Thursday, October 31, 2013

Central Bank Independence and Scott Sumner's Monetary Dictatorship

     We've discussed before my personal run ins with Sumner-what he does is hide behind the smokescreen that I'm too ignorant to discuss economics with him.

      He also has a real problem with my writing a blog-he thinks I shouldn't be allowed to write it at all as  I'm supposedly don't understand economics. He once claimed that I need to read some books first. Now, rest assured, I don't take anything Mr. Sumner could ever say to heart, I just consider the source. Of course, if I were to ask him what books I have to read to get this seal of approval he wouldn't answer-because it's a cop out.

    His whole modus operandi is a cop out but it's not just about me and it's not personal. A key thing he likes to say is that there is no such thing as public opinion in economics.

    Does this make him an anti-democrat? He will say no as he also always insists that he believes in democracy, however, the catch is just not in economics. This is the real key: if the public is too ignorant of economics then the answer is to leave it to the total control of ostensible monetary experts-ergo, the need for 'CB independence.'

    He will argue that he thinks that laypeople should be able to make decisions, just not in those things effecting the economy. The trouble is if noneconomists aren't allowed to the conversation about economics what's really left for them? I mean as far as public policy goes, what is more important than the economy? This whole meme of the need for a technocratic monetary elite to run the economy for us who are too simpleminded to get it is wrongheaded.

   This is why he hates fiscal policy to be used in demand stimulus and stabilization-he thinks the public should have no say in the working of the economy which is about the most deadly serious matter for any concerned citizen.

    Economists believe all kinds of things that most people don't-like that it's legitimate to raise the prices of snow shovels in the winter and that the minimum wage has cataclysmic effects on the economy. No wonder why Sumner hates democracy in economics so much-we've long since ignored the technocrats on such things.

    For more see

    Unlearning Econ argues that the economy might do well if we stopped listening to the economists. He does also give rules on how not to argue with economists. I wonder how many of them I may have broken here.

    P.S. I've said it before I'll say it again: Annoy Scott Sumner, read Diary of a Republican Hater. 


Wynne Godley and the Return of Hydraulic Keynesianism?

     In the previous post we looked at Krugman's comments on the revised interest in Godley and what Krugman called 'hydraulic Keynesianism.'


      Krugman also provided a link on 'HK' that was to a very short Wiki entry on it. Yet I don't know if Wiki describes it here as the term has been used, certainly not the way that Krugman and the larger NC school uses it. 

     "Initially, the phrase, "hydraulic macroeconomics", was associated with Keynesian economic models,[7] but more recently came to be used for any dynamic macroeconomic model in mainstream economics. For example, Arnold Kling describes hydraulic macroeconomics thusly:

      Mainstream macroeconomics is "hydraulic." There is something called "aggregate demand" which you adjust by pumping in fiscal and monetary expansion.[8]

      Seems to me that HK refers to something much more specific-and as it has come to be used is in 
pejorative way-and certainly much more specific than Wiki makes it sound. It refers to Keynesianism in the U.S. before 'maximization' and 'optimization' were smuggled back in. Godley is making quite a comeback, though, unfortunately he's not here to see it as he died in 2010. 

      He is given a lot of credit for not just predicting the crisis but having a model that clearly predicted it. 

      "In a 2011 study, Dirk J. Bezemer, of Groningen University in the Netherlands, found a dozen experts who warned publicly about a broad economic threat, explained how debt would drive it, and specified a time frame. Most, like Nouriel Roubini of New York University, issued warnings in informal notes. But Mr. Godley “was the most scientific in the sense of having a formal model,” Dr. Bezemer said.

