What Krugman and Stiglitz's Peers are Saying

     While no one takes more potshots than Krugman the results are in and Krugman haters-a la Bob Murphy-will have to read it and weep.

http://krugman.blogs.nytimes.com/2013/07/03/nobody-pays-any-attention-to-what-i-say

      Krugman placed on the top-the list was made by the Wall St. Journal .Krugman also says he appreciates Stiglitz placing second just behind him.

      "Let me say, the fact that Joe Stiglitz is up there makes me more optimistic about the world; as I’ve written in the past, he’s an insanely great economist, in ways that you really can’t comprehend unless you do economic modeling, but until now I would never have envisioned him having the kind of reach he now does."

       "What this might suggest is that the ecnomic world has changed a lot for someone like Stiglitz to now get such a wide hearing. In the past he was usually dismissed out of hand by the VSP in econ. It suggests that this crisis has led to a lot of soul searching. "

       http://krugman.blogs.nytimes.com/2013/07/03/nobody-pays-any-attention-to-what-i-say/

     In the past despite his accomplishments and his place on the Clinton financial team he was sort of an 'untoubhcable' among the economist ''peer group.' A lot was made of his recent suggestions of some very unorthodox explanations for occurrence of the Depression and the Great Recession. In both cases he suggested that steep job losses through technology changes-in the Depression the move from agriculture to manufacturing; in the GR the move to the Internet economy. 

    Most conventional-Neoclassical-economists were indignant in their dismissal. 

     http://diaryofarepublicanhater.blogspot.com/2011/12/stiglitz-guilty-of-macroeconomic-heresy.html

     http://diaryofarepublicanhater.blogspot.com/2013/06/jared-bernstein-joins-luddites.html

      If his ideas are getting such a wide hearing that is very encouraging and would seem to bode well. Krugman notes more broadly the high number of liberals on the list. As he correctly says himself: the facts have a well known liberal bias. 

      P.S. I mean 'peers' in the Richard Rorty sense-economists are not just honestly devoted to the pursuit of economic knowledge and truth-I do believe they genuinely do pursue this-but also a social group with its own mores and rules. Stiglitz has often flouted these rules and found himself on the wrong side f his fellow economists. 

Nick Rowe Seeks a Keynesian Answer to a Question about Consumption, Investment, and the Government

      Here is the question he poises:

      "And there are two different questions we could ask about the composition of output:"

1. What is the optimal mix between consumption and investment spending?

2. What is the optimal mix between private and government spending?

     "Those two questions are orthogonal. They are two different dimensions. Consumption/investment is North/South; private/government is East/West. A change in the optimal mix between consumption and investment spending has no obvious implications in either direction for the optimal mix between private and government spending. (Maybe the government has a comparative advantage in investment spending and the private sector a comparative advantage in consumption spending, or maybe it's the other way around.)"

     "Keynes' question was about the first of those two questions, and how a decentralised economy might not get the answer right, and could cause even worse problems as a side-effect of not getting the answer right."

     http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/07/keynes-question-and-the-keynesian-answer.html

      See, I don't know that I agree that Keynes question is about the optimal mix of consumption and investment. I would play devils advocate and ask why it matters at the outset .I consider myself a Keynesian, but for me, the answer is-whatever's necessary to get us full employment and healthy growth. 

      I'm not sure that Keynes necessarily had an optimum level of investing vs. consumption. We could point out that going by empirical history the division is about 80% to 20% in favor of consumption. The advocates of the 'progressive conssumption tax' set as a goal a time where consumption as a percentage drops to 76% and investment rises to 24% 

       http://diaryofarepublicanhater.blogspot.com/2013/04/a-progressive-consumption-tax.html?showComment=1367086392236#c2419579065684256146

        Now as for the division between government and private spending, the answer is-whichever gets us the optimal output and employment, but that you'd imagine that during a recession you'd expect the proportion of government spending as a percentage of output to go up. 

       Daniel Kuehn in response to Nick quoted a crucial passage in Keynes which I do think is vital to understand-today very few do at least among the Neoclassicals. 

