Month: November 2013

ObamaCare always was supposed to launch three arrows in its effort to increase health-insurance coverage:

1. Getting individuals and small groups better options through the exchange-marketplace (and then making people take advantage of those options whether they want to or not),
2. Expanding coverage by making more people eligible for Medicaid and by providing subsidies to make exchange-marketplace coverage affordable to those of the working poor and lower middle class who would not qualify for even expanded Medicaid.
3. Expanding coverage by getting those currently eligible for Medicaid who had not signed up for it to do so.

Ezra Klein writes up a good catch here. Only I did not think that this third arrow was “unexpected”–I thought it was part of the design:

Ezra Klein: Obamacare is having one huge success nobody knows about:

People are, rightly, upset about all that’s going wrong…. But something unexpected is going very, very right. The background here is that before the rollout of the Affordable Care Act there were a lot of people eligible for Medicaid who simply didn’t know it… with some states as low as 36 percent [of eligible people signing up] and others as high as 81 percent. The publicity around the new health-care law has led a lot of those people to inquire about whether they’re eligible for health insurance–and they’re finding out that they are…. In the red states… 91,000 people have… learned… that they are already eligible…. Of the 70,000 people who’ve enrolled in Medicaid in Washington State, 30,000 were eligible before the new law took effect–they just didn’t know it…

288 words

This means a roughly $60 billion direct federal transfer away from Red States over the next two years, and roughly $200 billion in lower economic activity in Red States–call it a negative of 4%-point-years of GDP, and of 2%-point-years of excess Red State unemployment.

Interesting times…

And last weekend three Democratic governors–all of whom should be mentioned much more often by substance-oriented reporters as future presidential possibilities than the standard senators whom lazy reporters focus on–weighed in:

Continue reading “Over the Next Two Years ObamaCare Is Going to Succeed Where Local Politicians in Office Want It to Succeed, and Is Likely to Fail Where Local Politicians in Office Want It to Fail” →

Richard Dobbs and Susan Lund write:

The [Big] Four central banks… have injected a $4.7 trillion tidal wave of liquidity….The consensus is that these actions have raised GDP by between 1 and 3 percent and prevented a catastrophic failure in the global financial system…. Our contribution to this on-going debate suggests that… the clearest impact from ultra-low interest rates appears to have come from enabling government expenditure, and possibly boosting housing construction. Non-financial companies… have been large beneficiaries of low interest rates, saving $710 billion on their debt service costs between 2007 and 2012. However, companies have not lowered the hurdle rates they use…. Credit [remains] tight for… many small companies in the United States and Europe….

Continue reading “Has Quantitative Easing on a $5 Trillion Global Scale Paid Noticeable Benefits? I Think So…” →

Every time I see the extremely smart and capable Bob Reich, I feel guilty.

I was a small part of the Treasury team within the Clinton administration that shut down a lot of ideas he had as Secretary of Labor–ideas to spend a little bit of money and quite possibly significantly improve the job the American economy does at matching workers with skills with jobs that need those skills. We thought that it was a much higher priority to pursue a bipartisan deal–a “grand bargain”–to set the financing of America’s social insurance system on a sound long-run basis, and if we could not get such a deal we would do it ourselves

Given that George W. Bush and his Republicans were going to gleefully smash much of our hard budget-balancing work over eight years on the floor in 2001-3–and given that the senior Republican policy barons like Alan Greenspan would only quietly whimper in private about how this was bad policy–it would have been better in retrospect to focus less on long-term fiscal stabilization as the road to equitable growth and to focus more on, well, on equitable growth as the road to equitable growth.

Continue reading “We Need a Less Ideological Language to Describe Politicians…: Tuesday Focus” →

Must Reads:

1. Annie Lowrey: Caught in a Revolving Door of Unemployment: “A five-year spell of unemployment has slowly scrubbed away nearly every vestige of Ms. Barrington-Ward’s middle-class life. She is a 53-year-old college graduate who worked steadily for three decades. She is now broke and homeless…. She was laid off from an administrative position at the Massachusetts Institute of Technology in 2008; she had earned about $50,000 that year. With the recession spurring employers to dump hundreds of thousands of workers a month and the unemployment rate climbing to the double digits, she found that no matter the number of résumés she sent out… he could not find work. ‘I’ve been turned down from McDonald’s because I was told I was too articulate’, she says. ‘I got denied a job scrubbing toilets because I didn’t speak Spanish and turned away from a laundromat because I was “too pretty”. I’ve also been told point-blank to my face, “We don’t hire the unemployed”. And the two times I got real interest from a prospective employer, the credit check ended it immediately.’ For Ms. Barrington-Ward, joblessness itself has become a trap, an impediment to finding a job. Economists see it the same way, concerned that joblessness lasting more than six months is a major factor preventing people from getting rehired, with potentially grave consequences for tens of millions of Americans…”
2. Paul Krugman: A Permanent Slump?: “The case for… a persistent state in which a depressed economy is the norm, with episodes of full employment few and far between was made forcefully recently… [by] none other than Larry Summers…. And if Mr. Summers is right, everything respectable people have been saying about economic policy is wrong, and will keep being wrong for a long time…. I know that many people just hate this kind of talk. It offends their sense of rightness…. Economics is supposed to be about making hard choices (at other people’s expense, naturally)…. But… economic reality is what it is. And what that reality appears to be right now is one in which depression rules will apply for a very long time…”

