Category: Equitablog

Stanley Fischer:

I am deeply honored that President Obama has nominated me to serve as Vice Chairman of the Federal Reserve Board. The Fed will continue to play a critical role in restoring and maintaining the health of the economy, and I look forward, if confirmed by the Senate, to working to the best of my ability with Janet Yellen and my future colleagues to achieve its policy goals.

Making the exchanges work for individuals looks to be difficult. Expanding Medicaid seems to be easy. And state governments’ incentives to acquiesce in Medicaid expansion in order to avoid creating an our-safety-net-hospitals-are-closing problem are very strong, while state governments’ incentives to spend energy and money on a working state or on their citizens’ access to a working federal exchange are less immediate: failing to do so does not create an urgent immediate problem.

Will ObamaCare turn out to be (partial) single-payer via Medicaid expansion in disguise?

Paul Krugman: The Medicaid Cure: “Something really interesting is happening on the health-care front: costs are rising much less rapidly than anyone expected. This is good news for the budget; it’s also good news for Obamacare….

Continue reading “Will ObamaCare Turn Out to Be (Partial) Single Payer?” →

From April 2008 to October 2009, the household employment survey results were disappointing and awful as the chronicled the collapse of employment in America. And since November 2009, the household employment survey results have been disappointing and awful as they have chronicled the flat-lining of the employment-to-population ratio: no greater a proportion of Americans have jobs now than had them in October 2009.

But, you might say: The employment-to-population ratio would have declined anyway because demography. Yes, but 0.5% points. Maybe 0.8% points if you push the demography coefficients to the very edge of their envelope. Not 4.8% points below its 2007 business-cycle peak, and 6.0% points below its 2000 business-cycle peak.

But, you might say: The unemployment rate! The unemployment rate is way down!! The unemployment rate is down from 10.0% to 6.7%!!! YAY!!!!

In fact, if you are Jason Furman, Chairman of President Barack Obama’s Council of Economic Advisors, the phrase “employment-to-population ratio” is found nowhere in what you write. What you write is:

Jason Furman: The Employment Situation in December: “FIVE KEY POINTS IN TODAY’S REPORT FROM THE BUREAU OF LABOR STATISTICS

1) America’s resilient businesses have added jobs for 46 consecutive months, with private sector employment increasing by 8.2 million over that period…. 2) The overall unemployment rate declined to 6.7 percent in December, the lowest since October 2008, but the lingering elevation in the unemployment rate is due to the large number of persons unemployed for more than 27 weeks…. 3) With the expiration of the EUC program at the end of December, the share of the unemployed receiving jobless benefits is likely to fall to the lowest on record…. 4) As of December 2013, the long-term unemployment rate remains markedly elevated, and recent temporary federal unemployment insurance programs have only expired when the long-term unemployment rate was roughly half of what it is now…. 5) While the unemployment rate is still too high, it is trending down, with declines for key demographic groups.

All true, but missing–and most important–is the fact that the reason the unemployment rate is trending down is not because the employment-to-population ratio is rising but because labor force participation is falling.

1. To the extent that those dropping out of the labor force will return when the labor market strengthens, the declining unemployment rate is irrelevant–the strength of the labor market is then best measured by the employment-to-population ratio.

2. To the extent that those dropping out of the labor force won’t return when the labor market strengthens, the declining unemployment rate coupled with the flat-lining employment-to-population ratio is an absolute and total complete disaster: a permanent reduction in the efficiency of the American economy at matching potential workers who could use jobs with potential jobs that could use workers, and a permanent injury to America’s wealth and productive potential.

Barista, please change that decaf double expresso to a caf…

Aaron Carroll raises my quality of life!

Aaron Carroll: Do people still not get the hydration thing?: “In 2007, I published a paper in the BMJ on medical myths. One of the them was the idea that you needed eight glasses of water a day….

Two years later, we published a book on the subject. One of the included myths was the 8 glasses of water thing. A whole separate chapter was: ‘Caffeinated beverages are dehydrating’. Hint – they’re not.

So you’ll forgive me for imagining that this issue was put to rest. I was wrong. “No Evidence of Dehydration with Moderate Daily Coffee Intake: A Counterbalanced Cross-Over Study in a Free-Living Population“….

Guess what? Coffee isn’t dehydrating. Sigh.

Of course, there remains the question of just what counts as “moderate” daily coffee intake…

Robert Waldmann: Poverty and the “Laboratories of Democracy”:

Marco Rubio proposes, among other things, the bold new idea of block grants. [Kevin] Drum condemns the proposal, but writes that there have been some advantages from Fedralism. I throw a cow. He wrote: ‘state experimentation, a la welfare reform in the early 90s, could be pretty valuable’. ‘if each of the various state policies were rigorously studied’…. What have we learned from a state level welfare reform experiment? Well, we now know that welfare reform kills people: http://angrybearblog.com/2013/06/welfare-reform-kills.html…. AFDC ‘participants in the experimental group had a 16 percent higher mortality rate than members of the control group (hazard ratio: 1.16; 95% confidence interval: 1.14, 1.19; p < 0.01). This amounts to nine months of life expectancy lost between the ages of thirty and seventy for people in FTP’. Odd that this statistically significant result from an actual experiment has had no influence on the debate at all. There is little point having laboratories of democracy if people ignore the experimental results and just go with their prejudices, as we do…

