Category: Equitablog

Should-Read: Christina Romer and David Romer (2009): Do Tax Cuts Starve the Beast? The Effect of Tax Changes on Government Spending: “The hypothesis that decreases in taxes reduce future government
spending is often cited as a reason for cutting taxes… https://www.brookings.edu/bpea-articles/do-tax-cuts-starve-the-beast-the-effect-of-tax-changes-on-government-spending/

…This paper examines the behavior of government expenditure following legislated tax changes that narrative sources suggest are largely uncorrelated with other factors affecting spending. The results provide no support for the hypothesis that tax cuts restrain government spending; indeed, the point estimates suggest that tax cuts increase spending. The results also indicate that the main effect of tax cuts on the government budget is to induce subsequent legislated tax increases. Examination of four episodes of major tax cuts reinforces these conclusions…

Must-Read: To leave their successors half a cable off of a lee shore in hurricane season may well turn out to have been the biggest failure of the Bernanke-Yellen Federal Reserve:

Mark Thoma: Here’s Why We’re Not Prepared for the Next Recession: “When will the next recession hit?… http://www.thefiscaltimes.com/Columns/2017/07/17/Here-s-Why-We-re-Not-Prepared-Next-Recession

…Will monetary and fiscal policymakers have the ability to respond effectively?… This is not a prediction that a recession is just around the corner…. It’s a warning that we need to be ready in case a recession does hit relatively soon, as it well could. The problem is, we aren’t ready. Even a year or so from now, the Fed’s target interest rate won’t be high enough to leave much room for cuts in response to an economic downturn….

Criticism from the right over the Fed’s quantitative easing policies… related to fears of inflation that never materialized, was loud and widespread on the political right. Without much room to cut interest rates, and without support from the Trump Fed for other stimulative measures, there’s little the Fed will be willing and able to do in response to economic problems. As for fiscal policy, when the recession does hit the economy keep your fingers crossed that Congressional gridlock stops Republicans from making things worse. During the Great Recession, Republicans made it very clear how they will respond when millions and millions of people lose their jobs and need help. First, they will use the recession as an opportunity to argue for their favorite policy, tax cuts for the wealthy… [and] austerity–cuts to government programs. In a recession, spending on social services goes up as more people are in need, and tax revenues fall due to lower incomes, both of which cause a temporary increase in the government deficit….

Our best hope is that the economy remains at full employment long enough for the Fed to restore its ability to cut rates and that Congress is gridlocked when the downturn comes…. It would be hard to be less prepared for a recession than we are right now.

Must-Read: A promos of Nancy MacLean’s Democracy in Chains http://amzn.to/2tGUUeN: My view is that Brown v. Board of Education was not the major cause of James Buchanan’s decision to try and U VA President Colgate Darden’s decision to fund the “Virginia School of Political Economy”—Public Choice as a discipline that had only one wing, a right one, and that would, as the late Mancur Olson liked to say, “never be healthy until its left wing was as strong as its right, and it was no longer an ideological movement masquerading as an academic sub discipline”. But it was certainly a trigger, and support was always very welcome from those whose concerns about appropriate governmental decentralization, limited powers, and checks and balances started and ended with preserving white supremacy.

Noah Smith was on the case back in 2011:

Noah Smith (2011): Noahpinion: The liberty of local bullies: “I have not been surprised by any of the quotes that have recently come to light from Ron Paul’s racist newsletters. I grew up in Texas, remember… http://noahpinionblog.blogspot.jp/2011/12/liberty-of-local-bullies.html

…If you talk to a hardcore Paul supporter for a reasonable length of time, these sorts of ideas are more likely than not to come up. So does this mean that Ron Paul’s libertarianism is merely a thin veneer covering a bedrock of tribalist white-supremacist paleoconservatism? Well, no, I don’t think so. Sure, the tribalist white-supremacist paleoconservatism is there. I just don’t think it’s incompatible with libertarianism….

Libertarianism… [in] its modern American manifestation… is not really about increasing liberty…. An ideal libertarian society would leave the vast majority of people feeling profoundly constrained in many ways…. Freedom… can be curtailed… by a large variety of intermediate powers like work bosses, neighborhood associations, self-organized ethnic movements, organized religions, tough violent men, or social conventions…. There is plenty of room for people to be oppressed by… “local bullies”. The modern American libertarian ideology does not deal with the issue…. [To] Nozick, Hayek, Rand, and other foundational thinkers… if your freedom is not being taken away by the biggest bully that exists, your freedom is not being taken away at all….

Not surprisingly, this gigantic loophole has made modern American libertarianism the favorite philosophy of a vast array of local bullies…. The curtailment of government legitimacy, in the name of “liberty,” allows abusive bosses to abuse workers, racists to curtail opportunities for minorities, polluters to pollute without cost, religious groups to make religious minorities feel excluded, etc…. I see no real conflict between Ron Paul’s libertarianism and his support for the agenda of racists. It’s just part and parcel of the whole movement… as it in fact exists.

