Monday, December 31, 2012

Senate 'Almost There' but Hold On: House Has "no Plans" for Vote Tonight

     It's not clear where this is coming from. Is it gamesmanship? The GOP is in a pique of hurt feelings based on some early afternoon bluster by the President. They are claiming that Obama's statement that the sequester cuts will not be done only with spending cuts-but more revenue-they are now suggesting may be a deal killer.

    "With hours remaining to avert the so-called fiscal cliff, President Barack Obama said a deal is “within sight” and urged lawmakers to come together to avert automatic tax hikes and spending cuts that kick in on Tuesday."

     "But his midday press conference, with a group of middle-class Americans looking on, was not without a bit of bravado as well. Obama took multiple shots at Congress for its clumsiness in negotiations and insisted that he'd demand more tax hikes if the legislative body used the impending debt ceiling standoff to demand spending cuts."

      "In the process, the president irked several Republican aides, who suggested that the entire fiscal cliff deal had been complicated because of his tone and criticism."

     “Potus just moved the goalpost again. Significantly. This is new,” tweeted a top aide to McConnell.

      "Doug Heye, a spokesman for House Majority Whip Eric Cantor (R-Va.), tweeted, “If Obama's goal was to harm the process and make going over the cliff more likely, he's succeeding.” Another Cantor spokesperson said, “So....I'm confused....does POTUS want a deal or not? Because all those jabs at Congress certainly sounded like a smack in the face to me."

    Yeah I now I have a little tear in my eye!

    "Sen. John McCain (R-Ariz.) said the president "sent a message of confrontation" to Republicans, who could be voting on a deal in the next 24 hours. "I'm not sure ... whether to be angry or to be saddened," he added.

    "A source close to House Republican leadership went even further, telling HuffPost that the lower chamber was in revolt over Obama's remarks and that the deal could blow up because of them

     To me this should be stored under "You're kidding, right?!" I mean your going to blow up a deal that will hurt so many Americans because you're feelings are hurt? Still, for whatever reason, the House GOP claims not to have any plans for a vote tonight, regardless of whether a bill passes in the Senate:

      "A notice from the House Majority Whip's office indicates Republicans have no plans to hold a vote on any Senate-passed legislation to avoid the so-called fiscal cliff."

       "There will be a Special GOP Conference Meeting at 5:00 p.m. in HC-5," according to the alert. "Immediately following Conference tonight, roughly 5:30-6:00 p.m. we will have our first and only vote series of the day on suspensions."

      "To translate, the House is only planning to vote on a handful of scheduled, non-controversial measures this evening. They plan to leave tonight whether or not the Senate passes a bill to avoid the expiration of the Bush tax cuts at midnight. That means that unless the GOP's plans change, then starting at midnight, the revenue baseline resets to a pre-Bush tax cut baseline, and any fiscal cliff legislation becomes a tax cut."

     "The consequences for the shape of any deal are potentially huge, but still unclear.
     From what I understand, the House has been suggesting that they could get a deal done by January 2-which still might be in time...
     So the plot thickens, My suspicion: it's more gamesmanship. I've always thought a deal would happen, though I've had my doubts over the last 5 days. I still think we will. I'll be glad when we know one way or the other though.

Apparent Breaththrough on Fiscal Curb

     This is what the Poltico headlines are screaming right now. Talking Points Memo says "McConnell: We Have a Deal...  Almost."

     HuffingtonPost declares 'Close.'

      From Politico:

     "With the clock ticking toward the midnight fiscal cliff, President Barack Obama said Monday that a deal to avert tax hikes and spending cuts in the new year “is within sight, but it’s not done.”
“There are still issues to resolve, but we’re hopeful that Congress can get it done,” Obama said.

     "As Obama spoke, Congress was closing on a $600 billion deal that would raise taxes on households that make more than $450,000 a year and individuals who make more than $400,000. The emerging deal would also permanently patch the Alternative Minimum Tax, raise the estate tax rates for high-value properties, extend unemployment benefits for a year, extend several middle-class tax cuts for five years and add a temporary fix to Medicare reimbursement rates."

     "The breakthrough came in overnight negotiations between Senate Minority Leader Mitch McConnell (R-Ky.) and Vice President Joe Biden.

     "On the floor Monday afternoon, McConnell announced he had reached agreement with Biden on all the outstanding tax issues, though they were still haggling over how to modify the $109 billion in automatic spending cuts set to take effect in the new year. He said Congress should immediately clear the tax deal in order to prevent historic tax hikes starting Tuesday."

      “Let’s pass the tax relief portion now, let’s take what’s been agreed to and get moving,” McConnell told his colleagues.

      "The agreement would reflect significant concessions by both sides, but particularly for McConnell. Obama campaigned on raising taxes for families who make more than $250,000, but McConnell has long been dead-set against any tax increases, warning they would jeopardize the economy. It would make the higher tax rates for wealthier families permanent, which McConnell would sell as a win for his party since it could avert future fights over expiring tax rates."

    Read more:

     If the basic outline of the tax deal is coming into focus, this is less true of the sequester cuts:

     However, there has been no agreement over “turning off” the sequester, tens of billions of dollars in spending cuts that will hit the Pentagon and other federal agencies beginning on Jan. 2, the sources said. That remains the biggest sticking point in the talks. Democrats want to delay the sequester for a full year and pay for it with a mix of new revenue and spending cuts, while House Republicans have been demanding only spending cuts. Any deal without House Republicans will be a heavy lift.

     Obama did speak about an hour ago in a strong statement that insisted that any future deal over the sequester will not be paid solely with spending cuts as the GOP wants but will require significant revenue:

     "The emerging fiscal cliff deal in Congress will only delay scheduled spending cuts -- the so-called "sequester" -- and President Obama said he will look to add further revenue in any future deal to offset them in addition to new spending cuts."

    "Revenues have to be part of the equation in turning off the sequester," he said. He suggested that he might be open to reducing Medicare costs in the long term if it were accompanied with tax reform that eliminates deductions favoring wealthy Americans and large corporations.

       Jamie Bouie speculates on what the President was after in his rather combative press conference he gave an hour ago.

       Whatever his objective was, it clearly irked the Republicans: so I say it was worth it...

        "Republicans reacted immediately and with tremendous hostility to President Obama’s remarks at the White House Monday afternoon, and accused him of jeopardizing a deal to avoid the fiscal cliff."

        "Senate Minority Leader Mitch McConnell and Vice President Joe Biden had been nearing agreement on legislation to avert broad tax increases and spending cuts next year, say aides with direct knowledge of the negotiations."

       "But the evolving framework is unsatisfactory to members of both parties, including members of Democratic leadership, and one Democratic aide described the whole process was “hanging by a thread.”

