Grasping Reality on TypePad, by Brad DeLong

Noahpinion:

Economics, politics, and distraction from productive activity: Since the recession began, Arnold Kling has been trumpeting a very non-traditional way of thinking about the economy. At first this went by the name of "recalculation," but Kling has now settled upon "PSST," which stands for "Patterns of Sustainable Specialization and Trade."... I'll let Kling sketch the idea in his own words:

Regular readers know that I am trying to nudge them toward a different paradigm in macroeconomics. I want to get away from thinking of economic activity as spending, and instead move toward thinking of it as patterns of sustainable specialization and trade.... I believe that trying to describe economic activity using an aggregate production function is a mistake.... The advantage of the aggregate production function is that...it yields an aggregate supply curve. This allows macro to be presented using the familiar tools of supply and demand.... Instead, I think that the right tools to use for macro are the two-country, two-good models of international trade.... At full employment, both countries are taking advantage of specialization and trading with one another. When something happens to adversely affect the pattern of trade, some workers shift from market activities to non-market activities, mostly in the form of involuntary unemployment. Gradually, new patterns of specialization and trade emerge, and full employment returns. That is what I have been calling the Recalculation Story....

Every first-time econ student who has ever been presented with a macroeconomic aggregate probably has some variant of this reaction. Economies are just too complex to be modeled with this handful of variables! Then someone raises his hand and asks the Teaching Assistant if that isn't the case, and the Teaching Assistant shakes his head and says "Yeah, well, just try to model a complex system like that and see how far you get!" Because it is hard...

Stan Collender:

The Dirty Secret About Today's "Clean" Debt Ceiling Vote: The House Republican leadership wants everyone to think that the expected large “no” vote this evening on a “clean” debt ceiling will demonstrate that there’s no support for increasing the government’s borrowing limit unless deficit reductions are attached.  That’s simply not true.... [A] debt ceiling increase with deficit reductions attached would also very likely... if not certainly... be rejected [by the House].  In other words, just because a debt ceiling increase that doesn’t include spending cuts or revenue increases can’t be adopted doesn’t automatically mean that, as the [House] leadership wants us to believe, a bill with them will pass.

Ryan Chittum:

Elizabeth Warren Is Smeared, and the Press Is Along for the Ride: You’d think the press could resist the he said-she said copy when the truth is easy to discern. Congressman Patrick McHenry’s smearing of Elizabeth Warren is a good test of how the press handles dishonest politicians and their lies. And most of the press gets a big fat F on this one. On Tuesday, McHenry, a North Carolina Republican, called Warren a liar, both on CNBC before she testified and during her actual testimony. Here’s how The New York Times, with its delicate sensibilities, put it:

Decorum Breaks Down at House Hearing

Goodness! Pass the smelling salts!

The NYT piece is about as pure an example of he said-she said reporting as you’ll see and a good showcase for why such false equivalence is a bad thing for readers.... The Wall Street Journal was no better, nor was Reuters, The Hill, or almost any of the other mainstream news stories I read.

But for anyone half paying attention, much less a beat reporter, this is not a close call: McHenry is full of it...

Ryan Chittum on Stephen Moore:

Zombie Lie Laboratory Creates 62 Percent Tax Rate Plan : CJR: Stephen Moore of The Wall Street Journal editorial board hacks out an instant classic on how to mislead people with numbers. The question-as-headline is your second red flag that this just might be a deeply disingenuous op-ed (the first is that it’s on The Wall Street Journal op-ed page):

A 62% Top Tax Rate?

The top marginal tax rate is just 35 percent now, of course. So how does Moore come up with the idea that Obama and the Democrats are pitching a 62 percent tax rate for the rich? Disingenuously...

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

If Ruth Marcus had talked to any serious health economists about the Ryan plan to end Medicare as we know it--or even read the CBO's report--she would know that the Ryan plan is really scary. She didn't. She doesn't.

Matthew Yglesias surveys the wreckage:

‘Mediscare’ Works Because The Consequences of Privatizing Medicare Are Scary: [Ruth Marcus's] weekend remarks on Medicare... reveal that the right is having some success in its plan to cry “mediscare” in an effort to avoid criticism of its Medicare privatization scheme. Here’s what she said on Meet The Press:

MARCUS: This play has been run time after time. If you go back and look at the quotes from President Clinton back when he needed to win re-election, they sound a lot like the quotes from Democrats today about don’t let those Republicans take away your Medicare. The difference is that the debt is bigger, the deficit is bigger, the gap is bigger, and the situation is more dire. But I think that, sadly, the lesson of New York 26 is “mediscare” works.

Here’s what’s true:

Paul Krugman:

Clarity Has A Well-Known Liberal Bias: As Jonathan Chait and Jamelle Bouie note... another VSP day at the Washington Post, with both the editorial page and the fact-checker tut-tutting at Democrats who insist on describing the Republican plan to dismantle Medicare as a plan to dismantle Medicare. Because it is, you know, a plan to dismantle Medicare. When you transform a program that pays seniors’ medical bills into a program that gives them a voucher that almost certainly isn’t enough to buy adequate insurance, you can call the new scheme Medicare, but it isn’t the same program.

What the Post fact-checker seems to want, nonetheless, is for Democrats to talk about what Republicans are proposing only in big words and complicated sentences, so that the public doesn’t understand what they’re saying.

And the editorial page is still trying to claim that there’s something honest and important about the Ryan plan — even though it is completely clear to anyone paying attention that this plan offers nothing constructive in the way of solutions to the problem of rising health costs.

Here’s an analogy: think of Medicare as a footbridge that is deteriorating and will eventually become unsafe. You could propose structural repairs to fix its faults; Ryan doesn’t do that. Instead, he proposes knocking the bridge down and replacing it with trampolines, in the hope that pedestrians can bounce across the stream. And the Post declares that he deserves credit for pointing out that the bridge is falling down, and proposing a solution. Um, we knew that the bridge was in bad shape — and his solution is a fraud.

What’s going on here? Chait points out that denunciations of “scare tactics” only seem to happen when someone is trying to protect the social safety net, suggesting that what’s happening here is a reflection of the Beltway’s fundamental hostility to social insurance. I’d also add that VSPs invested heavily in the Ryan bubble, and are still not willing to face up to the extent to which they were flim-flammed...

Derek Thompson:

College? There's an App for That: How USC Built a 21st Century Classroom: In the spring of 2008, John Katzman, the founder of the Princeton Review, approached the Masters of Arts in Teaching (MAT) program at at the University of Southern California with a revolutionary idea. USC could increase its graduates by a factor of ten without building another room.... It's three years later, and 1,500 aspiring teachers are now earning Masters degrees in teaching at the University of Southern California -- more than the Masters programs at Harvard (972) and Stanford (415) combined. Since USC and Kaztman teamed up to create the country's first online course for a Masters in teaching, called MAT@USC, the school that graduated only 100 students in 2007 is on pace to become the country's largest not-for-profit teacher prep program by 2013. "Teachers and students uniformly love it," said Melora Sundt, associate dean of academic programs at USC's Rossier School of Education. "We're bringing people from all over the world into the same classroom." Now in 45 states and 25 countries, including Turkey, Japan and South Korea, USC's online education has gone global.

The centerpiece of MAT@USC is a virtual "classroom" accessible by laptop, smart phone or iPad.... Professors can post slides or discussion questions on the screen, students press a button to virtually "raise their hand," and everybody can watch recorded of past sessions....The school still accepts students selectively, still charges the same tuition and still requires 20 weeks of in-classroom practice. Students upload daily videos of their work in classrooms from their home city....

SC's biggest critics are faculties at other universities. They say you have to be in the classroom to learn teaching. USC responds: You do have to be in the classroom, but you don't have to be in Los Angeles. "Everything about this program pushes definitions about what is a semester, what is the university, what is a classroom, and where do the faculty belong?" Sundt says. "We presented our program to another large research university for their business, law and education school deans. They said they had an online course in committee for two years. Two years! They couldn't believe what we did. Their comment was: 'How did you make this happen?'" Sundt laughs and says, "This is the future, guys. I kept thinking, this train is going to run right over you."

Things I want to have at the forefront of my brain--for when I am surprised, as I will be, by an unexpected question from an unexpected direction while talking to reporters, phone callers, passers-by, radio interviewers, cable TV interviewers, etc....

A baker's dozen:

1. On Paul Ryan's claim that "Obama-care kills Medicare as we know it. Obama-care raids $500 billion from Medicare to spend on Obama-care, puts in place a 15-panel board to ration Medicare by unelected bureaucrats. Our budget, repeals the raiding, gets rid of the rationing board, preserves this program, makes no changes for a person 55 years of age or older and saves Medicare": James Kwak: "Ordinarily this wouldn’t be worth responding to, except to point out, as Sam Stein did, that Ryan’s proposed budget also ”raids $500 billion from Medicare,” so the statement that “we stop the raiding” is, um, a lie. But it isn’t news that Paul Ryan has an issue with honesty, except perhaps for David Brooks."

2. On John McCain's claim that Sarah Palin can beat Barack Obama because she "inspires great passion, especially among the Republican faithful": David @ Crooks and Liars: "A recent Washington Post/ABC News poll found that only 17 percent of Republicans had a "strongly favorable" view of her."

3. On Republican claims that 51% of households don't pay any taxes: Mark Thoma sends us to Chuck Marr and Brian Highsmith: "The 51 percent figure is an anomaly that reflects the unique circumstances of 2009.... In a more typical year, 35 percent to 40 percent of households owe no federal income tax.... The 51 percent figure... ignores the substantial amounts of other federal taxes... households pay.... [O]nly about 14 percent of households paid neither federal income tax nor payroll tax in 2009.... Most of the people who pay neither federal income tax nor payroll taxes are low-income people who are elderly, unable to work due to a serious disability, or students, most of whom subsequently become taxpayers..."

4. Caroline Baum's claim that the upward-sloping yield curve means that we should be optimistic: Paul Krugman: "[T]he long-term rate is a prediction of future short-term rates. If investors expect the economy to contract, they also expect the Fed to cut rates.... If they expect the economy to expand, they expect the Fed to raise rates, making the yield curve positively sloped. But here’s the thing: the Fed can’t cut rates from here, because they’re already zero. It can, however, raise rates. So the long-term rate has to be above the short-term rate..." The normal relationship between the slope of the yield curve and expectations of growth simply breaks down when interest rates are very low.

