Month: November 2014

Must- and Shall-Reads:

• Sam Fleming: BoE’s Mark Carney urges banker bonus overhaul
• Gavyn Davies: Japan’s latest recession spells trouble for Abe | Large global benefits from the 2014 oil shock | Gavyn Davies | The very long run equity bull market | Gavyn Davies
• Mark Thoma: Why the Great Recession may be with us for years
• Ryan Avent: Japan’s economy: About that debt
• Brian Kahn: NASA, Other Data Show Globe Had Warmest October

 

1. Mark Thoma: When Piketty Argued for Income Redistribution, He Changed Economics: “Thomas Piketty’s Capital in the Twenty-First Century… has it changed anything within economics?… Piketty has… revive[d] the study of the distribution of wealth without violating the positive and normative distinction that economists hold so dear…. Whether or not Piketty is correct about the fundamental determinants of these distributions remains to be seen, but he deserves much credit…. Another thing Piketty deserves credit for is the revival of the historical, narrative methodology…. In his 1919 presidential address to the American Economic Association, Irving Fisher said, ‘The real scientific study of the distribution of wealth has, we must confess, scarcely begun as yet.’ Nearly a hundred years later that, along with a revival of historical methods and perspective, may finally be changing.”

2. Robert F. Martin et al.: Potential Output and Recessions: Are We Fooling Ourselves?: “The economic collapse in the wake of the global financial crises (GFC) and the weaker-than-expected recovery in many countries have led to questions about the impact of severe downturns on economic potential. Indeed, for several major economies, the level of output is nowhere near returning to pre-crisis trend (figure 1). Such developments have resulted in repeated downward revisions to estimates of potential output by private- and public-sector forecasters. In addition, this disappointment in post-recession growth has contributed to concerns that the U.S. economy, among others, is entering an era of secular stagnation. However, the historical experience of advanced economies around recessions indicates that the current experience is less unusual than one might think. First, output typically does not return to pre-crisis trend following recessions, especially deep ones. Second, in response, forecasters repeatedly revise down measures of trend…”

3. James Pethokoukis: The GOP needs to rethink its approach to tax cuts: “Steve Moore… doesn’t like the conservative idea of cutting the tax burden and increasing take-home pay of American parents by expanding the child tax credit…. So the Republican Party — tagged as the ‘party of the rich’–should head into 2016 with a plan to cut taxes on the rich and raise them on working class Americans? Hmm. (And by the way, there doesn’t seem to be any evidence that turning people into non-income taxpayers nudges them into greater support for expanding government.) Anyway, what should the GOP pitch to the middle-class be, according to Moore? This: cutting the top income tax rate would boost GDP growth, which in turn would broadly boost middle-class incomes…. When incomes for the top 1% have risen by 200% over the past three decades vs. for 40% for the middle class, it’s not surprising that Americans wonder about the wisdom of cutting top tax rates…”

4. Ed O’Keefe: Samuel Alito Fails to Quote Straight: “‘Some of the columns that are written, you know, are another story,’ Alito said, in a rare public lecture on Constitutional history and law presented by the New York Historical Society on Saturday. ‘Some of them are written by people who are not very knowledgeable…. I was reading one, actually, reading one this morning that was complaining about the current membership of the Court, because unlike in past days, according to this columnist, we don’t have a representation of drunks, philanderers, and a few, you know, a few other n’er do wells.’… [Dahlia Lithwick’s] column…. ‘Compared with the political operators, philanderers, and alcoholics of bygone eras, they are almost completely devoid of bad habits or scandalous secrets. This is, of course, not a bad thing.’ American legal scholar and Yale University professor Akhil Reed Amar, who moderated the discussion and referred to Alito by his first name throughout the event, politely described the column as ‘interesting’, and quickly moved on to other topics…”

5. Charles Pierce: Here’s Some Stupid For Lunch: “The editorial board of The Washington Post [serves up] the absolutely perfect Beltway word-souffle: ‘[Obama] has tried compromise, and the Republicans spurned him. We will not relitigate that last contention except to note that behind the legislative disappointments of the past six years lies fault on both sides.’ Wow.”