      "That was before Obama’s remarks, in which he boasted that the nascent plan would protect major progressive priorities, and attacked Congress for threatening to derail it before the end of the day when all of the Bush tax cuts expire. Obama also issued a key demand regarding an issue at the heart of the remaining differences between the parties."
“Revenues have to be part of the equation in turning off the sequester,” Obama said.
That may be a non-starter for Republicans.

      If the GOP plans on letting all this pain happen to 98% of taxpayers out of some personal pique against the President's choice of words it underscores why the country voted against them so decisively on November 6 and they should expect more such debacles.

GOP Senate Source: There Will Be a Deal

     True, right now in liberal-land, there's consternation that the deal will be horrible. As I've suggested, if we get what's currently being advertised-$400,000 floor on higher taxes($500,000 for married couples)-it's a pretty good deal, even if the Dems give the GOP the lower rate on inheritance taxes-provided the capital gains and dividend taxes also go up to Clinton rates.

    Again, keep in mind that proviso. I don't think it's so bad compromising on the inheritance tax-though it's not my preference-if we do get tax hikes for the rich on capital gains and dividends in addition to the raise in individual rates. If the GOP were able to keep those as well as the estate tax, then I'd agree it's a cave.

     This GOP source mentioned in the title, thinks there will be a deal, though it could possibly wait till January 2; however, it's when not if, according to him. The headlines keep changing, but at present the latest according to HuffPo is revenue of $715 billion:

     "The details for the deal, which still is being tinkered with, were passed along to The Huffington Post by a source with direct knowledge of the talks. While progressive lawmakers and pundits have bemoaned some of the details, some top Hill aides seemed increasingly bullish on the prospect of closing a deal before the day was through."

     "Under the framework, the Bush-era tax cuts would be extended permanently for individuals at $400,000 and joint filers at $450,000. A second Senate Democratic source familiar with the state of play confirmed those details. The top rate on ordinary income would go back to 39.6 percent and raise an estimated $370 billion in revenue over 10 years."

     "The same thresholds would be applied for capital gains and dividends, with the top rates in that case going up to 20 percent -- a concession to Republicans (the rate on dividends was set to return to 39.6 percent) but not far from the president's position during the campaign."

    As you can see this is right in line with my framework. I maintain that's a good deal. The question of sequestration remains a problem. Some GOPers yesterday were complaining about a Democratic proposal to put 50% of the new tax revenue towards offsetting the sequestration through 2014.

   "An outstanding issue remains as to what to do with the $1.2 trillion in sequestration-related cuts that are triggered on Jan. 1, with the parties arguing over how long to stave off the cuts, and whether and how to offset them."

   Many Dems argue this is a bad deal-bargaining away new revenue for a temporary fix that the Republicans have an incentive to stop as well-the same criticism applies to reports that the Dems are offering a "Doc Fix" as part of negotiations.

   According to the current report the estate tax will be raised, though only slightly:

    "The estate tax, which had been a sticking point, will be raised slightly. Currently, it stands at 35 percent on a $5 million threshold. That would be raised to 40 percent, again on a $5 million threshold, which would raise an estimated $25 billion in revenue over 10 years."

    There will also be a reduction in deductions for high earners:

      "Taxes benefits would also decrease for high-income earners, with respect to their personal exemptions and itemized deductions. Under the deal being negotiated, the personal exemption phase-out would be capped at $375,000 for individual filers and $425,000 for joint filers. The limitation on itemized deductions would be set at $250,000 and $300,000 respectively. What this means, in basic terms, is that above those income levels, the value of exemptions and deductions goes down and the tax bill paid by those taking the exemptions and deductions goes up. These provisions would raise an estimated $185 billion over 10 years."

      "The deal being negotiated would, in addition, include a permanent patch to the alternative minimum tax, which was designed to ensure that the wealthy paid a share of taxes, but could engulf millions of middle class earners if left untouched."

     "The deal would include a five-year extension of stimulative tax policies, such as the Earned Income Tax Credit, the Child Tax Credit and the college credit expansions. There would be a one-year extension of the 50 percent bonus depreciation provision introduced in the American Recovery Act, which enables small businesses to deduct up to $250,000 of the cost of machinery and other equipment."

    "There are still major areas of disagreement to be negotiated. For example, the deal calls for a one-year resolution to the so-called doc-fix, which adjusts the amount of money doctors receive for taking Medicare patients. But as of Monday morning, there was no agreement on how to pay for it."

     There will apparently be an extension of unemployment benefits.

     "Both sides had also agreed that unemployment insurance should be extended one year, affecting an estimated 2 million recipients. But again, there was a dispute over how to cover the $30 billion cost."

     Overall, this doesn't sound like a cave, though it is to be bemoaned that apparently there's no payroll tax extension. Shows the GOP doesn't really care about tax cuts that don't benefit the rich.

    If the sequestration is left in place this is also to be bemoaned. Yes, I wish we could deal with the debt ceiling right now but it's clear there's no time for everything-and we don't know what's been discussed there. You have to let the GOP feel they won something. Many, like Tom Cole are basing their support for raising taxes on the rich with the carrot that they'll be able to get some spending cuts later. I think they've actually overestimated "leverage" they have with the debt ceiling: they forget what a hit the Republican brand took during that game of debt ceiling chicken. I suspect that if they try to force in the kind of Medicare cuts, et. al, that Romney ran on-and lost-by forcing a hostage situation every month over the debt ceiling they could really hurt themselves even further than they did in the first round.

   Finally, that many liberals are bemoaning this deal-without knowing the details-is probably a good thing. It might help get more House Republican votes-making them think it's a good deal for them.



A Sinking Feeling That Obama's About to Cave

     I just wrote about this: that many liberals now think he and maybe the other Dems are about to cave.

     The latest on the fiscal curb

    Krugman, too, speaks of a "sinking feeling" that the President is about to cave:

     "Many reports in the past hour or two suggesting that Obama is about to cave on the fiscal cliff — water down his tax demands in return for some minor Republican concessions — concessions that won’t involve taking the debt ceiling off the table."

      "Let’s hope this is wrong."

       "Is it really possible that Obama still doesn’t understand that every time he does this — especially if it comes just a few days after stern statements about how he won’t give it — it just reinforces the Republican belief that he can always be bullied into submission? If he cuts a bad deal on the fiscal cliff today, he more or less guarantees that just a few weeks from now Republicans will go all out on using the debt ceiling to extract more concessions."

      "So far, these are only reports on background, so maybe the truth isn’t that bad. But suddenly that sinking feeling, the sense that you’ve got a leader you can count on to wimp out when it matters, is back."

     I guess it depends what you consider caving. Is moving up the flloor on the higher tax rates from $250,000 to $500,000 for couples-and from $200,0000 to $400,000 for individuals while compromising on the inheritance tax caving?

     I say no, or at least it depends on what the larger context of the deal is. Some liberals right now are saying yes. In any case, they may well be helping the Democrats by giving the Republicans the ablity to say to the ultra Righties: 'Listen to the libs squeal! We've got as good a deal as we can get!'