5. Claims that only inflationistas want to turn us into Zimbabwe favor higher inflation: Ken Rogoff, a former advisor to John McCain, says that 6 percent inflation “for at least a couple of years” would be very good for the U.S. economy. It would help eliminate the debt overhang that he believes is hobbling the recovery.

6. Ruth Marcus's claim that Democrats are crying "wolf" and "Mediscare": Steve Benen: "It’s exasperating, but it’s worth reemphasizing what too many establishment types simply refuse to understand: Democrats are telling the truth... offering an accurate assessment of the Republican plan for Medicare. If voters find the GOP proposal frightening, the problem is with the plan, not with Democrats’ rhetoric. I’m at a loss to understand what, exactly, Ruth Marcus, David Brooks, and their cohorts would have Dems do. Congressional Republicans have a plan to end Medicare and replace it with a privatized voucher scheme. The proposal would... shift crushing costs onto the backs of seniors, freeing up money for tax breaks for the wealthy. The plan is needlessly cruel, and any serious evaluation of the GOP’s arithmetic shows that the policy is a fraud..."

7. RERUN: On the Republican claim that Obama has increased nondefense discretionary spending by 80%: Paul Krugman: "The number comes from taking nondefense discretionary spending as reported — which rose 26 percent from 2008 to 2010 (Table 8.7) — and then adding the entire discretionary spending part of the stimulus.... [N]ot all of the stimulus funds were spent in 2010... [and] stimulus spending is already in those discretionary spending numbers. So this GOP talking point is a complete fraud; it’s based on counting the same spending several times over." This is not a mistake you can make by accident.

8. RERUN: On Peter Wallison's claim that Fannie and Freddie caused the financial crisis: Mike Konczal: "The conservative talking point: half of all subprime and other high-risk mortgages were held by the GSEs!... This zombie argument finally got fully dismembered by Center for American Progress’ David Min in his recent report taking apart Wallison.... Wallison and Pinto claim that the GSEs were responsible for half of all subprime and subprime-like mortgages. They do this by making up a confusing definition of “subprime-like."... The fun part of making up your own definition is that it can be whatever you want it to be.... The three-card monte trick is pretty straightforward once you know where to watch. There’s a lot of statements that go: “Fannie and Freddie made a lot of subprime loans and other high-risk mortgages. And subprime loans had a 25% default rate!” And you naturally assume that the other high-risk loans must also have a gigantic default rate compared to regular mortgages. Except they don’t..."

9. RERUN: On Tim Pawlenty's claim that President Obama is setting up this false choice between default and raising the debt ceiling: Pawlenty claims "you can take away that false choice by ordering the Treasury to pay the obligations to outside creditors first..." Failing to pay people inside the United States to whom the U.S. government owes money has a name, Tim. It's name is "default." It's not an alternative to default, it's a type of default.

10. RERUN: On Glenn Hubbard's claim that Obama has "ruled out long-term entitlement spending restraint": Nancy Ann Min De Parle: "[T]he tools in the Affordable Care Act and other steps... already taken will save nearly $120 billion for Medicare over the next five yearss.... While we’ve made real and significant progress, there is more work to do... the President’s framework... includes reforms that would save at least an additional $200 billion for Medicare over the next decade. The framework would: (i) Bend the long-term cost curve by setting a more ambitious target of holding Medicare cost growth per beneficiary to GDP per capita plus 0.5 percent beginning in 2018, through strengthening the Independent Payment Advisory Board (IPAB). (ii) Reduce Medicare’s excessive spending on prescription drugs and lower premiums for beneficiaries without shifting costs to seniors or privatizing Medicare..."

11. RERUN: On Stephen Moore's claim that "in reality" the Democrats are proposing a 62% top income tax rate: Moore's op-ed is simply not reality-based. There is no such proposal for a 62% marginal top income tax rate, not from any Democratic office holder or advisor. Moore claims that "in the late 1980s, the U.S. was nearly the lowest taxed nation in the world, and a quarter century later we're nearly the highest." The U.S. today has a smaller tax share of GDP than every single other G-7 nation. The reason that the U.S. collects a larger share of taxes from the rich is that our incomes today are much more skewed toward the rich than those of other G-7 nations.

12. RERUN: On Republican opposition to raising the debt ceiling: Right-leaning Clive Crook: "Tea Party true believers may be salivating.... Shutting down the government [by blocking the debt-ceiling increase is a button [Republicans] dare not press.... To do it in 2011, with the economy laid low and financial markets still twitchy, would be the limit of irresponsibility. It would be betting the recovery to make a point. This time, political annihilation might follow, and the party would deserve it..."

13. SPEAKS FOR ITSELF: Tim Dickinson: '[Roger] Ailes' Reported "Personal Paranoia" About Muslims, Gays Mirrored On Fox: Inside his blast-resistant office at Fox News headquarters, Ailes keeps a monitor on his desk that allows him to view any activity outside his closed door. Once, after observing a dark-skinned man in what Ailes perceived to be Muslim garb, he put Fox News on lockdown. "What the hell!" Ailes shouted. "This guy could be bombing me!" The suspected terrorist turned out to be a janitor. "Roger tore up the whole floor," recalls a source close to Ailes. "He has a personal paranoia about people who are Muslim -- which is consistent with the ideology of his network"...'

Paul Krugman beats me by 23 minutes with his "Shoulda Coulda Woulda" post--and, besides, I think it is better than mine.

Krugman:

Shoulda Coulda Woulda: on the Obama issue, I still think that the administration has made four serious misjudgments.

1. I think that it has paid too much attention to the short-run political risks of taking unpopular positions versus the medium-run political risks of having a lousy economy....

2. The administration made what I continue to believe was the awful decision to pretend that the half-measures it was actually able to get were exactly right, not a penny too small. Would it have made a difference in 2010 if Obama had been able to say to the country, “I asked for more aid to the economy, but those guys blocked it, and that’s why we’re not recovering faster”?...

3. It’s one thing to recognize that there’s only so much you can do; it’s another to adopt the arguments of your enemies. Since some time in the fall of 2009, Obama’s rhetorical stance has been basically that he’s like the GOP, but less so; can you even remember him offering a full-throated defense of Keynesian policies?

4. While the White House doesn’t set Fed policy, it does get to appoint Fed governors. Why are there all those vacant seats? Why weren’t there recess appointments?

Jared Bernstein:

Shoulds Versus Coulds | Jared Bernstein | On the Economy: [T]his got me thinking about the relative value of important voices like Paul [Krugman]’s promoting what we should do right now as opposed to what, given political constraints, we could do. And I think now is a good time to emphasize the latter. Let me be clear.  I totally agree that we mustn’t let “political realism” shut down our thinking on the best way out of this mess.  And while that kind of writing sometimes feels academic to me, if done well (as Paul does it), it can slowly but persistently set the stage for actually doing the right thing when the political landscape shifts.  Shift it will, and at that time, Paul will be among those who built the “new” paradigm from which economic policy will flow (“” around ‘new’ because most of this is known since Keynes)....

But then there’s this: There will be no WPA-type programs in our near future.  There was no appetite for them in the Obama admin in the midst of the worst recession since the Great Depression and there’s a lot less now.  The reasons for that are interesting and I’ll speak to them another day.  But it ain’t happening. And please don’t accuse me of “negotiating with myself” here.  I stressed above the importance of making those arguments, and I frequently made them myself as a member of the President’s economics team.

Hoisted from Archives: Hoisted from Comments: Tom Ricks Explains Why He Did Not Write the Stories He Thought He Should Be Writing: Drew writes, at http://delong.typepad.com/sdj/2006/08/tom_ricks_expla.html#comment-20780805:

This drove me nuts back on '02.

I worked for a Congressman at the time who, along with quite a group of similar minded folk, would give regular coordinated floor speeches at appropriate times in the build up to war asking the hard questions (this wasn't the "why can't we all get along Kucinich caucus" -- these were the hard-headed opponents to the war who were working closely with Gen. Clark and other national security thinkers).

Hoisted from Comments: Maynard Handley:

What Kind of News Does the Net Need?: From Crooked Timber 5 years ago. Nothing has changed since then, and the organizations involved are no more self-aware than they were in 2006.

Reporters are not expected to report the facts. They report “the news” – that is, transitory events. Underlying trends and conditions are not “news,” unless some event – the release of a report, a parliamentary hearing – makes them so. In Western countries, the press takes its cues for what is “news” primarily from the government and the opposition, with a few additional sources for specialized reporting—notably large corporations and the entertainment industry. Other than events prompted by these cues, only a large number of deaths—as in a riot, a natural disaster, a plane crash, or a terrorist attack—or a remarkable death—as in a gruesome murder—will qualify an event as “news.”

Jeffrey Goldberg, 2006:

What Would Jimmy Do?: Jimmy Carter... his latest book, the sensationally titled Palestine: Peace Not Apartheid.... This is a cynical book, its cynicism embedded in its bait-and-switch title. Much of the book consists of an argument against the barrier that Israel is building to separate Israelis from the Palestinians on the West Bank. The "imprisonment wall" is an early symptom of Israel's descent into apartheid, according to Carter. But late in the book, he concedes that "the driving purpose for the forced separation of the two peoples is unlike that in South Africa -- not racism, but the acquisition of land." In other words, Carter's title notwithstanding, Israel is not actually an apartheid state....

Carter does not recognize the fact that Israel, tired of the burdens of occupation, also dearly wants to give up the bulk of its West Bank settlements (the current prime minister, Ehud Olmert, was elected on exactly this platform) because to do so would fatally undermine the thesis of his book. Palestine Peace Not Apartheid is being marketed as a work of history, but an honest book would, when assessing the reasons why the conflict festers, blame not only the settlements but also take substantial note of the fact that the Arabs who surround Israel have launched numerous wars against it, all meant to snuff it out of existence...

