Category: Equitablog

Should-Reads:

1. Nicholas Bagley: The government may have lost in D.C., but it just won in the Fourth Circuit: “Just hours after the D.C. Circuit invalidated an IRS rule extending tax credits to federally established exchanges, the Fourth Circuit issued an opinion upholding the very same rule…. In the Fourth Circuit’s view, the relevant ACA language—the language that pins the calculation of tax credits to the cost of a plan purchased on an exchange that was ‘established by the State under 1311’–is ‘ambiguous and subject to multiple interpretations’…. The context… cuts against the challengers’ interpretation…. In the court’s view, ‘it makes sense to read § 1321(c)’s directive that HHS establish “such Exchange” to mean that the federal government acts on behalf of the state when it establishes its own Exchange’…. At the end of the day, the court said that it could not definitively ‘discern whether Congress intended one way or another to make the tax credits available on HHS-facilitated exchanges’. As such, the court reasoned, under basic principles of Chevron deference, the IRS’s interpretation of the ambiguous statute was owed deference. That’s especially so, the court reasoned, since ‘the plaintiffs do not dispute that the premium tax credits are an essential component of the Act’s viability’…”

2. Mary Daly and Bart Hobijn: Downward Nominal Wage Rigidities Bend the Phillips Curve: “Both the slope and curvature of the Phillips curve depend on the level of inflation and the extent of downward nominal wage rigidities…. Downward nominal wage rigidities likely have played a role in shaping the dynamics of unemployment and wage growth during the last three recessions and subsequent recoveries.”

3. Brianna Cardiff-Hicks et al.: Do Large Modern Retailers Pay Premium Wages?: “With malls, franchise strips and big-box retailers increasingly dotting the landscape, there is concern that middle-class jobs in manufacturing in the U.S. are being replaced by minimum wage jobs in retail. Retail jobs have spread, while manufacturing jobs have shrunk in number. In this paper, we characterize the wages that have accompanied the growth in retail. We show that wage rates in the retail sector rise markedly with firm size and with establishment size. These increases are halved when we control for worker fixed effects, suggesting that there is sorting of better workers into larger firms. Also, higher ability workers get promoted to the position of manager, which is associated with higher pay. We conclude that the growth in modern retail, characterized by larger chains of larger establishments with more levels of hierarchy, is raising wage rates relative to traditional mom-and-pop retail stores…”

4. Josh Barro: Not Everyone Is Addicted to Inflation: “The fight over monetary policy is rather similar to the fight over Common Core curriculum standards. These reforms, born out of a years-long bipartisan consensus process and supported by policy wonks on both sides of the aisle, have become the latest object of conservative opposition now that President Obama is taking credit for them. The obvious move for a Republican politician wishing to please the conservative base is to oppose Common Core…. Bobby Jindal… who listed Common Core as a plank of his education reform agenda in 2012, is now an ardent foe. Yet withdrawing from Common Core has proved surprisingly hard, even in places where Republicans control all branches of government…. Look at Wisconsin. Gov. Scott Walker has decided he wants out of Common Core. But Common Core opponents have run into a roadblock in the form of the Republican chairmen…. It’s one thing to oppose Common Core when your career is not steeped in education policy; it’s another thing to throw away years of work toward a policy you’ve long thought was good. On inflation, as on curriculum, the conservatives who matter most have been generally able to resist the demands of their base.”

5. Ryan Sweet and Adam Ozimek: The U.S. Labor Market’s Chicken-Egg Dilemma: “Policymakers can approach the situation in several ways. One would be to assume that labor force participation will not respond to wage growth… and unless the Fed raises rates soon inflation will accelerate. Second, they can assume the labor force will respond… and simply wait for that to happen, holding to the current course of near-zero interest rates…. A third approach would focus on productivity growth, which could remain suppressed by underinvestment over the next couple of years. This would hurt wages and thus keep many out of the labor force longer. Since higher interest rates would likely undermine investment, the Fed should be patient. One advantage of the wait-and-see approach is that will at least allow economists and policymakers to see which story is correct…. In contrast, acting now by raising rates will leave the answer unknown to the structural-versus-cyclical question…”

Should Be Aware of:

• Fabius Maximus: Tom Clancy, manufacturer of myths that kept us happy & ignorant
• Seth Borenstein: World Breaks Monthly Heat Record 2 Times in a Row

And:

1. Charles Stross: App Store Annoyances: “For most mobile apps I use iOS…. Walled gardens may be prisons, but the bigger they are the less you notice the walls: also… the best iOS apps are pretty, and if I’m going to be interacting with a device from dawn ’til dusk I do not want it to offend my eyes every time I look at it…. But now for my main gripe…. The App Store has usability flaws that are becoming crippling…. The iTunes app store offers virtually zero library management and curation tools…. My app library is slowly sinking under a pile of… Abandonware…. Take-overware…. Forced upgrade-ware…. Get-out-of-my-face-ware…. Excessively-updated-ware…. Over to you folks. What do you acutely feel the lack of in these curated app collections?”

2. Guido Matias Cortes et al.: The Micro and Macro of Disappearing Routine Jobs: A Flows Approach: “The U.S. labor market has become increasingly polarized since the 1980s, with the share of employment in middle-wage occupations shrinking over time. This job polarization process has been associated with the disappearance of per capita employment in occupations focused on routine tasks. We use matched individual-level data from the CPS to study labor market flows into and out of routine occupations and determine how this disappearance has played out at the “micro” and “macro” levels. At the macro level, we determine which changes in transition rates account for the disappearance of routine employment since the 1980s. We find that changes in three transition rate categories are of primary importance: (i) that from unemployment to employment in routine occupations, (ii) that from labor force non-participation to routine employment, and (iii) that from routine employment to non-participation. At the micro level, we study how these transition rates have changed since job polarization, and the extent to which these changes are accounted for by changes in demographic composition or changes in the behavior of individuals with particular demographic characteristics. We find that the preponderance of changes is due to the propensity of individuals to make such transitions, and relatively little due to demographics. Moreover, we find that changes in the transition propensities of the young are of primary importance in accounting for the fall in routine employment…”

Already-Noted Must-Reads:

1. Robert Waldmann: Anchored Perceived Inflation, or How Fox News Helped Obama: “A huge recession, sluggish recovery and gigantic persistent output gap…. Core PCE inflation… fell from sticking close to 2% to fluctuating in the range of 1% to 2%. The standard lowbrow backward-looking forecasting equation… completely failed…. There are two candidate explanations for this surprising behavior of inflation. One is that there is strong downward nominal rigidity…. Another quite different explanation is that expected future inflation has a very important role in wage and price setting and that inflation expectations are anchored…. The median respondent in the Michigan University/IPSOS Reuters survey persistently expected future inflation of almost exactly 3% in almost all surveys since mid 2009… in period after period a majority of survey participants have been surprised by actual inflation lower than their forecast. This is a new phenomenon…. [Perhaps,] like inflation expectations, inflation perceptions have delinked from reality…. I give the credit to Fox news…. People… [who] rely on Fox News… are out of touch with reality–their expectations and perceptions are what Roger Ailes wants them to be…. Fox News convinces people that inflation has been and will be high…. [Thus] actual inflation is low but positive. It fits the facts which I reported. You decide.”

2. Scott Lemieux: The Teleological Fallacy: “A good point about… Thomas Frank… [by] fearless navigator of our new comment system JeremyW…. ‘[W]hat strikes me… is that… rather than a system where actual progressive change is difficult to win support for and subject to several veto points, he seems to think we have one where radical changes are constantly on the cusp of occurring and the whole neoliberal enterprise must be held together by a dastardly sellout president who can subvert the will of the people.’