     As for the income tax, I even thought the $250,000/$200,000 threshold was too low: people at these levels are hardly rich and I don't necessarily see why we should be determined to stick it to them. True, the one problem with this is that raising the floor also cuts taxes for those who make over $500,000/$400,000 on their income between the old and new floors. As for the inheritance tax I don't love the idea of letting the GOP keep the current low rates of 35% for those making over $5,000,000 however, it might be acceptable if it's in the context of a deal which raises capital gains and dividends rates for the rich to Clinton rates.

     My feeling is that I'm not going to assume the worse. Maybe it's necessary that some do assume the worst to keep the Dems honest. However, that role's clearly more than adequately filled. My job as a relative party man and pollyanna is much more understaffed! It's not for nothing that when I used to write at Firedoglake-prior to Jane Hamsher banning me-I was the resident "DNC operative."

    As I quote on my Twitter page, "Principles indeed! Betray your principles and stand by your party!" These are the immortal words of one of the greatest Republicans ever, Thaddeaus Stevens, and his words ought to be remembered time like these. It's all well and good to castigate the Dems at the first sign of trouble: all this does is strengthen the GOP and increase the dysfunction of our politics. Obama and the rest of the Dems have performed honorably until now at least, including Harry Reid flushing out the GOP's attempt to force chained cpi into the deal.

   For me at least, they've earned some benefit of the doubt.




Good News and Bad News on the Fiscal Curb

     The good news is according to the latest reports-though this keeps changing-a deal is increasingly likely.  The bad news: many liberals seem to think the Dems are selling out out of a desire to get a deal at any price.

     Talking Points Memo speaks of the 'Dems' Mystifying New Fiscal Cliff Strategy.'

      "A deal like this re-enforces the GOP’s skewed approach to budgeting, which basically ignores the impact tax cuts or increases have on the deficit. It indulges their desire to reduce budget negotiations back down to what and how much to cut — and to the status quo ante that new spending can’t be paid for with higher taxes."

     "And it calls into question Obama’s insistence that he’ll refuse to negotiate a debt limit increase early next year. Under the GOP’s most recent offer, the sequester will still be largely intact. And having agreed to compromise on the one thing he was supposed to get for free, Obama will be left to choose between two basically identical, but losing propositions: cut a skewed deal with Republicans to raise the debt limit; or “refuse” to negotiate over the debt limit, but reach the same endpoint in order to defuse the sequester."

     "Here’s another way to look at it: Relative to current policy, tax revenues will increase by about $5 trillion over 10 years automatically if Congress does nothing. Likewise, if Congress does nothing, spending will fall about $1.2 trillion over the same timeframe. Obama’s willing to give away $4.2 trillion in revenue from the get go, and then, apparently, negotiate down further from there.Republicans don’t want to yield on any of those spending cuts, and don’t think they have to. This is why Obama’s supporters are so distraught about the latest news reports."

     Janelle Bouie too suspects the Dems of having squandered their leverage:

      "As The Post reported, Democrats have agreed to raise the income threshold to $450,000 from $250,000, meaning that the Bush tax cuts would remain in place for all income below the former. What’s more, the threshold for the estate tax will remain at $5 million — it is scheduled to drop to $1 million. In return, Democrats get an extension of unemployment benefits — no payroll tax cut, no stimulus."

      "The current Democratic offer is even further from ideal than the one presented by President Obama, and it represents a huge erosion of leverage. Republicans are now the ones in control, and as Jonathan Chait notes, it has everything to do with the president’s willingness to cave on taxes and his genuine desire to avoid the fiscal cliff. The White House doesn’t seem to think that it has much leverage after Jan. 1, or at least that any deal it gets after taxes go up will lack important elements like unemployment insurance."

     "I think this is mistaken. As President Obama himself noted in his interview with David Gregory yesterday, Republicans are most focused on reducing tax rates on the wealthiest Americans. In the post-cliff environment, taxes on the wealthiest will go up far above of what Democrats want. If low taxes are their goal, Republicans have no choice but to come to an agreement, and it’s there that Democrats can draw terms to their advantage."

    "There’s still time for the White House to embrace this and prevent further concessions to the GOP. But if President Obama remains committed to getting a deal done before the new year, then in all likelihood, it won’t be favorable to his short-term or long-term interests."

      However, whether or not we like the deal, it seems now that a deal is more likely again-it's like the stock market itself: every minute a new report claims the opposite of what the previous one did regarding likelihood or lack theoreof. Politico now talks of "major progress" having been made:

      "Senate Minority Leader Mitch McConnell (R-Ky.) and Vice President Joe Biden engaged in furious overnight negotiations to avert the fiscal cliff and made major progress toward a year-end tax deal, giving sudden hope to high-stakes talks that had been on the brink of collapse, according to sources familiar with the discussion.

     McConnell and Biden, who served in the Senate together for 23 years, are closing in on an agreement that would hike tax rates for families who earn more than $450,000, and individuals who make more than $400,000, according to sources familiar with talks. That would mark significant concessions for both men, particularly for McConnell. President Barack Obama campaigned on raising taxes for families who make more than $250,000, but McConnell has long been dead-set against any tax increases, warning they would jeopardize the economy.

Read more:

     As usual I must be the liberal who tells other liberals to calm down just a little bit. I agree that the Dems most not be too eager to do a deal to the extent that they give away the store. I don't think though that what we're hearing suggests that. Honestly I don't think that $400,000 is terrible as a floor for the higher taxes. I have even long suspected that $250,000 is a little low: a couple who makes that are hardly rich; they're working stiffs like anyone else though they are well educated professionals.

    I'm not thrilled with the stories that claim that the Dems may totally let the GOP win on the inheritance tax. However, while I don't think it should stay at 35% only on inheritances above $5million, I think you have to keep in view other taxes that are going up on the rich like dividends and capital gains. I think it could be worth it to let the GOP win on the inheritance tax in exchange for a rise in the cap and dividends rates back to Clinton rates. To be sure, I hope the Dems get at least a compromise on the estate tax than leaving it at the current low rate, but if we get higher rates on income, dividends and capital gains it's worth it.

   It is a disappointment if nothing is done about the sequester and debt ceiling. Still there's been a lot of different snippets that have come out about this so I'd rather reserve judgement. At the end of the day the GOP has to feel like it's getting something out of this. Certainly, the Dems should get a lot more as we won the election, have a mandate, and we gave up way too much in 2011. Still, the GOP has to get something they can show their members.

   I don't like the specter of more debt ceiling chicken either. However, this is one way to get GOPers to support this deal: the carrot that they'll have their chance to get what they want later. Now, I think ultimately, they overestimate their leverage on the debt ceiling. While some of them seem to remember that as a very successful operation where they got over $1 trillion in cuts with no revenue, what they forget is that half of that was in military cuts they hate more than Democrats and that their party got a real black eye from using the debt ceiling as a hostage.

