Things to Read on the Afternoon of June 13, 2014

Should-Reads:

1. Andrew Sullivan: Our Cold Civil War Intensifies: “I spent last night again watching Fox News…. The president is a lawless dictator, abetting America’s Islamist foes around the world, releasing Taliban prisoners to aid in his own jihad on America, fomenting a new caliphate in Iraq, and encouraging children to rush the Mexican border to up his vote-count, while effectively leaving those borders open to achieve his ‘fundamental transformation of America.’… Megyn Kelly… regarded as more centrist than Sean Hannity… Brent Bozell, far right veteran, and Andy McCarthy, pro-torture activist touting his book calling for Obama’s impeachment. The only pushback Kelly provided to a relentless stream of hysteria was to ask whether the president sincerely wanted another terror attack on America–since it would hurt his approval ratings…. The ‘chaos’ at the border and the emerging caliphate in Iraq may have been merely the unintended consequences of fecklessness rather than a deliberate attempt to destroy everything valuable in the United States…”

2. Mark Thoma: “As someone who had a series called ‘Market Failures in Everything’ when this blog first started over nine years ago, and as someone who believes market failures remain important even when the economy is operating at full capacity, I’m glad to see views evolving. Market failures and business cycles form the basis for my calls for government intervention, though as I have written many times, I am coming around to the idea the intervention may also be needed to redistribute income as an offset for those who reap where they never sowed…. Markets have had 40 years to solve the inequality problem…. A ‘hands off’ policy when the economy is operating at full capacity, a capacity that can be limited by market failures, is not helpful in this regard…”

3. Paul Krugman (2010): “It’s possible to be both a conservative and a Keynesian; after all, Keynes himself described his work as ‘moderately conservative’…. But in practice, conservatives have always tended to view the assertion that government has any useful role in the economy as the thin edge of a socialist wedge…. William Buckley[‘s]… key complaint… was that the Yale faculty taught–horrors!–Keynesian economics. I’ve always considered monetarism to be, in effect, an attempt to assuage conservative political prejudices without denying macroeconomic realities…. Friedman was saying… we need policy to stabilize the economy–but we can make that policy technical and largely mechanical…. When monetarism failed… it was replaced by the cult of the independent central bank…. And this worked for a while… in part because the political insulation of central banks also gave them more than a bit of intellectual insulation, too. If we’re living in a Dark Age of macroeconomics, central banks have been its monasteries, hoarding and studying the ancient texts lost to the rest of the world. Even as the real business cycle people took over the professional journals, to the point where it became very hard to publish models in which monetary policy, let alone fiscal policy, matters, the research departments of the Fed system continued to study counter-cyclical policy in a relatively realistic way…”

• Arvind Subramanian: Readings to Understand Economic Development
• Adam L. Silverman: “The Islamic State in Iraq and the Levant (ISIL)… is… capitalizing on Sunni discontent and disenfranchisement… settling scores. It is true that the Sunnis are outnumbered and I have had conversations with informed observers who argue the Iraqi Sunnis know they cannot win, unfortunately no one seems to have told the Iraqi Sunnis that!…”
• Bill Black: “Friedrich von Hayek is so popular among libertarians because of his denial of the legitimacy of democratic government and his claims that it is inherently monstrous and murderous to its own citizens…”
• Warren Rojas: Cantor Staff Self Medicates, Spending $6,500 at Tune Inn
• Maximilian Auffhammer

And:

1. Martin Hackmann et al: What are the Welfare Gains of the Individual Mandate: Evidence from MA | owenzidar: “We develop a model of selection that incorporates a key element of recent health reforms: an individual mandate. Using data from Massachusetts, we estimate the parameters of the model. In the individual market for health insurance, we find that premiums and average costs decreased significantly in response to the individual mandate. We find an annual welfare gain of 4.1% per person or $51.1 million annually in Massachusetts as a result of the reduction in adverse selection. We also find smaller post-reform markups.”

2. Ramesh Ponnuru: John Goodman Knows Wehbycare Won’t Work: “John Goodman, until recently the president of the National Center for Policy Analysis, has a post at Forbes attempting to defend Dr. Monica Wehby’s proposed ‘fixes’ to Obamacare from my charge that her plan won’t work… what he’s really saying is that… he agrees with me that as presented it won’t…. One last peculiarity of Goodman’s post…. Here’s where Wehby has stood on replace vs. fix, in chronological order: On the campaign website it outlined a plan of ‘fixes’… the campaign manager then said that Wehby was for replacement; and now the campaign is approvingly tweeting an article that commends her for not wanting a replacement. The tweet itself describes her plan as ‘reforming Obamacare’. All clear?… NCPA[‘s]… board had unanimously voted to dismiss Goodman because of ‘serious’ misconduct…. Goodman [says]… ‘I’m afraid the NCPA is engaged in serious misconduct… a legal struggle…. Pete duPont and I are leaving…. There was a fight on the board, we had board members threatening to sue each other, board members threatening to sue me, it’s been a whirlwind. These things happen.’… Goodman called back again to say, first, that the organization is now being run by a board that does not know how think tanks work and, second, that the underlying dispute involves illegal activities by NCPA ‘which I don’t want to get into right now’. So it sounds like the lawyers will be busy…”

