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July 2012

The Macroeconomic Situation, and My Calendar This Morning

My calendar this morning:

  • 0800: Curl up into a ball on the floor
  • 0830: Whimper
  • 0900: Lapse into catatonia
  • 0930: Revert to whimpering
  • 1000: Sobbing
  • 10:30: Return to catatonia

Ryan Avent, by contrast, is still able to use his words:

BEN BERNANKE is on Capitol Hill today, providing his semi-annual commentary on the state of monetary policy. The backdrop for this testimony is as dark as it's been in some time. We would expect the American economy to manage trend growth in nominal output of about 5%… 3% real annual GDP growth and 2% annual inflation, give or take. In the 11 quarters since the end of the recession, NGDP growth has come in at more than a 5% annual rate only twice…. [W]e would expect consistent above-trend growth during the recovery to make up some of the lost ground.

In the first quarter of 2012, NGDP grew at a 3.9%…. Tracking estimates… for the April-June period… an NGDP growth rate of no more than 1.5%…. Mr Bernanke's testimony says as much:

The pace of economic recovery appears to have slowed during the first half of this year, with real gross domestic product (GDP) likely having risen at only a modest pace. In the labor market, the rate of job gains has diminished recently, and, following a period of improvement, the unemployment rate has been little changed at an elevated level since January…. With the unemployment rate expected to remain elevated over the projection period and ination generally expected to be at or under the Committee’s 2 percent objective, most participants expected that...the federal funds rate would remain extraordinarily low for some time...In addition to projecting only slow progress in bringing down unemployment, most participants saw the risks to the outlook as weighted mainly toward slower growth and higher unemployment.

Mr Bernanke ought to be brimming with apologies for such miserable performance. Instead, he simply notes:

The Committee again stated that it is prepared to adjust the size and composition of its securities holdings as appropriate to promote a stronger economic recovery in a context of price stability...

One might expect the chairman's Congressional audience to respond by saying, "Wait, the committee believes that it could take additional action and that such action would promote a stronger recovery and sustained improvement in labour market conditions? What in heaven's name are you waiting for?… [W]e can blame our abysmal performance on partisan polarisation and the filibuster! What's your excuse?"

Elsby and Shapiro: Why Does Trend Growth Affect Equilibrium Employment?

Why Does Trend Growth Affect Equilibrium Employment?:

That the employment rate appears to respond to changes in trend growth is an enduring macroeconomic puzzle. This paper shows that, in the presence of a return to experience, a slowdown in productivity growth raises reservation wages, thereby lowering aggregate employment. The paper develops new evidence that shows this mechanism is important for explaining the growth-employment puzzle. The combined effects of changes in aggregate wage growth and returns to experience account for all the increase from 1968 to 2006 in nonemployment among low- skilled men and for approximately half the increase in nonemployment among all men.



Late Night: Crybaby Conservatism on the Supreme Court: [T]he stream of accusations from conservatives that Chief Justice Roberts buckled under pressure from liberals to reverse his intended vote.  What liberals, you ask?  Well, this is the fun part.  I surveyed the literature on this subject, such as it is, and the complaints consistently cite only two examples:  a speech in the Senate by Patrick Leahy of Vermont in mid-May, and an article in the New Republic by Jeffrey Rosen two weeks earlier.

Yes, ladies and gentlemen, we really rolled out the big guns on this one…

So, given that this is hardly the kind of withering assault that the right-wingers are painting it as, what’s really going on?  If you guessed that the general rule about conservative projection — that they invariably accuse the left of exactly what they’re doing themselves — applies here, you’re probably right. The much-hyped liberal “pressure” cited above was easily outshouted by the conservative echo chamber complaining about it (in the National Review, Fox News, the Wall Street Journal, multiple columnists on the Washington Post op-ed pages, and so on)… all of this whining… in the week around Memorial Day.  It’s quite plausible that, as Linda Greenhouse of the New York Times suggests, key conservatives (apparently including Ramesh Ponnuru of the National Review) were tipped off… and so they decided to fire up the mighty Wurlitzer in a last-ditch effort to pressure Roberts themselves.