6. Scott Lemieux: Today In People Insulting Your Intelligence – Lawyers, Guns & Money : Lawyers, Guns & Money: “Shorter David Brooks: ‘If Obama takes unilateral action on immigration, congressional Republicans will stop cooperating with his initiatives!’ Shorter Lambert Strether: ‘We would totally have had single-payer if it wasn’t for the meddling of President, Speaker of the House, Senate Majority Leader, Secretary of State, Chief Justice of the United States, and longtime don of the Gambino crime family Jonathan Gruber.  Also, I have no idea what was actually in the Heritage health care proposal, and think that governors rule Massachusetts like kings.’ Shorter Verbatim Megan McArdle: ‘So what would I have done, when Obamacare was tanking in the polls and Scott Brown was elected to the Senate on an anti-Obamacare platform? I would have passed something more modest that still significantly expanded coverage, expanding Medicaid to 150 to 200 percent of the poverty line and creating a national high-risk pool to insure anyone who’d been turned down for coverage more than twice in the past 12 months, at prices comparable to what a healthy person of their age would pay in the insurance market. Again, much cheaper, much less intrusive, no blowback from people who lost their policies, and very unlikely to have been tampered with by the Supreme Court.‘ Oh, yes, the Supreme Court tampering with an expansion of Medicaid–that’s unpossible!” :: Postmodulator says: “I liked this even better: ‘creating a national high-risk pool to insure anyone who’d been turned down for coverage more than twice in the past 12 months, at prices comparable to what a healthy person of their age would pay in the insurance market.’ So, make the bill more palatable by putting the public option back in. I genuinely refuse to believe this woman is the same species as me.”

7. Jonathan Chait: Bush Official Flip-Flopping on Obamacare — NYMag: “Getting in his licks today is Tevi Troy, former Bush administration health official, who takes to the Wall Street Journal editorial page to denounce Obamacare’s ‘Cadillac tax’…. Troy’s column does not mention that the Cadillac tax–or, usually, even more stringent versions of it–have been a mainstay of Republican health-care plans as well…. Troy’s op-ed also fails to mention that he himself used to oppose the tax break for employer-sponsored health insurance. In a 2007 speech, he explained that Bush proposed to cap the health-insurance tax deduction to exclude the more expensive plans: ‘The President’s proposal would allow every taxpayer with health insurance that meets certain basic criteria… to deduct $15,000 for a family…. These numbers we’re pretty confident are large enough to cover all but the most expensive Cadillac-type plans.’… Obama’s Cadillac tax kicks in at a threshold of $30,000 per year, compared to the $15,000-per-year threshold Troy endorsed under Bush. Troy has more recently changed his thinking on the issue. As the president of the American Health Policy Institute, Troy’s work now focuses on warning America about the dangerous burdens of the Cadillac tax he once endorsed…. Troy’s op-ed doesn’t mention that either…”

Should Be Aware of:

• Ada Palmer: The Hollow Crown: Shakespeare’s Histories in the Age of Netflix
• Daniel Davies: The World Is Squared: Episode 4 – In Hot Places
• Chen Ning Yang: The conceptual origins of Maxwell’s equations and gauge theory
• CBO (2014): Update: Budget and Economic Outlook 2014-2024
• Open-Face Salmon Reuben Recipe : Emeril Lagasse : Food Network
• I Vespri Siciliani
• Cory Doctorow: How the Enigma code-machines worked)

 

1. Molly Redden: Catholic Church Argues It Doesn’t Have to Show Up in Court Because Religious Freedom: “When Emily Herx first took time off work for in vitro fertilization treatment, her boss offered what sounded like words of support: ‘You are in my prayers.’ Soon those words took on a more sinister meaning. The Indiana grade school where Herx was teaching English was Catholic. And after church officials were alerted that Herx was undergoing IVF—making her, in the words of one monsignor, ‘a grave, immoral sinner’—it took them less than two weeks to fire her. Herx filed a discrimination lawsuit in 2012. In response, St. Vincent de Paul School and the Fort Wayne-South Bend Diocese, her former employers, countered… [that] its religious liberty rights protect the school from having to go to court at all…”

2. Nicholas Carlson (2012): Romney Was So Proud Of His Universal Healthcare Law He Included It In His Official Portrait: “One of Republican presidential candidate Mitt Romney’s campaign promises is that he will do everything he can to repeal the Affordable Care Act, aka ‘Obamacare.’ But Romney hasn’t always been so opposed to the ideas behind ‘Obamacare,’ such as the act’s requirement that all individuals buy health insurance. While he was governor of Massachusetts, Romney’s own signature legislation was a healthcare reform act built around the idea of an individual mandate. In 2005, Romney even called it ‘the ultimate conservative idea.’ In materials from his 2008 campaign for President, Romney cited reports that the bill had ‘newly insured’ some 300,000 people. In fact, Romney was so proud of this legislation that he insisted his official governor’s portrait include a copy of the bill…”

