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January 2011

Short Answers to Simple Questions: Affordable Care Act Edition

Me: So Chief Medicare Actuary Richard Foster's position is that repealing the Affordable Care Act will not increase the deficit because if the Republicans don't repeal it now some other congress will repeal the deficit-reducing parts of it later?

Respected Real Health Care Expert: Yes.

This has been another addition of short answers to simple questions.

Paul Van de Water on Budget Arithmetic:


Testimony: Paul Van de Water: The Medicare actuary has raised questions about the sustainability of one particular category of Medicare savings in health reform — the reductions in payment updates for most providers to reflect economy-wide gains in productivity.  Although these concerns deserve a serious hearing, other experts see more room to extract efficiencies and improve productivity in the health care sector.  Notably, the Medicare Payment Advisory Commission (MedPAC), Congress’s expert advisory body on Medicare payment policies, generally expects that Medicare should benefit from productivity gains in the economy at large.  MedPAC finds that hospitals with low Medicare profit margins often have inadequate cost controls, not inadequate Medicare payments.

Because the productivity adjustments are now law, Congress would have to pass a new law to stop them from taking effect.  Under the statutory pay-as-you-go rules, that future legislation would have to be paid for, so that it didn’t increase the deficit....

[B]oth CBO and the Medicare actuary have always assumed [in the past] in their projections that the laws of the land will be implemented, rather than hazard guesses about how future Congresses might change those laws.... Gail Wilensky, who ran Medicare under President George H.W. Bush, has expressed it this way: “It would be very hard to know what you would use if you didn’t use current law — whose view you would use.”...

Bringing deficits under control will require making difficult trade-offs and tough political decisions on both taxes and spending, especially for health care.  If we can’t count any provision that is controversial and might later be changed, we would have to conclude that neither the Bowles-Simpson proposals, the Rivlin-Domenici plan, nor Congressman Ryan’s Roadmap would really reduce the deficit.  In fact, if we can’t count any provision that a later Congress might reverse, we can’t [ever] do serious deficit reduction...

Department of "Huh?": Republicans Are Making a Big Fuss About How Medicare Actuary Rick Foster's View of the Affordable Care Act Differs from that of Doug Elmendorf

But I don't see it. I really don't see it.

Here is the CBO score of the Affordable Care Act:


Here is Medicare actuary Richard Foster's score of the Affordable Care Act:

These look like very much the same numbers--except that Foster's table is missing the "other provisions [of the ACA] affecting revenues" line.

Foster is marginally less optimistic about the Affordable Care Act than Doug Elmendorf and other economists like me are. Actuaries like Foster tend to assume that people do not change their behavior in response to incentives, hence we economists view their estimates with enormous skepticism.

Foster's big complaint with ACA is not that the policies won't reduce costs but rather that Congress will repeal the policies that save costs: that they are not "sustainable":

Compared to prior law, the level of total national health expenditures is estimated to be higher through 2019 under the Affordable Care Act, but two particular provisions of the legislation would help reduce NHE growth rates after 2016. Specifically, the productivity adjustments to most Medicare payment updates... the excise tax on high-cost employer health plans....

Although these growth rate differentials are not large, over time they would have a noticeable downward effect on the level of national health expenditures. Such an outcome, however, would depend critically on the sustainability of both provisions. As discussed previously, the Medicare productivity adjustments could become unsustainable even within the next 10 years, and over time the reductions in the scope of employer-sponsored health insurance could also become an issue. For these reasons, the estimated reductions in NHE growth rates after 2016 may not be fully achievable."

To say that the Affordable Care Act will in the end not reduce costs because doctors will successfully lobby Congress to repeal some of its provisions in order to make their incomes from Medicare grow more rapidly than the ACA permits might welk be true.

But I don't think that is an actuarial judgment.

And if it were one would have expected doctors to lobby Congress not to pass the ACA in the first place.

Aaron Carroll on Being a Doctor


Health care from the heart – my response: When I think about being a doctor, I almost always go back to residency.... I... know those who remember fondly their days as residents, being in the trenches and completely immersed in clinical care. I was not one of those people.... I didn’t hate residency because of the hours, although they were terrible. I didn’t hate the pay. I didn’t hate being overworked or underappreciated. I didn’t hate patients or the people I worked with. I hated the system. More specifically, I hated being a doctor in the system.

I just finished Atul Gawande’s latest masterpiece. I am rarely so jealous of anyone as I am of him and his skill right now. He brought it all back for me. I can tell you many horror stories of those three years in Seattle. But ask me to rank the top few, and this one inevitably comes to the top:

I was on a rotation in the Neonatal Intensive Care Unit (NICU), where babies who are born prematurely or really sick are cared for. A couple came in with a midwife after a way-too-long and rather botched attempt at a home delivery. As soon as they arrived, we knew things were not going to go well. The baby was born in extreme distress. It appeared to be septic, or massively infected. Initial vital signs looked really bad. And then things got worse. One by one, the baby’s systems seemed to shut down. He couldn’t breathe on his own, so we put in a breathing tube. Then his heart started to fail, so we put lines into his umbilical cord to pump in medications. His lungs collapsed, so we put in tubes into his chest to help them reinflate. While another doctor and I struggled to keep all this going, I listened as, right behind me, the doctors in charge sounded downright optimistic to the parents, who were, understandably, a mess. They could not imagine how things had gone wrong so fast. They wanted to hear good news. No one seemed to be able to tell them the truth. They were given messages of hope, and they told us to do everything. That’s what we do in medicine. That’s especially what we do in the NICU. They left to go home and get clothes and supplies. Everyone dispersed.

So I was alone with this baby. It was small and blueish and had an ungodly number of devices and tubes coming out of it. I was 26, depressed, and I started to cry. The baby never moved. His heart would slow down, and I’d up his meds. His heart rate would come back up until it didn’t, and then it would drop again. So I upped the meds some more. I don’t know how long this went on. I didn’t eat, I didn’t go to the bathroom, I didn’t talk to anyone. I just stood and watched. Eventually, the ventilator stopped getting the job done, so we had to put the baby on an oscillator. Basically, instead of giving normal breaths, this machine shoves tiny amounts of air in and out really fast. It sometimes works when other things fail. It was loud, noisy, and made the baby shake. I don’t think he noticed. Things slowly got worse. Nothing was working, and every vital sign was heading downwards. As instructed, I just kept adding stuff to keep him alive. But deep down inside, I started to think that what I was doing was wrong. Not incorrect — wrong. I wondered if I was hurting the baby. I just wanted him to be at peace. And, for a moment, I wanted the baby to die.

I don’t like to think about it. I try not to. Ever. But it happened.

Not long after, nothing I was doing was working. I called in the doctors in charge, and they agreed. They asked where the parents were. It suddenly dawned on me that they hadn’t yet returned. We called them, and they were shocked to hear how bad things were. After all, those same doctors had told them things were going to be OK.

They rushed back as fast as they could. They didn’t make it in time.

I thought I would post a piece of Gawande’s article and talk about how we completely screw up end-of-life care. I thought I would make a comment about how we spend too much money or waste resources. I thought I would talk about tradeoffs and better choices. But I can’t. Partly because I can’t do his work justice, and partly because this is an issue where deep down inside I think we are doing a ton of harm. Full stop.

I went home that night and bawled uncontrollably. This kind of thing happened all too often. I toyed with the idea of getting out. I even prepared some resumes to send off to companies outside of medicine.

But, some time later, I found myself back in the NICU. A similar situation was occurring. This time, though, the doctor in charge handled everything differently. She spoke to the patients honestly and in a completely different tone. She asked the parents what they wanted out of the short time they might have with their baby.

They cried at first, but then they stopped. They cleaned the baby up and dressed him in clothes his grandparents had bought. And they took him out.

They were gone for a few hours, and then they came back. They allowed us to give the baby drugs to comfort him. They held him, as a family, as he quietly passed.

I remember quite clearly his sister was in the room. She was about six. I asked her how they had spent the day. She told me how they had taken the baby to the park to see the water. They had brought him to family members so everyone could hold him. They showed him the sun and let him lay in the grass and let a dog lick his face. Her mother was listening in at the end, and somehow smiling.

Some months later, I ran into the mother in a different part of the hospital. She remembered me, and thanked me for all I had done. I remarked that I hadn’t done much; they had cared for the baby.

“No,” she replied. “Without all of you, he never would have known what chocolate ice cream tastes like.”

I spent four years in medical school learning how the body works, how it can break down, and how to repair it. I spent three more learning how to give the right drugs and do the right procedures to fight illness. And in all the time I’ve been a doctor, I honestly don’t know if I’ve ever done any more good than helping to stop the system so that baby, and that family, could share some ice cream...


Calculated Risk Chart Gallery.png

All statistics around Christmastide are shaky because of the unreliability of the seasonal adjustment factors. But this is not good news:

Calculated Risk: Weekly Initial Unemployment Claims increase sharply to 454,000: The DOL reports on weekly unemployment insurance claims:

In the week ending Jan. 22, the advance figure for seasonally adjusted initial claims was 454,000, an increase of 51,000 from the previous week's revised figure of 403,000. The 4-week moving average was 428,750, an increase of 15,750 from the previous week's revised average of 413,000. Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims for the last 10 years. The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased this week by 15,750 to 428,750...

David Axelrod Is Not Making Sense

And Matthew Yglesias is unhappy:

The Eternal Mystery: I just got out of a meeting in the West Wing between David Axelrod and a few progressive writers and . . . well . . . I don’t have a ton to report.

