Larry Summers would have been a very good Fed Chair http://t.co/47Anu8xuzL pic.twitter.com/HZy5WOVcNB

— Matt O'Brien (@ObsoleteDogma) February 9, 2015

And:

I think that everyone who has ever worked for Larry will have the same reaction to Paul’s question: “Of course he would not be assimilated!”, followed by laughter. What you need most in Larry’s office is not to guard against groupthink and paying too much attention to the recent-past consensus, but rather someone whose core competence is: “Let’s think about this some more. If we still think this is a good idea in a week, we could always do it then…” Someone with as much confidence in his own judgment and as much enthusiasm as Summers is the personality type least likely to be assimilated by the constant drip-drip-drip of concerns and questions.

Indeed, the argument that Janet Yellen would be significantly better at making the Fed run in harness smoothly while Larry Summers would be better at taking bold action when it was called for even without an FOMC consensus behind him was the substantive point at issue in the choice between the two.

Where I think Federal Reserve groupthink takes hold is in a narrowing-down of the tails: you run your models, you make your forecasts, most of the time the outcome is pretty close to what you had forecast, and so you gain confidence–especially because there is an immense amount of information flooding in that validates and backs your central-tendency forecast.

The main argument against a June 2015 interest-rate liftoff and a 0.25%-point/meeting climb in interest rates thereafter to a normal level of 4% in mid-2017 are, after all, two:

1. The financial markets are betting that such a liftoff would then be reversed and interest rates lowered sometime in 2016.

2. With such a path two bad shocks in 2016 would create a very dangerous situation; while with liftoff delayed two good shocks in 2016 would not cause serious trouble.

But Fed groupthink has the effects, I guess, of making the Federal Reserve confident that, like Jon Snow, the financial markets know nothing; and of focusing attention on central tendencies at the expense of giving proper weight to the asymmetry of risks in the tails…

Can someone point me to something Stuart Butler has written in the past three years that has turned out to be correct?

I mean, it seems to be blinkered, partisan, wrong–and obviously wrong at the time, both in its analysis of the political forces and of the policy substance. Am I wrong? Take a look:

I mean:

• The combination of interest rates and even a subnormal posture made for a much more optimistic budget picture in 2012 than Butler claimed…
• The claim that ACA exchange subsidies would turn out to be an unexpectedly-large budget buster was simply wrong…
• I look monthly for disemployment effects from the ACA, and if I look really hard I can find things that might be very small ones…
• No, there were no politically-viable prospects for serious Medicare reform…
• The Heritage Foundation “simulation” that states would benefit budgetarily from Medicaid expansion for only the first three years–I haven’t heard anyone repeat that lately…
• The claim that the federal government was likely to renege on its Medicaid-expansion funding promises seemed deaf to the real politics at the time and seems even deafer now…
• The Republican argument that expanding Medicaid would be a bad idea for a state looked bad at the time and looks worse and worse with every passing day…
• Expanding Medicaid has not locked anybody into an unsustainable policy path…
• The cost-reduction thinking of the ACA does not, at least now, look wistful…
• If it is not now time to open the champagne at the improvement in the health-care spending-path trajectory, when would it be time?

And when I look at what Stuart Butler is writing today, I see no talk about how his root-and-branch opposition to Medicaid expansion, unwarranted budgetary and health-care spending-growth pessimism, and belief that the politics were still favorable for ACA repeal were all misjudgments. I see no talk about how the fact that the world has turned out to be a different place from what he claimed it was back in 2012 and 2013 has led him to rethink. I read, instead:

Stuart Butler: Two Cheers for the GOP’s Burr, Hatch and Upton Alternative to Obamacare: “It’s high time for the GOP to move away…

…from going-nowhere votes to repeal the Affordable Care Act (ACA or ‘Obamacare’)… adopt the strategy of achieving a more conservative vision of health through structural–and potentially bipartisan–amendments to the ACA…

Shouldn’t this denunciation of a GOP pursuing “going-nowhere… repeal… [of] ObamaCare…” come with, at the very least, an admission that this is a reversal-of-field on Butler’s part as well? Especially as the politicians Butler wants to praise today–Burr, Hatch, and Upton–are still pursuing that will-o’the-wisp forcefully, so that Butler asks us to:

Put aside… the lawmakers’ statement that the first thing to do is to repeal the ACA… the important thing is to focus on the core elements of the proposal as potential vehicles for broad-based reform…

where I take “broad-based” to be a synonym for “bipartisan”.