3. Brian Buetler: Reihan Salam Obamacare Article Shows Why the Debate Will Never End: “The trick is to make the opposition look more sporting. Salam laments that Democrats tailored their health care legislation to obscure and delay transfers so that budget analysts wouldn’t treat the law as they might a single-payer program where… everything coming in is a tax, and everything going out is an expenditure…. The right’s memory has grown conveniently spotty…. In 2011, in a different context, Salam mocked the kind of scolding he’s now directing at Obama. ‘Ah, he made the program marginally less politically poisonous, which will make it harder for us to demonize him. Now let’s attack him for hypocrisy!’ he wrote, paraphrasing critics. The policy architect in that instance was Paul Ryan, who proposed phasing out the existing Medicare program, but only after 10 years, and only for future retirees. At the time, Salam didn’t believe his opponents’ rhetorical strategy had much merit. ‘I mean, I get it,’ he added. ‘But also: let’s move on’…”

What are the odds that future generations will not dismiss the stories of Fred Hiatt’s shop at The Washington Post as improbable fictions? When Paul Krugman denounced “opinions of shape of earth differ” journalism, he was making a joke!

Charles Pierce: Here’s Some Stupid For Lunch: “The editorial board of The Washington Post [serves up] the absolutely perfect Beltway word-souffle:

[Obama] has tried compromise, and the Republicans spurned him. We will not relitigate that last contention except to note that behind the legislative disappointments of the past six years lies fault on both sides.

Wow.

Mark Thoma: When Piketty Argued for Income Redistribution, He Changed Economics: “Thomas Piketty’s Capital in the Twenty-First Century…

…has it changed anything within economics?… Piketty has… revive[d] the study of the distribution of wealth without violating the positive and normative distinction that economists hold so dear…. Whether or not Piketty is correct about the fundamental determinants of these distributions remains to be seen, but he deserves much credit…. Another thing Piketty deserves credit for is the revival of the historical, narrative methodology…. In his 1919 presidential address to the American Economic Association, Irving Fisher said, ‘The real scientific study of the distribution of wealth has, we must confess, scarcely begun as yet.’ Nearly a hundred years later that, along with a revival of historical methods and perspective, may finally be changing.

I read Reihan Salam over at Slate.

My first, minor, thought is that the Slate editors seriously fell down on their job in failing to demand even a modicum of intellectual consistency here. Let me endorse Brian Buetler:

Brian Buetler: Reihan Salam Obamacare Article Shows Why the Debate Will Never End: ” Salam laments that Democrats tailored their health care legislation…

…to obscure and delay transfers so that budget analysts wouldn’t treat the law as they might a single-payer program where… everything coming in is a tax, and everything going out is an expenditure…. The right’s memory has grown conveniently spotty…. In 2011, in a different context, Salam mocked the kind of scolding he’s now directing at Obama. ‘Ah, he made the program marginally less politically poisonous, which will make it harder for us to demonize him. Now let’s attack him for hypocrisy!’ he wrote, paraphrasing critics. The policy architect in that instance was Paul Ryan, who proposed phasing out the existing Medicare program, but only after 10 years, and only for future retirees. At the time, Salam didn’t believe his opponents’ rhetorical strategy had much merit. ‘I mean, I get it,’ he added. ‘But also: let’s move on’…

My second, big, thought is that there are no live policy ideas–that the Republicans are now the captives of the nihilists they have turned their activist base into, and that their only strategy now is to hope that somehow, some way, ObamaCare can be made to collapse.

I came to this thought as I noted Salam ending his piece with:

Reihan Salam: Obamacare FAQ: Everything you need to know about why conservatives want to repeal the president’s health care law: “I’m a firm believer in scrapping Obamacare and starting over. But that’s much easier said than done…”

when the entire gravamen of the piece had been that there was no alternative that could command anything like even a near-majority of the Republican base.

But let’s back up. Let’s listen. The beginning:

Reihan Salam: “If you don’t read the conservative press…

…you might have no idea why those of us on the right side of the political spectrum are so worked up about Obamacare. To promote cross-ideological understanding, I’ve prepared this little FAQ…

In my view, he is engaging in false advertising here: I read that conservative press. I don’t understand any reason other than the naked pursuit of partisan advantage that Reihan and company are so worked up about Obamacare. And this piece simply confirms me in that view.

