My panel contribution:

Cato Economic Growth Conference Panel 4

• Conference video page: The Future of U.S. Economic Growth | Cato Institute
• 51 short online essays on: Reviving Economic Growth: A Cato Online Forum | Cato Institute

Torsten Slok says:

And Tim Duy says:

Tim Duy: Challenging the Fed: Both Paul Krugman and Ryan Avent are pushing back on the Federal Reserve’s apparent intent to raise rates in the middle of next year. Why is the Fed heading in this direction?… I don’t think that the Fed is reacting to external criticism.

What I think is that there are two basic views of the world. In one view, the post-2007 malaise is simply the hangover from a severe financial crisis. Time heals all wounds, including this one, and the recent data suggests such healing is underway.

The alternative view is that the economy is suffering from secular secular stagnation… suggests the need for a very low or negative real interest rates to maintain full employment…. I believe that the consensus view on the Fed is the former, that the malaise is simply temporary (“a temporary inconvenience”) and now ending…. The Summary of Economic Projections[‘s] implied equilibrium Federal Funds rate is around 3.75%… below what might have been perceived as normal ten years ago… [but from] slower potential growth rather than secluar stagnation….

Gavin Davies… catches… Stanley Fischer… reject[ing] the main monetary policy implication of the secular stagnation hypothesis…. I find it hard to believe that Fischer carries anything but extreme intellectual weight within the Fed…. This is not to say that I do not share Krugman’s and Avent’s concerns. I most certainly do….

If you want to know what the Fed is thinking at this point, a journalist needs to push Yellen on the secular stagnation issue at next week’s press conference. Does she or the committee agree with Fischer? And does she see any inconsistency with the SEP implied equilibrium Federal Funds rates and the current level of long bonds?

Jack Lew:
Fires Back at Elizabeth Warren: ‘You need multiple perspectives’ | WashingtonExaminer.com:
“You need multiple perspectives represented in a department like the Treasury. I think you’re hearing more from the few than from the many…. It is a natural thing for there to be some lingering concerns about whether or not the institutions… that caused the last crisis are truly changed. It’s a lot to expect for the American people who are struggling with wages that are not rising as fast as they should to say everything’s fine.”

The surface case against Antonio Weiss is that the job needs someone who is (a) a superb regulator, or (b) a superb bond seller, and that he is, instead, (c) a superb merger-maker who has (d) profited immensely from the current order on Wall Street and thus inevitably predisposed to assume that the current order on Wall Street is a good one. The case against is that (d) could be accepted if it came with (a) or (b), but it doesn’t: it comes with (c) instead.

The deep case against Antonio Weiss is that the Treasury has, from the Senate’s perspective, behaved very badly under Obama–starting with its inability to find a way to spend the first $50 billion tranche on mortgage relief that it had promised to spend. As a result, the Treasury deserves no deference–and must overcome a high bar in order to get the people it wants into big cushy plum jobs like Under Secretary of the Treasury.

The deep case for Antonio Weiss is that Under Secretary of the Treasury is not, for him, a big cushy plum present of a job–it pays less by a lot than Lazard, it does not materially boost his future earning power on the future speaker circuit (as it would for an academic), it is the equivalent of taking out the garbage.

Now people like to think that they are doing something useful, and taking out the garbage is a very useful thing to do, and it is very satisfying to look back and think that you have successfully taken out the garbage–especially if you are unsure or ambivalent about the social value of the rest of what you have done in your career. I know that the fact that I may have turned the scales (as everyone working on it turned the scales) in passing the 1993 Clinton Reconciliation bill, and probably was a (one of many) decisive factors in making sure that bill included a major expansion of the Earned Income Tax Credit and thus a significant constructive shift in America’s income distribution is a great comfort and source of pride to me.

But if the Senate were doing Antonio Weiss a favor by confirming him, it is only that it is letting him have a try at being an effective public servant for part of his career. It is not giving him a big plum cushy job as a present.

And the government functions better when jobs are filled.

So: I ask Elizabeth Warren; I ask Simon Johnson; I ask Franken, Durbin, Shaheen, Sanders, and Manchin; I ask every Republican Senator save Hatch and Bennet: if not Antonio Weiss, who? Who is your Yellen to Weiss-as-Summers? Who is your Warren to Weiss-as-Barr? Who who would take the job would be better at the job than Antonio Weiss, and why?