But apparently, that’s nothing compared to what was going on inside the Court itself…. [I]t’s not hard to figure that part of their pressure campaign was leaking to GOP-friendly media that Obamacare might survive — and, in classic right-wing fashion, attempting to accuse their opponents of improperly influencing the vote...

What Was Scott Sumner Talking About?

David Glasner:

I Figured Out What Scott Sumner Is Talking About « Uneasy Money: Paul Krugman and Simon Wren-Lewis pounced on this assertion, arguing that Ricardian equivalence actually reinforces the stimulative effect of government spending financed by taxes, because consumption smoothing implies that a temporary increase in taxation would cause current consumption to fall by less than would a permanent increase in taxation…. Now this response by Krugman and Wren-Lewis was just a bit opportunistic and disingenuous, the standard explanation for a balanced-budget multiplier equal to one having nothing to do with the deferred effect of temporary taxation. Rather, it seems to me that Krugman and Wren-Lewis were trying to show that they could turn Ricardian equivalence to their own advantage…

This seems to me to be wrong.

Suppose that there is no consumption smoothing and no balanced-budget multiplier: that households have a target level of savings independent of their income and wealth, so that raising their taxes by $1 leads them to cut back the present value of consumption spending not by $(1-s) but by the full $1. So that with no consumption smoothing there is no balanced-budget multiplier.

But now add consumption smoothing. This period's government purchases go up by $1. This period's private consumption spending goes down by $r. There is a short-term stimulative effect of fiscal policy even without a balanced-budget multiplier...

It's Been 36 Hours since the Romney Campaign Pushed the Plunger and Exploded Glenn Kessler's Position...

…that Romney had severed his ties with Bain in February 1999. When the campaign says "in 2002, he decided retroactively that he had retired from Bain in 1999", Kessler's claim that Romney had nothing to do with and bears no responsibility for any of Bain's actions is simply not supportable.

You know, I would have expected, by now, an admission, a retraction, and an apology from Glenn Kessler for getting the story wrong.

How long do you think we will have to wait for one?

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

Opportunity vs. Inequality

Lawrence Summers:

Land of opportunity can fight inequality: Progressives argue that widening inequality jeopardises the legitimacy of our political and economic system… a time when the market is generating more inequality is no time to shift tax burdens from those with the highest incomes to the middle class… [little] social value [is] associated with the activities behind many… fortunes, especially in finance…. Conservatives argue that… high tax rates run more risk than they once did of driving businesses and jobs overseas… policy measures taken to combat inequality directly will have perverse side effects.

Unfortunately, the points on both sides of the argument have considerable force…. I support moves to make the tax system more progressive… [but] inequality is likely to remain high and continue to rise even in the face of all that can responsibly be done….

Where does this leave the public policy agenda?… [T]he focus needs to shift… to inequalities in opportunity…. By definition, the number of children not born in to the top 1 per cent who move into the top 1 per cent must equal the number of those born into the top 1 per cent who move out… promot[ing] equal opportunity must both seek to enhance opportunity for those not in wealthy families, and to address some of the advantages enjoyed by the children of the fortunate.

The most important step that can be taken to enhance opportunity is to strengthen public education…. The leading universities have in the past 40 years, with the encouragement and support of the federal government, made a significant effort to recruit and support students from ethnic minorities. This should continue…. It is time the best institutions undertook the kind of commitment to economic diversity that they have long mounted towards racial diversity….

Parents always seek to help their children…. But there is no reason why the estate tax should decrease… when great fortunes are increasingly dominant. Nor should tax-planning techniques that are de facto tax cuts only for those with millions of dollars of income and tens of millions in wealth continue to be legal.

Liveblogging World War II: July 16, 1942

Jon Henley:

Letters from Drancy: The operation that became known as the round-up of the Vél d'Hiv began at 4am on Thursday July 16, 1942. Some 4,500 French policemen took part. The 12,884 victims - including 4,051 children - were held briefly in schools and police stations throughout Paris, then herded into municipal buses and driven away.