Continuing:

At least some [conservatives] like Avik Roy of the Manhattan Institute… believe Obamacare should be reformed and not repealed…

A little insight into why Avik thinks it needs to be reformed and not repealed, and what reforms he wants, would be useful–but that insight is not forthcoming.

Conservatives… would like to see it repealed for several reasons. First… it subsidizes insurance coverage for people of modest means by raising taxes on people of less-modest means…. Conservatives tend not to be enthusiastic about redistribution…

As I see it, there are three possibilities:

1. Poor people don’t get to go to the doctor–and die in ditches.
2. Poor people get to go to the doctor, but the doctors who don’t treat them don’t get paid and have to scramble to charge somebody else via various forms of cost-shifting.
3. The government subsidizes insurance coverage for people of modest means by raising taxes on people of less modest means.

In my view, Slate’s editors seriously fell down on the job in not requiring that Salam say whether he thinks it is better to go for (2)–imposes in-kind taxes on doctors–or (1) rather than (3). The view on the left and in the center is that (1) is a non-starter. As Margaret Thatcher said back in 1993 when she visited Washington, DC: “Of course we want to have universal health care! We aren’t barbarians!” The view on the left and in the center and on the not-insane right is that (2) is profoundly dysfunctional and would prove extraordinarily inefficient. If Salam prefers (1), he should explain why Margaret Thatcher was a squishy leftist. If Salam prefers (2), he should explain why he disagrees with every single technocrat who knows about the health-care financing system.

Continuing, we find Salam still beating the drum of the now-exploded myth that ObamaCare will lead to rapidly-rising health-care costs:

Second, there is a widespread belief on the right that the main driver of the federal government’s fiscal woes is the soaring cost of health entitlements, like Medicare and Medicaid. Champions of Obamacare claim that the law will improve matters…. Conservatives are skeptical…. Instead of tackling the health entitlement problem, say conservatives, Obamacare will make matters worse…

Actually, no. Conservatives don’t say that any more:

Sarah Cliff (August 2012): Romney’s right: Obamacare cuts Medicare by $716 billion. Here’s how: “The Romney campaign has gone on the offense on Medicare…

…charging that the Affordable Care Act ‘cuts $716 billion’ from the entitlement program…

By far the greatest and high-volume component of the conservative critique of ObamaCare is that it does cut the projected growth rate of Medicare spending.

Finally:

Most conservatives believe that America needs a [different] system…. The problem, as we’ll see, is that there’s not a lot of consensus around what an Obamacare replacement should look like…

And:

Wait a second. Isn’t Obamacare actually a Republican plan? While Democrats were pushing for Obamacare, Rep. Paul Ryan, the Republican from Wisconsin, was pushing for an ambitious Medicare reform that bore a strong family resemblance to Obamacare…. Was it because he—along with all other anti-Obamacare Republicans—is a hypocrite? Well, no…. To put it crudely, the goal of Ryan’s Medicare reform was to move from more socialism to less socialism…. The problem with Obamacare, for Ryan and others on the right, is that it moved America’s health system in the wrong direction, from less socialism to more socialism…

Why are ObamaCare’s hopes to move Medicare toward a “premium support” model “more socialism”, while Paul Ryan’s hopes to move Medicare toward a “premium support” model “less socialism”? Reihan leaves that as an exercise for the reader.

Similarly, ObamaCare’s health exchanges look a lot like RomneyCare’s health exchanges:

There is nothing wrong in principle with establishing marketplaces where people can buy insurance…. The Obamacare exchanges aren’t best understood as simple marketplaces, where the main role of regulators is to ensure transparency. Rather, they serve as central planning boards that establish coverage mandates and review rates. You might think that’s a good thing or a bad thing, but it definitely limits opportunities to offer new types of coverage and new models for care delivery…. When you look at Obamacare as a law that greatly increases federal regulation of the insurance market… it is not ideal from a conservative perspective…

The problem–as Reihan knows–is that it is very difficult to make a competitive market function rather than collapse in any situation in which one side of the market knows a great deal more than the other about the value and cost of what is being bought and sold. That is true in spades of health insurance: the insuree knows much more about his or her health and thus can calculate his or her likely future health-care costs much better than the insurer. Thus to make a health-insurance market function you need to properly structure the market with what Salam calls “coverage mandates and review rates” by “central planning boards”.

