Category: Equitablog

Things You Must Read:

• Izabella Kaminska: Greenspan’s dilemma revived <–A very optimistic take on what the U.S. economy’s real short- and medium-run problems are…
• David Warsh: Home Alone II?: “Evidence is accumulating that Obama is simply not a good manager of the immensely complicate government over which he presides. (An unnamed White House aide solemnly avers to the Post team that the president ended every meeting with his health care staff with the admonition, ‘All that is well and good, but if the Web site doesn’t work, nothing else matters’) but a good manager would not just say it, but would also make it so…”

Things You Should Read:

• **Simon Wren-Lewis: The view from Germany: “In a currency union, the only feasible outcome is for German inflation to run ahead of the rest of the EZ by a significant and persistent amount for a number of years. If the ECB was willing and able to target 2% inflation, then that would mean future German inflation significantly and persistently above 2%… excess demand in Germany…. The problem arises because the ECB is unwilling or unable to target 2% inflation. That in theory allows Germany to attempt to force the EZ as a whole to make the required internal adjustment without inflation in Germany exceeding 2%. It can do this by a restrictive fiscal policy. This is exactly what it has done…”
• Sabrina Tavernise: Cuts in Hospital Subsidies Threaten Safety-Net Care <–Another side effect of John Roberts, C.J.: when he rewrote the Affordable Care Act from the bench, he did not know enough about the law to understand that if he were to rewrite the law to give states the option to not-expand Medicaid he very much needed to also rewrite the law’s Subsidy and Disproportionate Share Payment provisions…
• Philippines Storm Kills Estimated 10,000
• Jared Bernstein: Recent Fiscal Policy: Its Impact on the Economy and the People in It

Things You Should Be Aware of:

• Joseph Newhouse et al.: Free for All?: Lessons from the Rand Health Insurance Experiment
• Brink Lindsey: Why Growth Is Getting Harder
• Paul Waldmann: Why Isn’t Everyone More Worried about Me? Lori Gottleib’s most ridiculous Obamacare “victim” story yet <–In the New York Times
• Charlie Stross: Catching a Blighty <–Properly remembering Armistice Day

Matthew Yglesias appears surprised by Greg Mankiw this lunchtime: Mankiw on babies: They’re not Porsches.:

Greg Mankiw brings a variety of considerations to bear against the Affordable Care Act in a new post, including the idea that it’s unfair to transfer financial resources from non-parents to parents:

But having children is more a choice than a random act of nature. People who drive a new Porsche pay more for car insurance than those who drive an old Chevy. We consider that fair because which car you drive is a choice. Why isn’t having children viewed in the same way?

Continue reading “Do Parents and Children Constitute a Rent-Seeking Special-Interest Group?” →

Anybody who has been on the inside of any event subjected to the Woodward or perhaps the White treatment knows three things:

1. Of the new things reported in Halperin and Heilemann book with the self-parody title–Double-Down Game-Change All-in Political-Gossip-Fest MMXIII–one-third are true, one-third are badly mischaracterized and misleading, and one-third are flat-out lies.

2. Readers cannot tell what in Halperin-Heilemann is what because the authors do not know either.

3. The prominence of the Halperin-Heilemann reporting style degrades governance and reduces public understanding, for the signal about politicians’ true beliefs and orientations is drowned by the sensationalist noise, and the fact that politics is graded not as an effort to construct win-win deals but as a zero-sum sporting contest helps, via an observer effect, to turn it into such.

Continue reading “Yet Another Fruitless Plea for Our Reporters to Look Not at Flash and Noise But at Substance and Signal…” →

Nicholas Bagley: is flummoxed at Obama’s current thinking about his “if you like your current health insurance, you can keep it” misspeaking:

Obama pairs apology with perplexing proposal: Now that the President has apologized for not being exactly straight… when he said… no one would lose their insurance… he wants to make it up…. But what exactly does the administration have in mind?…. I’m completely stumped. The Obama administration can’t just issue tax credits because it feels bad… only ‘applicable taxpayers’ can get tax credits… an ‘applicable taxpayer’ is defined as a taxpayer with household income between 100 and 400 percent of poverty. Nor can the administration delay…. Starting on January 1, 2014, all plans, whether on the exchanges or off, have to cover the ‘essential health benefits package’. That package includes cost-sharing requirements, a particular sticking point for most of these canceled plans…

I confess that that particular talking point simply hadn’t registered on my brain at the time.

It should have.

And I confess if it had registered I would probably have thought: “ACA creates exchanges and so improves opportunities for individuals and small businesses, and ACA provides subsidies. Why should anybody lose their health insurance?”

If I had been not-stupid back then, I would have noted that under the ACA:

1. The subsidies to insurance companies for the disappointing Medicare Advantage–i.e., Medicare HMO–plans were going away since Medicare Advantage seemed to be costing the U.S. Treasury a lot of money and yet delivering few if any health-sector benefits. Medicare beneficiaries who liked their Medicare Advantage–as they should: it’s heavily subsidized–and did not want it to go away would be pissed.