     "It was far from a first for Mr. Godley. In January 2000, the Council of Economic Advisers for President Bill Clinton hailed a still “youthful-looking and vigorous” expansion. That March, Mr. Godley and L. Randall Wray of the University of Missouri-Kansas City derided it, declaring, “Goldilocks is doomed.” Within days, the Nasdaq stock market peaked, heralding the end of the dot-com bubble."
    "Why does a model matter? It explicitly details an economist’s thinking, Dr. Bezemer says. Other economists can use it. They cannot so easily clone intuition."
      The list of those who is influencing is quite impressive.
      "But his influence has begun to spread. Martin Wolf, the eminent columnist for The Financial Times, and Jan Hatzius, chief economist of global investment research at Goldman Sachs, borrow from his approach. Several groups of economists in North America and Europe — some supported by the Institute for New Economic Thinking established by the financier and philanthropist George Soros after the crisis — are building on his models."
     This NYT article does a much better job than Wiki of defining the difference that Krugman as in mind between 'HK' and more mainstream NC Keynesianism:
      "Mainstream models assume that, as individuals maximize their self-interest, markets move the economy to equilibrium. Booms and busts come from outside forces, like erratic government spending or technological dynamism or stagnation. Banks are at best an afterthought."
      "The Godley models, by contrast, see banks as central, promoting growth but also posing threats. Households and firms take out loans to build homes or invest in production. But their expectations can go awry, they wind up with excessive debt, and they cut back. Markets themselves drive booms and busts."
    " Krugman admits that what has come since the demise of 'HK' in economics hasn't necessarily been too impressive yet he claims that HK had some failures-he probably has in mind things like the failure of the crude version of the Phillips Curve. In any case, while that was crude, it's tough to see how Friedman's Permanent Income Hypothesis is any kind of improvement."
    Godley certainly wouldn't consider himself part of  pre U.S. Keynesianism with its sole reliance on a consumption function. 
    P.S. I often say that Sumner more than any other Neoclassical economist has done a good job of trying to save NC. His version of Rational Expectations-which is largely the mainstream version of Krugman, et. al as well-is that prediction is both
   1). Impossible as expectations are rational. 
   2). Total dumb luck if they do happen. Being an economist in no way enables you or anyone to predict the future as no one person can be as smart as the market. 

Krugman on Hydraulic Keynesianism

     I'm in the middle of reading Keynes' GT again. This is the case of one book truly shaking the world's intellectual axis-there aren't too many we can think of in economics that has done that-certainly you would have to also place both Marx's Capital and Smith's Wealth of Nations-in that category. 

     It has certainly been a very maligned book. Even the rabidly anti-Keynesian Sumner always says that Keynes wasn't so bad-if you leave out GT.

     Many have tried to claim that we had another revolution in the 70s with Lucas and Friedman, but that was a counterrevolution that tries bring us back to the pre-GT age. 

     Krugman had a provocatively entitled post a few weeks ago entitled 'Wynne Godley and the Hydraulics.'

     "A slightly belated reaction to Jonathan Schlefer’s interesting piece on therevived influence of Wynne Godley. There will, I’m sure, be a lot of argument about whether Godley’s approach was actually superior to somewhat more mainstream approaches. But I was struck by Schlefer’s characterization of Godley’s approach:
In mainstream economic models, individuals are supposed to optimize the trade-off between consuming today versus saving for the future, among other things. To do so, they must live in a remarkably predictable world.
Mr. Godley did not see how such optimization is conceivable. There are simply too many unknowns, he theorized.
Instead, Mr. Godley built his economic model around the idea that sectors — households, production firms, banks, the government — largely follow rules of thumb.
     "What you might not realize from this passage is that Godley’s notion that we should represent behavior by rules of thumb isn’t something new — it’s something old, which got driven out of macroeconomics. The “hydraulic Keynesianism” of the 1950s was all about viewing the economy as a kind of mechanism in which consumer behavior could be represented by an ad hoc consumption function, investment behavior by an ad hoc investment function, and so on. This produced a more or less mechanistic view of the economy, and AW Phillips famously represented hydraulic macro with aliteral hydraulic mechanism."

     The idea of using convention and 'rules of thumb'  in making investment decisions goes right back to Keynes. However, by the 50s it was decided that optimizing behaviour had to be brought back. 

      ""So why did hydraulic macro get driven out? Partly because economists like to think of agents as maximizers — it’s at the core of what we’re supposed to know — so that other things equal, an analysis in terms of rational behavior always trumps rules of thumb. But there were also some notable predictive failures of hydraulic macro, failures that it seemed could have been avoided by thinking more in maximizing terms."

      "First involved consumption spending. Conventional Keynesian consumption functions suggested that the savings rate would rise as incomes rose — and this wasn’t just the Keynesian interpreters, Keynes himself made the same claim. This, in turn, led to predictions of rising savings rates after World War II, and hence a persistent shortage of demand — hence the secular stagnationtheory briefly prominent. (There was even an early Heinlein novel built in part around the secular stagnation theory. As I recall, it was pretty bad.)"
     Krugman finds it interesting that 'hydraulic Keynesianism' is making something of a comeback. 
     "You could argue, and I would, that the rebellion against hydraulic macro went much too far. It’s not at all clear how much good the whole apparatus of maximizing behavior in New Keynesian models really does, and to the extent that such models do seem more or less to work, it’s only by making some ad hoc behavioral assumptions that are grafted on to the rest of the structure."
     "But it is kind of funny to see a revival of old-fashioned macro hailed, at least by some, as the key to a reconstruction of the field."