        ""AN act of individual saving means — so to speak — a decision not to have dinner to-day. But it does not necessitate a decision to have dinner or to buy a pair of boots a week hence or a year hence or to consume any specified thing at any specified date. Thus it depresses the business of preparing to-day’s dinner without stimulating the business of making ready for some future act of consumption. It is not a substitution of future consumption-demand for present consumption-demand, — it is a net diminution of such demand. Moreover, the expectation of future consumption is so largely based on current experience of present consumption that a reduction in the latter is likely to depress the former, with the result that the act of saving will not merely depress the price of consumption-goods and leave the marginal efficiency of existing capital unaffected, but may actually tend to depress the latter also. In this event it may reduce present investment-demand as well as present consumption-demand. "

         http://factsandotherstubbornthings.blogspot.com/2013/07/nick-rowe-on-keynesian-questions.html?showComment=1372890046066#c2708131744872019221

       This point of Keynes is almost universally not understood. Among Neoclassial economists the very idea that present savings won't necessarily be spent in the future. 

Good News and Bad News For Obamacare Haters

       The good news is they get to make much ado about nothing-as usual. The White House is delaying the employer mandate for a year and of course conservatives are declaring victory. The usual. It's a disaster. Now lets get rid of the rest of it. 

        "after news of the delay broke, House Majority Leader Eric Cantor responded on Twitter with a simple declaration. “Rather than simply delaying the pain, we should go ahead and scrap this entire law before any more damage is done.”

        http://www.washingtonpost.com/blogs/plum-line/wp/2013/07/03/we-can-fix-the-problems-with-the-employer-mandate-but-the-gop-wont-let-it-happen/

         "Already, conservatives like Erick Erickson are saying it's unfair to delay the mandate on employers without also delaying the mandate on individuals. Erickson won’t be the last to make this argument, just as he already has plenty of company citing this news as proof that Obamacare is a disaster."

         Ok, so that's the good news. They have a new talking point. The bad news is this is pretty small beer. Indeed, according to Jonathan Cohn, the employer mandate is held by most economists to have a negligible effect on how many employers offer healthcare. There are plenty of good reasons why employers already offer their employees healthcare and this is unlikely to change much.

          "I’ve always liked the employer mandate, largely for its symbolic value: It’s a way of making sure everybody contributes to health coverage, in some manner. But economists and health policy experts will tell you, almost universally, that the employer mandate is actually bad policy. As they see it, the requirement doesn’t have much effect on whether most employers decide to offer their workers coverage. For the most part, the experts say, employers will decide whether to offer coverage based largely on whether they think it helps retain employees. Today, well more than 90 percent of employers with more than 50 employees decide to offer insurance for that reason. Remember: That's with no penalty at all. As Timothy Jost, the Washington and Lee law professor, writes at Health Affairs:"

All of the reasons employers now have for offering coverage to their employees—significant tax subsidies, recruitment and retention of employees, and increased productivity and decreased absenteeism when employees are healthy—will continue to exist without the mandate penalty.

        The employer maintains basically like the individual mandate-neither mandate actually mandates that you buy healthcare just levies a small penalty if you don't. Both mandates don't hit those who can't afford the care-individuals beneath a certain level of income are required to buy and neither are those businesses with less than 50 employees. 

        Indeed, if the GOP opposition weren't so utterly dysfunctional it would be possible to discuss the policy questions rationally. Ezra Klein and many others think the employer mandate even might be better scrapped-it's only a small part of Obamacare though. 

        "Truth is, delaying or modifying the employer mandate is exactly the kind of adjustment many experts expected the law would need–and that, in a less polarized environment, would happen through Congress without nearly this much fuss. But that’s one of the big problems with health care reform right now: It’s impossible to make those adjustments. As Klein writes, "the legislative process around the health-care law is completely broken."