Jeffrey Goldberg, 2010:

Apartheid State: Either the Jews of Israel would [then] grant the Palestinians the vote, at which point their country would lose its Jewish majority and its identity as a refuge for the Jewish people, or it would deny them the vote, and become an apartheid state. The latter option is untenable, of course: Many Jewish Israelis would be repulsed by this thought; other nations that already consider Israel a pariah would now have just cause; and Israel would lose its last remaining friend, the U.S., because no American -- including and especially young American Jews -- would identify with a country reminiscent of pre-Mandela South Africa. If Netanyahu had been thinking strategically, he might have realized this... he might have done something bold: Acknowledge that the age of Jewish settlement is over. He did mention, fleetingly, that certain settlements would be set adrift in a theoretical peace deal. But he seemed unaware that he was delivering a speech that could easily have been given 10 years ago. It is not 10 years ago. Israel is now 10 years closer to achieving full pariah status.... Israel will soon enough be seen by most of the world as the occupier not of disputed territory but of a foreign country.... Netanyahu, who understands the existential threat posed by Iran, does not seem to understand the nature of this other existential threat.... An eternal truth of Middle East politics is that the Palestinians never miss an opportunity to miss an opportunity. Lately, though, this has become an Israeli specialty. If Israel misses the chance this year to set the Palestinians on a course toward independence, it will jeopardize its future as a Jewish democracy.

James Fallows:

Scheduling Notes, Plus 'Net Needs News': Today is "Net Needs News" Day, meant as a reminder that the net-based news ecology is great, as long as a "regular" reporting-based news-gathering structure survives to supply info. I've examined this problem last year and this year in the magazine...

I really am not sure.

Look at http://washingtonpost.com/ right now. The lead economic story is Robert Samuelson, "Europe’s recovery at the abyss." Where is the value added in the article?

The net-based news ecology would do absolutely fine without it: "Greece could tip Europe into crisis" is not news, is not analysis, is not insight.

The second story is by Alan Fram covering a speech by Cass Sunstein at the American Enterprise Institute. There is nothing in it that you couldn't have gotten from a one-pager from Sunstein's office.

And there is Marjorie Censer "‘Insourcing’ effort still under fire despite Pentagon’s gradual retreat from plan."

On the business-economy page http://www.washingtonpost.com/business/economy/, we have Howard Schneider, "As the host of November’s summit in Hawaii, the Obama administration is trying mightily to restore the relevance of Asia-Pacific Economic Cooperation forum." We have four stories from Associated Press. We have links to Ezra Klein (who is excellent) and Steven Pearlstein (who is excellent).

For my issues, I think Bloomberg is a very valuable input into the net-based news ecology. I think that Associated Press is valuable. There certainly is an important role for Ezra Kleins and Steven Pearlsteins and aggregators and curators to play.

But otherwise? The value added is not coming from the "regular" reporting-based news-gathering structure. it produces: "Obama proposes revamping regulations to aid businesses", "Greece could tip Europe into crisis", "‘Insourcing’ effort still under fire despite Pentagon’s gradual retreat from plan", and "As the host of November’s summit in Hawaii, the Obama administration is trying mightily to restore the relevance of Asia-Pacific Economic Cooperation forum."

Until newspapers figure out how they have gotten themselves into a box in which, as one senior journalist told me, "on the average day I learn more from Ezra Klein's weblog than from the entire national news staff of the New York Times," they will have no idea how to climb out of the crate into which they have crawled.

Ezra Klein tells me that I will become a smarter person if I regularly go and read Ross Douthat's weblog. So I surf on over and find the very interesting:

Tim Pawlenty and the American Dream: Amid the sudden wave of Tim Pawlenty coverage, perhaps the strangest observation belongs to Christian Schneider, writing at National Review:

[W]hile [Pawlenty's] introductory video is effective at positioning himself as a “truth teller,” it contains one of my foremost pet peeves in political commercials: the “I’m from humble beginnings” talking point.... [I]t’s true that there are things to be admired in coming from humble beginnings. It teaches some people to value simple pleasures, and it gives them a sense of what manual labor is really like. But let’s face it — among people who grow up in trailer parks, the number who end up taking paternity tests on the Maury Povich Show outstrips congressmen by about 1.2 million to one. Yet voters seem to associate growing up poor as evidence of character and accomplishment.... Should we discount Paul Ryan because his family was fairly well off? Did Mitch Daniels drop out of the presidential race because his father was an executive at a pharmaceutical company? Is Al Gore’s opulent upbringing more objectionable than, say, everything he’s done since then? Of course, the answer is no. In fact, the inverse is true. When I drive by a house with a car up on blocks in the front yard, it doesn’t compel me to walk up to the guy in the tank top on the front porch, hand him my wallet, and trust him to spend my money wisely...

David Leonhardt:

As the Economy Wavers, Is Washington Paying Attention?: The latest economic numbers have not been good. Jobless claims rose last week, the Labor Department said on Thursday. Another report showed that economic growth at the start of the year was no faster than the Commerce Department initially reported — “a real surprise,” said Ian Shepherdson of High Frequency Economics. Perhaps the most worrisome number was the one Macroeconomic Advisers released on Wednesday. That firm tries to estimate the growth rate of the current quarter in real time, and it now says annualized second-quarter growth is running at only 2.8 percent, up from 1.8 percent in the first quarter. Not so long ago, the firm’s economists thought second-quarter growth would be almost 4 percent. An economy that is growing this slowly will not add jobs quickly. For the next couple of months, employment growth could slow from about 230,000 recently to something like 150,000 jobs a month, only slightly faster than normal population growth. That is certainly not fast enough to make a big dent in the still huge number of unemployed people.

Are any policy makers paying attention?

When the economy weakened in the first quarter, Ben S. Bernanke, the Federal Reserve chairman, and Obama administration officials said the slowdown was just a blip and growth would soon pick up....

The most sensible response for Washington would be to begin thinking more seriously about taking out an insurance policy on the recovery. The Fed could stop worrying so much about inflation, which remains historically low, and look at how else it might encourage spending. As Mr. Bernanke has said before, the Fed “retains considerable power” to lift growth. The White House and Congress, meanwhile, could begin talking about extending last year’s temporary extension of business tax credits, household tax cuts and jobless benefits beyond Dec. 31. It would be easy enough to pair such an extension with longer-term deficit reduction... the current moment remains a textbook time to use them — when the economy is struggling to emerge from the aftermath of a terrible recession. The one thing not to do is to turn to deficit reduction too quickly after a crisis, as Europe is painfully learning.

Almost four years after the mortgage market first began to quiver and unemployment began to rise, Americans are understandably eager for good economic news. But wishing for it doesn’t make it so. You have to wonder whether the people in Washington have learned that lesson yet.

Economics 24, Section 1: The Financial Crisis and the Great Recession of 2007-2012 (1 unit, letter-graded)

Professor J. Bradford DeLong

Friday 4:00-5:30, 597 Evans Hall, CCN: 22386

What should I have them read? They are freshmen, after all--freshmen with AP credit in economics, but freshmen...

Mark Thoma:

Economist's View: Paul Krugman: Against Learned Helplessness: I first started worrying about the possibility of a slow recovery of unemployment long ago.... I've tried to keep this issue alive here and in columns, reminding everyone at every opportunity that we need to do more about the unemployment problem, calling or jobs programs, more from the Fed, etc., etc. It's been frustrating. A year ago I gave up on policymakers, but promised "I'll still complain -- there's no reason to let policymakers off the hook." I've tried to do that, to the point where I've sometimes wondered if I'm overdoing it by making the same point again and again. I'm still pessimistic about anything being done to help the millions of unemployed -- I talked earlier this week about how "there seems to be no shortage of reasons to dismiss weakness in labor markets" -- but it's worth it to continue to try...

But I would not call it "optimism of the will." Nevertheless, it is worthwhile to keep on plugging.

Oren's Kitchen:

Richard Milne, David Oakley, and Michael Mackenzie of the Financial Times:

Key bond yields fall amid global growth fears: Benchmark government bond yields in the US, UK, Germany and Japan have fallen unexpectedly over the past seven weeks as investors take fright at weakening economic prospects and the still-critical eurozone debt crisis. The fall of 14 to 15 per cent in 10-year yields, the benchmark market interest rates for government bonds, has coincided with a sharp fall in inflation expectations in the same countries. “The global economy in February, March and April clearly slowed down and that will continue in May and June. That explains much of the fall in yields,” said Robert Parker, the head of the International Capital Markets Association’s investor council. “But you are probably going to get a [positive] surprise in July and August.”

Such a big move in bond markets is significant because the vast majority of investors at the start of 2011 thought government bond yields would rise consistently over the course of the year as economic growth normalised. But growth in the US and UK in recent months has fallen short of initial forecasts. Bond investors are also fretting about the end of the US Federal Reserve’s policy of buying Treasury bonds, known as quantitative easing. “The market is rather concerned about what comes after the Federal Reserve stops ­printing money and what it means for growth,” said Steve Lear, deputy chief investment officer at JPMorgan Asset Management.

Anthony O’Brien, strategist at Morgan Stanley, said: “The government bond markets are telling you that the industrialised economies are going to see very little growth this year and probably not much growth for a few years to come.” Investors say other reasons have contributed to the fall in yields, including the debate in the eurozone over a Greek debt restructuring and a fall in commodity prices that has lessened the pressure on central banks to raise rates. Some investors have also been forced to cover their negative bets on government bonds as buying from the Fed has pushed yields ever lower...

Things I want to have at the forefront of my brain--for when I am surprised, as I will be, by an unexpected question from an unexpected direction while talking to reporters, phone callers, passers-by, radio interviewers, cable TV interviewers, etc....

A baker's dozen:

1. On the Republican claim that Obama has increased nondefense discretionary spending by 80%: Paul Krugman: "The number comes from taking nondefense discretionary spending as reported — which rose 26 percent from 2008 to 2010 (Table 8.7) — and then adding the entire discretionary spending part of the stimulus.... [N]ot all of the stimulus funds were spent in 2010... [and] stimulus spending is already in those discretionary spending numbers. So this GOP talking point is a complete fraud; it’s based on counting the same spending several times over." This is not a mistake you can make by accident.

2. On Peter Wallison's claim that Fannie and Freddie caused the financial crisis: Mike Konczal: "The conservative talking point: half of all subprime and other high-risk mortgages were held by the GSEs!... This zombie argument finally got fully dismembered by Center for American Progress’ David Min.... Wallison and Pinto... [make] up a confusing definition of “subprime-like."... The fun part of making up your own definition is that it can be whatever you want it to be.... The three-card monte trick is pretty straightforward once you know where to watch. There’s a lot of statements that go: “Fannie and Freddie made a lot of subprime loans and other high-risk mortgages. And subprime loans had a 25% default rate!” And you naturally assume that the other high-risk loans must also have a gigantic default rate compared to regular mortgages. Except they don’t..."

