Category: Equitablog

Paul Krugman: Secular Stagnation Arithmetic:

The key point is NOT to focus on events since crisis struck; this is not a case of taking a business-cycle slump and imagining that it will last forever. Instead, the argument is that the sources of demand during the good years-the Great Moderation from 1985-2007–are not going to be available even when the aftereffects of crisis have faded away…. Underneath the apparent stability of the Great Moderation… debt… rising by around 2 percent of GDP annually; that’s not going to happen in future… a reduction in demand… of around 2 percent of GDP….

Slowdown in the rate of growth of potential output, mainly… demography… perhaps… slowing productivity…. CBO thinks… 1 percentage point…. The [investment] ‘accelerator’… is somewhat above 2[:]… a 1 percentage point drop in potential growth would reduce investment spending by 2 percent of GDP…. We seem to be depressing aggregate demand by 4 percentage points….

Now, this effect can be offset to some degree by reducing interest rates. But can this be enough?… The average real rate during the GM years was 1.9 percent… hard to avoid the conclusion that the average real rate looking forward will have to be negative. If inflation stays relatively low, e.g. 2 percent, this would mean an economy that often, perhaps usually, finds itself in a liquidity trap…

Over at Equitable Growth’s Equitablog I am starting a hopefully-weekly feature I am going to call: “The Honest Broker”. The point of it is to, once a week, give people a 3000-or-so-word introduction and assessment that will bring them up to speed on some particular issue of importance to equitable growth.

This will be in large part the point of the Equitablog weblogging exercise: we want to play our position, and help focus the attention of the public sphere on the issues that are truly important, rather than joining the webloggy equivalent of the 20 six-year-olds in a mass around the soccer ball who have forgotten which goal is there’s and are kicking randomly.

And putting out, once a week or so, an introduction-and-assessment of an issue area seems a good way to do that.

In a year we will have 52 slots. That should be enough to cover great deal of the issues relevant to equitable growth–to the seamless web of advancing material well-being, in its components of accumulation and investment (of factors, ideas, and institutions), production (providing incentives to use accumulated and invested resources to produce stuff, producing stuff in the right proportions, and ensuring demand is there to get the produced stuff bought), distribution (plus its feedbacks onto production and accumulation and investment), and implementation.

Plus dialogue: this will work only if we get the dialogue going…

So: Suggestions? Examples? Pitches? Requests?

The first three are:

• Washington Center for Equitable Growth | Ashok Rao on Has Rising Inequality Really Been a Problem Over the Past Generation?: The Honest Broker for the Week of December 8, 2013
• Washington Center for Equitable Growth | Is Growth Getting Harder? If so, Why, and What Can We Do About It?: The Honest Broker for the Week of December 1, 2013
• Washington Center for Equitable Growth | Chilean Politics, “Neoliberalismo”, Once-And-Future President Michelle Bachelet, “Seeing Like a State”, the Really-Existing Socialist and Neoliberal Projects of the Twentieth Century, and the Electoral Victory of Her New Majority Coalition: The Honest Broker for the Week of November 24, 2013

Must-Reads:

1. Rick Santorum: Africanist: “Nelson Mandela…was fighting against a great injustice. I would make the argument that we have a great injustice going on right now in this country with an ever increasing size of government that is taking over and controlling people’s lives, and Obamacare is front and center in that…”

2. Sherry Glied and Stephanie Ma: How States Stand to Gain or Lose Federal Funds by Opting In or Out of the Medicaid Expansion: “Following the Supreme Court’s decision… state officials are now deciding whether to expand their Medicaid programs under the Affordable Care Act…. States that choose to participate in the expansion will experience a more positive net flow of federal funds than will states that choose not to participate. In addition to providing valuable health insurance benefits to low-income state residents, and steady sources of financing to state health care providers, the Medicaid expansion will be an important source of new federal funds for states:”

Should-Reads:

1. Matthew Klein: Fixing What’s Wrong With Economics 101: “My colleague James Greiff tells me that his introductory course in economics had a heavy emphasis on the history of ideas, with The Worldly Philosophers as his textbook. But things have changed since then. In my ideal world, introductory economics students would start as I did, by studying Richard Radford’s account of his experience in a German prisoner of war camp during World War II. It’s less than 14 pages…. Joan and Richard Sweeney’s account of their baby-sitting cooperative’s troubles with inflation and deflation during the 1970s is another classic text…. Longer readings could include Charles Kindleberger’s Manias, Panics, and Crashes and Liaquat Ahamed’s Lords of Finance…”

2. Steve Goldstein: What bubble? Corporate profits reach new record as share of GDP: “One can make an argument about the stock market being overvalued, but the corporate profits that should underlie valuations are certainly in pretty good shape…. There are a number of profit measures in the report, but the one shown in this graph, adjusted after-tax profits…. As a percentage of GDP, corporate profits reached a record of 10.8%…”

