Thursday, October 30, 2014

Tempting offer

At the end of his long screed attacking Krugman, Cliff Asness writes:
Now for a real prediction: Paul will continue to be mostly wrong, mostly dishonest about it, incredibly rude, and in a crass class by himself ...... That is a prediction I'm willing to make over any horizon, offering considerable odds..........Any takers?
Asness is conflating two predictions: Krgthulu will be
1.  mostly wrong, mostly dishonest about it, and
2.  incredibly rude, and in a crass class by himself

One would be safe betting against Asness on prediction 1, and clean up on those long odds offered if the bet were judged fairly, but how about prediction 2?  The assessment here would be purely subjective. What many of us see as justifiable snark (to draw people's attention to important policy decisions made and not made) apparently hurts Asness's fee-fees, so if he's the one who gets to define "incredibly rude, and in a crass class by himself" - well, I guess he'll want your money on the bet.

Now if only he made the offer on prediction 1 only......

Update: Krgthulu gives one justification for his style:
Making fun of billionaires who are clueless about economics, and lack the menschood to admit their mistakes, serves a couple of functions. It reminds the audience that being rich doesn’t mean that you know what you’re talking about; it also provides other rich people some incentive to think before they speak, and maybe even do some homework before preaching to the rest of us. I’m snarky for a reason.

Brad DeLong nails it

 From Washington Center for Equitable Growth:
There are two questions that must be answered in the process of figuring out whether having the government borrow money and spend is a good idea:
  1. What is the money being used for?
  2. How expensive is the money to borrow?
Back in the Reagan-Bush I years–the steep run-up in the debt-to-annual GDP ratio in the 1980s and the first third of the 1990s:
  1. The money was used to rapidly build up the U.S. military to counter the Soviet Union’s overwhelming might–an overwhelming might that existed only in the fantasies of the neoconservatives who ran the “Team B” exercise initiated at the CIA by George H.W. Bush.
  2. The money was used for tax cuts for the rich in the hope that increasingly incentivizing entrepreneurship would accelerate economic growth above the pace of the 1970s–a vain hope indeed.
  3. The real interest rate at which the U.S. government could borrow was relatively high–between 3.5%/year and 8.5%/year, and averaging 5.5%/year in the 1980s.
DeLong goes on to quote from Krgthulu on our depressed economy:
There’s an obvious policy response to this situation: public investment. We have huge infrastructure needs, especially in water and transportation, and the federal government can borrow incredibly cheaply–in fact, interest rates on [ten-year] inflation-protected bonds have been negative much of the time (they’re currently just 0.4 percent). So borrowing to build roads, repair sewers and more seems like a no-brainer. But what has actually happened is the reverse. After briefly rising after the Obama stimulus went into effect, public construction spending has plunged. Why?… The federal government could easily have provided aid to the states…. But once the G.O.P. took control of the House, any chance of more money for infrastructure vanished
 And after summarizing the fiscal failures of Bush ll, DeLong concludes:
Now, of course, things look different.......The fruit as to what the government could do that would be useful, productive, and growth-enhancing is not just low-hanging. It is lying on the ground.
And yet it is impossible to get the chattering class in Washington to seriously ask the two questions:
  1. How valuable would be the things we would be using the money for?
  2. How expensive would the money be to borrow?
and reach the natural, obvious, inescapable conclusion that right now what the U.S. needs is not a smaller but a larger national debt. Instead, all we hear is:
Why can’t Washington do the math?
Why not indeed!

Monday, October 27, 2014


Back in the day, when congressman Richard Nixon was exposing Alger Hiss, it was said that to left wingers, for Nixon to pursue Hiss was despicable - but to be proved right was unforgiveable.

I see some of the same reaction in the right's view of Paul Krugman: to expose conservative follies is despicable, but to be proved right (over and over) is unforgiveable.

Saturday, October 25, 2014

Republican Obama

For years I've been describing President Obama as an Eisenhower Republican (i.e. a moderate conservative).

