Month: April 2014

It is unclear whether Paul Ryan understands what he is doing or not. But if he does, he is laying it all out there–that the Republican health-care endgame is as follows:

• If you are already sick, have the wrong genetic markers, or are poor, the plan is for you to beg at your church for money to pay your health care bills.

• Health insurance is to be reserved only for those from the middle class who lack adverse genetic markers and who have no preexisting conditions.

• Why? Because freedom!

I swing back and forth between thinking that Paul Ryan understands, thinking that he does not understand, and thinking that he just isn’t thinking about it but, instead, simply taking whatever step looks most solid without raising his eyes…

Continue reading “What Might the Republican Health-Care Reform Endgame Be?: Tuesday Focus/The Honest Broker for the Week of April 12, 2014” →

Must-Reads:

1. Richard Mayhew: $2.32 per person per month: “That is the great ‘risk corridor’ and ‘death spiral’ potential of one major Exchange carrier.  Highmark is an insurer for Pennsylvania, Delaware and West Virginia.  They did well on the Exchanges this year by picking up over 100,000 new members in Pennsylvania.  However their actuaries were off by a little bit…. ‘The state’s largest health insurer expects to lose $2.9 million on its exchange business in Pennsylvania from July 1, 2014, to June 30, 2015, according to a filing with the state Department of Insurance.’ The actuaries, flying blind, were able to get within a large cup of coffee.  The article states that the major source of error was an underestimation of how much ‘catch-up’ care that previously uninsured individuals were consuming in the first three months of the open enrollment and active policy period.  I think that this error will narrow as the last minute surge of healthier and younger people who either signed up last week or are in the process of signing up now through the blue box enrollment period enter the acturial calculations.  But even if the revised projection is perfect, and the age/health composition of the Highmark risk pool does not get younger/healthier, their base rates have to increase by the cost of a good cup of coffee. So how do we get death spiral stories out of that? We don’t.”

2. Ezra Klein: How politics makes us stupid: “At one point in our interview Kahan does stare over the abyss…. He recalls a dissent written by Supreme Court Justice Antonin Scalia in a case about overcrowding in California prisons. Scalia dismissed the evidentiary findings of a lower court as motivated by policy preferences. ‘I find it really demoralizing…’ Kahan says. But Scalia’s comments were perfectly predictable given everything Kahan had found…”

Continue reading “Things to Read on the Evening of April 6, 2014” →

Ezra Klein: How politics makes us stupid: “At one point in our interview…

…Kahan does stare over the abyss…. He recalls a dissent written by Supreme Court Justice Antonin Scalia in a case about overcrowding in California prisons. Scalia dismissed the evidentiary findings of a lower court as motivated by policy preferences. “I find it really demoralizing…” Kahan says. But Scalia’s comments were perfectly predictable given everything Kahan had found.

Scalia is… the kind of identity-protector who has publicly said he stopped subscribing to the Washington Post because he “just couldn’t handle it anymore,” and so he now cocoons himself in the more congenial pages of the Washington Times and the Wall Street Journal. Isn’t it the case, I asked Kahan, that everything he’s found would predict that Scalia would convince himself of whatever he needed to think to get to the answers he wanted?…

The threat is real. Washington is a bitter war between two well-funded, sharply-defined tribes that have their own machines for generating evidence and their own enforcers of orthodoxy. It’s a perfect storm for making smart people very stupid. The silver lining is that politics doesn’t just take place in Washington. The point of politics is policy. And most people don’t experience policy as a political argument. They experience it as a tax bill, or a health insurance card, or a deployment. And, ultimately, there’s no spin effective enough to persuade Americans to ignore a cratering economy, or skyrocketing health-care costs, or a failing war….

At least, that’s the hope. But that’s not true on issues, like climate change, where action is needed quickly to prevent a disaster that will happen slowly…. And it’s not true when American politics becomes so warped by gerrymandering, big money, and congressional dysfunction that voters can’t figure out who to blame for the state of the country. If American politics is going to improve, it will be better structures, not better arguments, that win the day.

Why do the top 0.01% think they want a depressed real economy and low inflation?