   They seem to be hoping that maybe elections don't have consequences that all they need is the debt ceiling to implement the Ryan Medicare plan. I think on this they're dead wrong. The politics will be too perilous. They won't be able to use this as the ultimate trump card. This grenade will detonate in their own hands.

   However, for now, it may be fine to allow them to think they have this leverage if it compels them to do a deal today. Indeed, maybe all the hand-wringing liberal posts are in our interest as well, making it easier for Republican leadership to convince their members that they're really getting something.

   How about Bouie's point that the Dems should be willing to go over the cliff? They should, but only if necessary. They have shown they are willing to do so, but if we get tax hikes on income, dividends, and cap gains for the rich I think that's what we've been looking for. Remember that going over the cliff puts no little burden on average Americans like you and me.

  We could see immediately higher taxes taken out of our meager checks-mine is particularly meager, I hope for your sake yours is a little less so! Indeed, we will apparently see higher payroll taxes immediately anyway.

  In addition a failure to get a deal before January 1 might mean a delay in us getting our tax refunds, to say nothing for those who will see their unemployment checks interrupted-a position I've been in enough times over the last 4 years to know about; fortunately I'm currently employed, but for meager, part time wages.

   So while the Dems are willing to go over, it's preferable to get a deal and I think what I've heard for sounds like a good deal, though of course the devil's in the details. At least chained cpi is off the table, thanks to Harry Reid.


Sunday, December 30, 2012

Lazy Punditry: David Gregory Protests Too Much

     I see that Gregory is quite bent out of shape that some from the Obama Administration have referred to the media narrative that the fiscal curb is the fault of both the parties-'a pox on both your houses;-is just "lazy punditry."

    What's that matter David? Does the shoe fit? Today he lashed out saying that 'the American people care about results' that the President needs to understand that its not just about "being right." He suggests that ultimately if we go over the cliff and to suffer from these higher tax rates-I like the rest of us could see this in a week or so, though I think there are ways they can forestall the effects short term-Americans will blame everyone in Washington, and the President will take a large share of any blame as, well, he's the President.

   As for this talk about Americans caring only results not the causes, well that was the narrative that lazy journalists like Gregory and his fellow lazy journalists like Bob Woodward and David Brooks-who fittingly was on Gregory's Meet the Press this morning-were pushing during the election. Americans wouldn't blame the obstructionist GOP and wouldn't understand that events in the EU were a problem for the U.S. recovery. All they would care about were results and since the results weren't as stellar as anyone wanted them to be, everyone would blame the President and he alone.

   Mitch McConnell would get a pass for never negotiating in good faith but instead seeing the only objective as not fixing the economy but making Obama a one term President. In a word, the the Gregorys and Woodwards were saying that McConnell and company's obstruction would work as only the President has any responsibility for anything that ever goes wrong in the economy even though Congress is who writes the bills and they had not supported his jobs bill in 2011.

    Woodward has ad nauseum repeated the categorical imperative that it's up to the President to "work his will" and if things don't work out it's all his fault. Well, then, why wasn't Mitt Romney elected in a landslide as some lazy pundits actually predicted. Indeed, on narrative repeated in a sizable part of the media was that Obama would either win in a squeaker or Romney in a landslide-because of that Denver debate. So this is what the pundits like Gregory, Brooks, and Woodward were telling during the election.

    Yet, Krugman's very serious people (vsp) are still as self-important and long-winded as ever. The Republican party may not have learned anything by their defeat but neither have the vsp media.

     Brooks was kvetching as usual about the stupidity of Americans in not voting for people who want to decimate the social safety net. Why can't people learn that their pain is a gain for David Brooks and his vsp friends!



The Age Old Question: Is Inflation the Price of Civilization?

    Or is it just an unmitigated tax, particularly on the poor? I've never believed that inflation is an unmitigated evil or that it's worse for the poor at least on every level. Back when I had my radio show, I got in an on air argument with my co-host Turbo Kitty after she insisted that inflation is indeed an unmitigated tax on the poor. For more on my argument with her

     I just found it found it astonishing at the time that she thought that inflation was an unmitigated evil, and that deflation would benefit the poor. Since then, I've learned that there are many who would agree with her. Our radio collaboration soon ended when she wanted to spend more time on Occupy Wall St. I don't know that this argument helped our relationship. From my stand point it was really motivated by a desire on my part to understand this, it was nothing personal.

    It did seem to me like her views on many things sounded very Right wing for a gal who was something of a radical leftist-she wanted to blow up the banks-preferably literally, etc. Yet she thought the fairest tax system would be a flat tax and that inflation is an unmitigated tax on the poor. Just sounds very conservative to me. Major Freedom would love her.

  Again, I see now that at least based on the consensus, there is a lot of disagreement among economists-it depends what school you ask among other things. The Austrian school in particular sees inflation as unmitigated evil. It's "theft" and hurts the poor more. To me, the issue is at least somewhat ambiguous.

   After all, even if inflation raises prices, it also reduces the amount of debt you owe; I think we can plausibly presume that generally speaking the creditor class is a wealthier group than the debtor class.

   Still, I also now see that I was mixing a number of different issues up in this inflation debate. One thing is I've always instinctively hated the idea of the neutrality of money: for me, I've always felt it's absurd. I'm now finally reading people who are helping me understand why it's wrong. As a layman in economics that's kind of how I have to grapple. Often I here some macro guys make these claims that I instinctively don't trust but lack the theoretical background to really show why they're wrong, though I think they are. Later, I learn more theory and see why.

  Yet, the neutrality of money is a different question than whether inflation is absolute bad or not. You can think it is and still not believe in the neutrality of money-in the short or long term. As to the kind of argument Turbo Kitty was making, I can better see where her mistake was now.

  She was arguing along the lines that if the price of gas was $.10 per gallon in 1950 and $4.00 today, then we have been robbed to the tune of 4000 percent: ie, we're 4000 percent poorer. That's clearly totally wrong. Again, though, it's not necessarily about whether or not inflation is an absolute social evil.  The trouble with her analysis-and it's very common I think among the man in the street with no knowledge of economics-is that she is not comparing apples to apples.

  We are not 4000 percent poorer while the greedy oil companies are 4000 percent richer as this is in nominal values.To really judge today's oil price you have to look at it in constant dollars. For this reason, while gas right now is about $3.50 per gallon and most Americans find this very high, it actually hasn't gone up during the President's time in office as it was at this level or higher in 2008 prior to the big sell off in commodities during the deflation of the second half of 2008-the financial crisis.

   Here's an analysis that argues that gas prices by historical standards are not high. Indeed, they are very low by relative national standards as Britain pays over 50 percent more than we do and much of the Eurozone pays over 100 percent more.

    Even if the price of something is after being adjusted in real dollars, historically high, that doesn't tell us that we're worse off. After all, you have to factor in other prices, and then wages.