Jared Bernstein:
My version of the progressive agenda fits on a little bag. Take that, complexity!:
“I was having a coffee with someone at the Corner Bakery…

>who argued that the problem with the policy agendas of people like me is that they’re way too complex. ‘You couldn’t write it down on this little bag, for example,’ he said, a bit haughtily for my taste, as he threw down the gauntlet and handed me the bag…. The topic is: ‘Ways to reduce inequality and generate broadly shared prosperity.’

>I’ll write it all down here …. Full employment! Low-income Households: education opportunity, expand EITC, higher min wage, subsidized jobs (direct job creation). Middle class: affordable higher education, boost manufacturing through lower trade deficit! **High end:&& close wasteful tax loopholes, financial market oversight (fewer bubbles), ‘financial transaction tax.’

>I suppose you could argue there’s more… politicians committed to reconnecting growth and prosperity… willing to write the budgets… reducing the influence of money in politics… financial transaction tax… a tiny tax on security trades, like 0.03 percent… that would raise significant revenue while dampening unproductive volatile and high-speed trades.)…. Protecting what we’ve got, from social insurance to labor laws to Obamacare.

>But… there’s no great mystery to pushing back on the great economic disconnect. In fact, it’s in on the bag.

…and some have greatness thrust upon ’em. Germany is now experiencing the last in full measure. So how is it faring with this eminence? Quite well, but not well enough…. Remarkably, of Europe’s large countries Germany has arguably the most stable and adult democracy. It is free of the xenophobic populism that mars the others. In Angela Merkel, it possesses an exceptionally mature and responsible leader.

Despite these triumphs, all is not well. The eurozone economy is mired in stagnation and ultra-low inflation. Yet many German policy makers resist efforts to change this for the better…. Meanwhile, to the east a revanchist Russia has destabilised a hapless Ukraine and threatens to destabilise even more of its former empire. Again, just as is the case for the economy, this challenges postwar Germany’s reflexes.

It wishes to avoid a more assertive posture but can no longer do so. The difficulty Germany finds in playing its new roles is understandable. Germany did not seek the euro. On the contrary, it was a price others foolishly asked Germans to pay for unification…

Must- and Shall-Reads:

• Amartya Sen:
  Social Choice and Social Welfare
• Diane Coyle and Andrew Haldane:
  Wat’s Wrong with Economics?: It Didn’t Predict the Crash—and That Isn’t Its Only Flaw
• Olivier Blanchard (1993):
  Movements in the Equity Premium
• Federico Cingano:
  Trends in Income Inequality and its Impact on Economic Growth
• Mark Thoma: Inequality Harms the Most Vulnerable
• Rosa Brooks: Tick, Tick, Bull, Shit: Don’t believe the CIA’s ticking time bomb excuse when it says it had to torture
• Guillermo Roditi Dominguez:
  The Personal Savings Rate and the Balance of Payments
• Greg Ip:
  The Federal Reserve: Opportunistic Overheating