         Klein had made this same point regrading climate change. If the GOP didn't always play 'my way or the highway' they might gain at least something. By making it all or nothing, the Dems are forced to play this game and defeat them totally. 
   
        http://diaryofarepublicanhater.blogspot.com/2013/06/the-gop-congress-is-mad-but-wheres.html

        My way or the highway usually means the GOP ends up on the highway but they're too bad at math. 

Morisi is Gone: Democracy Egyptian Style

     The generals who dispatched him today tell him not to worry: hey you can run again.  He doesn't have to leave the country-though he can if he wants to. Very fair military coup! 

      "Former Egyptian General Sameh Seif Elyazal told CNN anchor Christiane Amanpour Wednesday that newly-ousted President Mohamed Morsi would be "most welcome" to run for office in the upcoming presidential election."

      ""I don't think there is any law to exile him from that. So he is most welcome to play his role again," Elyazal said.

      "Elyazal also said the army does not intend to exile or imprison Morsi."

      "He is in a very safe place. There is no intention whatsoever to put him in jail. There is no intention whatsoever to put anybody else in jail, at all," Elyazal said. "And he is free, I guess he would be free to leave Egypt soon, or to live in Egypt, it depends on him."

      http://livewire.talkingpointsmemo.com/entry/former-egyptian-general-morsi-welcome-to-run-for?ref=fp 

     

     In Egypt, this seems to be script for now. Once the Egyptian people have decided they can't wait till the election. It sort of brings Rousseau's General Will or Mao's fantasy of 'Permanent Revolution.' We often hear that what we really need is direct democracy.' Does it get more direct than this?

     "The armed forces ousted Egypt’s first democratically elected president Wednesday after just a year in power, installing a temporary civilian government, suspending the constitution and calling for new elections. Islamist President Mohammed Morsi denounced it as a “full coup” by the military."

     "After the televised announcement by the army chief, millions of anti-Morsi protesters in cities around the country erupted in delirious scenes of joy, with shouts of “God is great” and “Long live Egypt.”

      "Fireworks burst over crowds dancing and waving flags in Cairo’s Tahrir Square, epicenter of the 2011 uprising that ousted autocrat Hosni Mubarak. Now it was one of multiple centers of a stunning four-day anti-Morsi revolt that brought out the biggest anti-government rallies Egypt has seen, topping even those of 2011."

      "But the move potentially throws the country into further confrontation."

      http://talkingpointsmemo.com/news/egypt-army-removes-morsi-from-power-calls-early-elections.php?ref=fpa

      Potentially further confrontation. You think so? You have to say this though. Anyone considering running for President in Egypt isn't going into this lightly. After all, they may well be next. I'm not sure whether to see this as democratic or not. In a way, it's a bad sign. This is not exactly how you achieve stability. On the other hand it does send a warning. The Muslim Brotherhood thought it could have things all its way and its learned quite differently. 

     Indeed, one criticism of Obama for not opposing the ousting of Mubarak is that he would inevitably be replaced with the MB. Yet the Egyptian people have shown they wont stand for this. 

     "Elected with 51.7 percent of the vote in last year’s presidential election, Morsi took office vowing to move beyond his roots in the Muslim Brotherhood."

     "But his presidency threw the country into deep polarization. Those who took to the streets this week say he lost his electoral legitimacy because he tried to give the Brotherhood and Islamist allies a monopoly on power, pushed through a constitution largely written by his allies and mismanaged the country’s multiple crises."

     “Now we want a president who would really be the president of all Egyptians and will work for the country,” Said Shahin, a 19-year-old protester in Tahrir, said, falling to the ground to pray as soon as el-Sissi spoke.

      

In July's Senate Some Fireworks over Nominations, Nuclear Option

       This week a lot will be on the line with Obama's three high level executive nominations coming before the Senate. For judicial nominations there has been progress this year as the level of foot dragging seen in the previous 4 years has dissipated. 