    As to inflation itself, my tendency is still to think that while certainly it's no unmitigated social good, neither is it an unmitigated evil. Certainly there's nothing good to say about hyperinflation. However, I don't see that modest amounts of inflation is an evil. What is more unmitigated is the effect of deflation, particularly the poor. Yes, maybe prices are down, but this is cold comfort when you're out of work becasue of the deflation or your debt burden becomes more and more heavy.


Saturday, December 29, 2012

Woj on When the State of Macro Will Be Good Again

     He has a post in answer to the skirmishing over macro going on between Stephen Williamson, Krugman, et. al. I've had a few posts on it myself.

    I find if anything, Glasner-as is often the case-had as penetrating analysis as anyone; Woj also indicated he feels the same about this. Ok, let's see Woj's take:

    "Responding to a debate between Krugman and Steve  Williamson on the current state of macroeconomics, Noah Smith asks, Macro, what have you done for me lately? The entire post is definitely worth reading, including the updates and comments. With apologies, I have copied several paragraphs here:

So if collegiality and similarity of technique are measures of a field's health,
then macro is doing quite well. But I feel like there's a larger question: What
has macro done for the human race in the last 40 years? How are we better off as
a result of all this macro research effort?
          So macro has not yet discovered what causes recessions, nor come anywhere close to reaching a      consensus on how (or even if) we should fight them.

Given this state of affairs, can we conclude that the state of macro is good? Is a
field successful as long as its members aren't divided into warring camps? Or
should we require a science to give us actual answers? And if we conclude that a
science isn't giving us actual answers, what do we, the people outside the
field, do? Do we demand that the people currently working in the field start
producing results pronto, threatening to replace them with people who are
currently relegated to the fringe? Do we keep supporting the field with money
and acclaim, in the hope that we're currently only in an interim stage, and that
real answers will emerge soon enough? Do we simply conclude that the field isn't
as fruitful an area of inquiry as we thought, and quietly defund

And who do we call in to evaluate the health of a science? If we only rely on
insiders to evaluate their own field, we are certain to run afoul of vested
interest (If someone asked you "How valuable is the work you do", what would you
say?). But outsiders often lack the relevant expertise to judge someone else's

It's a thorny problem. And (warning: ominous, vague brooding ahead!) it seems to be
cropping up in a number of fields these days, from string theory in physics to
"critical theory" in literature departments. Are we hitting the limits of Big
Science? Dum dum DUMMMM...But no, this question leads us too far

      "In general my views on the matter are well represented by Smith. My early
frustrations with economics were largely because I thought pursuits within macro
had gone far afield from trying to understand business cycles in a modern
economy. Since that time, I have been inspired by a group of competing theories
that incorporate money and the financial system into macroeconomic models. My
hope and belief is that these currently heterodox methods will, in time, be able
to largely explain what causes recessions and how to fight them. If, and when,
that occurs, the state of macro will be good."

      I guess if Woj is apologizing for quoting Smith at length, I should be apologizing for quoting at length his quoting of Smith at length.... LOL.

      Smith in many ways is a good person to talk to about heterodox ideas and remaking macro. The reason I say this is because of his background in physics. He has often mentioned that this background in physics gives him a different perspective for issues econ than your typical graduate student. In addition, a lot of the heterodox guys like Steve Keen swear by the importance that physics can bring to bear for macro, making it an "honest woman" as it were: ie, a real science.

     By the way, if you're are really interested in heterodox econ, you really got to start with Keen; I'm reading his "Debunking Economics" right now and it gives you the kind of weapons you need if you're like me: an interested layman who has some skepticism about Neoclassical econ but get a little intimidated when the establishment guys show off all their pretty little models. Often when I read someone like Sumner I don't buy what he's saying but I don't necessarily have the best arguments at hand to show why-to fight him on his own turf: not that he's the worst guy in the world, there are far worst and in some sense his ideas are now considered "heterodox."

    At the present that's where we are: the real "heterodox" ideas as featured in a piece by the Economist about a year ago, is Internet Austrianism, Sumner's Market Monetarism, and the MMTers-a kind of post-Keynesian school; Keen is close to it. Woj himself takes a bit from each of these schools or at least both MMT and the Austrians; I'm not sure so much from the MMers. I'm never really sure what the Austrians really have to offer me, however, It seems they're most about telling us we must never do any fiscal policy whereas MMT is about how we should.

    True, the also talk about misallocation of resources-but you can be a post-Keynesian and get that. What is uniquely Austrian in that?

    In any case, while I agree with Woj about the need to change macro and that the heterodox ideas are the way to do it, it's much easier said than done. You have to think about what Thomas Kuehn  said about the shape of scientific revolutions. Paradigm shifts don't happen too often. In econ, we've seen basically two since the rise of the Neoclassical school back in the 1870s-this was lead by Walras, Menger, and Jevons.

   We had Keynes in the 30s and we had Lucas in the 70s. Arguably-and I will argue-that Lucas was basically an anti-Keynesian counterrevolution. Recall that Keynes himself literally invented macro. Lucas was really about making macro more and more about micro-and requiring it to have foundations in micro-ie, "microfoundations."

   In any case, any new paradigm shift won't be easy. However, I do think you can certainly see what could be the building blocks for this paradigm shift. You have the various heterodox schools named above. Then you have younger economists like Smith who bring a different sensibility even if they're schooled in the Neoclassical tradition.

   Smith in particular because of his physics background has an affinity for the idea that what's needed in economics-to make it even a dismal science-are natural experiments. This lack is why economics as much as it wants to is no hard science, but a squishy, soft science. What really divides "hard" and "soft" sciences is the ability to perform controlled experiments. This lack is why Marxists can continue to talk about a "falling rate of profit" as if this hasn't been entirely repudiated by history or Neoclassicals can continue to claim the economy is in stable equilibrium after the Great Depression or the recent Lesser Depression.

   More generally, I understand that many of the younger economists and students are less interested in theory and more in empirical work. These tendencies may abet such a paradigm shift. What seems unlikely is that we'll see this led by a return to IS-LM as Krugman wants to urge.


The Hurdles in Getting a Fiscal Curb Deal By Monday

     Amid new optimism about getting a deal, there are some hurdles, both on policy and procedural. The policy issues are about taxes:

     "Taxes remain the primary sticking point. Republicans have signaled a willingness to extend the George W. Bush-era tax cuts for all income up to $400,000, while Democrats prefer the $250,000 figure that Obama campaigned on, according to sources in both parties."

     "Tied into that discussion was another over the estate tax, with Republicans and some Western Democrats pushing to keep estates worth up to $5 million exempt from taxes, while Obama pushed to lower the threshold to $3.5 million."

     It's hard to see why this should be insurmountable. Actually, $400,000 certainly wouldn't kill me; I'm not sure I wouldn't even prefer it to $250,000 which does seem a little low-are a couple who make $250,000 a year really rich?

