Category: Equitablog

Brian Buetler: Watch Rand Paul Run for His Life Before Steve King Insults an Immigrant in Iowa: “It’s a cruel coincidence for GOP presidential aspirants…

…that the Republican Party’s most uncensored, most influential, anti-immigrant member (Representative Steve King) hails from a state (Iowa) where, for arbitrary reasons, presidential primary candidates face their first real electoral test… Republicans like Senator Rand Paul have to break bread in public… with someone they must be prepared to flee mid-meal, while still chewing. That’s what happened Monday at a Paul fundraiser in Okoboji, Iowa…. Sticking up for the DREAMer in the video would plausibly doom Paul’s primary campaign. Standing with King would pose an equal but opposite threat in the general, as would playing dumb. So, he did what he had to do. And it was a wise move…. To many Republicans, feigning surprise at an immigrant’s command of English and calling her a lawbreaker is unremarkable. As is the suggestion that children should refuse to travel with their parents absent proper authorization, or that they should self-deport once they grow up…. But most people don’t find these kinds of things particularly commendable.”

Must- and Should-Reads:

1. Brad DeLong (2011): Economic Downturns, the Social-Darwinist Waltz, and the Navigation of the Starship Asgard: “Tyler Cowen writes: ‘More rooftop-ready results on reservation wages: I conclude that some people aren’t very good at looking for jobs and further some people are not very good at accepting job offers….’ It seems to me that this is one of the steps in what I have sometimes called the Social-Darwinist Waltz. It goes like this…. 5. You say government has not intervened?… 6. Well, it must be because some people are not skilled decision-makers and are not rational judges of their own interests. 7. But their lack of skill and foresight is non-adaptive. 8. Their lack of skill and foresight is blameworthy. 9. And they should be punished. 10. And in punishing them, the market outcome is good after all…. It is, I think, very important for rational policy to halt the Social-Darwinist Waltz where Tyler is, at step 7, and not go on to step 8…. A system that for good outcomes requires that people act in ways people do not do is not a good system–and to blame the people rather than the system is to commit a major intellectual error. Consider the… Starship Asgard…. When one person transposes an 8 and a 3 in the fifth and sixth decimal places of a hand calculation, the result should not be to send the starship hundreds of light years off course into uncharted space. Similarly, in a well-functioning economy the failure of a critical mass of unemployed workers to realize that they really should drop their reservation wage because the economy is suffering from a nominal shock should not send the unemployment rate on a multiyear journey upward during which it kisses 10%.”

2. Adrianna McIntyre: 5 media mistakes in the Halbig debate: “Over the past few weeks, thousands of words have been written on Halbig v. Burwell…. There are some things… just getting lost… worth getting right here. 1) Administrative Law 101: The administration doesn’t need to prove intent, just ambiguity…. 2) And the text of the law can be read as ambiguous. Yes, even the words ‘established by the State’…. 3) Medicaid expansion is a deeply flawed analogy…. 4) The ‘foresight error’ argument could cut in favor of the government just as easily as it could cut against it…. 5) The courts won’t really care what Jonathan Gruber–or reporters–knew, or when they knew it…. As for the ‘But Gruber was lying in documents he filed with the court!’ line, even Michael Cannon… isn’t seizing on that…”

3. Abbe Gluck: The CBO Score and the Made-Up Narrative of the Obamacare Subsidies Case: “The CBO scoring of Obamacare was central, in the public eye, and intensely scrutinized by all involved…. CBO never assumed in scoring the bill that subsidies would be unavailable on federal exchanges…. The text of the ACA, when read not in isolation, but in context…clearly permits the Government’s interpretation of the subsidies…. But the CBO story offers another datum–along with the testimonials of staffers and reporters that have been pouring out all week–that no one ever assumed the statute said otherwise…. Remember this is a Chevron case–a case that turns on the doctrine of agency deference. To win under the doctrine, all the Government has to do is show that its reading of the statute is plausible. The challengers… have to convince the Court their reading of the statutory text is not only plausible but is the only possible reading…. A major lawsuit… should not be based on a story that is made up…”