Should Reads:

1. Thoreau: Vocation of the Elites § Unqualified Offerings: “There’s another side to the problems…. I’m glad that some of our elite class passes through top educational institutions. I could think of worse ways to shape them. The real problem is that there are few routes to sit at the table.  By all means, have some Ivy Leaguers there.  But have those Ivy Leaguers in a wider range of endeavors than just the FIRE sector. Have people who came up through organized labor.  Have people who came up through professions and vocations, through entrepreneurial activity outside the FIRE sector, and through numerous other paths. (But keep the journalists out of the elite class. The last thing we want is journalists who like sitting at fancy dinners with their rich buddies. The proper place for a journalist is digging up dirt outside the banquet hall, while the rich are unaware what they’re up to.) This monoculture, this lack of variety in the paths to the top…”
2. Jonathan Chait: Obama’s Latest Katrina Threatens Doom Once Again: “The Obamacare rollout debacle has officially reached its Katrina Phase…. The Obamacare rollout is merely Obama’s most recent Katrina, following in the wake of… the Gulf Oil spill, the 2009 swine-flu outbreak, the humanitarian disaster in Haiti, the General Motors bailout, Hurricane Sandy, Syria, and the now-forgotten springtime scandals–which, the New York Times reported in an equally portentous news analysis last May, ‘have reinforced fears of an overreaching government while calling into question Mr. Obama’s ability to master his own presidency’. If every one of Obama’s Katrinas were an actual Katrina, America as we know it would long since have ceased to exist and we’d be living in a watery post-apocalyptic hellscape…”
3. Michael Kimmel: America’s angriest white men: Up close with racism, rage and Southern supremacy:|”Many of the younger guys are veterans of the first Gulf War, a war that they came to believe was fought for no moral principles at all, but simply to make America’s oil supply safer and to protect Israel from possible Arab attack. They feel they’ve been used, pawns in a larger political game, serving their country honorably only to be spit out and stepped on when they returned home to slashed veteran benefits, bureaucratic indifference to post-traumatic stress disorder, and general social contempt for having fought in the war in the first place. They believed they were entitled to be hailed as heroes, as had earlier generations of American veterans, not to be scorned as outcasts…”
4. Charlie Stross: CMAP: “Why do you use Microsoft Word?”: “I sometimes fantasize about Markdown taking off everywhere. It’s not as if Markdown editors are thin on the ground; it’s almost become a de-facto standard on the iPad due to iOS’s lack of a rich text library prior to iOS 7. Markdown is expressive enough to write a novel (novels are structurally very simple). It’s so lightweight that you can learn the basics in half an hour and print a crib sheet on the side of a coffee mug. There are powerful Markdown editing tools with syntax colourizing and folding and other features… and you can write it using any plain text editor. If we could just get everyone to use it, there are powerful proofing tools out there—it’s a plain text based markup language, so the entire panoply of programmer’s tools are available. But it ain’t gonna happen. Novelists are not only not IT people; they are on average quite old (it’s rare to sell a first novel before you turn 30: most working novelists are middle-aged). They are emphatically not early adopters…”
5. Paul Krugman: What To Do When You’re Wrong: “Barry Ritholtz reminds us that we’ve just passed the third anniversary of the debasement-and-inflation letter–the one in which a who’s who of right-wing econopundits warned that quantitative easing would have dire consequences. As Ritholtz notes, they were utterly wrong. Also, rereading the letter now, you have to wonder what kind of economic model they had in mind…. You don’t just want to look at whether people have been wrong; you want to ask how they respond when events don’t go the way they predicted. After all, if you write about current affairs and you’re never wrong, you just aren’t sticking your neck out enough. Stuff happens, and sometimes it’s not the stuff you thought would happen. So what do you do then? Do you claim that you never said what you said? Do you lash out at your critics and play victim? Or do you try to figure out what you got wrong and why, and revise your thinking accordingly?…. So, have any of the signatories to that 2010 letter admitted being wrong and explained why they were wrong? I mean any of them. Not as far as I know. And at that point this becomes more than an intellectual issue. It becomes a test of character.”