1. Ariel Kalil:
   Addressing the Parenting Divide to Promote Early Childhood Development for Disadvantaged Children:
   “Growing income inequality over the past three decades has created a social divide with stagnated incomes for families at the bottom of the distribution and sharply increased earnings for those at the top (Atkinson, Piketty, and Saez 2011). As the economic destinies of affluent and poor American families have diverged, so too has the educational performance of the children in these families (Reardon 2011). Socioeconomic gaps in children’s cognition and behavior open up early in life and remain largely constant through the school years (Duncan and Magnuson 2011). However, rising inequality in income is not the sole cause of the divergence in children’s achievement and behavior (Duncan et al. 2013). Parents do more than spend money on children’s development—they also promote child development by spending time with their children in cognitively enriching activities and by providing emotional support and consistent discipline. The ‘parenting divide’ between economically advantaged and disadvantaged children is large and appears to be growing over time along these dimensions (Altintas 2012; Hurst 2010; Reeves and Howard 2013). Consider the parenting time divide between economically advantaged and disadvantaged households. National time diaries show that mothers with a college education or greater spend roughly 4.5 more hours each week directly interacting with their children than do mothers with a high school diploma or less…”
2. Daniel Strauss:
   Sen. Warren Tears Into Defenders Of Poetry-Loving Obama Treasury Nominee: In leaving Lazard, Warren noted that Weiss would receive a golden parachute of about $20 million. “For me, this is just one spin of the revolving door too many. Enough is enough,” Warren said. “The response to these concerns has been, let’s say, loud. First his supporters say ‘come on, he’s an investment banker so of course he should be qualified to oversee complicated financial work at treasury. But his defenders haven’t shown his actual experience that qualifies him for this job at treasury.” One of the more substantive arguments against Warren’s opposition to Weiss is that he’s as good as could possibly be gotten in a nominee for a top treasury position. Warren said she has supported qualified people with ties to Wall Street but that’s not what Weiss is…
3. Morning Must-Read: Andrew Sullivan:
   Darkness Visible: Live-Blogging The Torture Report:
   “I want to end on a positive note. Everything that happened in this damning report is because of Americans. But the report itself is a function of other Americans determined to push back against evil done in this country’s name. Those Americans have been heroes in exposing this horror from the get-go, and they include many CIA agents who knew full well what this foul program was doing to their and America’s reputation. But they also include the dogged staff of the Select Committee…. Dan Jones… was the key figure in putting this together. He was handed with literally millions of pages of often incomprehensible and weirdly filed documents, and somehow had to pull them all together…. There were many early mornings when he carried on, not knowing if any of this would ever see the light of day–and, of course, both the CIA and the Obama administration did all they could to stop its release. It’s so easy to dismiss them many people working in government in Washington…. This report is arguably the most important act of public service in holding our government accountable in modern times. The great achievement of this report, moreover, is its meticulousness. No one can now claim that these torture sessions gave us anything of any worth…. They will still claim torture worked – but they will be lying or rather desperately repeating talking points that the CIA’s own documents have now categorically refuted. So the last word goes to Feinstein: ‘All of us owe them our deepest thanks. Even on this darkest of days, they give me hope.’… Ambers notes that this is not an act of interrogation: ‘Over and over, the CIA justified ratcheting up the techniques based not on any intelligence or evidence that the detainees did know more than they were sharing, but instead to increase their own confidence that the detainees had shared everything they knew. In other words, the thinking was: “We’ll enhance his interrogations until it’s not possible that he could withhold actionable information from us.” “Our assumption is the objective of this operation is to achieve a high degree of confidence that [AbuZubaydah is not holding back actionable information concerning threats to the United States,” was how Zubaydah’s top interrogator put it in a cable to headquarters. Even though the CIA was telling the executive branch that the prisoner was holding back information and that they needed to rough him up to get it out of him, the operational order for the torture itself said otherwise.’ If this is the rationale for torture, then every person in interrogation should be tortured. You’ve got to prove they don’t have anything else to tell us. I guess that was the kind of decision made when pondering whether to do the 151st near-drowning, after the 150th. All I want you to do is imagine if you were witnessing this scene in a movie. The interrogators would be Nazis, wouldn’t they? And now they are us.”
4. Dylan Scott:
   Sorry, Haters: Here’s Another Big Way Obamacare Is Working As Planned:
   “It hasn’t been at the top of the conversation about Obamacare, but new evidence suggests that yet another piece of the law is working exactly as it’s supposed to. A key provision of the Affordable Care Act that was designed to keep insurers from overspending on administrative costs or else be forced to rebate premiums to customers looks to be succeeding in not only reducing those costs but in lowering premiums. A new report from federal health officials, which concludes that health spending had grown at a historically slow rate in 2013, says the so-called MLR provision is helping drive the broader easing of spending growth in the industry. The medical-loss-ratio requirement mandates that insurance companies spend at least 80 percent of premiums on actual health benefits. It is one of the various provisions intended to help shape the behavior of insurance companies, making the market more efficient and cost-effective for consumers. Administrative costs are kept down, meaning that more of people’s money is going to real care. ‘The medical loss ratio requirement and rate review mandated by the ACA put downward pressure on premium growth,’ officials from the federal Centers for Medicare and Medicaid Services wrote in their report. Overall private insurance spending, of which premiums are a part, grew at a 2.8-percent rate — the lowest since at least 2007. As Larry Levitt, vice president at the non-partisan Kaiser Family Foundation, put it to TPM in an email: ‘That is how it’s intended to work.'”
5. Paul Krugman:
   Jean-Claude Yellen:
   “My guess–and it’s only that–is that they have, maybe without knowing it, been bludgeoned into submission by the constant attacks on easy money. Every day the financial press, many of the blogs, cable financial news, etc, are full of people warning that the Fed’s low-rate policy is distorting markets, building up inflationary pressure, endangering financials stability. Hard-money arguments, no matter how ludicrous, get respectful attention; condemnations of the Fed are constant. If I were a Fed official, I suspect that I would often find myself wishing that the bludgeoning would just stop, at least for a while–and perhaps begin looking for an opportunity to prove that I’m not an inflationary money-printer, that I can take away punchbowls too. So my guess is that the Fed, given an improving US job market, is strongly tempted to buy some peace by hiking rates a little, just to quiet the critics for a few months. But the objective case for a rate hike just isn’t there. The risks of premature tightening are huge, and should not be taken until we have a truly solid recovery that includes strong wage gains and inflation clearly on track to rise above target. We don’t have any of that, and if the Fed acts nonetheless, it has the makings of tragedy.”
6. Dylan Matthews:
   We have a spending deal:
   “Congressional negotiators have reached a deal to fund the federal government through September (except the Department of Homeland Security, because immigration)…. Support… lukewarm at best among House Democrats, and several House Republicans are already pledging to oppose it. The deal will cancel the votes of the thousands of DC voters who backed marijuana legalization last month. But it’ll also stop the DEA from cracking down on medical marijuana dispensaries in states where that’s legal. The deal also dramatically loosens limits on donations to political parties. That might not be a bad policy, though. There’s a pretty remarkable provision giving Blue Cross Blue Shield a break on a key Obamacare rule. Funds for crime victims are nearly quadrupled in the bill. The deal repeals part of Dodd-Frank meant to prevent banks from making risky investments with federally-insured money. Here’s why it’s important. That provision led Elizabeth Warren to come out strongly against the spending deal. There are a whole bunch of other random riders too, including ones delaying rules on whole grains and sodium in school lunches and blocking trucker-sleep regulations.”

