Month: December 2013

Must-Reads:

1. Robert Greenstein: On the Murray-Ryan Budget Agreement: “The budget agreement…represents an improvement… albeit a modest one…. Lawmakers should make every effort to accompany it with an extension of federal emergency unemployment benefits that will otherwise expire the week after Christmas… scale back a number of damaging cuts that they imposed in 2013 in areas ranging from education and Head Start to low-income housing and medical research…. It modestly promotes economic growth by somewhat easing the sequestration cuts in the near term while the economy remains weak and spreading out the offsets over a 10-year period…. It gives appropriators an opportunity to set funding priorities for 2014 and 2015, rather than mechanically extending last year’s funding levels….

   “But the agreement also has limitations…fails to extend emergency jobless benefits… replace less than half of the total sequestration cuts in 2014 and a much smaller share in 2015… leaving non-defense discretionary funding at levels too low…. Its $22 billion in savings that would go for deficit reduction will barely make a dent in our longer-term fiscal challenges, and those savings would have been better used to extend the expiring emergency unemployment benefits or scaling back the sequestration cuts to a greater degree.”

2. Paul Krugman: Upstairs, Downstairs, Outside: “Via Mark Thoma, David Cay Johnston has a great piece noting that today’s service economy is in many ways like the Edwardian-era economy in which a small number of wealthy people employed a large number of servants — except that we tend to outsource the service, relying on restaurants and cleaning services instead of cooks and maids. And our outsourced servants are, he notes, arguably paid and treated worse than the in-house servants of the past, even in absolute terms–let alone relative to per capita GDP. It’s a novel and useful way to think about just how unequal our society has grown.”

3. Robert E. Rubin, Roger C. Altman and Melissa Kearney: Making the poor–and the U.S.–poorer still: “Congress… cut[ting] food stamps. The Senate passed a bill in June mandating $4 billion in cuts over 10 years; the House version, passed in September, imposes nearly $40 billion in reductions…. This negotiation is occurring amid the worst poverty levels in two decades, a weak overall economy and rapidly falling budget deficits…economically and morally unsound…. 15 percent of the population–nearly 47 million people–lives in poverty, including 22 percent of children…. For a family of four, the poverty threshold is $24,000 or less…. Roughly 18 million other people are near-poor, living within 130 percent of the poverty line…. Most Americans living in poverty experience hunger or the pervasive fear of it…. Total federal spending on the Supplemental Nutrition Assistance Program (SNAP), this country’s main hunger prevention program, was $82.5 billion in fiscal 2013… [in a] $16 trillion economy…. It is hard to reconcile traditional American values of hard work and generosity with the levels of poverty and fear of hunger in our country…. It has been a generation since our country last had a robust conversation about combatting poverty. Now is the time to reinvigorate that conversation, not cut needed benefits.”

4. Austin Frakt: To avoid failure, the Affordable Care Act must evolve: “The participation of the young and healthy is supposed to be required, of course, by the individual mandate. But the mandate’s penalty is relatively modest and its enforcement mechanisms relatively weak… its power… depends… on civic duty….Matt O’Brien…’real people’, he argued, ‘aren’t rational self-maximizers… We don’t like to feel like we’re doing the wrong thing. We like to follow the rules instead. Feel like we’re a good person’. That the viability of the new marketplaces rests on convincing people that it is their civic duty to purchase health insurance is a weak link. I expect it will break in some markets…. Sure, you can call it a ‘mandate’. But it’s just a choice. Play or pay…. And yet, within the community rating/guaranteed issue framework, the non-participation by younger and healthier people imposes a cost on others…”

Continue reading “Things to Read on the Morning of December 12, 2013” →

On the one side, Eric Morath reports from the Wall Street Journal’s annual CEO Council:

Eric Morath: Fed Effort to Boost Growth ‘Dangerous’ But Necessary:

The Federal Reserve is in “dangerous territory” in its effort to boost growth, said [Glenn Hubbard,] a former economic adviser to President George W. Bush, but it’s hard to fault the central bank for the effort…. It does create the risk of asset bubbles….[But] “The problem is not the Federal Reserve, the problem has been the government,” said Mr. Hubbard….Rather than buying $85 billion a month in securities, the more appropriate policy response would have been a big government investment in infrastructure and other needs, he said….

