Category: Equitablog

William Cohan: A First-Person History Lesson From Robert Rubin: “Asked why he was a Democrat…

…Rubin explained that his grandfather ran ‘the most powerful political club’ in Brooklyn, was a delegate to the 1936 Democratic Convention, and then added:

I’m in more of an eclectic position than most folks. I could have been a moderate Republican or a moderate Democrat, a centrist in either one, except if I look at where I am and then look at the people who are left on the spectrum, I relate to their values and the things that concern them. There are a number of areas where I don’t agree with them… [but] their concern for the poor and their concern for having a society that works for everybody instead of just for a few, the notion that you can’t put people out on their own to pull themselves up by their own bootstraps, and you have a society that helps people when they need it.

David Altig: “Monetary Policy Is an Exercise in Risk Management. Here is the probability of being wrong…

…100 percent. The question is what is the worst way to be wrong. In our view, the worst way to be wrong is to pull the trigger too quickly than to pull the trigger a little bit late.

Paul Krugman: The Unwisdom of Crowding Out: “I am, to my own surprise, not too happy…

…with the defense of Keynes by Peter Temin and David Vines…. Temin-Vines… seems to conflate several different bad arguments under the heading of ‘Ricardian equivalence’, and in so doing understates the badness. The anti-Keynesian proposition is that government spending to boost a depressed economy will fail…. I actually see five arguments out there–two (including the actual Ricardian equivalence argument) completely and embarrassingly wrong on logical grounds, three more that aren’t logical nonsense but fly in the face of the evidence. First, there’s the Say’s Law argument…. ‘This is just accounting,’ declared John Cochrane. No, it isn’t–and it was the remarkable fact that prominent economists were saying things like this, as if none of the debates of the 1930s had happened, that led me to proclaim a Dark Age of macroeconomics. Second, there’s the misuse of Ricardian Equivalence…. Even if it were (it isn’t), what the anti-Keynesians were saying was wrong, as I tried to explain a number of times…. Third, there’s the standard textbook crowding-out story… [which] doesn’t work when we’re at the zero lower bound…. Fourth, there’s the claim that we’re at full employment, or maybe always at full employment…. Finally, there’s the confidence fairy…. You do a disservice to the debate by calling all of these things Ricardian equivalence; and the nature of that disservice is that you end up making the really, really bad arguments sound more respectable than they are…

tom: Hoisted from the Internet from One Year Ago:

Re: “Automatically signing people up for low-cost default insurance”

Yet another instance of conservatives proposing ideas based purely on how they sound as slogans, and purely as a moving the bar trick: it is not intended as a replacement, only to sound like a plausible replacement, but only until when what it is proposed to replace is no longer in effect….

Yesterday James Capretta, today Megan McArdle trot out supposedly more palatable alternatives to Obamacare that are in fact rephrased versions of single payer or a public option. Why? Because there is no room to the right of Obamacare, except for nothing. That is why the Republican agenda sloganized as ‘repeal and replace’ amounts in practice to ‘repeal.’

Hoisted from the Internet from One Year Ago: Please read:

• Richard Epstein
• John Cochrane

and tell me what is going on here. Anyone have any plausible answers for me?

The lack of any public or even private willingness to mark one’s beliefs to market is amazing. As is the inexorable and irresistible desire to call the pitch a strike before the pitcher has even walked to the mound.

It’s not as though either Cochrane or Epstein has the confidence that would have been created by a lifetime of calling the balls and strikes more accurately than anyone else that might have motivated such hubris.

Nor do either of them have any standing other than that that comes from a perception of being smart.