3. Paul Krugman: PREs, VSPs, and the ECB: “Via Mark Thoma, ECB Watchers reports on what it calls a ‘confusing’ speech by Peter Praet, the chief economist of the European Central Bank. But actually there’s nothing at all confusing…. Praet, we learn from the speech, is a PRE; so, probably, are many of his colleagues at the ECB, including, one suspects, Mario Draghi himself. But they have to operate in an environment where Europe’s VSPs, who are both doctrinaire and in important ways anti-intellectual, still hold enormous power…. Praet… shows himself to be a Perfectly Reasonable Economist, aware of the… the zero lower bound on interest rates and the great difficulty in engineering downward movements in nominal wages…. You do have to wonder what calculation leads to the notion that a[n inflation] target of “close to but less than 2%” is appropriate, as opposed to, say, 3 or 4 percent. But actually you don’t… he and his boss have to deal with Europe’s Very Serious People… who believe in austerity regardless of circumstances….

   “The sad and remarkable thing that we’ve learned over the past year or so is how little intellectual debate matters. On both fiscal austerity and monetary policy, the PREs have completely blow the VSPs out of the water — the inflationistas, the expansionary austerians, the 90-percent threshold of doom people have all seen their claims collapse in the face of evidence. Yet policy barely changes, and the VSPs continue to talk as if they are in possession of The Truth. Still, I guess it’s good to know that there are PREs at the ECB, even if what they know doesn’t seem to matter very much.”

Should Be Aware of:

1. J.F.: Republican policy: Think of something: “AT A lunch given by a Republican women’s club outside Augusta, Georgia last month, Ralph Hudgens, Georgia’s Insurance Commissioner, shared his thoughts on the Affordable Care Act (ACA). The subject of his ire, curiously, was the requirement that insurers cover pre-existing conditions—-a provision of the ACA that even his fellow Republicans have little problem with. To Mr Hudgens, however, having a pre-existing condition and expecting insurers to cover you anyway is no different than getting into a car wreck that’s “your fault”. It’s callous, cruel and, of course, wrong: the human body breaks down, and it breaks down in ways that are neither predictable nor fair…. Now, the ACA isn’t perfect, but it is at least a good faith effort to make sure that nobody dies or goes bankrupt from lack of insurance. One would expect the Insurance Commissioner of Georgia to at least mention, if only for appearance’s sake, his concern for the hundreds of thousands of Georgians that might suffer those fates. But no.

   “I was thinking of Mr Hudgens as I read this month’s cover story in Commentary. It’s a plea from John Podhoretz and Michael Medved to Republicans: stop the infighting, the primary challenges, the insistence on ideological purity, because ‘the truest beneficiary of the intra-Republican civil war will be the Democratic Party’. In that assessment, they are, of course, correct…. Messrs Podhoretz and Medved are also correct in identifying a second batch of beneficiaries of Republican infighting: ‘a new class of political activists’ who rely on ’emotion—often negative emotion’…. Politics is easy. Anyone can yell at the TV. Anyone can get outraged at an email accusing someone of perfidy, treason, dishonesty or failing to honour campaign promises. Anyone can fork over money to someone who promises that they and they alone can save America. I am still on the email lists for various failed Republican presidential candidates from 2012, and they still send me emails: Biblical secrets to investing! The weird trick about retirement income the government doesn’t want you to know! It’s the same marketing strategy, just with grifts rather than candidates.

   “Where I think Messrs Podhoretz and Medved err–and how this connects to Mr Hudgens–is their assumption that if Republicans would just stop the infighting, they’d win. In their entire article they have not one policy idea, just an exhortation to ‘attract votes and voters’. The unstated assumption… is that Barack Obama won through some combination of chicanery, anti-white racism and his ‘cool’ factor…. One candidate favoured universal health care, higher taxes on the rich and a relatively non-bellicose foreign policy; the others opposed all three…. As I said above, the ACA is far from perfect. But it’s better than telling cancer patients and diabetics that it’s all their fault.”

2. Ed Kilgore: The Lost Constituency For Fighting Inequality: “A crucial factor in the success or failure of conservative backlash against efforts to extend the social safety net is whether they can be depicted as morally offensive to people who really have little or nothing in common with the wealthy and powerful Americans being asked to pay the freight. And that’s why racial appeals are so important in mobilizing downscale white folks to view themselves as victims or rivals of those people benefiting from our barebones version of the European welfare state…. It’s no longer considered dangerously self-destructive for representatives of our economic ruling classes to talk about getting rid of the New Deal and Great Society programs and making America an experiment in unregulated capitalism.”