      I don't think Godley would answer to the name 'hydraulic Keynesianism' as post-Keynesians like him are critical of American Keynesianism right back to Hicks. Minsky certainly argued that the sole focus of American Keynesianism-'bastard Keynesianism'-on the consumption function was a mistake from the start. 

     What it seems to me is that the more time that went by the more Neoclassical concepts were sneaked back in to Keynesianism. 

Wednesday, October 30, 2013

Sumner Declares Delong for Market Monetaristism

     I give Sumner credit for his missionary zeal but it seems to me that he suffers from what the economists call 'confirmation bias.' Everything proves his point.

      "And no, he wasn’t talking about Paul Krugman!  Here’s the Fama comment about QE that set him off:

They’re basically neutral events. I don’t think they do very much.

     "Fama argued the Fed simply swapped low interest federal debt (reserves) for low interest federal debt (T-securities)"

      "DeLong insisted the market reaction showed that Fama was wrong in saying they don’t do very much:

The profound cluelessness as to what is going on in financial markets today is mind-numbing.

      "Something I’ve said about 862 times."

     "People, I’m not making this up.  You fell asleep last night in a world where market monetarism was a fringe theory and woke up in a world today where everything is topsy-turvy.  Arguments market monetarists have been making for years are suddenly conventional wisdom in the Keynesian community."

      "Quick!  Someone please dig up a quote where Krugman says QE is basically a neutral event, and that it doesn’t do very much."

     Actually, the Fama-Santelli exchange was great. Whether or not Fama is clueless I don't think he was the most clueless in the room with Santelli there. Basically you have on guy saying it's a neutral event and the other one acting like it's been a catastrophe of epic proportions-all that money printing! 

     "Nobel prize winner Eugene Fama was on CNBC earlier today to discuss the Federal Reserve and its extraordinary monetary policy. Pragmatic Capitalism's Cullen Roche flagged this heated exchanged between Fama and CNBC's Rick Santelli. Santelli asked specifically about the effects of the Fed's quantitative easing program and the risks associated with it. [Fama answered:]
What they are doing... the effects are being greatly inflated by the accounts. What they've doing is issuing a lot of short-term debt--$85 billion a month--and using it to buyback long-term debt with the goal of lowering the interest on long-term debt. Now they take credit for lowering interest on short-term debt. But in fact what they've been doing should've raised rates on short-term debt.
     "The profound cluelessness as to what is going on in financial markets today is mind-numbing. I mean, we could understand a finance economist not understanding labor market institutions or events, or an industrial organization specialist not understanding monetary economics. But this is cluelessness about finance on the part of a finance economist."
     "It goes on."

     "Fama argued that the Fed was not affecting the economy that much. Santelli, however, continued to pursue the idea that there are risks associated with the Fed's actions. [But Fama:]
They're basically neutral events. I don't think they do very much.
But Santelli kept pursuing this line of questions, and tensions began to rise:
Let me interrupt you. If it's no big deal, then why don't all central banks just do this to the nth degree and make it a constant day to day week to week event where they purchase what's issued, keep interest low, and just target a low rate forever. Why won't that work then?
[Responded Fama:]
There's so much confusion in what you said it's difficult to answer.
      "Santelli's not too sophisticated."
      "But Santelli was watching financial markets in the spring, and registered the datum that when Ben Bernanke talked about shifting the future path of quantitative easing purchases, asset prices jumped. And Santelli is trying to incorporate this into his thinking--hence he sees Fama's claim that QE has no effect on interest rates as something so bizarre that it just doesn't register on his mind. Santelli is too reality based for it to even enter his mind that when Fama says "they are basically neutral events" he means not only that QE doesn't shift the chance of future disasters but also that QE doesn't affect interest rates today."
     "Fama, however, seems to have missed last spring--or, rather, Fama thinks that, by pure coincidence, at that exact moment when when Bernanke talked about the "taper", the market's underlying utility function shifted to be less patient and more averse to risk."
     Santelli certainly isn't too sophisticated-and is the father of the tea party to boot-Fama isn't wrong about his confusion. As Sumner mentioned Krugman it ought to be pointed out that he opposes taper of QE3 not because he thinks it does much-Sumner himself agrees with this-but just that in the absence of what he prefers-forward guidance-QE3 at least sends the right signals to the market. 
     Krugman has never expoused the idea of Santelli-Woodford for that matter-that QE could be positively harmful. His view is that indeed, QE doesn't really do much beyond what Fama said-swap one asset for another-but that:

     "On the whole, I’m sympathetic to skepticism about the effectiveness of QE, predictably. After all, I’ve been arguing for forward guidance instead for 15 years. On the other hand, right now investors are not making a clear distinction between QE and forward guidance; taper talk has been accompanied by a clear shift in expectations toward the notion that the Fed will raise short-term rates sooner rather than later. So I wouldn’t be tapering now — it sends a bad signal at a time when recovery remains very weak and fragile.:


    Again, basically Sumner's view as well, 

More On Sumner's Claim that ACA has Outlawed Healthcare Insurance

     I wrote a post last night about this claim-and some other Sumner claims.

     I see that Edward, a regular Money Illusion reader dropped by which is welcome-as he is a pretty smart guy. Here are his comments:

    "Mike, why is catastrophic insurance being the only insurance not making sense?"

    "In every other insurance industry, catastrophic insurance is norm and standard. Your car insurance company doesn't pay for your new car at the dealership. Nor does it pay for your oil change, new tires and whatnot."

    "To those people who have pre-existing conditions, I say, lets have a public option (I hate the term "single payer" An option should be what public medicine is."

    "Weirdly, i think the British system (socialized medicine with private healthcare for those who are willing to pay) is better than the Canadian system on this. The Canadian system has "private" doctors billing the government for payment. But as long as they accept government funds, they are prohibited from taking private money to those who want to leap in front of the queue. Thats why I shudder whenever I hear the words 'single payer" from a liberal."

    My main point on this was not whether or not catastrophic insurance being the only insurance makes sense or not-though I would vote no myself as it will definitely not cover all the necessary basic costs of those who can't afford insurance-I'm not talking about the equivalent of a new car either-but whether Sumner's claim that it was outlawed is correct. Interestingly, the much maligned HeatlhCare.Gov website has information up on this and there are no glitches on this page. The answer is that catastrophic is available. 

    What nothing but catastrophic would do is greatly diminish the health insurance already available and I don't know anyone who can seriously say the problem is that there is too much healthcare choices available for those who can't afford it. The other trouble is that this would lead to very high deductibles I don't know what Edward thinks of when he hears 'single payer' from a liberal-I guess we'd get somewhere if I knew what he hears when he hears it from a conservative-just catastrophic? Medicare is an example of a single payer healthcare plan for the elderly and most people think it's done pretty well-certainly the GOP does as it never describes it's Ryan plan as being about simple repeal-as it does with Obamacare. What's ironic is Mike Konczal's point: basically what the GOP wants to do with Medicare is transform a single payer health care plan for the elderly into Obamacare for the elderly. Yet politics has led them to Obamacare Derangement syndrome-and it's their own plan.

   P.S. The British system may be great but again, Medicare for all would work pretty well as well, to be sure, I supported the public option vs. single payer during the debate over ACA as well-why not see how each does side by side. 

   P.S.S. The Obamacare website seems to be working much better now-the other day it kept freezing up but now I'm able to navigate it without any trouble. As Krugman says it the technology will be worked out one way or the other, whether by the November 31 deadline remains to be seen. 


Don't Feed the Bears or Smile at the Children

     I bumped into a friend of mine at the library last night. I originally met her back when we both worked for the Census back in 2010. We often look back on those days fondly. She was actually my crew leader. We made a lot of money-$18 an hour-and would have early morning meetings at McDonald's. 

     Since then I've moved to a new 'career'-the wonderful world of telemarketing.

     Unfortunately she hasn't been able to find regular employment since-I've made the point that whether or not she would like doing it, telemarketing is something that has a low barrier to entry at least. Recently she had a job as a substitute lunch lady-which is kind of ironic with her educational background she had hoped to be able to teach. 

     Yet, she noticed they stopped calling her for shifts. Now she has figured out why: apparently they felt she was too nice to the students. I find this a very interesting example of a microscopic society at work. It makes me think of nothing so much as a cousin of mine who's a prison guard. When he first started other guards didn't like him because he was too nice to the inmates. 