Must- and Shall-Reads:

• Sam Fleming: BoE’s Mark Carney urges banker bonus overhaul
• Gavyn Davies: Japan’s latest recession spells trouble for Abe | Large global benefits from the 2014 oil shock | Gavyn Davies | The very long run equity bull market | Gavyn Davies
• Mark Thoma: Why the Great Recession may be with us for years
• Ryan Avent: Japan’s economy: About that debt
• Brian Kahn: NASA, Other Data Show Globe Had Warmest October

 

1. Mark Thoma: When Piketty Argued for Income Redistribution, He Changed Economics: “Thomas Piketty’s Capital in the Twenty-First Century… has it changed anything within economics?… Piketty has… revive[d] the study of the distribution of wealth without violating the positive and normative distinction that economists hold so dear…. Whether or not Piketty is correct about the fundamental determinants of these distributions remains to be seen, but he deserves much credit…. Another thing Piketty deserves credit for is the revival of the historical, narrative methodology…. In his 1919 presidential address to the American Economic Association, Irving Fisher said, ‘The real scientific study of the distribution of wealth has, we must confess, scarcely begun as yet.’ Nearly a hundred years later that, along with a revival of historical methods and perspective, may finally be changing.”

2. Robert F. Martin et al.: Potential Output and Recessions: Are We Fooling Ourselves?: “The economic collapse in the wake of the global financial crises (GFC) and the weaker-than-expected recovery in many countries have led to questions about the impact of severe downturns on economic potential. Indeed, for several major economies, the level of output is nowhere near returning to pre-crisis trend (figure 1). Such developments have resulted in repeated downward revisions to estimates of potential output by private- and public-sector forecasters. In addition, this disappointment in post-recession growth has contributed to concerns that the U.S. economy, among others, is entering an era of secular stagnation. However, the historical experience of advanced economies around recessions indicates that the current experience is less unusual than one might think. First, output typically does not return to pre-crisis trend following recessions, especially deep ones. Second, in response, forecasters repeatedly revise down measures of trend…”

3. James Pethokoukis: The GOP needs to rethink its approach to tax cuts: “Steve Moore… doesn’t like the conservative idea of cutting the tax burden and increasing take-home pay of American parents by expanding the child tax credit…. So the Republican Party — tagged as the ‘party of the rich’–should head into 2016 with a plan to cut taxes on the rich and raise them on working class Americans? Hmm. (And by the way, there doesn’t seem to be any evidence that turning people into non-income taxpayers nudges them into greater support for expanding government.) Anyway, what should the GOP pitch to the middle-class be, according to Moore? This: cutting the top income tax rate would boost GDP growth, which in turn would broadly boost middle-class incomes…. When incomes for the top 1% have risen by 200% over the past three decades vs. for 40% for the middle class, it’s not surprising that Americans wonder about the wisdom of cutting top tax rates…”

4. Ed O’Keefe: Samuel Alito Fails to Quote Straight: “‘Some of the columns that are written, you know, are another story,’ Alito said, in a rare public lecture on Constitutional history and law presented by the New York Historical Society on Saturday. ‘Some of them are written by people who are not very knowledgeable…. I was reading one, actually, reading one this morning that was complaining about the current membership of the Court, because unlike in past days, according to this columnist, we don’t have a representation of drunks, philanderers, and a few, you know, a few other n’er do wells.’… [Dahlia Lithwick’s] column…. ‘Compared with the political operators, philanderers, and alcoholics of bygone eras, they are almost completely devoid of bad habits or scandalous secrets. This is, of course, not a bad thing.’ American legal scholar and Yale University professor Akhil Reed Amar, who moderated the discussion and referred to Alito by his first name throughout the event, politely described the column as ‘interesting’, and quickly moved on to other topics…”

5. Charles Pierce: Here’s Some Stupid For Lunch: “The editorial board of The Washington Post [serves up] the absolutely perfect Beltway word-souffle: ‘[Obama] has tried compromise, and the Republicans spurned him. We will not relitigate that last contention except to note that behind the legislative disappointments of the past six years lies fault on both sides.’ Wow.”