An awful lot of progressive dialogue with the administration just keeps coming around to the same one point. According to the Obama administration the nation’s fiscal problem is in the long term. According to the Obama administration the nation’s fiscal problem is mostly due to entitlements. And according to the Obama administration in the short-term there’s a large output gap. So why a short-term discretionary spending freeze? Well on the merits there’s just no good reason you can give. The logic is clearly political. So, fine, politics is part of governing. But the White House’s belief that a strategy of unilateral preemptive concessions is a smart approach to legislative negotiations is as deeply held as it is difficult to understand. When has this worked? What has it helped achieve?...

I guess the thing to say is that as best I can tell the people working in the Obama administration are smart people who understand the fiscal policy situation perfectly well. That's a huge step forward relative to a lot of other people in Washington. But understanding is only as useful as your tactical approach lets it be, and I'm very skeptical on this front.

Dear Gmail:

Messages from Twitter saying that so-and-so is now following me are not important messages.

Thank you.

Ulysses S. Grant on the Secession of Texas

Via T-Nehisi Coates, U.S. Grant:

U.S. Grant: Doubtless the founders of our government, the majority of them at least, regarded the confederation of the colonies as an experiment. Each colony considered itself a separate government; that the confederation was for mutual protection against a foreign foe, and the prevention of strife and war among themselves. If there had been a desire on the part of any single State to withdraw from the compact at any time while the number of States was limited to the original thirteen, I do not suppose there would have been any to contest the right, no matter how much the determination might have been regretted. The problem changed on the ratification of the Constitution by all the colonies; it changed still more when amendments were added; and if the right of any one State to withdraw continued to exist at all after the ratification of the Constitution, it certainly ceased on the formation of new States, at least so far as the new States themselves were concerned. It was never possessed at all by Florida or the States west of the Mississippi, all of which were purchased by the treasury of the entire nation. Texas and the territory brought into the Union in consequence of annexation, were purchased with both blood and treasure; and Texas, with a domain greater than that of any European state except Russia, was permitted to retain as state property all the public lands within its borders. 

It would have been ingratitude and injustice of the most flagrant sort for this State to withdraw from the Union after all that had been spent and done to introduce her; yet, if separation had actually occurred, Texas must necessarily have gone with the South, both on account of her institutions and her geographical position. Secession was illogical as well as impracticable; it was revolution. Now, the right of revolution is an inherent one. When people are oppressed by their government, it is a natural right they enjoy to relieve themselves of the oppression, if they are strong enough, either by withdrawal from it, or by overthrowing it and substituting a government more acceptable. But any people or part of a people who resort to this remedy, stake their lives, their property, and every claim for protection given by citizenship--on the issue. Victory, or the conditions imposed by the conqueror--must be the result. 

Paul Krugman Is Depressed by How Very Little Republican Politicians Know

It really does seem that to actually know something about the world leads you to say things that disqualify you from a position of authority in the Republican Party.

Paul Krugman:

Shiny Lazy People: A few further thoughts about the Ryan response to the SOTU... [I]f your whole public act is based on your supposed knowledge of the importance of fiscal responsibility, wouldn’t you long ago have made sure that you actually know something about the fiscal crises now taking place in Europe? But no. I suspect that Ryan is honestly unaware that Ireland, far from being a spendthrift, was seen as a fiscal role model before the crisis. And that’s not hyperbole: in 2006 George Osborne, now Britain’s Chancellor of the Exchequer, declared that

Ireland stands as a shining example of the art of the possible in long-term economic policymaking, and that is why I am in Dublin: to listen and to learn.

And I also suspect that Ryan is honestly unaware that the UK has not, in fact, experienced a debt crisis.

How can he be unaware of these things? The only explanation I have is intellectual laziness — why check the facts when you already believe that you have The Truth?...

Ryan warns that if we don’t deal with our fiscal problems, we’ll have to raise taxes and cut benefits for seniors. So what can we do to reduce the deficit? Well, government spending is dominated by the big 5: Social Security, Medicare, Medicaid, defense, and interest payments; you can’t make a significant dent in the deficit without either raising taxes or cutting those big 5. Defense is untouchable, says the GOP; so that leaves the entitlement programs. And 2.7 of the three entitlement programs are benefits to seniors (70 percent of Medicaid spending goes on seniors). So let’s see: to avoid cuts in benefits to seniors, we must … cut benefits to seniors.

I’m reasonably sure that Ryan hasn’t thought any of this through.

Macro Advisers Becomes Increasingly Confident

They think we will have a real recovery:

The unanticipated strength in new home sales in December raised our forecast for growth of brokers' commission in the first quarter. To the nearest tenth, this left our tracking estimate of GDP growth in the first quarter unchanged at 4.0%...

Reality-Based Economists' Letter on the Affordable Care Act

David Cutler, Harold Pollack, and Karen Davenport put this letter together and assembled the signatures in 48 hours...

Harold Pollack emails:

We have at last count 272 labor, public finance, and health economists, several on this list. Had we included health services researchers and other social scientists (a tiny number of non-economists ended up on there for various random reasons), we could have doubled that number with people who have credible specific expertise. A pdf should be posted soon.

What's striking is the reach across the profession--not so much the dignitaries such as Arrow or Kahneman, but former CBO, Treasury, CEA people, serious people in research and government.... For what it's worth in a post-truth environment, we can honestly say that economic and clinical claims made on behalf of the repeal effort are generally viewed as non-substantive within the health policy community, and that ACA commands broad support from researchers who have researched the subject.

January 26, 2011

Honorable Dave Camp, Chairman
Honorable Sander Levin, Ranking Member
U.S. House of Representatives
Committee on Ways and Means
Washington, DC 20515

Dear Chairman Camp and Representative Levin:

This week, Congress is holding hearings on the economic impact of health care reform.  We write to convey our strong conclusion that leaving in place the Patient Protection and Affordable Care Act of 2010 (ACA) will significantly strengthen the economy and promote economic recovery.  Repealing the Affordable Care Act would cause needless economic harm, and would set back efforts to create a more disciplined and more effective health care system.

Our conclusion is based on two economic principles.  First, high medical spending harms employment and economic growth.  Many studies demonstrate that employers respond to rising health insurance costs by reducing wages, hiring fewer workers, or some combination of the two.  Lack of universal coverage impairs job mobility as well; workers pass up opportunities for self-employment or for positions working for small firms because they fear losing their health insurance or facing higher premiums.  Second, the ACA contains essentially every cost-containment provision policy analysts have considered effective in reducing the rate of medical spending.  These provisions include:

  • Payment innovations including greater reimbursement for patient-centered primary care; bundled payments for hospital, physician, and other services provided for a single episode of care; shared savings approaches or capitation payments that reward accountable provider groups that assume responsibility for the continuum of a patient’s care; and pay-for-performance incentives for Medicare providers.
  • An Independent Payment Advisory Board with authority to make recommendations to reduce cost growth and improve quality within both Medicare and the health system as a whole
  • A new Innovation Center within the Centers for Medicare and Medicaid Services, or CMS, charged with streamlining the testing of demonstration and pilot projects in Medicare and rapidly expanding successful models across the program
  • Measures to inform patients and payers about the quality of medical care providers, which provide relatively low-quality, high-cost providers financial incentives to improve their care
  • Increased funding for comparative effectiveness research
  • Increased emphasis on wellness and prevention

Taken together, these provisions are likely to reduce employer spending on health insurance.  Estimates suggest spending reductions ranging from tens of billions of dollars to hundreds of billions of dollars.  Because repealing reform would eliminate the above provisions, it would increase business spending on health insurance, and hence reduce employment.  One study concludes that repealing ACA would produce job reductions of 250,000 to 400,000 annually over the next decade.  Worker mobility would be impaired as well, as people remain locked into less productive jobs just to get health insurance.

The budgetary impact of repeal would also be severe.  The Congressional Budget Office concludes that repealing ACA would increase the cumulative federal deficit by $230 billion over the next decade, and would further increase the deficit in later years. Other studies suggest that budgetary impact of repeal is even greater.  State and local governments would face even more serious fiscal challenges if the ACA were repealed, as they would lose substantial resources provided under the new law while facing the burdens of caring for 32 million more uninsured people. Repealing the ACA would thus make a difficult budget situation even worse.

Rather than undermining health reform, Congress needs to make ACA as successful as it can be. This would be as good for our economy as it would be for the health of our citizens.

I would like to note that my guess is that repealing the Affordable Care Act would have a smaller drag on employment than David Cutler thinks--perhaps half of a third as large...

We Are Live at The Week: RomneyWorld vs. ObamaWorld

President Romney vs. President Obama: Somewhere out there in the multiverse, beyond space and time -- perhaps in the place on the TV show "The Fringe” where the characters Olivia and Walter's counterparts Fauxlivia and Walternate live -- is a place in which President Mitt Romney won the 2008 presidential election. The specific reasons for Romney’s victory are not terribly important. Perhaps the fundamentalist preachers of the Republican Party endorsed rather than scorned Romney for his Mormonism. Perhaps traditional Republican power brokers were less willing to forgive John McCain for his previous forays into "bipartisanship." Probably Mitt Romney would have been better informed and appeared more of a leader in responding to the financial crisis than McCain. Add in a few missteps by the Democrats, and it might well have been Mitt Romney before whom John Roberts bobbled the oath of office in January 2009. It could have happened here, therefore it did happen somewhere out in the multiverse.

What do the American economy and economic policy look like right now along that President Romney branch of the multiverse?

Well, they look a lot like they look right here on earth.