Some 7,000 of them, foreign, stateless and French Jews, men women and children, spent five days in the Vélodrome d'Hiver, the winter cycling stadium, on rue Nélaton in the capital's 15th arrondissement, without food and with one water tap between them. From there, families were sent to two camps in the Loiret district, where the children were separated from their parents. Single adults and couples without children were mostly taken straight to the Drancy transit camp just beyond the Paris ringroad.

Almost all of them ended up in Auschwitz. La rafle du Vél d'Hiv, Operation Spring Wind for the German occupiers, marked the start of the mass round-ups of Jews in France. Of the 33,000 rounded up and deported over the next two months around the country, 2,600 returned.

The Vélodrome d'Hiver itself no longer exists. But nearby, at the place de Martyrs-Juifs, is a monument where the French prime minister, Jean-Pierre Raffarin, will lay a wreath this Sunday in a ceremony also attended by the defence minister, the mayor of Paris, officials from the Jewish community and a handful of survivors.

Yes, National Review Is Classy. Why Do You Ask?

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

Jay Nordlinger:

Against Growth!: Chief Justice Roberts…. A reader writes, “I fear he has grown in office, and will keep growing.” Yes, that is a fear…. During the 1980s, Tip O’Neill and other liberals said, “We were hoping that Reagan would grow in office"…. [S]ome conservatives lamented that he had indeed “grown” in office. He had gone out of his way to accommodate liberals and moderates, and to accommodate the Kremlin. He was raising taxes, spending like crazy, welcoming wetbacks, pursuing arms control. One common cry from the right was, “None of this would be happening if Ronald Reagan were alive.”…

What Is in Mitt Romney's Tax Returns?

Dan Shaviro's view:

Start Making Sense: Why won't Romney release his 2009 tax return?: Increasingly, everyone… agrees that the reason for Romney's reluctance to release any pre-2010 tax return might be that what it would show is worse than all the heat he is taking for non-disclosure. But what could that be?…

  1. We know from the 2010 tax return, in which he had a net capital loss carryforward from 2009, that he zeroed out his net capital gains - including from carried interest Bain income - in 2009.

  2. 2009 was the last year in which he received certain Bain payments as the playout of his "retroactive retirement."

  3. It's been hard to understand what benefit he thought he was getting from the Swiss bank account, and there was an IRS amnesty program in 2009 for fraudulent nondisclosure of offshore income.  If he had to come clean in 2009, this might be embarrassing….

[I]t may be a reasonable guess that Romney had a lot more gross income in 2009 than 2010 and 2011, yet paid less tax or even zero tax.… We know from attachments to the 2010 return that some of his "blind trusts" were engaged in transactions identified by the IRS in Notice 2002-35, which pertains to fake loss-generating scams that involved abusing and misinterpreting the notional principal contract regulations…. [W]illingness to do extremely aggressive tax sheltering (such as through loss generation from circular flows of cash) in 2009 would not come as a huge surprise, even though it seems like a dumb idea if you are preparing to run for president again. I wonder if the very fact that he was running for president might have led him to figure that he was audit-proof, on the ground that the IRS would look too political if it started challenging things…. [A] Huffington Post commentator claims that, "according to people close to the situation, Romney would drop out of the presidential race before ever releasing further tax returns."  That certainly sounds dire, and a huge 2009 gross income plus huge claimed losses, perhaps even topped off by amnesty income reports, would be one way of getting there.

William Cohan:

The Secret Behind Romney’s Magical IRA - Bloomberg: The most mysterious of the unexplained mysteries about Mitt Romney’s considerable wealth is how he was able to amass between $21 million and $102 million in his individual retirement account during… 15 years…. Assuming Romney maxed out these tax-deferred contributions, he would have invested roughly $450,000 in his SEP-IRA during his years at Bain….

If you are the Warren Buffett of IRA investors, it is conceivable that you could turn $450,000 into as much as $102 million -- an increase of 227 times -- but not very likely…. Mere investing mortals would be lucky to still have $450,000 in the account….

