Category: Equitablog

Kevin Drum: The Filibuster is Dead (Partly):

CNN reports that by a vote of 52-48, the filibuster of judicial and executive branch nominees has been eliminated. The nuclear option has been detonated.

WCEG: Things to Read at Lunchtime on November 21, 2013

Must Reads:

1. Ezra Klein and Evan Soltas: Three reasons filibuster reform might actually happen today: “Could Democrats back out at the last minute, as they have so many times before? Absolutely. But there’ve been three big changes…. (1)… Back in January, the best arguments against filibuster reform had… to do with the rest of the Democrats’ agenda…. But gun control died in the Senate…. Boehner refused to consider the Senate’s immigration legislation…. So in pure ‘getting-things-done’ terms, Democrats are faced with a choice: keep the filibuster and get nothing done. Change the filibuster and get nothing done aside from staffing the federal government and filling a huge number of judicial vacancies with lifetime appointments. (2) Democrats believe Republicans will shred the filibuster as soon as they get a chance…. Senate Democrats just watched Republicans mount a suicide mission to shut down the government. Their confidence that Republicans will treat the upper chamber’s rules with reverence is low, to say the least.
   This has led to some fatalistic thinking about filibuster reform: If Republicans are going to blow the filibuster up anyway, Democrats might as well take the first step and get some judges out of the deal. (3) Senate Democrats feel betrayed by Republicans. It’s hard to overstate the pride senior Senate Democrats took in cutting their January deal…. But then Republicans filibustered more judges and executive-branch nominees. And the pride top Democrats took in their deal to avert filibuster reform has turned to anger that Republicans made them look like trusting fools…”

2. Lawrence Mishel, Heidi Shierholz, and John Schmitt: Don’t Blame the Robots: Assessing the Job Polarization Explanation of Growing Wage Inequality | Economic Policy Institute: “The tasks framework that Acemoglu and Autor developed… is a distinct improvement… [but] suffers from its own empirical failings…. The relatively smooth, long-standing nature of job polarization… appears poorly suited to explaining the abrupt rise in inequality at the end of the 1970s or… the sharp change in the path of the 50/10 wage differential after 1986–1987; the failure of the most conventional measure of job polarization… to show… occupational employment polarization in the 2000s, even as wage inequality continued to grow; and, the consistent lack of correspondence across the 1980s, 1990s, and 2000s between changes in occupational employment, occupational wages, and the overall wage distribution. Recent research that has focused on the role of typically low-wage service occupations has not rescued the tasks framework from these shortcomings…. Technology may be a factor in widening wage inequality, but, if so, the tasks framework is not the model that captures those dynamics.”

Should-Reads:

1. David Keohane and Izabella Kaminska: Zhou seems a little flustered: “We were going to be slightly snarky in the face of Zhou Xiaochuan, head of the People’s Bank of China… the lack of a timetable and the ambiguity of phrasing making this seem rather similar to what we’ve heard in the past–but then we saw this from Neil Mellor at BoNYM and felt bad: ‘However, although a timetable was absent… this announcement constituted the beginnings of a new era for financial markets and no superlative would overstate its significance.’ Oops. Mellor may well have a point… rowing back a bit on timetable-snark [does] seem sensible…”
   … people are still willing to look for a good deal on the Exchanges…”

2. Yao Yang: Yao Yang breaks down China’s new reforms and considers what’s missing: “This is related to the final document’s most significant lacuna: political reform. In fact, a Singapore-style approach–combining a freewheeling market economy and an authoritarian regime–has clearly emerged from the plenum. It is an approach that awaits the test of time…. Given China’s much greater size and complexity, the Chinese government’s pursuit of the Singaporean model, with its suppression of any and all social disorder, would ultimately undermine economic dynamism. To build the innovative economy envisioned by the third plenum, the CCP’s leadership needs to find a new governance model that fosters a vibrant society. Sooner rather than later, the crucially important economic reforms that have just been unveiled will not be enough.”

3. Austin Frakt: Are Republicans really anti-exchange?: “My view is that Republicans are not generally, ideologically opposed to exchanges. Deep down, I think any pro-market health reformer knows exchanges are sensible. Consequently, at least some of the broad structure of the Affordable Care Act should be appealing to conservatives. To the extent elected officials most sympathetic to right-of-center health policy aren’t behaving accordingly, there would seem to be a disconnect between policy preferences and political tactics.[1] As I tweeted earlier this week: ‘The ACA is a conservative reform not because of its pedigree, but because it is a sound chassis for almost everything conservatives propose’. [1] Just so you don’t have to, I will accuse myself of putting it mildly.”

