Things to Read on the Afternoon of February 4, 2015

Must- and Shall-Reads:

• Zoltan Poszar: A Macro View of Shadow Banking: Levered Betas and Wholesale Funding in the Context of Secular Stagnation
• Ken Rogoff: “Europe needs to be much more generous in permanently writing down debt and, even more urgently, in reducing short-term repayment flows. The first is necessary to reduce long-term uncertainty; the second is essential to facilitate near-term growth…”
• Matthew Yglesias: Obama’s new budget proves the grand bargain is finally dead

1. Scott Lemieux: What Happens if the Court Goes ACA Troofer?: “Just as some Democrats took a hit for passing the ACA (and were right to do so, because the point of winning elections is to do stuff), Republicans who are opposed to the idea of helping people without medical insurance will be willing to take some political risk to severely damage the ACA…. That said, I’m not sure how much political risk there will be. At the federal level… Obama is likely to take the primary blame for the failure of ‘Obamacare’ no matter who’s really responsible…. At the state level… it will… be Republican governments that are unwilling to set up exchanges, and this will hurt some middle class people. But I’m still not sure what the political hit will be… [if] low-information voters… correctly assess blame for a problem that still only affects a minority of voters…. I think Republicans would be able to stand by and do nothing as a Republicans in black robes wreck the exchanges and largely get away with it.”

2. Cardiff Garcia: US Treasury Yields and Shrinkage, Sovereign Bond Availability Edition: “Sometimes the simplest explanation is the only one needed, and in economics it doesn’t get much simpler than supply and demand. Competing reasons have been offered for the sustained, vigorous decline in 10-year and long-dated US Treasury yields…. Stories about the factors that influence the demand for safe debt…. The supply of safe sovereign debt is a more straightforward story…. Thanks to the anticipated debt purchases by the ECB and the continuing purchases by the Bank of Japan, net issuance of sovereign debt from advanced economies that’s available to the private sector will turn sharply negative this year and next…. Net issuance of US Treasuries will grow… but not by enough to offset the collective decline of European and Japanese sovereign debt. And the US is still the prettiest pig in the global barnyard…. Will the weakness in long yields and how it affects inflation expectations alter the expected trajectory of US monetary policy? Possibly not. Members of the Fed are increasingly comfortable scoffing at market-based measures of inflation expectations…”

3. Diane Coyle: How Technology Will Disrupt Education–and How It Won’t: “The Khan Academy is one impressive online resource…. MOOCs have not yet lived up to their original expectations…. Yet, having observed the capacity of the web to torpedo the existing structure and distribution of profits in one industry after another since the mid-1990s, it’s certain education will not remain unchanged. But if not MOOCs, what?… Reputation [is] an important selling point in the higher education market. Excellent courses contribute to an institution’s reputation, but do not define it. The quality and profile of the research… social status and success of its students matter at least as much…. Does this mean higher education will be immune from digital disruption? Of course not…. Work out which tasks performed by universities can be substituted for by online technologies, and which are complements to them…”

4. Morris Kleiner: Reforming Occupational Licensing Policies: “Occupational licensing has been among the fastest growing labor market institutions in the United States since World War II. The evidence from the economics literature suggests that licensing has had an important influence on wage determination, benefits, employment, and prices in ways that impose net costs on society with little improvement to service quality, health, and safety. To improve occupational licensing practices, Kleiner proposes four specific reforms. First, state agencies would make use of cost-benefit analysis to determine whether requests for additional occupational licensing requirements are warranted. Second, the federal government would promote the determination and adoption of best-practice models through financial incentives and better information. Third, state licensing standards would allow workers to move across state lines with a minimal cost for retraining or residency requirements. Fourth, where politically feasible, certain occupations that are licensed would be reclassified to a system of certification or no regulation. If federal, state, and local governments were to undertake these proposals, evidence suggests that employment in these regulated occupations would grow, consumer access to goods and services would expand, and prices would fall.”

