Things to Read at Lunchtime on February 21, 2014

Must-Reads:

1. Stan Collender: Does Anyone Else Realize The Federal Debt Ceiling Was ELIMINATED?: “Most reports said the GOP folded its debt ceiling tent and went home. Three years after Senate Minority Leader Mitch McConnell (R-KY) began to insist that Congress would never allow the  government’s borrowing limit to be raised again unless Republicans got something something in return, and long after House Speaker John Boehner (R-OH) said there would be no debt ceiling increase unless he got a dollar in spending cuts for every dollar of increased borrowing authority, congressional Republicans allowed the government to borrow more…. But… far more significant: the federal debt ceiling wasn’t just raised, it was eliminated until March 2015… the federal government has no statutory limit whatsoever on the amount it may borrow over the next 13 months…. Congressional Republicans and Democrats alike should now be able to realize that the debt ceiling… no longer serves any practical purpose…. something that both parties join together to offer in the lame duck session of Congress that is virtually inevitable this year.”

2. Bill McBride: Calculated Risk: The Stimulus Success: “It is important for the future to set aside ideology and recognize that the American Recovery and Reinvestment Act of 2009 helped the economy. The stimulus could have been structured differently… why have tax incentives for businesses to invest when there is already too much capacity?… Recoveries from financial crisis are slow [so] investment in infrastructure could have been larger and lasted longer (not just “shovel ready” programs)… but overall the program was obviously helpful.  Note: One of the reasons I was able to anticipate the bottom of the recession was that I correctly analyzed the impact of the stimulus. It is sad today that extremist ideologues are arguing the stimulus failed. This is very dangerous for the future…. From the White House: ‘The Recovery Act, by itself, saved or created about 6 million job-years, where a job-year is defined as one full-time job for one year. This translates to an average of 1.6 million jobs a year for four years through the end of 2012. This estimate is within the range of estimates provided by the Congressional Budget Office and other outside organizations.’ This impact is in line with analysis from the CBO and others. We should debate the actual impact of the stimulus. We should debate the effectiveness of each component of the stimulus. But we should also ridicule the ideologues … Rubio’s comments are not just wrong but dangerous (if enough people believe him).”

3. The Epicurean Dealmaker: Occupy Galt’s Gulch: “‘Each of us in this room has warmed ourself at fires we did not build, and each of us has drunk from wells we did not dig.’ — Mark Shields, as heard, October 1997…. The exposure and ridicule of hubris among the Great and Good, the not-so-great and not-so-good, and the patently pathetic yet surprisingly lucky has been an overarching concern and even gleeful entertainment in these pages…. To date, what has typically stayed my hand is an acknowledgement that any efforts to puncture the iron-clad self regard of the self-appointed financial elite would be doubly futile… my targets have historically been both too impervious and too self-evidently ridiculous to bother. What has tipped my hand at last has been the appearance, at Megan McArdle’s blog site, of a really excellent guest post by entrepreneur and investor Jim Manzi. Mr. Manzi’s capitalist credentials are indisputable, so I was both impressed and heartened to read the words he excerpted there from his newly published book: ‘Many entrepreneurs hold the opinion that “I did it all on my own”…. The entrepreneur relies on an ecosystem of venture capitalists, risk-taking purchasers, and so on. This ecosystem itself rests on a deeper foundation of collective, government-led enterprise. The delivery of our software, for example, depended on the existence of the Internet, which is the product of a series of government-sponsored R&D efforts, in combination with subsequent massive private commercial development. Government funding has been essential to much of the university science that entrepreneurs have exploited. Honest courts and police are required for functioning capital markets and protection of assets; physical infrastructure is required for the roads and running water without which we would not spend much time thinking about artificial intelligence software. At the absolute foundation, national armed forces protect the whole system against external aggression. All of our exciting technical and economic innovations ultimately require men to stand watch all night looking through Starlight scopes mounted on assault rifles—and die if necessary—to protect our commercial, law-bound society. Would you do this to protect a billionaire hedge-fund manager who sees his country as nothing more than lines on a map?'”

4. Sven Jari Stehn and Jan Hatzius: Fed Should Target Wage Growth: “Low inflation should be indicative of the size of the employment gap. This approach, however, relies on a tight link between slack and price inflation. And the experience of the last couple of years suggests that price inflation is not very responsive to the employment gap at low levels of inflation and seems to fluctuate quite randomly when we are in the neighborhood of price stability. The behavior of core PCE inflation between 2011 and 2013 is a good example: core inflation rose by a full percentage point during 2011 and then dropped by the same amount in 2013, without any compelling macroeconomic explanation…. While such a [wage-targeting] policy is not perfect — because the wage inflation process, too, is subject to uncertainty — the error band around the paths for the funds rate and unemployment rate is lowered significantly and more so than in the case of increased focus on price inflation. The intuition is simple: because the wage inflation process is more stable than the price inflation process in our estimated model, the former provides a better cross check of labor market slack and thus there is a stronger case for Fed officials to focus on it.”