4. Aaron Carroll: A pickle for conservative states refusing the Medicaid expansion: “The ACA covers most Americans making less than 138% of the poverty line through the Medicaid expansion. Because everyone thought the expansion would happen nationwide, they only wrote in subsidies for people making more than 100% of the poverty line…. Now there’s a problem–people making too little in states that refuse the expansion may not get subsidies, and therefore they may not be able to get insurance in the exchanges…. Things are different for legal immigrants…. In order to make sure that all legal residents were covered, the ACA instead provides subsidies for legal immigrants to go get inurance in the exchanges, no matter how little they make. So we’re going to have a potential situation next year where poor non-immigrants will get nothing in states that refuse the Medicaid expansion, but poor immigrants will get subsidies to buy private insurance…. It’s hard to see this playing out well politically…”

5. David Glasner: The Internal Contradiction of Quantitative Easing: “I can’t help observing… that the two main arguments made by critics… do not exactly coexist harmoniously…. QE is ineffective… dangerous…. The tension might at least have given a moment’s pause…. Nor… does the faux populism of the attack on a rising stock market and… crocodile tears for helpless retirees living off… interest… coexist harmoniously with… the same characters… (e.g., Freedomworks, CATO, the Heritage Foundation, and the Wall Street Journal editorial page) for privatizing social security…. I am also waiting for an explanation of why abused pensioners… can’t cash in the CDs…. In which charter… does one find it written that a perfectly secure real rate of interest of not less than 2% on any debt instrument issued by the US government shall always be guaranteed?”

Should Be Aware of:

Jonathan Cohn: I Just Lost My Insurance Because of Obamacare. What Do I Do? A step-by-step guide to replacing your health insurance | David Dollar et al.: Growth still is good for the poor | Stephanie Paige Ogburn: Missing Data from Arctic One Cause of “Pause” in Temperature Rise | Q4 GDP Tracking: 1.4%/Yr |

The Seven Cardinal Virtues of Equitable Growth for America

1. Manage the macroeconomy to match aggregate demand to potential supply. Take the dual mandate seriously: maintaining full employment is as important a central bank goal as low and stable inflation–and much more important than preserving healthy margins for the banking sector. Run large deficits–run up the national debt–in times of war, depression, or other national emergency calling for government action. Pay down the debt in other times.

2. Invest. Invest in ideas, in equipment capital, in structures capital, in education: we need more of all forms of investment. Boost public and private investment: we need both kinds.

3. Over the past generation, America has shifted enormous resources into value-subtracting industries: health-care administration, prisons, finance, carbon energy. We need to reverse those shifts. We need to focus the American economy on the value-creating sectors rather than the value-subtracting ones.

4. We ought to have had a carbon tax 20 years ago. We still need one.

5. We need more immigration. It is much easier, worldwide, to move the people to where the institutions are already good than to make good institutions where the people are. More immigration produces a richer country for those already here. More immigration is a mitzvah for immigrants. More immigration is, to a a lesser degree, a mitzvah for those in poor countries outside, who see less population pressure on resources. And a U.S. in 2070 that has 600 million people is more of an international superpower than a U.S. in 2070 that has only 400 million people. If you would rather have the U.S. than China or Russia be the world’s superpower in 2070, you should want more immigration into the U.S. now.

6. We need more equality. If we want to have equality of opportunity 50 years from now, we need substantial equality of result right now.

7. We are going to need a bigger and better government. The private unregulated market does not do well at health-care finance, at pensions, or at education finance. The private unregulated market does not do well at research and early-stage development. The private unregulated market does not do well with commodities that are non-rival, or non-excludible, or produced under conditions of greatly-increasing returns to scale. We are, in all likelihood, moving into a twenty-first century in which these sectors will all be larger slices of what we do. Thus in the twenty-first century a well-functioning economy will need a larger government share in the economy than was needed in the twentieth century.

420 words…

I can understand Barack Obama not yet realizing that after the news has filtered through five layers of bureaucracy, each with a direct incentive to take a step in the optimistic direction, what is reported to you is not what really exists. But Kathleen Sibellius was Governor of Kansas. And Marilyn Tavenner? They really have no excuse for not knowing better…

Indeed, Barack Obama really has no excuse.

Continue reading “Evening Must-Read: Clay Shirky on the Extraordinary Healthcare.gov Management Failure…” →

Antonio Fatas on the Global Economy: Bubbles, interest rates and full employment:

Global [safe] real interest rates during the last expansion (2001-2007) were very low by historical standards. The main candidate to explain low real interest rates is the saving glut that Ben Bernanke referred to in his 2005 speech…. But if what we saw in these years was an increase in the pool of saving that drove down interest rates we should expect investment to increase…. And if investment increases we should expect an increase in growth rates. But none of this happened….