     Still, I'm very pleased that the debate is between $400,000 and $250,000, and not $400,000 and $1,000,000. The President is certainly right to go back to the $250,000 mark. The GOP should have taken the $400,000-not to mention chained CPI; an idea many liberals hate, and I'm none too fond of myself-when they had the chance. Snooze, you lose.

    The trouble with raising it to $400,000 though is that this is also another tax cut for the rich as they pay less tax on their income between $250,000 and $400,000 as Greg Sargent points out. As for the estate tax, maybe they can split the difference. Again, none of this sounds insurmountable.

   "Politically, the key is not just to pass something out of the Democratically controlled Senate, but also to do so with enough votes from Republicans to compel their House counterparts to support a deal. A bill with limited support from Senate Republicans would be dead on arrival in the GOP-dominated House, aides in both chambers said."

    "The critical deadline for the Senate-based negotiations is Sunday afternoon, according to Reid and McConnell. If they can come up with something by then, the Senate could approve it by late Sunday or late Monday morning, giving the House the rest of New Year’s Eve to consider it."

     "Even under this optimistic timeline, Senate and House leaders would need cooperation from the hard-liners in their respective caucuses, who could turn to procedure to block a compromise.
Under normal Senate rules, for instance, a new piece of legislation could take a full week to begin consideration, have full debate and then final passage."

    "To avoid that, the Senate would instead likely take up a bill that has already passed the House — and which keeps all taxes at their current rates — and gut it and replace it with new language. Even so, McConnell would need to ensure that the most conservative Republicans don’t filibuster the measure or then force a lengthy 30-hour debate, which is allowed under Senate rules.
If all of that can be worked out, the Senate would ship a bipartisan deal across the Capitol Rotunda by Sunday night or Monday morning."

     "The first thing that would have to happen in the House is an agreement to waive a rule instituted under Speaker John A. Boehner (R-Ohio) that requires a full day between the time a bill is published and when it is voted on."

     "Boehner has also discussed amending a Senate-passed bill with a more conservative tilt on taxes — a possibility he again raised during Friday’s White House meeting."

    “Let us know what you come up with, and we’ll consider it — accept or amend it,” Boehner told the other leaders, according to the notes of a Boehner aide.

     "Amending the bill would send it back across the Senate for last-minute consideration, with many of the same procedural hurdles applying again and with the clock ticking steadily toward midnight.
Most congressional aides, however, have little faith in the speaker’s ability to amend anything, because Democrats would withhold their votes and he would need at least 217 Republicans to support him. That would set up a replay of Boehner’s ill-fated “Plan B” from last week, in which several dozen Republicans refused to support any increase in tax rates."

     "If there were not 217 GOP votes to amend the bill, Boehner would then hold a vote. And if enough Democrats and Republicans supported it and Obama were willing to sign it, Washington would have a deal."

     The reason for optimism about the House is for one thing the GOP gains nothing by waiting till January and going over the cliff as the next Congress will be more Democratic. In addition, Boehner doesn''t want to be the reason we go over the cliff which will be the case if the Senate sends him something and he refuses to put it up for  a vote.


President Stands Tall on Fiscal Curb; Starts "GOP Civil War'

      Or so says Charles Krauthammer:

      Conservative columnist Charles Krauthammer believes President Barack Obama has used the fiscal cliff to start an "internal civil war" among House Republicans.

     "He’s been using [the fiscal cliff talks] — and I must say with great skill, and ruthless skill and success — to fracture and basically shatter the Republican opposition," Krauthammer told Fox News host Sean Hannity. "The only redoubt of the opposition is the House. And his objective from the very beginning was to break the will of the Republicans in the House, and to create an internal civil war. And he’s done that.”

      "How did he do it? By always insisting from Day One after the election that Republicans had to raise rates," Krauthammer said.

     I have no problem with Krauthammer's characterization. I notice that a lot of the conservative media have been pushing this narrative over the last day. Of course, no one can exploit divisions if they don't exist.

    Not all Republicans understand the lockstep opposition to even slightly higher tax rates for the rich. Even Bill Kristol admitted as much.

    Yesterday Obama was expected to compromise more for the sake of a deal-any deal-to avert the "fiscal cliff." I refer to it-as some other liberals do-as the "fiscal curb" to underscore that the entire issue has been blown way out of proportion anyway and that this "cliff" is entirely self-imposed.

     However, the President didn't offer any more compromises, I'm happy to be able to report. He has asked the Senate and House to get something done. If Mitch McConnell refuses to let it go up to a vote, the last measure will be Reid having a vote on a scaled back bill that extends the tax cuts for those making under $250,000 a year-ie, the $400,000 offer he made 2 weeks ago is rescinded-and extend unemployment benefits.

     As the President points out, there are enough votes in both chambers of Congress if the GOP leaders simply allow a vote:

     "Threading all the legislative needles now falls to Reid and McConnell, who pledged to work together to craft a package that can win significant bipartisan support."

      "If that effort fails, Obama said, he has asked Reid to press ahead with a bare-bones bill that would keep the president’s campaign promise to raise taxes on income over $250,000 and extend emergency unemployment benefits for the long-term unemployed."

      “I believe such a proposal could pass both houses with bipartisan majorities as long as those leaders allow it to actually come to a vote,” Obama said. “If members of the House or the Senate want to vote no, they can. But we should let everybody vote. That’s the way this is supposed to work.”

     Indeed, that's the rub: these measures can pass as long as McConnell doesn't filibuster and Boehner allows a vote. At this point we're hearing that a deal may be happening after all:

     "President Obama and Senate leaders were on the verge of an agreement Friday that would let taxes rise on the wealthiest households while protecting the vast majority of Americans from historic tax hikes set to hit in January."

     "The development marked a breakthrough after weeks of paralysis. After meeting with Obama at the White House, Senate Majority Leader Harry M. Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) said they would work through the weekend in hopes of drafting a “fiscal cliff” package they could present to their colleagues on Sunday afternoon."

     Not to put too fine a point on it but I've consistently said I think there will be a deal. I never really wavered at all on this until Harry Reid expressed pessimism on Thursday. However, now it looks like it still may happen. Again, I see no upside for the GOP-other than if going over the cliff is somehow necessary for Boehner to remain speaker.

      (Of course, if you're a believer in efficient markets as Sott Sumner is then you think predictions are all just dumb luck anyway, nothing more than being lucky in flipping a coin).

     As Krauthammer says, the House is the last line of redoubt. Still, will Boehner refuse to hold a vote on something that gets through the Senate? He's not talking like a guy prepared to do that:

     "On Friday, Boehner offered few hints about how he will respond to the new flurry of activity. Since a humiliating House rejection last week of an alternative plan, Boehner has said it is the responsibility of the Senate to act."