Should Be Aware of:

• Annie Karni and Celeste Katz: “Obama was ‘unsmiling during the call, and slightly irritated when it was over,’ Axelrod writes. The president hung up and said Romney admitted he was surprised at his own loss, Axelrod wrote. ‘”You really did a great job of getting the vote out in places like Cleveland and Milwaukee”, in other words, black people’, Obama said, paraphrasing Romney. ‘That’s what he thinks this was all about’…”)
• Red Scott: “The Queen of Code,” new short documentary on computing pioneer Grace Hopper
• Lisa Abramowicz: “The 2008 financial crisis gave a few credit products a bad reputation… CDOs… credit-default swaps. But now… Goldman Sachs Group Inc. is… peddling… a ‘bespoke tranche opportunity.’”

1. Kevin Drum: Here’s the Big Problem With Liberals’ “Middle Class” Agenda: “President Obama recently advanced two proposals designed to help the middle class… a mortgage plan available to anyone who bought a home…. a college tuition plan that would have helped middle-income workers with money saved by eliminating 529 college savings plans. The mortgage plan has met with considerable enthusiasm. The tuition plan, by contrast, flamed out…. In theory, universal programs like Obama’s mortgage plan are designed to help the middle class, and this is what makes them both popular and politically palatable. In practice, though, the bulk of their benefits usually go to the well off, and this is what really makes them politically palatable. That’s why the tuition program met an instant death. It really did help the middle class—and only the middle class—and this meant it lacked the all-important political support of the well off. In fact, since the well off would be losing a benefit to pay for it, it attracted their instant opposition. And that was that…”

2. Jeff Spross: Obama’s middle-out economics is good. Bottom-up economics is better.: “The Democrats’ new proposals to boost the middle class feature a number of design aspects that render them almost useless to the lower class. More broadly, the Democrats have spent the last few decades turning away from a commitment to a broad and generous social safety net, and towards shrinking government and mandating work requirements. (Though ObamaCare was a welcome exception to this trend)…”

3. Elias Asquith: America’s vaccination nightmare: “[Chris] Christie went against the vast majority of medical professionals…. ‘It’s more important what you think as a parent than what you think as a public official,’ said Christie, who claims his own children were vaccinated… ‘parents need to have some measure of choice in things as well’…. You should not be surprised to hear that Christie’s comments were not well-received…. He earned finger-wagging and derision from ostensibly nonpartisan media figures and GOP operatives… criticism became so vociferous and widespread that the National Review was moved to publish not one but two posts that halfheartedly defended Christie…. Christie… seemed to tacitly endorse the conspiratorial belief that the science on vaccinations is up for debate… yet another sign that Christie will do absolutely anything whatsoever to be the Republican Party’s presidential nominee…. Rand Paul’s mistake… was an inverse of Christie’s…. Paul told Evans that he didn’t believe there was ‘anything extraordinary about resorting to freedom’… cite[d] unspecified, secondhand anecdotal evidence ‘of many tragic cases of walking, talking normal children who wound up with profound mental disorders after vaccines.’… Paul comes off quite poorly in the CNBC exchange, sounding patronizing and defensive… seemed to confirm a lingering suspicion about Paul: specifically, that his name is far from the only way you can tell that he’s the son of conspiracy theorist, ex-congressman and two-time Republican presidential candidate Ron Paul…”

4. Elizabeth Stoker Bruenig: Rand Paul, Libertarians Have Horrifying Views on Parenting: “Confronted with the question of whether or not discouraging vaccination is a threat to children’s health, Paul launched into a meandering consideration of public health and liberty that concluded with the assertion that ‘the state doesn’t own your children, parents own the children.’ Paul’s bizarre rendering of the parent-child relationship as unilateral ownership is not the most unhinged thing a well-regarded libertarian has ever said about children. In fact, libertarians exhibit a historical inability to adequately explain how parents should relate to their children, why parents are obligated (if at all) to care for their children, and whether or not moral nations should require that parents feed, clothe, and shelter their children within a libertarian frame. Consider Lew Rockwell… a professed fan of child labor…. Murray Rothbard… imagined that laws against child labor were passed in order to artificially inflate the wages of adults… [said] a parent… ‘should have the legal right not to feed the child, i.e., to allow it to die.’… Such dark fantasies are not restricted to the weird world of libertarian academia…. Libertarianism rests on the whimsical notion that all people are isolated, entirely free agents with no claims on others except those that they can negotiate through consensual contracts…. To avoid a hellish death spiral of infectious disease and neglect, we would all do well to reject Paul and his cohort on the subject of child rearing.”