   “The most crucial underlying premise of Frank’s argument is that the American political economy was on the verge of a radical transformation in 2008, and this was prevented from happening because Barack Obama saved neoliberalism’s bacon. This is a rather problematic for his argument given its transparent falsity. It’s simply not true that most Americans drew the same conclusions from the financial meltdown that Frank did, and even they did the elites who control or strongly influence many key veto points in the American system certainly didn’t…. Similar premises are also generally seen on attacks on the ACA from the left. To argue that the ACA isn’t better than the status quo ante from a progressive standpoint would be ridiculous, so the strategy is to change the baseline and compare the ACA to another alternative. In policy terms, this isn’t challenging, since you could throw a dart and Western Europe and get a health care system preferable to the ACA. But it’s also completely irrelevant…

   “Left ACA critics smart enough not to argue that Barack Obama could have forced the Senate to pass single payer through such brilliant strategery as promising senators that he would campaign for them in states where he’s enormously unpopular turn to assertions that the American insurance industry was on the verge of collapse before Barack Obama saved it… sheer lunacy…. To people who confuse American politics with the Oxford debating society, the success of Medicare should make Medicare for all highly popular. In reality, the overwhelmingly conservative white beneficiaries of Medicare are much more likely to take the lesson of ‘I’ve got mine and to hell with you’…. What’s going on with Republican statehouses and the Medicaid expansion should draw a line under that. The typical Republican state politician is willing to turn down huge pots of free money from the federal government to validate the principle that if the working poor get sick it should be left to the Great Market in the Sky to sort things out. To believe in this context that the collapse of the private American health insurance industry was inevitable absent the ACA is to enter a land of fantasia.”

3. Nicholas Bagley: ObamaCare and Halbig: What Does This Morning’s Decision Mean?: “In a major setback for the Affordable Care Act the D.C. Circuit just released a fractured opinion invalidating the IRS’s rule extending tax credits to federally facilitated exchanges…. About two-thirds of the states… declined to establish exchanges. In those states, the federal government stepped in and established the exchanges on the states’ behalf. In today’s opinion, the D.C. Circuit held that a federally facilitated exchange isn’t “established by the State under 1311.” As a result, the IRS can’t offer tax credits to those who purchase plans on such exchanges… the average estimated tax credit in 2014 is $4,700…”

4. Bob Laszewski: Halbig Decision Puts Obamacare Back on the Front Burner and Will Give Republicans a Huge Political Headache: “In the DC Court ruling one of the majority judges said: ‘The fact is that the legislative record provides little indication one way or the other of the Congressional intent, but the statutory text does. Section 36B plainly makes subsidies only available only on Exchanges established by states.’… This issue never came up…. About everyone also believed some states would not establish their own exchanges. Smaller states, for example, might opt out because they just didn’t have the scale needed to make the program work. I don’t recall a single member of Congress, Republican or Democrat, who believed that if this happened those states would lose their subsidies. At worst, this is clearly a drafting error that in the old days would have been quickly fixed in a technical corrections bill. But these aren’t the old days…. No one risks losing their subsidies until this issue is finally decided….

   “This would put Republicans in the federal exchange states in a heck of a political bind…. The political consequences for all of these people losing their subsidies and their coverage would immediately shift to the Republicans who control these state governments. Proponents of Halbig argue that the fault for people losing their coverage would be on the Obama administration because they have operated Obamacare in an illegal manner…. Millions of people would have their insurance yanked out from under them in what people will see as part of the ongoing partisan political wars being waged by people out of touch with life in the rest of the country. The fundamental problem the Halbig proponents have here is that common sense, whatever a court rules, tells people that denying subsidies in half the states was never the intent of the Congress–that this is all about political point scoring and stopping a law Republicans hate…. Obamacare’s most partisan and ideologically opposed enemies scored a big victory today…. But below the surface lots of sensible Republicans must be sweating bullets.”

Bob Laszewski: Halbig Decision Puts Obamacare Back on the Front Burner and Will Give Republicans a Huge Political Headache: “In the DC Court ruling one of the majority judges said…

…’The fact is that the legislative record provides little indication one way or the other of the Congressional intent, but the statutory text does. Section 36B plainly makes subsidies only available only on Exchanges established by states.’… This issue never came up…. About everyone also believed some states would not establish their own exchanges. Smaller states, for example, might opt out because they just didn’t have the scale needed to make the program work. I don’t recall a single member of Congress, Republican or Democrat, who believed that if this happened those states would lose their subsidies. At worst, this is clearly a drafting error that in the old days would have been quickly fixed in a technical corrections bill. But these aren’t the old days…. No one risks losing their subsidies until this issue is finally decided….

