ is meant to generate moral outrage. A case in point is the gender neutrality…. Before the Affordable Care Act, premiums for women in the younger age groups in the individual and small-group market were as much as 70 percent higher than those of men of similar age because women bear children…. Imposing gender-neutral community rating on such a market inevitably leads to some economic transfer from men to women…. Among many Americans and most Europeans and Asians–men included–this mandated gender neutrality is noncontroversial. Perhaps it is thought of as a small token of gratitude for the extraordinary contribution to humanity women make in this regard. Besides, there is growing scientific evidence that the physical and intellectual development of humans into adulthood is strongly influenced by their experience and nutrition in utero and during early childhood. Thus, a nation does not even have to be particularly humane, but merely smart, to grant women of child-bearing age easy access to the best maternal and child care attainable, including good nutrition. It is a solid economic investment with high social returns over generations. Yet as I have noted previously, many other Americans seem to view children more in the nature of lovable human pets–that is, more in the nature of a private good than a precious social resource.”

Should-Reads:

  1. Joan McCarter: Daily Kos: From ‘I don’t want any part of Obamacare’ to ‘It’s a godsend’: “Last year, TIME published a massive special report, ‘Bitter Pill: Why Medical Bills Are Killing Us’…. Central to that story were Stephanie and Sean Ricci, an Ohio couple with two kids who had just started up a new business, and who had just been struck by Sean’s aggressive and expensive cancer…. Steven Brill has a an update…. Here’s Stephanie Ricci last October: ‘I don’t think Obamacare will help us. I don’t want anything to do with it…. I hear a lot of bad things about it—that it doesn’t cover pre-existing conditions and it’s too expensive’, she added, referring to what she said were ‘television ads and some politicians talking on the news. Just a lot of talk that this is a bad law’. Did I mention she’s an Obama hater?… What Stephanie soon discovered, she told me in mid-November, ‘was a godsend…. Here I get full protection for $566, compared to no protection for almost $500…. This is wonderful…. No, we don’t get MD Anderson, but we do get the Cleveland Clinic and lots of other good care’, Stephanie says…. As Brill points out, if the Riccis had been living in Texas, where Sean got cancer treatment, or in any of the other states that refused Medicaid expansion, they’d still be screwed. They’d be in the Medicaid gap…. That’s the kind of situation that the Affordable Care Act was supposed to end for everyone…”

  2. M.S.: Those crazy class-conscious leftists: “DAVID BROOKS warns us that the current anxiety about income inequality is self-defeating. ‘Some on the left have always tried to introduce a more class-conscious style of politics. These efforts never pan out’, he writes. ‘America has always done better, liberals have always done better, when we are all focused on opportunity and mobility, not inequality, on individual and family aspiration, not class-consciousness’…. A passage of precisely such class-conscious rabble-rousing that I happened to re-read…. ‘[T]he most common and durable source of factions has been the various and unequal distribution of property. Those who hold and those who are without property have ever formed distinct interests in society’…. The author of this radical, class-conscious vision of society was James Madison, America’s fourth* president and co-author of its constitution.”

  3. Harry Stein: The Omnibus Spending Bill Reveals the Economic Consequences of the Murray-Ryan Budget Deal: “All in all, the omnibus spending bill makes mostly good choices to invest in our economy, but its potential is sharply limited by the constraints of the Murray-Ryan budget agreement. That agreement finally took a step back from the ever-increasing austerity policies of the past few years, but it was only a small step.
    If federal and state governments had not chosen austerity in the first place, the U.S. economy could have added more than 8 million jobs since 2010, which is 2.4 million more jobs than have been created…”

Kevin Drum: Everywhere in the World, Governments Heavily Regulate the Home Mortgage Business | Bruce Bartlett: Slashing the IRS Budget—Penny-Wise and Pound-Foolish | Shane Ferro: L’affaire demande |

Should Be Aware of:

  1. Historinhas: ‘Abenomics’ one year on: “Shinzo Abe was elected in September 2012 on a promise to revive growth and put an end to deflation. How have his promises ‘performed’ one year after taking power in December 2012?… Inflation… appears to be gaining ‘positive traction’ after years of languishing in deflationary territory…. The bounce in aggregate demand (NGDP) and real output (RGDP)…. The strong rise in the stock market is indicative of positive expectations about the effects of the plan. The depreciation of the yen is an important transmission mechanism of the expansionary monetary policy…. A trade balance deficit… is indicative that the income effect of the expansionary policy was stronger than the terms of trade effect of the exchange devaluation…. It is also interesting to compare Japan since ‘Abenomics’ with what´s happening in the Eurozone…the EZ is travelling to ‘where Japan is coming from’!”

  2. Ed Kilgore: Rand Paul Needs To Stop Writing a Revisionist History of Civil Rights: “I understand that a revisionist history of the civil rights movement is of great psychological importance to some conservatives. We’ll probably hear a lot more of it on Monday in conjunction with a MLK Holiday many of their forebears opposed. But Rand Paul’s forays into this area are just plain ill-advised. Last April he gave a speech at Howard University that pursued the ridiculous theory that the New Deal was essentially a complement to Jim Crow…. And now we have… ‘Rand Paul (R-Ky.)… likened President Obama’s governing philosophy to the kind of ‘majority rule’ that led to Jim Crow laws and Japanese internment camps…. Paul and others like him really need to stop trying to invoke the legacy of the Civil Rights movement to… [create] a oligarchical or even theocratic dictatorship of absolute private property rights and puny government.”

And:

Stan Collender: Five Reasons The Omnibus Appropriation Passed By Such Big Margins |

January 18, 2014

Connect with us!

Explore the Equitable Growth network of experts around the country and get answers to today's most pressing questions!

Get in Touch