Continue reading “Fear the Global Investment Shortfall, and What It Means for Long-Run Growth” →

OK. We are going to get deep into the history-of-thought, the intellectual-autobiographical, and the methodology-of-economics weeds here, so perhaps this should be called not “Wednesday Focus” but rather “Wednesday Unfocus”. Go and talk among yourselves rather than reading this if you wish…

I find that Simon Wren-Lewis wants to stick his head in the lion’s mouth by defending “rational expectations” as a working hypothesis:

Continue reading “The Utility and Disutility of Rational Expectations: Wednesday Focus” →

Must-Reads:

1. Ezra Klein: Elizabeth Warren wants to spend more on Social Security. But she’s not thinking big enough! “She joins a growing movement of Senate Democrats, including Tom Harkin, Mark Begich and Bernie Sanders. ‘Social Security is incredibly effective, it is incredibly popular, and the calls for strengthening it are growing louder every day’, Warren said…. Washington frets endlessly over the problems that Social Security, which is projected to exhaust its trust funds in the coming decades, might cause the budget. It frets about it so much, in fact, that it completely misses the problems Social Security is uniquely poised to solve for the country. For years, pension experts have spoken of the ‘three-legged stool’ of retirement savings: Social Security, employer pensions and private savings…. [But] today, Social Security is basically the only leg holding it up…”
2. Barry Eichengreen: Does the Federal Reserve Care about the Rest of the World?: ” Many economists are accustomed to thinking about Federal Reserve policy in terms of the institution’s “dual mandate,” which refers to price stability and high employment, and in which the exchange rate and other international variables matter only insofar as they influence inflation and the output gap–which is to say, not very much. In fact, this conventional view is heavily shaped by the distinctive and peculiar circumstances of the last three decades…. The Federal Reserve paid significant attention to international considerations in its first two decades, followed by relative inattention… then back to renewed attention to international aspects… in the 1960s, before the recent period of benign neglect…. I argue that in the next few decades, international aspects are likely to play a larger role in Federal Reserve policymaking…”

Should-Reads:

1. Noam Levey: Healthcare plan enrollment surges in some states after rocky rollout: “A number of states that use their own systems, including California, are on track to hit enrollment targets for 2014 because of a sharp increase in November, according to state officials. ‘What we are seeing is incredible momentum’, said Peter Lee, director of Covered California…. California–which enrolled about 31,000 people in health plans last month–nearly doubled that in the first two weeks of this month. Several other states, including Connecticut and Kentucky, are outpacing their enrollment estimates, even as states that depend on the federal website lag far behind. In Minnesota, enrollment in the second half of October ran at triple the rate of the first half, officials said. Washington state is also on track to easily exceed its October enrollment figure, officials said…”
2. Burkhard Bilger: Inside Google’92s Driverless Car
3. ProGrowthLiberal: EconoSpeak: John Taylor on Monetary Policy and Inflation: “If you were expecting John Taylor to address… Barry Ritholtz… stop holding your breath… Taylor of late has been saying that our current mess was created by a deviation from the Taylor rule. Here’92s his evidence: ‘Inflation was not steady or falling during the easy money period from 2003-2005… [the] Fed’92s interest rate was too low… inflation… doubled from 1.7% to 3.4% per year… extraordinary inflation and boom in the housing market…. Finally, the unemployment rate got as low as 4.4% well below the natural rate.’… No one… was saying back then that the employment to population ratio had become dangerously high. The 4.4% unemployment rate… was not reached until late 2006… [after] two years of rising short-term interest rates. Now had Taylor and his fellow Bush economic advisors were very concerned about excessive aggregate demand–why did we not seen calls for fiscal restraint back then? If Taylor thinks this is a serious rebuttal to what Summers said, it is no surprise he has yet to acknowledge that 2010 forecast of inflation from QE.”

Should Be Aware of:

Matt Schiavenza: A Chinese President Consolidates His Power | Mark Thoma sends us to Paul Krugman: The Geezers Are Not Alright | Menzie Chinn: An opinion piece by Sean Fieler in USAToday…. I found the reference to growing inflation of interest. Here are some data of relevance. They indicate low and declining inflation using various measures, CPI, PCE, PPI, core, headline | Marco Nappolini: Secular stagnation and post-scarcity | Joshua Angrist et al: Semiparametric Estimates of Monetary Policy Effects: String Theory Revisited | Mike Konczal: Given the Myth of Ownership, is the Idea of Redistribution Coherent? |

Olivier Blanchard writes:

Olivier Blanchard: Monetary Policy Will Never Be the Same:

Finally, turning to capital flows. In emerging markets (and, more generally, in small advanced economies, although these were not explicitly covered at the conference), the evidence suggests the best way to deal with volatile capital flows is by letting the exchange rate absorb most but not necessarily all the adjustment.

The standard argument in favor of letting the exchange rate adjust was stated by Paul Krugman at the conference. If investors want to take their funds out, let them: the exchange rate will depreciate, and this will lead, if anything, to an increase in exports and an increase in output.

Continue reading “Olivier Blanchard Speaks Delphicly on Managing International Capital Flows” →

I interpret this as IMF chief economist Olivier Blanchard saying, as clearly and straightforwardly as his office allows him to, that in his judgment the 2% per year inflation target is past its sell-by date and rotted, and that the North Atlantic economies need to move to a 4% per year inflation target in order to reduce the risk of another 1932, or another 2010.

What do you think?

Continue reading “IMF Chief Economist Olivier Blanchard Speaks Delphicly on the Appropriate Inflation Target” →