Category: Equitablog

Must-read: Jefferson Cowie and Nick Salvatore: “The Long Exception: Rethinking the Place of the New Deal in American History”

Posted on by Brad DeLong

Must-Read: From “The Defining Moment” to “The Long Exception”…

Jefferson Cowie and Nick Salvatore (2008): The Long Exception: Rethinking the Place of the New Deal in American History: “The period from Franklin Roosevelt to the end of the twentieth century… [shows] that the New Deal…

…was more of an historical aberration–a byproduct of the massive crisis of the Great Depression—than the linear triumph of the welfare state. The depth of the Depression undoubtedly forced the realignment of American politics and class relations for decades, but… there is more continuity in American politics between the periods before the New-Deal order and those after its decline than there is between the postwar era and the rest of American history…. While liberals of the seventies and eighties waited for a return to what they regarded as the normality of the New Deal order, they were actually living in the final days of what Paul Krugman later called the “interregnum between Gilded Ages”… [with respect to] race, religion, class, and individualism.

Must-read: Bloomberg View: “Congress Should Care About the IMF”

Posted on by Brad DeLong

Must-Read: Bloomberg View: Congress Should Care About the IMF: “Since 2010, Washington’s paralysis has blocked badly needed changes at the International Monetary Fund…

…The [budget] bill will let them go forward. This is good news. It serves U.S. as well as global interests. But the protracted delay draws attention to a deeper problem, still unresolved: Rather than lead the IMF in its vital work, the U.S. continues to settle for the role of glum bystander. Five years ago, IMF members agreed, among other things, to increase the fund’s financial resources and rebalance countries’ voting power…. Congressional approval was needed, and this is only now being granted…. The U.S., out of negligence rather than calculation, has said it isn’t much interested in having an up-to-date IMF and can’t be bothered to recognize the new standing of China and other big emerging economies…. Doesn’t the spending bill put this right, finally? Better late than never? That would be generous…. Reforming the IMF by stealth, after prolonged delay, is better than not doing it all. For its own sake, and everybody else’s, the U.S. should aim a bit higher than that.

Must-read: Matthew Yglesias: “Seattle Shows San Francisco and New York How to Fix the Housing Crisis”

Posted on by Brad DeLong

Must-Read: Matthew Yglesias: Seattle Shows San Francisco and New York How to Fix the Housing Crisis: “As California’s Legislative Analysis Office wrote…

…Washington state centraliz[es] more planning functions at the state level…. Skeptics often note that new construction tends to target the high end of the market…. And that’s true here. Stiles reports that the weakness in the market is at the high end, “where 5.4 percent of the units are vacant,” while cheaper rentals feature a lower vacancy rate. But these markets are all logically linked. As proprietors of luxury buildings begin to lower rents in response to high vacancy rates, some people currently in mid-market housing will take advantage of the opportunity to upgrade. That puts downward price pressure on the middle of the market and draws more people further up the chain. None of this exactly makes Seattle a cheap place to live–land is still more expensive there than it is in Atlanta, and multi-family apartment buildings are often more expensive to build than sprawling single-family homes. But a high level of construction ensures that the homeland of Microsoft and Amazon remains substantially cheaper than the Bay Area homeland of Apple and Google.

Must-reads: December 23, 2015

Posted on by Brad DeLong

Must-read: Ria Misra: “You Can Barely Even See Yosemite’s Largest Glacier Anymore”

Posted on by Brad DeLong

Must-Read: Ria Misra: You Can Barely Even See Yosemite’s Largest Glacier Anymore: “Lyell Glacier was Yosemite’s National Park’s largest glacier…

…In 1883, park officials took a photograph of the ice giant. This year, NASA’s climate team recreated that photo with the glacier in its current state. The comparison is stunning. Lyell Glacier is not only the largest in Yellowstone, it’s also the second largest in the Sierra Nevada range. Since 1883, it’s lost 80 percent of its surface area, to the point where it covers only 1/10th of a square mile—and of that loss, 10 percent occurred in just the last four years. The historical loss is huge, but even more sobering is what it suggests for the future. We’re rapidly losing the ice and snowpack that have been especially key for Western and mountain states—not just in Yellowstone or the parks, but all over…

You Can Barely Even See Yellowstone s Largest Glacier Anymore

Must-read: Kevin Quealy and Margot Sanger-Katz: “The Experts Were Wrong About the Best Places for Better and Cheaper Health Care”

Posted on by Brad DeLong

Must-Read: This excellent piece reminds me to worry: What risks does the departure of David Leonhardt from The Upshot create for it?

Kevin Quealy and Margot Sanger-Katz: The Experts Were Wrong About the Best Places for Better and Cheaper Health Care: “These [Medicare and private insurance cost] maps look nothing alike…

…Their big differences are forcing health experts to rethink what they know about health costs…. Grand Junction spent far less money on Medicare treatments–with no apparent detriment to people’s health. The lesson seemed obvious: If the rest of the country became more like Grand Junction, this nation’s notoriously high medical costs would fall…. [But] places that spend less on Medicare do not necessarily spend less on health care over all. Grand Junction, as it happens, is one of the most expensive health-care markets in the country for the privately insured…. Health-care researchers who have seen the new findings say they are likely to force a rethinking of some conventional wisdom about health care. In particular, they cast doubt on the wisdom of encouraging mergers among hospitals, as parts of the 2010 health care law did…. Some of the areas with the most cost-effective Medicare providers also have lower-cost private health care–but just as many places with relatively low Medicare costs have high private insurance spending.

