Month: November 2014

Simon Wren-Lewis:
Understanding Anti-Keynesians: “I should really stop there…

…but having started with Tyler Cowen’s post, I really should say something about his comments on the UK…. Why the obvious fact that other things besides fiscal policy are important in explaining growth in any year is thought to be an anti-Keynesian point I cannot see. And if the case against Keynesian ideas rests on the incorrect forecast once made by a prominent Keynesian then this is really scraping the barrel.

Must- and Shall-Reads:

• Chuck Marr and Robert Greenstein: Tax Extenders Package Is Fundamentally Flawed
• 2014 PKConference

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1. Mark Thoma:
   Some good job news for a hard-hit group :
   “The ‘hollowing out’ of America’s middle-class jobs in recent years is a trend that started before the Great Recession…. But where do those who have lost their jobs go?…. Many people believe most of those who lose middle-class jobs end up worse off than before, but recent research by economic policy analyst Ellie Terry and economist John Robertson of the Federal Reserve Bank of Atlanta finds… ‘of those in middle-skill occupations who remain in a full-time job, about 83 percent are still working in a middle-skill job one year later…. What types of jobs are the other 17 percent getting? Mostly high-skill jobs; and that transition rate has been rising. The percent going from a middle-skill job to a high-skill job is close to 13 percent: up about 1 percent relative to before the recession. The percent transitioning into low-skill positions is lower: about 3.4 percent, up about 0.3 percentage point compared to before the recession.’… We still have plenty to fret about over employment across all skill levels, especially middle-skill jobs. But it could be even worse…”
2. Martin Wolf:
   Radical cures for unusual economic ills:
   “Crises are cardiac arrests of the financial system…. The time to worry about a patient’s lifestyle is not during a heart attack. The need is to keep them alive…. In my book, The Shifts and the Shocks, I suggest that a number of shifts in the world economy created chronically weak demand in the absence of credit booms… excess savings in emerging economies… shifts in income distribution, ageing and a secular decline in the propensity to invest in high-income countries… globalisation, technological innovation, and the growing role of the financial sector. It is not enough to clean up…. Policy makers also have to eliminate the dependence of demand on unsustainable credit. Without that, even a radical clean-up will not deliver buoyant demand…. The crisis left a grim legacy. The eurozone has done a worse job of dealing with this than, say, the US. But the origins of the crisis are to be found in longer-term structural weaknesses. Policy has to address these failings, too, if exit from the crisis is not to be the beginning of a journey into the next one. The answers are likely to be unorthodox. But so, too, is today’s economic condition. Rare ailments need unusual treatments. So look for them.”
3. Anne Laurie: Monday While-We’re-Waiting Open Thread » Balloon Juice:
   “Matt Yglesias… [on] the new Wingnut Wurlitzer meme: ‘Conservative pundits who didn’t like the bipartisan comprehensive immigration reform bill that passed the US Senate in 2013 also didn’t like Obama’s deportation relief through executive action. They object to both the content… and to the process… as roughly akin to overthrowing the democratic constitutional order through military force in order to establish a brutal Latin American dictator…. There are many things one could say about this comparison, starting with the fact that unlike a proper caudillo such as Augusto Pinochet, Obama hasn’t had thousands of people detained and tortured without trial. Or, indeed, that it was actually Obama’s predecessor who was having people detained and tortured without trial. But perhaps the strangest thing about it is that when American conservatives analogize Obama to a Hispanophone military dictator, we are meant to understand this a criticism when the historical reality is that American conservatives have generally been quite enthusiastic about caudillos…. Indeed, thanks to the miracle of modern-day traffic recirculation methods, old National Review content singing Pinochet’s praises falls directly adjacent to complaints about Obama’s caudillismo…'”
4. Paul Krugman: Keynes Is Slowly Winning: “Back in 2010… I read the OECD Economic Outlook which called not just for fiscal austerity but for interest rate hikes–350 basis points on the Fed funds rate by the end of 2011!–because, well, because. Now the OECD is calling for fiscal and monetary stimulus…. It’s not the same people…. A new chief economist, Catherine L. Mann, whose excellent research has always been pragmatic…. But by selecting Ms. Mann the OECD was making a statement, and my sense is that the ground is shifting…. It has taken a while. In early 2013, with the infamous growth cliff at 90 percent debt and the case for expansionary austerity collapsing, many of us thought we had the austerians on the run. But we underestimated the extent to which officials and, to some extent, the news media had a professional stake in the positions they had staked out…. This still goes on. Simon Wren-Lewis complains, and rightly, about ‘mediamacro’–and his government has learned nothing. The Bundesbank is still what it always was. But the hawks seem in retreat at the Fed; Mario Draghi… sounds an awful lot like Janet Yellen; the whole way we’re discussing Japan is very much on Keynesian turf…. Businessweek was declaring that expansionary austerian Alberto Alesina was the new Keynes; now… Keynes is the new Keynes… Paul Singer complaining about the ‘Krugmanization’ of the debate…. Partly, I think, it’s just a matter of time…. The refusal of almost everyone on the anti-Keynesian side to admit any kind of error has gradually made them look ridiculous. All of this may be coming too little and too late to avoid policy disaster…. But it’s something to cheer, faintly…”
5. Marcel Fratzscher: Germany’s Four Neins: “Germany’s stance toward Europe has become one of rejection and disengagement…. Germany has all of the leverage it needs to implement the stability-oriented reforms that it wants for Europe… can compel France to pursue deeper reforms in exchange for more time to consolidate its deficit. Germany cannot, however, indulge its obsession with supply-side reforms without also pursuing growth-enhancing policies….
   The key to ending the European crisis is a stimulus plan that addresses deficiencies on both the supply and demand sides. That is why Germany’s refusal to help find a way to finance the proposed European investment agenda… is a mistake. Equally problematic is Germany’s focus on maintaining a fiscal surplus…. Germany’s fourth policy mistake is its apparent withdrawal of support for the ECB…. If Germany refuses to take a more reasoned approach, it risks undermining the ECB’s credibility…. The question is whether Germany’s leaders will recognize this before Europe’s economy falls into an even deeper slump.”