3. On Senator John Barraso's (R-WY) claim that Don Berwick is Obama's health care rationing czar: Newt Gingrich: "Don Berwick at the Institute for Healthcare Improvement has worked for years to spread the word that the same systematic approach to quality control that has worked so well in manufacturing could create a dramatically safer, less expensive and more effective system of health and health care..."

4. On Tim Pawlenty's claim that ObamaCare has added to the national debt: Igor Volsky and Pat Garofalo: "According to the Congressional Budget Office, enacting the Affordable Care Act 'will produce a net reduction in federal deficits of $143 billion over the 2010-2019 period'. Similarly, the Center for Medicare and Medicaid Services (CMS) concluded that Medicare spending will decline $86.4 billion and that by 2019, it is projected to grow 7.7 percent—0.9 percentage point more slowly than if the law had not passed..."

5. On Tim Pawlenty's claim that President Obama is setting up this false choice between default and raising the debt ceiling: Pawlenty claims "you can take away that false choice by ordering the Treasury to pay the obligations to outside creditors first..." Failing to pay people inside the United States to whom the U.S. government owes money has a name, Tim. It's name is "default." It's not an alternative to default, it's a type of default.

6. On the claim that all approaches to curbing Medicare spending are unproven: Matthew Yglesias: "[T]he world has a lot of examples of health care systems that are more "statist" than Americans... the "statist" approach does in fact succeed in pushing costs down lower than what we experience in the United States.... [R]elatively "non-statist" approaches like the one they use in Switzerland lead to higher than normal costs for Europe... the "super-statist" approach of the United Kingdom leads to extremely low costs. Last, right inside the United States of America we conveniently have a single-payer health insurance system for senior citizens, and a more market-oriented one for non-seniors. And guess what? Medicare is cheaper. The administrative overhead is lower, and the unit cost of services rendered is also lower. The argument against a statist approach that needs to be taken at least somewhat seriously is the idea that statist approaches make health spending too low..."

7. RERUN: On Mitt Romney's claim that uncertainty about government policy hobbles the recovery: Will Wilkinson: "The principal themes of Mitt Romney's speech here in Des Moines earlier this afternoon were that America's economy remains a wreck because Barack Obama's a rank amateur whose woeful inexperience, ignorance of the requirements of a robust economy, and faintly un-American taste for the public-policy fashions in Europe, has created a climate of economic uncertainty that has retarded recovery." One more time: uncertainty about government policy shows itself in: (a) businesses who say they are unusually worried about government regulation, (b) investors who are willing to pay unusually high prices for insurance against inflation, and (c) savers who demand unusually high rates of return before they will lend. We see none of these things right now--what we see is a simple shortage of aggregate demand.

8. RERUN: On Glenn Hubbard's claim that Obama has "ruled out long-term entitlement spending restraint": Nancy Ann Min De Parle: "[T]he tools in the Affordable Care Act and other steps... already taken will save nearly $120 billion for Medicare over the next five yearss.... While we’ve made real and significant progress, there is more work to do... the President’s framework... includes reforms that would save at least an additional $200 billion for Medicare over the next decade. The framework would: (i) Bend the long-term cost curve by setting a more ambitious target of holding Medicare cost growth per beneficiary to GDP per capita plus 0.5 percent beginning in 2018, through strengthening the Independent Payment Advisory Board (IPAB). (ii) Reduce Medicare’s excessive spending on prescription drugs and lower premiums for beneficiaries without shifting costs to seniors or privatizing Medicare..."

9. RERUN: On Joe Nocera's claim that Democrats should not scorn Paul Ryan: "While the Democratic Party might be well served in trying to use the Ryan plan to bury their political opponents, the country itself is not. The debate we need is not about whether Medicare should be reformed, but how.... It would be nice if we could treat the Ryan plan not as an object of derision but as a launching-off point for a serious debate..." It would have been nice if Paul Ryan had proposed a Medicare plan that could be a launching off point for a serious debate--the Medicare reforms in the Affordable Care Act are such a launching-off point. The problem is that Ryan didn't: instead, he proposed something that is rightly an object of derision. That's not a problem with the Democrats. That's a problem with Paul Ryan and the Republicans.

10. RERUN: On Stephen Moore's claim that "in reality" the Democrats are proposing a 62% top income tax rate: Moore's op-ed is simply not reality-based. There is no such proposal for a 62% marginal top income tax rate, not from any Democratic office holder or advisor. Moore claims that "in the late 1980s, the U.S. was nearly the lowest taxed nation in the world, and a quarter century later we're nearly the highest." The U.S. today has a smaller tax share of GDP than every single other G-7 nation. The reason that the U.S. collects a larger share of taxes from the rich is that our incomes today are much more skewed toward the rich than those of other G-7 nations.

11. RERUN: On the Wall Street Journal's editorial claim that "the regulatory tax on Americans is now larger than the income tax": The WSJ editorial board writes: "so-called independent agencies like the Federal Reserve... were a perfect 0 for 17 in failing to estimate costs as well as benefits [of regulation]..." Are they seriously claiming that the Federal Reserve has overregulated financial markets over the past decade because it hasn't been writing bureaucratic reports explicitly enumerating and comparing costs and benefits?

12. RERUN: On Republican opposition to raising the debt ceiling: Right-leaning Clive Crook: "Tea Party true believers may be salivating.... Shutting down the government [by blocking the debt-ceiling increase is a button [Republicans] dare not press.... To do it in 2011, with the economy laid low and financial markets still twitchy, would be the limit of irresponsibility. It would be betting the recovery to make a point. This time, political annihilation might follow, and the party would deserve it..."

13. SPEAKS FOR ITSELF: Jake Sherman and John Bresnahan: The presentation [Republican whip Kevin] McCarthy and other top Republicans are giving to [Republican congressional] lawmakers is stunningly simple and illustrates just how unfamiliar House Republicans are with governing. On presentation slides viewed by POLITICO, McCarthy and other House leaders are using colored, flag-laden charts to show how much debt China and other nations hold. They are explaining to the members how Congress has raised the debt ceiling in the past — including as part of the Troubled Asset Relief Program and Democrats’ stimulus bill. Pushing back on conservative discontent, they are showing that both the conservative Republican Study Committee’s budget and the House Republican budget call for a hike in the debt ceiling. They have a slide explaining why California GOP Rep. Tom McClintock and Pennsylvania Republican Sen. Pat Toomey’s plan to prioritize debt payments won’t work — although they don’t mention the lawmakers by name...

If it is not obvious, for the "Virtual Green Room" feature:

For the Virtual Green Room: May 28, 2011: Things I want to have at the forefront of my brain--for when I am surprised, as I will be, by an unexpected question from an unexpected direction while talking to reporters, phone callers, passers-by, radio interviewers, cable TV interviewers, etc....

that I am experimenting with, I would welcome additions, recommendations, and suggestions. There's a lot of misinformation out there, and it is good to have at your fingertips what is needed to debunk as much of it as possible...

That is what somebody who observed him closely said to me a while ago. And they were right:

Tim Pawlenty : I don't think we should raise the debt ceiling. And if the Congress moves in that direction, the president, they better get something really good for it. It better be permanent, and it better be structural, like a balanced budget amendment and like permanent caps and limits on spending that are specific, not just aspirational.... My position many, many months ago when I wrote an op-ed for one of the major national newspapers was this. President Obama was setting up this false choice between default and raising the debt ceiling. And at least for a while, you can take away that false choice by ordering the Treasury to pay the obligations to outside creditors first...

Failing to pay people inside the United States to whom the U.S. government owes money has a name, Tim. It's name is "default." It's not an alternative to default, it's a type of default.

And this is supposed to be one of the grownups of the Republican Party.

We really, really, really would be better off without it.

Ezra:

Wonkbook: Why did Senate Republicans vote for Ryan's plan?: The big story isn't that Ryan's budget failed in the Senate. It's that it only lost the votes of five Republican senators. That's a remarkable show of party unity on behalf of a budget that can't pass, is deeply unpopular, and is largely blamed for the GOP's defeat in New York's 26th district.... Perhaps Senate Republicans really, truly believe in Ryan's framework. But since it's not passing, and about 40 of the Republicans who voted for the budget expressed interest in modifying it or finding an alternative, it seems difficult to hang this one entirely on conviction. More likely is that most Senate Republicans are, for the moment, more afraid of their base than of their voters.... For Democrats, of course, this is perhaps the best of all possible worlds. The Ryan plan won't pass, so they don't need to worry about it actually becoming law, but almost every Republican incumbent Republican has voted for it, making it a legitimate campaign issue in races all across the country...

Damian Paletta reports:

Rep. Ryan, Gene Sperling Trade Broadsides on Budget: “I want to point out how isolated the House Republicans are,” [Sperling] said. “Serious people doing serious discussions do not take an absolutists position that you cannot have a penny of revenue.”

He said Mr. Ryan has “put himself in a box” with his unwillingness to raise tax revenue. He said this forced Republicans to call for “very severe cuts” that if “explored” by Americans “they would not be proud of.”

Mr. Sperling attacked the House Republican proposals to overhaul Medicare and Medicaid, saying that the $770 billion in savings Republicans wanted from changing Medicaid would be unneccessary if Republicans would agree to roll back certain tax cuts.

“You can’t say to anybody who would be affected by that, that we have to do that, that we have no choice,” he said. “The fact is that all of those savings would be unnecessary if you were not funding the high income tax cuts.”

He also said that Mr. Ryan was wrong when he said that raising taxes as part of a broader package would hurt economic growth.

“Everything he said I heard nine million times in 1993,” said Mr. Sperling, who was NEC deputy director in the Clinton administration and later became Mr. Clinton’s national economic adviser.

I would have expected him to know better. I'm disappointed.

Matt Miller:

Wait! Paul Ryan has a point: Put this numbers game aside, however, and you still have the multitrillion-dollar point: In any other wealthy nation, a Ryan-sized voucher would more than suffice to ensure high-quality health care for seniors.... If you’re with me so far, the Democratic case on Medicare (as well as the GOP’s case last election) is therefore caught between two claims that can’t both be true: (1) we spend much more on health care than anybody else without better results; and (2) if we cut the growth of this spending to below the rate of GDP growth, we’d have to curtail Americans’ access and quality of care...

It depends on how we cut the rate of growth of health care spending. We can try to bend the health-care cost curve smart--computerization of medical records, diminishing the power of specialists to reward themselves in princely fashion, evidence-based medicine, accountability. We can try to bend the health-care cost curve stupid--avoiding delivery system reform, providing insurance companies with mammoth additional opportunities to game the system for immense profit by creating and exploiting adverse selection in new ways, depriving low-income people of the power to purchase health insurance and praying for the market efficiency fairy to come and rescue the health-care sector.

