Month: December 2013

Over at the New Republic, I see that the extremely thoughtful Henry Aaron and Harold Pollack are irate in their: “Single-Payer Healthcare Supporters Complain About Obamacare Problems”:

It has been a rough two months for the Affordable Care Act and its defenders…. anger over the botched rollout is understandable, but these recriminations are poorly timed—and just plain wrong…. The ACA is working reasonably well in some places–California, Connecticut, Kentucky, Washington, and the District of Columbia…. These under-reported success stories show that insurance exchanges can work, if properly administered…. The human benefits are real, from California to Breathitt County in rural Kentucky. These successes make the federal government’s dismal rollout even more embarrassing…. Given that complexity, some on the left say, life would be simpler if only Congress had been willing–which it was not–to scrap all current arrangements and replace them with a single, federally administered health insurance plan. Those on the right regard this complexity and say that life would be simpler if only Congress had been willing—which it was not—to scrap all current arrangements and replace them with income-related vouchers people could use to help pay for private insurance of their choice…. These polar-opposite camps each disdain the kludgy fixes of incremental politics. And yet, incrementalism is what most Americans want….

Continue reading “Why Did Obama Deviate from His Primary Campaign’s David Cutler Hundred-Flowers No-Mandates Health Care Reform Plan, Anyway?” →

Must-Reads:

1. Henry Aaron and Harold Pollack: Now’s Now Is Not the Time for Liberals to Say “I Told You So” About Obamacare: “It has been a rough two months for the Affordable Care Act and its defenders…. The performance failures in the rollout of healthcare.gov have triggered cries of ‘I told you so!’ from some liberals. This wouldn’t have happened, they say, if only Obama had supported some form of single-payer plan, such as Medicare for all. The anger over the botched rollout is understandable, but these recriminations are poorly timed–and just plain wrong. For starters, the ACA is working reasonably well in some places–California, Connecticut, Kentucky, Washington, and the District of Columbia, for example. These under-reported success stories show that insurance exchanges can work, if properly administered…. The human benefits are real, from California to Breathitt County in rural Kentucky. These successes make the federal government’s dismal rollout even more embarrassing…. The real beef of those who seek a more radical rewiring of our healthcare system is not with the president. It is with the coalition of labor, healthcare, disability, and anti-poverty groups that coalesced during 2007 and 2008 around a health reform model that later became the ACA…. We wish ACA had gone farther. It could have provided more generous premium assistance and cost-sharing for working families. It could have allowed people near retirement to buy into Medicare. Alas, senators such as Joe Lieberman–not Obama–scuttled these possibilities. The ACA is only the first step in a long journey of needed health reforms…. There was and is no alternative to the messy incremental politics that produced Obamacare. Liberals such as then–House Majority Speaker Nancy Pelosi didn’t make unpalatable compromises because they held pallid aspirations for health reform. They compromised because they knew that they could not impose their will on querulous colleagues, because they needed 60 Senate votes, because millions of Americans needed help, and because it is better to win messily than to lose gloriously…”

2. Ryan Avent: Economic growth: On the inevitability of justice: “The Pope… offered a lengthy statement on economic justice…. ‘Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world…This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacra­lized workings of the prevailing economic system.’ On Saturday Greg Mankiw… weighed in…. ‘It is sad to see the pope using a pejorative, rather than encouraging an open-minded discussion of opposing perspectives.Third, as far as I know, the pope did not address the tax-exempt status of the church. I would be eager to hear his views on that issue. Maybe he thinks the tax benefits the church receives do some good when they trickle down.’ This is just the sort of response that leads non-economists to detest economists: condescending, callous, and, worst of all, intellectually lazy. It is also an example of some truly epic point-missing…. The Pope does not appear to be attacking growth. Rather, he is attacking the view that ‘economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world’…. Mankiw… certainly seems to be displaying precisely the viewpoint that the Pope is warning about: don’t worry about the outcomes of growth (and for heaven’s sake don’t do anything about them), because growth is pretty rad. But let’s be clear. Historically it has taken quite a lot of hard work to ensure that economic growth does bring about greater justice and inclusiveness…. Mankiw might argue that growth enabled the generosity the led to social pressure for change…. If you want to praise growth as justice-enhancing because growth improves our moral intuition, then you also have to praise those who act on their moral intuition in an effort to create institutions that deliver greater justice. Mr Mankiw would rather be snide and complain that the Pope is name-calling…”