    He argues that over time this has served him better-he gets the respect of the inmates who realize that at least he's fair. However, it's interesting what this says about social psychology is it not? Recently I talked about the fact that economists are not just scientists-though even this has been contested-but also are members of their own society. One that in significant ways is at variance in their beliefs and opinions with the larger society.

   For example, most economists think that its legitimate to raise prices of snow shovels during a blizzard-most laypeople think it's wrong. I notice that Unlearning Econ has written a bit more on what you might call the social psychology of economists lately.

  "This is only a brief, cursory overview, but even so we should have expected better examples of economists’ successes, and far fewer, less catastrophic failures. In my opinion, if there is a role for economists in advising policy, it’s on small, micro-issues like Al Roth’s auctions, or on specific empirical matters. However, once we get more complex, economists’ pet policies seem to be at best neutral, and they have no empirical reason to prefer their choices to those of the electorate."

  He argues that we don't actually need economists to have an economy anymore than we need physicists to have laws of physics. Well I added the analogy but it's true ta many things we do are based on political or social decision rather than economics. Take the minimum wage. Till this very day, only about 50% agree that the MW is beneficial economically-yet we have long since agreed as a society that whatever the alleged losses of efficiency we don't believe employers can pay workers less than a certain bare minimum. 


Tuesday, October 29, 2013

Sumner and Obamacare: Who's Pants Are on Fire?

     As Reagan once said there he goes again. Sumner is accusing Obama of lying. Which is a little ironic. 

     "The president defended his proposal by saying that, for high-income taxpayers, “the tax rates would just go back to where they were under President Clinton.” The president reminded his listeners that the economy grew at a rapid clip during the Clinton years, adding tens of millions of new jobs."

      Where exactly is the lie? Well if you believe, Sumner, it's because in saying they will go back to Clinton rates omits that there is a new investment tax under ACA. I still don't get why this makes such a big difference. I mean if that's a lie it's nothing compared with the whoppers Sumner tells all the time. Note that Obama's basic point is not debunked even if you factor in a 2.8% tax to fund Obamacare-recall that the law was only declared constitutional because Judge Roberts decided it is a tax not a fee. 

      Still if you admit that growth was strong in the 90s despite a 39.6% top marginal rate is it so implausible to argue that it would have still grown even if there had been an additional 2.8% tax giving the rich a 42.4% tax? I mean is it believable that the we wouldn't have had a boom based on a difference of 2.8%? Especially when you recall that the capital gains tax was higher during the Clinton years which more than compensates for not having the ACA tax 

       "President Obama repeatedly assured Americans that after the Affordable Care Act became law, people who liked their health insurance would be able to keep it. But millions of Americans are getting or are about to get cancellation letters for their health insurance under Obamacare, say experts, and the Obama administration has known that for at least three years."

      Actually, this claim you keep hearing is also way overdone. Sumner is quoting from an NBC story that is getting a lot of mileage. Yet despite all the incendiary talk about how Obama 'knew this for 3 years and never admitted to it' ignores the fact that the White House spoke openly about this back in 2010 and there is actually nothing new about this story-nor is it the great scandal it's being billed as. 

    Note how Republican scandals are always about 'how long have they known?!'-I mean this was a big preoccupation of the phony Benghazi scandal as well as the fake IRS Tea Party scandal-'who in the White House knew this and when exactly?!' and now the same thing with Obamacare. Also, GOP fake scandals always have to have a scapegoat who's blamed for everything-one hapless individual is the evil one behind it all. So in Benghazi, it was Susan Rice, in IRSGate it was Lois Lerner, now in Obamacare it's Kathleen Sebelius. The facts are usually a lot more mundane:

     "This all sounds very ominous until you consider that the naturally high turnover rate associated with the individual market means that it’s highly unlikely that individuals would still be enrolled in plans from 2010 in 2014. In fact, the Obama administration publicly admitted this when it issued the regulations in 2010, leading Republicans like Sen. Mike Enzi (R-WY) to seize on the story in order to push for repeal of the grandfather regulations."

     This was covered in great detail in 2010, the last time Republicans tried to make a mountain out of this by confusing an distorting the facts. 