And why no mention anywhere that Burr-Hatch-Upton’s plan is a minor reworking of last year’s Burr-Coburn-Hatch proposal? Why the pretense that this is a new offer, rather than an attempt to revive something that did not get traction with the leadership of either party last year?

And why call for two cheers for a plan that Butler says has these features:

• “The specific [health-care insurance] credit design is imperfect…”
• “Regrettably, the new plan raises the cap [on the deductibility of employer-sponsored health insurance] above the thresholds even for the badly designed ACA ‘cadillac tax’ on high-cost plans…”
• “The GOP plan could have moved much more decisively towards state-led reform… within the ACA itself is a provision that allows states to propose radical changes…. Rather than seek to repeal… §1332, the plan sponsors would have been much wiser to have proposed strengthening it…”
• “The proposal has attracted liberal criticism, with some critics raising design concerns that need to be addressed…”

And yet his bottom line is:

The Burr-Hatch-Upton plan is an important proposal from leading GOP lawmakers and includes approaches that contain the basis for agreement. If the White House and congressional Democrats are willing to look seriously at several of its central provisions, they will see opportunities for addressing the impasse over the ACA and achieving health coverage goals that are widely shared.

But why does Butler say this is superior to the ACA? He says its steps away from incentivizing employer-sponsored insurance are inferior to the ACA’s. He doesn’t see the point of the Dingbat Kabuki involved in not building on §1332. It has serious design flaws. And its tax-credit design is “imperfect”. And Butler seems to me to give us no reason to prefer it to the ACA save one:

• It is a proposal by Republicans.

Well, the core design of the ACA was once a proposal by Republicans too. As Jon Gruber likes to say, ObamaCare is RomneyCare. Why not simply stick where we are and see how the policy bets we have placed with ObamaCare turn out, so that we actually learn something about what does and does not work?

Must- and Shall-Reads:

• Chico Harlan and Jim Tankersley: “‘When Hillary Clinton runs, she’s going to say, “The Republicans gave us a crappy economy twice, and we fixed it twice. Why would you ever trust them again?”‘ said Kevin Hassett… former economic adviser to… John McCain… and…Mitt Romney…”
• Miles Kimball: “Certificates that… attest to… ability to write computer code, write a decent essay, use a spreadsheet, or give a persuasive speech are going to be worth more and more. And any training program that takes the need to maintain its own credibility seriously can help students gain those skills and certify them…”
• Paul Krugman: “European debtors did… need to tighten…. [But] Germany and other core economies which needed to spend more… also tried to spend less. The result was… an environment in which reducing debt ratios was impossible…”
• Henry Aaron: “In place of the Obamacare requirement that people carry health insurance… Burr-Hatch-Upton plan would impose penalties lasting indefinitely on families that,… go without insurance, even if insurance is unaffordable.  And it is likely to be unaffordable…”
• Roger Farmer: Neo-Paleo-Keynesianism: A Suggested Definition

1. Michael Hiltzik: When a State Blocks Obamacare, ERs Close: The Lesson of Louisiana: “Baton Rouge… is about to lose one of its crucial hospital emergency rooms…. Gov. Bobby Jindal has refused to expand Medicaid under the Affordable Care Act, and won’t put up any other money to keep the facility open. Because of the scheduled closure of the ER of Baton Rouge General Medical Center-Mid City, patients needing emergency treatment will have to travel as much as 30 minutes longer…. Jindal has tried to position himself as the last stalwart Republican opponent of the ACA, but his state’s experience shows that his position is folly…. In the expectation that Medicaid would pick up the slack, the ACA reduced so-called disproportionate share hospital payments, which went to hospitals serving a large number of the uninsured. So institutions in states that have refused to expand Medicaid, like Louisiana, have faced a double-whammy–they still have to serve a large number of uninsured patients, but they have less money to do so. The ACA has reduced uncompensated care costs… by $5.7 billion in fiscal 2014 compared with what they would have been otherwise…”