3. Charlie Stross: “I’ll be voting ‘yes’ for an independence Scotland in September. Not with great enthusiasm (as I noted earlier, if Devo Max was on the ballot I’d be voting for that) but because everything I see around me suggests that there is some very bad craziness in the near future of England, and I don’t want the little country I live in to be dragged down the rabbit hole by the same dark forces of reaction that are cropping up across Europe, from Hungary to Greece. The failure modes of democracy, it seems to me, are less damaging the smaller the democracy…”

Already-Noted Must-Reads:

1. Victor Fleischer: How Obama Can Increase Taxes on Carried Interest: “President Obama could change the tax treatment of carried interest with a phone call to the Treasury Department. But the White House will need a precise understanding of the regulatory landscape to make a change that is fair, easy to administer, and will hold up in court…. Managers of private equity, venture capital and other private investment funds receive a share of the profits, known as carried interest, in exchange for the services they provide. Under current law, the income they earn is often taxed at the long-term capital gains rate of 20 percent…. less than half the rate most would pay if their income were taxed as ordinary income…. Every year, the Obama administration proposes a budget that would close the loophole; every year, Congress fails to act…. Fund managers… put in just 1 percent of the financial capital and reap 20 percent of the profits…. So one may reasonably question whether the fund manager really ought to be taxed as a partner and not as a service provider. § 707(a)(2)(A)… directs the Treasury Department to write regulations addressing this kind of compensatory arrangement…. The Treasury has broad discretion to recharacterize transactions where the partner is not acting in one’s capacity as a partner but, rather, as a service provider. Remarkably, the Treasury has never issued these regulations in… 30 years…. If the administration should follow this path, fund managers would pay tax at ordinary rates, just like lawyers, accountants, bankers and other service providers…”

2. Malcolm Gladwell: Black Like Them: “Things changed when I left for Toronto…. The infamous Jane-Finch projects… were considered the Jamaican projects. The drug trade then taking off was said to be the Jamaican drug trade. In the popular imagination, Jamaicans were–and are–welfare queens and gun-toting gangsters and dissolute youths…. After I had moved to the United States, I puzzled over this seeming contradiction–how West Indians celebrated in New York for their industry and drive could represent, just five hundred miles northwest, crime and dissipation. Didn’t Torontonians see what was special and different in West Indian culture? But that was a naïve question. The West Indians were the first significant brush with blackness that white, smug, comfortable Torontonians had ever had. They had no bad blacks to contrast with the newcomers, no African-Americans to serve as a safety valve for their prejudices, no way to perform America’s crude racial triage. Not long ago, I sat in a coffee shop with someone I knew vaguely from college…. He began to speak of the threat that he felt Toronto now faced. It was the Jamaicans, he said. They were a bad seed… he launched into a long explanation of how, in slave times, Jamaica was the island where all the most troublesome and obstreperous slaves were sent, and how that accounted for their particularly nasty disposition today. I have told that story many times since, usually as a joke, because it was funny in an appalling way–particularly when I informed him much, much later that my mother was Jamaican. I tell the story that way because otherwise it is too painful. There must be people in Toronto just like Rosie and Noel, with the same attitudes and aspirations, who want to live in a neighborhood as nice as Argyle Avenue, who want to build a new garage and renovate their basement and set up their own business downstairs. But it is not completely up to them, is it? What has happened to Jamaicans in Toronto is proof that what has happened to Jamaicans here is not the end of racism, or even the beginning of the end of racism, but an accident of history and geography. In America, there is someone else to despise. In Canada, there is not. In the new racism, as in the old, somebody always has to be the nigger…”

3. Billmon: The Syria/Iraq Situation: Not Only Stranger Than We Imagine…: “Tangle of enemies & allies notwithstanding, decision 4 Obama is actually simple: Should US provide air cover for Iranian Quds Force in Iraq? Which is kind of mind-blowing to contemplate, but if ISIS & Co. are going to be stopped, Iranian ground forces will have to be the core.”

4. Mark Thoma: Why income redistribution doesn’t hurt growth: “Until recently, most economists believed there’s a trade-off between equity and efficiency and that the redistribution of income would lower economic growth…. The main reason is that taking income away from the wealthy reduces the incentive to implement innovative ideas. In its most extreme form, where redistribution is used to ensure that everyone has the same income, why bother to work hard, or work at all? But… Ostry [et al.]… there are also reasons to believe the redistribution of income can enhance economic growth…. Their paper’s main finding is that ‘redistribution appears generally benign in terms of its impact on growth; only in extreme cases is there some evidence that it may have direct negative effects’… ‘the combined direct and indirect effects… are on average pro-growth’…. Economics does not tell us what the distribution of income ought to be. That involves a value judgment, and individuals will differ on what is fair and equitable. But economics can tell us about the consequences of redistribution, and the best evidence we have suggests that modest redistribution, if anything, enhances growth.”