How do we know Salam knows this? Because he says so:

The individual mandate? Wasn’t it dreamed up by the right-wing Heritage Foundation? The individual mandate has a long, tortured history…

That is, if you didn’t get it, a “yes”: the central planning boards with their coverage mandates was the Heritage Foundation’s best guess as to how to make a competitive health-insurance market function rather than collapse.

But, Salam says, the conservative economists who understood the issue and their elected political allies failed to communicate with the Republican base:

The pre-Obamacare conversation about the individual mandate never really reached the conservative grass roots, where infringing liberty is generally seen as a no-no. Just as… John McCain’s support for cap and trade… [did not mean] Joseph J. McCoalburner also favored hiking oil prices to save the polar bears… the Republican masses didn’t greet the idea of an individual mandate with wild enthusiasm…

If you didn’t get that, this is the executive editor of National Review saying: “what we have here is a failure of National Review to communicate what conservative policies were. And because what we have here is a failure to communicate, we must now oppose our own policies. This is somehow Obama’s fault.”

But, Salam says, nothing to see here! Move along!:

Conservatives have other ideas for addressing the problem…. James Capretta has called for low-cost default insurance, in which state governments would automatically sign you up for cheap coverage, but you could opt out at any time. Though many conservatives balk at this kind of soft paternalism, it would almost certainly mean higher coverage levels than a weak individual mandate…

Automatically signing people up for low-cost default insurance has other names: Single-payer. Public Option. Even with “soft paternalism”, these ideas are much less to the liking of the Republican base than are the exchanges at the heart of what was once RomneyCare.

Salam concludes:

Do Republicans have any ideas for replacing Obamacare, or do they intend to repeal it and just leave everyone who needs health insurance in a lurch? There are a number of reform proposals that have been floating around…. I expect we’ll see more of them…. When three Republican senators teamed up to release their own health reform plan… they limited the credit… [left] out a decent number of middle-income families. Other conservatives, like Bobby Jindal, the profoundly unpopular Republican governor of Louisiana, have proposed even stingier plans, which will have a tough time passing muster in the post-Obamacare era. This is part of why the aforementioned Avik Roy has argued that conservatives should just accept that Obamacare is here to stay…

That, if you missed it, is a “No. They don’t have any ideas.”

Robert F. Martin et al.: Potential Output and Recessions: Are We Fooling Ourselves?: “The economic collapse in the wake of the global financial crises (GFC)…

…and the weaker-than-expected recovery in many countries have led to questions about the impact of severe downturns on economic potential. Indeed, for several major economies, the level of output is nowhere near returning to pre-crisis trend (figure 1). Such developments have resulted in repeated downward revisions to estimates of potential output by private- and public-sector forecasters. In addition, this disappointment in post-recession growth has contributed to concerns that the U.S. economy, among others, is entering an era of secular stagnation. However, the historical experience of advanced economies around recessions indicates that the current experience is less unusual than one might think. First, output typically does not return to pre-crisis trend following recessions, especially deep ones. Second, in response, forecasters repeatedly revise down measures of trend…

James Pethokoukis: The GOP needs to rethink its approach to tax cuts: “Steve Moore… doesn’t like the conservative idea…

…of cutting the tax burden and increasing take-home pay of American parents by expanding the child tax credit…. So the Republican Party — tagged as the ‘party of the rich’–should head into 2016 with a plan to cut taxes on the rich and raise them on working class Americans? Hmm. (And by the way, there doesn’t seem to be any evidence that turning people into non-income taxpayers nudges them into greater support for expanding government.) Anyway, what should the GOP pitch to the middle-class be, according to Moore? This: cutting the top income tax rate would boost GDP growth, which in turn would broadly boost middle-class incomes…. When incomes for the top 1% have risen by 200% over the past three decades vs. for 40% for the middle class, it’s not surprising that Americans wonder about the wisdom of cutting top tax rates…

Ed O’Keefe: Samuel Alito Fails to Quote Straight: “‘Some of the columns that are written…

…you know, are another story,’ Alito said, in a rare public lecture on Constitutional history and law presented by the New York Historical Society on Saturday. ‘Some of them are written by people who are not very knowledgeable…. I was reading one, actually, reading one this morning that was complaining about the current membership of the Court, because unlike in past days, according to this columnist, we don’t have a representation of drunks, philanderers, and a few, you know, a few other n’er do wells.’… [Dahlia Lithwick’s] column…. ‘Compared with the political operators, philanderers, and alcoholics of bygone eras, they are almost completely devoid of bad habits or scandalous secrets. This is, of course, not a bad thing.’ American legal scholar and Yale University professor Akhil Reed Amar, who moderated the discussion and referred to Alito by his first name throughout the event, politely described the column as ‘interesting’, and quickly moved on to other topics…