4. Janet Currie: Health, Wealth and Foreclosure: “Losing your home to foreclosure can be bad for your health. Watching your neighbors lose their homes to foreclosure can be just as debilitating…. Nationwide the 2.82 million foreclosures in 2009 resulted in an additional 2.21 million emergency hospital visits—-an increase in hospitalizations that cost a whopping $5.6 billion in that year alone…. Many middle class Americans are only one medical emergency away from bankruptcy without even factoring in the loss of a home or the inability to sell their homes due the sharply deteriorated community housing values…. Now it could be that a sudden wave of serious mental and physical illness swept through neighborhoods experiencing higher rates of foreclosure or that the overall higher rates of poor health among low-income wage earners contributed to the inability of some of them to cover their monthly mortgage payments. But our study accounted for both factors…”

5. Matthew Yglesias: The false choice between equality and globalization: “Late Friday night House Republicans passed a bill to strip about 580,000 immigrants of their work permits while President Obama ponders executive action to reduce the pace of deportations and conservative columnist Ross Douthat preemptively slams the illegality of the as-yet-unknown measure. Which is to say that while Cowen’s point about the global picture is both interesting and correct, his political stance is backwards. It’s not fans of Capital in the 21st Century who are pushing nationalism as an alternative to plutocracy, but its detractors…. Inside the United States, a major debate has taken place inside GOP circles…. An initially popular idea, especially in business circles, was that the GOP should moderate its stance on immigration and seek Latino votes. This was, of course, countered by the party’s most retrograde elements–the Michele Bachmanns and the Steve Kings. But more importantly, the pro-immigration impulse was also opposed by the most forward-thinking elements in American conservative politics. Douthat, David Frum, Reihan Salam, and other ‘reform conservatives’ have positioned themselves as leading opponents of a compromise with the White House on immigration…. And the cause of its rise is not left-wing worries about inequality, but the failure of traditional supply-side economics. Reagan-era conservatives could be for welfare state rollback and broadly pro-immigration because they promised a rising tide that would lift all boats. Now that we’re decades into an era of wage stagnation, those kind of easy promises ring hollow. So for Cameron and the reformicons, a tilt against immigrants is the new answer…. Let the rich get richer, but prevent them from hiring maids from Latin America, and soon enough wages for native-born maids will rise…”

6. Paul Krugman: Con Men Aren’t Stupid: “Larry Kotlikoff fulminating about how mean I am — so mean that he apparently could’t bring himself to read what I wrote. No, I didn’t say that Paul Ryan is stupid. I did imply — and have said explicitly on many other occasions — that he is a con man. Why did I do that? Not as a way to avoid having a substantive discussion. I’ve documented Ryan’s many cons very extensively… his budgets were sold on false pretenses… magic asterisks…. Still, why not pretend that we’re having a nice, honest discussion? Because I’m trying to inform readers… and the attempt to sell right-wing goals under false pretenses is an important part of the story. If you fell for the carefully crafted image of Ryan as an honest wonk, you were being taken in — and it’s my job to ensure that you’re properly informed. I wish we lived in a world in which you could presume that major figures are arguing in good faith, in which what they claim to be doing in their policy proposals was what they were actually doing. But wishing doesn’t make it so, and I would be acting in bad faith myself if I pretended that the world was like that…”

And:

• Christopher D. Carroll (200): Death to the Log-Linearized Consumption Euler Equation! (And Very Poor Health to the Second-Order Approximation)
• Hilary Wething: What I’ve learned in the last three years
• Nick Bunker: Summertime blues for some workers and businesses

Should Be Aware of:

