Month: November 2013

It’s still four days before the launch of the Washington Center for Equitable Growth, and my weekend’s reading around on the internet has led me to identify our first need: higher-quality criticism of what we do…

Dan Kervick, meet James Pethokoukis:

Dan Kervick:

The Washington Center for Equitable Growth–Neoliberalism Reloaded?: “One knows in advance that whatever policy WCEG ends up advocating will have to get the Good Plutocracy seal of approval from the likes of General Electric, Goldman Sachs, Comcast, Walmart Boeing and the other financial backers of Podesta and his political network…”

James Pethokoukis:

Poor Americans Are Richer Today: “The CEP will be a strong advocate of sharply higher tax rates given that its director is Emmanuel Saez, an economist who wouldn’t mind seeing a top tax rate of over 70%…. The CEP will assume that the last few decades have been terrible ones for the US middle-class. Nothing but economic stagnation and exploding inequality. It’s a claim President Obama has repeatedly made. Except it is simply not true…”

May I simply say that there is no “seek approval from Goldman Sachs” button in the WCEG WordPress control suite?

And may I simply say that there is something very wrong with claiming that “it is simply not true” that the last few decades have seen “exploding inequality” here in America, for they have?

In the words of The Fish in the Pot in Dr. Suess’s The Cat in the Hat, those are not good games to play. I wish they would stop.

The whole point of this enterprise is to get people to play better games than bold-faced denials of empirical reality on the one hand, and bold-faced dismissals of opposing views as driven by material and ideological blinders on the other. We will succeed if we get people like Dan and Jim to move beyond that. We will fail if we don’t.

Any suggestions on how we could best accomplish this?

Must Reads:

• Uwe Reinhardt’s highly favorable review of Angus Deaton’s Wealth, Health and Inequality
• Stan Collender on why we should not expect any bipartisan budget-deal progress over the next three months
• Mark Thoma sends us to Bill McBride: ‘State and Local Government Austerity is Over’: “This… is… a significant change from state and local governments being a headwind for the economy to becoming a slight tailwind…”

Should Reads:

• Michael Gapen of Barclay’s on the thoughts of senior members of the Federal Reserve staff and how they suggest an even longer time of near-zero short-term interest rates–until 2017 or so…
• Menzie Chinn: A Feasible Measure for Mitigating Income Inequality: raise the minimum wage! The EITC cannot and should not be asked to do it all…
• Paul Krugman: in The Mutilated Economy on Reifschneider et al. on how a failure to deal with unemployment is killing the economy’s long-run growth prospects…

Should Be Aware of:

• Justin Lahart says Worry Over Inequality Occupies Wall Street: <–Is this a meaningful trend, or just a couple of anecdotes? The switch of Wall Street from 40%-60% Obama-McCain to 10%-90% Obama Romney was instructive; it would be nice if it were shifting back…
• Angus Deaton: The Great Escape: Health, Wealth, and the Origins of Inequality
• Simon Johnson: “Quiet Coup” <–Wall Street as a politically-dominant value-subtracing sector: the sensible right-wing critique of America’s contemporary political economy…
• Luigi Zingales: Capitalism for the People: : Recapturing the Lost Genius of American Prosperity <–America’s ills today in an Italian mirror: the sensible right-wing critique of America’s contemporary political economy…
• Gary Bass: The Blood Telegram: <–Scott Lemiux: “As part of my longstanding argument that people making ‘Nixon was really a liberal president’ arguments are being too clever by at least three quarters, Gary Bass’s new book The Blood Telegram is apparently devastating about Nixon’s role in the genocide that preceded the creation of Bangladesh…”
• Brad DeLong: The Budget and Macro Policy: slides updated to November 2013, text not yet updated…
• Brad DeLong: Slides for Janet Yellen as Central Banker

From Uwe Reinhardt’s highly favorable Review of Angus Deaton’s The Great Escape: Wealth, Health and Inequality:

The book demonstrates that assessments of income inequality are basically meaningless without the backdrop of the origins of a prevailing inequality in income and wealth…. Deaton asserts that economists routinely apply Pareto’s principle too narrowly, overlooking that the wealthy in societies with highly unequal distributions of income and wealth may capture the country’s systems of governance… rig market processes in their favor or to exploit taxpayers through what economists call “rent seeking”…. This causal flow from wealth to politics and thence a perpetuation of wealth has been noted by others–among… Simon Johnson… in his “Quiet Coup” and… Luigi Zingales [in his Capitalism for the People)]….