This would put Republicans in the federal exchange states in a heck of a political bind…. The political consequences for all of these people losing their subsidies and their coverage would immediately shift to the Republicans who control these state governments. Proponents of Halbig argue that the fault for people losing their coverage would be on the Obama administration because they have operated Obamacare in an illegal manner…. Millions of people would have their insurance yanked out from under them in what people will see as part of the ongoing partisan political wars being waged by people out of touch with life in the rest of the country. The fundamental problem the Halbig proponents have here is that common sense, whatever a court rules, tells people that denying subsidies in half the states was never the intent of the Congress–that this is all about political point scoring and stopping a law Republicans hate…. Obamacare’s most partisan and ideologically opposed enemies scored a big victory today…. But below the surface lots of sensible Republicans must be sweating bullets.

Sarah Kliff: Separate circuit court rules in favor of Obamacare subsidies: “The Fourth Circuit Court of Appeals…

ruled Tuesday afternoon that Obamacare subsidies could be offered through federally-run insurance marketplaces.

It is… clear that widely available tax credits are essential to fulfilling the Act’s primary goals and that Congress was aware of their importance when drafting the bill,” the Fourth Circuit Court ruled.

We’ll have more coverage soon….”

The estimable Neil Irwin and Tyler Cowen get, I think, things wrong here.

First, Tyler, commenting on Neil:

Tyler Cowen: Facts about non-residential investment: “One simple hypothesis is that it’s not worth spending more on American workers at current wage levels.  As workers, while Americans are quite good, they are just not that much better than a variety of high-IQ individuals in cheaper countries, many of whom now have acceptable infrastructure to work with.

Next, Neil:

Neil Irwin @ The Upshot: “Five years into the economic recovery…

…businesses still aren’t plowing much money into big-ticket investments for the future. Nonresidential fixed investment… still hasn’t bounced back to its pre-crisis share of the economy, let alone made up for lost ground from the record lows of 2009…. If firms increased their spending enough to close that gap, it would mean an extra $220 billion in annual economic activity and perhaps a couple of million more jobs. But there may be even more important and lasting consequences for this lack of spending by businesses. Capital spending improves worker productivity. And worker productivity improves living standards. Less capital spending by businesses means less investment in the kinds of equipment, software and intellectual property that will make the economy more competitive over the long haul.

But when I look at the time series I see, for the nominal/nominal equipment spending share of potential GDP:

And for the real/real share:

For the real/real measure, neither Tyler nor Neil’s point is a thing: as far as equipping U.S. workers with productive tools, understood as equipment and software, even in the depressed economy of today the U.
S. is, even given the enormous amount of slack in the economy, doing a better job than it did save in the decade or so that started in 2007. In longer-run perspective this is not a thing.

For the nominal/nominal measure–which assumes that the appropriate reaction to the secular decline in equipment and software prices relative to GDP in general is for companies to boost their expenditure in order to keep the nominal investment share of potential GDP the same–we still seem to be ahead of the average pace of the 1950s, 1960s, and early and mid 1970s. Whether there is a shortfall depends on whether you think that there is little economic slack left–in which case equipment and software investment is lagging substantially behind where we would expect it to be–or whether there is still an enormous amount of economic slack. If, as I think, there is still more economic slack in the economy than there was at the business-cycle troughs of 1992 and 2001, equipment investment is not doing too bad. And when you reflect on the fact that back in 1992 and in 2002 virtually everyone expected much stronger demand growth than we expect now it seems entirely reasonable to see the nominal/nominal share of equipment investment and software in potential GDP as not lower but higher than reasonably expected.

What do I think? I think that if you want to look for an explanation of why the U.S. economy is currently depressed, then look at depressed residential investment and government-spending austerity–do not look at equipment investment to infer businesses hobbled by regulations and more pessimistic about the future than the state of present and expected future demand warrants. Similarly, I think that if you want to look for indicators that U.S. workers are overpaid (or that the value of the dollar is too high) do not look at equipment investment.

