Must-Read: Tierney Sneed: Inside Louisiana’s Blockbuster Medicaid Expansion Roll Out

Posted on by Brad DeLong

Tierney Sneed: Inside Louisiana’s Blockbuster Medicaid Expansion Roll Out: “Louisiana’s Medicaid expansion marked a major breakthrough for Obamacare…

…Now that the program has been open for enrollment for two weeks, the dramatic success the state has had in bringing residents into the program has attracted national attention. Since June 1… more than 201,000 people have enrolled. The state is well on track to meet its 375,000-enrollee goal, which will save Louisiana an estimated $184 million in the next year. Those numbers are even more remarkable given the obstacles facing the Edwards administration, namely the refusal of the GOP legislature to fund even one new employee to ease the transition to the expanded program….

Without any additional funding for the roll out–meaning no new state employees, no eligibility workers, nor any other new administrative tool to ensure that Louisianans were taking advantage of the expanded coverage–the state had to depend on the infrastructure of existing social service programs, whose participants were eligible for the Medicaid expansion. The tactic had the dual advantage of saving the state money while creating an application process that was minimally burdensome…. That creative approach… helped Louisiana achieve the numbers that it did. ‘Louisiana, through doing this, is definitely being a leader in trying to use these available resources to streamline and make enrollment efficient,’ Samantha Artiga, a Medicaid expert at the Kaiser Family Foundation, told TPM….

To pull together the program, the state sought out the assistance of non-governmental organizations like Robert Wood Johnson Foundation, Kaiser and Milbank. ‘As a former Robert Woods Johnson clinical scholar and someone who had been in academia, my mindset has always been focused on, ‘How do I get grants?’ Gee said. Making matters more difficult, the state was seeking out outside support after the wave of initial grant money–much of it going to early adopter states–had dried up. ‘We missed out,’ Gee said, of the initial round of Center for Medicare & Medicaid innovation grants that went to states that expanded Medicaid right off the bat. ‘So here we are, needing it more than those places probably did without the ability to apply for those types of grants,’ she said. The state did find outside help, though mostly in the form of consulting and technical assistance…

Why Not Up the Mississippi?: Outtake from Cohen and DeLong, Concrete Economics

Posted on by Brad DeLong
Preview of Why Not Up the Mississippi Outtake from Cohen and DeLong Concrete Economics

The conventional–pioneer–wisdom in American history is, still, that independent, entrepreneurial people settled the continent in small farms and established this civilization, pulling themselves up by their own bootstraps and building things through their own energy and enterprise, aided by democracy and the legal infrastructure of the free market.

This, of course, misses three big and immediate things:

  • First, the Amerindians who had been 12000 years in residence rightly objected–both to the plagues the European settlers brought that decimated their populations and then to the form the civilization being built took. Behind small-farm settlement stood conquest–and conquest requires governments and armies, not free-market association and catallaxy.

  • Second, a great deal of the surplus generated by the American economy–and used to finance its development–up to and beyond 1865 came from slavery–once again, not a free-market institution by any means.

  • Third, conquest and slavery do not by themselves build a prosperous economy, let alone an economy as prosperous as that of America today. Behind small-farm settlement stands an enormous public-sector governmental framework of institutions, infrastructure, and incentives necessary for an economy to be truly developmental.

As we have argued elsewhere, to a truly remarkable degree all United States citizens today owe that framework to the one single individual who may have made a significant difference in American political economic history, Alexander Hamilton—although even he needed his followers and successors to make a durable impact.

But, before there was a Hamilton, before there was a United States of America, there were earlier deliberate shapings of the economy of North America-to-be. These shaping were carried out by the colonial powers who ruled North American: Spain, France and Britain–and, in the end, especially by the British politicians who decided on the form that the British colonizing effort in the Americas would take.. Their plans and powers resulted in a pre-revolutionary American economy that was quite different in where it was located and how it was organized from what nature–also known as economic geography—-would appear to have intended.

Back in the 17th century the British government made the decision that its colonial policy would be to bet on populating the Atlantic seaboard–at least the Atlantic seaboard north of Virginia–with colonies based on staple agriculture and yeoman settlement, rather than with colonies based on treasure theft, on forced-labor mining, on slave-plantation agriculture, or on long-distance trade:

  • To some degree, this was a matter of necessity: Britain being late to the American colonial enterprise, It had to take what was left over.

