Markets Don't Expect Inflation; Professional Forecasters Don't Expect Inflation; and Economists Who Know How to Do Their Job Don't Expect Inflation
Can We Haz QE III Now, Pleeze?

For the Virtual Green Room: June 3, 2011

Rebuttals to right-wing fake talking points and misinformation that 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. STUPIDEST RIGHT-WING CLAIM OF THE DAY: Michael Barone: "The [Republican presidential nomination] race has already occasioned a weight of commentary, much inevitably misleading. One piece of conventional wisdom seems to me clearly incorrect: it is that Republicans, a docile and deferential lot, always nominate the candidate next in line..." But the Republicans have done so for nearly a century: the last time they nominated somebody who was not next-in-line was Dwight D. Eisenhower in 1952. The last time before that was Warren Harding in 1920. How can it be incorrect if it is correct?

  2. **Bill Cohan's claim that Obama should not recess-appoint Elizabeth Warren: Felix Salmon: "The U.S. Congress only has two choices. It can raise the debt ceiling, or it can abolish the debt ceiling. The latter option isn’t realistic, sadly. Which means that the debt ceiling is going to be raised. Yet somehow the House of Representatives contrived today to vote 318-97 against raising the ceiling.... Faced with a Congress of such monumental doltishness, what is the White House to do? It can stick to its guns and try to put in place the very best policies for America that it can. Or it can randomly detonate various such policies, even if doing so would achieve precisely nothing, on some kind of inchoate principle that the occasional public sacrifice might somehow mollify an unknown number of lamebrained legislators. That seems to be the philosophy of Bill Cohan, who has decided that Elizabeth Warren must resign from the nascent Consumer Financial Protection Bureau, on the grounds that Congress won’t confirm her. But Cohan’s argument doesn’t even make internal sense.... By Cohan’s own account, then, any nominee would face exactly the same fate as Warren — even a Republican. It’s the bureau that these senators don’t like, and they’re not going to confirm anybody to run it unless and until they also get the authority to hobble it. Throwing Warren to the sharks would just give them a taste for blood, and make them even more optimistic about their chances of getting exactly what they want..."

  3. 150 Republican "economists" who claim that "an increase in the national debt limit that is not accompanied by significant spending cuts and budget reforms... will harm private-sector job creation in America": Finkelstein: "Benjamin Zycher: Michelle Obama Is The Product Of "Affirmative-Action Coddling" And "An Intellectual Lightweight."... Thomas C. Rustici: "In November We Will Kick Your Asses Out And Save This Republic From Your Socialistic Tyranny."... John Cogan: "It's Wrong To Allow Surpluses."... Larry Lindsey... advocated for the Bush tax cuts to the wealthy as an "insurance policy" against recession... Kevin Hassett... "Dow 36,000." Hassett made a public bet that the Dow would be closer to 36,000 than 10,000 by the year 2010. Yet, the Dow was at 10,000 in 2010... Douglas Holtz-Eakin, top economic adviser to Sen. John McCain's presidential campaign. The McCain campaign's response to the financial crisis was to suspend the campaign, arrange for a bipartisan meeting with the President, and then proceed to say nothing at the meeting.... Furthermore, 24 of the economists who signed both letters also signed a 2003 letter endorsing the Bush tax cuts as a "fiscally responsible" path to "more employment, economic growth, and opportunities for all Americans.""

  4. Mitt Romney's claim that we are only inches away from ceasing to be a free market economy: Paul Krugman: "Romney is not a stupid man; nor is he, as best one can tell, temperamentally an extremist. So he has to know that he’s talking total nonsense. The only major expansion of the state Obama is pursuing is a health care plan that is, ahem, essentially identical to what Romney did in Massachusetts. And given the realities of the federal budget — the federal government is basically an insurance company for old people with an army on the side, and the baby boomers are becoming seniors — the only way to keep federal spending below 20 percent of GDP would be to impose savage cuts on Medicare and Social Security. But Romney is willing to pretend to be an ignorant extremist to have any chance of getting the Republican nomination. So this ends up being a character issue: do you want a man that cynical in the White House?"

  5. RERUN: The Ryan plan: Michael Gerson paddles away from it as fast as he can: "Rep. Paul Ryan’s Medicare reform plan is admirable, even courageous, but not the final word. The subsidies he proposes may well be too small to be a realistic alternative to the current system. Republican presidential candidates will need some leeway to make their own recommendations. This is not heresy; it is strategy.... Triangulation is different from trash talk..."

  6. RERUN: Douglas Holtz-Eakin's claim that it would be reckless to pass a clean increase in the debt ceiling: Let's quote right-leaning Clive Crook again: "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..."

  7. RERUN: Robert Lucas's claim that Barack Obama's election has permanently depressed U.S. real GDP by 8%: Matthew Yglesias: "What’s happened, according to Lucas, is that Obama’s policies have caused us to deviate permanently to a lower, European-style growth path. The initiation of Social Security didn’t do that. Nor did its expansion in the 1950s. Nor did the creation of Medicare, Medicaid, Title I federal aid to schools or the War On Poverty. The Clean Air Act didn’t do it. Nor did the Clean Water Act or the Americans With Disabilities Act. George W Bush’s expansion of Medicare didn’t do it. Nothing about the growth of the welfare state in postwar America was able to jar America off the American-style growth path and put it on the European path. And then along came Barack Obama, the Affordable Care Act and a few other bills, and like magic we’re Sweden..... A leading economic scholar thinks Obama’s domestic agenda has been far-and-away the most consequential in American history. It’s kind of a big deal..."

  8. RERUN: Ruth Marcus's claim that Democrats refuse to acknowledge the need for any changes in the path of Medicare spending: Matthew Yglesias: When Will DC Pundits Acknowledge That The Affordable Care Act Contains Cost Control Efforts?: "[T]he vast majority of House Democrats... voted “yes” and... the Senate Democrats... all voted for [the Affordable Care Act]. The story about Republicans backing savage cuts while Democrats are in denial about the need for restraint is a comfortable one, but it bears no relationship to reality. Not only did the Affordable Care Act include specific cuts in Medicare subsidies to private insurers, it establishes a wide array of mechanisms that its authors believe will reduce the growth rate of health care spending, including in public sector programs. Hospitals were squealing about this just yesterday on the front page of The New York Times.... [Marcus is] just pretending that Obama forgot to address the issue..."

  9. RERUN: Republican smears of Elizabeth Warren--and journalistic complicity: 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!... But for anyone half paying attention, much less a beat reporter, this is not a close call: McHenry is full of it..."

  10. RERUN: Stephen Moore's 62% top marginal tax rate again: Ryan Chittum: "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..."

  11. 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.

  12. 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 years.... 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..."

  13. SPEAKS FOR ITSELF: A House Republican close to Boehner: “Of course, [not raising the debt ceiling is dangerous But it’s dangerous for everybody, especially the president. At the end of the day, [Obama] will have to give in.” Another senior GOP lawmaker: “Who has egg on their face if there is a sovereign debt crisis, House Republicans or the president?”