2. Barry Eichengreen:: Cassandras and Currency Wars: “Economic analysis, it seems, is the art of recycling old ideas under new names. So it is with the debate over currency wars, which parallels exactly the 1930s debate over competitive currency devaluation. David Woo, meet Ragnar Nurkse. Nurkse, in… 1944… [argued that] competitive devaluation was a negative-sum game. These are exactly the arguments made by today’s Cassandras of currency wars…. Subsequent scholarship shows, however, that the main reason monetary policy didn’t work more powerfully in the 1930s was that it wasn’t tried…. Central banks in the 1930s were reluctant to utilise their newfound monetary freedom… failed to make open-ended commitments to raise prices… effectively transform expectations… supplement the new monetary regime with supportive fiscal action… failed to convince investors that they were committed to a fundamentally new policy regime…. And because they failed to coordinate their monetary and exchange rate policies internationally, haphazard exchange rate changes only created volatility and uncertainty, as argued here. Today, in contrast, central banks like the Bank of Japan and European Central Bank are making open-ended commitments to do what it takes…. Without that action and those steps, however, the Cassandras of currency wars will be right.”

3. Tim Duy: On The Fed Credibility Gap: “David Wessel opines…. ‘The markets think Fed officials and staff economists are overly optimistic about the U.S. economy, as they have been in the past….’ I will suggest another framework: Financial markets are pricing in a ‘secular stagnation’ scenario that is at odds with Federal Reserve thinking…. Suppose that the short term equilibrium real rate has fallen to zero…. Change the estimate of NAIRU from 5.6% to 5%… close to pre-recession Fed estimates. The results… [are] fairly close to market expectations…. It thus appears reasonable to argue that financial market participants are pricing in a secular stagnation story combined with a pre-recession level of NAIRU. In contrast, the Fed is not seriously contemplating such a story…. The biggest risk to the expansion is a dogmatic view… on the part of the Federal Reserve…. Financial market participants are saying the Fed has less room to maneuver than monetary policymakers believe. The Fed, I fear, is not taking sufficient heed of those signals. Would it be outrageous to think that the Federal Reserve could find itself backtracking after just 200bp of rate hikes? Not if Sweden serves as any example…. The Fed… risk[s] tightening too aggressively and turning an expansion that should last at least four more years into one with only two left.”

Should Be Aware of:

• Liz Gannes: Ten Years of Google Maps, From Slashdot to Ground Truth
• Nathaniel Stein: “I was keenly aware of my Jewishness when I enrolled at Hogwarts in… 1949…. Many of the more overtly anti-Semitic trappings were by that time long gone–the pork-levitation requirement dropped…”:

1. Paul Krugman: Greece: The Tie That Doesn’t Bind: “I’ve long believed that Matthew Yglesias hit on something… when he noted that small-country politicians… have personal incentives to go along with troika demands…. ‘Normally you would think that a national prime minister’s best option is to try to do the stuff that’s likely to get him re-elected…. But in the era of globalization and EU-ification… if you leave office held in high esteem by the Davos set, there are any number of European Commission or IMF or whatnot gigs that you might be eligible for even if you’re absolutely despised by your fellow countrymen…. The ultimate demonstration of solidarity to the ‘international community’ would be to do what the international community wants even in the face of massive resistance from your domestic political constituency.’ But a genuine government of the left… is very different–not because its policy ideas are wild and crazy, which they aren’t, but because its officials are never going to be held in high esteem by the Davos set. Alexis Tsipras is not going to be on bank boards of directors, president of the BIS, or, probably, an EU commissioner. Varoufakis doesn’t even like wearing ties…. There will be no consolation prizes for failing conventionally. Do Berlin and Brussels understand this? If not, they are operating under a dangerous misconception.”

2. Andrew Kaczynski: New Jeb Bush Chief Technology Officer Deleting Old Tweets About “Sluts”: “Ethan Czahor’s tweets began disappearing today after news broke that he had been hired by Jeb Bush…. After the story of his hiring broke, tweets on his Twitter account started disappearing. The Twitter account is linked from his personal website. The count this morning was 177 tweets…. The latest tweet count is 132. Several of the deleted tweets refer to women as ‘sluts’…. Right to Rise did not return request for comment on the deleted tweets.”

3. The Onion: Health Experts Recommend Standing Up At Desk, Leaving Office, Never Coming Back: “Experts at the Mayo Clinic issued a new set of health guidelines Thursday recommending that Americans stand up at their desk, leave their office, and never return. ‘Many Americans spend a minimum of eight hours per day sitting in an office, but we observed significant physical and mental health benefits in subjects after just one instance of standing up, walking out the door, and never coming back to their place of work again,’ said researcher Claudine Sparks, who explained that those who implemented the practice in their lives reported an improvement in mood and reduced stress that lasted for the remainder of the day, and which appeared to persist even into subsequent weeks…”

Mark Thoma sends us to