Must- and Shall-Reads:

• Irving Fisher (1919): Economists in Public Service
• Jason Millman: Why Uber loves Obamacare – The Washington Post

 

1. Rob Dent et al.: Measuring Labor Market Slack: Are the Long-Term Unemployed Different?: “There has been some debate… Krueger, Cramer, and Cho (2014) and Gordon (2013) about whether the short-term unemployment rate is a better measure of slack than the overall unemployment rate…. The two measures are sending different signals…. One can argue that the unemployment rate is exaggerating the extent of underutilization in the labor market, based on the premise that the long-term unemployed are, in practice, out of the labor force and likely to exert little pressure on earnings. If this is indeed the case, inflationary pressures might start building up sooner than suggested by the overall unemployment rate. In a three-part series, we study the available evidence on the long-term unemployed and argue against this premise. The long-term unemployed should not be excluded from measures of labor market slack…”

2. Adair Turner: Printing money to fund deficit is the fastest way to raise rates – FT.com: “What is the right course for monetary policy? The International Monetary Fund seems to answer with forked tongue. Its latest World Economic Outlook urges that monetary policy should stay loose to stimulate growth. Yet its Global Financial Stability Review warns that loose monetary policy risks creating financial instability…. In fact the best policy is to print money and raise interest rates. That sounds contradictory, but it is not…. Most countries have opted to combine fiscal tightening with ultra-loose monetary policy, setting short-term interest rates close to zero and using quantitative easing to reduce long-term rates and boost asset prices. But… sustained low interest rates create incentives for highly leveraged financial engineering…. The Bank for International Settlements therefore argues that monetary policy should be tightened as well as fiscal, but that would depress demand yet further. We should indeed seek a swift return to higher interest rates, to remove the dangerous subsidy to high leverage…. The best way to do that, particularly in Japan and the eurozone, would be to deploy a variant of Friedman’s idea of dropping money from a helicopter. Government deficits should temporarily increase, and they should be financed with new money created by the central bank and added permanently to the money supply. Money-financed deficits would increase demand without creating debts that have to be serviced. This would lift either real output or inflation and allow interest rates to return to normal more quickly…”

3. Larry Mishel: Washington Post “Wage Freeze” Brain Freeze: “Mostly the Washington Post issues a smug assessment that ‘[n]othing in the last four decades refutes the basic case for flexible, innovative, American-style capitalism’ but then immediately negates this conclusion by saying ‘if the system doesn’t work for the middle class, it really isn’t working at all.’ If, in fact, the economy is not working for most everybody then perhaps it is worth challenging the way the economy operates, including many of the ways the Post advocates it should operate!”

4. Paul Krugman: Contractionary Policies Are Contractionary – NYTimes.com: “Terrible numbers from Japan…. The ill-considered sales tax hike of the spring is still doing major damage…. So contractionary policy is contractionary. I could have told you that, and in fact have told you that again and again. But some people still don’t get the message. In Germany, the Bundesbank president opposes expansionary monetary policy because it might reduce the pressure for fiscal austerity: ‘Such purchases might create new incentives to run up debt, besides adding to the reform fatigue in a number of countries’…. That’s actually quite an awesome concern to express at this moment. European recovery has stalled, largely thanks to fiscal contraction; inflation is far below target, and outright deflation looms; and the political basis for the European project is coming apart at the seams. And Weidmann worries that monetary expansion might make life too easy for debtors. But as Wolfgang Munchau says in a terrific column today, ‘German economists roughly fall into two groups: those that have not read Keynes, and those that have not understood Keynes’…. How does this end? We have to keep pounding on the issues, and I’m reasonably sure that Draghi and co get it. But with the largest player on the European scene living in a fantasy world, the best guess has to be that nothing much is done until there is complete political crisis, with anti-European nationalists taking over one or more major nations.”

