Month: April 2014

Let me first protest about the framing: it is not real inflation-adjusted risky interest rates that have been coming down for three decades: it is safe nominal interest rates, and even more so safe nominal interest rates that have been coming down (as the exaggerated early 1980s inflation premium has been wrung out). If we had a 4%/year inflation target in the North Atlantic, or if we had the gaps between expected returns on risky and safe nominal assets that back in the 1990s we thought of as normal, we would not have a big problem at all.

And I am still waiting for an argument as to why the obvious solution is a one-time permanent move to a 4%/year inflation target or a 6.5%/year nominal GDP growth target. Yuriy Gorodnichenko and Michael Weber (2013) provide one such argument, but I do not think it is strong enough to reverse what I see as a strong presumption that the right inflation target is 4%/year.

Continue reading “Why Not a 4%/Year Inflation Target? Or a 6.5%/Year Nominal GDP Growth Target: Friday Focus: April 4, 2014” →

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….

Continue reading “Afternoon Must-Read: Ryan Cooper: How to Talk to a Climate-Change Contrarian” →

Bureau of Labor Statistics: Employment Situation Summary: “Total nonfarm payroll employment rose by 192,000 in March…

…and the unemployment rate was unchanged at 6.7 percent…. In March, the number of unemployed persons was essentially unchanged at 10.5 million, and the unemployment rate held at 6.7 percent…. The number of long-term unemployed (those jobless for 27 weeks or more), at 3.7 million, changed little in March…. The labor force participation rate (63.2 percent) and the employment-population ratio (58.9 percent) changed little over the month…. The number of persons employed part
time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed….

Total nonfarm payroll employment rose by 192,000 in March. Job growth averaged 183,000 per month over the prior 12 months…. The average workweek for all employees on private nonfarm payrolls increased by 0.2
hour in March to 34.5 hours, offsetting a net decline over the prior 3 months…. In March, average hourly earnings for all employees on private nonfarm payrolls edged down by 1 cent to $24.30…. Over the year, average hourly earnings have risen by 49 cents, or 2.1 percent…

Over at Health Law Prof blog: Ann Marie Marciarille: *REINVENTING AMERICAN HEALTH CARE by Ezekiel Emanuel:

The best joke in Zeke Emanuel’s new book is told near the beginning, but referenced throughout–which makes the joke yet richer and more multi-layered by the book’s dense 349 page end. It goes like this: There are two people who actually understand the American health system, and both Victor Fuchs and Alain Enthoven are 90 and 83 years of age, respectively. I don’t care if Zeke Emanuel wrote the joke himself because what he did write is the book that should make all of us a little less fearful….

[It] is two shorter books, intertwined. Several chapters… could be a standalone book as a primer on the American health care system, or what the anthropologist Clifford Geertz described as “thick description.” More than an entry-level overview of the status quo, these chapters (particularly Chapter Two on “Financing Health Care”) represent something I might assign to my health law students.

Continue reading “Ann Marie Marciarille Reads Zeke Emmanuel on the ACA: Thursday Focus: April 3, 2014” →

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.

Must-Reads:

1. Jared Bernstein: Paul Ryan’s New Budget: Orwell Would Blush: “It’s a lot like his old ones, as you’d expect, with a few new wrinkles…. Here’s pretty much all you need to know: his cuts to Pell grants–college tuition assistance for students from low-income families–comes under the section called ‘Expanding Opportunity’. ‘Strengthening the safety net’ is actually block granting SNAP (food stamps) and Medicaid. ‘Ending cronyism’ is repealing Dodd-Frank.  Orwell would blush.”

2. Aaron Carroll: Look, exchanges are either evil, or they’re not.: “From the Fiscal Year 2015 House Budget Resolution: ‘Starting in 2024, seniors (those who first become eligible by turning 65 on or after January 1, 2024) would be given a choice of private plans competing alongside the traditional fee-for-service Medicare program on a newly created Medicare Exchange. Medicare would provide a premium-support payment either to pay for or offset the premium of the plan…. The Medicare recipient of the future would choose, from a list of guaranteed-coverage options, a health plan that best suits his or her needs. This is not a voucher program. A Medicare premium-support payment would be paid, by Medicare, directly to the plan or the fee-for-service program to subsidize its cost. The program would operate in a manner similar to that of the Medicare prescription-drug benefit…. This approach to strengthening the Medicare program——which is based on a long history of bipartisan reform plans——would ensure security and affordability for seniors now and into the future….’ If I took this language, swapped in ‘Americans’ for ‘seniors’ and ‘ACA’ for ‘Medicare’, this would almost be a perfect description of the state exchanges that are part of the Obamacare…. I know that exchanges are, to some conservatives… preferable… [to] the single-payer-like Medicare system we have… that these same exchanges are less preferable… than the status quo ante. What I don’t understand, however, are people who declare community-rated, guaranteed-issue exchanges some unholy end-of-days totalitarian plan to destroy freedom when they’re part of the ACA, yet completely awesome and budget-saving when they’re part of Medicare.”