6. Scott Lemieux: Today In People Insulting Your Intelligence – Lawyers, Guns & Money : Lawyers, Guns & Money: “Shorter David Brooks: ‘If Obama takes unilateral action on immigration, congressional Republicans will stop cooperating with his initiatives!’ Shorter Lambert Strether: ‘We would totally have had single-payer if it wasn’t for the meddling of President, Speaker of the House, Senate Majority Leader, Secretary of State, Chief Justice of the United States, and longtime don of the Gambino crime family Jonathan Gruber.  Also, I have no idea what was actually in the Heritage health care proposal, and think that governors rule Massachusetts like kings.’ Shorter Verbatim Megan McArdle: ‘So what would I have done, when Obamacare was tanking in the polls and Scott Brown was elected to the Senate on an anti-Obamacare platform? I would have passed something more modest that still significantly expanded coverage, expanding Medicaid to 150 to 200 percent of the poverty line and creating a national high-risk pool to insure anyone who’d been turned down for coverage more than twice in the past 12 months, at prices comparable to what a healthy person of their age would pay in the insurance market. Again, much cheaper, much less intrusive, no blowback from people who lost their policies, and very unlikely to have been tampered with by the Supreme Court.‘ Oh, yes, the Supreme Court tampering with an expansion of Medicaid–that’s unpossible!” :: Postmodulator says: “I liked this even better: ‘creating a national high-risk pool to insure anyone who’d been turned down for coverage more than twice in the past 12 months, at prices comparable to what a healthy person of their age would pay in the insurance market.’ So, make the bill more palatable by putting the public option back in. I genuinely refuse to believe this woman is the same species as me.”

7. Jonathan Chait: Bush Official Flip-Flopping on Obamacare — NYMag: “Getting in his licks today is Tevi Troy, former Bush administration health official, who takes to the Wall Street Journal editorial page to denounce Obamacare’s ‘Cadillac tax’…. Troy’s column does not mention that the Cadillac tax–or, usually, even more stringent versions of it–have been a mainstay of Republican health-care plans as well…. Troy’s op-ed also fails to mention that he himself used to oppose the tax break for employer-sponsored health insurance. In a 2007 speech, he explained that Bush proposed to cap the health-insurance tax deduction to exclude the more expensive plans: ‘The President’s proposal would allow every taxpayer with health insurance that meets certain basic criteria… to deduct $15,000 for a family…. These numbers we’re pretty confident are large enough to cover all but the most expensive Cadillac-type plans.’… Obama’s Cadillac tax kicks in at a threshold of $30,000 per year, compared to the $15,000-per-year threshold Troy endorsed under Bush. Troy has more recently changed his thinking on the issue. As the president of the American Health Policy Institute, Troy’s work now focuses on warning America about the dangerous burdens of the Cadillac tax he once endorsed…. Troy’s op-ed doesn’t mention that either…”

Should Be Aware of:

• Ada Palmer: The Hollow Crown: Shakespeare’s Histories in the Age of Netflix
• Daniel Davies: The World Is Squared: Episode 4 – In Hot Places
• Chen Ning Yang: The conceptual origins of Maxwell’s equations and gauge theory
• CBO (2014): Update: Budget and Economic Outlook 2014-2024
• Open-Face Salmon Reuben Recipe : Emeril Lagasse : Food Network
• I Vespri Siciliani
• Cory Doctorow: How the Enigma code-machines worked)

 

1. Molly Redden: Catholic Church Argues It Doesn’t Have to Show Up in Court Because Religious Freedom: “When Emily Herx first took time off work for in vitro fertilization treatment, her boss offered what sounded like words of support: ‘You are in my prayers.’ Soon those words took on a more sinister meaning. The Indiana grade school where Herx was teaching English was Catholic. And after church officials were alerted that Herx was undergoing IVF—making her, in the words of one monsignor, ‘a grave, immoral sinner’—it took them less than two weeks to fire her. Herx filed a discrimination lawsuit in 2012. In response, St. Vincent de Paul School and the Fort Wayne-South Bend Diocese, her former employers, countered… [that] its religious liberty rights protect the school from having to go to court at all…”