Back before World War I there were many very rich people with nominal assets: nominal bonds and real estate rented out for very long term at fixed nominal rents. As a result, they had to clear an immediate financial interest in hard money: low inflation. But after World War I, everybody realizes the risk of holding a heavily nominal-weighted portfolio in a fiat-money world subject to bouts of large inflation. Since 1920 the super-rich are almost as likely to be net nominal borrowers as net nominal debtors. And for anyone with a portfolio predominantly in real assets, the benefits of a high-pressure economy via higher profits and higher growth greatly outweigh any residual negative loading on higher inflation.

Continue reading “Oligarchy and Monetary Policy: I Confess That I Do Not Understand: Monday Focus: April 7, 2014” →

In Alfred Hitchcock’s (1938) The Lady Vanishes, the moment when the train is stopped in the countryside by armed fascists is the moment of revelation and clarity: all becomes clear, the adversaries reveal themselves, and the proper action heroics can begin.

In Wes Anderson’s (2014) The Grand Budapest Hotel, the first moment when the train is stopped in the countryside by armed authoritarians is one of suspense broken by comic-opera comedy. Just as the militia have determined that the young Zero Moustafa’s papers are not in order are going to pull him off of the train and take him away to an unknown fate, it turns out that their leader–Captain Albert Henckels-Bergersdorfer–is the same Little Albert to whom Zero’s patron M. Gustave was “very kind” when as a lonely little boy he stayed with his parents at the Grand Budapest Hotel in Nebelsbad, Zubrowka:

Continue reading “Telling the Real History of Twentieth-Century East-Central Europe Through Black Screwball Comedy Cozy-Catastrophe Farcical Tragedy: Watching Wes Anderson’s “The Grand Budapest Hotel”: The Honest Broker for the Week of April 5, 2014″ →

Richard Mayhew: $2.32 per person per month: “That is the great ‘risk corridor’ and ‘death spiral’ potential of one major Exchange carrier…

Highmark is an insurer for Pennsylvania, Delaware and West Virginia.  They did well on the Exchanges this year by picking up over 100,000 new members in Pennsylvania.  However their actuaries were off by a little bit….

The state’s largest health insurer expects to lose $2.9 million on its exchange business in Pennsylvania from July 1, 2014, to June 30, 2015, according to a filing with the state Department of Insurance.

The actuaries, flying blind, were able to get within a large cup of coffee.  The article states that the major source of error was an underestimation of how much ‘catch-up’ care that previously uninsured individuals were consuming in the first three months of the open enrollment and active policy period.  I think that this error will narrow as the last minute surge of healthier and younger people who either signed up last week or are in the process of signing up now through the blue box enrollment period enter the acturial calculations.  But even if the revised projection is perfect, and the age/health composition of the Highmark risk pool does not get younger/healthier, their base rates have to increase by the cost of a good cup of coffee.

So how do we get death spiral stories out of that? We don’t.

Must-Reads:

1. Tim Duy: One For the Doves – Tim Duy’s Fed Watch: “this [employment] report fits nicely with the view outlined by Federal Reserve Chair Janet Yellen earlier this week.  The labor market continues to improve at a moderate pace, a pace that remains insufficient to rapidly alleviate the issues of underemployment and low wage growth…. I think the real policy question should be: “why is the Fed engaged in reducing policy accommodation in the first place?” If Yellen is as concerned about the plight of labor as she purports to be, and if she and her colleagues are as committed to the 2% inflation target as they purport to be, then it seems like there is a strong argument for slowing the pace of the taper and using a rules based approach to take the risk of earlier-than-anticipated rate hikes off the table. In short, there seems to be a disconnect between the Fed’s rhetoric and the general policy direction.  They seem to have lost interest in speeding the pace of the recovery. Persistently low inflation, however, may push them into action.  St. Louis Federal Reserve President James Bullard opened up the door to slowing the taper if inflation does not prove to be bottoming.”