Should Be Aware of:

• Josh Marshall: Making Sense of Darren Wilson’s Story)
  Ta-Nehisi Coates: Barack Obama, Ferguson, and the Evidence of Things Unsaid
  Richmond Ramsey:
  Fox Geezer Syndrome

1. Chris Blattman:
   Should we believe the institutions and growth literature?: “The empirical institutions and growth literature… I find it more compelling and rich than the statistical literature, but they’re nice complements…. A few quick thoughts and pointers: The institutions literature has focused too much on constraints and not on capacity…. You might argue a third dimension of institutions is the political machinery that gets developed to answer the question ‘Who decides?’…. ‘How to manage peaceful political transitions as the relative power of different interest groups change?’ is a really, really, fundamental question a society has to answer….The slightly less-read stuf…. Tim Besley and Torsten Persson’s work on state capacity…. Some of the small-sample comparative case study work in Latin America, such as Jeffrey Paige or James Mahoney. most economists only read Engerman and Sokoloff. There’s a huge comparative politics…. One of the nicer, more concise summaries is in John Ishiyama’s short textbook…. There’s a growing empirical micro literature that uses subnational or individual data to show how important are things like social norms, rules, decision-making processes, and all the other things we think of as ‘institutions’ at the micro level….One of the takeaways that is hard to reconcile with the macro literature is that these local institutions appear to be quite malleable in the short term. How do we understand persistence at the macro level then?”
2. Kevin Drum:
   Obama’s Immigration Order: Lots of Sound and Fury, But Not Much Precedent | Mother Jones:
   “Eric Posner warns that President Obama’s recent executive action on immigration… ‘may modify political norms.’… And since most of the regulatory apparatus of the government is fundamentally liberal in nature, a political norm that allows presidents to suspend enforcement of rules they don’t like benefits conservatives a lot more than it does liberals…. Political norms matter, as Republicans know very well, since they’ve smashed so many of them in recent years. Still, there are a couple of reasons that there’s probably less here than meets the eye, and Posner acknowledges them himself. First… the specific actions he took are justified by statutory language and congressional budgeting priorities that are unique to immigration law… [as] Posner himself agrees…. But there’s a second reason that Obama isn’t seriously breaking any political norms: they were already broken years ago. Posner himself tells the story…. Agency regulations and executive orders are already major battlegrounds of public policy that are aggressively managed by the White House, regardless of which party is in power. Has Obama expanded this battleground? Perhaps. But… immigration law is fairly unique in its grant of power… we don’t really have to worry about President Rand Paul rewriting the tax code from the Oval Office…. The kinds of things he can do are about the same now as they were a week ago.”
3. Noah Smith:
   Fake Aspergers, Guys?: “This is something I’m hearing more and more often these days: right-wingers, at least the smart ones, are just people with Aspergers, whose condition prevents them from being socially sensitive enough to feel the vibes of political correctness…. It occurs to me that it’s not that hard to fake Aspergers… just talk about nerdy stuff, get a blank stare on your face every once in a while, intentionally ignore social cues, etc…. It’ll be fun–if you meet a girl who you know is too pretty to sleep with you, instead of bowing and scraping ineffectually before her majesty and beauty, you can say un-PC stuff that sends her into spasms of ineffectual rage! Wheeeee!!… One thing… annoys me…. Real Asperger’s guys are usually not right-wing types who brashly declare their disdain for social cues by talking about rape around girls. Most of them are kind, good-hearted people who occasionally say offensive or hurtful things simply by accident, and are very very slow to realize it–but when they eventually do realize (or are informed by friends), they are generally remorseful and distressed. They are people with a real, if minor, disorder, who almost all wish they didn’t have the limitations they have…. I wouldn’t like to see those real Asperger’s people given a bad name by swaggering right-wing jerks…”

Martin Wolf:
Radical cures for unusual economic ills:
“Crises are cardiac arrests of the financial system…

…The time to worry about a patient’s lifestyle is not during a heart attack. The need is to keep them alive…. In my book, The Shifts and the Shocks, I suggest that a number of shifts in the world economy created chronically weak demand in the absence of credit booms… excess savings in emerging economies… shifts in income distribution, ageing and a secular decline in the propensity to invest in high-income countries… globalisation, technological innovation, and the growing role of the financial sector. It is not enough to clean up…. Policy makers also have to eliminate the dependence of demand on unsustainable credit. Without that, even a radical clean-up will not deliver buoyant demand…. The crisis left a grim legacy. The eurozone has done a worse job of dealing with this than, say, the US. But the origins of the crisis are to be found in longer-term structural weaknesses. Policy has to address these failings, too, if exit from the crisis is not to be the beginning of a journey into the next one. The answers are likely to be unorthodox. But so, too, is today’s economic condition. Rare ailments need unusual treatments. So look for them.

Anne Laurie:
Monday While-We’re-Waiting:
“Matt Yglesias…

…[on] the new Wingnut Wurlitzer meme:

Conservative pundits who didn’t like the bipartisan comprehensive immigration reform bill that passed the US Senate in 2013 also didn’t like Obama’s deportation relief through executive action. They object to both the content… and to the process… as roughly akin to overthrowing the democratic constitutional order through military force in order to establish a brutal Latin American dictator…. There are many things one could say about this comparison, starting with the fact that unlike a proper caudillo such as Augusto Pinochet, Obama hasn’t had thousands of people detained and tortured without trial. Or, indeed, that it was actually Obama’s predecessor who was having people detained and tortured without trial.