587 words

Nicholas Bagley: ObamaCare and Halbig: What Does This Morning’s Decision Mean?: “In a major setback for the Affordable Care Act…

…the D.C. Circuit just released a fractured opinion invalidating the IRS’s rule extending tax credits to federally facilitated exchanges…. About two-thirds of the states… declined to establish exchanges. In those states, the federal government stepped in and established the exchanges on the states’ behalf. In today’s opinion, the D.C. Circuit held that a federally facilitated exchange isn’t “established by the State under 1311.” As a result, the IRS can’t offer tax credits to those who purchase plans on such exchanges… the average estimated tax credit in 2014 is $4,700….

In a lengthy and passionate dissent, Judge Edwards notes his disagreement at every turn with the government:

The majority opinion ignores the obvious ambiguity in the statute and claims to rest on plain meaning where there is none to be found. In so doing, the majority misapplies the applicable standard of review, refuses to give deference to the IRS’s and HHS’s permissible constructions of the ACA, and issues a judgment that portends disastrous consequences. I therefore dissent.

What happens now?… The government will probably ask the whole D.C. Circuit to review it… after filibuster reform, the court’s seven Democratic appointees outnumber its four Republican appointees.

In all likelihood, the case would be heard en banc in the late fall or winter. If the government loses again—which is unlikely, in my view—the Supreme Court would almost certainly take the case…. This is by no means is this the final word on the exchange litigation. But that’s not to minimize the significance of the court’s decision today…

More from Nicholas Bagley:

In his opinion for the Court, Judge Griffith starts with the text of the statute. He first acknowledges that a federal exchange is a 1311 exchange…. But that’s not enough. As Griffith sees it, “[t]he problem confronting the IRS Rule is that subsidies also turn on… who established them.” The statutory text requires the exchanges–even those established under 1311–to be “established by the State.” Because federal exchanges aren’t established by a state, but by the federal government, individuals who purchase a plan on federally established exchanges are ineligible for tax credits…. What about the ACA requirement that federally established exchanges report on who receives tax credits? Wouldn’t that be superfluous if no one received any such credits? “Not so,” says Griffith. “Even if credits are unavailable on federal Exchanges, reporting by [federally established] Exchanges still serves the purpose of enforcing the individual mandate.”

What about the ACA provision stating that “qualified individuals” can buy plans on an exchange? Since a “qualified individual” is defined in the statute to mean someone who “resides in the States that established the Exchange,” Griffith acknowledges that giving this provision its plain meaning would mean that “the 36 states with federal Exchanges… have no qualified individuals.” Even so, he says, “[t]he government… tilts at windmills.” In Griffith’s view, “[t]he obvious flaw in this interpretation is that the word ‘only’ does not appear in the provision.” [Griffith thus claims that] people in states with federally facilitated exchanges… [are] allowed on those exchanges, even if [they are not “qualified individuals”]…. Griffith addresses the legislative history of the ACA…. In Griffith’s view… silence about whether Congress intended the odd result of depriving individuals on federal exchanges of subsidies is not enough. “[T]here must be evidence that Congress meant something other than what it literally said.”

Griffith concludes his opinion with the following remarkable statement:

We reach this conclusion, frankly, with reluctance. At least until states that wish to can set up Exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly. But, high as those stakes are, the principle of legislative supremacy that guides us is higher still. Within constitutional limits, Congress is supreme in matters of policy, and the consequence of that supremacy is that our duty when interpreting a statute is to ascertain the meaning of the words of the statute duly enacted through the formal legislative process. This limited role serves democratic interests by ensuring that policy is made by elected, politically accountable representatives, not by appointed, life-tenured judges.

Robert Waldmann: Anchored Perceived Inflation, or How Fox News Helped Obama: “A huge recession, sluggish recovery and gigantic persistent output gap….

…Core PCE inflation… fell from sticking close to 2% to fluctuating in the range of 1% to 2%. The standard lowbrow backward-looking forecasting equation… completely failed…. There are two candidate explanations for this surprising behavior of inflation. One is that there is strong downward nominal rigidity…. Another quite different explanation is that expected future inflation has a very important role in wage and price setting and that inflation expectations are anchored…. The median respondent in the Michigan University/IPSOS Reuters survey persistently expected future inflation of almost exactly 3% in almost all surveys since mid 2009… in period after period a majority of survey participants have been surprised by actual inflation lower than their forecast. This is a new phenomenon…. [Perhaps,] like inflation expectations, inflation perceptions have delinked from reality…. I give the credit to Fox news…. People… [who] rely on Fox News… are out of touch with reality–their expectations and perceptions are what Roger Ailes wants them to be…. Fox News convinces people that inflation has been and will be high…. [Thus] actual inflation is low but positive. It fits the facts which I reported. You decide.