Should-Read: Ann Marie Marciarille: Those Pesky Pre-Dispute Arbitration Agreements for Skilled Nursing Facilities: “Assisting a parent or loved one in seeking skilled nursing facility admission is no joke… http://www.marciarille.com/2017/05/those-pesky-pre-dispute-arbitration-agreements-for-skilled-nursing-facilities.html

…which is part of the reason it may be so liberating to laugh about what the snf admissions process may ask of adult sons and daughters of potential patients. Oh, the machinations for admission in an industry where admittance is not guaranteed and where trying to put your best foot forward (easy family to deal with; uncomplicated patient; commercially insured and so on) can bear some resemblance to a fraternity or sorority rush-with all the frantic pleas to “please like me!”  I have never seen this depicted more accurately and more achingly than in the 2007 movie “The Savages.” Laugh-out-loud funny scenes where the adult brother and sister, played by Philip Seymour Hoffman and Laura Linney, try to work the system to get their Dad admitted….

In light of all of this… why be taken back that many if not most snfs include a clause in their nursing home admission agreements requiring the signing party (capacitant older individual or responsible family member) to waive the right to a jury trial on many possible future claims against the snf and to agree to be bound, instead, by binding (often secret) arbitration?  These are  pre-dispute arbitration agreements and their scope extends to bar jury trial on claims of substandard care, as in the Kindred Nursing Centers opinion issued today by the Supreme Court. Enforcement of contractual waiver of pre-dispute arbitration agreements is strongly favored under the Federal Arbitration Act….

We can sleep well tonight knowing that snfs may enforce pre-dispute arbitration agreements signed by adult children of snf applicants under general power of attorney authority without any specific language authorizing jury trial waiver provisions. It would after all, make it “trivially easy” for a state like Kentucky to require under state law  a clear statement of such authority as a way to undermine the FAA. And there you have it.  All contracts, including those often  made in extremis in the face of overwhelming health care need, are just contracts after all. Strike the language you say? Refuse to sign off on that pre-dispute arbitration clause for Mom or Dad’s snf? Ah, but the clause is essential for admission, as is the POA itself for many facilities. You, as adult child of an individual needing speedy admission to a snf, are the supplicant here. And don’t forget it.

Nicholas Bagley: Nursing homes and mandatory arbitration: “Emboldened by a string of aggressive Supreme Court decisions, businesses are increasingly turning to arbitration to shield themselves from civil litigation… http://theincidentaleconomist.com/wordpress/nursing-homes-and-mandatory-arbitration/

…Arbitration does have its advantages. It’s cheaper and faster than civil litigation, and arbitrators can be selected who have some relevant expertise. In a competitive market, the benefits of arbitration should accrue to consumers in the form of lower prices. But the extraordinary growth of mandatory arbitration over the past couple of decades is one of the more unnerving developments in modern American law. Genuine consent to arbitration is often fictional. Arbitrators tend to favor the repeat players who hire them—companies, not consumers. Arbitration agreements can forestall class action lawsuits, making it difficult or impossible to hold companies to account for small-in-size but widespread injuries. And where civil litigation can shine a light on shoddy business practices, arbitration is shrouded in secrecy.

In October 2016, the Centers for Medicare and Medicaid Services (CMS) decided to push back on mandatory arbitration. By rule, CMS adopted a novel “condition of participation” for Medicare and Medicaid. Nursing homes that participate in the programs—which is to say, all nursing homes—could no longer ask their residents to sign away their right to sue upon entering the nursing home…. Predictably, the nursing home industry sued, arguing that the rule exceeded CMS’s authority…. It’s a big deal, for reasons I’ll explore over the next few weeks in a series of posts. What does the research say about civil litigation and nursing home safety? Can nursing home residents really make informed decisions about surrendering their constitutional right to a jury trial? And is it true that CMS lacks authority to regulate arbitration agreements?

Should-Read: Nancy Folbre: Why current definitions of family income are misleading, and why this matters for measures of inequality: “Researchers studying income distribution in the United States seem reluctant to acknowledge the family as an important unit of production and distribution… https://equitablegrowth.org/research-analysis/why-current-definitions-of-family-income-are-misleading-and-why-this-matters-for-measures-of-inequality/

…Incomplete definitions of both family and income either obscure or render invisible transfers between and within households, including the value of housework and family care. Evidence from specialized surveys—such as the Health and Retirement Survey, the Panel Survey of Income Dynamics, the Survey of Income and Program Participation, and the American Time Use Survey—clearly demonstrate the quantitative relevance of these omissions….

Overall, such transfers may have an equalizing effect because they generally flow from those with more market income to those with less. But young white adults are more likely to receive transfers from relatively affluent parents, while young black adults are more likely to transfer income to those closer to the bottom of distribution….