Should-Reads:

1. George W. Evans, Eran Guse, and Seppo Honkapohja (2007): Liquidity Traps, Learning and Stagnation: “We examine global economic dynamics under learning in a New Keynesian model in which the interest-rate rule is subject to the zero lower bound. Under normal monetary and fiscal policy, the intended steady state is locally but not globally stable. Large pessimistic shocks to expectations can lead to deflationary spirals with falling prices and falling output. To avoid this outcome we recommend augmenting normal poli- cies with aggressive monetary and fiscal policy that guarantee a lower bound on inflation. In contrast, policies geared toward ensuring an output lower bound are insufficient for avoiding deflationary spirals.”

2. Scott Sumner: TheMoneyIllusion » Nick Rowe explains how to avoid reasoning from a price change: “If I was told by Nostradamus that the Fed kept the interest rate on reserves at 0.25%/year for the next 20 years, I’d certainly revise downward my inflation forecast.  But that’s because I would assume the causation runs from a lower rate of inflation to a lower policy rate.  And that’s because I assume the Fed has a model in its head where raising the policy rate is contractionary…. I had thought it was widely understood that QE has been modestly expansionary for nominal spending and inflation.  Recall that markets have responded to QE announcements by changing asset prices in a way that implied higher inflation expectations. So what is the ‘data’ that Andolfatto refers to when he says that Williamson’s post is motivated by ‘data’? It’s a simple time series graph showing that the inflation rate has been fairly low since 2009–rising after QE1, and then falling after QE3. But why would that graph have any bearing on the inflationary impact of QE? Surely you’d want to look at market responses to QE announcements, not the actual path of inflation. As far as I know everyone who seriously follows QE knows that the program is inflationary.  The only serious debate is whether it has only a tiny inflationary effect, or whether it has a modest inflationary effect. I can’t imagine anyone claiming it’s been deflationary.For God’s sake the dollar fell by 6 cents against the euro on the day QE1 was announced! Does anyone seriously think a 6 cent depreciation in the dollar is deflationary? So why develop models to explain empirical results that don’t exist? I don’t get it.”

Should Be Aware of:

1. Karl Smith (December 2011): Bitter Medicine: “Before anything else, the banks must be saved, most likely through an open-ended lending facility like the Federal Reserve’s Term Auction Facility (TAF). They must come before taxpayers, before pensioners, before the reforms that might transform southern Europe into a dynamic player in the global economy. Not because it is fair or just or right. It is none of these things. It must happen because we have constructed a global economy that has massive international banks at its heart. Money, banking, and credit lubricate the billions of transactions that happen around the world every day. If the global financial system collapses, so will trade. Stopping that collapse will involve central banks around the world loaning enormous sums of money to their private banks at very low interest rates. It will also mean that they do this as the private banks constrict their lending to businesses and families. Cash will pile up in global banks as a war chest in case things take a turn for the worse. As with the U.S. bailout, it will seem awful and it will be awful. But it will be necessary…”

2. Ta-Nehisi Coates: In Defense of a Loaded Word: “MY father’s name is William Paul Coates…. I have never called my father Billy. I understand, like most people, that words take on meaning within a context…. But as with so much of what we take as human, we seem to be in need of an African-American exception…. A fairly regular ritual debate over who gets to say ‘nigger’ and who does not…. ‘If you call yourself the n-word’, said the Rev. Al Sharpton, ‘you can’t get mad when someone treats you like that’. This is the politics of respectability–an attempt to raise black people to a superhuman standard. In this case it means exempting black people from a basic rule of communication–that words take on meaning from context and relationship. But as in all cases of respectability politics, what we are really saying to black people is, ‘Be less human’. This is not a fight over civil rights; it’s an attempt to raise a double standard…. To prevent enabling oppression, we demand that black people be twice as good. To prevent verifying stereotypes, we pledge to never eat a slice a watermelon in front of white people. But white racism needs no verification from black people. And a scientific poll of right-thinking humans will always conclude that watermelon is awesome…. A separate and unequal standard for black people is always wrong. And the desire to ban the word “nigger” is not anti-racism, it is finishing school. When Matt Barnes used the word “niggas” he was being inappropriate. When Richie Incognito and Riley Cooper used “nigger,” they were being violent and offensive. That we have trouble distinguishing the two evidences our discomfort with the great chasm between black and white America…”

Nick Rowe: The effect of nominal interest rates on inflation | Kathleen Geier: ≠ Inequality Matters |

Ryan Avent: Economic growth: On the inevitability of justice:

The Pope… offered a lengthy statement on economic justice…. ‘Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world…This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacra­lized workings of the prevailing economic system.’

