Category: Equitablog

Neera Tanden, Zeke Emanuel, and Topher Spiro: A New Management Structure for a New Phase of the Affordable Care Act: “A CEO of marketplace health insurance…

…who would oversee the federal marketplace, the state marketplaces, and insurance oversight and regulation… the single leader accountable for all of implementation… a background in health care issues, as well as private-sector experience, and should be appointed for the remainder of the administration…. An advisory board composed of the secretary of health and human services—who would serve as the chairperson—the administrator of the Centers for Medicare & Medicaid Services, the commissioner of the Internal Revenue Service, and two private-sector individuals… free from conflicts of interest…. A technical advisory committee composed of representatives from the IT general contractor, the Centers for Medicare & Medicaid Services, the Office of Immigration Statistics, the Social Security Administration, the Internal Revenue Service, state Medicaid agencies, state insurance commissioners, and insurers…. A a work plan that prioritizes and schedules the long list of tasks… within specific timeframes. This plan should be made transparent to stakeholders and the general public.

Jonathan Chait: Obama’s Moment of Environmental Decision: “On June 2, President Obama will personally announce new Environmental Protection Agency regulations on existing power plants…

which will be the policy centerpiece of his second term. Nobody knows how these rules will work or how ambitious they will be…. He wants them to effectively reduce carbon pollution, he wants them not to cost consumers too much, and he wants to be sure they can survive legal challenge. The trouble is that he can only pick two of these. And the primary question weighing on administration regulators as they make their decision will be how to read the mind of Anthony Kennedy…. The Natural Resources Defense Council… [proposes] a regulatory scheme that would mandate that every state reduce its emissions…. The NRDC plan is clever because it allows every state to find the most cost-effective way to meet its emissions targets…. It has all the market-based benefits of cap-and-trade, in other words. The risk is that… it leans on defensible but untested applications of the Clean Air Act. If the Supreme Court decides to invalidate the plan, he’ll be left with nothing. The alternatives would be either to write a weak regulation… or… an extremely strong regulation that imposes very high dislocation costs on states that rely heavily on coal-powered electricity. Both… would… run less risk of being overturned. Effective, legally safe, and cheap–Obama has to pick two. The legal risk can itself be boiled down to the risk that Anthony Kennedy, the Supreme Court’s swing justice, will overturn the regulations…. Kennedy… had a prominent role in the Supreme Court case that authorized the EPA to regulate carbon dioxide, which might make him hesitant to slap down the agency for carrying out his ruling. He has continued to display a preference for regulations that meet his own sense of practicality…. The mysterious workings of the mind of Anthony Kennedy have perplexed a generation of legal scholars. In this case, the outcome may literally determine the fate of the world.

Matt O’Brien: It’s Not Personal: “Long-term unemployment is a terrifying trap that…

…even in the best of times, is difficult to escape. And it’s a trap that you can get stuck in for no reason other than bad luck. Today, there are still almost 3.5 million people who have been out of work for six months or longer and are looking for work. There isn’t a more urgent crisis, and there are three things you should keep in mind about it… the long-term unemployed aren’t much different from the short-term unemployed… The long-term unemployed have a hard time getting companies to even look at their job applications, let alone hire them…. There’s never been this much long-term unemployment before…. Long-term unemployment isn’t a story about lazy people choosing to live on the dole instead of getting a job. It’s a story about people who want a job not being able to find one, because there aren’t enough of them—and then falling to the back of the jobs line. That is, it’s a story about macroeconomic bad luck. Think about it this way. We know that companies discriminate against the long-term unemployed. That’s why their ranks have been so slow to come down. But we also know that the long-term unemployed are like the short-term unemployed in every way except for how long they’ve been out of work. So we don’t know why so many more short-term unemployed people are becoming long-term unemployed today than in the past—unless it’s the economy, stupid. And it is the economy. Ben Casselman of 538 has already shown that the best predictor for how long you were unemployed was the unemployment rate when you lost your job…. There’s no reason to think that the long-term unemployed are necessarily lazy or lacking skills…. The lesson here is that we need stimulus…. Nobody should lose their career because they lost their job at a bad time.

Should-Reads:

1. Felix Salmon: The most expensive lottery ticket in the world: “Founding a Silicon Valley startup, then, is a deeply irrational thing to do: it’s a decision to throw away a large chunk of your precious youth at a venture which is almost certain to fail. Meanwhile, the Silicon Valley ecosystem as a whole will happily eat you up, consuming your desperate and massively underpaid labor, and converting it into a few obscenely large paychecks for a handful of extraordinarily lucky individuals. On its face, the winners, here, are the people with the big successful exits. But after reading No Exit, a different conclusion presents itself. The real winners are the happy and well-paid engineers, enjoying their lives and their youth while working for great companies like Google. In the world of startups, the only winning move is not to play.”

