Ten Things Worth Reading, Mostly Economics: February 12, 2010
DeLong Smackdown Watch: Health of the American Political System

The Fiscal Times Does Not Look Sustainable to Me...

The Fiscal Times - The Source For All Things Fiscal launches, with Stan Collender saying that:

Say Hello To The Fiscal Times: At least as far as I can tell, TFT is going to try to be a legitimate and unbiased fiscal news reporting organization.  The reporters on the team all have outstanding reputations for objective writing.  More important, those that I know would sooner sell apples on the street corner than have their integrity questioned by writing for a biased source...

Matthew Yglesias parries:

Matthew Yglesias: Shocking True Tales of Media Bias: I worked for the American Prospect... no one has ever told me what to write or what position to take. But nobody thinks The American Prospect is an “unbiased” news source. It’s very biased! The thing is that if you staff your publication with reasonably intelligent people you don’t need to give them explicit orders to conform.... When I was at TAP, most of my opinions were either in line with my editors or else were on subjects where the bosses didn’t have strong feelings. But there were also issues where my editors did have very strong feelings and I didn’t agree with their take, and so to make my life easier I tended not to focus on those issues. That’s just how life works.... The real issue with a news source isn’t whether it’s “unbiased” but whether or not it in some way enhances your understanding of the issues. The Peterson Foundation seems to have decided it wants to hire smart, capable people so I assume they’ll do smart, capable work...

And here I want to disagree with Matthew Yglesias: smart, capable people do not necessarily do smart, capable work--put them in a situation in which their incentives are wrong and dumb, incompetent people will muddle through while smart, capable people will wreak vast destruction.

The problem I feared with the Fiscal Times grew out of the fact that the first piece from it that surfaced, by Eric Pianin and Elain Povich on the Conrad-Gregg debt commission proposal, was very, very bad indeed. It started by saying that the national debt is like the outstanding carried balance your credit card--which is simply not true, unless your credit card lets you borrow at 2% per year (mine charges 18%). It continued by saying that Conrad and Gregg proposed a "special commission to make the tough decisions... broad power to force painful spending cuts and tax increases through Congress"--which was also simply false: the commission had no power to force anything through congress, in fact the commission's recommendations would have faced greater procedural hurdles in congress than standard proposals.

If +1 is an article that does a perfect job of informing its readers, 0 is an article that leaves its readers no better but no worse off than before, and -1 is an article that actively misleads its readers--well, then Povich and Pianin are a -2. It smells: don't say that the commission will have powers to "force painful spending cuts and tax increases" when it doesn't because you are dumb and incompetent. You are much more likely to say false things like that if you are smart and capable--but have decided that you are in the business of boosting Judd Gregg's reputation as a deficit hawk rather than in the business of informing your readers.

So now the Fiscal Times has launched for real. How is it doing? We start with a score of -2 out of a possible maximum of 1, for an initial -200%. I took a random trawl through their website:

Neil Irwin: Fed Reserve Hopes Exit Strategy Will Up Market Confidence:

When you've flooded the economy with trillions of dollars, mopping up is no easy task. That's the reality the Federal Reserve is confronting as it starts to explain how it will undo the aggressive growth-supporting steps that were put in place when the economy was in its deep dive -- and begins to be clearer about when that may happen. But it is a fraught exercise. Federal Reserve leaders and private economists expect the jobless rate to remain high for years, despite a dip in the unemployment rate to 9.7 percent in January, and the Fed could make the situation worse if it moves too abruptly. In the meantime, financial markets have shown new signs of fragility, swooning in the past three weeks, including a 1 percent drop in the stock market Monday that drove the Dow Jones industrial average to close under 10,000 for the first time in three months...

This "swooning"--a 7% decline in the S&P. By my count, there have been 12 larger short-term declines in the past three years, so "swooning" is something the market does once every three months. Interest rates... the long end of the yield curve is about 12 basis points higher than it was three weeks ago and 8 basis points lower than it was five weeks ago.

Call this a zero. It conveys some information about how the Federal Reserve is thinking about unwinding extraordinary monetary policy, but readers are not well-served by being told to overinterpret market movements.

Calvin Woodward and Martin Crutsinger: Fact Check: Obama Budget Leap of Faith Growth:

President Barack Obama's proposed budget relies on a commission without teeth to help his administration wrestle the deficit out of the danger zone. It forecasts stronger economic growth than most economists expect and calls on Congress to cut programs that lawmakers cherish. All budgets from the White House are leaps of faith of some sort. This one is no exception. The economic forecasts used in setting spending priorities are in line with independent expectations for now. After that, though, the administration's projections appear ever more fanciful...

Of the three things that Woodward and Crutsinger call "fanciful," one is that the budget proposes things that congress is unlikely to adopt. That strikes me as simply wrong: it is the business of the budget to propose things and say how much they cost. Call this a +0.6.

Aiofe White: Europe Searches for Way Out of Debt Crisis:

The euro is under siege — and the next few days will be crucial. Financial markets are betting heavily that Greece's crushing debt could drag down the entire eurozone...

This gets a -1. The Greek economy is simply not large enough to "drag down the entire eurozone."

Jeannine Aversa: Bernanke Outlines Plan for Pulling in Stimulus Aid:

Prepare for the end of record-low interest rates, Federal Reserve Chairman Ben Bernanke says. Just not yet. Higher rates on credit cards, home equity loans and some mortgages will follow the Fed's eventual pullback of the trillions it injected into the economy. Savers will benefit, though. As rates gradually climb, certificates of deposit and savings accounts will finally pay more. Bernanke indicated Wednesday that the Fed is still months away from raising rates or draining most of the stimulus money it injected to rescue the financial system. For now, the global recovery remains too fragile to pull back much on government stimulus. Europe is facing a debt crisis. And President Barack Obama is making a push to cut taxes to stimulate job creation.

Bernanke discussed the Fed's plans in prepared remarks to a House committee hearing that was postponed because of the East Coast snowstorm. Bernanke chose to release the testimony because of interest from investors and others...

A +1. We are now at -1.4 for five articles--for a score of -28%.

Stan Collender: A Commission Can't Work Unless Republicans Come Aboard:

Henry Aaron does a very good job explaining why commissions in general and budget commissions in particular aren't the political panacea some make them out to be. But he stops short of providing the real reason a budget commission created by presidential order will have problems. No, it's not what Republican Senator Judd Gregg says; his position that it won't be worth the effort because Congress will not have committed in advance to take up whatever the commission recommends at best is disingenuous subterfuge. The real reason it's not likely to succeed is that congressional Republicans don't want to participate. At least that's the word I'm hearing with increasing frequency and stridency from the GOP leadership. Even though the White House budget commission will allow the Republicans to name half of the House and Senate members, the leadership is talking about refusing to do so. That refusal either would stop the commission before it gets started, or force the Democratic members to do precisely what a commission is intended to avoid: a deficit reduction plan associated with just one party and, therefore, mired in the same partisan political muck that is typical of federal budget politics these days...

Another +1.

Katherine Reynolds Lewis: Treasury Reaps Big Returns on TARP Investments:

The Treasury has recouped nearly a third of the $545 billion it invested to help rescue U.S. financial institutions and in some cases has reaped substantial returns on those investments. The strong showing is preliminary, as much of the government’s investment in banks is still outstanding. But it contrasts sharply with widespread criticism that the government bailout of Wall Street was excessive and costly to taxpayers. The Treasury, for example, made a nearly 24 percent return on its investment in American Express Co., 20 percent on its rescue of Goldman Sachs Group and nearly 17 percent from Morgan Stanley Group....

"The perception that most of the public had, that this was money poured down a rat hole, was always wrong," said Douglas J. Elliott, a fellow at the Brookings Institution. "We've gotten more back than we expected because the financial sector and even the economy turned around a lot faster than we thought."... Critics decried the government bailout as an excessive rescue of Wall Street fat cats at the expense of taxpayers and other sectors of the economy, and the Treasury's handling of the program remains a major point of contention on Capitol Hill.

To be sure, the government's $70 billion investment in American International Group (AIG) and the $85 billion spent to bail out General Motors Corp. and Chrysler Group LLC are unlikely ever to turn a profit, leaving the overall TARP program in the hole...

The flat contradiction of the headline by the "to be sure.." sentence gets this a -1.

Merrill Gooozner: Rise of the Machines:

Just before Christmas, 41-year-old Michael Kelley decided he wanted a whole-body imaging exam, the heavily advertised service touted on television by celebrities like Oprah Winfrey. He didn’t smoke, wasn’t overweight, and didn’t have elevated cholesterol. "I’m pretty normal for a guy my age," he said. No matter. The electrical engineer scheduled a full-body X-ray computed tomography or CT scan at Virtual Physical.... About an hour after checking in, Kelley left the clinic clutching a manila envelope with high-resolution 3-dimensional images of most of his major body systems, including the insides of the major coronary arteries pumping blood to and from his heart. "They said I was fine, no plaque," he said. Kelley paid $1,400 for a CT scan to confirm what he and his doctor already knew — he was perfectly healthy.

High-tech medical imaging advances, along with robotics, new devices, body parts, and pharmaceuticals have changed almost every aspect of health care and improved the quality of life for young and old alike.

The U.S. leads the world in creating state-of-the-art diagnostic and therapeutic treatments with the potential to work miracles in millions of patients. But the miracles come at a stiff price. Unlike other industries where technology has helped lower costs by eliminating waste and increasing productivity, technology has become a major factor in increasing health care costs. In a January 2008 report, the Congressional Budget Office concluded that "roughly half of the increase in health care spending during the past several decades was associated with the expanded capabilities of medicine brought about by technological advances." One reason for this dichotomy is the overuse and misuse of technology as preventive medicine...

A +1 for the substance, and another +1 for the headline: +2.

Jill Drew: Profile: CBO Director Doug Elmendorf:

When the elevator opens onto the fourth floor of the Ford House Office Building, a half dozen blocks from the U.S. Capitol, a visitor is greeted by a wooden bookshelf displaying printed reports and little else in the bare, broad passageway. Unlike the ornate surroundings of the Speaker of the House or the Senate Majority Leader, the halls of the Congressional Budget Office exude none of its power as an inner sanctum of policy pronouncements. And CBO Director Douglas W. Elmendorf apparently likes it that way...

With that lead, a zero.

Tom Herman: Resurrection of the Estate Tax:

On New Year's Day, the federal estate tax, dubbed the "death tax" by critics, died unexpectedly. But don't even think about writing its obituary. Many lawyers and accountants predict that Congress probably will restore the tax retroactively to Jan. 1 this year. However, nobody knows when lawmakers will act or precisely what the resurrected tax will look like. Nothing may be certain except death and taxes. But this year, there is no certainty about taxes after death. All the questions swirling around this grisly topic have created thorny issues for many wealthy people and their tax advisers. "It's a real mess," says Herbert Nass, a New York City trusts and estates lawyer and author of two books on wills and estate tax-related topics. He is handling a case involving a very wealthy person who died earlier this year. Will that person's estate have to pay a federal estate tax this year or not? Also, he wonders, "Will we need to liquidate assets in the estate in order to pay the federal estate taxes, if any?" And how can wealthy clients plan their affairs in view of all the uncertainty?

Last year, tax advisers and political analysts assumed that Congress would surely take action before 2010 and not leave the issue in limbo. "It certainly seemed to me that the dynamics of a deal were there" before this year, says Douglas Holtz-Eakin, a former director of the Congressional Budget Office and the director of economic policy for Sen. John McCain when the Arizona senator ran for president in 2008. The House did approve legislation restoring the tax, but the Senate didn't act. Now, with important midyear elections coming up later this year, the estate tax outlook is growing increasingly cloudy, and tax specialists see a wide range of possible outcomes...

A huge amount of throat-clearing. Twenty paragraphs. Should have been five--with the first paragraph being, in total, "We don't know what's going to happen to the estate tax, but it is likely to return in some form. Here are four scenarios, ranked by my guesses of their probability."

A +0.4.

That gives us a final score of 1 for 10 articles, or 10%. A very unimpressive debut.

Looking at the masthead, I see a bunch of people who don't belong in any forum that aims to inform the public--Michael Tanner, Joseph Antos come to mind immediately. After his December 31, 2009 Washington Post article it is hard to have any confidence in Eri Pianin. But there are some very good people associated with the operation--Edmund Andrews, John Berry, and Merrill Goozner are always worth reading.