Must-Reads:

1. Noah Smith: Heroes of NoahSmithian Weblogging: Cory Doctorow: “Besides being one of my favorite science fiction authors, the founder of BoingBoing… has shaped the blogosphere. In his novels, Doctorow is unrivaled in his ability to portray accurately the culture of modern geeks and nerds, and his blog is basically set up to cater to that segment… cool new technologies, science fiction, weird news, and social commentary. Geek culture itself wouldn’t be what it is without Cory Doctorow (who, by all accounts, blogs from a balloon wearing a red cape and goggles)…. esides being the Alpha Geek of the North American information age… his libertarianism is… ‘pure’, unsullied by any connection with moneyed interests or the ghost of the Confederate States of America. Doctorow’s idea of freedom is all about what makes individual human beings feel free, not about what Robert Nozick or Ayn Rand arbitrarily defined as ‘liberty’ in order to support an anti-leftist agenda. And Doctorow fights passionately for his idea of liberty…. His book Little Brother was the most inspiring treatise I’ve read about the insanity of America’s post-9/11 curbs on civil liberties. To think that it came from a Canadian!”

2. Robert Reich: Why The Republican’s Old Divide-and-Conquer Strategy–Setting Working Class Against the Poor–Is Backfiring: “For almost forty years Republicans have pursued a divide-and-conquer strategy intended to convince working-class whites that the poor were their enemies. The big news is it’s starting to backfire. Republicans told the working class that its hard-earned tax dollars were being siphoned off…. The poor were ‘them’–lazy, dependent on government handouts, and overwhelmingly black–in sharp contrast to ‘us’, who were working ever harder, proudly independent…. The strategy also served to distract attention from the real cause of the working class’s shrinking paychecks–corporations that were busily busting unions, outsourcing abroad, and replacing jobs with automated equipment and, subsequently, computers and robotics. But the divide-and-conquer strategy is no longer convincing because the dividing line between poor and middle class has all but disappeared…. Poverty is now a condition that almost anyone can fall into…. Fifty years ago, when Lyndon Johnson declared a ‘war on poverty’, most of the nation’s chronically poor had little or no connection to the labor force, while most working-class Americans had full-time jobs…. Economic insecurity is endemic. Working-class whites who used to be cushioned against the vagaries of the market are now fully exposed…. This new face of poverty–a face that’s both poor, near-poor, and precarious working middle, and that’s simultaneously black, Latino, and white–renders the old Republican divide-and-conquer strategy obsolete…”

3. Adrianna Macintyre: Sometimes health policy can’t be about about health care: “Toward the end of the month, a household’s resources—income, SNAP, Social Security, and/or other benefits—can become exhausted, ostensibly changing food consumption patterns…. This chart drives the point home. Low-income individuals are at higher risk of hypoglycemia—and that risk changes over the course of a month…. Their high-income counterparts exhibit no significant trend. Appendicitis findings are offered as a ‘control’…. According to the authors, ‘hypoglycemia is one of the most common adverse drug events leading to visits to the emergency department’, and it’s been estimated that episodes of care for hypoglycemia have an average cost of $1,186. But it’s not the only condition that constrained food budgets might impact: ‘It is reasonable to postulate that the exhaustion of food budgets late in the month might also influence admission patterns for other diet-sensitive diseases, such as congestive heart failure.’… Policy wonks have a terrible habit of focusing on insurance and health system design (and here I count myself, because health care financing is the research I find most interesting, so it’s what I write about). This gives short shrift to the ‘social determinants’ of health—upstream factors related to lifestyle, environment, and socioeconomic status—that cannot be corrected by medical interventions. We’re fond of highlighting how much more the United States spends on health services, but an idiosyncrasy that receives less attention is how much less we spend on other social services…”

4. Ryan Avent: Inequality: On important but irrelevant facts: “WRITING on Thomas Piketty’s new book, Nicolas Goetzmann notes: ‘I think that Piketty missed something which might be important: Capital is mobile, workers are not, and at the end we have this: Gini is reducing on a worldwide basis since 2005.’ Scott Sumner adds: ‘I also like Goetzmann’s comment about global Gini coefficients. Liberals should care about global welfare. Are they closet nationalists?’ These sorts of remarks are common responses to those pointing out that inequality is soaring across the rich world, and they strike me as very problematic…. It implies, without ever making an actual argument, that efforts to reduce income inequality within rich economies must necessarily slow reductions in global inequality. Why bring up the global statistic unless you are worried that expressions of concern about national inequality are likely to undermine the global trend?…. I’m not sure why someone would want to stake out the position that subsidised pre-school for disadvantaged children is unnecessary, for example, because global inequality is falling…. [Moreover,] inequality is growing within emerging markets…. One of the most important points in Mr Piketty’s book is that the conventional wisdom that development naturally increases and then reduces inequalities is wrong…. So yes, global inequality has been falling. That is no reason for people of any ideological persuasion to ignore very worrying trends in national distributions of income and wealth.”