Should Be Aware of:

Continue reading “Things to Read on the Afternoon of May 17, 2014” →

• Adam Smith (1776): Republican Virtue in the North American Colonies
• Emanuel Derman (2014): Berkeley Masters in Financial Engineering Commencement Speech
• Vladimir Lenin (1923): Last Testament

Colin Lewis: Larry Summers gets it wrong on Piketty and Robots: “Summers gets much right, especially with respect to how many people are unemployed….

He… [thinks] robotics will have a major impact… [and that] Thomas Piketty does not emphasize the threat of robotics… enough…. ‘I am not sure that Piketty’s theory emphasizes the right aspects. Looking to the future, my guess is that the main story connecting capital accumulation and inequality will not be Piketty’s tale of amassing fortunes. It will be the devastating consequences of robots, 3-D printing, artificial intelligence, and the like for those who perform routine tasks. Already there are more American men on disability insurance than doing production work in manufacturing. And the trends are all in the wrong direction, particularly for the less skilled, as the capacity of capital embodying artificial intelligence to replace white-collar as well as blue-collar work will increase rapidly in the years ahead.’… [But] Piketty does look to the future… [his] extreme example is a society where robots produce the entire output… and [the] factoral income distribution would be 100% capital, 0% labor…. We should take the threat of robots and potential mass unemployment seriously, as Summers says… but more importantly we should consider Piketty’s warning on who owns the robots…

Martin Feldstein: Piketty’s Numbers Don’t Add Up: Ignoring dramatic changes in tax rules since 1980 creates the false impression that income inequality is rising

Those are the headlines and subheads that the Wall Street Journal’s editors gave his op-ed on Thomas Piketty…

I cannot imagine that any other than a very few highly detached from reality would be happy to be associated with the claim that income inequality is not rising across the North Atlantic: that is not a hill to die on today.

And I cannot imagine that any other than a very few highly detached from reality would be happy to be associated with the claim that Piketty’s estimates of increasing wealth-to-income and wealth concentration “don’t add up” given their reflection in secularly-high equity valuation ratios, bond valuation ratios, and capital income shares.

Now Marty’s op-ed itself is quite good. But the impact it will have on the debate is dominated by the title and subhead the editors give it.

And there does come a point where one’s editors are so heavily engaged in the ideological-warfare game that the only way to win is not to play. And I think we have reached that point here…

Ryan Avent: Secular Stagnation: Glut Busters: “A particular view about the macroeconomics of the pre-crisis period seems to be coalescing….

Since we haven’t solved the underlying savings glut, the American economy now has three options, according to this view:

• Suffer through the same low growth (“secular stagnation”) that was characteristic of the early 2000s.
• Use monetary policy to raise demand through higher asset prices and credit growth, restoring decent growth but creating a risk of new bubbles.
• Use deficit-financed fiscal policy to absorb excess savings and boost demand, without relying on rapid growth in private credit.

Certainly, parts of this story are correct. But is this really the best way to describe what was taking place?… One might… argue that the problem in the 2000s was not that the Fed haplessly created a bubble in order get the economy going again…. The problem was that it… ought to have done… was intervene aggressively in foreign-exchange markets to dampen the dollar’s rapid appreciation…. Doug Campbell… [and] Ju Hyun Pyun…. Now obviously, direct intervention in foreign-exchange markets is not the sort of thing America is supposed to do…. But this is a taboo that needs rethinking. Depreciations have historically been the most effective way to lift expectations for growth and inflation….

The Fed will not do any of the above autonomously. The decision to change the global monetary system will be political, just as it was in 1933 and in 1971, when American presidents made the necessary policy shift. Such decisions only tend to be made when the status quo is clearly untenable or when large political majorities demand a different course. Unfortunately, America’s secular stagnation mess does not seem likely to test either limit for some time to come.

Consumption spending has fallen less relative to potential GDP than has GDP as a whole: the sectors that have fallen more than proportionately relative to potential are construction and government purchases–not household consumption spending.

Household consumption spending has fallen, but not more than the average component of GDP:

For reasons I do not completely understand, Amir Sufi and Atif Mian’s House of Debt is being sold as a “consumer” alternative to the “banking panic” theory of the crash of 2007-2009. See, for example, Ryan Avent:

Ryan Avent: Free exchange: The opposite of insurance: A new book argues that household debt, not broken banks, fuelled the recent recession…. The notion that financial crises are transmitted to the broader economy by the “bank-lending channel” has dominated… policymaking…. Atif Mian… and Amir Sufi[‘s book]… challenges this orthodoxy. The real cause of the post-crisis slump, they argue, was… the run-up in household debt that came before, which became an anchor on consumption when home prices subsequently collapsed….

Continue reading “Reviewing Ryan Avent’s Review of Amir Sufi and Atif Mian’s House of Debt: Friday Focus: May 16, 2014” →