Stanley Fischer, former governor of the Bank of Israel, agrees that the Fed’s early action helped avoid an even deeper crisis. He added that the Fed can successfully unwind its stimulus programs. “Everyone knows now about asset prices and presumably they’ll take that into account and moderate policy accordingly,” he said. The Fed’s actions were “dangerous, but necessary.”

On the other side, Joe Gagnon:

Continue reading “A Debate on the Risks of Quantitative Easing: Stan Fischer and Glenn Hubbard and Ben Bernanke vs. Joe Gagnon: Thursday Focus (December 12, 2013)” →

Let me turn the microphone over to young Berkeley academic Patrick Iber–who I think of as a younger Tony Judt, only for Latin America rather than Europe–to tell us what us Nortamericanos should learn from the experience of our neighbors to the south.

I do think that there are important historical lessons–two of them. The first is that if you did not believe that high inequality hobbled growth, look at Latin America (in the past). The second is that if you did not believe that healthy growth is possible in an environment that is also focused on reducing inequality, look at Latin America (in the present):

Patrick Iber: What Can the United States Learn about Equitable Growth from Latin America?

Continue reading “The United States in the Latin American Mirror: Wednesday Focus (December 11, 2013)” →

Mark Thoma says something very smart:

Mark Thoma: Economist’s View: The EITC versus The Minimum Wage: They are complements, not substitutes.

And he quotes Arin Dube in 2013:

7) The best evidence suggests that minimum wage increases lead to moderate reductions in the poverty rate, especially together with the Earned Income Tax Credit. There are strong theoretical rationales—and empirical confirmation—that minimum wages and EITC are complementary policies when it comes to helping low-income families. A high minimum wage prevents wage reductions that can result from an EITC. Since the EITC is indexed to the CPI, minimum wage indexation will prevent erosion of EITC benefits for minimum wage workers.

Continue reading “Mark Thoma: The EITC and the Minimum Wage Are Not Substitutes But Complements” →

A nice, smart, thoughtful reflection on some not-very-conscious presuppositions that should not be presuppositions…

James Kwak: Free Market Reflexes:

I’ve been reading a lot about education recently, for reasons that are not worth going into here. I don’t know that much about the area, so I’ve been reading some background stuff and review articles, including a Hamilton Project white paper by Michael Greenstone, Adam Looney, and Paige Shevlin. It’s pretty mainstream, self-professed “third way” stuff, with a heavy dose of measurement and performance evaluation…. There are a fairly strong tilt toward market mechanisms and some idealistic naivete about practical problems…. The white paper, however, betrays a certain conceptual bias that I find disturbing, even in topical areas where it seems otherwise reasonable.

Continue reading “Musings by James Kwak on Some Cognitive Biases of ThirdWayism…” →

Perhaps a couple of charts from the estimable Barry Ritholtz (but Barry is still estimable) very estimable [Calculated Risk](http://www.calculatedriskblog.com) will help get the point across: one of the many big problems of the U.S. economy is that the U.S. government has indeed–as Barack Obama wrongly urged us to do in his 2010 State of the Union Address–tightened its belt in the aftermath of the crisis. As almost every real economist knows, a time in which government credit is extraordinarily good and idle resources are extraordinarily large is a time for government to borrow-and-spend, to leverage up, and so keep the private sector’s desire to leverage down from causing lost decades–yes, we are now going to start speaking of “lost decades” in the plural:

Continue reading “I Agree with Bob Greenstein and Larry Mishel: Budget Deal Does Little **Almost Nothing at All** to Address the **Dire** Needs of the Economy” →

Robert E. Rubin, Roger C. Altman and Melissa Kearney: Making the poor–and the U.S.–poorer still:

Congress may take up legislation this week to cut food stamps. The Senate passed a bill in June mandating $4 billion in cuts over 10 years; the House version, passed in September, imposes nearly $40 billion in reductions…. This negotiation is occurring amid the worst poverty levels in two decades, a weak overall economy and rapidly falling budget deficits. Under these circumstances, it would be economically and morally unsound to carry out the cuts…. 15 percent of the population–nearly 47 million people–lives in poverty, including 22 percent of children…. For a family of four, the poverty threshold is $24,000 or less…. Roughly 18 million other people are near-poor, living within 130 percent of the poverty line…. Most Americans living in poverty experience hunger or the pervasive fear of it…. Total federal spending on the Supplemental Nutrition Assistance Program (SNAP), this country’s main hunger prevention program, was $82.5 billion in fiscal 2013… [in a] $16 trillion economy…. It is hard to reconcile traditional American values of hard work and generosity with the levels of poverty and fear of hunger in our country…. It has been a generation since our country last had a robust conversation about combatting poverty. Now is the time to reinvigorate that conversation, not cut needed benefits.

Paul Krugman: Upstairs, Downstairs, Outside:

Via Mark Thoma, David Cay Johnston has a great piece noting that today’s service economy is in many ways like the Edwardian-era economy in which a small number of wealthy people employed a large number of servants — except that we tend to outsource the service, relying on restaurants and cleaning services instead of cooks and maids. And our outsourced servants are, he notes, arguably paid and treated worse than the in-house servants of the past, even in absolute terms–let alone relative to per capita GDP. It’s a novel and useful way to think about just how unequal our society has grown.

Affordable Care Act health-care reform implementation. Federal Reserve appointments. Dodd-Frank financial regulation implementation. Environmental regulation–how and whether to control carbon dioxide emissions as a garden-variety pollutant under the Clean Air Act, and whether the Keystone pipeline is an environment minus (further entrenching the carbon economy) or an environmental plus (shifting us away from dirty coal). Finally–five years late, no thanks to Tim Geithner and Barack Obama’s appointments non-policies–using the Federal Housing Finance Administration to do what needs to be done to rebalance housing finance in the aftermath of a housing sector-based financial crisis, and with any luck use FHFA and the GSEs it regulates as tools of macroeconomic policy to ease the load on the Federal Reserve. (See Joe Gagnon.) Judiciary appointments. Turning promises that addressing inequality is job #1 into realities. And foreign policy–lots of foreign policy: climate, economic, democracy, and security.

There is an awful lot of policy to be done over the next three years. Virtually none of it, however, involves Senators preening for the cameras, or is of interest to non-quantitative reporters wanting to write “opinions of shape of earth differ” stories. Even following what will be going on will require digging down into federal administrative mechanisms, and reaching out to what is going on outside the Beltway…

Continue reading “Ezra Klein Says; ‘It is ridiculous to declare Obama’s presidency ‘finished’”” →

…That half of the nation where states built their own exchanges and have begun the expansion of Medicaid, that is:

Top states for http://t.co/oSlogbvX7h enrollment: Feds: 137,204 CA: 107,087 NY: 45,513 FL: 17,908 WA: 17,770 TX: 14,038 KY: 13,145

— igorvolsky (@igorvolsky) December 11, 2013

And:

Dylan Scott: Iowa’s Medicaid Expansion Plan Gets Federal Approval:

The Obama administration has approved Iowa’s alternative plan for expanding Medicaid under Obamacare–but with one important tweak…. Branstad had asked the Centers for Medicare and Medicaid Services to allow the state to use Medicaid expansion money to pay for people to purchase private health coverage on http://healthCare.gov–similiar to what Arkansas had already received approval for. That would cover people between 100 and 138 percent of the federal poverty level. People below the poverty level would be covered by a modified version of the state’s traditional Medicaid program. But Iowa also wanted to require those covered by the expansion to contribute money toward their coverage. CMS said Tuesday that Iowa could implement that requirement for people above the poverty line, but not for people below it…

But:

RT @jamiedupree: 10 states have signed up fewer than 1,000 people; 11 states have less than 2,000 signed up for private coverage

— igorvolsky (@igorvolsky) December 11, 2013

Continue reading “It Really Looks Like ObamaCare Implementation Is Proceeding Relatively Well in Half the Nation…” →