  • To some degree, this was because the British government was not an absolutist one with Bastilles available, and it seemed wise to try to diminish domestic tensions by subsidizing the emigration of especially-vocal malcontents–whether Puritan, Quaker, or Catholic.

  • But mostly this was a matter of policy: from the days of Francis Drake on British expeditions to the Americas carried colonists rather than plantation owners and conquistadores, or rather than missionaries and coureurs du bois.

Thus Spanish and French, governments largely ignored their potential colonists outside the forts, ports, and trading posts they established–St. Augustine, Mobile, New Orleans, etc. They largely eschewed support for yeoman settlement and staple small-farm agriculture. They pushed for resource exploitation via long-distance trade, treasure-theft, extractive and exploitative plantation agriculture, and mining. And these industries were accompanied by extractive political-economic institutions. They were tuned to maximize the short-run financial flow to the metropole and the chances of proconsuls being able to return to the European capital with their fortunes in a decade or less. This did not provide a large incentive for French and Spanish subjects to migrate and large numbers. This did not provide a large incentive for those who did migrate to stay.

The English governments, by contrast, provided a very visible hand in support of colonial settlement–and, of course, provided a mailed fist directed against the North American continent’s Amerindian inhabitants. This mattered enormously.

The English settled the wrong, eastern, Atlantic coast. Ships probing upward along the rivers soon encountered rapids, and beyond the rapids came the mountains: the great Appalachian Range. The Spanish and French built their port-forts on the proper, southern, Gulf coast of America. From that base broad navigable rivers allowed rapid, cheap, and easy movement inland; culminating, of course, in the unique Mississippi-Missouri-Ohio River. Spain had, of course, known about the Mississippi Valley since Hernando de Soto’s thousand-man expedition of 1540.

Gulf of Mexico-based settlement provided a major advantage. The settler agricultural economies possible in the seventeenth, eighteenth, and nineteenth centuries were far from self-sufficient. Their spearheads required the weight of full spearshafts behind them, in the form of a steady supply of largely hand-made manufactured goods–high-tech for their time–from Europe.

Thus the southern, water road to the most fertile and valuable parts of agricultural America was the obvious and optimal one. A simple glance at the map of where U.S. agriculture is today tells the story. America’s prime agricultural resources are in the watersheds of the St. Lawrence, Mississippi-Missouri-Ohio, Sacramento-San Joaquin, and Columbia Rivers–not east of the Appalachians:

NewImage

Expansion up the Mississippi from the south seemed natural. Expansion from the east across the Appalachians seemed not. And those who crossed the Appalachians would do so without a sound logistical tail. And without secure transport links behind them, such migrants could be, at best, itinerant trappers and woodsmen–not agricultural settlers.

However, the Spanish authorities in charge along the coast of the Gulf of Mexico in the sixteenth, seventeenth, and second half of the eighteenth centuries, and the French authorities in charge in the first half of the eighteenth century, did not design a settler economy. Thus the initial British governmental decisions to design their version of colonial America by yeoman settlement made New York City rather than New Orleans or St. Louis the economic capital of America. It changed the destiny of the continent. Government trumped geography. And government trumped geography because the British colonial government made it so, while the French and Spanish colonial governments did not.

The British deciders in the thirteen colonies and their successors in the United States believed in and acted to make Manifest Destiny via agricultural settlement a reality. The Spanish and French deciders who controlled the mouth of the Mississippi up to 1803 did not. Thus while the logic of geography strongly suggests that the largest city of colonial America really ought to have been New Orleans, that was not the way it happened. Better agricultural land and better water transportation than was available east of the Appalachians did not lead to mass settlement: New Orleans in 1800 did have 10,000 people, but St. Louis had only 1000, Chicago did not exist, and Cincinnati, Pittsburgh, and Nashville were then villages being settled not from the southwest but from the east by people trecking over the Alleghany Mountains and through the Cumberland Gap.

By contrast, New York in 1800 had 80,000 people, Philadelphia 40,000, Boston 25,000, and Charleston, SC 20,000: 165,000 people in cities of 10,000 or more east of the Appalachians, and so (then) cut off from what was to become America’s productive heartland, with only 10,000 people in cities with easy access to what would become the farmbelt. The overall population mix disparity was the same: 1800 saw 5.0 million people of recent European and African descent settled in the original thirteen states, with only 300,000 in the Missouri-Mississippi-Ohio Valleys.

