Category: Equitablog

Dylan Scott: New Hampshire Advances Medicaid Expansion Under Obamacare: “The GOP-controlled New Hampshire Senate approved a privatized plan for expanding Medicaid under Obamacare….

The bill passed 18 to 5. Five of the 13 Republicans opposed the plan…. The proposal would use Medicaid dollars to help low-income residents purchase private health coverage, as Arkansas has done. The Democratic-controlled House is expected to approve the plan, and Democratic Gov. Maggie Hassan has expressed her support. About 58,000 New Hampshirites are expected to gain coverage under the expansion.

Joseph E. Stiglitz: Stagnation by Design: “Markets are not self-correcting.

The underlying fundamental problems that I outlined earlier could get worse–and many are. Inequality leads to weak demand; widening inequality weakens demand even more; and, in most countries, including the US, the crisis has only worsened inequality…. Markets have never been very good at achieving structural transformations quickly on their own…. The sectors that should be growing, reflecting the needs and desires of citizens, are services like education and health, which traditionally have been publicly financed, and for good reason. But, rather than government facilitating the transition, austerity is inhibiting it…

Tim Worstall: Ritchie on redistributionl: “There’s another very interesting bit to add to this as well.

Which is that other work tells us that how you do the redistribution does indeed matter. Transactions taxes are worst (they have the highest deadweight costs), then capital and corporation taxes, then income taxes, then consumption and finally repeated taxes upon real property. And it’s notable that the countries that do the most redistribution (the Nordics, they have the biggest gaps between market and post tax post benefit gini) do it by having heavier than we do consumption taxes and lighter than we do capital and corporate ones (note that that last is influenced not so much by the rate but by the base).

Tim Duy: A Lackluster Start to the Year: “Incoming data… disappoint[s]….

Part of the blame should fall on overly optimistic interpretations of data patterns at the end of 2013. In particular, the recently downwardly revised GDP numbers were less than spectacular abstracting away from inventory effects. Looking at real final sales, I see slow and steady, or even a modest softening, not magic acceleration…. The latest data disappointments were the weak ADP report suggesting a just 139k private sector NFP gain in March and a similarly weak reading on the service side of the economy from ISM…. My baseline expectation for monetary policy is that recent softer data makes little difference in the tapering plans…. My suspicion is that [Yellen] will need to see real evidence that labor market slack has evaporated in the form of faster wage growth before she begins to worry of overshooting.

Must-Reads:

1. Ryan Avent: Monetary policy: No cushion needed, apparently: “THE Federal Reserve basically never sees a recession coming (at least when it isn’t busily creating one to whip inflation)…. San Francisco Fed president John Williams spoke as if America’s most recent macroeconomic convulsion took place in the 1970s: ‘In his own economic forecast, Mr Williams said, the Fed will raise interest rates in the middle of next year with the unemployment rate at about 6 per cent, inflation at 1.5 per cent and “everything moving in the right direction”.“At that point if we don’t start to adjust monetary policy there’d be a risk of overshooting,” he said. “You don’t wait until you’re at full employment before you start to raise interest rates from zero.”’ That reads to me like the words of a man who has learned nothing at all from the experience of the past few years. That’s probably a little unkind; what is said in public never corresponds exactly to what is said in discussions with the rest of the FOMC or in private. But I find this very troubling…. Monetary policy appears to have consistently underreacted to weak demand—delivering too little stimulus with too long a lag. That underreaction is down partly to a lack of familiarity with ‘unconventional’ policy tools, and partly to FOMC members’ concerns that unconventional tools involve risks that normal interest rate policy does not. I don’t know exactly how much the zero lower bound has cost the American economy over the past half decade, but the bill probably runs to several trillion dollars. So you’re on the FOMC. You have plenty of recent, bitter experience with this important assymetry…. How do your views evolve? Not at all, it would seem, if you are Mr Williams, who appears to be suggesting that any risk of overshooting is intolerable. Better to put the current recovery at risk and court future disaster than treat the inflation target symetrically.
2. Tim Noah: The partisan divide over the Earned Income Tax Credit: “President Obama’s new budget increases spending on and expands eligibility for the Earned Income Tax Credit, the largest and most successful government assistance program for the working poor. The much-praised House GOP tax reform introduced last week would cut the EITC, even though a House GOP report excoriating most federal assistance to the poor singled out the program for applause. This new partisan difference over the EITC… speaks volumes…. Welfare reform should have ended the partisan scrimmage over welfare dependency. Instead, it merely shifted the goalposts. Previously, the GOP had praised the ‘deserving’ (i.e., working) poor even as it derided the ‘dependent’ (i.e., welfare-collecting) poor…. Republicans… rebrand[ed] as ‘dependent’ any low-income person who collected government assistance, even if that person also had a job…. House Ways and Means Committee Chairman Dave Camp’s tax reform… would in effect replace the EITC with a payroll-tax exemption up to $4,000 and impose various restrictions… would cut this highly-regarded program by $217 billion over the next decade. Robert Greenstein, chairman of the Center on Budget and Policy Priorities, a Washington nonprofit, calculates that a mother with two children working full-time at the minimum wage would lose roughly $2,000 per year once the change went fully into effect.”

Continue reading “Things to Read at Lunchtime on March 6, 2014” →

Ryan Avent: Monetary policy: No cushion needed, apparently: “THE Federal Reserve basically never sees a recession coming (at least when it isn’t busily creating one to whip inflation)….