     "The goal of grandfather regulations is to allow a consumer to keep their existing policies, while also ensuring that there are some basic patient protections built into these plans. If insurers make changes that significantly burden enrollees with lower benefits and increased costs they have to come into compliance with all consumer protections. Therefore, policies lose their grandfathered status if insurers cancel coverage when a person becomes ill, impose lifetime limits on benefits, eliminate all benefits for a particular condition and reduce the cap for covered services each year, among other changes. (In fact, in November of 2010, the federal government loosened some of these standards.)"
     "So yes, individuals can keep the plans they have if those plans remain largely the same. But individuals receiving cancellation notices will have a choice of enrolling in subsidized insurance in the exchanges and will probably end up paying less for more coverage. Those who don’t qualify for the tax credits will be paying more for comprehensive insurance that will be there for them when they become sick (and could actually end up spending less for health care since more services will now be covered). They will also no longer be part of a system in which the young and healthy are offered cheap insurance premiums because their sick neighbors are priced out or denied coverage. That, after all, is the whole point of reform."
     While he delights in throwing around the word 'liar' Sumner finishes off with his own whopper.  
     " I’ve had nothing to say about the computer “glitches” because that’s not the issue.  The issue is and has always been the fact that Obamacare outlaws the only kind of insurance that makes any sense—catastrophic insurance.  Glad to see people are finally waking up to that fact."
     This is why I give Sumner credit for being shrewd. He is usually too smart to go after the low hanging fruit like razzing about computer glitches. Yet for all this, what he says about catastrophic insurance is false on two counts. First of all, Obamacare did not eliminate it. 
      Secondly, no one has been converted to the idea that only catastrophic makes sense. All the hewing and crying isn't any kind of enlightenment but just because of the computer glitches. 

On a Woman's Right to Choose, Good News Comes in Twos

     Or to put it another way, as Texas goes, so goes Oklahoma. Of course, we've already seen another victory in Mississippi.

    Part of the very aggressive strategy that many state GOPs have embarked on is about seeing how much they can get away with. They've been doing this across the board-from union busting, to voter id laws-no doubt emboldened by the very poor decision of the SJC to void Section 5 of the Voting Rights Act-but nowhere more than on a woman's right to choose. Often they do things that make it clear it's not just against abortion but birth control in general and indeed women's healthcare, period. 

    Some good news out of Oklahoma following yesterday's good news in Texas:

    "The Oklahoma Supreme Court definitively ruled Tuesday that a 2011 restrictive state abortion law is unconstitutional."
     "The Center for Reproductive Rights raised a legal challenge that prompted a district court to strike down the law in 2012, a decision later upheld by the Oklahoma Supreme Court. In light of Tuesday's ruling on the scope of the law, it is up to the U.S. Supreme Court whether to review the case. 
On Monday, a federal judge ruled Texas' new abortion restrictions unconstitutional on the grounds that the regulations violated physicians' right to do what they think is best for patients and unreasonably restricted women's access to abortion clinics."

     "Speaking of good news, Obama finally got his NLRB general counsel pick confirmed today. This is good news and very important first and foremost because the office has functioned under a cloud since 2009 as the GOP hadn't allowed a vote until now-they didn't vote for him but stood down on the filibuster honoring a deal with Harry Reid a few months ago." 

    "Speaking on the Senate floor Monday, Sen. Lamar Alexander (R-Tenn.) said that he wouldn't block the Griffin nomination, but he also said that he didn't have to like it. Not surprisingly, some Republicans aren't thrilled about a former union lawyer taking the general counsel position."

     "I'm concerned about the direction of the National Labor Relations Board as an advocate more than an umpire. I don't think [Griffin's] presence as general counsel will improve that situation," Alexander said. 
     "What I hope we can do over next several years is look for a long-term solution for the restructuring of the National Labor Relations Board ... The board has become far too politicized."
     You have to wonder what it even means to say that a political appointee's office is 'too politicized.' That the GOP hates him means he's probably going to actually do his job which is protect workers' rights rather than do an Alan Greenspan-ie, just let everyone 'self-regulate.'

Mitch McConnell vs. Mitch McConnell on the End of Debt Ceiling Chicken

     On the one hand, he was pretty categorical about not going down the road any more govt shutdowns or games of debt ceiling chicken, yesterday, speaking in front of wealthy Republican donors like the Chamber of Commerce:

     "Mitch McConnell isn’t going to have another government shutdown on his watch. The Kentucky Republican stood up over the weekend and said he wanted to address the “elephant in the room” at a fundraising retreat in Sea Island, Ga. Speaking before roughly 300 K Streetersand big donors, McConnell said Republicans will not come close to defaulting on the nation’s debts or shutting down the government early next year when stop-gap government funding and the debt ceiling are slated to be voted on again."