I'm glad to see Bruce Bartlett agree:
In my opinion, Obama has governed as a moderate conservative—essentially as what used to be called a liberal Republican before all such people disappeared from the GOP.
And Rick Ungar in Forbes a couple of years ago:
Amidst all the cries of Barack Obama being the most prolific big government spender the nation has ever suffered, Marketwatch is reporting that our president has actually been tighter with a buck than any United States president since Dwight D. Eisenhower.
I see a couple of analogies between the Eisenhower and Obama presidencies.

Positive domestic action  on civil rights
Eisenhower - Little Rock
Obama - gays in the military.

Negative foreign actions which come back to haunt us:
Eisenhower - overthrowing the democratically elected Mossadeq in Iran, a misjudgment that has led to the present hardline Islamic state which is one of our greatest foreign headaches.
Obama - the indiscriminate drone wars, which have alienated large parts of the population in the very countries from whom we need support in opposing violent radical Islam, and from which we can expect further "terrorist" (i.e retaliatory) attacks.

So yes, for good and bad, an Eisenhower Republican.

Wednesday, October 22, 2014

Can We Really Undo the Damage Done by Reagan?

Kinderman and Krueger have a working paper out at the National Bureau of Economic Research proposing a return to the Eisenhower era's top marginal tax rate of around 90% as one step toward increasing federal revenue while at the same time reducing the alarming inequality we are witnessing here in the US.

Diamon and Saez have also suggested a much higher top marginal rate, settling on an optimum figure of 73%.  About 70% seems about right to me. In my post of Feb 2013 I proposed these tax rates:
Suggested marginal rates for married filing jointly - halve the income ranges for singles. The top marginal rate (constant dollars) is the same as it was in 1965-66.
10%            $0 - 25,000
15%            $25,000 - 75,000
25%            $75,000 - 150,000
35%            $150,000 - 325,000
50%            $325,000 - 650,000
60%            $650,000 - 1,500,000
70%            Over $1,500,000

Let's hope that the Kinderman Krueger paper will move the range of discussion acceptable to the Village in a rational direction.

Britain Calling

Ha-Joon Chang has a nice article in The Guardian, examining Britain's disastrous experience with austerity: a fall in income for millions of citizens, and growing inequality as an unreasonably high share of the nation's income goes to the top 1% .  We in the US have had somewhat the same experience*, yet in both countries the dominant narrative remains the same: debt is bad, and deficits must be cut.

Chang counters:
The country is in desperate need of a counter narrative that shifts the terms of debate. A government budget should be understood not just in terms of bookkeeping but also of demand management, national cohesion and productivity growth. Jobs and wages should not be seen simply as a matter of people being “worth” (or not) what they get, but of better utilising human potential and of providing decent and dignified livelihoods.

* though in our case mitigated by the 2009-2011 stimulus, the automatic stabilizers of food stamps and unemployment insurance, and the Fed's quantitative easing.

Monday, October 20, 2014

In His Own Words

So Rand Paul thinks the Bilderberg Group are
"very wealthy people, who I think manipulate and use government to their own personal advantage. They want to make it out like world government will be good for humanity. But guess what? World government is good for their pocketbook." 

Let's bring his words back to reality by just a few substitutions.
The Koch brothers are
"very wealthy people, who I think manipulate and use government to their own personal advantage. They want to make it out like Republican government will be good for the US. But guess what? Republican government is good for their pocketbook." 

Sunday, October 19, 2014

The Cephalopod Smackdown

Brad DeLong delivers it:

Consider whether one should line up with Amity Shlaes--along with William Kristol, Niall Ferguson, James Grant, David Malpass, Dan Señor, and the rest of that motley company--against Ben Bernanke. Suppose that one has no special expertise on the issue. Suppose that Ben Bernankehas studied that issue for his entire adult life.
  1. Wouldn't anybody with a functioning neural network greater than that of a moderately-intelligent cephalopod recognize that such a lining-up was an intellectual strategy with a large negative prospective α?
  2. Wouldn't--after the intellectual strategy's large negative-α returns have been realized--anybody with a functioning neural network equal to that of a moderately-intelligent cephalopod recognize that it was time to perform a Bayesian updating on one's beliefs, rather than doubling down and claiming that: it's not over--the inflationary pressures are building minute-by-minute?
  3. Wouldn't--when thinking about how to double-down on one's negative-α intellectual strategy, and placing even more of one's mental and reputational chips on the claim that expanding and keeping the Federal Reserve's balance sheet beyond $1.5T generates excessive and dangerous risks of inflation, and that any such expansion ought to be stopped and reversed--anybody with a functioning neural network even less than that of a moderately-intelligent cephalopod recognize that phrasing one's doubling-down in the voice of John Belushi on a very bad day would be unwise, would be likely to call forth mockery and scorn on the same rhetorical level that one had chosen, and would make one a figure of fun and merriment?
  4. And, when the readily-predictable tit-for-tat responses at the rhetorical level one chose do in predictable and due course manage to arrive, that to respond by whinging and sniveling and feeling offense would be unwarranted--would demonstrate only that whatever functioning neural network one does have was not fully connected to reality?
Hah! Smackdowns don't get much better than this!  (I guess it's this kind of thing that cause the practitioners of derp  to refer to Brad DeLong as Paul Krugman's "personal Rottweiler".)

Thursday, October 16, 2014

What I Do Not Understand

Imagine if in 1944, while the US was still facing its largest national crisis since the great depression, and after President Roosevelt's re-election with 53.4% of the vote, the Republicans had deliberately undercut the war effort for their political gain, resulting in the prolonging of the war, and thousands of needless deaths.  Who would vote for such a party?

But that is how the Republicans behaved during the country's greatest crisis since WWll: the financial collapse of 2008 and the subsequent downturn*, which put millions out of work.  One would have thought that after Obama's 2008 election with 52.9% of the vote (not that far from Roosevelt's 1944 share), and with the country still in crisis, the Republicans would have supported the president's efforts to get people back to work and the economy back on track.

Instead on the day after the inauguration, Republican lawmakers met to plan undercutting the president's efforts.
For several hours .... they plotted out ways to not just win back political power, but to also put the brakes on Obama's legislative platform.
That was just the immediate first step in a policy of sabotaging the recovery, which was detailed in Mike Grunwald's book The New New Deal.   “If he was for it,” former Ohio Senator George Voinovich explained, “we had to be against it.

Vice President Biden told me that during the transition, he was warned not to expect any bipartisan cooperation on major votes. “I spoke to seven different Republican Senators who said, ‘Joe, I’m not going to be able to help you on anything,’ ” he recalled. His informants said McConnell had demanded unified resistance. “The way it was characterized to me was, ‘For the next two years, we can’t let you succeed in anything. That’s our ticket to coming back,’ ” 
One Obama aide said he received a similar warning from a Republican Senate staffer he was seeing at the time. He remembered asking her one morning in bed, How do we get a stimulus deal? She replied, Baby, there’s no deal!
“This is how we get whole,” she said with a laugh. “We’re going to do to you what you did to us in 2006.”
At the House retreat [before Obama took office], Pete Sessions delivered this message to his colleagues:
The team’s goal would not be promoting Republican policies, or stopping Democratic policies, or even making Democratic bills less offensive to Republicans. Its goal would be taking the gavel back from Speaker Pelosi.
“That is the entire Conference’s Mission,” Sessions wrote.
In January 2009, after just a week in office, Obama announced he would visit the Capitol to meet with Republicans at noon of that day to talk with them about his economic recovery plans.  
Shortly before 11 a.m., the AP reported that Boehner had urged Republicans to oppose the stimulus. Obama press secretary Robert Gibbs handed Obama a copy of the story in the Oval Office, just before he left for the Hill to make his case for the stimulus, an unprecedented visit to the opposition after just a week in office. “You know, we still thought this was on the level,” Gibbs says. Obama political aide David Axelrod says that after the President left, White House aides were buzzing about the insult.
“It was stunning that we’d set this up and, before hearing from the President, they’d say they were going to oppose this,” Axelrod says. “Our feeling was, we were dealing with a potential disaster of epic proportions that demanded cooperation. If anything was a signal of what the next two years would be like, it was that.”
David Obey, then chairman of the House Appropriations Committee, met with his GOP counterpart, Jerry Lewis, to explain what Democrats had in mind for the stimulus and ask what Republicans wanted to include. “Jerry’s response was, ‘I’m sorry, but leadership tells us we can’t play,’ ” Obey told me. “Exact quote: ‘We can’t play.’ What they said right from the get-go was, It doesn’t matter what the hell you do, we ain’t going to help you. We’re going to stand on the sidelines and bitch.”
In his campaign, Obama had promised to hold his hand out to the Republicans so they could tackle the economic crisis together.  The GOP had other ideas.
    Grunwald again:
Republicans recognized that after Obama’s big promises about bipartisanship, they could break those promises by refusing to cooperate.
[McConnell] realized that it would be much easier to fight Obama if Republicans first made a public show of wanting to work with him.

McConnell realized that Obama's promises of bipartisanship gave his dwindling minority real leverage.  Whenever Republicans decided not to cooperate, Obama would be the one breaking the promise. ... As long as Republicans refused to follow his lead, Americans would see partisan food fights, and conclude that Obama failed to produce change.
George Voinivich:  "All he cared about was making sure Obama could never have a clean victory."
The goal was to portray [the stimulus] as trillion dollar spending bill at a time of trillion dollar deficits, rather than an economic recovery bill at a time of economic crisis. 
The dream of hope and change was about to enter the world of cloture votes and motions to recommit.
And so President Obama's hope of a bipartisan effort to get the economy rapidly back on track was undercut, and millions of Americans suffered through unemployment - unemployment that ruined lives as careers were stalled or ended, and in the case of college graduates not even begun. (Suicides increased from around 35,000 in 2007 to over 40,000 in 2012.)

This has been suffering imposed by the Republicans solely for political and electoral gain - the good of the country be damned.  (And to add insult to injury, the Republicans claim that it has been Obama who has been "divisive"!)

What I do not understand:  why would anyone even contemplate voting for such a party?

* Some may point to 9/11 as the greatest crisis since WWll.  While it was a monstrous crime that affected thousands of people, it was more akin to the 1996 Oklahoma City bombing, though on a larger scale, and should have been treated the same way as that earlier terrorist attack, instead of the hysterical reaction of the Bush administration that led to the current threats from ISIS.

Update 10/29/2014  Brad DeLong agrees:
(T)here is something wrong with anyone who publicly supports today's Republican Party without having an immediate, practical plan for utterly transforming it root-and-branch into something else.

Update 11/6/2014

And the midterm results show that the Republicans' policy of obstruction and maintaining a weak economy has worked for them, as they have gained control of the Senate and a larger majority in the House.  Let's hope they will now promote economic growth policies expecting it will bring them political advantage.

Further update:

Or perhaps not.   The American Prospect's Paul Waldman:
The incentives for them to continue fighting Obama on anything and everything are everywhere. The strategy of maximal obstruction got them where they are today. Twenty-four Republican senators will be up for re-election in 2016, and every last one will be looking over their right shoulder, worrying about a primary challenge and knowing that the only way to avoid it is to be as venomous as possible in their opposition to Obama. And next year’s House will also become even more conservative than it is now, with the addition of a group of new Tea Partiers.
A Republican party in the flush of a sweeping victory isn’t exactly going to be looking for areas where it can dial back its demands. If someone would like to explain how a GOP caucus in Congress even farther to the right than the one whose antics we currently enjoy would be more inclined to compromise with Barack Obama than it is now, I’m all ears.

Update 11/7/2014.  Krgthulu weighs in:
But the biggest secret of the Republican triumph surely lies in the discovery that obstructionism bordering on sabotage is a winning political strategy. From Day 1 of the Obama administration, Mr. McConnell and his colleagues have done everything they could to undermine effective policy, in particular blocking every effort to do the obvious thing — boost infrastructure spending — in a time of low interest rates and high unemployment.
 This was, it turned out, bad for America but good for Republicans. Most voters don’t know much about policy details, nor do they understand the legislative process. So all they saw was that the man in the White House wasn’t delivering prosperity — and they punished his party. 

Update 11/8/2014.  Eric Boehlert points out the complicity of the national press:
Led by Sen. Mitch McConnell (R-KY), Republicans vowed in 2009 to oppose every political move Obama made, not matter how sweeping or how minor.  "To prevent Obama from becoming the hero who fixed Washington, McConnell decided to break it. And it worked," wrote Matthew Yglesias at Vox, in the wake of the midterm election results. New York's Jonathan Chait made a similar observation about McConnell: "His single strategic insight is that voters do not blame Congress for gridlock, they blame the president, and therefore reward the opposition."
But why? Why don't voters blame Congress for gridlock?
Why would the president, who's had virtually his entire agenda categorically obstructed, be blamed and not the politicians who purposefully plot the gridlock? Because the press has given Republicans a pass. For more than five years, too many Beltway pundits and reporters have treated the spectacular stalemate as if it were everyday politics; just more "partisan combat." It's not. It's extraordinary. (See here, here, here, here, here, here, here, and here.)
Update 11/26/2014:  Jon Chait weighs in:
The GOP has withheld cooperation from every major element of President Obama’s agenda, beginning with the stimulus, through health-care reform, financial regulation, the environment, long-term debt reduction, and so on. That stance has worked extremely well as a political strategy. (Boldness added.)  Most people pay little attention to politics and tend to hold the president responsible for outcomes. If Republicans turn every issue into an intractable partisan scrum, people get frustrated with the status quo and take out their frustration on the president’s party. It’s a formula, but it works.

(Of course, my title for this post is somewhat tongue-in-cheek.  It's been apparent all along that the press has failed dismally in its duty to inform the public about just what was going wrong in Washington, and that is why a deliberate campaign of sabotage was so handsomely rewarded.)

Wednesday, October 15, 2014


Voices of sanity from British conservatives:

If you need proof of just how friendless Israel’s hard-Right government has become, consider the statements last night from MPs who would normally count themselves the country’s natural allies. Arch-Tories such as Nicholas Soames (whose grandfather Winston Churchill is Israeli prime minister Benjamin Netanyahu’s political hero) spoke eloquently in favour of Palestinian statehood. And Richard Ottoway, chair of the foreign affairs select committee, said that despite having been “a friend of Israel long before I became a Tory”, its recent policies had “outraged me more than anything else in my political life”, concluding: “If Israel is losing the support of people like me, it is losing a lot of people.”

It has been the position of every British government since 1967 that the West Bank, East Jerusalem and Gaza have not been lawfully part of the State of Israel, whether at its creation or at any point thereafter. Indeed, that is the view of every foreign government, including the United States.
And since 1967, a clear line has been drawn in international law which defines which territory is occupied and which is not. Yet relentlessly, every week, every month, and every year for decades, Israelis have built illegal constructions on Palestinian land.
The construction of settlements in the Occupied Palestinian Territories is contrary to Article 49 of the Fourth Geneva Convention which prohibits the occupying power from transferring parts of its own population into the territories it occupies. This is a position held by the international community and confirmed by the International Court of Justice. Indeed, the Supreme Court of Israel itself has repeatedly found that the West Bank is held in belligerent occupation.
But since 1967 Israel has continuously and systematically built outside its legitimate borders and has claimed its neighbours’ land as its own. Israeli settlements are the worst, most destructive, aspect of the military occupation, an occupation which has become the longest in modern international relations.
The continued expansion of settlements demonstrates that the occupier has little or no intention of ending that occupation or of permitting a viable Palestinian state to come into existence.
I do not expect the same degree of realism to come out of Washington.

Friday, October 10, 2014

More non-apologies

In the 2012 campaign, Mr, Romney claimed that under his policies if he were president, unemployment would be down under 6%, and 12 million new jobs created by the end of his first term (four years) -  contrasting his policies with that of President Obama.

Now in 2014 (two years after the 2012 campaign), unemployment is at 5.9%,  there have been 11 million new jobs created, and we're on track to reach 12 million in just a few months.  So under President Obama's policies (at least those that haven't been undercut by an obstructionist congress), one of Mr. Romney's four year goals has been accomplished withinin two years, and the other expected to be accomplished in a little over two years.  Or to put it another way - Mr, Romney was promising in his campaign that he would slow the rate of job growth, and maintain a higher unemployment rate longer compared to the president's policies.

I've yet to hear a Republican apologize for supporting Mr. Romney and his slow growth, employment slowing policies, now that the comparative results are in.