San Francisco Fed president John Williams spoke as if America’s most recent macroeconomic convulsion took place in the 1970s: ‘In his own economic forecast, Mr Williams said, the Fed will raise interest rates in the middle of next year with the unemployment rate at about 6 per cent, inflation at 1.5 per cent and “everything moving in the right direction”.“At that point if we don’t start to adjust monetary policy there’d be a risk of overshooting,” he said. “You don’t wait until you’re at full employment before you start to raise interest rates from zero.”’ That reads to me like the words of a man who has learned nothing at all from the experience of the past few years. That’s probably a little unkind; what is said in public never corresponds exactly to what is said in discussions with the rest of the FOMC or in private. But I find this very troubling…. Monetary policy appears to have consistently underreacted to weak demand—delivering too little stimulus with too long a lag. That underreaction is down partly to a lack of familiarity with ‘unconventional’ policy tools, and partly to FOMC members’ concerns that unconventional tools involve risks that normal interest rate policy does not. I don’t know exactly how much the zero lower bound has cost the American economy over the past half decade, but the bill probably runs to several trillion dollars. So you’re on the FOMC. You have plenty of recent, bitter experience with this important assymetry…. How do your views evolve? Not at all, it would seem, if you are Mr Williams, who appears to be suggesting that any risk of overshooting is intolerable. Better to put the current recovery at risk and court future disaster than treat the inflation target symetrically.

Tim Noah: The partisan divide over the Earned Income Tax Credit: “President Obama’s new budget increases spending on and expands eligibility for the Earned Income Tax Credit,

the largest and most successful government assistance program for the working poor. The much-praised House GOP tax reform introduced last week would cut the EITC, even though a House GOP report excoriating most federal assistance to the poor singled out the program for applause. This new partisan difference over the EITC… speaks volumes…. Welfare reform should have ended the partisan scrimmage over welfare dependency. Instead, it merely shifted the goalposts. Previously, the GOP had praised the ‘deserving’ (i.e., working) poor even as it derided the ‘dependent’ (i.e., welfare-collecting) poor…. Republicans… rebrand[ed] as ‘dependent’ any low-income person who collected government assistance, even if that person also had a job…. House Ways and Means Committee Chairman Dave Camp’s tax reform… would in effect replace the EITC with a payroll-tax exemption up to $4,000 and impose various restrictions… would cut this highly-regarded program by $217 billion over the next decade. Robert Greenstein, chairman of the Center on Budget and Policy Priorities, a Washington nonprofit, calculates that a mother with two children working full-time at the minimum wage would lose roughly $2,000 per year once the change went fully into effect.

Must-Reads:

1. Aaron Carroll and Austin Frakt: Zombie Medicaid arguments: “They just won’t die…. We want to focus on the first statement, the one that declares that Medicaid doesn’t improve patients’ health. That’s not true…. There are lots of legitimate claims to make against Medicaid. It under-reimburses physicians, for instance, causing access problems in some areas and for some beneficiaries…. But the natural response to saying docs don’t get paid enough would be to increase Medicaid funding to improve that. Gutting the program will do the opposite…. We look forward to a continuing and lively debate on how to reform the health care system. But declaring that health insurance in the form of Medicaid hurts people or ‘doesn’t work’ ignores the real good that it does…. Let’s listen to each other’s arguments and respond to them, instead of repeating talking points past each other.”

2. Jon Aziz: Why Is the American internet so slow?: “Other countries have done more to ensure that the market is open to competition. A 2006 study comparing the American and South Korean broadband markets concluded: ‘[T]he South Korean market was able to grow rapidly due to fierce competition in the market, mostly facilitated by the Korean government’s open access rule and policy choices more favorable to new entrants rather than to the incumbents. Furthermore, near monopoly control of the residential communications infrastructure by cable operators and telephone companies manifests itself as relatively high pricing and lower quality in the U.S. [Professor Richard Taylor and Eun-A Park via Academic.edu]’ And the gap between the U.S. and Korea has only grown wider since then…”

Continue reading “Things to Read at Night on March 5, 2014” →

Jon Aziz: Why is American internet so slow?: “Other countries have done more to ensure that the market is open to competition.

A 2006 study comparing the American and South Korean broadband markets concluded:

[T]he South Korean market was able to grow rapidly due to fierce competition in the market, mostly facilitated by the Korean government’s open access rule and policy choices more favorable to new entrants rather than to the incumbents. Furthermore, near monopoly control of the residential communications infrastructure by cable operators and telephone companies manifests itself as relatively high pricing and lower quality in the U.S. [Professor Richard Taylor and Eun-A Park via Academic.edu]

And the gap between the U.S. and Korea has only grown wider since then…

And I cannot see why he thinks what he thinks:

Pedro Nicolaci da Costa: Rubin Says Fed’s QE3 Will Lead to Trouble: “Rubin took the central bank to task for its bond-buying program…

The real issue is, what were the risks and rewards of QE3? There’s a widely held view that the benefits of QE3 have been relatively limited…. These vast flows of capital have gone up the risk curve and created what may well have been excesses, that now as we know are tending to unravel–and that has a destabilizing effect…. I don’t think there are any magic wands. Uncertainties could be far greater with the vast increases that have taken place in the balance sheet of the Fed….

Continue reading “I Continue to Fail to Understand Robert Rubin Thought…: Wednesday Focus: March 5, 2014” →