Category: Equitablog

Should-Reads:

1. Richard Rubin and Margaret Collins: Early Tap of 401(k) Replaces Homes as American Piggy Bank: “The Internal Revenue Service collected $5.7 billion in 2011 from penalties, meaning that Americans took out about $57 billion from retirement funds before they were supposed to. The median size of a 401(k) is $24,400 as of March 31, with people older than 55 having $65,300, according to Fidelity Investments. Those funds can disappear quickly in retirement, and the early withdrawals indicate that the coming retirement crisis could be even more acute than expected…”

2. Simon Gilchrist et al.: Monetary Policy and Real Borrowing Costs at the Zero Lower Bound: “For the ZLB period, we identify two policy surprises: changes in the 2-year Treasury yield around policy announcements and changes in the 10-year Treasury yield that are orthogonal to those in the 2-year yield. The efficacy of unconventional policy in lowering real borrowing costs is comparable to that of conventional policy, in that it implies a complete pass-through of policy-induced movements in Treasury yields to comparable-maturity private yields…”

3. Mary C. Daly and Leila Bengali: Is It Still Worth Going to College?: “Earning a four-year college degree remains a worthwhile investment for the average student. Data from U.S. workers show that the benefits of college in terms of higher earnings far outweigh the costs of a degree, measured as tuition plus wages lost while attending school. The average college graduate paying annual tuition of about $20,000 can recoup the costs of schooling by age 40. After that, the difference between earnings continues such that the average college graduate earns over $800,000 more than the average high school graduate by retirement age…”

4. Charlie Crist: “I left the Republican Party because the Republican leadership went off the cliff… so unfriendly to the African-American president. I’ll just go there…. Because I was a Republican, I saw the activists and what they were doing, and it was intolerable to me… and I saw how the party–some of them–were treating the African-American president and I couldn’t take it anymore. That’s a big part of why I left the party…”

Should Be Aware of:

Continue reading “Things to Read on the Evening of May 7, 2014” →

Jennifer Taub: What Tim Geithner Got Right: “I believe Mr. Geithner correctly recognized that restoring bank profitability…

…could be hastened by undermining efforts to rescue homeowners. What he got wrong was choosing banks over people. Mr. Geithner was right when he told Liaquat Ahamed in an interview published in the New Republic that ‘there is an ongoing political effort to legislate a weakening Dodd-Frank or block political appointees’, but he was wrong when he added, ‘That effort does not have much political force now’. Mr. Geithner is right when he notes that the 2008 crisis rescue presented an ‘extreme real-time challenge’. But it would be wrong to assume that means the government had no models…. Franklin D. Roosevelt‘s administration managed a rescue and reform that was (in comparison with the Bush administration and later, the Obama Administration) far tougher on failing banks and easier on struggling homeowners. The Home Owners Loan Corporation that was established in 1933, for example, refinanced more than a million (or 20 percent of all) home mortgages in the country…. I do concur that the country is indebted — not to Mr. Geithner, but perhaps because of him. Consider the more than nine million homeowners who still owe more on their mortgages than their property is worth. This collective negative equity still holds back the economy and housing market…

Janet Yellen: Testimony: The Economic Outlook–May 7, 2014: “Valuations for the equity market as a whole…

…and other broad categories of assets, such as residential real estate, remain within historical norms…. Bank holding companies… have improved their liquidity positions and raised capital ratios to levels significantly higher than prior to the financial crisis… stress tests mandated by the Dodd-Frank Act have provided a level of confidence in our assessment of how financial institutions would fare…. For the financial sector… leverage remains subdued and measures of wholesale short-term funding continue to be far below levels seen before the financial crisis…. The Federal Reserve finalized a rule implementing section 165 of the Dodd-Frank Act to establish enhanced prudential standards for large banking firms in the form of risk-based and leverage capital, liquidity, and risk-management requirements…. The Federal Reserve is considering whether additional measures are needed to further reduce the risks associated with large, interconnected financial institutions. While we have seen substantial improvements in labor market conditions and the overall economy since the financial crisis and severe recession, we recognize that more must be accomplished. Man… are still unemployed, inflation continues to run below the FOMC’s longer-run objective, and work remains to further strengthen our financial system…

Sarah Kliff: The former Obamacare czar wants to make single-payer happen: “Don Berwick last job was running Obamacare’s implementation at the Department of Health and Human Services…

…where Republicans berated the former doctor for supporting the British health service. His next goal: bringing single-payer health care to Massachusetts. The former Medicare administrator is the only candidate in the Massachusetts governor race running on a single-payer platform. He says he settled on the idea when he was thinking through the different goals he wanted to achieve–slower health care cost growth, better quality care–all seemed most attainable when the government was the one paying everybody’s health care costs.

I began to list the policies I wanted to pursue, and then I came to the payment side…and I started to talk to the people who helped shape Vermont, looked at Vermont, and I just said, ‘oh my, there is just one straight shot here, it’s going to single-payer’. At that point it was more about thinking about putting it on the table. Now it is the entire table….

Austin Frakt does the math:

If the study of the impact of RomneyCare in Massachusetts on mortality “amenable to health care” had had the power of the study of the impact of the Medicaid lottery in Oregon, the Massachusetts study would have concluded that the effects of RomneyCare on mortality were not “significant”. A whole host of commentators would then have said that the study’s failure to find “significant” effects–never mind that effects would have had to be at least five times as large as an optimist would find plausible to be “significant”–was a point that should strengthen your belief that RomneyCare was a waste of money.

