…the practical implications of full repeal have made it a dead letter among all but the most reactionary conservatives in the Republican Party…. Bloomberg found that only 35 percent of American adults supports outright repeal…. [and] repeal and ‘repeal and replace’ are nearly coterminous…. Repeal is a fringe position… in that those who do support it reside disproportionately on the periphery of the law itself…. Dell Stone, quoted in the Bloomberg article, is a textbook case. Stone, 83, says she ‘certainly hopes’ the law gets repealed…. Stone’s antipathy to Obamacare stems from somewhere, but not from her interaction with the law itself. At 83, her frustrations with out-of-pocket health care costs are at best only tangentially related to Obamacare. She isn’t shopping for insurance on the federally facilitated Alabama exchange. She’s on Medicare. And she probably isn’t unhappy that the law increased her taxes because it almost certainly didn’t….
Among 18- to 64-year-olds—the people who pay for the law, or are eligible for the law’s benefits, or might become eligible for the law’s benefits at some point in the future—Obamacare is breakeven. Among… old people… 36 percent view the law favorably, while 46 percent view it unfavorably…. We shouldn’t give everyone’s views about Obamacare equal weight. The public sentiment animating the repeal movement is derived from people who have a negligible stake in the law, but who would like to throw millions of people off their new insurance plans…. Presumably we’d have no problem ignoring old people if they objected to child tax credits financed by working-age people. We should ignore them in this instance, too.
Category: Equitablog
Must-Read: Miles Corak: “After Piketty”: 12 Policy Proposals
…encouraging innovation that increases the employability of workers, notably by emphasizing the human dimension of service provision. Public policy should aim to reduce market power in consumer markets, and to re-balance bargaining power between employers and workers…. Return to a more progressive rate structure for the personal income tax, with a top rate of 65 per cent…. The government should offer guaranteed employment at the living wage…. Employers should adopt ethical pay policies…. Increased taxation of investment income….
A fresh examination of the case for an annual wealth tax…. All receipts of inheritance and gifts inter vivos to be taxed…. National Savings… offering a guaranteed positive (and possibly subsidised) real rate of interest on savings…. Institutions to represent the interests of savers and to provide alternative outlets for saving not driven by shareholder interests…. A capital endowment for all, either at adulthood or at a later date…. An EU initiative for a participation income as a basis for social protection, starting with a universal basic income for children.
Must-Read: Eduardo Porter: Big Mac Test Shows Job Market Is Not Working to Distribute Wealth
…declined over the first decade of the millennium widely across the industrialized world. ‘It’s puzzling that we can get away with paying so little for what are really terrible jobs,’ Professor Ashenfelter told me…. The job market–that most critical institution of capitalist societies, the principal vehicle to distribute the nation’s wealth among its people–is not working properly. This raises a fundamental question: If the job market cannot keep hardworking people out of poverty and spread prosperity more broadly, how will it be done? Is public assistance our future?… Something is not working right for a majority of Americans. Maybe it’s time to try something different.
Must-Read: Francesco Saraceno: The Blanchard Touch
…the link between labour market reform and economic performance. But the IMF is not new to these reassessments… has increasingly challenged the orthodoxy that still shapes European policy making… the widely discussed mea culpa in the October 2012 World Economic Outlook, when the IMF staff basically disavowed their own previous estimates of the size of multipliers, and in doing so they certified that austerity could not, and would not work… broke another taboo, i.e. the dichotomy between fairness and efficiency… a presentation by IMF economists showing how austerity and inequality are positively related with political instability… research linking increased inequality with the decline in unionization. Then, of course, the ‘public Investment is a free lunch’ chapter three of the World Economic Outlook, in the fall 2014.
In between, they demolished another building block of the Washington Consensus: free capital movements may sometimes be destabilizing…. The fact that research coming from the center of the empire acknowledges that the world is complex, and interactions among agents goes well beyond the working of efficient markets, is in my opinion quite something. What does this mass… of work tell us? Three things…. First, fiscal policy is back. it really is. The Washington Consensus does not exist anymore, at least in Washington…. Second… the IMF research department proves to be populated of true researchers, who continuously challenge and test their own views, and are not afraid of u-turns if their own research dictates them…. [Third] the ‘new’ IMF should learn to be cautious in its policy prescriptions…. Adopting a more prudent stance in dictating policies would be wise…
What explains rising wealth inequality?
At the University of Chicago, where I went to graduate school, they sell a t-shirt that says “that’s all well and good in practice, but how does it work in theory?” That ode to nerdiness in the ivory tower captures the state of knowledge about rising wealth inequality, both its causes and its consequences. Economic models of the distribution of wealth tend to assume that it is “stationary.” In other words, some people become wealthier and others become poorer, but as a whole it stays pretty much the same. Yet both of those ideas are empirically wrong: Individual mobility within the wealth distribution is low, and the distribution has become much more unequal over the past several decades.
Several recent working papers by Mariacristina De Nardi of the Federal Reserve Bank of Chicago attempt to match theory with reality. The problem theorists of wealth inequality face is, essentially, figuring out why people save. In the models of a stationary distribution, the reason that people save is to guard against future misfortune. But misfortune rarely happens to the rich, which is part of why they keep getting richer, and thus why the wealth distribution is getting more skewed. The other reason why is that people who are already wealthy have the highest savings rates, which is a problem for theories that rely on precautionary savings as a motive.
De Nardi offers some more promising candidates. One is that people want to secure their children’s wellbeing through bequests. Another is that entrepreneurs need capital to finance otherwise-constrained new businesses. This entrepreneurial accumulation mechanism is similar to the one theorized by economist Charles Jones of Stanford University, who models how a highly unequal wealth distribution gets more unequal over time thanks to the statistical properties of entrepreneurial wealth growth.
Third, since there’s a high correlation between parental earnings and children’s subsequent earnings, and higher-income people save much more, high-earning family dynasties can accumulate a large stock of wealth.
What do these findings tell us about the consequences of wealth inequality? Economists typically highlight individual or inter-generational mobility within the wealth distribution as both a reason not to care that the distribution itself is unequal and as an argument that having wealthy parents (or not) doesn’t matter that much for children’s outcomes. In fact, an influential model by the late Gary Becker and Nigel Tomes, both of the University of Chicago , predicts that accumulated wealth reduces income inequality because parents who love all their children equally allocate their bequests to compensate for their stupid children’s likely lower earnings potential in the labor market. According to those two authors, families redistribute from the smart to the dumb, and therefore, by implication, governments don’t have to redistribute from the rich to the poor.
But as Thomas Piketty and numerous other scholars point out, those reasons not to care about wealth inequality are not empirically valid. There’s scant evidence that parents leave larger inheritances to stupid children. Nor is there much evidence that native ability is the major determinant of earnings in the labor market or other life outcomes. The weakness of these explanations gets to a much larger question, one of the most important (and unanswered) ones in economics: Why are some people rich while others are poor? What economists are just finding out (while others have known for awhile now) is, essentially, “because their parents were.”
Must-Read: David Einhorn (2006): Speech at the Value Investing Congress
…try to win lots of small pots… are the day traders of the poker tables. Others play any… two high cards… get outplayed after the flop by the loose aggressive types who eventually wear them down… long-only closet indexers who trade too much. Then there are the rocks…. They fold and they fold and they fold. They are going to wait until they know they have a huge advantage. Then they bet as much as they can. It is very hard to beat a player like this. They can last a long time. Once people figure them out, nobody will play them when they do play. So they don’t get the chance to get enough chips in when they have a large advantage. Could this be what is becoming of Berkshire Hathaway?… My poker style… is close to the patient players waiting for a big advantage…. I try to pick out one or two people at the table I want to play against…. When the situation feels right, I put in a big, aggressive raise with a marginal holding…. To do well in a poker tournament, you have to recognize a few non-traditional opportunities and you need to get people to sometimes fold the better hand…
Today’s Must-Must-Read: Olivier Blanchard: Rethinking Macroeconomic Policy: Introduction
…My subtitle was rejected by one of the co-organisers, namely Larry Summers. He argued that I was far too optimistic, that we were nowhere close to knowing where were going. Arguing with Larry is tough, so I chose an agnostic title…. We are indeed proceeding in the trenches. But where the trenches are eventually going remains unclear…. Let me start with macroprudential tools. If anything, the Crisis has convinced most of us that they have to be part of the basic macro toolkit…. But where are these trenches going? We do not know the shape of the future financial system, for example the degree to which it will be institution/bank based or market based. Sure, the same uncertainty applies to, say, the high-tech sector, and we do not worry; we just observe, and we shall see where it goes. But finance is different. Policymakers cannot be simple observers, as what the financial system will be depends very much on regulation. And we do not have a good sense of what regulation should be…
Must-Read: Justin Fox: China Will Keep Growing Because It Has to
…The U.S. and the U.K… were tripped up every 10 to 20 years by financial crises and economic depressions…. [Since] 1978, when the Chinese Communist Party ‘shifted its center of gravity from propagandizing class struggle and organizing political campaigns to economic construction,’ China is now in its 37th straight year of economic expansion…. China adopted a radically pragmatic approach to governing. If something resulted in economic growth, it was a good policy. The only real limit was that the supremacy of the Communist Party could not be challenged… [a] strange blend of Communist-Party corporatism, Keynesian macroeconomics and Schumpeterian entrepreneurialism has delivered spectacular improvements in living standards and similar gains in national clout…. Delivering steady economic growth has become the key source of its legitimacy, so it will keep doing whatever it can to deliver. And, given how painful an outright Chinese recession would be for the sputtering global economy right now, we’re kind of stuck with rooting for it to succeed.