5. Judy Feder: The Inevitability of Disruption in Health Reform: “Concern about even modest disruption of existing health insurance coverage by the ACA regenerates the belief that “there’s got to be a better way” to make coverage available, adequate and affordable. But this brief shows that disruption is inevitable in any health reform and that the ACA’s disruption is remarkably limited—far less than single payer proposals on the left or market-based proposals on the right. Further, unlike even many narrowly targeted reform alternatives, the ACA improves the pooling of risk that is essential to effective insurance.”

6. Jason Furman and Betsey Stevenson: Congressional Budget Office Report Finds Minimum Wage Lifts Wages for 16.5 Million Workers: “The new Congressional Budget Office (CBO) report finds that 16.5 million workers would get a raise from increasing the minimum wage to $10.10 per hour and this would help millions of hard-working families, reduce poverty, and increase the overall wages going to lower-income households. On employment, CBO’s central estimate is that raising the minimum wage to $10.10 per hour would lead to a 0.3 percent decrease in employment and CBO acknowledges that the employment impact could be essentially zero. But even these estimates do not reflect the overall consensus view of economists which is that raising the minimum wage has little or no negative effect on employment.  For example, seven Nobel Prize winners and more than 600 other economists recently stated that: ‘In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market.'”

Should-Reads:

• Greta Krippner (2005): The Financialization of the American Economy
• Megan Benetsky: 2007-2011 County-to-County Migration Flows
• Jason Furman: The Economic Impact of the American Recovery and Reinvestment Act Five Years Later

• Samuel Bowles and Herbert Gintis: The Inheritance of Inequality

• Chye-Ching Huang and Nathaniel Frentz: What Really Is the Evidence on Taxes and Growth?: “A 2012 Tax Foundation report asserted that ‘nearly every empirical study of taxes and economic growth published in a peer-reviewed academic journal finds that tax increases harm economic growth’…. The Tax Foundation mischaracterized, exaggerated, or selectively described the findings of six of those 19 [studies].  When one adds to these six studies the three state-level studies that the Tax Foundation misrepresented and the three studies that the Tax Foundation correctly identified as showing a “neutral” effect of taxes on growth, 12 of the 26… do not support its flat assertion that tax increases harm growth. The Tax Foundation’s review omitted dozens of relevant studies published in major journals or edited compilations since 2000, many of which conclude that levels of taxation have little if any impact on economic growth or that adverse impacts are limited…. The Tax Foundation’s assertion of a growing ‘consensus among experts’ that taxes harm growth is false.  In fact, studies that the Tax Foundation cited, as well as others that it omitted, explicitly note the lack of academic consensus.”

• Jonathan Chait: Do Liberals Want to Kill Iron Man?: “One sleight of hand in Mankiw’s column… is his easy leap from the relatively unobjectionable way Downey earns his fortune to the way other executives… earn theirs. If you don’t like Downey’s movies, you can choose not to attend them. If you don’t like the financial industry siphoning off your 401(k) or plunging the world economy into a massive crisis destroying trillions of dollars and ruining the lives of millions of people forever, you don’t have as much recourse. Mankiw wants us to ignore the serious moral problems embedded in the rentier class…. But there is somebody who considers Downey’s income a great injustice: Greg Mankiw. As Mankiw has insisted time and time again, Obama’s tax policies unfairly seize too great a share of Downey’s income and spend it on people less deserving than Downey. Indeed, Mankiw’s work suggests he believes society’s cruel exploitation of Downey and his economic peers is the single most compelling social wrong in the world today. Have Obama’s confiscatory tax policies discouraged Downey from sharing his talents with the world? Apparently not — he is already filming another Avengers sequel. If we followed Mankiw’s urgings and reduced Downey’s tax rates, would he give us even more films? That seems hard to believe. Does Downey himself even begrudge his current tax burden? I don’t know the answer, but the fact that he donated to Obama’s reelection, the failure of which would have spared him from his current onerous rate, suggests he probably does not.”

• Quinn Norton: Twitter I Love You But You’re Bringing Me Down: “‘Internet argument is a strange game’, I tweeted one day, ‘The only winning move is not to play’. ‘NO IT’S NOT’, a friend replied immediately. Moments later she called me Hitler. I saved it as the perfect internet argument, at which point my friend went on to say my mother is gay (an uncontroversial fact) and sent me a picture of a Puerto Rican Hitler cat.”