Paul Ryan's plan for the abolition of Medicare as we know it is an attempt to bend the health-care cost curve stupid. And it is indeed the case that cutting the growth of health-care spending in the Ryan way is highly likely to curtail Americans' access to and quality of health care.

Matt should have talked to Henry Aaron. Henry would have explained to Matt that he really shouldn't call the Ryan plan "premium support", and why the Ryan plan is unlikely to be part of any good solution.

Jonathan Bernstein says that Ross Douthat really does not understand the Republican politicians he supports.

Jonathan:

A plain blog about politics: What Forced Ryan's Errors: Ross Douthat today argued that the Republican budget as drafted by Paul Ryan contained an "unforced error" on taxes.... Well, there are a few things here.... I think [Paul Ryan] is signaling that he is, in fact, planning to rely on the Heritage numbers; he has no intension of really paying for rate cuts by cutting an equal amount of tax expenditures.... [I]f Ryan admits that he's using phony numbers, then those who praised his "courage" might not have done so. If he specifies the pay-fors and they wind up (as Jonathan Chait expects), that the overall result is to shift the tax burden away from the rich, then Republicans get exactly what they're getting now (but with less wiggle room for objecting to it, if that matters). Or if Ryan somehow does come up with pay-fors that keep the tax burden the same, he's going to wind up having a lot of major Republican supporters quite unhappy with him for taking away their important tax deductions.... [T]he problem is, basically, lowering tax rates for the wealthy as part of a deficit reduction plan. No matter what you do beyond that, it's going to be hard to sell.... Douthat misses the whole point of the exercise, which is to lower tax rates for rich people. Of course, if you accept the idea of increasing the share of taxes paid by the wealthy, then virtually none of these convoluted maneuvers are needed.

So: vagueness isn't a forced error; it's the best of a set of bad choices, given the starting point of dropping rates. And dropping rates for wealthy taxpayers isn't an unforced error; it's "forced" because it's the whole point of the Republican Party, at least these days.

Things I want to have at the forefront of my brain--for when I am surprised, as I will be, by an unexpected question from an unexpected direction while talking to reporters, phone callers, passers-by, radio interviewers, cable TV interviewers, etc....

A baker's dozen:

1. On Glenn Hubbard's claim that Obama has "ruled out long-term entitlement spending restraint": Nancy Ann Min De Parle: "[T]he tools in the Affordable Care Act and other steps... already taken will save nearly $120 billion for Medicare over the next five yearss.... While we’ve made real and significant progress, there is more work to do... the President’s framework... includes reforms that would save at least an additional $200 billion for Medicare over the next decade. The framework would: (i) Bend the long-term cost curve by setting a more ambitious target of holding Medicare cost growth per beneficiary to GDP per capita plus 0.5 percent beginning in 2018, through strengthening the Independent Payment Advisory Board (IPAB). (ii) Reduce Medicare’s excessive spending on prescription drugs and lower premiums for beneficiaries without shifting costs to seniors or privatizing Medicare..."

2. On Republican claims that contractionary fiscal policy is expansionary: Jonathan Chait: "Neil Irwin: 'Republican leaders urge a steep and swift reduction in government spending... that these cuts would strengthen economic growth not only in the distant future but almost immediately. That view is at odds with many of the nonpartisan groups...' [Alesina's] study... suggests that deficit reduction can increase growth.... But Noah Kristula-Green.... 'The problem: [Alesina] found very few cases.... 9 examples out of 107... more... problematic... is that... growth and deficit reduction occurred [only] in countries where cuts in spending were accompanied with... looser monetary policy... conservative-derided quantitative easing (QE2)...' In short, the proposition that cutting spending will increase short-term economic growth is totally unserious. The one piece of alleged ballast turns out not to support the case."

3. On Mitt Romney's claim that uncertainty about government policy hobbles the recovery: Will Wilkinson: "The principal themes of Mitt Romney's speech here in Des Moines earlier this afternoon were that America's economy remains a wreck because Barack Obama's a rank amateur whose woeful inexperience, ignorance of the requirements of a robust economy, and faintly un-American taste for the public-policy fashions in Europe, has created a climate of economic uncertainty that has retarded recovery." One more time: uncertainty about government policy shows itself in: (a) businesses who say they are unusually worried about government regulation, (b) investors who are willing to pay unusually high prices for insurance against inflation, and (c) savers who demand unusually high rates of return before they will lend. We see none of these things right now--what we see is a simple shortage of aggregate demand.

4. On the OECD's claim that stimulative economic policy is "largely exhausted; therefore, we have to 'go structural': Paul Krugman: [I]t’s just that can’t-do spirit.... [T]he report writes as if a period of 4 percent inflation rather than 2 percent inflation would be a terrible thing... it would be really horrible if we had inflation at the same rate as prevailed during Morning in America.... [O]ne of the main arguments for higher inflation when you’re facing a zero lower bound [is that] it would reduce real interest rates.... Third... a period of modestly higher inflation would help reduce that private debt overhang, which would help promote economic recovery, which would in turn raise revenues and help the fiscal situation. In sum, the case for higher inflation is vastly better than the OECD is willing to acknowledge."

5. On Thomas Saving and John Goodman's claim that the Ryan plan has no larger Medicare cuts in it than the Affordable Care Act does: Saving and Goodman: "In light of the heated rhetoric of recent days, it is worth noting that for everyone over the age of 55, there is no difference between the amount of money the House Republicans voted to spend on Medicare and the amount that the Democrats who support the health-reform law voted to spend. Even for younger people, the amounts are virtually identical with GDP indexing..." The key here is "GDP indexing." Ryan says that the Ryan plan does not have "GDP indexing" but "CPI indexing"--and that makes half the difference. The other half of the difference is that the Ryan plan requires that Medicare beneficiaries pay the (expensive) administrative overhead and (expensive) profits of private insurance companies, while the ACA does not.

6. On Irwin Stelzer's claim that investors are worried about a U.S. default: Stelzer: "All know that the crisis will be resolved by a last-minute deal.... All the negotiators, but not all investors. The gross value of contracts insuring against a U.S. default, although still small relative to the size of the Treasury debt market, has doubled from a year ago..." Each investor thinking they need insurance against a U.S. credit default event is matched by one who thinks they can make money providing such insurance. The volume is an indicator not of average investor opinion but of opinion spread. Average investor opinion can be read off of the price of U.S. credit default swaps. U.S. credit default swaps today cost 40% of what they cost in late 2008 and the same as they cost a year ago.

7. On Michael Barone's claim that Secretary Sibelius is "waiving away the law" for Obama campaign contributors: Barone: "If Obamacare is so great, why do so many people want to get out from under it?... Union members are only 12 percent of all employees but have gotten 50.3 percent of Obamacare waivers.... What other factors may be considered? Political contributions or connections? (Unions contributed $400 million to Democrats in the 2008 campaign cycle.) The [HHS] websites don’t say..." The Department of HHS: "Mini-med plans... do not provide security in the event of serious illness or accident, they are unfortunately the only option that some employers offer.... [T]he Affordable Care Act allows these plans to apply for temporary waivers from rules restricting the size of annual limits to [coverage].... Waivers only last for one year and are only available if the plan certifies that a waiver is necessary to prevent either a large increase in premiums or a significant decrease in access.... No other provision of the Affordable Care Act is affected by these waivers: they only apply to the annual limit policy..."

8. On Joe Nocera's claim that Democrats should not scorn Paul Ryan: "While the Democratic Party might be well served in trying to use the Ryan plan to bury their political opponents, the country itself is not. The debate we need is not about whether Medicare should be reformed, but how.... It would be nice if we could treat the Ryan plan not as an object of derision but as a launching-off point for a serious debate..." It would have been nice if Paul Ryan had proposed a Medicare plan that could be a launching off point for a serious debate--the Medicare reforms in the Affordable Care Act are such a launching-off point. The problem is that Ryan didn't: instead, he proposed something that is rightly an object of derision. That's not a problem with the Democrats. That's a problem with Paul Ryan and the Republicans.

9. RERUN: On Speaker John Boehner's claim that only Democrats have voted to cut Medicare: Era Klein: "Someone should have told John Boehner that the Ryan budget includes the Affordable Care Act’s Medicare cuts..."

10. RERUN: On Stephen Moore's claim that "in reality" the Democrats are proposing a 62% top income tax rate: Moore's op-ed is simply not reality-based. There is no such proposal for a 62% marginal top income tax rate, not from any Democratic office holder or advisor. Moore claims that "in the late 1980s, the U.S. was nearly the lowest taxed nation in the world, and a quarter century later we're nearly the highest." The U.S. today has a smaller tax share of GDP than every single other G-7 nation. The reason that the U.S. collects a larger share of taxes from the rich is that our incomes today are much more skewed toward the rich than those of other G-7 nations.

11. RERUN: On the Wall Street Journal's editorial claim that "the regulatory tax on Americans is now larger than the income tax": The WSJ editorial board writes: "so-called independent agencies like the Federal Reserve... were a perfect 0 for 17 in failing to estimate costs as well as benefits [of regulation]..." Are they seriously claiming that the Federal Reserve has overregulated financial markets over the past decade because it hasn't been writing bureaucratic reports explicitly enumerating and comparing costs and benefits?

12. RERUN: On Republican opposition to raising the debt ceiling: Right-leaning Clive Crook: "Tea Party true believers may be salivating.... Shutting down the government [by blocking the debt-ceiling increase is a button [Republicans] dare not press.... To do it in 2011, with the economy laid low and financial markets still twitchy, would be the limit of irresponsibility. It would be betting the recovery to make a point. This time, political annihilation might follow, and the party would deserve it..."

13. SPEAKS FOR ITSELF: David Brooks on how the Republicans should destroy Medicare the next time they try: "I do think that is the lesson. The Republicans are telling themselves, this year, it's different. This year the people are so disgusted by the debt they want us to be serious. And so what they effectively did was, they saw a line of battlements and a field of 400 yards with no cover, and they ran straight at it. And they get mowed down. And so I think a lesson for the Republicans has to be, do something more crafty. Don't just run straight at it..."