Changes in the family economy of the United States have probably had only small effects on the relative income of the top 1 percent or the top 5 percent. They have larger implications for both the reality and the perception of relative income among households with divergent patterns of female labor-force participation and family responsibility…

Should-Read: John Maynard Keynes (1924): Obituary for Alfred Marshall: “The study of economics does not seem to require any specialised gifts of an unusually high order… https://todayinsci.com/K/Keynes_John/KeynesJohn-Quotations.htm

…Is it not, intellectually regarded, a very easy subject compared with the higher branches of philosophy and pure science? Yet good, or even competent, economists are the rarest of birds. An easy subject, at which very few excel! The paradox finds its explanation, perhaps, in that the master-economist must possess a rare combination of gifts. He must reach a high standard in several different directions and must combine talents not often found together. He must be mathematician, historian, statesman, philosopher—in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician…

Must-Read: John Maynard Keynes (1938): On Tinbergen. To Harrod http://economia.unipv.it/harrod/edition/editionstuff/rfh.34a.htm: “My dear Roy…

…I think we are a little bit at cross purposes. There is really nothing in your letter with which I disagree at all. Quite the contrary. I think it most important, for example, to investigate statistically the order of magnitude of the Multiplier, and to discover the relative importance of the various facts which are theoretically possible.

My point against Tinbergen is a different one. In chemistry and physics and other natural sciences the object of experiment is to fill in the actual values of the various quantities and factors appearing in an equation or a formula; and the work when done is once and for all. In economics that is not the case, and to convert a model into a quantitative formula is to destroy its usefulness as an instrument of thought. Tinbergen endeavours to work out the variable quantities in a particular case, or perhaps in the average of several particular cases, and he then suggests that the quantitative formula so obtained has general validity. Yet in fact, by filling in figures, which one can be quite sure will not apply next time, so far from increasing the value of his instrument, he has destroyed it. All the statisticians tend that way. Colin, for example, has recently persuaded himself that the propensity to consume in terms of money is constant at all phases of the credit cycle. He works out a figure for it and proposes to predict by using the result, regardless of the fact that his own investigations clearly show that it is not constant, in addition to the strong a priori reasons for regarding it as most unlikely that it can be so.

The point needs emphasising because the art of thinking in terms of models is a difficult–largely because it is an unaccustomed–practice. The pseudo-analogy with the physical sciences leads directly counter to the habit of mind which is most important for an economist proper to acquire.

I also want to emphasise strongly the point about economics being a moral science. I mentioned before that it deals with introspection and with values.[3] I might have added that it deals with motives, expectations, psychological uncertainties. One has to be constantly on guard against treating the material as constant and homogeneous in the same way that the material of the other sciences, in spite of its complexity, is constant and homogeneous. It is as though the fall of the apple to the ground depended on the apple’s motives, on whether it is worth while falling to the ground, and whether the ground wanted the apple to fall, and on mistaken calculations on the part of the apple as to how far it was from the centre of the earth.

But do not be reluctant to soil your hands, as you call it. I think it is most important. The specialist in the manufacture of models will not be successful unless he is constantly correcting his judgment by intimate and messy acquaintance with the facts to which his model has to be applied.

I have every intention of writing my paper for Cambridge,[4] but whether I shall turn up to read it in person is very much more doubtful. As regards your own address,[5] I would strongly urge on you that it would be a much better plan to read a curtailed version and leave the audience to study a complete text of it later, than to recite the printed version at a great pace, relying on the audience to follow in the text. In fact audiences do not follow in the text, if only for the reason that reading pace is quite different from speaking pace, even when the latter is accelerated. You want to catch the attention of the audience to the impact of your own personality on the text. The details of the latter they can pick up much more satisfactorily and completely when they get home[a].

Yours ever,

J M Keynes

Notes:

[1] The letter (misdated 16 July 1938 in Keynes’s Collected Writings) was only received by Harrod two weeks later: see letter 799.

[2] C. Clark, “Determination of the Multiplier from National Income Statistics”, Economic Journal XLVIII, September 1938, pp. 435-48.

[3] Letter 787.

[4] “The Policy of Government Storage of Foodstuffs and Raw Materials” (1938), which was eventually read by G. Shove (see letter 812 ). Keynes had originally suggested a different topic: see letter 749.

[5] Harrod, “Scope and Method of Economics” (1938:15).

[a] TLS with autograph corrections, four pages on four leaves numbered from the second, in HP II-79. Further copy, marked “CO/15” at the top of the page, in HP II-200. CcI in JMK CO/11/277-80. The letter is printed in Keynes, Collected Writings, vol. XIV, pp. 299-301. Reproduced by kind permission of the Provost and Scholars, King’s College, Cambridge.