2. Nicholas Carlson (2012): Romney Was So Proud Of His Universal Healthcare Law He Included It In His Official Portrait: “One of Republican presidential candidate Mitt Romney’s campaign promises is that he will do everything he can to repeal the Affordable Care Act, aka ‘Obamacare.’ But Romney hasn’t always been so opposed to the ideas behind ‘Obamacare,’ such as the act’s requirement that all individuals buy health insurance. While he was governor of Massachusetts, Romney’s own signature legislation was a healthcare reform act built around the idea of an individual mandate. In 2005, Romney even called it ‘the ultimate conservative idea.’ In materials from his 2008 campaign for President, Romney cited reports that the bill had ‘newly insured’ some 300,000 people. In fact, Romney was so proud of this legislation that he insisted his official governor’s portrait include a copy of the bill…”

3. Brian Buetler: Reihan Salam Obamacare Article Shows Why the Debate Will Never End: “The trick is to make the opposition look more sporting. Salam laments that Democrats tailored their health care legislation to obscure and delay transfers so that budget analysts wouldn’t treat the law as they might a single-payer program where… everything coming in is a tax, and everything going out is an expenditure…. The right’s memory has grown conveniently spotty…. In 2011, in a different context, Salam mocked the kind of scolding he’s now directing at Obama. ‘Ah, he made the program marginally less politically poisonous, which will make it harder for us to demonize him. Now let’s attack him for hypocrisy!’ he wrote, paraphrasing critics. The policy architect in that instance was Paul Ryan, who proposed phasing out the existing Medicare program, but only after 10 years, and only for future retirees. At the time, Salam didn’t believe his opponents’ rhetorical strategy had much merit. ‘I mean, I get it,’ he added. ‘But also: let’s move on’…”

What are the odds that future generations will not dismiss the stories of Fred Hiatt’s shop at The Washington Post as improbable fictions? When Paul Krugman denounced “opinions of shape of earth differ” journalism, he was making a joke!

Charles Pierce: Here’s Some Stupid For Lunch: “The editorial board of The Washington Post [serves up] the absolutely perfect Beltway word-souffle:

[Obama] has tried compromise, and the Republicans spurned him. We will not relitigate that last contention except to note that behind the legislative disappointments of the past six years lies fault on both sides.

Wow.

Mark Thoma: When Piketty Argued for Income Redistribution, He Changed Economics: “Thomas Piketty’s Capital in the Twenty-First Century…

…has it changed anything within economics?… Piketty has… revive[d] the study of the distribution of wealth without violating the positive and normative distinction that economists hold so dear…. Whether or not Piketty is correct about the fundamental determinants of these distributions remains to be seen, but he deserves much credit…. Another thing Piketty deserves credit for is the revival of the historical, narrative methodology…. In his 1919 presidential address to the American Economic Association, Irving Fisher said, ‘The real scientific study of the distribution of wealth has, we must confess, scarcely begun as yet.’ Nearly a hundred years later that, along with a revival of historical methods and perspective, may finally be changing.

I read Reihan Salam over at Slate.

My first, minor, thought is that the Slate editors seriously fell down on their job in failing to demand even a modicum of intellectual consistency here. Let me endorse Brian Buetler:

Brian Buetler: Reihan Salam Obamacare Article Shows Why the Debate Will Never End: ” Salam laments that Democrats tailored their health care legislation…

…to obscure and delay transfers so that budget analysts wouldn’t treat the law as they might a single-payer program where… everything coming in is a tax, and everything going out is an expenditure…. The right’s memory has grown conveniently spotty…. In 2011, in a different context, Salam mocked the kind of scolding he’s now directing at Obama. ‘Ah, he made the program marginally less politically poisonous, which will make it harder for us to demonize him. Now let’s attack him for hypocrisy!’ he wrote, paraphrasing critics. The policy architect in that instance was Paul Ryan, who proposed phasing out the existing Medicare program, but only after 10 years, and only for future retirees. At the time, Salam didn’t believe his opponents’ rhetorical strategy had much merit. ‘I mean, I get it,’ he added. ‘But also: let’s move on’…

My second, big, thought is that there are no live policy ideas–that the Republicans are now the captives of the nihilists they have turned their activist base into, and that their only strategy now is to hope that somehow, some way, ObamaCare can be made to collapse.