On Saturday Greg Mankiw… weighed in…. ‘It is sad to see the pope using a pejorative, rather than encouraging an open-minded discussion of opposing perspectives.Third, as far as I know, the pope did not address the tax-exempt status of the church. I would be eager to hear his views on that issue. Maybe he thinks the tax benefits the church receives do some good when they trickle down.’

This is just the sort of response that leads non-economists to detest economists: condescending, callous, and, worst of all, intellectually lazy. It is also an example of some truly epic point-missing…. The Pope does not appear to be attacking growth. Rather, he is attacking the view that ‘economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world’…. Mankiw… certainly seems to be displaying precisely the viewpoint that the Pope is warning about: don’t worry about the outcomes of growth (and for heaven’s sake don’t do anything about them), because growth is pretty rad.

But let’s be clear. Historically it has taken quite a lot of hard work to ensure that economic growth does bring about greater justice and inclusiveness…. Mankiw might argue that growth enabled the generosity the led to social pressure for change…. If you want to praise growth as justice-enhancing because growth improves our moral intuition, then you also have to praise those who act on their moral intuition in an effort to create institutions that deliver greater justice. Mr Mankiw would rather be snide and complain that the Pope is name-calling…

And we are live over at Project Syndicate:

Back in 2007 and before I taught my students that the United States was a flexible economy. It had employers who would be willing to gamble and hire when they saw workers who would be productive without work. It had workers who would be willing to move to opportunity, or to try something new in order to get a job. And as these processes took place–as entrepreneurial workers and bosses took a chance–supply would indeed create its own demand. Adverse shocks to spending could indeed create mass unemployment and idle capacity, but their effects would be limited it to one, two, or at most three years. The way to bet, I told my students back in 2007 and before, was that the United States economy would recover roughly 40% of the ground between its current situation and its full employment potential and each year after the initial downturn had come to an end. 022 years, I said, was the domain of the Keynesian (and monetarist) short run. When analyzing events at a 3-7 year horizon, I taught, you were safe assuming a “classical” model–one in which the economy would return to full employment, and in which changes in economic policy and in the economic environment would change the distribution but not the level of spending, production, and employment. And beyond seven years was the domain of economic growth and economic institutions.

Continue reading “The Short Run and the Long Run: Savings Gluts, Investment Shortfalls, too-Low Inflation Targets, Reduced Risk-Bearing Capacity, and the Failures of Our Public Sphere…: Monday Focus” →

Supporting America’s Lower-Middle-Class Families : The Hamilton Project:

When: Wednesday, December 4, 2013 • 9:00 am – 12:00 pm

Where: The Liaison Capitol Hill Hotel

Media Inquiries: Karen Anderson • 202-797-6023 • KAnderson@brookings.edu

General Inquiries: Laura Howell • 202-797-6484 • LHowell@Brookings.edu

More than half of American families earn $60,000 or less a year — outside of poverty but with limited economic security. Indeed, many of these families rely on government programs for support and one major setback could throw their lives into chaos. On December 4th, The Hamilton Project at Brookings will host a forum to highlight two new proposals for aiding America’s lower-middle class…. Strengthen[ing] the food stamp (SNAP) program… a secondary earner tax deduction to help “make work pay” for both spouses in low income families….

The forum will conclude with a discussion between Jason Furman, Chairman of the President’s Council of Economic Advisers, and David Leonhardt, Washington Bureau Chief for the New York Times, on the challenges facing America’s lower-middle-class families.