      "At the White House, according to the House Republican briefed on the meeting, Boehner repeatedly deferred to Senate leaders on policy details, saying only: “Let us know what you come up with, and we’ll consider it — accept it or amend it.”

       "By New Year’s Eve, however, there would be no time before the year-end deadline for House amendments, which would require yet another vote in the Senate. Boehner would have a choice: Go over the fiscal cliff, or bring a bill to the floor that might win the support of a majority of Democrats and only a fraction of his own Republican caucus."

        "Rank-and-file House members, who won’t return to the Capitol until Sunday evening, were anxiously awaiting word on the developments from afar. Many had hoped for a package that would cut trillions of dollars from the federal deficit, a goal that would not be met by the stripped-down package under construction in the Senate."

         "Rep. Jason Chaffetz (R-Utah) said he has an “open mind” about a last-minute deal, but sounded a skeptical note that could bode trouble in the House. “Our No. 1 priority is cutting spending,” he said. “The problem is that we’re not actually solving the problem.”

         "But a retiring Rep. Steven C. LaTourette (R-Ohio), a close friend of Boehner’s and a champion of a broad deal, said he could offer his support for a limited deal if the speaker requested it."

         “A small-ball bill would be horribly disappointing to me,” said LaTourette, who has repeatedly said he’d be willing to raise taxes only as part of a far-reaching deficit-reduction agreement. But, he said, “I’m a Team Boehner guy, and I will support the speaker.”


Friday, December 28, 2012

David Glasner: Resolved! The State of Macro is Rotten

     Krugman's post skewering modern macro predictably provoked a feverish reaction by Stephen Williamson.

      Others weighed in from there-Noah Smith, Scott Sumner, Bob Murphy, et. al. However, as is often the case, David Glasner has about as succinct take on it as I've seen:

       "Last week, Paul Krugman, set off by this blog post, complained about the current state macroeconomics. Apparently, Krugman feels that if saltwater economists like himself were willing to accommodate the intertemporal-maximization paradigm developed by the freshwater economists, the freshwater economists ought to have reciprocated by acknowledging some role for countercyclical policy. Seeing little evidence of accommodation on the part of the freshwater economists, Krugman, evidently feeling betrayed, came to this rather harsh conclusion:
The state of macro is, in fact, rotten, and will remain so until the cult that has taken over half the field is somehow dislodged.
       "Besides engaging in a pretty personal attack on his fellow economists, Krugman did not present a very flattering picture of economics as a scientific discipline. What Krugman describes seems less like a search for truth than a cynical bargaining game, in which Krugman feels that his (saltwater) side, after making good faith offers of cooperation and accommodation that were seemingly accepted by the other (freshwater) side, was somehow misled into making concessions that undermined his side’s strategic position. What I found interesting was that Krugman seemed unaware that his account of the interaction between saltwater and freshwater economists was not much more flattering to the former than the latter."
       "Krugman’s diatribe gave Stephen Williamson an opportunity to scorn and scold Krugman for a crass misunderstanding of the progress of science. According to Williamson, modern macroeconomics has passed by out-of-touch old-timers like Krugman. Among modern macroeconomists, Williamson observes, the freshwater-saltwater distinction is no longer meaningful or relevant. Everyone is now, more or less, on the same page; differences are worked out collegially in seminars, workshops, conferences and in the top academic journals without the rancor and disrespect in which Krugman indulges himself. If you are lucky (and hard-working) enough to be part of it, macroeconomics is a great place to be. One can almost visualize the condescension and the pity oozing from Williamson’s pores for those not part of the charmed circle."
      Williamson certainly is smug! For me if his picture of "modern macro" is accurate, then it hardly any longer deserves to be called a science as it's more a self-satisfied country club for those who agree and occupy the establishment. Glasner then clearly shows he's not so happy with modern macro either. Interestingly, he traces the beginning of decline to none other than Milton Friedman:
      "it’s interesting to note that, despite his Marshallian (anti-Walrasian) proclivities, it was Friedman himself who started modern macroeconomics down the fruitless path it has been following for the last 40 years when he introduced the concept of the natural rate of unemployment in his famous 1968 AEA Presidential lecture on the role of monetary policy. Friedman defined the natural rate of unemployment as:
the level [of unemployment] that would be ground out by the Walrasian system of general equilibrium equations, provided there is embedded in them the actual structural characteristics of the labor and commodity markets, including market imperfections, stochastic variability in demands and supplies, the costs of gathering information about job vacancies, and labor availabilities, the costs of mobility, and so on.
     "Aside from the peculiar verb choice in describing the solution of an unknown variable contained in a system of equations, what is noteworthy about his definition is that Friedman was explicitly adopting a conception of an intertemporal general equilibrium as the unique and stable solution of that system of equations, and, whether he intended to or not, appeared to be suggesting that such a concept was operationally useful as a policy benchmark. Thus, despite Friedman’s own deep skepticism about the usefulness and relevance of general-equilibrium analysis, Friedman, for whatever reasons, chose to present his natural-rate argument in the language (however stilted on his part) of the Walrasian general-equilibrium theory for which he had little use and even less sympathy.
Inspired by the powerful policy conclusions that followed from the natural-rate hypothesis, Friedman’s direct and indirect followers, most notably Robert Lucas, used that analysis to transform macroeconomics, reducing macroeconomics to the manipulation of a simplified intertemporal general-equilibrium system."
     " Under the assumption that all economic agents could correctly forecast all future prices (aka rational expectations), all agents could be viewed as intertemporal optimizers, any observed unemployment reflecting the optimizing choices of individuals to consume leisure or to engage in non-market production. I find it inconceivable that Friedman could have been pleased with the direction taken by the economics profession at large, and especially by his own department when he departed Chicago in 1977. This is pure conjecture on my part, but Friedman’s departure upon reaching retirement age might have had something to do with his own lack of sympathy with the direction that his own department had, under Lucas’s leadership, already taken. The problem was not so much with policy, but with the whole conception of what constitutes macroeconomic analysis."
     He then criticizes the proclivity to make macroeconoimcs more and more the handmaiden of microeconomics:
     "The paper by Carlaw and Lipsey, which I referenced in my previous post, provides just one of many possible lines of attack against what modern macroeconomics has become. Without in any way suggesting that their criticisms are not weighty and serious, I would just point out that there really is no basis at all for assuming that the economy can be appropriately modeled as being in a continuous, or nearly continuous, state of general equilibrium. In the absence of a complete set of markets, the Arrow-Debreu conditions for the existence of a full intertemporal equilibrium are not satisfied, and there is no market mechanism that leads, even in principle, to a general equilibrium. The rational-expectations assumption is simply a deus-ex-machina method by which to solve a simplified model, a method with no real-world counterpart. And the suggestion that rational expectations is no more than the extension, let alone a logical consequence, of the standard rationality assumptions of basic economic theory is transparently bogus. Nor is there any basis for assuming that, if a general equilibrium does exist, it is unique, and that if it is unique, it is necessarily stable. In particular, in an economy with an incomplete (in the Arrow-Debreu sense) set of markets, an equilibrium may very much depend on the expectations of agents, expectations potentially even being self-fulfilling. We actually know that in many markets, especially those characterized by network effects, equilibria are expectation-dependent. Self-fulfilling expectations may thus be a characteristic property of modern economies, but they do not necessarily produce equilibrium."
       "An especially pretentious conceit of the modern macroeconomics of the last 40 years is that the extreme assumptions on which it rests are the essential microfoundations without which macroeconomics lacks any scientific standing. That’s preposterous. Perfect foresight and rational expectations are assumptions required for finding the solution to a system of equations describing a general equilibrium. They are not essential properties of a system consistent with the basic rationality propositions of microeconomics. To insist that a macroeconomic theory must correspond to the extreme assumptions necessary to prove the existence of a unique stable general equilibrium is to guarantee in advance the sterility and uselessness of that theory, because the entire field of study called macroeconomics is the result of long historical experience strongly suggesting that persistent, even cumulative, deviations from general equilibrium have been routine features of economic life since at least the early 19th century."
      "That modern macroeconomics can tell a story in which apparently large deviations from general equilibrium are not really what they seem is not evidence that such deviations don’t exist; it merely shows that modern macroeconomics has constructed a language that allows the observed data to be classified in terms consistent with a theoretical paradigm that does not allow for lapses from equilibrium. That modern macroeconomics has constructed such a language is no reason why anyone not already committed to its underlying assumptions should feel compelled to accept its validity."
      "In fact, the standard comparative-statics propositions of microeconomics are also based on the assumption of the existence of a unique stable general equilibrium. Those comparative-statics propositions about the signs of the derivatives of various endogenous variables (price, quantity demanded, quantity supplied, etc.) with respect to various parameters of a microeconomic model involve comparisons between equilibrium values of the relevant variables before and after the posited parametric changes. All such comparative-statics results involve a ceteris-paribus assumption, conditional on the existence of a unique stable general equilibrium which serves as the starting and ending point (after adjustment to the parameter change) of the exercise, thereby isolating the purely hypothetical effect of a parameter change."
    "Thus, as much as macroeconomics may require microfoundations, microeconomics is no less in need of macrofoundations, i.e., the existence of a unique stable general equilibrium, absent which a comparative-statics exercise would be meaningless, because the ceteris-paribus assumption could not otherwise be maintained. To assert that macroeconomics is impossible without microfoundations is therefore to reason in a circle, the empirically relevant propositions of microeconomics being predicated on the existence of a unique stable general equilibrium. But it is precisely the putative failure of a unique stable intertemporal general equilibrium to be attained, or to serve as a powerful attractor to economic variables, that provides the rationale for the existence of a field called macroeconomics."
      Finally, Glasner correctly calls out Krugman for his inconsistency in criticizing the Freshwater guys so sharply while accepting their basic intrinsic model:
     "So I certainly agree with Krugman that the present state of macroeconomics is pretty dismal. However, his own admitted willingness (and that of his New Keynesian colleagues) to adopt a theoretical paradigm that assumes the perpetual, or near-perpetual, existence of a unique stable intertemporal equilibrium, or at most admits the possibility of a very small set of deviations from such an equilibrium, means that, by his own admission, Krugman and his saltwater colleagues also bear a share of the responsibility for the very state of macroeconomics that Krugman now deplores."
    Interestingly I'm not really sure where Glasner ultimately wants to take things though he clearly doesn't like where it currently is, In the comments he said this to whether he is a "heterodox" economist:
    "Do I think myself as a heterodox economist? Not really. I regard myself as within the broad neoclassical tradition, but I very much dislike the excessive formalism that has overtaken neoclassical economics since the late 1960s and especially the way that macroeconomics has been transformed. That puts in the same boat as people like Leijonhufvud and Laidler."