I came to this thought as I noted Salam ending his piece with:

Reihan Salam: Obamacare FAQ: Everything you need to know about why conservatives want to repeal the president’s health care law: “I’m a firm believer in scrapping Obamacare and starting over. But that’s much easier said than done…”

when the entire gravamen of the piece had been that there was no alternative that could command anything like even a near-majority of the Republican base.

But let’s back up. Let’s listen. The beginning:

Reihan Salam: “If you don’t read the conservative press…

…you might have no idea why those of us on the right side of the political spectrum are so worked up about Obamacare. To promote cross-ideological understanding, I’ve prepared this little FAQ…

In my view, he is engaging in false advertising here: I read that conservative press. I don’t understand any reason other than the naked pursuit of partisan advantage that Reihan and company are so worked up about Obamacare. And this piece simply confirms me in that view.

Continuing:

At least some [conservatives] like Avik Roy of the Manhattan Institute… believe Obamacare should be reformed and not repealed…

A little insight into why Avik thinks it needs to be reformed and not repealed, and what reforms he wants, would be useful–but that insight is not forthcoming.

Conservatives… would like to see it repealed for several reasons. First… it subsidizes insurance coverage for people of modest means by raising taxes on people of less-modest means…. Conservatives tend not to be enthusiastic about redistribution…

As I see it, there are three possibilities:

1. Poor people don’t get to go to the doctor–and die in ditches.
2. Poor people get to go to the doctor, but the doctors who don’t treat them don’t get paid and have to scramble to charge somebody else via various forms of cost-shifting.
3. The government subsidizes insurance coverage for people of modest means by raising taxes on people of less modest means.

In my view, Slate’s editors seriously fell down on the job in not requiring that Salam say whether he thinks it is better to go for (2)–imposes in-kind taxes on doctors–or (1) rather than (3). The view on the left and in the center is that (1) is a non-starter. As Margaret Thatcher said back in 1993 when she visited Washington, DC: “Of course we want to have universal health care! We aren’t barbarians!” The view on the left and in the center and on the not-insane right is that (2) is profoundly dysfunctional and would prove extraordinarily inefficient. If Salam prefers (1), he should explain why Margaret Thatcher was a squishy leftist. If Salam prefers (2), he should explain why he disagrees with every single technocrat who knows about the health-care financing system.

Continuing, we find Salam still beating the drum of the now-exploded myth that ObamaCare will lead to rapidly-rising health-care costs:

Second, there is a widespread belief on the right that the main driver of the federal government’s fiscal woes is the soaring cost of health entitlements, like Medicare and Medicaid. Champions of Obamacare claim that the law will improve matters…. Conservatives are skeptical…. Instead of tackling the health entitlement problem, say conservatives, Obamacare will make matters worse…

Actually, no. Conservatives don’t say that any more:

Sarah Cliff (August 2012): Romney’s right: Obamacare cuts Medicare by $716 billion. Here’s how: “The Romney campaign has gone on the offense on Medicare…

…charging that the Affordable Care Act ‘cuts $716 billion’ from the entitlement program…

By far the greatest and high-volume component of the conservative critique of ObamaCare is that it does cut the projected growth rate of Medicare spending.