5. Matthew Yglesias: The worst two paragraphs about American politics you’ll read today: “Ron Fournier, like many of us, is frustrated with the state of American politics…. He explains that the big problem with Obama’s approach was failing to take a page from the Massachusetts universal health care program that is in fact the model for Obamacare: ‘On health care, we needed a market-driven plan…. Just such a plan sprang out of conservative think tanks and was tested by a GOP governor in Massachusetts, Mitt Romney. Instead of a bipartisan agreement to bring that plan to scale, we got more partisan warfare. The GOP resisted, Obama surrendered his mantle of bipartisanship, and Democrats muscled through a one-sided law that has never been popular with a majority of the public.’ It is true that we did not get a bipartisan agreement. It is true that the GOP resisted. It is true that the law is unpopular. But Obama didn’t surrender his mantle of bipartisanship. The GOP took it away from him. They took it away from his as part of a deliberate strategy. They knew, as Fournier says right in this very column, that a big bipartisan health reform would be more popular than a big partisan health reform. So since Republicans didn’t want Obama to be popular, they had every incentive to refuse to reach a bipartisan agreement. And thus no agreement was reached. But… Obama and congressional Democrats delivered exactly the kind of reform Fournier says America needed. Shouldn’t they be congratulated?… In substance, you still have a progra… on the Massachusetts model…. It’s also not something Obama bungled. It’s a consequence of mismatched incentives in Washington…. The opposition party would like the president to not be associated with bipartisan initiatives…. If you don’t understand that, you’ll never understand today’s politics. Worse, you’ll be consistently making bipartisanship less likely. It’s precisely because of columns like this one that it made narrow political sense for the GOP to abjure compromise. Why bargain if any failure to reach agreement will be blamed on the president?”

6. Richard Mayhew: What a difference a year makes: “This is more of a personal note on the scramble to get the Exchanges up and running which then ran into a brick wall of Healthcare.gov not working at all last year. Last year, I spent thirty one of the thirty six hours before go-live either at work or online at home.  My major challenge was to get the web directories up and running so that they would reflect the accurate at that moment network that we were offering…. The Exchanges were narrow networks with significant targetting.  The ‘final’ networks were not really final, as we received a contract amendment to opt-in to Mayhew Narrow at Medicare + a smidge from a two hospital chain and its 300 docs at 8:30pm the night before go-live.  Since the long term solution was not in place, I had an ad-hoc solution that was ‘good enough’ to work and that required a four hour rebuild process.  I launched my final good to go web directory at 2:30AM. This year, the web directories entered the production stream three weeks ago.  One doc had the nerve to die on us, so we had to remove her, and another practice bought out a four doc cardiology practice so we had to add them, but that is the normal churn of networks.  It is routine. I received one call from a co-worker this weekend.  She wanted to know where the financial attribution schema for SNP was stored. This year, I went to a wedding where the brides were beautiful.  I refereed a championship game where I loved that it was 31 and snowing instead of 33 and raining.  I went to the birthday party of a friend’s daughter. Last year, I had a 110 hour week. This year, it is business as usual.”

7. Nick Bunker: [What’s the Value of Health Insurance?(https://equitablegrowth.org/news/whats-value-health-insurance/): “The problem boils down to this question: how much is government-provided health insurance, Medicaid and Medicare, worth to a household?… CBO answered that question using the so-called ‘average cost’ method…. Prior to 2012, the agency calculated the value of government-provided health insurance by looking at the ‘fungible value’ of health insurance…. The difference… is quite large… the average cost method increased the average income of a household in the bottom 20 percent of the before-tax distribution by $4,600, or by about 25 percent…”

Should Be Aware of:

• Rick Bookstaber et al.: An Agent-based Model for Financial Vulnerability

 

1. Mattias Vernengo: NDid the New Deal help in the recovery?: “Joshua Hausman… suggests… the 1936 Veteran Bonus was essential for the expansion of consumption and growth in 1936…. He says: ‘All this is not easily explained by factors other than the bonus. Monetary factors were if anything contractionary in 1936. Broad money supply growth slowed from 14 percent in 1935 to 11 percent in 1936. And in August 1936, the Federal Reserve raised reserve requirements.’ Hausman correctly notices that monetary policy had little effect on the boom in 1936, which fits what Eccles thought about that, and also about the role of monetary policy in the 1937-8 recession. The recession was for Eccles caused by a fiscal contraction largely due to two factors, the new Social Security Law that went into effect, increasing taxes, without initially disbursing payments, and the end of soldier’s bonus payments, which would add support to Hausman’s story. Yep, multipliers (effective demand) work.”