April 21, 2015 Trans-Pacific Partnership Briefing Conference Call: Questions for US Government Representatives
Trying to get the issues straight in my mind here…
>antonio.white@xxxxxx.xxx: Dear Mr. Delong: I hope this note finds you well. In light of recent activity in Congress related to the Trade Promotion Authority legislation, I write to invite you to join an off-the-record conference call with XXXXXX senior staff for an update on the current state of play. The call is scheduled for today, Tuesday, April 21 at 3:45 p.m. ET
Dear Mr. White:
Thank you very much for your invitation. I will try. I will have to move a couple of things–and I am not the most important person involved in them…
But if you want to know where my concerns are, let me start by quoting something that I wrote before:
We get a net addition to world wealth of $3 trillion. That is indeed a very small number relative to the wealth of the world both now and discounted into the future. But that is a rather large number compared to other things the U.S. government might do this year. So why not grab for it?
The reasons not to advanced appear to be political and distributional–both within-U.S. distributional and global-distributional. So:
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Trade-liberalization initiatives rank much higher on the Republican Party’s priority list than they do on the Democratic Party’s priority list. I have always thought it was a mistake for President Clinton to put WTO and NAFTA to the top of his priority list without getting any Republican procedural or substantive legislative concessions that would have advanced other pieces of his agenda in return for his doing so. Why is president Obama following the same strategy?
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What steps have been taken to ensure that Trans-Pacific Partnership-driven harmonization of labor, environmental, and health and safety standards takes the form of coordination at the top rather then of a race to the bottom?
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What is there in the TPP and in the Obama administration implementation plans to make sure that the gains will be divided equitably, rather then the TPP strengthening the economic bargaining power of the 1% so that they can grab more than 100% of the gains?
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Is the tightening of the intellectual-property regimes in the TPP really a good thing for the world or for the Pacific as a whole?
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Should the US negotiating position in the TPP be one of self-interest, or should it recognize its responsibility to be a benevolent global hegemon, inasmuch as our long-term interest in world prosperity and world peace outweighs any short-run economic advantage? Has the United States in fact recognized in the PPT negotiations?
Things to Read at Lunchtime on April 21, 2015
Must- and Should-Reads:
- The class war in American politics is over. The rich won :
- Why Unions Matter :
- Must-Read: It Takes A Regime Shift to Raise an Economy :
- Must-Read: Euro-Area Governance: What to Reform and How :
- UK Mediamacro Myths: An Introduction :
- Public Assistance, Private Subsidies and Low Wage Jobs :
- No More Cheating: Restoring the Rule of Law in Financial Markets :
- 7 Charts on What Obamacare Critics Get Wrong :
- The Effect of Rising Inequality on Social Security :
- “Is it the case that, compared to a few decades ago, there are far fewer papers in the top journals that simply try and explain historical time series for a single key macro aggregate (like consumption or saving)? If that is the case, is this due to the difficulties in getting microfounded models to fit, or something else?” :
Might Like to Be Aware of:
- : [Barney Frank’s Memoir](http://www.brookings.edu/blogs/fixgov/posts/2015/04/16-barney-frank-memoir-mann>
- http://www.munchkinwrangler.com/2015/04/16/gladness/ : “I am relieved beyond measure to see that The Three-Body Problem by Liu Cixin (translated by Ken Liu) has been added to the Best Novel Hugo shortlist in place of Lines of Departure…. This reaffirms to me… that withdrawing Lines of Departure from the shortlist was 1000% the right call to make…”
- Notes on Railroad Accidents (1879):
- The Hugo Awards Hijack: Nasty, Dishonest–But It Just Proves Progressives Right :
- “On Saturday, April 18th, I informed the administrators at Sasquan that we have withdrawn Black Gate from consideration for the 2015 Hugo Award…. I have serious concerns about the legitimacy of the 2015 Hugo ballot, as it was largely dictated by a single individual, Vox Day, who campaigned for a slate of nominees on his website (the Rapid Puppies slate). To a lesser extent, it was also influenced by Brad Togersen’s Sad Puppies slate. Together, the two slates successfully placed 61 nominees on the ballot. Black Gate was part of the Rabid Puppies ballot, although we were unaware of our inclusion until we were informed of our nomination…” :
- Keeping Up With the Hugos, 4/20/15 :
- Lesser-Known Trolley Problem Variations. :
- Keeping Up with the Hugos, 4/20/15 | Whatever :
- Marko Kloos (@markokloos): [“If there has ever been a day that called for a big slice of NY cheesecake and a double dram of Scotch on the side, today is it.. https://.”[(https://twitter.com/markokloos/status/588501714279538688)