         "In fact, so far this year, foot-dragging on the Senate floor hasn’t been a problem for judicial selections. Currently, the nominees who have waited for the longest time at that stage are one who was approved by the Judiciary Committee in April and two from May — and two of those have been cleared for final confirmation votes next week, when the Senate returns from recess. And there are only two other lifetime appointment judges on the Senate calendar right now."

       http://www.washingtonpost.com/blogs/plum-line/wp/2013/07/03/here-comes-senate-showdown-july/

       What happens this week with these executive nominees is going to give us a good indication of how this month will go. These are picks that the GOP may well see as controversial:

        "We still don’t know — Republicans don’t seem to know — whether Millet and the other two recent D.C. Circuit court nominees will be widely opposed by Republicans, or just receive some relatively token opposition. Indeed: As long as there are six votes for cloture, most Republicans can oppose them, and every single Republican can vote against final confirmation without stopping them."

       "At any rate, the first showdown in July is likely to be executive branch nominations. While many of the minor and uncontroversial ones have been confirmed — hey, compared with Barack Obama’s first term, that’s progress! — several key posts remain. There’s Richard Cordray, nominated to be Director of the new Bureau of Consumer Financial Protection, ready for a vote since March (and since Obama’s first term), but blocked so far by a filibuster. There’s Gina McCarthy, designated as the next administrator of the Environmental Protection Agency. There’s Thomas Perez, selected for secretary of labor. And there are five picks for the National Labor Relations Board."

       We know all too well the GOP antipathy for both the NLRB and the BCFP. Gina McCarthy will be a potential key ally for the President as he executes his climate control policy largely via the executive order-due toCongress' dereliction of it's role as genuine partner to the President. 

     Either way, we’ll start to learn what Republicans are going to do next Wednesday, and then soon after when the Judiciary Committee actually votes on Millet. Will committee Republicans oppose her? If so, will it be based (at least publicly) on something in her record, or will they really oppose her (and thus every D.C. Circuit nominee) because that bench supposedly already has enough judges?

Both the fate of many Obama policies and the near-term fate of the Senate are up for grabs. Senators are playing for high stakes here.

     If the GOP filibusters these 3 nominees this is what Harry Reid has promised will trigger the 'nuclear option.'  Yep, a lot is at stake. 

     http://diaryofarepublicanhater.blogspot.com/2013/05/for-harry-reid-and-filibuster-reform.html

GOP Strategy: Court Hispanic Votes Kick Female Voters in the Teeth

      The draconian 'prolife' bills by GOPers are multiplying by the day. Now Marco Rubio plans to sponsor the anti choice bill that the House passed.

       "Senator Marco Rubio (R-Fla.) today agreed to be the lead sponsor of a Senate bill to ban abortion after an unborn child is 20 weeks old. A similar measure passed the House last month and a state version is now being debated in the Texas legislature, where it is likely to be approved."

       http://www.washingtonpost.com/blogs/plum-line/wp/2013/07/03/marco-rubio-works-to-appeal-to-conservatives-with-an-anti-abortion-proposal/

        Greg Sargent interprets this as a kind of plan b-if immigration reform fails he'll have the deep anti abortion bills to build up his resume for 2016. 

        "The thinking is straightforward: If immigration reform fails, Rubio will have to rebuild trust and stature with a large number of conservatives. Opposition to abortion — given its constant throughout the GOP coalition — is the easiest path to take. By championing abortion restrictions, Rubio will attract the attention of pro-choice advocates and the acclaim of their pro-life counterparts. It’s not a bad strategy, and given the intensity of conservative opposition to abortion, it will probably work."

         I'm not sure this is what's going on. My take is more that the anti abortion bill is Rubio's way of trying to get back in the good graces of the conservatives after his support for immigration reform that many see as traitorous. It is true as Sargent says that there is a conservative argument out there that all the GOP needs to do is optimize the White vote and they can ignore the Hispanic vote. 

          Karl Rove, among others have ripped this theory to shreds but as usual the facts don't matter. 

           http://diaryofarepublicanhater.blogspot.com/2013/06/louie-gohmerts-complaint-about.html

           I'm still not convinced that Boehner doesn't bring this up to a vote ultimately. I do think though Rubio has to make up for his support of it by taking a hard lone on abortion .This whole episode with this-basically illegal-20 month bill has been about pleasing the base in Congress even though it's obviously futile. 