1. Brian Buetler: Ross Douthat Immigration ‘Amnesty’ Column Falsely Assumes Lawbreaking: “Douthat[‘s]… dynamic… [in] a single sentence: Democrats correctly regard impeachment as a political box canyon into which many conservatives want to march the Republican Party, and believe that maximal, unilateral action on behalf of immigrants is both an urgent priority and an effective way to exploit the tension between GOP leaders… and hardliners…. Douthat’s thesis rests on the assumption that aggressive executive action on behalf of certain unauthorized immigrants will by definition be ‘an extraordinary abuse of office…. [L]awless, reckless, a leap into the antidemocratic dark.’ These are awfully firm conclusions to draw about a policy that hasn’t been unveiled…. The problem is that outside of conservative media, where basically anything Obama does without explicit, immediate congressional authorization is presumed to be illegal, reporters have consulted experts… discovered that Obama probably has a great deal… of authority to defer deportation… also enjoys unchecked pardon power…. Despite all this, Douthat blends the assumption that Obama will be violating the law seamlessly into his column…”

2. Ross Douthat: Obama’s Impeachment Game: “SOMETHING rather dangerous is happening…. I do not mean the confusion of House Republicans…. Incompetence and gridlock are significant problems, indeed severe ones…. What is different–more cynical and more destructive–is the course President Obama is pursuing in response…. Sarah Palin’s pleas for attention have been creatively reinterpreted as G.O.P. marching orders, and an entire apocalyptic fund-raising campaign has been built around the specter of a House impeachment vote…. The president is… all but promising… extraordinary abuse of office…. Such an action would come equipped with legal justifications…. A John Yoo of the left… [will] build a case for the legality…. But the precedents would not actually justify the policy, because… selective enforcement of our laws amounts to a de facto repeal of their provisions…”

3. Matthew B. Canzoneri et al. (2006): Euler Equations and Money Market Interest Rates: A Challenge for Monetary Policy Models: “Standard macroeconomic models equate the money market rate targeted by the cental bank with the interest rate implied by a consumption Euler equation. We use U.S. data to calculate the interest rates implied by Euler equations derived from a number of specifications of household preferences. Correlations between these Euler equation rates and the Federal Funds rate are generally negative. Regression results and impulse response functions imply that the spreads between the Euler equation rates and the Federal Funds rate are systematically linked to the stance of monetary policy . Our findings pose a fundamental challenge for models that equate the two…”

Janet Currie: Health, Wealth and Foreclosure: “Losing your home to foreclosure can be bad…

…for your health. Watching your neighbors lose their homes to foreclosure can be just as debilitating…. Nationwide the 2.82 million foreclosures in 2009 resulted in an additional 2.21 million emergency hospital visits—-an increase in hospitalizations that cost a whopping $5.6 billion in that year alone…. Many middle class Americans are only one medical emergency away from bankruptcy without even factoring in the loss of a home or the inability to sell their homes due the sharply deteriorated community housing values….

Now it could be that a sudden wave of serious mental and physical illness swept through neighborhoods experiencing higher rates of foreclosure or that the overall higher rates of poor health among low-income wage earners contributed to the inability of some of them to cover their monthly mortgage payments. But our study accounted for both factors…

Abbe Gluck: The CBO Score and the Made-Up Narrative of the Obamacare Subsidies Case: “The CBO scoring of Obamacare was central…

…in the public eye, and intensely scrutinized by all involved…. CBO never assumed in scoring the bill that subsidies would be unavailable on federal exchanges…. The text of the ACA, when read not in isolation, but in context…clearly permits the Government’s interpretation of the subsidies…. But the CBO story offers another datum–along with the testimonials of staffers and reporters that have been pouring out all week–that no one ever assumed the statute said otherwise….

Remember this is a Chevron case–a case that turns on the doctrine of agency deference. To win under the doctrine, all the Government has to do is show that its reading of the statute is plausible. The challengers… have to convince the Court their reading of the statutory text is not only plausible but is the only possible reading…. A major lawsuit… should not be based on a story that is made up…

Adrianna McIntyre: 5 media mistakes in the Halbig debate: “Over the past few weeks…

…thousands of words have been written on Halbig v. Burwell…. There are some things… just getting lost… worth getting right here. 1) Administrative Law 101: The administration doesn’t need to prove intent, just ambiguity…. 2) And the text of the law can be read as ambiguous. Yes, even the words ‘established by the State’…. 3) Medicaid expansion is a deeply flawed analogy…. 4) The ‘foresight error’ argument could cut in favor of the government just as easily as it could cut against it…. 5) The courts won’t really care what Jonathan Gruber–or reporters–knew, or when they knew it…. As for the ‘But Gruber was lying in documents he filed with the court!’ line, even Michael Cannon… isn’t seizing on that…

Brad DeLong (2011): Economic Downturns, the Social-Darwinist Waltz, and the Navigation of the Starship Asgard: “Tyler Cowen writes: ‘More rooftop-ready results on reservation wages:…

I conclude that some people aren’t very good at looking for jobs and further some people are not very good at accepting job offers….