2. Insurers would have to step up their games and make sure all the plans they offered provided genuine comprehensive health insurance. This was a good piece of the ACA: the government is committing subsidies and operating the exchange, and so it needs to take on a quality standards-enforcing role.

3. Insurers would have to incorporate cost-sharing in their plans–would have to give insurance purchasers appropriate “skin in the game”. This has been a long-time right-wing demand for health insurance reform: that patients-to-be need to be made to think twice by feeling the pain of undertaking procedures not just in the hassle and the time and the anxiety and the… well, the pain; but also in their wallet.

4. In the new, changed health insurance marketplace, some of the plans insurers had offered would no longer be profitable from a marketing point-of-view.

If you had asked me a year ago and actually gotten me to think about the issue, I would have said that (1) was the thing to worry about, and the place where Obama had been significantly misleading. (2) I would have called a nothingburger: plans that aren’t really insurance would be replaced by plans that were insurance, and with the subsidy pools almost everybody would get a better deal. (3) I would have said was unlikely to be a step that would do much to improve the system but would not produce any Washington ripples, for (3) was something that both mainstream Democrats and all Republicans were invested in, with only left-wing Democrats whimpering about how rationing-via-pocketbook by means of copays was probably not a good idea. And I would have missed (4) completely.

And now I am, with Nicholas Bagley, flummoxed at Washington’s reaction. For nobody is worrying about (1), and everybody is worrying about (2), (3), and (4). Fixing (4) would require that we mandate that insurance companies keep offering their old plans at roughly their old prices: that would seem to have been ruled out by the initial decision to preserve health insurance companies’ role in the reformed system. (2) is really not something we want to fix. And (3)–well, that is a goal of reform for everybody except the whimpering left, even though Joe Newhouse taught me long ago that you often do not like what happens when people find their health care rationed-by-pocketbook via copays and other cost shares.

Any way to get this part of the conversation closer to the track it ought to be on?

688 words

It’s still four days before the launch of the Washington Center for Equitable Growth, and my weekend’s reading around on the internet has led me to identify our first need: higher-quality criticism of what we do…

Dan Kervick, meet James Pethokoukis:

Dan Kervick:

The Washington Center for Equitable Growth–Neoliberalism Reloaded?: “One knows in advance that whatever policy WCEG ends up advocating will have to get the Good Plutocracy seal of approval from the likes of General Electric, Goldman Sachs, Comcast, Walmart Boeing and the other financial backers of Podesta and his political network…”

James Pethokoukis:

Poor Americans Are Richer Today: “The CEP will be a strong advocate of sharply higher tax rates given that its director is Emmanuel Saez, an economist who wouldn’t mind seeing a top tax rate of over 70%…. The CEP will assume that the last few decades have been terrible ones for the US middle-class. Nothing but economic stagnation and exploding inequality. It’s a claim President Obama has repeatedly made. Except it is simply not true…”

May I simply say that there is no “seek approval from Goldman Sachs” button in the WCEG WordPress control suite?

And may I simply say that there is something very wrong with claiming that “it is simply not true” that the last few decades have seen “exploding inequality” here in America, for they have?

In the words of The Fish in the Pot in Dr. Suess’s The Cat in the Hat, those are not good games to play. I wish they would stop.

The whole point of this enterprise is to get people to play better games than bold-faced denials of empirical reality on the one hand, and bold-faced dismissals of opposing views as driven by material and ideological blinders on the other. We will succeed if we get people like Dan and Jim to move beyond that. We will fail if we don’t.

Any suggestions on how we could best accomplish this?

Must Reads:

• Uwe Reinhardt’s highly favorable review of Angus Deaton’s Wealth, Health and Inequality
• Stan Collender on why we should not expect any bipartisan budget-deal progress over the next three months
• Mark Thoma sends us to Bill McBride: ‘State and Local Government Austerity is Over’: “This… is… a significant change from state and local governments being a headwind for the economy to becoming a slight tailwind…”

Should Reads:

• Michael Gapen of Barclay’s on the thoughts of senior members of the Federal Reserve staff and how they suggest an even longer time of near-zero short-term interest rates–until 2017 or so…
• Menzie Chinn: A Feasible Measure for Mitigating Income Inequality: raise the minimum wage! The EITC cannot and should not be asked to do it all…
• Paul Krugman: in The Mutilated Economy on Reifschneider et al. on how a failure to deal with unemployment is killing the economy’s long-run growth prospects…

Should Be Aware of:

• Justin Lahart says Worry Over Inequality Occupies Wall Street: <–Is this a meaningful trend, or just a couple of anecdotes? The switch of Wall Street from 40%-60% Obama-McCain to 10%-90% Obama Romney was instructive; it would be nice if it were shifting back…
• Angus Deaton: The Great Escape: Health, Wealth, and the Origins of Inequality
• Simon Johnson: “Quiet Coup” <–Wall Street as a politically-dominant value-subtracing sector: the sensible right-wing critique of America’s contemporary political economy…
• Luigi Zingales: Capitalism for the People: : Recapturing the Lost Genius of American Prosperity <–America’s ills today in an Italian mirror: the sensible right-wing critique of America’s contemporary political economy…
• Gary Bass: The Blood Telegram: <–Scott Lemiux: “As part of my longstanding argument that people making ‘Nixon was really a liberal president’ arguments are being too clever by at least three quarters, Gary Bass’s new book The Blood Telegram is apparently devastating about Nixon’s role in the genocide that preceded the creation of Bangladesh…”
• Brad DeLong: The Budget and Macro Policy: slides updated to November 2013, text not yet updated…
• Brad DeLong: Slides for Janet Yellen as Central Banker

From Uwe Reinhardt’s highly favorable Review of Angus Deaton’s The Great Escape: Wealth, Health and Inequality:

The book demonstrates that assessments of income inequality are basically meaningless without the backdrop of the origins of a prevailing inequality in income and wealth…. Deaton asserts that economists routinely apply Pareto’s principle too narrowly, overlooking that the wealthy in societies with highly unequal distributions of income and wealth may capture the country’s systems of governance… rig market processes in their favor or to exploit taxpayers through what economists call “rent seeking”…. This causal flow from wealth to politics and thence a perpetuation of wealth has been noted by others–among… Simon Johnson… in his “Quiet Coup” and… Luigi Zingales [in his Capitalism for the People)]….

Continue reading “Uwe Reinhardt and Angus Deaton on Wealth, Health and Inequality” →

Attention Conservation Notice: Links to updated slides and non-updated text for my “The Budget and the Macroeconomy” talk

http://delong.typepad.com/sdj/the-budget-and-macroeconomic-policy.html

I have just updated my slides on my talk on The Budget and Macroeconomic Policy. They are now current as of November 2013…

The talk is the product of an invitation by Berkeley Goldman School of Public Policy Professor John Ellwood to come to his budgeting class to discuss the budget deficit and the economy at an introductory level. It was a good opportunity to try to pull together my thoughts about how to successfully teach this vitally-important topic at a generally-accessible level.

I framed it as:

• The government’s deficit (or surplus) affects the macroeconomy in three “runs”.
• In the short run, a government deficit can serve as a valuable tool to rebalance the economy in a depression if interest rates are very very low.
• In the medium run, a government surplus crowds in investment and boosts the rate of growth.
• In the long run a government that does not or cannot pay its bills gets into a world of hurt.

Although the slides are updated to November 2013, the transcript is still from the February 21, 2012 Berkeley GGSPP lecture…

Let me for one set out how I, at least, see this “equitable growth” business–how I see the conversation we should be having. There are four sequential questions:

1. What should we be doing to boost the productive potential of the American economy, and also the world economy? How do we best boost our resources—labor, skills, capital, infrastructure, ideas, and others?
2. What should we be doing to ensure that that productive potential was turned into actual useful goods and services produced?
3. what should we be doing in order to distribute those useful goods and services to the people who ought to have in some sense—who need them the most, who would enjoy them the most, and who deserve them the most?

Call these: “accumulation”, “production”, and “distribution”. Or, if you want to give them economists’ names: Smith-Solow, North-Keynes, Ricardo-Galbraith.

Continue reading “Prologue to a Framework for Thinking About “Equitable Growth”…” →

Must Reads:

• Alan Blinder and Janet Yellen’s (2001) The Fabulous Decade: their reflections on why equitable growth performance was so good in the decade of the 1990s–a summary of their short Century Foundation book of the same title.

• Gavyn Davies’s take on English, Lopez-Salido, and Tetlow’s and Reifschneider, Wascher, and Wilcox’s analyses calling for much more aggressive expansionary monetary policy. You aren’t going to read the papers. You do need to read Davies’s précis.

Adrianna McIntyre’s comments on a chart by Jon Gruber on the speed of the take-up of RomneyCare in Massachusetts. One of Ezra’s Klein’s “seven cute animals that think reasons Obamacare isn’t facing a death spiral”

Should Reads:

• Ed Glaeser’s “A happy tale of two cities: New York is a magnet for people on a fast-track to be rich, and for very low-income people. What’s wrong with that?” <- Glaeser’s take on what the mayor of New York City should and should not do for equitable growth at the mouth of the Hudson River.

• Brad Plumer’s giant chart on how the world is failing at its climate goals.

• Tim Duy’s On Lowering the Unemployment Target

Should Know Exists:

William Dudley (September 2003) Reflections on the Economic Outlook and the Implications for Monetary Policy: “We have established a threshold of 6.5 percent for the unemployment rate as long as we do not expect inflation to exceed 2.5 percent… and inflation expectations remain well-anchored…. The 6.5 percent unemployment rate is a threshold, and not a trigger… we might wait a long time after we breach the threshold before we begin to raise our federal funds rate target…”