3. Austin Frakt: Job lock: Conclusion: “The ACA only addresses certain, but not all, conditions that give rise to job lock and not completely. If you combine this fact with the prior paragraph, you’ll notice that we have a situation in which we neither fully know the extent of the problem nor the extent to which the ACA will address it. In their 2002 literature review, Gruber and Madrian also commented on the fact that we do not know the full welfare implications of job lock. As best I can tell, the literature has not advanced…. Nevertheless, the labor market distortions of the pre-ACA insurance landscape… are real… weighed heavily on the minds of economists… motivated some of the provisions of the health reform law.”

Continue reading “Things to Read at Dinnertime on April 2, 2014” →

Austin Frakt: Job lock: Conclusion: “The ACA only addresses certain,

but not all, conditions that give rise to job lock and not completely. If you combine this fact with the prior paragraph, you’ll notice that we have a situation in which we neither fully know the extent of the problem nor the extent to which the ACA will address it. In their 2002 literature review, Gruber and Madrian also commented on the fact that we do not know the full welfare implications of job lock. As best I can tell, the literature has not advanced…. Nevertheless, the labor market distortions of the pre-ACA insurance landscape… are real… weighed heavily on the minds of economists… motivated some of the provisions of the health reform law.

This morning’s example on why we root so strongly for Nate Silver, Ezra Klein, and company:

Rupert Murdoch’s Wall Street Journal: Jack Nicas and Susan Carey: Southwest Airlines, Once a Brassy Upstart, Is Showing Its Age: “CHICAGO: At Midway Airport here on Jan. 2,

Southwest Airlines Co. LUV +1.88% canceled a third of its flights…. A severe snowstorm was the main culprit, but Southwest managers also blamed ramp workers, suggesting that nearly a third of them called in sick to protest slow contract talks. The spat boiled into a legal battle, with the workers suing Southwest for requiring they provide doctor’s notes…. Now Southwest is asking for some of the biggest contract changes ever from employees in a bid to contain costs—and some union leaders are furious…. The recent acrimony is one way that Southwest is showing its age. Once the industry’s brassy upstart, the airline, which took wing 43 years ago, has begun to resemble the mainstream rivals it rebelled against in its youth: carriers that were slow-growing, complex and costly to run…. For decades, it was the fastest-growing and lowest-cost airline in the U.S., undercutting competitors’ fares in new markets and sending traffic skyward….

And then, without any sign of irony:

Over the past year, Southwest’s stock has risen 77.6% to $23.94, and the carrier remains the only U.S. airline with an investment-grade credit rating. Still, the airline has failed to hit its long-standing goal of a 15% return on invested capital since 2000…

I believe that in the pre-Murdoch Wall Street Journal somebody–Alan Murray, Marcus Brachli, or whoever–would have said: “Wait a minute. Air travel is a highly cyclical industry. We have had two recessions since 2000, one of them the biggest since the Great Depression. What airline could make 15%/year on invested capital in such an environment? The stock price is at record highs: why are writing a Southwest-shows-its-age rather than a Southwest-still-successfully-scrappy article?”

And Nicas and Cary would have been sent back to the drawing board…

But this kind of question is, apparently, no longer asked at Rupert Murdoch’s Wall Street Journal.

But this kind of question is supposed to be the kind of question asked by Nate Silver and is the kind of question asked by Henry Blodget…

Brad DeLong, Larry Summers, and Laurence Ball: Fiscal Policy and Full Employment: “

At present and going forward, activist fiscal policy is likely to be essential for the American economy to operate near potential levels of output and employment. This conclusion is a substantial change in view from the near-consensus of economists that monetary policy alone could and should be left to carry out the stabilization policy mission, a view that prevailed for nearly a generation prior to the 2008 financial crisis. READ MOAR

Aaron Carroll: Look, exchanges are either evil, or they’re not: “From the Fiscal Year 2015 House Budget Resolution:

Starting in 2024, seniors (those who first become eligible by turning 65 on or after January 1, 2024) would be given a choice of private plans competing alongside the traditional fee-for-service Medicare program on a newly created Medicare Exchange. Medicare would provide a premium-support payment either to pay for or offset the premium of the plan…. The Medicare recipient of the future would choose, from a list of guaranteed-coverage options, a health plan that best suits his or her needs. This is not a voucher program. A Medicare premium-support payment would be paid, by Medicare, directly to the plan or the fee-for-service program to subsidize its cost. The program would operate in a manner similar to that of the Medicare prescription-drug benefit…. This approach to strengthening the Medicare program——which is based on a long history of bipartisan reform plans——would ensure security and affordability for seniors now and into the future….

If I took this language, swapped in ‘Americans’ for ‘seniors’ and ‘ACA’ for ‘Medicare’, this would almost be a perfect description of the state exchanges that are part of the Obamacare…. I know that exchanges are, to some conservatives… preferable… [to] the single-payer-like Medicare system we have… that these same exchanges are less preferable… than the status quo ante. What I don’t understand, however, are people who declare community-rated, guaranteed-issue exchanges some unholy end-of-days totalitarian plan to destroy freedom when they’re part of the ACA, yet completely awesome and budget-saving when they’re part of Medicare.