2. Ryan Cooper: How to talk to a climate change contrarian (if you must): “Climate trolls make the link between climate change and extreme weather seem highly complicated. It isn’t…. Roger Pielke Jr… made his career repeatedly accusing climate scientists of scientific malfeasance for exaggerating the link between climate change and extreme weather…. Now the Breakthrough Institute, which is about as troll-y as they come with regards to climate change, is out with a true-to-form defense of Pielke, claiming that a new, devastating report from the United Nations Intergovernmental Panel on Climate Change entirely vindicates his approach to weather disasters…. When it comes to climate change and extreme weather, one simple fact takes care of the vast majority of what’s really important. You ready? Here it is, drum roll… More global warming means more extreme weather. To put it another way: Why do we care about climate change? Because it could cause serious, potentially catastrophic damage to our civilization. Extreme weather is a big part of how this will happen, according to the new IPCC report, which even Breakthrough and Pielke apparently agree is a good source: ‘Impacts from recent climate-related extremes, such as heat waves, droughts, floods, cyclones, and wildfires, reveal significant vulnerability and exposure of some ecosystems and many human systems to current climate variability (very high confidence). Impacts of such climate-related extremes include alteration of ecosystems, disruption of food production and water supply, damage to infrastructure and settlements, morbidity and mortality, and consequences for mental health and human well-being. For countries at all levels of development, these impacts are consistent with a significant lack of preparedness for current climate variability in some sectors.’ It’s really that simple. Organized science is highly confident that unchecked climate change will cause more extreme weather in the future, along with a grim parade of horribles. So we should stop the carbon pollution that causes it…. Economic damage is a completely cock-eyed way of looking at any of this. Poor countries are going to be hit hardest by climate change, but since they’re poor the damage isn’t going to be very ‘expensive’. As some dude named Nate Silver showed us back in 2009, you could delete something like three billion people off the face of the Earth and it would only add up to 5 percent of world GDP. What happened to that guy?”

3. Doug Henwood: GDP etc. in a deep funk: “By the way, here’s a graph of actual real U.S. GDP and its major components relative to their long-term (1970–2007) trendlines through the end of 2013. Note how things fell off a cliff in the recession. GDP, consumption, and government spending are all about 15% below where they’d be had they continued to grow in line with their long-term trend. (The hysteria over out-of-control government spending looks ludicrous in the light of this graph.) Investment is about 25% below where it “should” be. thanks largely to the housing collapse, though it’s staging something of a recovery. The other components have yet to begin closing the gap, because the recovery’s been so weak.”

4. Simon Johnson: The Too Big To Fail Subsidy Debate Is Over: “No doubt there is still a lot of shouting to come, but this week a team at the International Monetary Fund completely nailed the issue of whether large global banks receive an implicit subsidy courtesy of the American government…. Yes, there is an implicit subsidy that lowers the funding costs for very large banks… as much as 100 basis points… and yet this large scale of implicit support is small relative to the macroeconomic damage that is likely to be caused by the high leverage and incautious risk-taking that the subsidy encourages…. Still, as I explain in my NYT.com Economix column, I’m a big fan of this work because the Fund’s report is very good on how to handle and reconcile the main alternative methodologies for getting at the issue. The Fund offers an entirely reasonable approach that sets a very high quality bar.”

5. Henry Farrell: Piketty on Capital: A Footnote: “A correction: Dean Baker, in a somewhat grumpy review [of Piketty’s Capital, says: ‘Rather than continuing in this vein, I will just take one item that provides an extraordinary example of the book’s lack of attentiveness to institutional detail. In questioning his contribution to advancing technology, Piketty asks: “Did Bill [Gates] invent the computer or just the mouse?” Of course the mouse was first popularized by Apple, Microsoft’s rival. It’s a trivial issue, but it displays the lack of interest in the specifics of the institutional structure.’… I’ve been seeing the Gates quote circulate a bit among left-leaning friends, very likely because of its structural similarity to a notorious claim by a rather different big sweeping economics book [by David Graeber]…. Dean’s use of the Piketty quote is unfortunately rather misleading. What Piketty actually says…. ‘As for Bill Gates and Ronald Reagan, each with his own cult of personality (Did Bill invent the computer or just the mouse? Did Ronnie destroy the USSR single-handedly, or with the help of the pope?), it may be useful to recall that the US economy was much more innovative in 1950-1970 than in 1990-2010, to judge by the fact that productivity growth was nearly twice as high in the former period as in the latter, and since the United States was in both periods at the world technology frontier, this difference must be related to the pace of innovation.’ In other words, Piketty isn’t claiming that Bill Gates invented the computer, or the mouse, any more that he’s claiming that Saint Ronald went in there like Rambo with his missile launcher (with or without the help of trusty sidekick JP-II) to bring the Soviet Union to its knees. He’s engaging in sarcastic hyperbole to illustrate the ludicrous way in which popular wisdom attributes vast historical changes to the intervention of singular, godlike culture heroes. This is quite unambiguous in context, especially as Piketty has talked some pages before about Gates’ actual role…. Taken out of context, as it is in Baker’s review, it wrongly suggests that Piketty is ignorant or sloppy to a quite extraordinary degree…. I don’t think that this is deliberate dishonesty on Baker’s part… this kind of mistake can happen… there but for the grace of God…. But Baker’s misattribution to Piketty of a bewilderingly stupid-sounding claim that Piketty obviously does not make is the kind of thing that could go viral (and already is going semi-hemi-quasi viral). Thus, I think, it’s worth pointing out that it’s just not so…”