Finally:

Most conservatives believe that America needs a [different] system…. The problem, as we’ll see, is that there’s not a lot of consensus around what an Obamacare replacement should look like…

And:

Wait a second. Isn’t Obamacare actually a Republican plan? While Democrats were pushing for Obamacare, Rep. Paul Ryan, the Republican from Wisconsin, was pushing for an ambitious Medicare reform that bore a strong family resemblance to Obamacare…. Was it because he—along with all other anti-Obamacare Republicans—is a hypocrite? Well, no…. To put it crudely, the goal of Ryan’s Medicare reform was to move from more socialism to less socialism…. The problem with Obamacare, for Ryan and others on the right, is that it moved America’s health system in the wrong direction, from less socialism to more socialism…

Why are ObamaCare’s hopes to move Medicare toward a “premium support” model “more socialism”, while Paul Ryan’s hopes to move Medicare toward a “premium support” model “less socialism”? Reihan leaves that as an exercise for the reader.

Similarly, ObamaCare’s health exchanges look a lot like RomneyCare’s health exchanges:

There is nothing wrong in principle with establishing marketplaces where people can buy insurance…. The Obamacare exchanges aren’t best understood as simple marketplaces, where the main role of regulators is to ensure transparency. Rather, they serve as central planning boards that establish coverage mandates and review rates. You might think that’s a good thing or a bad thing, but it definitely limits opportunities to offer new types of coverage and new models for care delivery…. When you look at Obamacare as a law that greatly increases federal regulation of the insurance market… it is not ideal from a conservative perspective…

The problem–as Reihan knows–is that it is very difficult to make a competitive market function rather than collapse in any situation in which one side of the market knows a great deal more than the other about the value and cost of what is being bought and sold. That is true in spades of health insurance: the insuree knows much more about his or her health and thus can calculate his or her likely future health-care costs much better than the insurer. Thus to make a health-insurance market function you need to properly structure the market with what Salam calls “coverage mandates and review rates” by “central planning boards”.

How do we know Salam knows this? Because he says so:

The individual mandate? Wasn’t it dreamed up by the right-wing Heritage Foundation? The individual mandate has a long, tortured history…

That is, if you didn’t get it, a “yes”: the central planning boards with their coverage mandates was the Heritage Foundation’s best guess as to how to make a competitive health-insurance market function rather than collapse.

But, Salam says, the conservative economists who understood the issue and their elected political allies failed to communicate with the Republican base:

The pre-Obamacare conversation about the individual mandate never really reached the conservative grass roots, where infringing liberty is generally seen as a no-no. Just as… John McCain’s support for cap and trade… [did not mean] Joseph J. McCoalburner also favored hiking oil prices to save the polar bears… the Republican masses didn’t greet the idea of an individual mandate with wild enthusiasm…

If you didn’t get that, this is the executive editor of National Review saying: “what we have here is a failure of National Review to communicate what conservative policies were. And because what we have here is a failure to communicate, we must now oppose our own policies. This is somehow Obama’s fault.”

But, Salam says, nothing to see here! Move along!:

Conservatives have other ideas for addressing the problem…. James Capretta has called for low-cost default insurance, in which state governments would automatically sign you up for cheap coverage, but you could opt out at any time. Though many conservatives balk at this kind of soft paternalism, it would almost certainly mean higher coverage levels than a weak individual mandate…

Automatically signing people up for low-cost default insurance has other names: Single-payer. Public Option. Even with “soft paternalism”, these ideas are much less to the liking of the Republican base than are the exchanges at the heart of what was once RomneyCare.

Salam concludes:

Do Republicans have any ideas for replacing Obamacare, or do they intend to repeal it and just leave everyone who needs health insurance in a lurch? There are a number of reform proposals that have been floating around…. I expect we’ll see more of them…. When three Republican senators teamed up to release their own health reform plan… they limited the credit… [left] out a decent number of middle-income families. Other conservatives, like Bobby Jindal, the profoundly unpopular Republican governor of Louisiana, have proposed even stingier plans, which will have a tough time passing muster in the post-Obamacare era. This is part of why the aforementioned Avik Roy has argued that conservatives should just accept that Obamacare is here to stay…

That, if you missed it, is a “No. They don’t have any ideas.”