Zack Beauchamp: How President Obama’s Speech Today Explains His Presidency | Alan Pyke: Obama: Forget Fiscal Deficits, Focus On ‘Relentlessly Growing Deficit Of Opportunity’ | Kevin Drum: We Are Deliberately Destroying Our Medical Future | Aaron Carroll: Media madness, ACA edition |

Sherry Glied and Stephanie Ma: How States Stand to Gain or Lose Federal Funds by Opting In or Out of the Medicaid Expansion:

Following the Supreme Court’s decision in 2012, state officials are now deciding whether to expand their Medicaid programs under the Affordable Care Act. While the states’ costs of participating in the Medicaid expansion have been at the forefront of this discussion, the expansion has much larger implications for the flow of federal funds going to the states. This issue brief examines how participating in the Medicaid expansion will affect the movement of federal funds to each state. States that choose to participate in the expansion will experience a more positive net flow of federal funds than will states that choose not to participate. In addition to providing valuable health insurance benefits to low-income state residents, and steady sources of financing to state health care providers, the Medicaid expansion will be an important source of new federal funds for states.

Continue reading “Lunchtime Must-Read: Sherry Glied and Stephanie Ma: What States Not Expanding Medicaid Are Losing…” →

This morning the BLS tells us that we had in November a civilian adult employment-to-population ratio at 58.6%, no better than in October 2009…

The civilian unemployment rate down to 7.0%, more than halfway back to its business-cycle peak value from the Lesser Depression nadir…

The labor force participation rate down to 63.0%–when demography tells us it would be 65.5% in a healthy economy…

The nightmare: that we will never get those 2.5% of adults who are the missing members of the labor force back into looking for jobs, and then into employment.

Can we get them back into the labor force? What would we have to do to get them back into the labor force?

From Benjamin Harris and Melissa Kearney of the WCEG’s older cousin, the Hamilton Project:

Via Mark Thoma: A Dozen Facts about America’s Struggling Lower-Middle-Class :

• More than half of families in the United States earn $60,000 or less per year.
• Nearly half of families in the United States live below 250 percent of the federal poverty level.
• Struggling lower-middle-class families are almost equally headed by single parents and married couples….
• Roughly 40 percent of children in the struggling lower-middle class experience food insecurity or obesity, or both….
• Nearly 90 percent of Supplemental Nutritional Assistance Program (SNAP) recipients live in a household with at least one child, one disabled individual, or one elderly individual.
  America’s tax and transfer system expands the middle class….
• A low-income, single parent can face a marginal tax rate as high as 95 percent.
• The highest marginal tax rates tend to fall on the struggling lower-middle class.

Continue reading “The Hamilton Project on SNAP–the Program Formerly Known as “Food Stamps”–and Confiscatory Marginal Tax Rates on Two-Earner Working Poor Families: What Other Equitable Growth Think Tanks Are Doing Weblogging” →

Steve Goldstein: What bubble? Corporate profits reach new record as share of GDP:

One can make an argument about the stock market being overvalued, but the corporate profits that should underlie valuations are certainly in pretty good shape…. There are a number of profit measures in the report, but the one shown in this graph, adjusted after-tax profits…. As a percentage of GDP, corporate profits reached a record of 10.8%.

Richard Mayhew reminds us of a very important piece of reality. ObamaCare may not work–or may not work well–but it was the very best he could do if he was going to do anything at all:

Richard Mayhew: Extinguishing the Green Lantern again (or what John and Scott said) » Balloon Juice:

The key thing to remember is 217-60-1-5  in the universe as it is was in 2009-2010. (would be 218 but there were vacancies in the House) Those are the numbers of the minimal viable coalition.  PPACA passed at 219-60-1-5.

A decade or so ago I had a line about how there were three big potential storm clouds on the horizon–clouds that would probably dissipate, but that we should all fear. They were the (then distant, and now thankfully still distant) possibilities of:

• Weimar Russia (ex-superpower that thought it had been snookered by the west at the end of a struggle),
• National Hinduist India (casting Muslims in the historical role traditionally reserved for the Jews), and
• Wilhelmine China–a rising economic superpower, ruled by a class that had lost its social role, and that contemplated busying giddy minds with foreign quarrels as a way to distract popular attention from internal problems and debates.

Now I find Martin Wolf is also worrying about Wilhelmine China:

Continue reading “Wilhelmine China and the ECSADIZ” →

Barack Obama:

The premise that we’re all created equal is the opening line in the American story.  And while we don’t promise equal outcomes, we have strived to deliver equal opportunity–the idea that success doesn’t depend on being born into wealth or privilege, it depends on effort and merit. And with every chapter we’ve added to that story, we’ve worked hard to put those words into practice….

Continue reading “Barack Obama: “The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American Dream”” →