Things You Should Be Aware of:

J. Bradford DeLong and Lawrence H. Summers (1992): Macroeconomic Policy and Long-Run Growth | **Nick Hanauer and Eric Beinhocker: Capitalism Redefined | Michael Kimmel: America’s angriest white men: Up close with racism, rage and Southern supremacy | Ann Sinaiko et al.: Enrollment in Medicare Advantage Plans in Miami-Dade County: Evidence of Status Quo Bias? | Yuriy Gorodnichenko and Michael Weber: Are Sticky Prices Costly? |

Jay Rosen: Out of the press box and onto the field: I am joining up with the new venture in news that Pierre Omidyar, Glenn Greenwald, Laura Poitras and Jeremy Scahill are creating, along with Liliana Segura, Dan Froomkin, Eric Bates and others who are coming on board to give shape to this thing, which we are calling NewCo until we are ready to release the name | Bryce Covert: Democrats Push For Extending A Lifeline For The Long-Term Unemployed | Daniel McCarthy: Why the Tea Party Can’t Govern | Cosma Shalizi (2010): The Singularity in Our Past Light-Cone |

This morning I find myself distracted by reports that Tom Sargent believes that a 2%/year inflation trend is a costly redistribution of wealth from creditors to debtors that it would not be foolish to solve by restoring the gold standard. My reaction is: “WTF?!” I’m 99% certain that this is a misinterpretation…

And I also find myself distracted by the near-viral status of the Larry Summers IMF video. I know that Larry Summers has been thinking about using a [neo-Wicksellian model] to think about fiscal (and monetary, and regulatory) policy in a (near-permanent) low interest-rate environment since before we finished our [“Fiscal Policy in a Depressed Economy”]. And now his thoughts are developed enough for him to have taken them on the road to the IMF on November 8, 2013, and the talk has gone near-viral in the circles in which I travel (but alas, there is no(t yet) a transcript)…

Here we have Ryan Avent weighing in, advocating a shift in the target inflation rate in the North Atlantic from 2%/year to 5%/year, and complaining that Larry Summers won’t go there…

Continue reading “How Urgent Is the Need for a Higher Inflation Target?” →

Must Reads:

1. Ezra Klein: One senator’s lonely war against climate change: “Every week, Sen. Sheldon Whitehouse heads to the floor of the Senate, sets up an easel and some poster board and delivers a speech. He works hard on these speeches. They’re deeply researched and beautifully crafted. He delivers them with passion and fervor–to a mostly empty room. His colleagues figure they have better things to do than listen. But 100 years from now, when our grandchildren look back and try to understand what we were doing while the world burned, these speeches may well be some of the most famed rhetoric of the age. The speeches are on climate change. They range in tone from morally outraged to deeply wonky…”
2. Thoreau: Vocation of the Elites § Unqualified Offerings: “The ideas in Twilight of the Elites…. We have an ostensibly meritocratic elite class, and they are legitimized in part by their test scores and educations. We therefore tell ourselves that the solution to inequality is through the education system.  We’ll just give everybody a shot… if they’re good enough they’ll ‘succeed’, and this legitimizes everything. When people notice that inequality persists, the schools can be… scapegoats or saviors, playgrounds for pet projects or distractions from bigger problems. Much of what drives me crazy in education (or, for that matter, much of what might drive anybody else crazy in education) follows from those games…”
3. Daniel Drezner: Why Foreign Affairs Policymakers are More Prejudiced than Economic Policymakers: “Michael Desch and Paul Avey… find that senior foreign affairs policymakers are extremely dubious about the utility of political science scholarship…. They note at the end of their paper that an outstanding question remains: ‘why is it that policymakers are relatively tolerant of complex modeling and statistical work in Economics and survey research but not in other areas of political science and international relations?’…”

Should Reads:

1. John dos Passos (1938): U.S.A.: The 42nd Parallel / 1919 / The Big Money “Wars and panics on the stock exchange, machine gun fire and arson, bankruptcies, war loans, starvation, lice, cholera and typhus: good growing weather for the House of Morgan.”
2. Matthew Yglesias: Katrina vs. Obamacare: Here’s the difference: “1,833 people died during Hurricane Katrina…”
3. John Cassidy: SIX REASONS THE AFFORDABLE CARE ACT ISN’T HURRICANE KATRINA: “In writing about the rollout of the A.C.A., I, too, have used the term ‘disaster’…. But Hurricane Katrina? I can easily imagine why Republican politicians are making the comparison…. But does it really stand up? I don’t think so, and here are six reasons why: (1) Obama got out of Air Force One…. (2) Nobody’s been killed…. (3) This time, there is no ‘Brownie’…. (4) The war in Iraq is over…. (5) Despite it all, Healthcare.gov appears to be fixable…. (6) The ‘disaster’ narrative doesn’t yet represent the final cut: Once the Bush Administration had failed the immediate test of responding to Hurricane Katrina, there wasn’t much it could do to change the story. The victims were dead…”

Things You Should Be Aware of:

David Saha: Revisiting the case for rational expectations | Joseph E. Gagnon: Stabilizing Properties of Flexible Exchange Rates: Evidence from the Global Financial Crisis |

How the Victorians Wired the World: The TV Show on Youtube | Mark J. Perry: The era of the textbook cartel and $300 textbooks is ending | Neil Irwin: There is only one way to end Europe’s economic woes. Germany needs to buy more stuff |

Must Reads:

1. Larry Summers on the danger that the U.S. and Europe are turning Japanese, i.e., about to repeat Japan’s ongoing post-1991 episode of secular stagnation: “It is not over until it is over…. We may well need, in the years ahead, to think about how we manage an economy in which the zero nominal interest rate is a chronic and systemic inhibitor of economic activity, holding our economies back, below their potential…”
2. Andreas Mueller, Jesse Rothstein, and Till von Wachter: Unemployment Insurance and Disability Insurance in the Great Recession: “[Do] unemployed individuals who exhaust their Unemployment Insurance (UI) benefits use DI as a form of extended benefits[?] We exploit the haphazard pattern of UI benefit extensions in the Great Recession to identify the effect of UI exhaustion on DI application…. We find no indication that expiration of UI benefits causes DI applications… [and] rule out effects of meaningful magnitude…”
3. Mike Konczal: Given the Myth of Ownership, is the Idea of Redistribution Coherent?: “Given that all property rights are a creation of the state, is it possible to refer to ‘redistribution’ without reifying a notion of ‘everyday libertarianism’? I believe so. However, Matt Bruenig, over at our neighbors Demos, disagrees, and is slowly picking off liberal wonks on this topic. Given that I’m likely on the kill list, I might as well play offense…”

Should Reads:

1. Marshall Fitz: Don’t Believe the Boobirds: “Another day, another ‘Immigration Reform is Dead’ pronouncement. Now that declaration is being coupled with the jaw-dropping claim that both parties share the blame for the putative demise. Neither assertion holds up to scrutiny…”
2. Joe Gagnon: Stabilizing Properties of Flexible Exchange Rates: evidence from the Global Financial Crisis: “There is little difference… with respect to the growth rate of GDP or the inflation rate. However… the change in the unemployment rate and the variability of growth, inflation, and unemployment… outcomes are always better for inflation targeters. The better performance of inflation targeters is even clearer when one controls for other factors that affect economic performance and when one defines the group of hard fixers more appropriately…”
3. Robert Waldmann: Why does Fiscal Stimulus Work?: “Cochrane’s fantasy has so little connection with reality that it is hard to discuss… like expecting a reasoned critique of 2+2=5…. How does he manage such regular howlers? Well we have the ambiguity of “no spending multiplier”: here this ambiguously means that the… multiplier is 1 (there is no effect on private consumption); there it means that it is 0…. Argu[ing] that the multiplier… is 0… and then [that] a model or data which suggests that it is 1 is… proof that they were right…”
4. John Quiggin: Wall Street Isn’t Worth It: “Can Wall Street, in its present form, be justified? That is, does the share of income flowing to corporations and professional workers in the financial sector reflect their marginal contribution to the total value of social output?… I argue that society as a whole would be better off if the financial sector were smaller, and received much smaller returns. A political strategy based on cutting the financial sector down to size… is a necessary precondition for a broader attempt to make the distribution of wealth and power more equal…”

Things You Should Be Aware of:

Susan Houseman et al.: Measuring Manufacturing: Problems of Interpretation and Biases in the U.S. Statistics | ThinkUp | Stephen Broadberry: Accounting for the great divergence |

Henry Aaron: Obamacare Policy Jiu-Jitsu | Barry Ritholtz: 2010 Reminder: QE = Currency Debasement and Inflation | James Besson: Technology isn’t taking all of our jobs | Annie Lowrey: The Inequality of Climate Change | Jason Sattler: Early Medicaid Success Is A Victory Against Inequality | Lydia DiPillis: The real loser of the recession is rural America |