          After the House passed it, Boehner rather comically was insisting that the economy is their number one concern. Indeed, most Americans just don't see why abortion is suddenly on the table as such a lightening rod all of a sudden.. 

         Even in Texas-a fairly conservative state-there's saturation. While the bill that Governor Rick Perry is trying to ram through is not very popular-only 40% support vs. 51% who don't-an overwhelming number of Texans-80%-don't think that it's a good use of 'special session' time:

        "The findings from Greenberg Quinlan Rosner Research found that 51 percent of Texas are opposed to a "proposal would put in place new restrictions and regulations on abortion providers that would likely result in the closure of all but five abortion clinics in the state of Texas, all of which are located along the I-35 corridor, and would ban most abortions starting at 20 weeks of pregnancy" — provisions that describe the bill likely to pass the legislature during the latest special session called by Gov. Rick Perry (R). Forty-two percent support the proposal."

       "But a huge majority of 80 percent agreed with the following statement read by the pollsters: "A special session of the legislature should focus on issues like education, jobs, and the economy, instead of bringing up social issues like abortion that were already addressed in the regular session of the legislature." 

       http://livewire.talkingpointsmemo.com/entry/dem-poll-majority-of-texans-against-abortion-bill?ref=fpb

       Republicans have been claiming that the burst in anti choice legislation in GOP state after state shows that the American people are turning against abortion rights. This is to interpret things rather loosely.  Just because many GOP governors were elected in 2010 on the energized Tea Party platform-under frustration with the slow recovery and opposition to Obamacare-hardly proves that every state with a GOP Governor or legislature right now wants to see Roe v. Wade strongly cutback and for most clinics that perform abortions within the state-whether or not abortion is their main focus to be shut down. 

       At the state level, what we're seeing is that any place the GOP has power it is abused egregiously. At the national level, people like Rubio are kind of doing a quid pro quo-immigration reform is the one progressive idea that they will support. To make it up to the base, they are moving even further to the Right on abortion. Of course, they didn't run like this in 2012-then when Democrats knocked the GOP for Akin, Mourdock, et. al. they insisted that this was just a diversion from the economy. 

       So the GOP may welcome Hispanics while closing the door further on women? To say nothing about their standing with Blacks which is by definition going to be a lot worse now with the SJC's rollback of the Voting Rights Act. 

       http://diaryofarepublicanhater.blogspot.com/2013/07/voting-rights-act-pushes-gop-from.html

       

      

          

        

Tax Reform, 1986, and the Better Mousetrap

     As I said in a previous post, I've always been fairly skeptical of the entire project of 'tax reform.' Greg Sargent suggests that no one really wants tax reform-both liberals and conservatives just want their version of it-and I think that's right.

     "both parties appear to have essentially unrelated policy goals that they would like to achieve through tax reform. Democrats want to increase overall revenues; in fact, Democratic wonk Jared Bernstein today calls revenue-neutrality the “tax reform trap.” Republicans aren’t as specific about it, but it’s pretty clear they want a less progressive system — fewer tax brackets, and changes which are much more helpful to the wealthy than to middle class or poorer Americans."

     http://diaryofarepublicanhater.blogspot.com/2013/07/does-anyone-really-want-tax-reform.html

     So to his question-'does anyone really want tax reform?-I would tend to say at best 'I don't know.' Sargent says that to achieve it both sides would have to compromise:

       "To get anything done, both sides are going to have to give up any additional goals. For Democrats, that means waiting for revenues. And that’s not impossible; after all, taxes went up twice in the years after the 1986 tax reform passed"

     "And for Republicans, it may mean accepting more brackets, not fewer, in order to protect progressive taxation. Remember, there’s nothing “simplifying” about fewer tax brackets. No one calculates their tax themselves, and they won’t with anything more complex than a full flat tax that begins with the first dollar earned. Complexity in the tax code comes from exclusions and deductions, not from the basic rates.."