Well done, Quealy and Sanger-Katz!

Must-read: Jonathan Chait: “Sorry, Conservatives, Obamacare Is Still Working”

Posted on by Brad DeLong

Must-Read: Does Ross Douthat not understand that the “Cadillac Tax” is an essential part of every single Republican ObamaCare replacement plan? That while it is an important part of ObamaCare, it is not an essential part of ObamaCare? Or does he understand that element of the situation, but hope that his readers do not? Jonathan Chait reports. You decide!

Jonathan Chait: Sorry, Conservatives, Obamacare Is Still Working: “Ross Douthat’s Sunday column, as it so often does, offers the least unreasonable iteration…

…of the deranged state of conservative thinking on Obamacare. While no longer collapsing spectacularly, Obamacare is now sadly limping along in disappointing fashion, remaining just healthy enough not to expire…. The worst thing that’s happened to Obamacare is that Democrats have revolted against the Cadillac Tax. President Obama had to agree to delay the tax’s implementation for two years as part of the recent budget deal, in return for lots of good liberal policy (like tax breaks for green energy and low-income families). The Cadillac Tax would be in decent shape if Obama could just use his veto to keep it in place two years from now. The trouble is that Hillary Clinton, pressured by unions, has also come out against the Cadillac Tax. So now you have pro-union Democrats and anti-tax Republicans forming a coalition that looks like it can prevail starting in  2017, regardless of which party wins the election.

So, yes. Bad news for Obamacare, which looks like it has lost one of its many cost-control elements. But as bad as this news is for Obamacare, it’s absolutely catastrophic for Obamacare replacement. Every Republican plan to replace Obamacare relies on the same financing mechanism: limiting or repealing the tax break for employer-sponsored insurance. The Cadillac Tax is a smaller, more painless version of this same policy. If both parties can’t abide a partial rollback of the tax break for the most expensive health plans, they’re never, ever going to go along with eliminating the entire tax break for all health plans. The conservatives cackling over the demise of the Cadillac Tax are delusional — it’s as if they’re watching the backlash against the Iraq War in 2008 with fingers tented, anticipating that this will encourage war-weary Americans to support a land invasion of Russia. The bipartisan support for maintaining the tax break for employer insurance will hurt Obamacare, but it can survive. The Republican plans to replace it would all be wiped out.

The Cadillac Tax debacle illustrates a crucial underlying reality of the politics of health-care reform: Change is incredibly difficult. That is why the United States staggered along for decades with a system that simultaneously spent far more per citizen than any other system in the world and cruelly denied treatment to millions. The compromises in the law are a function of this reality. Obamacare’s drafters could not draw up a blue-sky plan as though they were free to design the system anew. They had to work around an entrenched reality, making the system more humane and efficient without unduly burdening those who feared change. That they managed to pass and implement such a reform in the face of hysterical opposition is a historic triumph, one with which the opposition, five-and-a-half years later, has not come to grips.

The 6 major adverse shocks that have hit the U.S. macroeconomy since 2005

Posted on by Brad DeLong

Talk to people at the Federal Reserve these days about how they feel about the institution’s performance during the seven very lean years from late 2008 to late 2015, and they tend to be relatively proud of how the institution performed. Almost smug.

Why? Well, let me pull out my old workhorse-graph of the four salient components of U.S. aggregate demand since 1999:

FRED Graph FRED St Louis Fed

And let me run through the six major adverse shocks to the U.S. macroeconomy since 2005:

(1) The collapse of residential investment after the end of the mid-2000s housing bubble, in order of their size (-3.8% of potential GDP):

FRED Graph FRED St Louis Fed

(2) The wave of austerity–mostly state-and-local, but considerable at the federal level as well–hitting government purchases (-3.0% of potential GDP):

FRED Graph FRED St Louis Fed

(3) The collapse of business fixed investment in the aftermath of the financial crisis (-2.9% of potential GDP):

FRED Graph FRED St Louis Fed

(4) The blockage of the credit channel that prevented there from being much significant bounce-back to normal in residential construction (-1.8% of potential GDP):

FRED Graph FRED St Louis Fed

(5) The (closely-associated with (3)) collapse of exports as the effects of the financial crisis spread beyond U.S. borders (-1.8% of potential GDP):

FRED Graph FRED St Louis Fed

And (6) on a different graph (since it is not one of the four salient components), and also closely-associated with (3), the adverse shock to consumption as it became clear first that there was going to be a deep and then a long downturn (-1.8% of potential GDP):

Graph Real Potential Gross Domestic Product FRED St Louis Fed

Those at the Federal Reserve these days put to one side (1) the extraordinary failure of foresight that led to the adoption of a 2%/year inflation target that nobody who had any inkling of what 2008-2015 would be like would ever have adopted; (2) truly massive failures of prudential regulation of housing finance and derivatives markets before 2008; and (3) bobbling the initial crisis response in the year starting October 2007. They deeply regret the hysteresis-driven damage to the long-run growth of the economy produced by the Lesser Depression–the physical investments not made, the new business models not experimented with, the organizational destruction unaccompanied by the “creative” part of the Schumpeterian process, the human-capital investments not made, the worker attachments to the labor market lost. And they say: given those six shocks and their magnitude, haven’t we done rather well at stabilizing the economy? Haven’t we certainly done much better than the BoJ, or the ECB, or the Bank of England?

And they are right: they have.

Since late 2008, the Federal Reserve has a lot to be proud of.