    "His remarks echoed similar comments he made following the shutdown that it was “not conservative policy” and that he always believed “this strategy could not and would not work.”

    "He’s in fighting mode,” said one attendee of McConnell. “He didn’t get into specifics about what they are doing and how they are going to do it, but McConnell and (Texas Sen. John) Cornyn were particularly forceful.”

     So no more debt ceiling chicken right? Right. Except, he's calling a Democratic plan to permanently 'de-weaponize' the debt ceiling 'outrageous.'

     "Here's how the bill would work: The president would be able to unilaterally lift the debt ceiling when necessary, and Congress would be able to vote to "disapprove" of it. If the motion to disapprove passes, the president could veto it, and Congress would need to muster up a two-thirds majority to override the veto. In short, it would de-weaponize the debt ceiling."

     So he is contradiciting himself. After all, if he truly has ruled out debt ceiling chicken why oppose de-weaponizing it? Actually, he's not just contradicting himself once but twice as this Democratic plan is actually borrowed from McConnell himself. 

    "The Republican leader's staunch rejection reveals that the GOP isn't ready to give up the threat of default in future standoffs, despite the economic damage caused by the repeated standoffs since 2011, and despite winning no substantive concessions from Democrats this month or in January, when they last voted to extend the debt ceiling."

     "Back in 2011, the Kentucky Republican floated the idea as a "Plan B" if all else failed. It would have lifted the debt ceiling in three stages through the end of 2012, each time giving Republicans an opportunity to score political points without genuinely threatening default -- which is how the debt ceiling has traditionally been used by the party out of power."

    If McConnell truly doesn't intend to get anywhere close to another threat of default then where is the problem? This would relegate the debt ceiling to what it was in the past-basically a symbolic sop to beat the opposition's head about to score political points-but without ever really threatening default. In truth the real answer is to simply end the debt ceiling, period. Failing this does McConnell have any good reason to oppose his own plan other than because he wants to maintain some semblance of a threat?

    Yet this isn't the first time that the GOP has contradicted itself. Take all the furor over the ACA website. It really shouldn't be any surprise that a major technological rollout like this has had some glitches-ok, a whole lot of glitches. Joe Manchin pointed this out the other day when Bill O'Reilly tried to get him to trash Obamacare-Manchin pointed out that when he was Governor a new state medicaid plan also had many glitches but in time he was able to get them fixed 

    Manchin argues for everyone to work together on the rollout but that's just it, the GOP doesn't want it to work and are enjoying the problems. It's been pointed out that while the tech glitches are par for the course and to be expected, if there are deeper problems it might be because it is after all a Republican plan that insisted on keeping the private insurers involved. 

    Krugman points out that despite all the hubbub it will get worked out in teh end whether or not the November 31 deadline is met or not. Again,not surprising. The GOP wants to demonize and this means they need it all to be blamed on one person who can be the lightning rod-in Benghazi it was Susan Rice, in IRS-gate it was Lois Lerner, with Obamacare they've settled on Kathleen Sebilius. 

    "The good news about, the portal to Obamacare’s health exchange, is that the administration is no longer minimizing its problems. That’s the first step toward fixing the mess — and it will get fixed, although it’s anyone’s guess whether the new promise of a smoothly functioning system by the end of November will be met. We know, after all, that Obamacare is workable, since many states that chose to run their own exchanges are doing quite well."

     However, the GOP being the party with no ironymeter doesn't see the irony here. 

     "But while we wait for the geeks to do their stuff, let’s ask a related question: Why did this thing have to be so complicated in the first place?"