Continue reading “Things to Read on the Afternoon of January 9, 2014” →

Ryan Avent: Inequality: On important but irrelevant facts: “WRITING on Thomas Piketty’s new book, Nicolas Goetzmann notes: ‘I think that Piketty missed something which might be important: Capital is mobile, workers are not, and at the end we have this: Gini is reducing on a worldwide basis since 2005.’ Scott Sumner adds: ‘I also like Goetzmann’s comment about global Gini coefficients. Liberals should care about global welfare. Are they closet nationalists?’

These sorts of remarks are common responses to those pointing out that inequality is soaring across the rich world, and they strike me as very problematic…. It implies, without ever making an actual argument, that efforts to reduce income inequality within rich economies must necessarily slow reductions in global inequality. Why bring up the global statistic unless you are worried that expressions of concern about national inequality are likely to undermine the global trend?…. I’m not sure why someone would want to stake out the position that subsidised pre-school for disadvantaged children is unnecessary, for example, because global inequality is falling…. [Moreover,] inequality is growing within emerging markets…. One of the most important points in Mr Piketty’s book is that the conventional wisdom that development naturally increases and then reduces inequalities is wrong…. So yes, global inequality has been falling. That is no reason for people of any ideological persuasion to ignore very worrying trends in national distributions of income and wealth.”

Robert Reich: Why The Republican’s Old Divide-and-Conquer Strategy–Setting Working Class Against the Poor–Is Backfiring:

For almost forty years Republicans have pursued a divide-and-conquer strategy intended to convince working-class whites that the poor were their enemies. The big news is it’s starting to backfire. Republicans told the working class that its hard-earned tax dollars were being siphoned off…. The poor were ‘them’–lazy, dependent on government handouts, and overwhelmingly black–in sharp contrast to ‘us’, who were working ever harder, proudly independent…. The strategy also served to distract attention from the real cause of the working class’s shrinking paychecks–corporations that were busily busting unions, outsourcing abroad, and replacing jobs with automated equipment and, subsequently, computers and robotics. But the divide-and-conquer strategy is no longer convincing because the dividing line between poor and middle class has all but disappeared…. Poverty is now a condition that almost anyone can fall into…. Fifty years ago, when Lyndon Johnson declared a ‘war on poverty’, most of the nation’s chronically poor had little or no connection to the labor force, while most working-class Americans had full-time jobs…. Economic insecurity is endemic. Working-class whites who used to be cushioned against the vagaries of the market are now fully exposed…. This new face of poverty–a face that’s both poor, near-poor, and precarious working middle, and that’s simultaneously black, Latino, and white–renders the old Republican divide-and-conquer strategy obsolete…

Robert Rubin: Sound government finances will promote recovery: “Debates persist in the US and eurozone about growth and job creation versus fiscal discipline. This false choice diverts fiscal focus away from a balanced approach that could achieve both imperatives….

Our unsound fiscal trajectory undermines business confidence, and thus job creation, by creating uncertainty about future policy and exacerbating concerns about the will of Congress to govern…. A sound fiscal trajectory is also a prerequisite for interest rates conducive to growth…. Unconventional policy decisions by central banks are sometimes justified as the only available tools in the absence of necessary government policies. The right criterion for action, however, is not the absence of alternatives, but an assessment of costs and benefits. In the US, the Federal Reserve’s first programme of quantitative easing was a courageous response to the crisis…. In the US, there are widely posed questions about the benefits of QE3, but the risks are significant…. The Fed’s dramatic expansion of bank reserves could feed excessive credit growth. Along with the possible erosion of Fed credibility on inflation, that could also feed inflationary expectations….

Unconventional monetary policy and stimulus can be part of a successful economic programme for a period of time. But they are no substitute for fiscal discipline, public investment and structural reform…

Here is the arithmetic: Right now the U.S. government can issue a 30-year inflation-protected maturity with a yield of 1.5% per year. Right now if the U.S. spends an extra $100 billion next year it gets $200 billion of increased real GDP and $67 billion of additional tax revenue next year, for $33 billion of additional debt and $500 million of additional annual debt interest in the further future. If $200 billion of additional GDP next year has a long-term boost to GDP of even 1/100 as large–either as extra workers set to work brush-up on their skills, as organizations and capital learn more about how to produce, or as greater corporate cash flow leads to productive private or as government purchases are diverted to productive public investment, the extra annual debt service is more than covered by extra taxes produced by higher potential output. Rubin says that stimulus is “no substitute for fiscal discipline”. But as long as interest rates and economic slack are at their current levels, stimulus is fiscal discipline. It is the failure to undertake fiscal stimulus right now that is long-run fiscal profligacy.

Why doesn’t this arithmetic show up anywhere in Rubin’s piece?

You cannot compare costs and benefits without valuing them–without using numbers. And yet there is not a single number in Robert Rubin’s op-ed…