      For me there are two issues. I don't really see what we get by this 'tax reform' if there's no increase in revenue. Yet, I'm also skeptical that 'tax reform' will even be revenue neutral-while not seeing what is gained for liberals even if it were. 

      Jared Bernstein makes the point that 'blank state tax reform'-where each 'tax entitlement' has to justify itself-rather than naming specific entitlements that are to be cut-is trap. What we're likely to see is lower rates but also less revenue. 

       http://jaredbernsteinblog.com/the-tax-reform-trap/

       He also links to a crucial paper on how this whole line of argument is a trap.

      " Policymakers are increasingly discussing the need for tax reform, with a number of them calling 

for large cuts in tax rates — to levels well below the Bush tax rates — as a core element of reform."

      "They contend that sweeping but unspecified cuts in tax expenditures (credits, deductions, and other 

tax preferences)will offset the cost of deep cuts in tax rates and, depending on the proposal, 

possibly generate some revenue to reduce deficits. Many who favor this approach go a step further 

and call for policymakers to commit to specific cuts in tax rates before they agree on any specific tax 

expenditures to reduce."

     "Such approaches pose big risks. They could produce tax “reform” that increases both deficits and 

inequality because while cutting “tax expenditures” sounds appealing in the abstract, cutting specific 

tax expenditures enough to offset the costs of substantial new rate cuts and contribute meaningfully

to deficit reduction would likely prove difficult, if not impossible, to achieve. Indeed, the difficulty 

of cutting popular tax expenditures — from the mortgage interest deduction to 401(k) tax 

preferences to the deduction for charitable contributions to the exclusion for employer-sponsored 

health insurance — is why those who urge policymakers to commit upfront to specific, large rate

cuts rarely specify any tax expendituresto cut. In fact, they often highlight tax expenditures that 

they would refuse to touch, such as the preferential tax rate for capital gains."

     "The 1986 Tax Reform Act, which tax experts often laud, cut tax rates and broadened the tax base 

and, all else being equal, the “lower the rates and broaden the base” formula is economically sound. 

But all else is not equal today; the nation faces enormous long-term budget deficits that will require 

wrenching policy choices, and all parts of the budget — very much including revenues —must be 

on the table. Given our daunting long-term deficits, the single most important goal of tax reform 

should be to raise substantial revenue, in a progressive manner, as part of a balanced deficitreduction policy."

     http://www.cbpp.org/files/6-8-12tax.pdf

     If anything, I'm not a fan of all the lionizing the 1986 'tax reform' gets. It actually was very regressive-it lowered the top rate down to 28% and had just one other rate-15%. It was very close to a flat tax. The only saving grace is that it did get rid of the entitlement on capital gains rates as this number went up to the same rate as the income rate. Of course, in this round conservatives are ruling out raising the capital gains tax in principle. 

     'Entitlement cuts' sound good in theory but in practice no one wants to lose theirs. This is why conservatives continue to use the Mitt Romney strategy of not discussing even on specific entitlement cut they desire but say 'Ok justify which ones we should keep.' It's a nice back door way of lowering rates and not getting more revenue. 

     One other point that could be quibbled with in the above quotes is that our 'long term deficits are so daunting.' Actually they're coming down. I do agree with the imperative to raise revenue however, for our structural deficits, and more generally in principle, I support a progressive tax code that raises sufficient revenue for a generous welfare state and necessary social spending. Bernstein's rules for discussing 'tax reform'-you see how skeptical of this term I remain-are sound:

      1) chose a revenue target, one that reliably reduces the deficit once the economy is back on track;

       2) figure out the rates and base needed to hit that target;

       3) ensure that a) a majority of policy makers accept the base broadeners and b) the changes do not make the code less progressive;

       4) only then, once progressive base-broadeners and a deficit-reducing revenue target are locked in, should lower rates be considered.  If the lower rates violate any of the prior conditions, they must be rejected.

      UPDATE: I should point out that the above quote paper was written prior to the fiscal cliff deal. My point that deficits are not so pressing wasn't so clear then-it's based on CBO numbers and projections we've seen since.