It seems to me that this is one of the steps in what I have sometimes called the Social-Darwinist Waltz. It goes like this…. 5. You say government has not intervened?… 6. Well, it must be because some people are not skilled decision-makers and are not rational judges of their own interests. 7. But their lack of skill and foresight is non-adaptive. 8. Their lack of skill and foresight is blameworthy. 9. And they should be punished. 10. And in punishing them, the market outcome is good after all…. It is, I think, very important for rational policy to halt the Social-Darwinist Waltz where Tyler is, at step 7, and not go on to step 8…. A system that for good outcomes requires that people act in ways people do not do is not a good system–and to blame the people rather than the system is to commit a major intellectual error.

Consider the… Starship Asgard…. When one person transposes an 8 and a 3 in the fifth and sixth decimal places of a hand calculation, the result should not be to send the starship hundreds of light years off course into uncharted space. Similarly, in a well-functioning economy the failure of a critical mass of unemployed workers to realize that they really should drop their reservation wage because the economy is suffering from a nominal shock should not send the unemployment rate on a multiyear journey upward during which it kisses 10%.

Must- and Should-Reads:

1. Sky Masterson: Comedic Monologue: “On the day when I left home to make my way in the world, my daddy took me to one side. ‘Son’, my daddy says to me: ‘I am sorry I am not able to bankroll you to a very large start, but not having the necessary lettuce to get you rolling, instead I’m going to stake you to some very valuable advice. One of these days in your travels, a guy is going to show you a brand new deck of cards on which the seal is not yet broken. Then this guy is going to offer to bet you that he can make the jack of spades jump out of this brand new deck of cards and squirt cider in your ear. But, son, do not accept this bet, because as sure as you stand there, you’re going to wind up with an ear full of cider…'”

2. Gary Clyde Hufbauer and Cathleen Cimino: NAFTA Rejoinder: The Effects are Positive (Part I): “[The CEPR] preferred the pre-1980 Mexican economic developmental model of protection and state control to the NAFTA model of free trade and private markets…. Everyone agrees that Mexican economic performance over the past 20 years has been subpar…. The question is why: Too big a dose of liberal economic policies and integration with the US economy (the CEPR explanation), or negative factors that were partly offset by a strong push from NAFTA (the PIIE explanation)?… McKinsey’s research shows that the ‘NAFTA sector’ of the Mexican economy (large firms with 500 employees or more) has performed strongly over the past 20 years…. Unfortunately, the large firms in the NAFTA sector still employ only 20 percent of the labor force… productivity has actually declined among smaller firms… falling by 6.5 percent per year. Oppressive regulation largely explains the poor performance of these firms…. Three other negative factors… are the chaos and cost of drug wars (largely fueled by American dollars), widespread corruption, and continued monopolistic control in critical sectors (illustrated by telecommunication and petroleum)…. While Mexico’s growth performance falls short of other countries that have liberalized their economic policies, it exceeds the performance of many economies still relying on state control in an overall assessment of past and potential growth.”