2. Jim Edwards: Morgan Stanley Analysts Visit Detroit And Love Uber: “We haven’t seen such a glowing note to investors in a long time. Taxis and car rental companies are going to die, the Morgan Stanley team suspects…. What seems to have happened is that Adam Jonas, Ravi Shanker, Paresh Jain, and Neel Mehta decided to use Uber in Detroit instead of regular taxis. Instantly, they noticed that taking Uber from the airport and around Michigan was about half the price…. They also really liked their drivers…. All three Uber drivers they encountered told them a similar story: Uber was the only job they could take that offered them enough flexibility to handle their other commitments…. At Business Insider, we’re familiar with these sudden road-to-Damascus conversions in favour of Uber. We had one ourselves earlier this year…. Uber’s software could be used for any transaction involving the physical exchange of goods or services between strangers who need to trust each other. To underscore the impression left by Uber, the Morgan Stanley team referenced the fact that the folks at Ford also believed Uber would change everything…”

Various wingnuts have started emailing me Jon Gruber videos. In them, Jon Gruber says what Gruber has always said about ObamaCare:

• That the Cadillac Tax was an unnecessarily complex and inverted long-run Rube Goldberg way of accomplishing McCain’s 2008 goal of eliminating the tax preference for employer sponsored coverage.

• That CBO’s distinction between mandates and taxes was unhelpful in either building a well-working system or understanding how it would work.

• That the gamble that cost-control measures would be effective in the long-run was a gamble.

And the very sharp Jon Cohn agrees with me:

Jon Cohn: Jonathan Gruber and Obamacare: What His Quotes Really Tell Us: “Gruber was] truly an independent voice….

…The most memorable instance of this was a set of statements that the Affordable Care Act would not do much to control costs…. Conservatives have presented these comments as a revelation…. Nothing could be farther from the truth. Gruber was quite open about his opinion at the time… ‘known as a skeptic’…. Gruber speaks about how the Administration designed its bill so that private insurance payments to insurers would not count as taxes. This was not a secret…. In 2009, CBO issued a very public memorandum on what it considered a private payment and what it considered a tax…. The CBO’s guidance and Administration’s reaction to it was reported by major outlets and discussed widely at the time. The same goes for Gruber’s discussion of the law’s so-called Cadillac tax…. Clawing back a tax break for individuals sounds bad while slapping a tax on insurers sounds good, so the Administration and its allies decided to do the latter…. One of the clearest explanations came in a blog item by Ezra Klein…. And which sources did Klein cite in his analysis? Two well-known health care economists, one of whom was Jon Gruber…

So when I am confronted with something like this from Reihan Salam:

Reihan Salam: Obamacare FAQ: Everything you need to know about why conservatives want to repeal the president’s health care law: “Then there is the matter of how the Congressional Budget Office estimated…

…how much Obamacare would eventually cost…. Gruber is considered one of the chief architects of Obamacare, having played a large role in the Massachusetts universal coverage plan…. His enthusiasm for Obamacare borders on the absurd—he even wrote a graphic novel touting its virtues. But his loose lips have caused headaches…. Gruber told a smallish audience at an academic panel that the Obamacare legislation was carefully written to ensure that the CBO ‘did not score the mandate as taxes.’… Michael F. Cannon of the Cato Institute, an indefatigable libertarian foe of Obamacare, observed back in 2009 that the Democrats’ ‘tailoring their private-sector mandates to avoid having those costs appear in the federal budget’ made Obamacare look much less expensive than it really was. When liberals say that conservatives should just accept that Obamacare is the law of the land and move on, they fail to understand that conservatives believe that Obamacare only became the law of the land because President Obama misled the public…

I wonder: Was Reihan simply not paying attention back in 2009-2010? Was he paying attention and is he now pretending he wasn’t?

I think that a tax is something that collects revenue to be used for programs, and a mandate–even a play-or-pay mandate–is something that shapes behavior. Mandates with fines for violation collect some revenue. Taxes also shape behavior. It is, however, useful to distinguish between them. ObamaCare’s individual mandate–or tax–is intended to shape behavior, not to raise revenue to fund other programs. Whether or not CBO were to score it as a mandate, it is a mandate. And CBO’s restriction of under what circumstances it would classify this mandate as a mandate was not terribly helpful to the policy-making process.

But the thing that makes me believe that it is not yet possible to have any sort of constructive dialogue with Reihan Salam is his claim:

[Gruber’s] enthusiasm for Obamacare borders on the absurd–he even wrote a graphic novel touting its virtues…

Once again: If Salam had been paying attention he would know that Gruber’s enthusiasm for ObamaCare is and always has been measured: supportive, but critically supportive rather than absurdly enthusiastic. If Salam has not been paying attention, why is he writing?