Scott Lemieux: The Teleological Fallacy: “A good point about… Thomas Frank…

…[by] fearless navigator of our new comment system JeremyW….

[W]hat strikes me… is that… rather than a system where actual progressive change is difficult to win support for and subject to several veto points, he seems to think we have one where radical changes are constantly on the cusp of occurring and the whole neoliberal enterprise must be held together by a dastardly sellout president who can subvert the will of the people.

The most crucial underlying premise of Frank’s argument is that the American political economy was on the verge of a radical transformation in 2008, and this was prevented from happening because Barack Obama saved neoliberalism’s bacon. This is a rather problematic for his argument given its transparent falsity. It’s simply not true that most Americans drew the same conclusions from the financial meltdown that Frank did, and even they did the elites who control or strongly influence many key veto points in the American system certainly didn’t…. Similar premises are also generally seen on attacks on the ACA from the left. To argue that the ACA isn’t better than the status quo ante from a progressive standpoint would be ridiculous, so the strategy is to change the baseline and compare the ACA to another alternative. In policy terms, this isn’t challenging, since you could throw a dart and Western Europe and get a health care system preferable to the ACA. But it’s also completely irrelevant…

Left ACA critics smart enough not to argue that Barack Obama could have forced the Senate to pass single payer through such brilliant strategery as promising senators that he would campaign for them in states where he’s enormously unpopular turn to assertions that the American insurance industry was on the verge of collapse before Barack Obama saved it… sheer lunacy…. To people who confuse American politics with the Oxford debating society, the success of Medicare should make Medicare for all highly popular. In reality, the overwhelmingly conservative white beneficiaries of Medicare are much more likely to take the lesson of ‘I’ve got mine and to hell with you’…. What’s going on with Republican statehouses and the Medicaid expansion should draw a line under that. The typical Republican state politician is willing to turn down huge pots of free money from the federal government to validate the principle that if the working poor get sick it should be left to the Great Market in the Sky to sort things out. To believe in this context that the collapse of the private American health insurance industry was inevitable absent the ACA is to enter a land of fantasia.

Should-Reads: (move up to below “plus” and before “and over here”)

1. Robert Lucas (2003): Chicago Follies (IV): “Macroeconomics was born as a distinct field in the 1940s, as a part of the intellectual response to the Great Depression. The term then referred to the body of knowledge and expertise that we hoped would prevent the recurrence of that economic disaster. My thesis in this lecture is that macroeconomics in this original sense has succeeded: Its central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades…” Via Lars P. Syll:

2. Matthew Rabin (1999): Risk Aversion and Expected-Utility Theory: A Calibration Theorem: “Within the expected-utility framework, the only explanation for risk aversion is that the utility function for wealth is concave: A person has lower marginal utility for additional wealth when she is wealthy than when she is poor. This paper provides a theorem showing that expected-utility theory is an utterly implausible explanation for appreciable risk aversion over modest stakes: Within expected-utility theory, for any concave utility function, even very little risk aversion over modest stakes implies an absurd degree of risk aversion over large stakes. Illustrative calibrations are provided…”

3. Matt O’Brien: Dear inflation truthers: This is how averages work: “Call it Amity[ Shlaes]’s Law. As a debate with an inflation truther grows longer, the probability of them asking how inflation could be low when some prices are rising faster than the average of all prices approaches one…. Inflation truthers will darkly note that the costs of stamps, coffee, haircuts, movie tickets, summer cottages, college tuition, and, of course, gasoline are all increasing more than the overall inflation rate. And they won’t mention anything that’s increasing less, let alone things that are falling in price…. Then they’ll triumphantly raise an eyebrow from beneath their tinfoil hats…. [but] unless every price is changing by the exact same amount, some of them will be increasing more than average and some of them will be increasing less. That’s how averages work. But in the hands of an inflation truther, this mathematical banality achieves a kind of totemic significance… the grassy knoll inside Area 51 where Janet Yellen is playing a record backwards that say hyperinflation is coming…. This isn’t an indictment of the government’s credibility. It’s an indictment of their own…”