     "It’s true that the Affordable Care Act isn’t as complex as opponents make it out to be. Basically, it requires that insurance companies offer the same policies to everyone; it requires that each individual then buy one of these policies (the individual mandate); and it offers subsidies, depending on income, to keep insurance affordable."
     "Still, there’s a lot for people to go through. Not only do they have to choose insurers and plans, they have to submit a lot of personal information so the government can determine the size of their subsidies. And the software has to integrate all this information, getting it to all the relevant parties — which isn’t happening yet on the federal site."
      "Imagine, now, a much simpler system in which the government just pays your major medical expenses. In this hypothetical system you wouldn’t have to shop for insurance, nor would you have to provide lots of personal details. The government would be your insurer, and you’d be covered automatically by virtue of being an American."
     "Of course, we don’t have to imagine such a system, because it already exists. It’s called Medicare, it covers all Americans 65 and older, and it’s enormously popular. So why didn’t we just extend that system to cover everyone?"
     "The proximate answer was politics: Medicare for all just wasn’t going to happen, given both the power of the insurance industry and the reluctance of workers who currently have good insurance through their employers to trade that insurance for something new. Given these political realities, the Affordable Care Act was probably all we could get — and make no mistake, it will vastly improve the lives of tens of millions of Americans."
    "Still, the fact remains that Obamacare is an immense kludge — a clumsy, ugly structure that more or less deals with a problem, but in an inefficient way."
     As Mike Konczal points out, ACA is basically what Paul Ryan wants to do with Medicare.
     "Some of the more cartoony conservatives argue that this is a failure of liberalism because it is a failure of government planning, evidently confusing the concept of economic “central planning” with “the government makes a plan to do something.”
     "However, the smarter conservatives who are thinking several moves ahead (e.g. Ross Douthat) understand that this failed rollout is a significant problem for conservatives. Because if all the problems are driven by means-testing, state-level decisions and privatization of social insurance, the fact that the coreconservative plan for social insurance is focused like a laser beam on means-testing, block-granting and privatization is a rather large problem. As Ezra Klein notes, “Paul Ryan's health-care plan -- and his Medicare plan -- would also require the government to run online insurance marketplaces.” Additionally, the Medicaid expansion is working well where it is being implemented, and the ACA is perhaps even bending the cost curve of Medicare, the two paths forward that conservatives don’t want to take."
      Though it's easy to forget, ACA actually goes back to Nixon. 
     Douthat really doesn't belong in today's Republican party because the defining requirement to get into the party is to never look beyond your nose or count above three. The idea that there is any considerations but the most immediate agenda is just not even guessed at in today's GOP. Douthat sounds more like a Whig-and the Democratic party is the real Whig party of today. 



Monday, October 28, 2013

Mitch McConnell Vows No More Govt Shutdowns, Debt Ceiling Chicken

     "After the GOP cave many worried that this whole thing is going to happen again in January. I wasn't so pessimistic because I just don't see how the GOP leadership can want to go through this again. It helps to understand that they didn't want this the first time, that it kind of happened 'by accident'-they had only intended to appease their Tea Party members without really falling off the ledge."

    Now Mitch McConnell is guaranteeing it won't happen again in speaking with wealthy GOP donors who were really frustrated by the recent absurdity.

    "Mitch McConnell isn’t going to have another government shutdown on his watch. The Kentucky Republican stood up over the weekend and said he wanted to address the “elephant in the room” at a fundraising retreat in Sea Island, Ga. Speaking before roughly 300 K Streeters and big donors, McConnell said Republicans will not come close to defaulting on the nation’s debts or shutting down the government early next year when stop-gap government funding and the debt ceiling are slated to be voted on again."

    "His remarks echoed similar comments he made following the shutdown that it was “not conservative policy” and that he always believed “this strategy could not and would not work.”

    "He’s in fighting mode,” said one attendee of McConnell. “He didn’t get into specifics about what they are doing and how they are going to do it, but McConnell and (Texas Sen. John) Cornyn were particularly forceful.”

     Read more:

     While many have argued that McConnell is worried about his Tea Party challenger in Kentucky and therefore doesn't want to rock the boat-and this was kind of how he acted during the fight-he has now clearly set himself up as a pragmatic and reasonable honest broker who can work with Democrats and definitely won't be privy to or tolerate any more wild Kamikaze missions. He's looking much more to his Democratic challenger, Allison Grimes. 

      Assuming they won't go down this road again as McConnell promises-and again I don't expect them to go down it again-will the be ready for fully normal governing? I wouldn't count on it, this is the Republican party we're talking about. As Greg Sargent points out, the only tangible reform the GOP was discussing after the lost election in 2012 was immigration reform and now you even have Mario Rubio inveighing against the Senate immigration bill-and he's a Republican. 

     "All this comes down to a fundamental question: Do Republicans think they need to prove the party can enter into the normal give and take of governing, or don’t they? Maybe the answer is No, because their majority is supposedly invulnerable. If so, there won’t be a budget deal or immigration reform; we’ll keep lurching from one crisis to the next; and we’ll find out what it really means politically in November of 2014.
But if the answer is Yes, that would require acceptance of a basic fact: There is probably nothing that could result from normal governing compromises between Republicans and Democrats that the Tea Party wing can ever accept."
     As I said, I don't think they'll let the Tea party go full shutdown mode again. If they're actually ready for governing again, well let's not get carried away.