Category: Equitablog

Should-Read: Sam Bell: Why Yellen Was Not Reappointed: “Trump deserves blame for not reappointing Yellen but more a story about the GOP…

…Hensarling, Mulvaney, Shelby, Pence, WSJ ed board, etc: a trend that started during @benbernanke tenure. includes (at times) “moderates” like Bob Corker plus intellectuals like John Taylor. I would (generously) characterize it as a belief that the Federal Reserve’s cure was worse than the disease (bad recession). That is why you hear a lot-most recently from Plosser-that it is premature to evaluate Yellen’s record.

Whenever the next bad thing happens in the economy they are going to blame it on Bernanke/Yellen and their “excesses” during the recovery. There is just too much ink spilled on that argument… and in too apocalyptic of tones to let it go, even at this late date.

So she won’t be Fed Chair, but you will continue to hear about Janet Yellen (and Ben Bernanke) for years to come. The GOP won’t let its ‘response worse than crisis’ analysis go, and that is why Yellen is gone…

Must-Read: Alice Rivlin described how she, in the first Obama administration, successfully negotiated with Paul Ryan, a serious person interested in honest estimates of how policies would work. I remember it very differently. Worth flagging for everybody thinking of taking Ryan’s policy competence or Ryan-endorsed estimates seriously:

Ryan Avent (2011): Best Budget Ever: “PAUL RYAN has officially revealed the House Republicans’ budget proposal…

…Whatever your take on the policy proposals, it’s worth approaching the rosy claims made on its behalf with extreme caution…. Heritage analysis… [is] simply outlandish…. Ryan’s plan will bring the unemployment rate down to… 2.8% in 2021…. That’s unrealistic enough to be considered somewhat bizarre. Everyone puts a positive spin on their policy proposals. But fundamentally worthy policies shouldn’t need to promise laughably overoptimistic outcomes to win support…

Must-Read: The Republican House caucus led by mainstream media-acclaimed “policy wonk” Paul Ryan are best thought of as a bunch of 19 year old college frat boys who didn’t do the reading winging it in a Model Budget Simulation course:

David Kamin: How a Tax Cut Turns Into a Tax Increase: “In rolling out their plan, House Republicans focused on an example family…

…a married couple making $59,000 per year and with two kids… a tax cut of over $1,182 in 2018…. [But] that… family making $59,000 would face a tax increase by 2024 relative… potentially rising to $500 by 2027.. even as tax cuts for those at the top are maintained….”

Should-Read: Mark Thoma: Federal Reserve Independence: “After the FOMC cut interest rates to almost nil during the Great Recession, the committee took advantage of its independence to boldly go where no Fed had gone before…

…With its “quantitative easing” program, the Fed purchased vast quantities of securities other than Treasury bonds, flooding banks with loanable deposits. President Obama respected the Fed’s independence, probably because it was pursuing policies that his advisers found appealing in light of their own frustrations with being unable to use more fiscal stimulus to speed the recovery. But the reaction from Republicans in Congress was a familiar one: threats to intervene.

This was partly inspired by genuine fears that the magnitude of the quantitative easing initiative would unleash inflation, and partly by a partisan inclination to attack an institution seen as allied with the Obama administration. It’s hard to know the extent to which pressure from Congress constrained the Fed’s actions. But the threats to audit the Fed, monitor policy decisions and strip it of its regulatory powers, combined with the public’s anger at policies that served the interests of Wall Street, certainly motivated Bernanke to mount an unusually public campaign defending the Fed’s independence…

Should-Read: Elhanan Helpman, Oleg Itskhoki, Marc-Andreas Muendler, and Stephen J. Redding: From Theory to Estimation: “Trade and Inequality: While neoclassical theory emphasizes the impact of trade on wage inequality between occupations and sectors…

…more recent theories of firm heterogeneity point to the impact of trade on wage dispersion within occupations and sectors…. [In] Brazil… much… overall wage inequality arises within sector–occupations and for workers with similar observable characteristics; this within component is driven by wage dispersion between firms; and wage dispersion between firms is related to firm employment size and trade participation. We then extend the heterogenous-firm model
of trade and inequality from Helpman et al. (2010) and estimate it with Brazilian data. We show that the
estimated model provides a close approximation to the observed distribution of wages and employment.
We use the estimated m…

Should-Read: Paul Krugman: Paul Ryan Is Choking On His Own Mystery Meat: “A cynic might have expected Republicans to go for full-on cynicism…

…“What, you took it seriously when we talked about fiscal responsibility? The joke’s one you! Ha ha ha!” And to a certain extent that is what they’ve done: after all the deficit-hawk posturing, they’re openly admitting that their intention is to increase the deficit by $1.5 trillion.

But they apparently didn’t feel free to cut completely loose: they did set a deficit target, and as I understand the mechanics of reconciliation, the budgets passed by the House and Senate, while they don’t actually set policy, kind of leave them stuck with an upper limit on just how much they can blow up the deficit.

And they have no idea how to get there. Try to cut one set of deductions, and the homebuilders get mad at you. Try to cut another, and upper-middle-class suburbanites in blue states who still vote GOP get mad. And so on.

The point is that these problems were always predictable, which is why the Ryan budgets were always obviously fraudulent. Ryan’s fakery may have fooled his naive constituents — by which I mean practically the whole Beltway pundit class — but never fooled anyone who could do the math.

So will the GOP pass something? Probably — but it’s more likely to be a miniature Christmas tree of handouts to the wealthy than the grand tax reform they’ve been promising.

?And let’s hope that whatever happens gets reported as the failure it is. Ryan and company promised big stuff, but never had any way to deliver. When it comes to big lies, Donald Trump is actually a very good, very normal Republican…