3. Frank Rich: ‘The Invisible Bridge,’ by Rick Perlstein: “It says much about Perlstein’s gifts as a historian that he persuasively portrays this sulky, slender interlude between the fall of Nixon and the rise of Reagan (as his subtitle has it) not just as a true bottom of our history but also as a Rosetta stone for reading America and its politics today. It says much about his talent as a writer that he makes these years of funk lively, engrossing and on occasion mordantly funny…. ‘The Invisible Bridge’ takes its title from a bit of cynical political advice bestowed on Nixon by Nikita Khrushchev: ‘If the people believe there’s an imaginary river out there, you don’t tell them there’s no river there. You build an imaginary bridge over the imaginary river’…. One of Perlstein’s enduring themes is that when it comes to the steady ascent of the conservative movement, contemporaneous journalists and Democratic and Republican elites alike are the last to figure out what is going on. He’s a connoisseur of wrong calls, many of them premature obituaries for the right, from now all-but-forgotten opinion titans of the day (Reston, Kraft, Alsop, Sidey, Evans and Novak)…. What’s particularly striking in the new book, though, is the cluelessness of the stalwart Republican grandees of the Ford presidential campaign, who were both blindsided and baffled by Reagan’s guerrilla victories in their own midst…”

4. Congressional Budget Office: 2014 Long-Term Budget Outlook: “In CBO’s extended baseline the fiscal gap for the 2015–2039 period amounts to 1.2 percent of GDP… a combination of cuts in noninterest spending and increases in revenues that equaled 1.2 percent of GDP in each year beginning in 2015…. After 2039, the pressures of rising federal budget deficits and debt held by the public would increase further unless laws governing taxes and spending were changed. Although projections for the very long term are highly uncertain, CBO estimates… the fiscal gap would be roughly 50 percent larger over a 75-year period than over a 25-year period…. For the extended alternative fiscal scenario… the 25-year fiscal gap amounts to 3.4 percent of GDP, the 50-year fiscal gap to 5.6 percent of GDP, and the 75-year fiscal gap to 7.4 percent of GDP…”

5. Simon Wren-Lewis: US savings behaviour, and empirical research strategies: “Chris Carroll, Jiri Slacalek and Martin Sommer…. The mainstay of modern macroeconomics is the consumption Euler equation…. Periods of high saving can reflect periods of temporarily higher income, or temporarily high real interest rates. Adaptations… assume that some proportion of consumers are liquidity constrained, and therefore consume all their income, or that consumption is subject to ‘habits’, which generates additional inertia. This model with or without these adaptations is not very helpful in explaining… the Great Recession…. This model is not very good at explaining US savings behaviour before the Great Recession either…. Consistency with the data is not the admissibility criteria for a microfounded macromodel. The Carroll et al paper finds two explanations… easier credit conditions, and the second is employment uncertainty…. Now for the methodology part…. In order to get their structural model they have to make the highly unrealistic assumption noted above. The reduced form, on the other hand, does not have this assumption imposed on it. So I do not think we can say that the results in Section 5 are more or less interesting than those in Section 4…. 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?”

6. Adam S. Posen: The Errors of Conservatives Obscure the Case for Trade: “Twenty years after Bill Clinton, former US president, signed the North American Free Trade Agreement (NAFTA), its very name chills the spines of US voters and congressmen alike…. Yet NAFTA-phobia is irrational…. Consumers in all three countries have gained…. America’s less-skilled workers have received an increasingly raw deal since the 1970s. But NAFTA is not to blame. To claim otherwise is at best to mistake coincidence for causation. At worst, it is a cynical tactic employed to protect special interests at the expense of the common good…. There have been job losses as a result of competition from Mexican (and Canadian) exports. Some critics of NAFTA estimate these at an average of 45,000 a year…. But out of a US workforce of 135 million workers—between 4 million and 6 million of whom leave or lose their jobs every month—that is less than 0.1 percent of turnover…. Since such a tiny fraction of total labor force churn in the United States is due to NAFTA, that deal cannot be a significant cause of wage or employment conditions at home…. This bogeyman-based approach to trade has failed both the progressive agenda and the US economy as a whole. America has ended up delaying or missing out on opportunities for trade expansion and thus income growth, while the welfare state continues to shrink…”

And:

• Sam Wang: Princeton Election Consortium
• First observations of methane release from Arctic Ocean hydrates
• Gary Clyde Hufbauer and Cathleen Cimino: NAFTA Rejoinder: The US Effects Are Clearly Positive for Most Workers (Part II)
• Timothy B. Lee: The case for investing in stocks, in two charts
• Velella
• Michael Santoli: In a mature bull market, financial engineering trumps business innovation
• Danielle Kurtzleben: The amazingly rapid suburbanization of poverty: “Once upon a time (specifically, the 1990s), the US was making remarkably fast progress against concentrated poverty. During that decade, the number of poor people living in poor neighborhoods fell by 24 percent. That progress has entirely reversed, according to a new report from the Brookings Institution. The share of people living in neighborhoods with 40 percent or higher poverty grew by 76 percent between 2000 and the 2008-12 period. And that concentration is growing in suburban neighborhoods in particular…”

Should Be Aware of:

1. Dante Atkins: CA-Gov: Kashkari spends a week homeless, learns nothing, hurts Republican Party: “This battle for the right to lose to Jerry Brown was widely seen as a referendum on the future of the Republican Party, at least in California. One one hand, there was Neel Kashkari: the son of South Asian immigrants, moderate on hot-button social issues, and focused on conservative, pro-business economic policies. Donnelly, by contrast, is a border-patrolling minuteman who was arrested for trying to bring loaded guns onto an airplane, and race-baited Kashkari by claiming that he supported fundamentalist Islamic law. Donnelly earned the vast bulk of grassroots Republican support, but Kashkari had better fundraising and far more support from establishment figures, and prevailed…”

2. James Hanley: Great Moments in Rent-Seeking: “‘The distinction between natural butter artificially colored, and oleomargarine artificially colored so as to cause it to look like butter…was held to be so marked, and the aptitude of oleomargarine when artificially colored to deceive the public into believing it to be butter was decided to be so great, that it was held no violation of the due process clause of the Fourteenth Amendment was occasioned by state legislation absolutely forbidding the manufacture, within the State, of oleomargarine artificially colored. As it has been thus decided that the distinction between the two products is so great as to justify the absolute prohibition of the manufacture of oleomargarine artificially colored, there is no foundation for the proposition that the difference between the two was not sufficient, under the extremest view, to justify [tax rates] distinguishing between them…. That is, that the manufacture of artificially colored oleomargarine may be prohibited by a free government without a violation of fundamental rights.’ From McCray v. United States (1904), one of the most turgidly written Supreme Court decisions I’ve ever read, but not without its unintentional moments of comedy gold…”

3. Peter Bright: With Mobile Safari as the new IE6, Microsoft modifies Windows Phone: “The mobile browsing experience on Windows Phone has steadily improved, taking a big leap forward in Windows Phone 8.1…. Internet Explorer team has looked at the 500 most popular mobile sites to check their behavior on Windows Phone, and, if they behave poorly, figure out what the problem is. The company says that the work it has done for the Update improves the browser’s behavior in more than 40 percent of these sites…”

Frank Rich: ‘The Invisible Bridge,’ by Rick Perlstein: “It says much about Perlstein’s gifts as a historian…

…that he persuasively portrays this sulky, slender interlude between the fall of Nixon and the rise of Reagan (as his subtitle has it) not just as a true bottom of our history but also as a Rosetta stone for reading America and its politics today. It says much about his talent as a writer that he makes these years of funk lively, engrossing and on occasion mordantly funny…. ‘The Invisible Bridge’ takes its title from a bit of cynical political advice bestowed on Nixon by Nikita Khrushchev: ‘If the people believe there’s an imaginary river out there, you don’t tell them there’s no river there. You build an imaginary bridge over the imaginary river’…. One of Perlstein’s enduring themes is that when it comes to the steady ascent of the conservative movement, contemporaneous journalists and Democratic and Republican elites alike are the last to figure out what is going on. He’s a connoisseur of wrong calls, many of them premature obituaries for the right, from now all-but-forgotten opinion titans of the day (Reston, Kraft, Alsop, Sidey, Evans and Novak)…. What’s particularly striking in the new book, though, is the cluelessness of the stalwart Republican grandees of the Ford presidential campaign, who were both blindsided and baffled by Reagan’s guerrilla victories in their own midst…”