But perhaps the strangest thing about it is that when American conservatives analogize Obama to a Hispanophone military dictator, we are meant to understand this a criticism when the historical reality is that American conservatives have generally been quite enthusiastic about caudillos…. Indeed, thanks to the miracle of modern-day traffic recirculation methods, old National Review content singing Pinochet’s praises falls directly adjacent to complaints about Obama’s caudillismo…

Must- and Shall-Reads:

• Lars Svensson: Monetary policy tradeoffs in CESEE
• Grégory Claeys et al.: Measuring Europe’s investment problem
• Izabella Kaminska: Lies, damned lies, and liquidity expectations
• Simon Wren-Lewis: Left, Right and Macroeconomic Competence

1. Nicholas Bagley: Three Words and the Future of the Affordable Care Act:
   “To help people like my kids’ piano teacher, the ACA extends tax credits to anyone earning between one and four times the poverty level who buys a qualified health plan so long as the individual is ineligible for Medicaid and doesn’t have access to employer-sponsored coverage…. As Michael Cannon and Jonathan Adler read the ACA, however, my kids’ piano teacher can’t get tax credits at all. Nor should roughly 9.5 million other people… Yet… the government’s alternative reading makes much better sense of the statute as a whole and avoids assigning a meaning to the ACA that is blatantly at odds with what the statute aims to accomplish…. To make out their case, however, it’s not enough for Adler and Cannon to show that it’s possible to read the ACA to withdraw tax credits from refusal states. If the statute is ambiguous on that point, it’s black-letter law that the courts must defer to the IRS’s authoritative interpretation (Chevron U.S.A. v. Natural Res. Def. Council, 467 U.S. 837 [1984]). Adler and Cannon… have to demonstrate that the statute unambiguously withdraws tax credits…. They haven’t come close to making such a demonstration…”

2. Jonathan Cohn: Obama’s Immigration Order: A Vote for American Exceptionalism: “American exceptionalism, you’ll remember, is something Obama’s critics claim he doesn’t believe in. ‘Our president doesn’t have the same feelings about American exceptionalism that we do,’ Mitt Romney said during the 2012 presidential campaign. In a 2010 cover story in National Review, Rich Lowry and Ramesh Ponnuru declared, ‘At the heart of the debate over Obama’s program is the survival of American exceptionalism.’… One consistent feature of exceptionalist discourse has been the idea that America permits greater upward mobility than does the Old World…. In recent decades, sadly, the reality of American mobility has diverged sharply from the myth…. America, Marco Rubio said a few years back, ‘is the only economy in the world where poor people with a better idea and a strong work ethic can compete and succeed against rich people in the marketplace.’ That’s not actually true. But it’s truer today than it was last week because the president who supposedly wants to make America more like Europe has instead made America more like its best vision of itself.”

3. Lars E.O. Svensson http://larseosvensson.se: Monetary policy’s best contribution to financial stability?: “Inflation on target and resource utilization at long-run sustainable rate. Suppose 2% inflation and 3% real growth, nominal growth 5% of asset prices and disposable income, doubling every 14 years. For any given nominal debt, LTV and DTI ratios halved in 14 years. Pretty good for repair of balance sheets. Monetary policy should only be the very last line of defense of financial stability, normally not to be used…”

4. Barry Eichengreen: The bond market’s dance over European debt will not last forever: “Are the circumstances confronting Europe’s heavily indebted governments today at all similar? To be sure, those governments face strong external pressures from the bond market. But they also face strong internal pressures from voters, who are unlikely to sit patiently for 10 to 15 years while 5 per cent of national income goes to pay off the debt of previous generations. The countries in question clearly lack the strong fiscal institutions needed for this task. The implication is that Europe’s official strategy for resolving its debt crisis will not work. Fortunately, there are feasible alternatives… grow the denominator of the debt/GDP ratio…. But sadly growth cannot be conjured up out of thin air. European policy makers have shown an inability to conjure it up any other way. The other alternative is debt restructuring. European officials continue to dance around the idea of writing down public debt, promising Greece lower interest rates and longer maturities but denying the need for more fundamental restructuring and for applying such measures more widely. The events of recent weeks make clear that they will not be able to dance much longer.”