Continue reading “Things to Go Watch This Week: Supporting America’s Lower-Middle-Class Families: The Hamilton Project” →

Must-Reads:

1. Tony Yates: Price level targeting: “In a nice post on the New York Fed’s blog, Liberty Street Economics, Marc Giannoni and Hannah Herman write on price level targeting.  In a nutshell, they observe that, whatever the FRB said it was doing ex ante, ex post it has brought about a trend-stationary price level, which is what you would get if you were ‘price level targeting’.  The question is begged:  so why not consolidate this into a formal Price Level Target to lock in the benefits?…”

2. Ricardo Hausmann: “It is often difficult to understand how countries that are dealt a pretty good economic hand can end up making a major mess…as if they were trying to commit suicide by jumping from the basement. Two of the most extreme cases… Argentina and Venezuela…. The puzzling thing is that this is not the first time either country has veered into an economic cul-de-sac…. It is certainly possible to describe how the road to hell is paved…. Overall inflation or some key price… come[s] under upward pressure. The government then uses its coercive power to keep a lid on price growth…. Things become really nasty when the government opts for foreign-exchange controls…. [which] give the government the sense that it can have its cake… and eat low inflation…. The dual-exchange-rate system ends up distorting production incentives… a combination of inflation and shortages… fiscal accounts worsen automatically…. Such a system can generate a self-reinforcing set of popular beliefs, which may explain why countries like Argentina and Venezuela repeatedly drive down dead-end streets. Because so many businesses make money from the rents created by the rationing of foreign exchange, rather than by creating value, it is easy to believe that markets do not work, that entrepreneurs are speculators, and that governments need to control them and impose ‘fair’ prices. All too often, this allows governments to blame the car, and even the passengers, for getting lost.”

Should-Reads:

1. Wendy Carlin: Teaching what matters in economics: The INET CORE Project: “We missed the boat in 2008…. Nor did we later provide convincing explanations…. Some… advocated policies that contributed to the onset… exacerbated the resulting unemployment… complacency… that a largely unregulated market economy would take care of itself…. Our students are… embarrassed when they are no more able to explain the eurozone crisis or persistent unemployment than their fellow students in engineering or archaeology…. Experimental methods have shown that people are more fair-minded and moral, and less calculating than the so called Economic Man… greatly expands the set of politically viable and economically effective policies…. Improved techniques for computer modelling of complex interactions… can help design policies…. For our students, though… this is all a well-kept secret. We impose a curriculum… remote from what economists now know, and more distant still from the pressing problems…. The curriculum project… is creating open access materials for a new curriculum… history, experiments and other data sources to test competing explanations and policies. This is a great time to be an economist. It is time we made it a golden age for students of economics…”

2. Andrés Rodríguez-Pose, Roberto Ezcurra: Government and spatial inequality: “Using regional data for 46 countries with different degrees of economic development over the period 1996-2006… there is a strong negative association between quality of government and within-country disparities. Countries with better quality of government register lower levels of spatial inequality”

3. Matthew Yglesias (May 28, 2013): Fast and Furious economics: “It would be comforting to simply dismiss the Fast and Furious franchise as an ethically unfortunate series of movies about illegal street racing… the low-trust ethics it embodies are… typical of societies featuring a high and growing level of income inequality…. generally take economically sound risks.
   In a world where the system increasingly seems to be rigged, it’s natural to turn to the Dominic Torettos of the world as heroes. Yet Dom, for all his hard work, ingenuity, and undeniable skill doesn’t really do anything useful or productive…. He lives by a code… ultimately destructive of the social institutions needed to generate prosperity. And yet at a time when elites long ago stopped caring whether the gains of economic growth would be widely shared, and in recent years seem to have turned their backs on the unemployed altogether, then these are the heroes we’ll turn to.”

Should Be Aware of:

1. John Holbo: Laugh if you like, but death on the tracks is funnyr: “Mirth is an emotion that may affect our moral thinking. Specifically, it makes us more utilitarian… trolley scenarios are, or may be, used as intuition pumps for utilitarian purposes. (They may be used for other things, of course.) But it is an underdiscussed fact that they may inherently do so, in part, because trolley tragedies can’t help being a bit funny…”

Duncan Black: “Every Villager pundit hitting a certain age decides that what the country really needs is mandatory military service for people younger than them” | Jo Wolff: “At its worst, philosophy is something you do against an opponent. Your job is to take the most mean-minded interpretation you can of the other person’s view and show its absurdity. And repeat until submission” | Glenn Fleishman: “The newsstand isn’t dead, but [Apple is] hiding it in a way that makes it less useful for publishers of any scale” | John Aziz: Why the post-antibiotic world is the real-life version of the zombie apocalypse | Chris Blattman: Where do warlords come from? (My favorite political economy paper of the year) | Kathleen Geier: “Last week, Michelle Goldberg wrote a smart and provocative blog post that… argues conservatives may be… abandoning the pseudo-populist brand of conservatism that, for decades, has been their mainstay, in favor of a more open elitism…” |