President Romney would have provided support to troubled banks--capital injections and stress tests--but he would have avoided even a few targeted nationalizations of the banking system: he is, after all, a Republican.

He would not have pushed the Treasury to engage in large-scale quantitative easing through the Public-Private Investment Program or large-scale mortgage restructuring through the HAMP home mortgage modification program.

On monetary policy, Romney would most likely have reappointed Ben Bernanke and let the Federal Reserve proceed as it wished. On fiscal policy, Romney's Chairman of the Council of Economic Advisers, Mark Zandi, and his National Economic Council Director Douglas Holtz-Eakin would have proposed a fiscal stimulus package that was 60 percent tax cuts and 40 percent spending increases. The Democratic Congress would then have bargained with the administration to produce a stimulus that was 40 percent tax cuts and 60 percent spending.

But, of course, all these policies are exactly what Obama and the Democratic Congress actually enacted.

On global warming, Romney would have abandoned economists' preferred Pigovian carbon tax for the complicated, corporatist and business-friendlier approach of a cap-and-trade system; but he would have been no more successful than Obama in assembling a Senate coalition to achieve anything.

On healthcare, Romney would have taken his signature Massachusetts health care reform and expanded it nationwide: we would have RomneyCare. But that is precisely what we do have.

I see only two key policy differences between RomneyWorld and ObamaWorld. Had Romney been elected President in 2008 we would not have repealed the military policy of "Don't Ask, Don't Tell." And had Romney been elected President in 2008, Elizabeth Warren would not now be Assistant to the President for Consumer Financial Protection.

Otherwise? As far as policy is concerned, we would be smack on the mark that we are on now.

But the politics would be very, very different.

Think, first, of the Republicans -- their legislators and office holders, their spinmasters, stenographers, and intellectuals. All Republicans except a small grumbling fringe would be crowing about how ObamaCare -- oops! I mean RomneyCare -- is the golden mean between continued tolerance of a dysfunctional system and rash experimentation with overregulation. All would be saying that Republicans were able to get things done because they were not overambitious or free-market-phobic. Republicans would talk about how Romney had bargained the Dodd-Frank financial regulation into a form where it was not intrusive overregulation but merely a sober attempt to fence in a free-range system that had been out of control. But the Dodd-Frank bill that Romney would have signed would be, save for the consumer protection agency, the same as the Dodd-Frank bill that Obama signed.

Republicans would talk about how Romney's expansionary fiscal policy had been effective in fighting the recession. They would say that, if anything, an even larger fiscal stimulus package back in the start of 2009 would have further boosted the shaky economy.

In that alternate RomneyWorld, professional bipartisans would be praising Romney for minimizing partisanship and working for sensible policies. They would praise him for aggressively expanding the deficit so that the government boosted aggregate demand in the depths of the downturn when the private sector sat down. And they would praise him for having taken major steps to control entitlement spending through the long-term cost-cutting and revenue-raising provisions of RomneyCare. But these professional bipartisans who would be praising President Romney for tackling the entitlement problem through Romneycare, by taxing Cadillac health plans and by giving teeth to the Payment Authorization Board, would be the very same people who in our world give Barack Obama no credit for either.

So while the policy outcomes in RomneyWorld would be remarkably similar to those achieved in ObamaWorld, the rhetoric that accompanied and publicly defined those outcomes would have been markedly different. Democrats would have lamented Romney’s various half –measures (which they largely perceive as three-quarters measures in our world) to deal with the crises. But no cries of socialism, or vitriol about government takeovers, would have greeted RomneyCare. There would have been no winks and nods to assertions among a fevered base that the president is a usurper. There would be no claims from Senators like Charles Grassley--who until Election Day 2008 supported health reform based on requiring all individuals to pay a tax if they did not have health insurance --that the Affordable Care Act's requirement that all individuals obtain health insurance on pain of paying an extra tax is unconstitutional.

There would be no Republican senatorial candidates telling people that when their party loses an election, "Second Amendment remedies" may be necessary.

And, though it’s considered very impolite to say this out loud: quite possibly in alternate RomneyWorld our members of Congress would be less likely to get shot.

Economics as a Regressive Science: Negative Intellectual Progress Since the Days of Jean-Baptiste Say Watch

Mark Thoma sends us to Paul Krugman:

Great Leaps Backward: I’ve been watching with sympathy as David Beckworth and Scott Sumner discover that their updated monetarism actually puts them on my side of the great ideological divide — cast into the outer darkness along with John Maynard Keynes and Milton Friedman.

But what does the other side believe?... [Robert Murphy] says that what we call an economic boom is actually something like China’s disastrous Great Leap Forward, which led to a temporary surge in consumption but only at the expense of degradation of the country’s underlying productive capacity. And the unemployment that follows is a result of that degradation: there’s simply nothing useful for the unemployed workers to do.... [W]hat reason do we have to think that it has anything to do with the business cycles we actually see in market economies?...

[T]here are many... problems with the notion of a recession as a supply shock. A short sample: If inflation is a case of too much money chasing too few goods, why aren’t slumps associated with accelerating rather than decelerating inflation, as the supply of goods falls? Why is there such a strong correlation between nominal and real GDP? Why is there overwhelming evidence that when central banks decide to slow the economy, the economy does indeed slow? And on and on.

Oh, and what evidence is there that the economy’s capacity is damaged during booms? Investment rises, not falls, during booms; yes, I know that Austrians take refuge in cosmic talk about the complexity of production and how measured investment may not show what’s really happening, etc., but where’s the positive evidence of what they’re claiming?

The point is that the real world looks a lot like the one Keynes and Friedman envisioned, in which the demand side drives the business cycle. Why should anyone be determined to throw away 75 years of economic thought, to believe that these appearances are deceiving? Why the insistence on taking an intellectual Great Leap Backward?

Well, at that point we’re into talking about the essentially political nature of this thing...

I Thought It Was Polite to Listen to the Speech Before You Released a Statement on It?

Clearly I do not understand modern manners...

Pete Peterson, via Atrios:

No, Pete Peterson, You Cannot Demand An Embargo Without A Bag Of Cash Attached: EMBARGOED UNTIL 9:00 PM January 25, 2011


In his speech this evening, President Obama rightly addressed the need to achieve economic stability and promote growth. While it is certainly important for the President to focus on economic recovery and job creation in the short term, reducing our projected federal debt is essential to the nation’s economic health and prosperity in the long term.

A spending freeze is a step in the right direction, but it is only one element of the long-term fiscal plan we need.

As we work to strengthen our economy today, we cannot afford to turn our backs on the future. We must couple current efforts to stimulate the economy with a long-term plan that reduces the ballooning interest costs which buy us nothing and crowd out deeply needed investments. We cannot become more of an investment economy if we don’t have future resources to invest.

A variety of organizations, including the President’s Commission on Fiscal Responsibility and Reform, are coming forward with pragmatic solutions to our long-term fiscal challenges. The magnitude of the problem is so great that spending cuts or revenue increases alone will not be enough. This year, the President and Congress must work together to agree upon a comprehensive, bipartisan plan to be implemented when the economy recovers, in order put our nation on a sustainable long-term path to recovery, competitiveness and prosperity.

Austerity Double-Dip Watch: The United Kingdom

Jennifer Ryan:

Economy Shrinks More-Than-Expected as December Freeze Precedes Budget Cuts: Britain’s economy unexpectedly shrank the most in more than a year in the fourth quarter as construction slumped and the coldest December in a century hampered services and retailing. Gross domestic product fell 0.5 percent after increasing 0.7 percent in the previous quarter, the Office for National Statistics said in London today. Growth would have been “flattish” without the impact of the weather.... The pound dropped after the report, which shows the U.K. recovery faded even before Prime Minister David Cameron’s government increased sales tax to 20 percent this month, which may damp consumer demand this year. The data may reinforce calls for the Bank of England to hold off increasing its key interest rate to curb inflation. Governor Mervyn King, who leads the bank’s divided policy committee, delivers his first public speech of the year later today.

“The economy is underheating, not overheating,” Neil Mackinnon, an economist at VTB Capital Inc. in London and a former Treasury official, said in a phone interview. “An interest-rate increase would easily push the economy back into recession and would be a major policy error.”... The GDP drop is the biggest since the second quarter of 2009, when it fell 0.8 percent.... While these are “obviously disappointing numbers, there is “no question of changing” the fiscal plan, U.K. Chancellor of the Exchequer George Osborne said. “We will not be blown off course by bad weather.”

His opposition counterpart Ed Balls said in a statement that the figures were a “matter of great concern.” “George Osborne and the Treasury must urgently re-think their reckless plan to cut the deficit too far and too fast and start putting growth and jobs first,” Balls said....

King is due to deliver his speech in Newcastle, England at 7:40 p.m. local time. The Bank of England left its key rate on hold this month, and the outlook for growth and inflation has divided U.K. policy makers. Consumer-price increases accelerated to an annual 3.7 percent in December, the 13th month it’s been above the central bank’s 2 percent target. While policy maker Adam Posen has described recent price gains as temporary, his colleague Andrew Sentance said late yesterday it’s a “mistake” to label “global factors affecting inflation as one-off short-term disturbances.” “Emerging market and developing economies which appear to have shaped global price developments over the past decade, and this pattern looks set to continue into the future,” he said....

“Any notion that interest rates were going to be put up earlier than the fourth quarter this year, this is the final nail in the coffin for that sort of talk,” said Hetal Mehta, an economist at Daiwa Capital Markets Europe Ltd. in London. “The government will have to rely on the Bank of England to keep interest rates very low for a very long time in order to allow them to continue with their fiscal tightening.”