Lydia DiPillis: Sen. Bob Corker can’t stand the United Auto Workers: An annotated interview | Mark Thoma: Contra Greg Mankiw, It’s Not Just Talent and Hard Work | Samuel Lee: What I Learned From Ray Dalio | Rich Yeselson: After Chattanooga | Matthew Stephenson: Turkish Turmoil and Politically-Motivated Anticorruption Enforcement | Kevin Roose: One-Percent Jokes and Plutocrats in Drag: What I Saw When I Crashed a Wall Street Secret Society | Ryan Cooper: The huge downside to fracking that everyone is ignoring |

1. Felix Salmon: Monopolizing bandwidth: “The US, by contrast, is unique in that it has very high broadband prices and an abundance of bandwidth. The country as a whole — or at least its urban centers — has no shortage of bandwidth at all. But if you want to connect your home or business to the major internet backbones, the cable-company gatekeepers will charge you an arm and a leg for doing so. Farhad Manjoo has the explanation for why this should be. Internet service is very cheap for the cable companies to provide, and it’s also price-sensitive: if you reduce the price, more people will sign up. As a result, the cable companies would make more money from their broadband offerings if they reduced the price. So why don’t they? Because right now, 91% of Americans with broadband also have cable TV (I think, I can’t find the link for that right now), and the cable companies make their real money from TV, not broadband. The cable companies therefore have every incentive to price broadband as high as possible, so as to make the marginal extra cost of getting TV as well as small as possible.”

2. Kevin Drum: Obama the Wimpy Tyrant….Or the Pathetic Autocrat….Or Something: “Jonah Goldberg phones in a column today about the tyranny of Barack Obama and his flagrant abuse… they’ll never get tired of it, no matter how inane it obviously is. I was, however, particularly impressed by this howler: ‘Some of his unilateral actions are a bigger deal, of course. The Environmental Protection Agency’s decision to treat carbon dioxide as a “pollutant” is an outrageous expansion of executive power. But Obama doesn’t tout that as a bullet point; he let the EPA take the political heat for that decision a while ago.’ Huh. Last I heard, Massachusetts and some other states sued the EPA, and eventually the Supreme Court ruled that EPA was required to regulate greenhouse gases. The suit began during George W. Bush’s first term and was resolved in 2007, while Barack Obama was still a freshman senator running a longshot campaign for the presidency…. My other favorite part of the column was the very last sentence, warning Democrats of blowback for their tyrannical ways: ‘They shouldn’t be surprised if the next Republican president takes advantage of that license.’ No worries there, my friend. We are, after all, talking about the party that fired the Senate parliamentarian when he refused to give them a favorable ruling on a tax bill… decided mid-decade redistricting was a brilliant new idea… to turn the filibuster into a routine requirement… that held open voting for three hours so it could armtwist holdouts into voting for Medicare Part D… spent the past three years passing voter ID laws in hopes that it would prevent likely Democratic voters from being able to cast ballots… decided it was kosher to threaten to blow up the good credit of the United States as a bargaining chip in routine budget battles. That party. I can assure Goldberg that we liberals have assumed all along that if Republicans get control of the presidency or Congress in 2016, they’ll steamroll our current norms of government in ways that make Democrats look like five-year-olds. We’ll be outraged, but we sure won’t be surprised.”

3. Noah Smith: Bet with Kurt Mitman about unemployment: “Kurt Mitman… has written a paper with three coauthors that examines cross-state evidence and concludes that unemployment benefits are a significant disincentive to work. It now looks like there is a very good chance that Congress will fail to extend unemployment benefits…. Kurt bets that more people will get work, so unemployment will fall while employment rises…. I bet that nothing much will happen…. Recent evidence from North Carolina suggests we might both be wrong–expiring benefits there seem to have led to a fall in unemployment and a corresponding rise in dropouts from the labor force…. Here are the official terms… as stated by Kurt: ‘We are interested in the December 2014 jobs report, to be released in January 2015…. The prediction of my model is that unemployment U will be 5.2% on that date, and an increase in the employment to population ratio E of 2 percentage points…. If benefits do not get re-extended… I win if…. U < 5.95%… [and if E > 59.6%]'”

And:

• Timothy Snyder: Fascism, Russia, and Ukraine

Keith Hennessey: Response to Senator Cruz on the debt limit | Mary Beard: Vocal women treated as ‘freakish androgynes’ | John Quiggin: Electricity privatisation in Australia: A record of failure | Sapna Maheshwari: Gap Raising Minimum Wage For More Than 65,000 U.S. Employees To $10 Next Year | Ben Thompson: Messaging: Mobile’s Killer App | Lydia DiPillis: Sen. Bob Corker can’t stand the United Auto Workers: An annotated interview | Bill Davidow: Welcome to Algorithmic Prison |