Continue reading “Things to Read on the Evening of April 5, 2014” →

Henry Farrell: Piketty on Capital: A Footnote: “A correction…

…Dean Baker, in a somewhat grumpy review [of Piketty’s Capital, says:

Rather than continuing in this vein, I will just take one item that provides an extraordinary example of the book’s lack of attentiveness to institutional detail. In questioning his contribution to advancing technology, Piketty asks: “Did Bill [Gates] invent the computer or just the mouse?” Of course the mouse was first popularized by Apple, Microsoft’s rival. It’s a trivial issue, but it displays the lack of interest in the specifics of the institutional structure….

I’ve been seeing the Gates quote circulate a bit among left-leaning friends, very likely because of its structural similarity to a notorious claim by a rather different big sweeping economics book [by David Graeber]…. Dean’s use of the Piketty quote is unfortunately rather misleading. What Piketty actually says….

As for Bill Gates and Ronald Reagan, each with his own cult of personality (Did Bill invent the computer or just the mouse? Did Ronnie destroy the USSR single-handedly, or with the help of the pope?), it may be useful to recall that the US economy was much more innovative in 1950-1970 than in 1990-2010, to judge by the fact that productivity growth was nearly twice as high in the former period as in the latter, and since the United States was in both periods at the world technology frontier, this difference must be related to the pace of innovation.

In other words, Piketty isn’t claiming that Bill Gates invented the computer, or the mouse, any more that he’s claiming that Saint Ronald went in there like Rambo with his missile launcher (with or without the help of trusty sidekick JP-II) to bring the Soviet Union to its knees. He’s engaging in sarcastic hyperbole to illustrate the ludicrous way in which popular wisdom attributes vast historical changes to the intervention of singular, godlike culture heroes. This is quite unambiguous in context, especially as Piketty has talked some pages before about Gates’ actual role…. Taken out of context, as it is in Baker’s review, it wrongly suggests that Piketty is ignorant or sloppy to a quite extraordinary degree…. I don’t think that this is deliberate dishonesty on Baker’s part… this kind of mistake can happen… there but for the grace of God…. But Baker’s misattribution to Piketty of a bewilderingly stupid-sounding claim that Piketty obviously does not make is the kind of thing that could go viral (and already is going semi-hemi-quasi viral). Thus, I think, it’s worth pointing out that it’s just not so.

Simon Johnson: The Too Big To Fail Subsidy Debate Is Over: “No doubt there is still a lot of shouting to come…

…but this week a team at the International Monetary Fund completely nailed the issue of whether large global banks receive an implicit subsidy courtesy of the American government…. Yes, there is an implicit subsidy that lowers the funding costs for very large banks… as much as 100 basis points… and yet this large scale of implicit support is small relative to the macroeconomic damage that is likely to be caused by the high leverage and incautious risk-taking that the subsidy encourages…. Still, as I explain in my NYT.com Economix column, I’m a big fan of this work because the Fund’s report is very good on how to handle and reconcile the main alternative methodologies for getting at the issue. The Fund offers an entirely reasonable approach that sets a very high quality bar.”

**Tim Duy:** One For the Doves – Tim Duy’s Fed Watch: “this [employment] report fits nicely with the view…

outlined by Federal Reserve Chair Janet Yellen earlier this week.  The labor market continues to improve at a moderate pace, a pace that remains insufficient to rapidly alleviate the issues of underemployment and low wage growth…. I think the real policy question should be: “why is the Fed engaged in reducing policy accommodation in the first place?” If Yellen is as concerned about the plight of labor as she purports to be, and if she and her colleagues are as committed to the 2% inflation target as they purport to be, then it seems like there is a strong argument for slowing the pace of the taper and using a rules based approach to take the risk of earlier-than-anticipated rate hikes off the table. In short, there seems to be a disconnect between the Fed’s rhetoric and the general policy direction.  They seem to have lost interest in speeding the pace of the recovery.