As of 1800, the European colonization and settlement of North America had, from the perspective of matching colonists to where the resources and the logistic and transportation avenues were, completely wrong.

Must-Reads: June 15, 2016

Posted on by Brad DeLong

Should Reads:

Must-Read: Bill Emmott: Let’s Get Fiscal

Posted on by Brad DeLong

Must-Read: I find myself thinking that when Larry and I presented our “Fiscal Policy in a Depressed Economy” back in 2012, some critics (Valerie Ramey) said they did not think there was hysteresis–that recessions did not, in fact, cast shadows on future productive potential–other critics (Marty Feldstein) said that they thought recessions had a cleansing effect (either through sectoral-adjustment or policy-reform channels) and hence boosted future potential; and yet others (Ken Rogoff) believed that the interest rates on government debt did not in fact represent the true opportunity cost of government borrowing, and it would turn out to be very expensive for even reserve currency-issuing sovereigns with exorbitant privilege to pull the fiscal-expansion fire alarm.

I wonder if any of them would claim that austerity lowers future debt/GDP burdens today?

Bill Emmott: Let’s Get Fiscal: “There can be pain without gain–a lesson that Western populations have been learning the hard way since at least 2012…

…With years of fiscal austerity in the United States, Europe, and Japan having achieved nothing, it is time for governments to start spending again. The proposal will be met with outrage from many governments, especially, but not exclusively, Germany’s, and will be dismissed by the many political candidates who treat sovereign debt, built up by the incumbents they are seeking to depose, as the devil’s work. But beyond ideology and self-interest lies a simple and unavoidable truth: austerity is not working. Japanese Prime Minister Shinzo Abe reluctantly acknowledged austerity’s failure…. The eurozone–the developed world’s leading champion of austerity–has yet to come to the same realization, despite glaring evidence. In 2012, eurozone leaders signed a fiscal compact aimed at controlling public debt–which, in total, amounted to 91.3% of GDP, according to the International Monetary Fund – by forcing countries to cut spending and raise taxes. By 2015, the eurozone’s budget deficit, as a share of GDP, had fallen by two-thirds from its peak in 2010.
Yet gross public debt had actually increased, to 93.2% of GDP….

The more governments cut their deficits, the faster growth slows–and the further out of reach debt-reduction targets become. Thus runs the self-defeating cycle of fiscal austerity…. Policymakers after 2010… assume[d] that reducing government demand would help to boost private investment. (In the eurozone, it should be noted, arguments for fiscal austerity were also fueled by mistrust among governments, with creditor countries demanding that debtors endure some pain in exchange for ‘gains’ like bailouts.) But times have changed. For starters, we are no longer living in an inflationary era…. Pursuing austerity in this context has resulted in a drag on growth so severe that not even the halving of energy prices over the last 18 months has overcome it.

Expansionary monetary policy–that is, massive injections of liquidity through so-called quantitative easing–is clearly not enough, either…. In today’s world, nothing can substitute for fiscal expansion…. Europe needs a new Marshall Plan, this time self-financed, rather than funded by the Americans, to kick-start economic growth and boost productivity. There is plenty of scope for a similar program in the US, too…. At a time of low borrowing costs and little to no inflation (or even deflation), austerity is not the answer. It is time for policymakers to recognize that there is no need for pain that is not bringing any gain. It is time to get fiscal.

Must-Read: Larry Summers: Fed’s Current Strategy Ill Adapted to the Realities

Posted on by Brad DeLong

Must-Read: Larry Summers is right.

If the Phillips Curve today still had the short-run slope in the gearing of expected inflation to recent past inflation that it appeared to have at the start of the 1980s, there might–but only might–be a case for the Federal Reserve’s current policy.

There is no reason for internal comity between the Board of Governors and the regional bank presidents to be a concern: Bernanke and Yellen have now had three full regional bank-appointment cycles to get bank presidents who are on the same page as the Board of Governors. The Federal Reserve always has and is understood to have the freedom to raise interest rates to maintain price stability when incoming data suggests that it is threatened: there is no need for talk to highball the chances of future rate increases when the current data flow does not suggest it will be needed. Thus I see no reasons at all to support a Fed policy posture other than that one that Larry Summers recommends: “signal[ling] its commitment to accelerating growth and avoiding a return to recession, even at some cost in terms of other risks…”

Larry Summers: Fed’s Current Strategy Ill Adapted to the Realities: “The current hawkish inclination of the Fed, with its chronic hope and belief that conditions will soon permit interest rate increases, is misguided…