Anthony Eden:

ANTHONY EDEN'S, SECRETARY OF STATE FOR FOREIGN AFFAIRS OF GREAT BRITAIN, SPEECH ON BRITISH WAR AIMS: It would be foolish to belittle Hitler's conquest of the greater part of the continent of Europe; it is a remarkable and ruthless military achievement. From Northern Norway to the Southern Mainland of Greece, from the Western shore of Brittany to the Eastern marshes of Poland, this one man rules over scores of millions of conquered peoples, either directly or through his creatures, be they Nazis or Quislings.

It is this man and his satellites, all except the Deputy Führer, now otherwise engaged, who control the lives and liberties of all who dwell in these vast territories. In all these lands once free, no man or woman can by any legal means read in a newspaper, hear on the wireless, or harbour a thought of which the Führer does not approve.

There has never been anything so brutally thorough in all history. Hitlerism imposes servitude not only on the body but on the mind and even on the spirit. It is serfdom made absolute. It is tyranny imposed by a military machine of immense power; it is tyranny by an utterly ruthless despotism.

Yet this vast and sinister fabric will not endure. For this many reasons could no doubt be given. I will be content with two. First, because as this Nazi despotism is utterly ruthless, so is it boundless in its ambition. It threatens every land in Europe that it has not overrun; it has crossed into Africa and into Asia where Hitler seeks to dupe Arabs into slavery on the Euphrates by exactly the same methods that he employs on the Tiber or the waters of Vichy. The Nazi menace must continue its march to every country and to every continent. None will be safe anywhere until this system is smashed. It is the universal realization of this truth that will first set a term to Hitler's power.

Here I come to the second reason why Nazi tyranny cannot endure, because no system that is built upon hate can survive, and the Nazi is hated in every land he rules. He is the alien and the oppressor. Wherever Germany's vast armies of occupation are stationed the men of those armies know that the peoples whom they hold in subjection by their presence pray for their defeat and flight. The Nazi uniform is the emblem of servitude in all these lands. So it is that the Nazi is building up against himself a flood unparalleled in force and volume. When the dam bursts it will sweep Hitler and his gang away, the Gestapo, the Quislings, and the satellites, and much else besides. Every German in his heart must know and fear this. He has good reason to do so. The reckoning will indeed be wide and fierce.

So it is that Nazism seems to pretend to itself that there might be some permanence in the thralldom it imposes. And so it is that Hitler has found it necessary to give some decent covering to the naked policy of terror and robbery on which he has embarked in Europe. He has for this purpose invented what he calls "The New Order." Hitler pretends that this New Order is to bring prosperity and happiness to those countries which have been robbed by him of their liberty and their normal means of livelihood.

But what is the reality behind Hitler's high-sounding announcement? It is not easy to find much which is definite in Germany's New Economic Order, except the plan by which the more important industries are to be mainly concentrated within Germany herself.

Meanwhile the satellite and tributary nations are to be compelled to confine themselves to agriculture and to other kinds of production which suit German convenience. Currency devices will fix the terms of exchange between Germany's industrial products and the output of the other States, so as to maintain a standard of life in Germany much above that of her neighbours. Meanwhile all foreign commerce would become a German monopoly. As part of the New Order citizens of tributary states will doubtless be forbidden to learn engineering or any other modern industrial arts. The permanent destruction of all local universities and technical schools will inevitably follow. In this way intellectual darkness must aggravate low physical standards, and the national revivals, which Hitler fears so much, will be indefinitely postponed....

No one can suppose that the economic reorganization of Europe after the Allied victory will be an easy task. But we shall not shirk our opportunity and our responsibility to bear our share of the burdens. The peaceful brotherhood of nations, with due liberty to each to develop its own balanced economic life and its characteristic culture, will be the common object. But it is the transition to this end which presents the problem. It is the establishment of an international economic system, capable of translating the technical possibilities of production into actual plenty, and maintaining the whole population in a continuous fruitful activity, which is difficult. The world cannot expect to solve the economic riddle easily or completely. But the free nations of America, the Dominions and ourselves alone possess a command of the material means.

And, what is perhaps more important, these nations clearly have the will and the intention to evolve a post-war order which seeks no selfish national advantage; an order where each member of the family shall realise its own character and perfect its own gifts in liberty of conscience and person. We have learnt the lesson of the interregnum between the two wars. We know that no escape can be found from the curse which has been lying on Europe except by creating and preserving economic health in every country.

Under a system of free economic co-operation Germany must play a part. But here I draw a distinction. We must never forget that Germany is the worst master Europe has yet known. Five times in the last century she has violated the peace. She must never be in a position to play that role again. Our political and military terms of peace will be designed to prevent a repetition of Germany's misdeeds.

We cannot now foresee when the end will come. But it is in the nature of a machine so rigid as the German to break suddenly and with little warning. When it comes, the need of succour to the European peoples will be urgent.

Shipping will be short and local organization in Europe in a state of collapse. It is, therefore, important to begin in good time the discussion of priorities and allocations. Our friends and allies now represented in London will tell us what their liberated countries will need most urgently, in order that we may all co-operate and be ready for prompt action.

In speaking of the reconstruction of Europe I do not overlook the fact that its settlement may affect and may be affected by developments elsewhere, such as, for example, in the Far East. After the unhappy struggle now in progress between Japan and China, there will obviously be problems of similar magnitude to be faced in that part of the world, in the solution of which all countries concerned will, we hope, play their part.

The right economic outcome after the war requires on our part no exceptional unselfishness but will require constructive imagination. It is obvious that we have no motive of self-interest prompting us to the economic exploitation either of Germany or of the rest of Europe. This is not what we want nor what we could perform. The lasting settlement and internal peace of the Continent as a whole is our only aim. The fact that at the bottom of his heart every combatant knows this is the ultimate source of our strength. To every neutral, satellite or conquered country, it is obvious that our victory is, for the most fundamental and unalterable reasons, to their plain advantage. But that victory stands also for something greater still. Only our victory can restore, both to Europe and to the world, that freedom which is our heritage from centuries of Christian civilization, and that security which alone can make possible the betterment of man's lot upon the earth.

In the tasks that lie ahead may there be given to our statesmen the vision to see, the faith to act, and the courage to persevere.

Benn Steil and Manuel Hinds's claim that the loss of the dollar's status as principal reserve currency would be a very big deal:

The Federal Reserve would now be forced to operate under external constraints comparable with those imposed by the classical gold standard, under which the US needed more gold to create more dollars.... [T]he US would no longer be able to cover its current account deficits just by conjuring dollars, it would also have to issue debt in euros...

But... but... but... but...

The euro is not the principal international reserve currency. Neither is the pound, Nor are Australian dollar, the Canadian dollar, the Swiss franc, or quite a number of other currencies. Yet the eurozone, Britain, Australia, Canada, and Switzerland are very able to issue their own debt in their own currencies. And they are in no wise "forced to operate under external constraints comparable with those imposed by the classical gold standard." Not at all.

It's just not true that if your currency is not the world's principal reserve currency that you cannot issue debt in your own currency. Not true at all.

It's just not the case that if your currency is not the world's principal reserve currency that you are "forced to operate under external constraints comparable with those imposed by the classical gold standard." It's just not the case.

Why would anybody claim that these things are true?

Why would the Financial Times ever print any claims that these things are true?

I do not understand it...

Ezra Klein:

Responding to Ryan - Ezra Klein - The Washington Post: In this post, I’m going to focus on [Paul Ryan's] two most important arguments.... The first argument can be summed up as “look at Medicare Part D,” the second as “look at the rest of the world.”

”Our premium-support plan is modeled after the Medicare Part D prescription-drug program,” Ryan writes.... Since 2006 — the first year of the benefit — Medicare Part D’s average premium has risen by 57 percent (pdf). Between 2010 and 2011, premiums rose by 10 percent.... [T]he program’s actuaries expect (pdf) expenditures “to grow at an average annual rate of 9.7 percent for the 10-year period 2011 to 2020.” That may be an excellent performance when compared with the Congressional Budget Office’s initial projections. But it’s a lot faster than inflation, which is what Ryan needs for his [Medicare] plan to work. Moreover, Part D’s performance vis-a-vis the early projections has had less to do with the program itself and more to do with sectorwide trends in the pharmaceuticals market.... Ryan’s plan is capped while Medicare Part D isn’t. In Part D, the federal government pays, on average, 74 percent of program’s costs. And that support grows alongside the program’s costs. Ryan’s plan covers about a third of beneficiary costs, and that support grows at the rate of inflation — so much more slowly than the rest of the program, or than Medicare Part D. This has always been the main criticism of Ryan’s plan, and Medicare Part D’s structure shows what a radical decision he made to structure it like that.

Which brings us to the rest of the world. I asked Ryan how he could say that government control never works in health care when Germany, the Netherlands, France and other countries pay so much less, and get as much or more, than we do. Ryan’s reply... is basically a dodge. First, he changed the countries: He moved to Canada and the United Kingdom rather than the examples I mentioned.... But even so, Ryan’s wrong to draw an equivalence between our costs and theirs. In 2008, Canada spent about $4,000 per person, per year, on health care. The United Kingdom spent a bit more than $3,000. We spent about $7,400.... [S]uggesting that we’re all facing the same sort of pressure is flatly wrong....

In both of his major arguments, Ryan focuses on the wrong numbers. When defending Medicare Part D, he argues that it came in cheaper than expected, ignoring both the reasons behind that performance and the fact that growth in the program was nevertheless much faster than his plan could bear. When attacking the systems in other countries, he cherrypicks numbers to demonstrate they want to save money... but ignores the numbers showing that they spend half as much as we do. The result is that he gives people the wrong impression of both Medicare Part D and health systems across the world....

[W]e both agree that controlling health-care costs is an urgent priority, that maintaining and improving quality a necessary task, and that none of this will be easy. But that just underscores how important it is for us to be realistic about what we can do, clear-eyed about what has and hasn’t worked elsewhere, and open to ideas that don’t fit with our philosophical preferences.

Mark Thoma:

Economist's View: "We Have No Idea What the Inflation Rates for Health Expenditures Really Are": The driving force behind fears of growing debt in the future is rising health care costs. That's what's behind all the scary projections about future debt burdens. I've said many times that if we solve the health care cost problem, the rest of the budget problem will be relatively easy to fix. And, conversely, if we don't fix the health care cost problem, the other things we do to the budget won't help much at all (while cutting other parts of the budget doesn't fix the debt problem, i.e. the benefits are small, the loss of services could have large costs). But how much confidence should we have in the health care cost inflation estimates? Is the increase in costs due to quality improvements, which is not inflation, or pure price increases without the accompanying quality changes, which is? If we are going to cut social services such as Medicare based upon the fear of rising healch care costs , we should be aware of how much confidence we have in the estimates of health care inflation.