4. Nick Bunker: The troubling trend in subprime auto loans: “The sudden subprime bubble in used car loans…. The causes of the financial crisis and the Great Recession of 2007-2009 are many and interconnected, but at the heart of the matter was the tendency of the financial system to channel debt to low-income households…. Today’s new lending bubble is similar to the subprime mortgage bubble–except that when it pops it won’t be as economically destructive… used cars aren’t as large a source of wealth as housing… there’s no evidence that securitized used car loans are a major part of the financial system today…. The problem is that the U.S. financial system still has the facility to create debt bubbles that target low-income Americans, fueled in part by high and rising levels of income inequality. Our financial system is less fragile since the housing and financial crises, but clearly there’s room for improvement.”

Should Be Aware of:

• CBO: The 2014 Long-Term Budget Outlook
• Josh Brown: Amazing Charts to Astound Your Friends! on Pinterest
• Paul Rosenberg: Debunking the right’s enduring myth: The truth about Richard Nixon and the fight to overturn the 1960 election
• Laura Tyson: The lack of corporate tax reform is putting US companies at a disadvantage
• Lawrence Summers (1991): The Scientific Illusion in Empirical Macroeconomics
• Daron Acemoglu et al.: Tim Geithner: Did well-connected bankers profit from his appointment to the Treasury?
• Miles Kimball: John Stuart Mill’s Rejection of Anarcho-Capitalism

And:

1. Paul Krugman: An Imaginary Budget and Debt Crisis: “For much of the past five years readers of the political and economic news were left in little doubt that budget deficits and rising debt were the most important issue facing America. Serious people constantly issued dire warnings that the United States risked turning into another Greece any day now. President Obama appointed a special, bipartisan commission to propose solutions to the alleged fiscal crisis, and spent much of his first term trying to negotiate a Grand Bargain on the budget with Republicans. That bargain never happened, because Republicans refused to consider any deal that raised taxes. Nonetheless, debt and deficits have faded from the news. And there’s a good reason for that disappearing act: The whole thing turns out to have been a false alarm. I’m not sure whether most readers realize just how thoroughly the great fiscal panic has fizzled–and the deficit scolds are, of course, still scolding…. There has been some real good news about the long-run fiscal prospect, mainly from health care. But it’s hard to escape the sense that debt panic was promoted because it served a political purpose–that many people were pushing the notion of a debt crisis as a way to attack Social Security and Medicare. And they did immense damage along the way, diverting the nation’s attention from its real problems–crippling unemployment, deteriorating infrastructure and more–for years on end…”

2. Mark Ames: Homophobia, racism and the Kochs: San Francisco’s Tech-Libertarian “Reboot” Conference is a Cesspool: “Lately, Rand Paul… has been hard-selling himself to Silicon Valley billionaires…. So now we have the ‘Reboot Lab’ conference taking place in the heart of San Francisco’s SOMA tech district. But if the purpose of the Reboot Lab conference is to merge Koch-brand libertarianism with Silicon Valley ‘libertarianism’, then the first thing you have to ask is: Why the Hell did they invite a mean homophobic hick like Cathy McMorris Rodgers to the show? Rep. McMorris Rodgers… got her higher education degree at… Pensacola Christian College (PCC)… publisher of A Beka textbooks for K-12 pupils, which teach kids that Islam is a ‘false religion’, Hindus are ‘incapable of writing history’, Catholicism is ‘a monstrous distortion of Christianity’, African religions preach ‘false religious beliefs’, liberals and Democrats are crypto-Marxists, and the United Nations is a ‘collectivist juggernaut that would crush individual freedom and force the will of an elite few on all of humanity’…. McMorris Rodgers… in the Washington state legislature… earned notoriety for blocking a bill that had already passed unanimously in Washington state’s upper house to replace the pejorative ‘Orientals’ with ‘Asians’ in official state documents. As reported in the press at the time, legislators were dumbfounded as to why McMorris Rodgers would do something as gratuitously mean-spirited…. McMorris Rodgers’ excuse, as reported in the Seattle Post-Intelligencer: ‘I’m very reluctant to continue to focus on setting up different definitions in statute related to the various minority groups. I’d really like to see us get beyond that.’… This weekend she’ll be keynoting at Reboot, sharing the stage with LeanIn.org’s Andrea Saul, whom Sheryl Sandberg hired last year to ‘help reach women–and men–so that we can all work together towards a more equal world’…”