Take a Bow 112th Congress! The Most Unproductive Ever

     This Congress has consistently had terrible poll numbers and we can now quantitatively see that it's fully deserved. The Congress was bad, but it was bad on the grand scale, as an outlier. It's now officially the most unproductive Congress ever, far worse than the 80th Congress- the 1946-48 GOP Congress that Harry Truman gave hell...

    "According to a Huffington Post review of all the bills that hit President Barack Obama's desk this session, Obama has signed 219 bills passed by the 112th Congress into law. With less than a week to go in the year, there are currently another 20 bills pending presidential action. In comparison, the last Congress passed 383 bills, while the one before it passed 460."

    "The 104th Congress (1995-1996) currently holds the ignominious distinction of being the least productive session of Congress, according to the U.S. House Clerk's Office, which has records going back to 1947. Just 333 bills became law during that two-year period, meaning the 112th Congress needs to send nearly 100 more bills to Obama's desk in the next few days if it wants to avoid going down in history -- an unlikely prospect, considering that both chambers are squarely focused on averting the "fiscal cliff" before the new year."

    "The 112th Congress has done far less than the 80th Congress (1947-1948), which President Harry Truman infamously dubbed the "Do-Nothing Congress." Those lawmakers passed 906 bills that became law."

      It's fitting that this Congress is poised to best the record for futility set by the Gingrich Congress of 1995-96. Conservatives like to say that the government that governs least governs best, but this Congress hasn't governed at all.

      "At least 40 bills, including ones awaiting Obama's signature, concerned the renaming of post offices or other public buildings. Another six dealt with commemorative coins."

     "Meanwhile, significant pieces of legislation that have traditionally received bipartisan support -- such as the reauthorization of the Violence Against Women Act -- have been blocked."

       Yes, obstructing the VAWA. Unlike Mitt Romney's term at Bain Capital, nobody can call this Congress stellar. Not suprisingly, Boehner's office has no comment for this ignominious record setting performance. Harry Reid rightly points out that a large part of the discredit for this can be chalked up tothe record filibusters by McConnell's Senate minority:

      "When asked for comment on the record of the 112th Congress, Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid (D-Nev.), pointed to the 115 times the Republican minority has held up a bill's passage by threatening to filibuster it. House Speaker John Boehner's (R-Ohio) office did not return a request for comment."

       "The lack of bipartisanship in Congress has been lost on no one. In April, Thomas Mann of the left-leaning Brookings Institution and Norm Ornstein of the conservative American Enterprise Institute published a Washington Post op-ed saying that the GOP deserves the blame for the dysfunction."

      "We have been studying Washington politics and Congress for more than 40 years, and never have we seen them this dysfunctional," they wrote. "In our past writings, we have criticized both parties when we believed it was warranted. Today, however, we have no choice but to acknowledge that the core of the problem lies with the Republican Party."

       Take a bow, Messrs. Boehner and McConnell. You failed the old fashioned way: you earned it. In doing so, you failed but at least you failed at a record setting pace.