So how much inflation is there in health care? Mark Bils, an expert on "the intricacies of price measurement," says we really aren't sure but the problem may not be as bad as we think. In either case -- quality changes or pure price increases -- we still have to consider the impact of rising health care costs on the budget. But public policy should be very different if the cost increase is due to the discovery of, say, a cure for cancer rather than pure inflation:

Meyer: What type of prices do you think might have been overestimated?

Bils: Services and healthcare. When you look at healthcare expenditures, you see that inflation is extremely rapid, much more rapid than other inflation rates. But we have no idea what the inflation rates for health expenditures really are. We don’t know! You can’t measure quality of healthcare very well.

If I compare healthcare costs today versus in the year 1800, well, I could go out and buy a bunch of leeches today for almost nothing. And I could have the healthcare I had in 1800. If you had a certain condition and you had $10,000 to get treated at today’s health prices, or $10,000 to get treated at 1960s prices with 1960s technology, I don’t think it’s so obvious that people would want to go back in time to get their important health conditions dealt with. In that sense, you say, I don’t know if there’s inflation. It’s pretty hard to say that there’s been a lot of inflation over the long haul in healthcare...

I see from Paul Van de Water thatMegan McArdle continues her ill-advised and erroneous war against present-value calculations and the CBPP...

Ezra Klein:

The GOP’s jobs agenda: Now more than ever: Academic books pack about 600 words to a page. Normal books clock in around 400. Large-print books — you know, the ones for kids or the visually impaired — fit about 250. The House GOP’s jobs plan, however, gets about 200 words to a page. The typeface is fit for giants, and the document’s 10 pages are mostly taken up by pictures. It looks like the staffer in charge forgot the assignment was due on Thursday rather than Friday, and so cranked the font up to 24 and began dumping clip art to pad out the plan.

Which is odd, because there’s nothing in this plan that hasn’t been in a thousand other plans. When I asked David Autor, an economist at MIT and a specialist on labor markets, to take a look at the substance, he pronounced it a classic case of “what Larry Summers would call ‘now-more-than-everism.’” “Here’s how it works,” Autor wrote in am e-mail. “1. You have a set of policies that you favor at all times and under all circumstances, e.g., cut taxes, remove regulations, drill-baby-drill, etc. 2. You see a problem that needs fixing (e.g., the economy stinks). 3. You say, ‘We need to enact my favored policies now more than ever.’ I believe that every item in the GOP list that you sent derives from this three step procedure....

Even if you think every item on that agenda is a grand idea, this isn’t exactly fast-acting medicine. “At best, an agenda like this is meant to improve long-term growth by a couple of tenths of a percentage point,” says Larry Mishel, president of the Economic Policy Institute. “It takes a really long time to move the dial. It’s not a response to a cyclical downturn.” That’s okay, because the document doesn’t believe in cyclical downturns. It only believes in deviations from the Republican agenda.... Four years ago, of course, George W. Bush was president. And he was, as you might remember, a Republican, not a Democrat. As for Wall Street, well, Wall Street who? But it’s not just that you could read this jobs plan without knowing the financial crisis ever happened. You could read it without knowing the past decade ever happened. As Mishel says, “if lower taxes and less regulation was such good policy, then George W. Bush’s economy would have been a lot better. But under Bush, Republicans cut taxes on business and on investors and high-income people and they didn’t add many regulations and that business cycle was the first one in the post-war period where the income for a typical working class family was lower at the end than at the beginning.”

That, however, is the agenda the House GOP thinks we need. And now more than ever.

Duncan Black:

Eschaton: 16 Months Since The Pivot: It's been about 16 months since the White House geniuses started talking about deficits instead of stimulus or jobs, leading us into the insane conversation we're having now. Next job report comes out one week from today. Last one had unemployment at 9.0%.

As I understood it back at the start of 2009, the pivot from fighting the recession to restoring stability to U.S. long-run public finances was supposed to come when recovery was well-established and we could see 7.5% unemployment approaching--or when worry about the state of America's public finances was causing long-term real Treasury interest rates and inflation premia to spike.

But that was not the White House's plan. I don't know what the White House's plan was. I don't know what the White House's plan is. It doesn't seem to involve the most obvious and practical steps--recess-appointments to the Federal Reserve Board who will advocate QE III and Treasury communications to shape expectations of the value of the currency.

Things I want to have at the forefront of my brain--for when I am surprised, as I will be, by an unexpected question from an unexpected direction while talking to reporters, phone callers, passers-by, radio interviewers, cable TV interviewers, etc....

A baker's dozen:

1. On Stephen Moore's claim that "in reality" the Democrats are proposing a 62% top income tax rate: Moore's op-ed is simply not reality-based. There is no such proposal for a 62% marginal top income tax rate, not from any Democratic office holder or advisor. Moore claims that "in the late 1980s, the U.S. was nearly the lowest taxed nation in the world, and a quarter century later we're nearly the highest." The U.S. today has a smaller tax share of GDP than every single other G-7 nation. The reason that the U.S. collects a larger share of taxes from the rich is that our incomes today are much more skewed toward the rich than those of other G-7 nations.

2. On the GOP's jobs agenda: Ezra Klein: "Academic books pack about 600 words to a page.... The House GOP’s jobs plan, however, gets about 200 words to a page. The typeface is fit for giants, and the document’s 10 pages are mostly taken up by pictures. It looks like the staffer in charge forgot the assignment was due on Thursday rather than Friday, and so cranked the font up to 24 and began dumping clip art to pad out the plan..."

3. GOP jobs agenda II: David Autor: "1. You have a set of policies that you favor at all times and under all circumstances, e.g., cut taxes, remove regulations, drill-baby-drill, etc. 2. You see a problem that needs fixing (e.g., the economy stinks). 3. You say, ‘We need to enact my favored policies now more than ever.’ I believe that every item in the GOP list... derives from this three step procedure.... That’s not to say that there are no reasonable ideas on this list. But there is certainly no original thinking here directed at addressing the employment problem..."

4. On House Majority Leader Eric Cantor's 5% Growth Strategy: Larry Kudlow wrote: "I suggested to Cantor that the GOP adopt a 5 percent national growth target.... 'That', he told me 'is a fantastic goal'..." The sum total of Eric Cantor's 5% growth strategy is this: to tell Larry Kudlow that a 5% per year growth target "is a fantastic goal." That is it.

5. On the Ryan plan to end Medicare as we know it: Peggy Noonon says: "Rep. Paul Ryan['s]... main problem on Medicare is that people fear the complexities and demands of a new delivery system...." But the Ryan plan has no new health-care delivery system. It simply drastically cuts the amount of money the federal government spends on Medicare, and tells you you have to find a private insurance company--and pay all its extra overhead and profits--to dole out the slashed Medicare payments to your doctors.

6. Ryan plan II: Ezra Klein: "Since 2006... Medicare Part D’s average premium has risen by 57 percent.... That... is a lot faster than inflation, which is what Ryan needs for his [Medicare] plan to work.... When defending Medicare Part D, [Ryan] argues that it came in cheaper than expected, ignoring both the reasons behind that performance and the fact that growth in the program was nevertheless much faster than his plan could bear..."

7. Ryan Plan III: Ezra Klein: "I asked Ryan how he could say that government control never works in health care when Germany, the Netherlands, France and other countries pay so much less, and get as much or more, than we do. Ryan’s reply... is basically a dodge.... Canada spent about $4,000 per person, per year.... The United Kingdom spent a bit more than $3,000. We spent about $7,400.... When attacking the systems in other countries, [Ryan] cherrypicks numbers to demonstrate they want to save money... but ignores the numbers showing that they spend half as much as we do.... [Ryan] gives people the wrong impression of both Medicare Part D and health systems across the world..."

8. Ryan Plan IV: Ezra Klein: "Of late, Paul Ryan has adopted the curious tactic of blaming his Medicare plan on Bill Clinton.... So let’s review: President Clinton did not convene a bipartisan commission on Medicare, the bipartisan commission on Medicare that was convened didn’t endorse the plan, and the plan under consideration was very, very different from the plan Ryan has proposed. This talking point Ryan is trotting out just isn’t true..."

9. On the Wall Street Journal's editorial claim that "the regulatory tax on Americans is now larger than the income tax": The WSJ editorial board writes: "so-called independent agencies like the Federal Reserve... were a perfect 0 for 17 in failing to estimate costs as well as benefits [of regulation]..." Are they seriously claiming that the Federal Reserve has overregulated financial markets over the past decade because it hasn't been writing bureaucratic reports explicitly enumerating and comparing costs and benefits?

10. On Megan McArdle's claim that "we cannot pay for social security by ending the Bush tax cuts on high earners": McArdle writes: "The [CBPP claims] we could, by simply refusing to extend the Bush tax cuts on high earners, cover virtually all of the Social Security shortfall.... But this is not the case.... [O]ur debt is not yielding 5.25% right now... [but] around 3%..." She says no, but the reality is yes, we could. Interest rates are low during recessions and high during booms. Odds are that as the economy recovers interest rates will rise and average about 5.25% in the future--which is what the CBPP needs for its calculation to be correct.

11. On Republican opposition to raising the debt ceiling: Right-leaning Clive Crook: "Tea Party true believers may be salivating.... Shutting down the government [by blocking the debt-ceiling increase is a button [Republicans] dare not press.... To do it in 2011, with the economy laid low and financial markets still twitchy, would be the limit of irresponsibility. It would be betting the recovery to make a point. This time, political annihilation might follow, and the party would deserve it..."

12. On signs of accelerating wage increases: Paul Krugman: "Bloomberg reports on signs that wages may be accelerating. It’s worth bearing in mind that we’re talking about modest stuff — if the employment cost index accelerates to 2 percent, that’s still just productivity growth, and hardly a sign of runaway inflation [as it is consistent with price inflation of zero]. Still, this isn’t what I expected to see, and I will be watching developments.... [Nevertheless,] the invisible bond vigilantes are intensifying their invisible attack: 10-years down to 3.06 percent, and the TIPS spread falling..."