Already-Noted Must-Reads:

1. David Cay Johnston: State’s Job Growth Defies Pessimistic Predictions After Tax Increases: “Dire predictions about jobs being destroyed spread across California in 2012 as voters debated whether to enact the sales and, for those near the top of the income ladder, stiff income tax increases in Proposition 30. Million-dollar-plus earners face a 3 percentage-point increase on each additional dollar. ‘It hurts small business and kills jobs’, warned the Sacramento Taxpayers Association, the National Federation of Independent Business/California, and Joel Fox, president of the Small Business Action Committee. So what happened?… Last year California added 410,418 jobs, an increase of 2.8 percent over 2012, significantly better than the 1.8 percent national increase in jobs. California is home to 12 percent of Americans, but last year it accounted for 17.5 percent of new jobs, Bureau of Labor Statistics data shows…. Eleven California counties, including Sacramento, accounted for almost 1 in every 7 new jobs in the U.S. last year…. Only three California counties lost jobs…. The empirical evidence also shows that the best-paying jobs tend to be clustered in states (and countries) with high taxes. The same tends to be true of wealth creators, including the most money-motivated among scientists, and existing wealth holders not actively engaged in business…. So next time someone tries to tell you that raising income taxes will destroy jobs, tell them the evidence just does not support that claim.”

2. Paul N. van de Water: New CBO Long-Term Budget Projections Tell Familiar Story: “The Congressional Budget Office (CBO)’s new long-term budget projections show that the nation’s fiscal outlook is stable for the rest of this decade and then worsens gradually…. Beyond the first ten years, CBO has made some small revisions in assumptions that, on balance, leave the projected path of debt largely unchanged. When we released our long-term estimates in May, we said:  ‘No deficit or debt crisis looms, and the weak labor market remains the nation’s most immediate economic concern. But policymakers and the public should not ignore the long-run budget problems, which remain challenging’.  That conclusion still holds…”

3. Ray Fisman: Sweden school choice: The country’s disastrous experiment with Milton Friedman and vouchers: “Americans wring their hands over the state of our schools… The angst over U.S. student performance—and its implications for the American workforce of the near future—is inevitably accompanied by calls for education reform: greater accountability, more innovation…. Advocates for choice-based solutions should take a look at what’s happened to schools in Sweden, where parents and educators would be thrilled to trade their country’s steep drop in PISA scores over the past 10 years for America’s middling but consistent results. What’s caused the recent crisis in Swedish education? Researchers and policy analysts are increasingly pointing the finger at many of the choice-oriented reforms that are being championed as the way forward for American schools. While this doesn’t necessarily mean that adding more accountability and discipline to American schools would be a bad thing, it does hint at the many headaches that can come from trying to do so by aggressively introducing marketlike competition to education…”

Ray Fisman: Sweden school choice: The country’s disastrous experiment with Milton Friedman and vouchers: “Americans wring their hands over the state of our schools…

…The angst over U.S. student performance—and its implications for the American workforce of the near future—is inevitably accompanied by calls for education reform: greater accountability, more innovation…. Advocates for choice-based solutions should take a look at what’s happened to schools in Sweden, where parents and educators would be thrilled to trade their country’s steep drop in PISA scores over the past 10 years for America’s middling but consistent results. What’s caused the recent crisis in Swedish education? Researchers and policy analysts are increasingly pointing the finger at many of the choice-oriented reforms that are being championed as the way forward for American schools. While this doesn’t necessarily mean that adding more accountability and discipline to American schools would be a bad thing, it does hint at the many headaches that can come from trying to do so by aggressively introducing marketlike competition to education…