So how did Romney do it?…

Mark Maremont… suggested that… Romney contributed to his IRA using the low-basis, low-value stock he received as a partner at Bain Capital in the various buyouts the firm did…. If Romney put $30,000 worth of Domino’s Pizza stock into his 1998 SEP-IRA, it is conceivable that it would be worth many times that amount when Domino’s went public in 2004…. [L]et’s say Romney was prescient and put into this hypothetical IRA only the stock of the buyout companies that did well, returning to investors a whopping 10 times their money…. Even so, that would [only] turn Romney’s $450,000 into $4.5 million…. [Even] $10 million… would still leave another $11 million to $92 million of unexplained value sitting in the presumptive Republican Party presidential nominee’s IRA….

Edward Kleinbard…. What was “quite troubling” to Kleinbard is that he suspected Romney may have contributed these interests to his IRA at a fraction of their market value -- “pennies on the dollar”…. “What’s very frustrating to me about all this is that we can only talk in abstractions and generalities because, again, of the lack of disclosure,” Kleinbard said.

Tyler Cowen Annoys Aaron Carroll

Aaron Carroll writes: Let’s try to stick to the real world when we talk about Medicaid.

Tyler Cowen annoys him in five ways:

  1. claim[ing] that we can’t “afford” more government intervention or, god-forbid, single-payer. That kind of statement willfully ignores the fact that every country that has MORE government intervention spends LESS.

  2. claim[ing] that an expansion of government insurance leads to lines and waiting when lots of countries have universal access and less of a wait-time problem than we do. Moreover, almost no one makes this argument when we expand private insurance, only government.

  3. blanket claim[ing] that doctors won’t accept Medicaid. Such statements often ignore the fact that the majority of Medicaid beneficiaries are children and pregnant women. We don’t need all types of doctors to accept Medicaid patients in equal numbers. They also ignore the fact that lots of doctors won’t accept new patients with Medicare or private insurance, either.

  4. claim[ing] government programs are “unpopular”. Like Medicare? I don’t think so. Is there any evidence that Medicaid is unpopular? I’d like to see it. Personally, I think that the fact that (a) all 50 states have bought in over time and (b) the Supreme Court just ruled that threatening to take it away is “coercive” speaks to the opposite. Additionally, polling shows the opposite of what Tyler (and lots of others) suggest.

  5. blanket acceptance of the awesomeness of the free market in health care, when there is no phenomenal evidence of its success. And again, those countries with less free market are cheaper, universal, and often just as good. So why are we always trying to run away from them?

Look, I get that people may not like the political implications of those systems. They may not like the governments that produce them. They may not like the lack of choice inherent in such systems. They may not like the potential limitations within them for making money, and therefore for innovation. But we need to stop making stuff up.

Counterfactuals We Can Believe in: The Economic Stakes of November

Suppose that Obama's voters had turned out in 2010 to vote for down ballot offices in as large numbers as they turned out in 2008. Where would the US economy be now?

There would have been no tea party Republican Governors' slashing of state employment, with attendance multiplier effect putting downward pressure on there and neighboring economies. There would have been no debt ceiling crisis to add substantially to economic uncertainty and increase the flight to quality. There would have been Larry Summers infrastructure bank, which would now be pumping out $200 billion a year in badly needed infrastructure investment.

Add all those up, and you get on economy with between $300 billion and $600 billion more of annual spending, depending on the multiplier. That is an economy with unemployment rate in the low 7s or the 6 percents. That's an economy growing at 3 to 4% per year instead of 1 to 2% per year. That some economy with a lower projected deficits and debt to GDP ratio then the economy we have today.

The failure of marginal Obama 2008 voters to turn out for down ballot candidates in 2010 was a disaster for America.

The election of Mitt Romney and a supporting congress this November would be a much bigger disaster for America. Think of the trainwreck that has been the Conservative government in Britain since 2010. And square it.