Continue reading “Uwe Reinhardt and Angus Deaton on Wealth, Health and Inequality” →

Attention Conservation Notice: Links to updated slides and non-updated text for my “The Budget and the Macroeconomy” talk

http://delong.typepad.com/sdj/the-budget-and-macroeconomic-policy.html

I have just updated my slides on my talk on The Budget and Macroeconomic Policy. They are now current as of November 2013…

The talk is the product of an invitation by Berkeley Goldman School of Public Policy Professor John Ellwood to come to his budgeting class to discuss the budget deficit and the economy at an introductory level. It was a good opportunity to try to pull together my thoughts about how to successfully teach this vitally-important topic at a generally-accessible level.

I framed it as:

• The government’s deficit (or surplus) affects the macroeconomy in three “runs”.
• In the short run, a government deficit can serve as a valuable tool to rebalance the economy in a depression if interest rates are very very low.
• In the medium run, a government surplus crowds in investment and boosts the rate of growth.
• In the long run a government that does not or cannot pay its bills gets into a world of hurt.

Although the slides are updated to November 2013, the transcript is still from the February 21, 2012 Berkeley GGSPP lecture…

Let me for one set out how I, at least, see this “equitable growth” business–how I see the conversation we should be having. There are four sequential questions:

1. What should we be doing to boost the productive potential of the American economy, and also the world economy? How do we best boost our resources—labor, skills, capital, infrastructure, ideas, and others?
2. What should we be doing to ensure that that productive potential was turned into actual useful goods and services produced?
3. what should we be doing in order to distribute those useful goods and services to the people who ought to have in some sense—who need them the most, who would enjoy them the most, and who deserve them the most?

Call these: “accumulation”, “production”, and “distribution”. Or, if you want to give them economists’ names: Smith-Solow, North-Keynes, Ricardo-Galbraith.

Continue reading “Prologue to a Framework for Thinking About “Equitable Growth”…” →

Must Reads:

• Alan Blinder and Janet Yellen’s (2001) The Fabulous Decade: their reflections on why equitable growth performance was so good in the decade of the 1990s–a summary of their short Century Foundation book of the same title.

• Gavyn Davies’s take on English, Lopez-Salido, and Tetlow’s and Reifschneider, Wascher, and Wilcox’s analyses calling for much more aggressive expansionary monetary policy. You aren’t going to read the papers. You do need to read Davies’s précis.

Adrianna McIntyre’s comments on a chart by Jon Gruber on the speed of the take-up of RomneyCare in Massachusetts. One of Ezra’s Klein’s “seven cute animals that think reasons Obamacare isn’t facing a death spiral”

Should Reads:

• Ed Glaeser’s “A happy tale of two cities: New York is a magnet for people on a fast-track to be rich, and for very low-income people. What’s wrong with that?” <- Glaeser’s take on what the mayor of New York City should and should not do for equitable growth at the mouth of the Hudson River.

• Brad Plumer’s giant chart on how the world is failing at its climate goals.

• Tim Duy’s On Lowering the Unemployment Target

Should Know Exists:

William Dudley (September 2003) Reflections on the Economic Outlook and the Implications for Monetary Policy: “We have established a threshold of 6.5 percent for the unemployment rate as long as we do not expect inflation to exceed 2.5 percent… and inflation expectations remain well-anchored…. The 6.5 percent unemployment rate is a threshold, and not a trigger… we might wait a long time after we breach the threshold before we begin to raise our federal funds rate target…”

Three things struck me as must-reads this morning:

Ed Glaeser’s “A happy tale of two cities: New York is a magnet for people on a fast-track to be rich, and for very low-income people. What’s wrong with that?” <- Glaeser’s take on what the mayor of New York City should and should not do for equitable growth at the mouth of the Hudson River.

Brad Plumer’s giant chart on how the world is failing at its climate goals.