…The greater danger is of too little rather than too much demand. A new Fed paradigm is therefore in order…. I would guess that from here the annual probability of recession is 25-30 percent. This seems to me the only way to interpret the yield curve. Markets anticipate only about 65 basis point of increase in short rates over the next 3 years. Whereas the Fed dots suggest that rates will normalize at 3.3 points, the market thinks that even 5 years from now they will be about 1.25 percent. Markets are thinking that recession will come at some point and when it does rates will go to near zero…. This implies that if the Fed is serious… about having a symmetric 2 percent inflation target then its near-term target should be in excess of 2 percent. Prior to the next recession–which will presumably be deflationary–the Fed should want inflation to be above its long term target…. The Fed’s dots forecasts refer to a modal scenario of continued recovery… [with] inflation rising to 2 percent only in 2018. Why shouldn’t they prefer a path with more demand, inflation at target sooner, more stimulus as recession insurance, and a small margin of extra inflation as a buffer against the next recession?….

The logic that led to the adoption of the 2 percent inflation target years ago suggests that it is too low now…. The case for a positive inflation target balances the benefits of stable money with the output cost of lowering inflation and two ways that positive inflation is helpful—the periodic need to have negative real rates, and inflation’s role in facilitating downward adjustment in real wages given nominal rigidities. All of the factors pointing towards a higher inflation target have gained force in recent years…. Experience has proven that Yellen was correct to be skeptical of the idea very low inflation rates would improve productivity. And it is plausible that the error in price indices has increased with the introduction of new categories of innovative and often free products…. If a two percent inflation target reflected a proper balance when it first came into vogue decades ago, a higher target is probably appropriate today….

Long term inflation expectations are depressed and declining…. The Fed has in the past counterbalanced declines in market inflation expectation measures by pointing to the relative stability in surveys-based measures. This argument is much harder to make now that consumer expectations of inflation have broken decisively below their all-time lows even as gas prices have been rising…. The Fed’s summary employment conditions index has been flashing yellow since the beginning of the year. Declines in this measure have presaged recession half of the time and uniformly been followed by rate reductions rather than rate increases….

The right concern for the Fed now should be to signal its commitment to accelerating growth and avoiding a return to recession, even at some cost in terms of other risks. This is not the Fed’s policy posture. Watching the Fed over the last year there is a Groundhog Day aspect. One senses they really want to raise rates and achieve a more ‘normal’ stance. But at the same time they do not want to tighten when the economy may be slowing or create financial turmoil. So they keep holding out the prospect of future rate increases and then find themselves unable to deliver. But they always revert to holding out the prospect of rate increases soon, partly for internal comity and partly to preserve optionality. Over the last 12 months nominal GDP has risen at a rate of only 3.3 percent. We hardly seem in danger of demand running away. Today we learned that Germany has followed Japan into negative 10 year rates. We are only one recession away from joining the club…

The United State of Women: How women are reshaping the American economy

Posted on by Bridget Ansel

Heather Boushey, executive director and chief economist at the Washington Center for Equitable Growth, gives remarks at the White House United State of Women Summit on June 14, 2016.

Let’s get right to the point. Women are not just half the population; we are half the economy. We are economic powerhouses. At least that’s what the numbers show. In the United States, 74 million women work outside the home. That’s six-in-ten women.

Since 1979, because of women’s added hours of work, our economy grew by 11 percent more than it would have otherwise. This is the equivalent to $1.7 trillion, equal to what we spend in a year on Social Security, Medicare, and Medicaid combined.

Women’s talents add to our nation’s productivity. And, their earnings boost family incomes.

Across the world, when women have access to education and jobs, we can see the positive effect on the economy. But, too often that power remains untapped. Economists estimate that the gender gap in employment leads to losses in GDP of 20 percent in Greece, Italy, and Japan to nearly 35 percent in the Gulf States and Iran. The International Labour Organization estimates that there are 865 million women who have the potential to contribute more to their economies. Most live in emerging or developing economies.

Here in the United States, we have solid evidence that women contributing their talents to American business and their family’s income has been good for our economy. This difference in how women spend their days changes everything. Women are not only their family’s caregiver, they are their family’s breadwinner.