Should Be Aware of:

• NASA Wallops Visitor Center
• BooMan:
  Not that anyone asked, but I never held and/or enjoyed any office or position of honor, trust or profit at The New Republic, whether under the regime of racist Marty Peretz or otherwise. Therefore, I do not have to say that I am in no position to criticize those who did hold such positions…”
• Elizabeth Stoker Bruenig:
  The Personal and the Political
• Hellbanning
• Margaret Sullivan:
  The Torture Report and The Times
• Ann Telnaes:
  A particularly disturbing CIA interrogation technique

1. Kevin Outterson:
   10 Million Deaths by 2050 from Antimicrobial Resistance?:
   “The Review on Antimicrobial Resistance, chaired by economist Jim O’Neill. The numbers are eye-popping: 10 million deaths by 2050, with equally huge global economic costs. These numbers dwarf the estimates in the 2013 CDC Threat Assessment. All microbial resistance is included in these estimates, bacteria, viruses, parasites and fungi. Much of the global burden of resistance will come in malaria, TB and HIV, in addition to bacteria…. Many are viewing these estimates as a ‘worst case’ scenario, assuming the governments of the world don’t achieve global collective action to address the problem of antimicrobial resistance. But this might not represent the worst case. The models do not include true pandemics such as the 1918 influenza. Last year, no one would have guessed that 2014 would be the year of Ebola. My bottom line: these model estimates require much careful additional work, but correctly identify the magnitude of the problem and the potential macroeconomic impact. It should also help us frame an appropriate response.”
2. Paul Krugman:
   American Evil: “As the Bush administration fades away in the rearview mirror, my sense is that many people — even liberals — are forgetting what it was really like. It becomes, in memory, just another administration whose policies you disapprove of, like the reign of Bush the elder. But it wasn’t. It was an administration that deliberately misled us into war, exploiting an atrocity to pursue an agenda that had nothing to do with that atrocity — and causing vast amounts of death and destruction in the process, not to mention undermining American strength. And it was an administration under which America became a torturer, with the enthusiastic approval of top officials. This wasn’t normal. And if it’s going be normal from now on, all the more reason to remember the Bush years with horror.”

If Elizabeth Warren and Simon Johnson had names–or a name–of a better candidate than Antonio Weiss who would take the job of Undersecretary of the Treasury, they would have a much stronger case than they do.

To argue for Janet Yellen over Larry Summers as Fed Chair was not silly. To argue for Elizabeth Warren over Michael Barr as CFPB Director was not silly.

To argue for an empty seat over Antonio Weiss is, however, a much, much harder lift to make…

Daniel Strauss:
Sen. Warren Tears Into Defenders Of Poetry-Loving Obama Treasury Nominee: In leaving Lazard, Warren noted that Weiss would receive a golden parachute of about $20 million. “For me, this is just one spin of the revolving door too many. Enough is enough,” Warren said. “The response to these concerns has been, let’s say, loud. First his supporters say ‘come on, he’s an investment banker so of course he should be qualified to oversee complicated financial work at treasury. But his defenders haven’t shown his actual experience that qualifies him for this job at treasury.” One of the more substantive arguments against Warren’s opposition to Weiss is that he’s as good as could possibly be gotten in a nominee for a top treasury position. Warren said she has supported qualified people with ties to Wall Street but that’s not what Weiss is…

They need an alternative candidate or candidates. Badly.