Snow last month kept Britons away from shops, creating the biggest-ever drop in retail sales for a December. Surveys by the Chartered Institute of Purchasing and Supply and Markit Economics Inc. showed services and construction also shrank....

The recovery faces further headwinds from government cuts to tackle a deficit that widened to 15.3 billion pounds ($24.4 billion) in December from 14.3 billion pounds a year earlier. The shortfall is projected to hit 10 percent of GDP this year.

Why Obama's Poll Ratings Are Rising

Our politics has been badly broken by the Republican Party. I think that Greg Sargent nails it:

Why Americans think Obama is too liberal: What McConnell was really saying here is that if any Republicans signed on to Obama's proposals, it risked suggesting to the American people that Obama's governing approach was moderate or even somewhat centrist -- something that could command some agreement. By contrast, when no Republicans signed on to Obama's proposals it made it far easier for them to paint Obama's agenda as ideologically off the rails to the left, which is exactly what they did.

If no Republicans were willing to sign on to Obama's proposals, that had to indicate that something was seriously amiss and that there was cause for real alarm about the overreaching nature of his agenda, right? And judging by the outcome of the midterms, this strategy worked....

[I]t's no accident that in the wake of Obama's successful passage of legislation with bipartisan support -- the tax deal, the New START treaty, the repeal of don't ask don't tell -- the new NBC/WSJ poll finds that the number who think Obama is "moderate" has suddenly jumped to the highest ever of his presidency. As McConnell recognized, denying Obama bipartisan support during his first two years made it far easier to paint him as an out-of-control old-style big government liberal....

What McConnell shrewdly recognized is that the public would read the absence of bipartisan cooperation with Obama as a sign of liberal extremism, and would perceive any bipartisan support for his agenda as a sign of moderation, regardless of the policy details. This is exactly what happened....

[Obama's] fundamental approach -- combine center-left and Republican solutions -- has been more or less the same throughout. He offered deals on health reform, just like on taxes. But they were rejected. The main difference is that Republicans signed on to the post-election initiatives, making them look "moderate" in comparison to the previous ones.

Hoisted from Comments: Are You Still Rich If You Spend Your Money Living in a Nice Place?


Are You Still Rich If You Spend Your Money Living in a Nice Place?: Re: "A family with two $75k earners is middle-class in the Bay Area, but is living high on the hog in Austin, Texas."

A family with two earners who can make $75k each in the Bay Area can't possibly make $75k each in Austin, Texas.

"more people would rather live in San Francisco than in Austin: that is why living in San Francisco is so expensive."

I strongly suspect that if you went down to the Embarcadero and made an announcement to all the legal assistants and IT personnel and secretaries and office managers and all the other support positions for the law firms and banks and brokers, "You can all move to Austin and get an equivalent job at your current salary," the support infrastructure of those office buildings would empty out in half an hour.

The reason the people who make $75k are in the Bay Area is that the people who make ten times that want to be in the Bay Area, and the $75k-ers need to be where the $750k-ers want to be.

Well, if they want to be $75Kers, they do.

And why do the $750Kers want to be in San Francisco? They clearly think the tradeoff is worth it, and the stuff rich people usually buy--very large homes with large grounds--is the stuff for which the price gradient is the steepest of all.

What More Is There to Be Said?

The kicker is that Jean-Baptiste Say did not believe in "Say's Law" as a short-run phenomenon. Even in 1803 he acknowledged the possibility of an excess demand for money--although he did dismiss it as a very transitory something that would be easily remedied:

Jean-Baptiste Say (1803), A Treatise on Political Economy Book I, Chapter XV: Sales cannot be said to be dull because money is scarce, but because other products are so. There is always money enough to conduct the circulation and mutual interchange of other values, when those values really exist. Should the increase of traffic require more money to facilitate it, the want is easily supplied, and is a strong indication of prosperity—a proof that a great abundance of values has been created, which it is wished to exchange for other values. In such cases, merchants know well enough how to find substitutes for the product serving as the medium of exchange or money...

By 1829, however, Say's analysis of an excess demand for money in a financial panic and its consequences for production and employment is--well, it sounds Keynesian:

Jean-Baptiste Say (1829), Cours Complet d'Economie Politique Pratique: The Bank [of England]... to limit its losses... forced the return of its banknotes and ceased to put new notes into circulation. It was then obliged to cease to discount commercial bills. Provincial banks were in consequence obliged to follow the same course, and commerce found itself deprived at a stroke of the advances on which it had counted, be it to create new businesses, or to give a lease of life to the old.

As the bills that businessmen had discounted came to maturity, they were obliged to meet them, and finding no more advances from the bankers, each was forced to use up all the resources at his disposal. They sold goods for half what they had cost. Business assets could not be sold at any price. As every type of merchandise had sunk below its costs of production, a multitude of workers were without work. Many bankruptcies were declared among merchants and among bankers, who having placed more bills in circulation than their personal wealth could cover, could no longer find guarantees to cover their issues beyond the undertakings of individuals, many of whom had themselves become bankrupt...

It has, after all, been known since at least 1829 that planned expenditure can fall short of planned production if people in aggregate plan to hold more liquid cash money, more savings vehicles, or more safe assets than financial markets have to supply--and that the consequence of planned spending falling short of planned production is depression and unemployment.

If Jean-Baptiste Say himself expressly argued that a financial crisis can produce a shortage o demand and a depression, what more is there to be said?

Paul Krugman:

The War on Demand: Something really strange has happened to the debate over economic policy in the face of the Great Recession and its aftermath — or maybe the real point is that events have revealed the true nature of the debate, stripping away some of the illusions. It’s a bigger story than any one point of dispute — say, over the size of the multiplier, or the effects of quantitative easing — might suggest. Basically, in the face of what I would have said is obviously a massive shortfall of aggregate demand, we’re seeing on all-out attack on the very notion that the demand side matters.

This isn’t entirely new, of course. Real business cycle theory has been a powerful force within academic economics for three decades. But... RBC guys had very little impact on public or policy discussion....

Now, however... it’s becoming clear that many people don’t so much disagree with the idea that demand matters as find it abhorrent, incomprehensible, or both. I fairly often get comments to the effect that I can’t possibly believe what I’m saying about monetary or fiscal policy, that no sensible person could believe that printing money or engaging in deficit spending will increase output and employment — never mind that all I’m saying is what Econ 101 textbooks have been saying for the last 62 years.

So what’s going on here?

First, Keynes was right: Say’s Law — the notion that income must be spent, and hence that supply creates its own demand — really is at the heart of the issue. Many, many people just can’t see how it’s possible for there to be an overall shortfall of demand. The reason I’ve always loved the baby-sitting coop story is that it’s a human-scale example of how demand shortfalls are possible. But my experience is that if you try telling that story to someone convinced that demand can’t ever be a problem, it just bounces off: the minute you finish, they’re back to saying that income must be spent on something, so a shortage of demand can never happen, and any rise in one person’s spending must lead to an equal fall in someone else’s spending.

Second... many people find the notion of inadequate demand abhorrent... [from] notions of morality.... [A] substantial number of writers on economics find the whole idea that the economy can suffer because people are too thrifty, insufficiently willing to spend, deeply repugnant.... The world shouldn’t be like that — and therefore it isn’t.

Third, monetarists — old-style Friedman-type monetarists who focus on monetary aggregates, or the new style which says that the Fed can and should target nominal GDP — are... part of the axis of monetary evil as far as the demand-deniers are concerned.... [F]rom the point of view of those who can’t see how demand can possibly matter they’re... Keynesians....

It’s kind of shocking if you think about it. Here we have a huge, hard-won intellectual achievement, one that accounts very well for the world we actually see, and yet it’s being thrown away because it doesn’t go along with ideological preconceptions. Once that sort of thing starts, where does it stop? The next thing you know, the theory of evolution will get the same treatment. Oh, wait.

Seriously, though, this is truly sad — and dangerous. Demand-side understanding, in my view, played a big role in helping us avoid a full replay of the Great Depression; if enough people had shared that understanding, we might have avoided even the minor-league Depression we’re going through. But willful ignorance is on the march — and the odds are that we’ll handle the next crisis very badly.

Liveblogging World War II: January 24, 1941

Harold Hinton:

LINDBERGH URGES NEGOTIATED PEACE: URGES NEUTRALITY; Aviator Testifies He Wants Neither Side to Win Conflict 'MISTAKE' TO AID BRITAIN This Prolongs War, He Says: Any negotiated peace to end the European war as soon as possible, whether or not such a peace would be considered just by the American people, would be preferable, in the interest of the United States, to prolonging the present conflict, Colonel Charles A. Lindbergh told the House Foreign Affairs Committee at its public hearing today.

Why Oh Why Can't We Have a Better Press Corps?

Has anybody ever seen a more diabetic coma-inducing beat sweetener than this, from Peter Baker of the New York Times?

Peter Baker:

The selection of [Gene] Sperling, who held the same job under Clinton [as Larry Summers's replacement], was telling. A onetime boy wonder who, despite his graying hair, still has the same whirling-dervish, work-till-midnight energy, Sperling... passed over for other prominent jobs... bided his time as a counselor to Geithner, and eventually won over Obama with his doggedness. As a champion of the payroll tax holiday, he proved critical to shaping Obama’s tax deal with Republicans and so many other issues that White House officials refer to him as B.O.G., the Bureau of Gene. Where Summers was a master macroeconomic thinker, Sperling is known for his mastery of getting things done, or at least waging the fight, in the place where policy, politics and media meet...

If anyone knows of any more fulsome, cloying, and extravagant praise by a reporter of a hoped-for future source, I'd love to see it in the comments...

Hoisted from Comments: More Thoughts on the Repeal-and-Replace the Affordable Care Act Crowd...

James Wimberly

The Remarkable Spectacle of the Repeal-and-Replace the Affordable Care Act Crowd...: Look at the amicus brief of a far more reputable gaggle of economists in the Florida individual mandate case:

It really is no contest on the quality of argumentation.

BTW, the case for ACA as near to the best feasible reform was abundantly made at the time. Standing laws don't need continuous fresh defences. It's up to the repeal-and-a-pony crowd to make their case, and there isn't one.






Invisible Campaign

Josh Marshall:

Invisible Campaign: I saw the news on Friday that former House Speaker Newt Gingrich will base his presidential campaign in Georgia. Isn't this like my telling you that my imaginary friend is quitting the venture capital business and becoming a folk singer? Interesting news but somehow the premise is more telling than the news itself.

Can Gingrich still raise any money?

Holy Fracking Climate Frack!!

Cold comfort_ Canada_s record-smashing mildness | UCAR.png

Now that's a positive temperature anomaly!

Bob Henson:

Cold comfort: Canada's record-smashing mildness: Some fascinating weather has unfolded across the Northern Hemisphere over the last month... heavy snow that battered the mid-Atlantic and New England states in late December... the United Kingdom’s coldest December in at least the last century. Meanwhile, the sparsely populated Canadian Arctic basked in near-unprecedented mildness.

It’s the second chapter of a tale that began a year ago, when Canada as a whole saw the warmest and driest winter in its history.  Much of the blame went to El Niño, which typically produces warmer-than-average weather across Canada.  So far, so good—but similar things are happening this winter, even with a La Niña now at the helm.

Just how mild has it been?  The map at right shows departures from average surface temperatures for the period from 17 December 2010 to 15 January 2011, as calculated by NOAA’s Earth Systems Research Laboratory.  The blue blip along the southeast U.S. coast indicates readings between 3°C and 6°C (5.4–10.8°F) below average for the 30-day period as a whole. That’s noteworthy—and in fact, it was the coldest December in more than a century of record-keeping across south Florida.... Blue also shows up across the UK, where December averaged 5.2°C (9.4°F) below normal.

What really jumps out, though, is a blob of green, yellow, orange, and red covering a major swath of northern and eastern Canada. The largest anomalies here exceed 21°C (37.8°F) above average, which are very large values to be sustained for an entire month.

To put this picture into even sharper focus, let’s take a look at Coral Harbour, located at the northwest corner of Hudson Bay in the province of Nunavut. On a typical mid-January day, the town drops to a low of –34°C (–29.2°F) and reaches a high of just -26°C (–14.8°F). Compare that to what Coral Harbour actually experienced in the first twelve days of January 2011.... After New Year’s Day, the town went 11 days without getting down to its average daily high. On the 6th of the month, the low temperature was –3.7°C (25.3°F). That’s a remarkable 30°C (54°F) above average. On both the 5th and 6th, Coral Harbor inched above the freezing mark. Before this year, temperatures above 0°C (32°F) had never been recorded in the entire three months of January, February, and March....

In mid-December, a vast bubble of high pressure formed in the vicinity of Greenland. At the center of this high, the 500-mb surface rose to more than 5.8 kilometers, a sign of remarkably mild air below. Stu Ostro (The Weather Channel) found that this was the most extreme 500-mb anomaly anywhere on the planet in weather analyses dating back to 1948.... Farther west, a separate monster high developed over Alaska last week....

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Why so freakishly mild?  One factor that both feeds and is fed by the warmth is the highly unusual amount of open water across seas that are normally frozen by late November. On the winter solstice (December 21), Hudson Bay was little more than half frozen... the Baffin/Newfoundland Sea fell weeks behind schedule in freezing up. As evident in the charts at bottom, these bodies of water remain in catch-up mode....

The extraordinary Arctic warmth and the midlatitude chill and snow bear the fingerprints of a negative North Atlantic Oscillation (NAO), the pattern that prevailed for much of last winter as well. As opposed to a positive NAO, where the jet stream whisks mild air across the Atlantic, a negative NAO—which has predominated since October—features a blocked-up jet stream that allows cold air to plunge more easily southward and mild air to take hold in the Arctic. It seems plausible that the open water between Greenland and Canada has played a role in the record warmth observed at the surface and aloft and the associated negative NAO. However, the NAO’s causes remain mysterious, and its future is impossible to predict...

Brian Beutler on the Intellectual and Moral Collapse of the Republican Party...

We are unlikely to ever get a health-care system with rational financing until everybody's care is paid for by some mechanism--rather than being paid for under the heading of somebody else's insurance via cost shifting. We are unlikely to have a society we can be proud of until everyone can get easy access to preventive, acute, and chronic medical care. For both intellectual and moral reasons a health care system that does not provide universal coverage is likely to be a lousy one.

The Republican Party agreed with this up until mid 2009. Now it doesn't.

Brian Beutler watches the train wreck:

How The Health Care Repeal Push Marks The End Of The Universal Health Care Consensus: Here's one case for the individual mandate in the health care law boiled down to two sentences -- both fairly elegant considering they were spoken extemporaneously.

There isn't anything wrong with it, except some people look at it as an infringement upon individual freedom. But when it comes to states requiring it for automobile insurance, the principle then ought to lie the same way for health insurance, because everybody has some health insurance costs, and if you aren't insured, there's no free lunch. Somebody else is paying for it." -- June 14, 2009....

[T]he individual mandate actually marries two distinctly American priorities -- an obsession with private markets, and the core belief that nobody should go without health care.

Considering just how cacophonous the health care debate has become, it might surprise you to learn that the mystery reformer quoted above is Sen. Chuck Grassley (R-IA), the Republicans' health care point man in the Senate who, during the same interview, with great authority, claimed "I believe that there is a bipartisan consensus to have individual mandates."

Two months later he threw in his lot with Sarah Palin (R-AK) and the Death Panelers. Now he claims -- along with about half the attorneys general in the country -- that the individual mandate is unconstitutional and, like the rest of the GOP, uses it as the foundation for a far-reaching political assault on the health care law....

Grassley's violent lurch to the right wasn't idiosyncratic. It was the consequence of a deliberate Republican political strategy.... What was once a popular, if not consensus, policy framework on the right -- authored by personal-responsibility conservatives and popularized by John Chafee, Bob Dole, and Mitt Romney -- rapidly became kryptonite for Republican politicians. As a result, for the first time in more than a half century, there is one political party in the country that has zero high-profile advocates for a forgotten goal: that somehow, some way, every citizen deserves proper health care.

And yet they can't quite bring themselves to say that....

Now that Republicans control the House of Representatives, their fusillade against the health care law has actual legislative ammunition. But the question of what they'd replace it with is still open. "We'll let the committees do their work on how we should replace this, and what the common sense reforms will be. They'll have hearings. It'll be a bipartisan process," said House Speaker John Boehner (R-OH). We'll see what they come back with."

What they came up with last time around -- their alternative to the Affordable Care Act -- was a grab bag of industry-friendly and anti-federalist ideas: malpractice reform, allowing people to buy insurance across state lines. The outcome, according to congressional actuaries, would be roughly no decrease in the number of uninsured people, when you adjust for population growth. "By 2019, CBO and JCT estimate, the number of nonelderly people without health insurance would be reduced by about 3 million relative to current law, leaving about 52 million nonelderly residents uninsured. The share of legal nonelderly residents with insurance coverage in 2019 would be about 83 percent, roughly in line with the current share"...

Mark Thoma Has a Forecst of Obama's State of the Union Address

Mark Thoma:

Economist's View: SOTU: Obama's Focus on Jobs: This is a year too late, more than that actually, but President Obama's intent to focus on jobs in the State of the Union address is welcome. The abandonment of the recommendations of the bipartisan majority on the debt-reduction commission -- for now anyway -- is also good news. This committee appeared to have Social Security in its sights mostly for ideological reasons rather than as something that would make a meaningful dent in the budget problem...

What puzzles me is what a "focus on jobs" means. At one level, it means neoliberal Democratic business as usual: most of our policies are, after all, aimed at raising the productivity of and the demand for labor. But "focus on jobs" implies policies that the executive branch can do on its own or persuade congress to pass that will have a large bang, and it is not clear to me what the White House thinks those are.

Matthew Yglesias Watches Douglas Holtz-Eakin Continue to Set His Own Credibility on Fire

Matthew Yglesias:

Yglesias » Is Repealing the Affordable Care Act Secretly About Replacing It With a Different Secret Law?: In a word: No. But don’t tell wonk-turned-hack Douglas Holtz-Eakin who explains:

Replacing PPACA with real health-care reform that delivers quality care at lower costs. That is what the repeal vote is really about.

I always forget if I’m allowed to use the word “bullshit” on an official CAPAF website (that was a mention—thanks Professor Goldfarb!), but I think this is best analogized to the solid waste of a male bovine. This just isn’t how public policy works. We change (or “replace”) laws all the time, and it doesn’t happen by first repealing predecessor laws tout court and then gesturing vaguely at a replacement. My guess is that Holtz-Eakin has a bunch of ideas about ways to improve health care policy in the United States relative to the post-ACA status quo. My guess is that I even agree with some of those ideas. The way to get those ideas enacted is to start explaining them to the press and the public and start talking to members of congress about turning them into bills.

At this point I’m not actually sure what the repeal vote is “really” about, but it’s definitely not about starting concrete conversations about further changes to the American health care system...

I was much more impressed by the Republican economists who did not sign than by those who did.

Liveblogging World War II: January 23, 1941

Operation Compass: General O'Conner's command captures Tobruk in Libya:

Brits and Australians take Tobruk: the British 7th Royal Tank Regiment drove westward from Bardia, which it had just taken from the Italians, with the intention of isolating Tobruk until the 6th Australian Division could aid in an assault. The attack on the coastal fortress of Tobruk was finally launched on the 21st and it fell the next day, yielding 30,000 Italian prisoners, 236 guns, and 87 tanks.

The Remarkable Spectacle of the Repeal-and-Replace the Affordable Care Act Crowd...

Andrew Sabl:

Two hundred economists (and nothin’ on): A few days ago, Politico Pulse (can’t find a permalink, but here’s where The Weekly Standard’s blog reprinted the story) published an item saying:

House Republicans open the health reform repeal debate today with an ace up their sleeves: a letter making the economic case for repealing the law, signed by 168 tenured economics professors and academic institution-affiliated scholars, two former CBO directors and four Federal Reserve economists, including a Nobel Laureate, among others.

"We believe the Patient Protection and Affordable Care Act is a threat to U.S. businesses and will place a crushing debt burden on future generations of Americans," the 200 economists write, in a letter organized by the American Action Forum and obtained by PULSE. They charge that the law is a barrier to job growth and a "massive spending increase" adding $1 trillion in government spending over the next decade.

Here's the (rather overheated) letter. Conveniently, it was followed a couple of days later by a crowd-sourced rating of top economics departments.... Of the 200 or so economists signing the letter, the number who teach at the top ten departments is four: Michael Boskin from Stanford... Robert Lucas from Chicago... and two from Columbia. We'll add the Nobel Laureate.... That makes five out of two hundred from top ten departments or the equivalent. On the other hand, Hillsdale College is well represented (four signers), as are conservative think tanks....

A letter like this is a political exercise, and the currency of politics is reputation. Whoever circulated the letter knew full well that the more famous economists from prestigious departments who signed it, the more impact it would have among people who actually care what experts think. And this is the best they could do...

Indeed. They also couldn't get even 200 to sign on for "repeal"--all they would sign on to is "repeal-and-replace."

And they couldn't get 200 to sign on to any specific replacement: just a vague fuzzy generic "replace."

And they couldn't get 200 to say a single word about why they think the CBO score of the bill is wrong--I mean, if it levies big taxes it is likely to reduce the deficit, right? The argument that it (a) levies big taxes and (b) increases the deficit is rather incoherent.

And they couldn't get more than two former Republican CEA members to sign on either...

Are You Still Rich If You Spend Your Money Living in a Nice Place?

Hoisted from Comments: Noah writes:

No, This Is Not Surprising...: I wish they would adjust these things for cost of living (or at least housing prices). A family with two $75k earners is middle-class in the Bay Area, but is living high on the hog in Austin, Texas.

But (unless you really like JEN-U-INE Mex-Tex food, and love to go to the Salt Lick and sit outside on those July evenings when the temperature is still 110F at 9 PM) more people would rather live in San Francisco than in Austin: that is why living in San Francisco is so expensive.

Living in a nice place that is expensive because it is nice is one way to spend the money you have when you are relatively rich--it does not keep you from being relatively rich.

Why Oh Why Can't We Have a Better Press Corps? (Peter Baker/New York Times Edition)

Robert Waldmann is annoyed at the New York Times's failure to fact-check Peter Baker and Peter Baker's inability to fact check himself.

Here's Peter Baker:

Obama’s Jobs Search: ACROSS LAFAYETTE SQUARE from the White House is the headquarters of the United States Chamber of Commerce. Last spring, four massive banners were hung on its building spelling out “J-O-B-S,” a message presumably visible from the third floor of the White House, where the president wakes up. By fall, the chamber and Obama were at war during a midterm campaign that ended with repudiation of the president’s party.

“The basic issue here,” Thomas Donohue, the chamber president, told me last month, “is uncertainty — uncertainty on what health care is actually going to cost, uncertainty on hundreds of rule-makings in the Dodd-Frank bill, uncertainty about what’s going to come out of the E.P.A. putting through what they couldn’t get legislatively, uncertainty about taxes.”

The health care program and the financial-regulation law sponsored by Senator Chris Dodd and Representative Barney Frank were bad enough, as far as the chamber was concerned. But Obama’s periodic forays into populism made it personal. He couldn’t seem to decide whether he was going to take Wall Street to task for its irresponsible behavior or cajole it into freeing up money to get the economy moving. One day he derided “fat-cat bankers” who caused the recession; another day, he soothed them by saying that he and the American people “don’t begrudge” multimillion-dollar bonuses...

Robert Waldmann:

Robert's Stochastic thoughts: [Baker's] claim "he soothed them by saying that he and the American people 'don’t begrudge' multimillion-dollar bonuses." is false.... I quote the context of the two words TWO Words ! which Baker ripped out of context.

Q Let's talk bonuses for a minute: Lloyd Blankfein, $9 million; Jamie Dimon, $17 million. Now, granted, those were in stock and less than what some had expected. But are those numbers okay?

THE PRESIDENT: Well, look, first of all, I know both those guys. They're very savvy businessmen. And I, like most of the American people, don't begrudge people success or wealth. That's part of the free market system. I do think that the compensation packages that we've seen over the last decade at least have not matched up always to performance. I think that shareholders oftentimes have not had any significant say in the pay structures for CEOs...

Obama said that the US people don't begrudge success or wealth as such, however, wealth based on Wall Street compenstation packages have no justification. Just to make it absolutely clear that Baker libeled Obama, I will also report the follow up question and answer:

Q Seventeen million dollars is a lot for Main Street to stomach.

THE PRESIDENT: Listen, $17 million is an extraordinary amount of money. Of course, there are some baseball players who are making more than that who don't get to the World Series either. So I'm shocked by that as well. I guess the main principle we want to promote is a simple principle of "say on pay," that shareholders have a chance to actually scrutinize what CEOs are getting paid. And I think that serves as a restraint and helps align performance with pay. The other thing we do think is the more that pay comes in the form of stock that requires proven performance over a certain period of time as opposed to quarterly earnings is a fairer way of measuring CEOs' success and ultimately will make the performance of American businesses better...

Baker falsely asserts [this interview] shows Obama soothing Wall Street executives, [but instead] he advocated regulation of compensation...

Thomas Jefferson Believed the Federal Government Could Regulate "Inactivity"

Rick Ungar:

Thomas Jefferson Also Supported Government Run Health Care: In response to my earlier piece on “An Act for the Relief of Sick and Disabled Seamen”, the 1798 law revealing that a number of our founders were more supportive of the notion of mandated health coverage and a government run hospital system than some may have imagined, many have noted that it is not surprising that such legislation would have been signed into law by President John Adams, a noted Federalist....

Greg Sargent, today reports that it wasn’t only John Adams who supported the notion of government run health care. According to Georgetown University history professor and noted historian of America’s early days, Adam Rothman, Thomas Jefferson –the iconic hero of the Tea Party – also supported the legislation. Sargent reprints the following email he received from Prof. Rothan on the subject –

Alexander Hamilton supported the establishment of Marine Hospitals in a 1792 Report, and it was a Federalist congress that passed the law in 1798. But Jefferson (Hamilton’s strict constructionist nemesis) also supported federal marine hospitals, and along with his own Treasury Secretary, Albert Gallatin, took steps to improve them during his presidency. So I guess you could say it had bipartisan support.

Ezra Klein adds to the debate pointing out that: was a payroll tax that all sailors on private merchant ships had to pay, and in return, they were basically given access to a small public health-care system. But it was, in essence, a regulation against a form of inactivity: You were not allowed to not do something, in this case, pay for sailor’s health insurance.

There are those who will continue to argue that these indications of how the founders viewed these issues in their own time do not necessarily resolve the issue as to how we may, Constitutionally speaking, proceed with reforming the health care system of today.

They may well be right.

But, at the least, can we not agree that the mounting evidence as to how men like Jefferson and Adams perceived the issue should bar the attempt to pin the objections to health care reform on the backs of the nation’s founders?...

No, This Is Not Surprising...

Microsoft Excel-1.png

S.D. of the Economist asks a question:

S.D.: The rich in America: Who's rich?: [A]nother thing that I, at least, was struck by when I looked at the Saez-Piketty data was the thresholds for being in the top 10% and 5% of the American population.... To get into the top 5%, you need to earn less than $150,000. To me, it's something of a wake-up-call to realise that a couple who make $75,000 each are in the top 5% of American households. I'm curious whether this is surprising to others, too? Would you, like me, have guessed the thresholds were higher? Does this change what you think about who is "rich" in America today?

It is not surprising, that is, if you keep your eyes open and criss-cross either urban or rural America. It is not surprising if you channel-surf cable TV and think about the advertisements that you watch and understand that advertisements are aimed at attracting disposable income dollars...

Why We Don't Believe that the Fact that We Had too Many People Working in Construction in 2007 Has Much to Do with Our Current 10% Unemployment

FRED Graph - St. Louis Fed.png

The arithmetic simply does not add up.

We had a construction cycle, but a simple shift of demand from construction to other sectors and the shifting of labor out of construction and the process of retraining construction workers for other occupations does not produce the more than six million fall in payroll employment from mid-2008 to mid-2009.

It simply does not.

Why Oh Why Can't We Have a Better Press Corps?

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Joshua Green writes:

Bad Climate for Global Warming: Last week, the National Oceanic and Atmospheric Administration and NASA's Goddard Institute for Space Studies announced that 2010 had registered as the hottest year on record. Nothing new here: nine of the last 10 years have been among the warmest ever.

The news highlighted one of Washington's biggest failures over the last two years: its inability to advance climate legislation...

Now let's stop right now. The inability to advance climate legislation wasn't "Washington's" failure: it was a failure of Republican legislators, their tame hacks and propagandists, the carbon-energy lobby, and coal-state Democratic legislators.

Joshua Green knows who the culprits are as well as I do. But for some reason he does not believe he can say so in his lead.

Why not, Joshua? Why not?

Why oh why can't we have a better press corps?

Here is the full piece:

Bad Climate for Global Warming - Joshua Green - Politics - The Atlantic: Last week, the National Oceanic and Atmospheric Administration and NASA's Goddard Institute for Space Studies announced that 2010 had registered as the hottest year on record. Nothing new here: nine of the last 10 years have been among the warmest ever.

The news highlighted one of Washington's biggest failures over the last two years: its inability to advance climate legislation. It was also a grim reminder that things could get worse. Some crucial policy areas have always been neglected and some initiatives stalled. But rarely has a first-order concern like the nation's climate and energy policy actually regressed -- and so dramatically as we've seen since the last presidential election.

Not long ago, it appeared likely that the United States would take meaningful action to mitigate climate change. In the 2008 presidential campaign, both Barack Obama and John McCain touted plans to limit carbon emissions under a cap-and-trade scheme. Even Sarah Palin supported the idea. Much of the business community did, too. Adding momentum was the recent Supreme Court ruling, in Massachusetts vs. Environmental Protection Agency, that required the EPA, under the Clean Air Act, to regulate harmful greenhouse gas emissions. Lawmakers, it was presumed, would take the matter into their own hands rather than cede that authority.

Of course, this didn't happen. Over the strenuous objections of Republicans and coal-state Democrats, the House of Representatives passed a cap-and trade bill in 2009 that met an ignominious death in the Senate. Along the way, cap-and-trade -- originally a conservative idea -- came to be vilified as "cap and tax'' and regarded by a substantial part of the conservative base as a form of fascist oppression. Today, fewer Americans believe in the reality of global warming than did so two years ago, and many took out their wrath last November on Democrats who'd supported a climate bill.

But this doesn't capture the full scale of the setback. Since that debacle, momentum in Congress has shifted strongly against climate-change legislation. If you want to frighten one of the remaining Democrats, suggest that he or she take another shot at passing cap-and-trade.

There's still the EPA. When both parties favored cap-and-trade, this option was viewed as the less desirable one. The agency could limit greenhouse gas emissions, but not through a system as flexible and efficient as cap-and-trade, which included simple improvements like building-efficiency standards that lay beyond the agency's remit. EPA regulations would thus be less effective.

The cap-and-trade bill that passed the House aimed to reduce emissions 17 percent by 2020 from their 2005 levels. A World Resources Institute study found that the most aggressive implementation of EPA regulations would only reduce emissions by 12 percent in that time frame. Scientists say reductions of 36-48 percent would be necessary to halt global warming. "Having EPA set carbon-pollution reductions was everyone's second choice for slowing global warming,'' said Daniel J. Weiss, director of climate strategy at the Center for American Progress Action Fund. "It was like 'In Case of Congressional Gridlock Break Glass.' ''

Now, the backup plan is the only plan, and "aggressive'' regulations are off the table. Last year, the EPA issued a "tailoring rule'' signaling how it intended to proceed. The results in no way resembled the fears expressed by many detractors that a burdensome new system of regulations would be imposed on small businesses. Instead, the EPA will confine its attentions strictly to the largest polluters, such as power plants, oil refineries, and chemical manufacturers.

These modest steps won't do nearly as much to slow global warming as the other, broader plans. But because the battle has shifted from the legislative to the regulatory front, the EPA nonetheless finds itself under attack from the newly empowered Republicans. One of the first things they will do is try to block EPA from establishing pollution standards, possibly by denying funds or refusing to raise the debt ceiling unless the process is slowed or halted.

It's not clear whether they'll succeed. But given the heightened importance of stronger restrictions, environmentalists can't feel good about recent developments. Earlier this week, the Obama administration said it would focus on eliminating regulations, rather than strengthening them. That's probably an accurate reading of the political climate. But for the planet's climate, it's yet another blow.

Comments on Doug Irwin: Peddling Protectionism: Smoot-Hawley and the Great Depression.


Irwin, D.A.: Peddling Protectionism: Smoot-Hawley and the Great Depression.:

"An astute and well-told account of a law more often invoked than understood, Irwin's examination of the Smoot-Hawley Act explains how--for good or ill--Congress lost its credibility as a maker of trade law. A valuable book for anyone who wants to understand the Great Depression and whether it could come back."

--Eric Rauchway, author of Blessed Among Nations and The Great Depression and the New Deal: A Very Short Introduction

"Douglas Irwin's elegant and sophisticated account of the Smoot-Hawley Tariff clears up some powerful and persistent myths. As Irwin shows, the tariff didn't begin with congressional logrolling (though that contributed substantially to the eventual outcome), it didn't cause the stock market panic of October 1929, and it didn't cause the Great Depression (but neither did it counteract deflation from abroad as some Keynesians and monetarists have claimed). And many of the book's details are fascinating and even bizarrely amusing."

--Harold James, Princeton University

"Economists and economic historians have closely examined the Smoot-Hawley Tariff over the past few decades, but no one before Douglas Irwin has pulled together such a wide-ranging body of evidence to give us a solid and detailed understanding of the passage and impact of the bill. Understanding the Great Depression has become even more important since the global financial crisis, and that makes this book very timely. Brief, accessible, and clear, Peddling Protectionism should appeal to a wide range of readers."

--Robert Whaples, Wake Forest University

"It would not surprise me if this became the definitive economic history of the Smoot-Hawley Tariff. Synthesizing and fleshing out the best research and nicely connecting economics and politics, Peddling Protectionism provides a fuller accounting of, and a deeper perspective on, what is arguably the best-known U.S. tariff of the twentieth century."

--Kris Mitchener, Leavey School of Business, Santa Clara University

Damned if I can think of who the "Keynesians and monetarists" are who claimed that Smoot-Hawley was stimulative by "counteract[ing] deflation from abroad." I was always taught by Keynesians and monetarists that Smoot-Hawley and retaliative moves by other countries together administered a contractionary supply shock to the world economy--although not one big enough to make the Great Depression great...

Perhaps I Should Give More Tests...

Jeffrey D. Karpicke and Janell R. Blunt:

Retrieval Practice Produces More Learning than Elaborative Studying with Concept Mapping: Educators rely heavily on learning activities that encourage elaborative studying, while activities that require students to practice retrieving and reconstructing knowledge are used less frequently. Here, we show that practicing retrieval produces greater gains in meaningful learning than elaborative studying with concept mapping. The advantage of retrieval practice generalized across texts identical to those commonly found in science education. The advantage of retrieval practice was observed with test questions that assessed comprehension and required students to make inferences. The advantage of retrieval practice occurred even when the criterial test involved creating concept maps. Our findings support the theory that retrieval practice enhances learning by retrieval-specific mechanisms rather than by elaborative study processes. Retrieval practice is an effective tool to promote conceptual learning about science.

Why Oh Why Can't We Have a Better Press Corps?

In my email inbox this morning, apropos of the New Yorker:

All the little details are off. Cloudberry gelato isn't a thing. (Cloudberry sorbet maybe). The stuff about yuppie women doing workouts that emphasize the upper body... surely he could have read the wikipedia entries for pilates or spinning. Sometimes I wonder if [David Brooks] knows any actual people, or just bases his writing on cliches he picks up on the internet...

So I went and checked:

David Brooks: What the science of human nature can teach us: High-status women, on the other hand, pay ferocious attention to their torsos, biceps, and forearms so they can wear sleeveless dresses all summer and crush rocks with their bare hands.... Occasionally, you meet a young, rising member of this class at the gelato store, as he hovers indecisively over the cloudberry and ginger-pomegranate selections, and you notice that his superhuman equilibrium is marred by an anxiety...

Indeed yes: "cloudberry gelato" produces only six hits on google. "cloudberry sorbet" produces about "about 1,000".

McSweeney's Internet Tendency: TED Talks Throughout History.

John Cafiero:

TED Talks Throughout History:

Have We Been Worshiping the Wrong Sacred Tree?
The Wheel Will Change the Way We Live Forever, Once We Turn It on Its Side and Attach It to Something, But What?
Global Initiatives for Making God Less Angry
How "Coins" Are Revolutionizing Bartering
Dragon Lairs, Leprechaun Hoards, and Other Promising Sources of Wealth in the New Economy
We Already Have the Technology to Turn Lead into Gold. Why Aren't We Doing It?
Not Your Father's Execution: How the Guillotine is Changing the Way We Think about Beheading
Reinventing the Factory: How the Use of Children In Manufacturing Benefits Us All
Are Peasants People?

Why Republicans Should Be Embarrassed to Advocate Repealing the ACA

Aaron Carroll:

More mandate-relevant evidence | The Incidental Economist: Yesterday I described a new paper that provided evidence that the individual mandate in Massachusetts has done the job it was designed to do, namely to cause the individual insurance market risk pool to become more favorable (include more relatively healthy individuals than it otherwise would). >Today there is more evidence that a means of motivating healthy individuals to enroll (like a mandate) is a necessary part of insurance market reforms. Anthony Lo Sasso shows that community rating and guaranteed issue in the absence of a mandate (or some other incentive for the healthy to enroll) cause the risk pool to become more adverse (include more relatively sick individuals)....

Lo Sasso explains:

T[C]ommunity rating was associated with a worsening of the non-group risk pool as younger and healthier individuals left the individual market while older and sicker individuals joined or remained in themarket. To test the robustness of this conclusion, we used data from the National Health Interview Survey (NHIS) to compare changes in detailed measures of health status and utilization for people with non-group coverage in several community rating and non-community rating states. We found that those maintaining non-group coverage after the adoption of community rating were significantly more likely to have days when they were restricted to bed or when their activities were otherwise restricted because of health problems as well as more doctor visits and hospital stays. In other words, community rating in the non-group insurance market led to a pool of enrollees in poorer health. [...]

Our results provide a compelling portrait of the distortions that can result from community rating and guaranteed issue regulations in the non-group market when there are no provisions in place to keep people enrolled in coverage. The deterioration of the risk pool is consistent with predictions from economic theory and potentially lays the foundation for an adverse selection death spiral...

Aaron Carroll again:

Let’s be clear about what all this means. There are sound theoretical reasons and substantial empirical support for the idea that guaranteed issue and community rating without a mandate (or similar inducement) cause problematic levels of adverse selection. Adverse selection leads to higher premiums and can destabilize the insurance market. These are as close to facts as one gets in social science. Consequently, if one is in favor of a well-functioning insurance market in which everyone can obtain affordable insurance, one cannot advocate guaranteed issue and community rating and nothing else. One needs some way to keep adverse selection under control. To be blunt, one can’t just take the favorable parts of the ACA and reject the unfavorable part (the mandate), at least not with suggesting a replacement that will do the same job...

Steven Hyder Thinks He Has a Constitutional Right to Be a Freeloader (No Libertarians in the Emergency Room Watch)

Jonathan Cohn goes to interview him:

Repealing Health Care Reform: How It Could Happen And What It Would Mean: Steven Hyder, 40, runs his own legal practice out of a shared office in downtown Monroe, Michigan, a blue-collar town south of Detroit. Mostly he handles relatively routine, low-profile work: bankruptcies, personal injury claims, that sort of thing. But recently, he became part of a much bigger case. He’s a named plaintiff in a lawsuit challenging the constitutionality of the Patient Protection and Affordable Care Act. The focus of Hyder’s suit, which was organized and written by a conservative legal organization, is the “individual mandate”—the requirement that everybody obtain health insurance or pay a fee to the government. The case is one of several moving through the federal judiciary. Sometime in the next few years, at least one of them is likely to end up before the Supreme Court.

A few weeks ago, I spoke with Hyder at his office, in order to learn more about why he had brought this case. He said his motive was straightforward. He’s opted not to carry health insurance because he doesn’t think the benefits justify the price, and he doesn’t want the government forcing him to do otherwise. Okay, I asked, but what if he gets sick and needs hospitalization? How will he afford those bills? It was a distinct possibility, he agreed, patting his waist and noting that he was a little overweight. But those potential bills would be problems for him and his hospital, he suggested, not society as a whole.

When I told him that I disagreed—that his decision to forgo health insurance meant other people would be paying his bills, via higher taxes and insurance premiums—he politely and respectfully took issue with my analysis. The discussion went back and forth for a while, but soon it became apparent that our differences went beyond the finer points of health care policy, to our most basic understanding of the rights and obligations of citizenship. “It’s a complete intrusion into my business and into my private life,” he told me. “I think it’s one big step towards a socialist society and I’m purely capitalist. I believe in supply-side economics and freedom”...

Note that Hyder doesn't say that if he can't pay his hospital bills cash he should die in the gutter in front of the hospital.

Donald Marron Says Greg Mankiw Gets It Wrong

Donald Marron is correct. Donald Marron:

What is Health Care Reform?: The policy community and commentariat often equate health care reform with the legislation (actually two pieces of legislation) that President Obama signed into law last year. As everyone knows, the Congressional Budget Office estimated that those two laws would, if fully implemented, reduce the federal budget deficit by $143 billion from 2010-2019. That’s the basis for the claim that “health care reform would reduce the deficit over the next ten years.” (CBO also discussed what would happen in later years, where the law, if allowed to execute fully, would have a bigger effect, but let’s leave that to the side right now.) The complication... is that the health care reform legislation included many provisions. Greg [Mankiw] notes, for example, that some expanded health insurance, while others raised taxes. In his view, only the first part constitutes health care reform....

In fact, it’s more complicated than that. By my count, the two pieces of health care reform legislation combined seven different sets of provisions:

  1. Expanding health insurance coverage (e.g., by creating exchanges and subsidies and expanding Medicaid)
  2. Expanding federal payments for and provision of health care services (e.g., reducing the “doughnut hole” in the Medicare drug benefit)
  3. Cuts to federal payments for and provision of health care services (e.g., cuts to Medicare Advantage and some Medicare payment rates)
  4. Tax increases related to insurance coverage (e.g., the excise tax on “Cadillac” health plans)
  5. Tax increases not related to insurance coverage (e.g., the new tax on investment income)
  6. The CLASS Act, which created an insurance program for long-term care
  7. Reform of federal subsidies for student loans....

Greg’s point, I think, is that... [t]o say “the health care reform law reduces the deficit over the next ten years according to CBO” is absolutely true. But it often gets elided to “health care reform reduces the deficit over the next ten years” which isn’t true if, like Greg, you think the revenue raisers, student loan changes, and CLASS Act aren’t really health care reform.....

Greg’s analogy has a flaw: it presumes that none of the tax increases count as health reform. I disagree. Our current tax system provides enormous ($200 billion per year) subsidies for employer-provided health insurance. They should be viewed as part of the government’s existing intervention in the health marketplace. And rolling back those subsidies strikes me as essential to future health care reform.... [The] tax on “Cadillac” health plans... will clearly affect health insurance markets, and it offset a portion of existing tax subsidies... [is] as part of health care reform.

The key thing is not the difference between spending and revenues, but between provisions that fundamentally change the health care system and those that do not...

By my count, more than half of the tax increases in the Affordable Care Act over the next two decades are provisions that fundamentally affect the health care system--and the share of tax increases that are clearly health related grows over time,

Congressional Representative Jeb Hensarling (R-TX) Calls for the Repeal of the Affordable Care Act and Its Replacement by Medicare-for-All

Very good to see a Republican joining the single-payer caucus:

Henserling: The American people don’t want [the Affordable Care Act]. It’s personal. Here’s my story, two days ago, I was in San Antonio, Texas, and my mother had a large tumor removed from her head. They wheeled her away at 7:20 in the morning, and by noon, I was talking to her along with the rest of our family. It proved benign, thanks to a lot of prayers and good doctors at the Methodist hospital in San Antonio. My mother’s fine. I’m not sure that would be the outcome in Canada, the U.K., or anywhere in Europe. No disrespect to our President, but when it comes to the health of my mother, I don’t want this President or any President or his bureaucrat or commissions making decisions for my loved ones. Let’s repeal [the Affordable Care Act] today, replace it tomorrow.

Matthew Yglesias comments:

Hensarling is 53 years old, so his mother is, of course, eligible for Medicare. And it’s true that Medicare, for all its flaws, is an excellent system of coverage. It’s also a system of universal taxpayer-financed government-provided health insurance... [like] Canada’s system of universal health care, which is probably why the Canadian program is also called “Medicare.” The biggest difference is that in Canada you get Medicare whether you’re 8, 18, 38, 68, or 88 whereas in the United States Medicare is only available to senior citizens. But seniors like Medicare! And so do their kids!

High and Rising Unequality Does Not Mean that Unemployment Is "Structural"

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David Leonhardt has a good response, pointing to the increasing college-high school wage premium as evidence that I am wrong and that the unemployment generated by the current downturn is structural:

Debating the Causes of Joblessness: The data that the Bureau of Labor Statistics released on Thursday gives me a chance to explain why I disagree [with Brad]. In short, the relative performance of more educated and less educated workers over the last few years has not been the typical pattern for a recession. Less educated workers, by many measures, are faring worse than they ever have.

The ratio of the typical four-year college graduate’s pay to a typical high-school graduate’s pay hit a record in 2010 — 1.56. Since 2007, the inflation-adjusted median weekly pay of college graduates has risen 1.6 percent. The inflation-adjusted pay of every other educational group — high school dropouts, high school graduates and people who attended college but did not get a four-year degree — has fallen since 2007. The same is true over the last decade; amazingly, only college graduates have received a raise.

It’s pretty surprising that college graduates’ real pay has risen during a three-year period when the economy was in miserable shape. It seems like a clear indication that our economy has an undersupply of skilled, educated workers. To put it another way, if there were more of these workers than they are, more of them would have jobs today...

I think that less-educated workers are faring worse in relative terms than they have since the end of the Gilded Age. I think that the economy is definitely short of well-educated workers--that that is why the college-high school wage premium is so high and continues to rise.

But I also think that these are issues that are almost completely separate from those of whether current unemployment is "structural"--by which I mean that an increase in aggregate demand would not produce higher employment but rather higher inflation.

After all, a rising college-high school wage premium was perfectly consistent with sub-five percent unemployment in 1999. Why should it require anything close to ten percent unemployment today?