The American Wife has become the American Worker. Only one in five children live in a family with a full-time, stay-at-home caregiver. Two out of every three mothers earns so much that she’s either the primary breadwinner or a co-breadwinner for her family. This is even though women earn only 79 on the male dollar—and women of color have an even larger pay gap.

We can all picture the “Leave it to Beaver” family. June’s at home caring for the Beav while Ward’s at work. Actually, can we? How many of you have even seen that show? How many see your family in that fictionalized portrait? Yep, that family’s experience is seriously outdated. Yet our workplace policies still presume that’s what a family looks like. They assume we all have a magical silent partner at home taking care of all of life while we’re at work. But that’s fantasy.

Caregiving—whether for a child or an aging parent—remains time-consuming and is increasingly expensive. To reconcile this, we need to rethink our nation’s basic labor standards and social protections. The United States stands with only Papua New Guinea in not having paid leave for mothers. And, I hear that Papua New Guinea is about to fix this!

California, New Jersey, Rhode Island and—soon—New York have universal, statewide paid family leave programs. In those states, a worker has the right to stay home—with pay—when they have a new child or to care for a seriously ill family member. Or when the worker herself is ill. On top of this, nearly three dozen places—five states, one county, 26 cities, and the District of Columbia (which, of course, is not a state)—have put in place the right for workers to earn paid sick days. That’s progress, but only for the lucky few who live in the right place.

Over 75 years ago, the first woman to lead a federal agency—Frances Perkins—helped craft into law two pieces of legislation that continue to define the rules that govern the boundaries between work and life. The Social Security Act gives us a set of insurance programs for when we cannot work, because we are a senior citizen, are too disabled to work, or when we’ve lost a job through no fault of our own. But we don’t have the same right to income support when we cannot work because we need to care for a family member for a few weeks  months. And, too often, those that have it earn the most. That’s not fair. To improve our economy, that needs to be fixed.

Every worker needs access to paid family and medical leave, including men. While women continue to do more care, men are increasingly stepping up and they’re realizing that it’s hard. In some surveys, men report more work-life conflict that women do.

The truth is, without the added hours of women, most families would have seen their incomes fall in recent decades. Women’s earnings have boosted family incomes, while also improving our overall economy through improving productivity. That’s why today’s workers also need predictable schedules and the right to talk to their boss about their schedule without fear of retaliation.

Putting sane rules on hours was another idea Mrs. Perkins championed. The Fair Labor Standards Act eradicated child labor and established the minimum wage and 8-hour workday. Recently, the Obama administration updated the overtime rules to cover an additional 4 million people.

This is a much-needed step forward. However, without a silent partner at home, chaotic or unpredictable schedules can wreak havoc on family life. And, it can mean that for an employee to be their most productive, they may need a little flexibility. With fewer than one in ten private sector employees having a union to help them negotiate schedules, most of us are on our own.

New rules that update our labor standards could fix this. Vermont and San Francisco are doing just that. They followed the lead of the United Kingdom and New Zealand, offering workers the right to request flexibility. And, San Francisco also added rules on predictability.

As many states and localities have recognized, the American Wife is the American Worker. That’s good for families and the economy.

We need new federal rules.

We can fix this.

The United States is and remains one of the richest nations the world has ever seen.

So, let’s do it.

 

Must-Read: Simon Wren-Lewis: Brexit and Democracy

Posted on by Brad DeLong

Must-Read: Some nice backup from the wise Simon Wren-Lewis. The frame of eurocrats vs. democrats is much, much, much too simple to be more than misleading. We want democracy where democracy belongs, with technocracy where it is needed–always acknowledging that circumstances alter cases, mechanism design is complex, and that democracy’s key benefits are as a legitimacy machine and an anti rent-seeking machine, not as a wise leader or wise policy selection machine:

Simon Wren-Lewis: Brexit and Democracy: “Germany… believed a union-wide demonstration of austerity was required…

…I strongly disagree…have thought a lot about why it happened, but a lack of democracy is not high on my list of culprits…. Democracy was overridden in Greece so cruelly… not [as] the result of actions of unelected bureaucrats, but of elected finance ministers… because of pressure from their own electorates. This exercise in raw political power worked because the Greek people wanted to stay in the Euro. The ‘bad equilibrium’ Evans-Pritchard talks about happens in part because of democracy…. Union governments should not lend money directly to other union governments, precisely because governments are democratic and so find it hard to accept write-offs…

Must-Reads: June 14, 2016

Posted on by Brad DeLong

Should Reads: