Things to Read on the Evening of October 17, 2014

Must- and Shall-Reads:

 

  1. Janet Yellen: Perspectives on Inequality and Opportunity from the Survey of Consumer Finances–October 17, 2014: “I think it is appropriate to ask whether this [rising inequality] trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity…. To the extent that opportunity itself is enhanced by access to economic resources, inequality of outcomes can exacerbate inequality of opportunity, thereby perpetuating a trend of increasing inequality…. Society faces difficult questions of how best to fairly and justly promote equal opportunity. My purpose today is not to provide answers to these contentious questions, but rather to provide a factual basis for further discussion…. I will review trends… then identify and discuss four sources of economic opportunity in America…. The first two are widely recognized as important sources of opportunity: resources available for children and affordable higher education. The second two may come as more of a surprise: business ownership and inheritances…. In focusing on these four building blocks, I do not mean to suggest that they account for all economic opportunity, but I do believe they are all significant sources of opportunity for individuals and their families to improve their economic circumstances…”

  2. Richard Mayhew: Harrassing the “deserving” poor: “Ann Marie Marciarille…. The Medicaid expansion in slightly more than half the states has expanded eligibility from… a politically powerless and disenfranchised primary user base… to… the working poor [who] will never have as much power as the non-working rich, but they have some…. Post 1: ‘A friend from Minnesota asks if I have heard of the ‘old’ Medicaid rules on child support assignment being applied to  ‘new’ Medicaid ACA-expanded  beneficiaries….. Does this mean Medicaid’s more draconian aspects will finally see the light of day in public debate? Will the inclusion of working poor people create a constituency for a Medicaid program… [not] apparently premised on the idea that Medicaid beneficiaries are getting something for nothing and payback is our mission?’ Post 2: ‘As I have discussed elsewhere, we are conflicted about Medicaid so it is no surprise that the ACA is conflicted… does nothing to alter state discretion to seek state recoupment of Medicaid costs from Medicaid beneficiaries who received basic medical services… after the age of 55….’ These types of rules have been put in place as part of the favorite American game of determing who is and is not part of the deserving poor.  Those rules applied to Medicaid when it was truly the poor person’s program and not a broad based payer of last resort.  To some, anyone who qualifies for Medicaid, even with the income eligiblity expansion is a ‘loser’ who deserves random harrassment, but beyond those assholes and sociopaths, it is harder for the American voting  public (which is quite different and generally more privileged than the general public on a variety of measures) to see the value of harrassing people who they either know or could have seen themselves to be.”

  3. Mohamed El-Erian: The Inequality Trifecta: “There were quite a few disconnects at the recently concluded Annual Meetings of the International Monetary Fund and World Bank. Among the most striking was the disparity between participants’ interest in discussions of inequality and the ongoing lack of a formal action plan for governments to address it. This represents a profound failure of policy imagination…. In the developed world, the problem is rooted in unprecedented political polarization, which has impeded comprehensive responses and placed an excessive policy burden on central banks. Though monetary authorities enjoy more political autonomy than other policymaking bodies, they lack the needed tools to address effectively the challenges that their countries face. In normal times, fiscal policy would support monetary policy, including by playing a redistributive role. But these are not normal times…. As a result, most countries face a trio of inequalities – of income, wealth, and opportunity – which, left unchecked, reinforce one another, with far-reaching consequences. Indeed, beyond this trio’s moral, social, and political implications lies a serious economic concern: instead of creating incentives for hard work and innovation, inequality begins to undermine economic dynamism, investment, employment, and prosperity… affluent households spend a smaller share… high levels of inequality also impede the structural reforms needed to boost productivity… erodes social cohesion, political effectiveness, current GDP growth, and future economic potential. That is why it is so disappointing that, despite heightened awareness of inequality, the IMF/World Bank meetings – a gathering of thousands of policymakers, private-sector participants, and journalists, which included seminars on inequality in advanced countries and developing regions alike – failed to make a consequential impact on the policy agenda. Policymakers seem convinced that the time is not right for a meaningful initiative to address inequality of income, wealth, and opportunity. But waiting will only make the problem more difficult to resolve…”

  4. Danilo Trisi: Safety Net Cut Poverty Nearly in Half Last Year: “Safety net programs… lift[ed] 39 million people — including more than 8 million children — out of poverty… Social Security, non-cash benefits such as rent subsidies and SNAP (formerly food stamps), and tax credits for working families like the Earned Income Tax Credit (EITC)…. Accounting for government assistance programs and taxes cuts the poverty rate for 2013 from 28.1 percent to 15.5 percent…. Safety net programs cut the poverty rate for children from 27.5 percent to 16.4 percent…”

  5. Paul Krugman: 1937: “Economists… warned… not to pull another 1937–a reference to the fateful year when FDR prematurely tried to balance the budget and the Fed prematurely tried to normalize monetary policy, aborting the recovery of the previous four years and sending the economy on another big downward slope. Unfortunately, these warnings were ignored…. And now things are sliding everywhere. Actually, Europe already had one 1937, with its slide into a double-dip recession; but now it’s very much looking like another. And the world economy as a whole is weakening fast…. I hope that the Fed will stop talking about exit strategies for a while. We are by no means out of the Lesser Depression.”

  6. Neil Irwin: The Depressing Signals the Markets Are Sending About the – NYTimes.com: “Just this summer, Federal Reserve officials were fretting over markets being so stable that it might create complacency, and we were writing about a global boom in asset prices…. The autumn has brought a rather darker set of worries…. Many crucial indicators in markets for international bonds, currency and commodities are pointing toward a heightened risk of a worldwide economic slowdown that may be beyond the ability of policy makers to halt. It would inevitably have ripple effects even on the relatively strong American economy.”

  7. Ryan Avent: Monetary policy: When will they learn?: “THE monetary economics of a world in which interest rates are close to zero are not especially mysterious. Stimulating the economy at that point requires central banks to raise expected inflation. Disinflation, by contrast, results in passive tightening, since the central bank can’t lower its policy rate and since the real interest rate is the policy rate less expected inflation. In this world, the downside risks are much larger than those to the upside. There is infinite room to raise interest rates if inflation runs uncomfortably high (one might even welcome that opportunity to push rates up as that would reduce the probability that rates would fall to zero again in future). But there is no room to reduce interest rates if inflation is running to low. That, in turn, forces central banks to use unconventional policy or run psychological operations to try to boost expectations. Central banks are not very good at those sorts of things. You need to overshoot, in other words, because undershooting feeds on itself…. Fatigue may be setting in at the Federal Reserve…. The threat is clear enough. Inflation in America is below the Fed’s 2% target and looks to be falling again. The disinflationary winds blowing in from abroad are strengthening to a gale…. Expectations for inflation over the next five years have fallen half a percentage point since July, to around 1.5%: a level at which the Fed has previously moved to begin new asset purchases. The yield on long-term Treasuries is tumbling again…. My question for the Fed is: what happens when disinflation continues in November and December after the Fed has termintated its asset purchase programme? Is it prepared to start purchases up right away, or will it wait to see whether things turn around? If so, how long is it prepared to wait? What is the plan here?… The sensible course is what it has been for the last six years: keep pushing until the economy is well clear of danger. If inflation gets up to 3% or 4% or 5%, well, there are far worse things, and the response is simple enough: tighten policy. Erring in the opposite direction may end up far more costly, however. As, I fear, we all may learn.”

Should Be Aware of:

 

  1. Preview of Ye Olde Inæqualitee Shoppe PseudoerasmusPseudoerasmus: Ye Olde Inæqualitee Shoppe: “Income inequality in pre-industrial societies was, in general, lower than in modern industrial societies, but traditional agrarian economies tended to be closer to their ‘maximum feasible inequality’ than modern ones…. You actually need some income to achieve substantial inequality!… You should compare actual inequality with the ‘maximum potential inequality’ possible given the society’s level of per capita income. This point is vividly illustrated in Milanovic, Lindert & Williamson….mIn a very poor society whose average income is close to the absolute survival level, the surplus extracted is pretty small and therefore inequality cannot be very high…. The interesting question becomes, did pre-industrial societies at different levels of income have different ‘extraction levels’? Put another way : did peasant incomes also rise when the average income rose or did the increase simply lead to more elite extraction?”

  2. Nick Rowe: Worthwhile Canadian Initiative: The representative agent does not know what he is doing: “We need to be careful when we use representative agent models, to avoid fallacies of composition (what is true of each of the parts might not be true of the whole). Each individual knows his own height, and George knows his own height, but… the representative agent does not know the height of the representative agent…. Will this process eventually converge to a Nash equilibrium where the representative agent knows what the representative agent is doing? George does not know that either. It might help George figure it out a bit better if the central bank at least told George what level of NGDP it was aiming for. It doesn’t solve all of George’s problems, but it does make coordination a little bit easier.”

  3. Tim Herrera: National Review is obsessed with Lena Dunham’s sex life and body: “National Review hates Lena Dunham! Boy, does it hate Lena Dunham. But not because it doesn’t like her show, or her new book, or even her artist parents.National Review hates Lena Dunham because… well, to be completely honest, I’m not actually sure why. But by God, they want you to know they hate Lena Dunham… on the cover… with a very long headline that begins: ‘Kevin D. Williamson on the Pathetic Privilege of Lena Dunham,’ and includes a series of feeling words, plus ‘Brooklyn’ and ‘Oberlin’… two-and-a-half pages about how Dunham has been to Brooklyn, goes shopping, wrote a book and also is a disgusting fat woman — not, like, Craig, Colo. fat, but definitely Hollywood fat. She also reportedly has opinions…. A one-off feature, National Review’s ‘Lena Dunham Is The Worst’ Article By The Numbers: 18: Total number of paragraphs in the story. National Review likes very, very long paragraphs. 2: Paragraphs about Dunham’s body. 5: Locations referenced when debating whether Dunham is fat. 1: Photos of Dunham eating cake accompanying the article. 7: Number of paragraphs Williamson uses to describe Dunham’s sex and dating life. 10: Explicit references to Dunham’s, Dunham’s infant sister’s, or Dunham’s mother’s genitals, as part of a three-paragraph section about Dunham’s ‘sexual abuse’ of her sister as supposedly written in her book, ‘Not That Kind of Girl.’ 5: Paragraphs Williamson uses to say that Dunham is a false-rape-accuser. 1: Bizarrely out-of-place references to the ‘surprising number of anecdotes from Palestinian fundraisers’ in Dunham’s book. 6: Appearances of the phrase ‘voice of a generation’ or variations of it (is she or isn’t she?). 1: Paragraphs about Dunham’s shopping habits.”

October 17, 2014

Connect with us!

Explore the Equitable Growth network of experts around the country and get answers to today's most pressing questions!

Get in Touch