13. SPEAKS FOR ITSELF Harvey Mansfield on Arnold Schwarzenegger and Dominique Strauss-Kahn: "Men are much more violent, but also more given to innovation and invention. Most science and all common sense says this, but our society now wants desperately to be gender-neutral, and it has great difficulty in admitting this obvious difference.... It certainly seems strange that being capable of rape can make a person better qualified for greatness, but it’s probably true..."

WSC:

Paul Van de Water:

Off the Charts Blog | Center on Budget and Policy Priorities: To some extent, the [Rep. Paul] Ryan plan [to eliminate Medicare and replace it with vouchers to purchase private insurance] would shift health care costs from Medicare to the program’s beneficiaries. But... the much bigger news is that Ryan’s plan would increase total health spending for the elderly — the beneficiaries’ share plus the government’s share — by upwards of 40 percent, according to the Congressional Budget Office (CBO).... First, private insurance plans have much higher administrative costs than Medicare.  Second, private plans have less bargaining power with health care providers and are unable to negotiate payment rates that are as low as Medicare’s...

Bill Clinton was unfair to Sister Souljah: in context she was not trying to start a race riot but stop pointless looting and destruction. But it was effective politics.

Now Tim Pawlenty goes to the Cato Institute to tell them that their wish to cut defense spending is destructive and wrong. But somehow he does not catch fire...

Mark Thoma is impressed by the strength and reliability of the trend in U.S. real GDP growth:

Does This Ease Your Worries?: US GDP from 1870-2008: As you can see from this picture, historically we’ve always recovered from recessions. Eventually. But as you can also see from the Great Depression, recovery has not always been immediate.... I am confident that we’ll return to trend this time as well, the question is how long it will take us to get there. At this point — with the worrisome signs in recent data — it’s not looking to be anywhere near as fast as we’d like.... So we will get back to trend. But it will be awhile before we get there.

The New York Times chooses Frank Bruni for its op-ed page. Eric Alterman has something to say:

Think Again: The Times’ Frank Bruni, or How to Succeed in Journalism Without Really Caring (About Issues): New York Times editorial page editor Andrew Rosenthal announced the appointment of Frank Bruni to the august position of op-ed page columnist this week.... Shortly after the 2000 election, Richard Wolffe, then a reporter for the Financial Times, summed up what went wrong in the coverage. “The Gore press corps is about how they didn't like Gore, didn't trust him. … over here, [on the Bush press plane], we were writing only about the trivial stuff because he charmed the pants off us.” The New York Times’s Frank Bruni, however, did not think he or his colleagues were to blame. Rather, the trivial nature of his work was apparently the fault of the voters. “Modern politics wasn't just superficial because the politicians made it so,” he argued. “It was superficial because the voters let it be.”

For starters, in his 2001 campaign book, Ambling Through History, Bruni described the first presidential debate between Bush and Gore as a dispiriting debacle for Bush. He wrote: 

By any objective analysis, Bush was at best mediocre in the first debate, in Boston. … in all of [the debates], he was vague. A stutter sometimes crept into his voice. An eerie blankness occasionally spread across his features. He made a few ridiculous statements. … I remember watching the first debate from one of the seats inside the auditorium and thinking that Bush was in the process of losing the presidency.

Funny, but the guy who covered that very same debate for The New York Times—a fellow by the name of “Frank Bruni”—wrote it up rather differently. Nothing at all appeared in his coverage about Bush’s “ridiculous statements.” Instead, Times readers got the following:

It was not enough for Vice President Al Gore to venture a crisp pronunciation of Milosevic, as in Slobodan, the Yugoslav president who refuses to be pried from power. … Mr. Gore had to go a step further, volunteering the name of Mr. Milosevic’s challenger, Vojislav Kostunica. Then he had to go a step beyond that, noting that Serbia plus Montenegro equals Yugoslavia. … and as Mr. Gore loped effortlessly through the Balkans, barely able to suppress his self-satisfied grin, it became ever clearer that the point of all the thickets of consonants and proper nouns was not a geopolitical lesson. … it was more like oratorical intimidation, an unwavering effort to upstage and unnerve an opponent whose mind and mouth have never behaved in a similarly encyclopedic fashion.

So the problem with Al Gore was the fact that he could remember and correctly pronounce the names of world leaders with whom the United States had just been involved in war. This apparently offended Bruni and he thought his readers should share his offense—at least until he wrote a book about it...

As does Jamison Foser:

NYT's Frank Bruni complains that he didn't have fun on Obama's date night: See, the Obamas dined at Blue Hill, a restaurant that Bruni concedes is "excellent" and "romantic" and "very much among the city’s standouts."  All of which would seem to make it an ideal choice for Date Night.  But the Obamas failed to consider whether their meal at Blue Hill would be sufficiently exhilarating for their uninvited third wheel, Frank Bruni.

Bruni:

In the very predictability of this choice, in its all-too-neat squaring with the officially sanctioned food agenda, in its absence of surprise or abandon, isn’t it ever so slightly disappointing? Just a little too pat and controlled?

During the 2008 campaign Mr. Obama sometimes came across — and was often portrayed — as someone almost joylessly disciplined and restrained around food, and that discipline and restraint went hand in hand with an unflappability that, on occasions, made it difficult for him to connect.

It would have been fun to see the president contradict that impression and play against type when he and the first lady sat down to dinner in New York. It would have been interesting to watch him bust loose and reach for something rich, messy, decadent, gluttonous: a plate of fatty lamb ribs at Resto; some pâtés and terrines at Bar Boulud; one of the offal dishes at Babbo; that killer bone-in New York strip at Minetta Tavern; the oyster pan roast at the John Dory . . . I'm sure the Obamas are kicking themselves for not thinking about how they could make their date more fun for Frank Bruni. 

But is Bruni really suggesting that the Obamas' restaurant was too predictable -- and that they instead should have gone to a restaurant (Babbo) owned by Mario Batali?  Batali is, no doubt, a fine chef.  But is it even possible to imagine a more predictable choice for out-of-towners in New York looking for an upscale meal than a Batali restaurant?... Anyway, the point is -- and I can't believe this needs to be spelled out -- the Obamas' Date Night really isn't about entertaining Frank Bruni, no matter what Bruni thinks...

Winston S. Churchill:

I think Hand wins the Internet...

Hoisted from Comments:

Buffalo Buffalo Buffalo Buffalo Buffalo Buffalo Buffalo Buffalo: Hand writes: No, you needn't posit anything about a Buffalo type of buffalo.

Any sequence of the word "buffalo" of length n>1 is a grammatical sentence of English.

First, let n be odd. We start with n=3: "Buffalo buffalo buffalo"; that is, some buffalo do buffalo buffalo, i.e., some buffalo are buffaloed by buffalo. But of course the buffalo who are buffaloing may themselves be buffaloed by buffalo, so just as some cats that watch mice are chased by dogs, or as we say, cats dogs chase watch mice, buffalo that buffalo buffalo themselves buffalo buffalo, and we can say that buffalo buffalo buffalo buffalo buffalo. Anytime we have the noun buffalo, we can add the relative clause "who are buffaloed by buffalo", or better, instead of the noun phrase "buffalo who are buffaloed by buffalo", we may say simply "buffalo that buffalo buffalo", then add the rest of the sentence, yielding "Buffalo that buffalo buffalo buffalo buffalo", or even better, "Buffalo buffalo buffalo buffalo buffalo". To a sentence consisting of n (odd) occurrences of the word, we can produce a sentence of n+2 occurrences.

Thus for any odd n, a sequence of n occurrences is a sentence.

But just as a dog that chases cats is a dog that chases, buffalo that buffalo some buffalo are buffalo that buffalo, so from one of our sequences of an odd number of occurrences, we can lop off the final direct object, producing a sequence of an even number of occurrences that is a grammatical sentence. For any n>1, odd or even, a sequence of n occurrences of "buffalo" is a grammatical English sentence!

This has truly far-reaching implications. And shows you the power of abstract mathematical reasoning...

Where Matt says "money" I say "liquidity"; and where he says "liquidity" I say "safety"; and where I say "duration" he does not seem to say much...

Matt Rognlie

How did small losses cause the Great Recession?: Here’s a thought experiment: what would happen if gas stations suddenly started requiring payment in cash? Would there be a recession? Of course not.... [Y]ou’d probably carry around a little extra cash for when you needed to buy gas, but your life would stay mostly the same....

Imagine a world where the Fed, rather than targeting interest rates, changes the size of the monetary base (the sum of cash and bank reserves) according to some rigid rule.... In this world, the sudden imposition of a requirement that motorists pay cash would cause an increase in the demand for base money—but no corresponding increase in supply. Since the short-term demand for base money is incredibly inelastic with respect to the nominal interest rate (minimal fluctuations in the supply of base money are enough to implement massive changes in the federal funds target), even a modest increase in the demand for cash would be enough to produce a large, contractionary spike in the federal funds rate. And thus a seemingly irrelevant change in the method of payment for a tiny part of the economy would be enough to send the United States into a deep recession.

Of course, central banks around the world realized long ago that this would be a problem—that’s why they target interest rates.... But there’s still a lesson here: somehow, a small change in the demand for one asset (cash) has the potential to bring a $15 trillion economy to its knees, if the Fed doesn’t respond in the right way.

Mark Thoma:

Economist's View: Weekly Initial Unemployment Claims increase to 424,000: New claims for unemployment insurance went back up last week, and historically claims at this level indicate job loss. Every time claims go up we hear about holidays falling at unusual times, seasonal adjustment problems, weather related problems -- there seems to be no shortage of reasons to dismiss weakness in labor markets. So I'll be interested to see what excuse policymakers come up with this time to ignore the unemployment crisis.

Glenn Hubbard's description of the Ryan budget as "well crafted" certainly ought to become yet another internet meme.

The SS Titanic was undoubtedly well-crafted...

New Orleans's levees were well-crafted...

One of the greatest contributions Milton Friedman made to American economics was his insistence that we should be "Marshallians" rather than "Walrasians." Marshallians stay close to the data: are the theoretical mechanisms we are studying things that we can see? Are their predictions consistent with the gross features of reality? Supply curves slope up: if we say that demand has changed and pushed us along a supply curve, is it in fact the case that both quantities and prices have risen (or fallen)? Demand curves slope down: if we say that supply has changed and pushed us along a demand curve, is it in fact the case that quantities have risen and prices have fallen (or fallen and risen)?

If the first-order predictions of our theories are not visible in the first-order movements of the data--quantities, prices, asset values, and expectations--then, Friedman (and Marshall) would say, our theory is broken and we need to fix it.