Tag: We Need Better Right-Wing Economists

Must-Read: AEI/Brookings Working Group on Poverty and Opportunity: Opportunity, Responsibility, and Security: A Consensus Plan for Reducing Poverty and Restoring The American Dream

Posted on by Brad DeLong

Must-Read: The “Report” of the AEI/Brookings Working Group on Poverty and Opportunity does not have a chair or a lead author–just fifteen names listed in alphabetical order: Lawrence Aber (Brookings), Sheldon Danziger (Russell Sage), Robert Doar (AEI), David T. Ellwood (Harvard), Judith M. Gueron (MDRC), Jonathan Haidt (New York University), Ron Haskins (Brookings), Harry J. Holzer (Georgetown), Kay Hymowitz (Manhattan Institute), Lawrence Mead (New York University), Ronald Mincy (Columbia), Richard V. Reeves (Brookings), Michael R. Strain (American Enterprise Institute), Jane Waldfogel (Columbia).

I have read through the report.

My first reaction is that Brookings (and Russell Sage, NYU, Georgetown, Columbia, and MRDC) would have done much, much better from an intellectual-technocratic point of view to partner for their working group not with AEI but with something like Demos or Roosevelt.

I really don’t see what any of the AEI/Manhattan people brought to the table that was useful–i.e., both true and relevant to policy. But the Report would, I think have been much strengthened by stronger and more thoughtful engagement with things like:

The only justification I can think of for the form this has taken is that partnering with AEI is bringing substantial political benefits–i.e., explicit endorsement of the Report by current Republican office-holders with the power to move things through the House and the Senate, to be followed by commitments and action on their part to actually move policies based on the report through the Congress. And I see none of that here.

Thus I find myself, at first reading, relatively disappointed with:

AEI/Brookings Working Group on Poverty and Opportunity: Opportunity, Responsibility, and Security: A Consensus Plan for Reducing Poverty and Restoring The American Dream

Hoisted from the Archives from Five Years Ago: Department of “HUH?!?!?!?!?!?!

Posted on by Brad DeLong

Every once in a while I think that our austerian intellectual adversaries could not have been as clueless in the aftermath of 2008 as I remember them being. But then I go back through my archives, and find things like this:

Department of “HUH?!?!?!?!?!?!”: Does David Andolfatto really think that the speed with which unemployed workers found jobs sped up as the recession hit?

Apparently so:

Is the Deficient Demand Hypothesis Consistent with the Facts on Labor Market Turnover

In a typical quarter, roughly 2,000,000 workers per month exited unemployment into employment. When the recession hits… look at what happens to the UE flow. While it does not rise as sharply as the EU flow, it rises nevertheless… and continues to remain high even as the EU flow declines. Is this surge in job finding rates among the unemployed consistent with the deficient demand hypothesis?

Wow. Just wow.

The pace of new hires falls by 30% as the recession hits. Firms just don’t see the demand to justify hiring at the normal pace.

But when firms hire, they hire from employed and the not-in-the-labor-force as well as the unemployed. With more than twice as many unemployed, a greater share of new hires now come from the currently-unemployed than used to, and so a greater number of people make the unemployment-to-employment transition.

But that is not any “surge in job finding rates among the unemployed.”

Your average unemployed person has a harder time and a lower chance of finding a job when the recession hits. Andolfatto has forgotten–or never bothered to learn–that a “job-finding rate” has a denominator as well as a numerator. There is no surge in the job finding rates among the unemployed–rather, the reverse.

This really is not rocket science, people…

The Importance of Unemployment Insurance for American Families and the Economy Brookings Institution

Must-Read: William Poole: Don’t Blame the Fed for Low Rates

Posted on by Brad DeLong

Must-Read: You know, given the demographic headwinds of this decade, the consensus of economic historians is likely to say that job growth under Obama was not weak, but quite possibly the second-strongest relative to baseline since the Oil Shock of 1973–somewhat worse than under Clinton, a hair better than under Carter or Reagan, and massively superior to job growth under either Bush:

Graph All Employees Total Nonfarm Payrolls FRED St Louis Fed

William Poole: Don’t Blame the Fed for Low Rates: “Long-term rates reflect weak job creation and credit demand, both a result of President Obama’s poor economic stewardship…

…The frequent claim that Federal Reserve Chair Janet Yellen and her colleagues are responsible for continuing low rates of interest may be correct in the small, but not in the large…. The real villain behind low interest rates is President Obama. Long-term rates reflect weak job creation and credit demand…. The real rate of interest, currently negative for short-term interest rates and only slightly positive for long rates, is a consequence of non-monetary conditions that have held the economy back….

Disincentives to business investment deserve special notice…. The Obama administration has created one disincentive after another… the failure to pursue tax reform… insistence on higher tax rates… environmental activism… growth-killing overreach in the Affordable Care Act and Dodd-Frank to the Consumer Financial Protection Bureau, the Environmental Protection Agency and the Labor Department….

The Fed is responsible, however, for not defending itself by explaining to Congress and the public what is going on. The Fed is too afraid politically to mention any details of its general position that it cannot do the job on its own. Yes, there are “headwinds,” but they are largely the doing of the administration…. The Obama administration didn’t create Fannie Mae and Freddie Mac, for instance, or the government’s affordable-housing goals—both of which fueled the 2008 financial crisis. But the Obama administration has failed to correct the economic problems it inherited. It has simply piled on more and more disincentives to growth. These disincentives have kept long-term rates low.

It seems to me that very little of William Poole’s argument makes any sense at all.

If the factors he points to were there and were operating, they would operate by lowering the future profits of both new capital and old capital. They should thus produce both (a) a fall in interest rates and (b) a fall in the equity values of established companies. We have the first. We do not have the second. Thus I find it very hard to understand in what sense this is made as a technocratic argument. It seems, instead, to be some strange fact-light checking off of political and ideological boxes: Obama BAD! Federal Reserve GOOD!!

Health Policy: The Intellectual Collapse of the Right Continues…

Posted on by Brad DeLong

Live from Crow’s Coffee: A correspondent emails:

You apparently didn’t arrive at the Kansas City Medicaid expansion event last night in time to hear:

(1) Cato’s Michael F. Cannon denounce ObamaCare for not eliminating employer-sponsored insurance, and thus getting people the kind of insurance that vanishes when they get sick and lose their job.

(2) Cato’s Michael F. Cannon denouncing Medicaid expansion for giving insurance to people even when they are not employed, and so eliminating the necessity to find and keep a job if you want health insurance.

You see what he did there? You are right about Think Tanks staffed by those more desperate to please ideologically-rigid billionaires than to actually think about the issues.