Gavyn Davies’s take on English, Lopez-Salido, and Tetlow’s and Reifschneider, Wascher, and Wilcox’s analyses calling for much more aggressive expansionary monetary policy. You aren’t going to read the papers. You do need to read Davies’s précis

Must Reads:

• Brian Buetler: How the media is blowing the Obamacare rollout
  <-How insurance companies are unreliable narrators on health-insurance “rate shock”, and how the ObamaCare rollout badly needs some truth-in-insurance-advertising to make health insurance companies act like the public utilities they always should have been…

• Christina Romer: Monetary Policy in the Post-Crisis World <- “I remember vividly being at a meeting of central bankers… in September 2009. All of the talk was: ‘We have stopped the crisis. Now what we need to do is go back to [being] prudent… [and] worrying about inflation’. Yet unemployment was still risin–it would hit 10% in October 0f 2009. Every inch of my body wanted to scream… ‘Oh no, you are not done!’ Monetary policymakers, unfortunately, did take a break from aggressive action in 2010 and 2011…”

Should Reads:

• Michael Stillman, M.D., and Monalisa Tailor, M.D, of the University of Louisville Medical Center, on the blockages to health-care access that are killing one of their patients with colon cancer <- A horrifying story to put anecdotal flesh on the quantitative bones of how inadequate our health-care safety net truly is right now, and why we as a nation get so little bang in health indicators from the mammoth bucks we commit to the sector.

• Carmen Reinhart making the case that we should be really worried about debt accumulation <- She, in my view at least, demonstrates that that case is quite weak as long as interest rates remain low.

• Jon Cohn: So you ended up XY instead of XX. Get over yourself <- Once you start saying women should pay more than men because of their genes, what justification is there for any form of social insurance against having failed to choose the right parents?

• Jim Tankersley: The brutal economies of hard-line Republican districts <- Not good in relative terms at generating jobs, not good at generating incomes.

• Brad Plumer: How the world is failing at its climate goals, in one giant chart <- Will we keep the global warming rise to less than 3.6F? No.

• Robert Gordon: Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds <- “Even if innovation were to continue… at the rate of the two decades before 2007, the U.S. faces six headwinds… demography, education, inequality, globalization, energy/environment, and the overhang of… debt… suggest[ing] that future growth in consumption per capita for the bottom 99 percent of the income distribution could fall below 0.5 percent per year for an extended period of decades…”

Should Know Exists:

• Pat Kline and Enrico Moretti: People, Places and Public Policy <- When place- rather than person-based equality-promoting policies actually promote equality–and efficiency too…

• Dave Reifschneider, William Wascher, and David Wilcox: Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy <- The fact that our cyclical unemployment is turning into structural unemployment means the urgency of demand-boosting policies is very great; the fact that all of it has not yet so turned means that there is still time…

• Marc Labonte: The FY2014 Government Shutdown: Economic Effects
  <- Yes, we will be between $50 billion and $150 billion poorer when the effects of the October government shutdown have worked their way through the system. Why do you ask?

And here is our first piece of press for WCEG:

David Leonhardt: Podesta Starting a Think Tank on Inequality:

John Podesta, a longtime adviser to Bill and Hillary Clinton and President Obama, is starting a research center in Washington to investigate the causes and effects of growing economic inequality…. The center will be called the Washington Center for Equitable Growth and be housed at the Center for American Progress, a left-leaning advocacy and research group that Mr. Podesta founded 10 years ago. Heather Boushey, an economist at the Center for American Progress, will become executive director…. The center will write grants to support academic research focusing on three broad questions: What is causing the rise in inequality over the last few decades in the United States and in other rich countries? What are the societal effects of higher inequality? And what policies might reduce inequality? Inequality has soared over the last three decades, with the share of annual income flowing to the top 1 percent of earners having risen to 22.5 percent, from 9.2 percent in 1973….

Continue reading “David Leonhardt: Podesta Starting a Think Tank on Inequality <– Our First Piece of Press for WCEG” →

Only two things that struck me as should-reads this morning:

Michael Stillman, M.D., and Monalisa Tailor, M.D, of the University of Louisville Medical Center, on the blockages to health-care access that are killing one of their patients with colon cancer–and thus on how inadequate our health-care safety net truly is right now.

Carmen Reinhart making the case that we should be really worried about debt accumulation–and, in my view at least, demonstrating that that case is quite weak as long as interest rates remain low.