This really is not rocket science, people!

Continue reading “Why Oh Why Can’t We Be Good Bayesians?: Austin Frakt Compares the Power of the Massachusetts RomneyCare and Oregon Medicaid Studies” →

Should-Reads:

1. David Wessel: All You Need to Know About Fed Policy in Three Questions: “Larry Summers… boiled the Fed’s current situation down to three simple questions…. 1. How much slack remains in the U.S. economy?… Today, economists disagree…. Janet Yellen [sys]… ‘There may be more slack in labor markets than indicated by the unemployment rate’…. If she is right, then the Fed should hold off on tapping the brakes because a lot of those long-term unemployed will go back to work when there are more jobs. 2. Once the economy returns to normal, say 5.5% unemployment, where should the Fed expect short-term interest rates to be?… In their latest forecast, Fed officials foresee an inflation-adjusted interest rate of 2% when all the slack is gone. But they’re hedging…. 3. What else should the Fed take into account?… Avoiding financial crises by acting before dangerous bubbles or excesses develop… the elaborate game between the Fed’s monetary policy and the fiscal policy…. And then there’s the rest of the world…”

2. Josh Gans: A thousand cuts and the last mile problem: “At the heart of the problem with competition on the Internet… is the ‘last mile’… a single ‘pipe’ running into dwellings and premises. To have more than one is not cost effective. And that ‘pipe’ will always be owned by someone and that someone will have monopoly access to the consumer…. So what are the options?… 1. Regulated prices…. 2. Privatisation…. What if, instead, the customer owned the last mile… customers are surely the natural owners here anyway. 3. Municipal broadband…. There may be other options…. It is time for the US to start thinking beyond letting regulation in the form of Net Neutrality do all the work for what is fundamentally a structural issue…”

Should Be Aware of:

Continue reading “Things to Read on the Morning of May 7, 2014” →

https://www.icloud.com/iw/#keynote/BAIKZqoaOhfEcfv4MJaBhaEE-i4USJ6TcE-F/20140506_Mr._Piketty_and_the_%22Neoclassicists%22–A_Suggested_Interpretation.key

Continue reading “Slides for: Mr. Piketty and the “Neoclassicists”: A Suggested Interpretation: Wednesday Focus: May 7, 2014″ →

It has been very clear to me for three decades what needs to be done in economic theory. Start with Paul Krugman’s observations this morning:

Paul Krugman: Paradigming Is Hard: “We have a body of economic theory built around the assumptions…

…of perfectly rational behavior and perfectly functioning markets. Any economist with a grain of sense–which is to say, maybe half the profession?–knows that this is very much an abstraction, to be modified whenever the evidence suggests that it’s going wrong. But nobody has come up with general rules for making such modifications….

Continue reading “In What Sense Does Economics Need a “New Paradigm”?: (Updated) Tuesday Focus: May 6, 2014″ →

Jared Bernstein: More on the Important New Blanchflower/Posen Paper: “B&P’s finding that including labor force inactivity in their wage analysis…

…helps explain some of the variation (in a particularly important way I’ll show below) has a very important implication. If the depressed labor force is a statistically identifiable contributor to slack, then some of the current labor force inactivity can be reversed, much the same way unemployment comes down in the face of strengthening labor demand. Or, put differently, part of the decline in the labor force is just slack that’s not measured by the unemployment rate…. Yellen… [says] as much: ‘…some “retirements” are not voluntary, and some of these workers may rejoin the labor force in a stronger economy… a significant amount of the decline in participation during the recovery is due to slack…’. P&B add their view that ‘…many individuals who are not actively searching for work under current labor slack conditions remain attached to the labor market.’  All of which leads to their key punchline: ‘A substantial portion of those American workers who became inactive should not be treated as gone forever, but should be expected to spring back into the labor market if demand rises to create jobs.’ Obviously, that has important implications for both the living standards of working-age households and macroeconomic growth…

Should-Reads:

1. Austin Frakt: Improving Health Through Coverage Expansion: “How certain are we that health insurance reduces mortality rates? Weeks before the Patient Protection and Affordable Care Act (ACA) became law, a provocative column in The Atlantic [by Megan McArdle] posed this question… drew on an unrepresentative subset of the literature… including a 2009 study by Kronick. Others have asserted, on the basis of studies with designs inappropriate for causal inference, that Medicaid coverage causes worse outcomes than no coverage. Such claims that health insurance is not good for health have fueled political opposition to the ACA’s subsidized coverage expansion, including nearly half of states opting out of Medicaid expansion. These claims are incorrect…. A growing body of work… has exploited the coverage expansion in Massachusetts… Courtemanche and Zapata… Van der Wees and coworkers… Sommers and colleagues…. The likely pathway… is clear: Coverage expansion is associated with improvements in measures of access to care…. Although some health care does not substantially improve health, much of it does…. What is unreasonable and, in my view, unconscionable is to leverage a selective reading of the evidence on the benefits of health insurance in an argument to deny assistance to Americans who cannot afford to purchase basic coverage.”

2. Harold Pollack: Could Obamacare save 24,000 lives a year?: “Ten years of Romneycare data offer solid evidence that the Affordable Care Act could reduce the nation’s mortality rate…”

Should Be Aware of:

Continue reading “Things to Read on the Morning of May 6, 2014” →