Should Be Aware of:

• Waldo Heinrichs: Threshold of War: Franklin D. Roosevelt and American Entry into World War II
• George Packer: The Astonishing Rise of Angela Merkel, the Most Powerful Woman in the World
• Jonathan Cohn: Ferguson Grand Jury: No Indictment for Darren Wilson in Brown’s Death
• Dahlia Lithwick: The University of Virginia Finally Confronts Its Rape Problem

1. Alex Parent:
   Come On, Feel the Buzz – The Baffler:
   “Joe Williams, a reporter for the political newspaper and web news site Politico, said… Republican presidential nominee Mitt Romney appeared comfortable only around white people…. Williams was quickly and rather publicly fired…. In August, Politico reporter David Catanese defended GOP Rep. Todd Akin’s bizarre lecture on where babies come from. Akin, running for U.S. Senate from Missouri, revealed that he believed a common conservative myth: that in the event of ‘legitimate rape,’ the female body somehow prevents pregnancy from taking place, thus negating the need for a rape exemption from a prospective abortion ban. Catanese tweeted that the negative response to Akin’s comments was overblown, because ‘we all know what he was trying to say.’ He continued digging, suggesting that Akin might have a point about this legitimate rape thing. After all, Catanese wrote, some unknown number of ‘reported’ rapes are surely fake (though it’s not ‘PC’ to admit as much), and it is certainly possible (not that he had checked out ‘the science’) that actual rapes are unlikely to lead to pregnancy. ‘The left is often 1st to shut down debate as ‘off limits’ when it deems so,’ he finally tweeted. ‘Aren’t these moments supposed to open up a larger debate?’ Catanese was reprimanded and taken off the Akin beat, but he kept his job. The difference between these two episodes speaks volumes about D.C.-based access journalism and the highly toxic, incestuous variant of it that Politico has perfected. Or to put things a bit more baldly: in all likelihood, David Catanese and Joe Williams suffered divergent professional fates because the leaders of Politico are more concerned about losing access to the Romney campaign than they are about losing access to victims of rape. How deep does this craving for access run?…”
   

2. Heather Boushey: On Presidential Medal of Freedom Recipient Robert Solow: “We applaud President Barack Obama’s selection of Robert Solow as a Presidential Medal of Freedom recipient. Solow’s transformative research in the field of economics and ongoing contributions to our understanding of long-term economic growth, productivity and inequality cannot be overstated…. Solow remains a scholar ahead of his time. Few intellectuals can effectively communicate the real-world implications of theoretical economic research, but Professor Solow’s brilliance is his ability to engage with diverse audiences and at the same time influence how generations of emerging scholars participate in empirical debates. Our nation is without a doubt better equipped to deal with tough economic challenges because of Professor Solow’s theoretical contributions to the field, but above all else because of his influence as a teacher to generations of scholars and policymakers.”

3. Alex Parent: Deal Me Out : “The modern finance industry is at a loss when it comes to justifying its own existence. Its finest minds can’t explain why we wouldn’t be better off with a much simpler and more heavily circumscribed model of capital formation. Sorkin likewise can’t make his readers fully grasp why the current system—which turns large amounts of other people’s money and even more people’s debt into huge paper fortunes for a small super-elite, and in such a way as to regularly imperil the entire worldwide economic order—is beneficial or necessary. But the New York Times and Wall Street each need him to try. Like a bloated and overleveraged global financial company, he’s far too crucial to be held to a regular standard of conduct. Our subprime lenders proved, in the final analysis, too big too fail; and now, certain of our name-brand financial writers are too big to practice journalism.”