The Slowing U.S. Economy

Jason Lange:

Retail sales fall for 3rd straight month in June as demand slumped for everything from cars and electronics to building materials…. Retail sales slipped 0.5 percent, the Commerce Department said on Monday. It was the first time sales had dropped in three consecutive months since late 2008…. "Evidence is increasingly clear that the U.S. economy is slowing," said Jim Baird, an investment strategist at Plante Moran Financial Advisors in Kalamazoo, Michigan….

The retail sales report raised hopes the Federal Reserve could launch another bond-buying program to help the economy. U.S. stocks fell and the yield on 10-year government debt declined to an all-time low, reinforcing the view the U.S. economy needs more monetary stimulus. Fed Chairman Ben Bernanke will brief lawmakers on Tuesday and Wednesday on the Fed's view of the economy.

Job creation in the United States has slowed dramatically in the last few months as employers worry about a sagging global economy hurt by Europe's snowballing debt crisis. The International Monetary Fund slashed its forecast for global economic growth on Monday, urging European policymakers to take bolder action to stem their crisis and warning that China's economy risks a hard landing.

Courtland Milloy of the Washington Post: I Worked Like a Dog to Elect Corrupt Incompetents! But You Were Mean to Me! I Am the Real Victim Here!

Yes, it would be a mercy if the Washington Post were to have published its last piece of fish wrap.

Courtland Milloy:

Well look who’s back: the Fenty brigade, led by true believers of former D.C. mayor Adrian Fenty. Among them are my nemeses — whom I have referred to before as myopic twits because of their inability to see that dog parks, bike paths and cupcake parlors do not make a “world-class city.”

And still they come to gloat….

Fenty supporters claimed that a victory by his chief rival, then-D.C. Council Chairman Vincent Gray, would mean a return to rampant government corruption…. Gray has played right into their hands….

Nevertheless, Gray accomplished his most important task. He defeated Fenty and sent the snarky schools chancellor, Michelle Rhee, packing. And the myopics still don’t see why. Too busy tweeting flash-mob snowball fights and guzzling imported beers at urban sandy beach bars, they neither heard nor saw those standing on the precipice of the city’s ever-widening economic chasm…. Get rid of the poor people, kick them out of the city. Without them in the classroom, Rhee could claim that her “tiger mom” style of teaching was working because test scores were rising….

[T]he myopics would do well to open their eyes to the shadow city in their midst. Predicting sleazy behavior is not the same as having insight.

The whole point of an I-hate-Asian-Americans dog-whistle is that it is supposed to be inaudible, Courtland Milloy. Yours is very audible indeed.

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

Andrew Sullivan on the Self-Immolation of Glenn Kessler of the Washington Post

Andrew Sullivan:

Joining and the WaPo's Kessler, PolitiFact weighs in on the Obama campaign's outsourcing rhetoric, checking an Obama ad's assertion that Romney's companies were "pioneers in outsourcing":

Looking at all the evidence made public so far, we do not think Romney was actively involved in the day-to-day management of Bain after 1999. But it doesn’t mean his influence disappeared after he left.

And their conclusion:

We find reasonable grounds for labeling the companies as "Romney’s." He was the founder of Bain and assembled a team that looked to make high returns. One strategy was to invest in companies that played off the trend in outsourcing. We make no judgment on whether outsourcing is good or bad. It was widely seen as profitable, and Bain selected companies that would succeed. If picking a company makes it yours, then these were Romney’s companies and in a general sense, they did what he expected them to do. The one caveat is there is a gray area of direct accountability, because no one has reported that he was personally involved in managing those firms….

Meanwhile, Dylan Byers says Kessler has "jumped the shark", while John Cole piles on. Jason Cherkis and Ryan Grim respond by flat-out rewriting Kessler's column for him (spoiler alert: a different conclusion). Apparently bewildered by the amount of criticism, Kessler responds:

I readily concede that the years 1999-2002 represent a gray period in Romney’s background.

The SEC documents, especially the ones Romney signed, do raise some questions. One could suggest that because Romney did not fully extricate himself from Bain until after his Olympic sojourn ended, he should bear some responsibility for what happened at Bain in these years. You could even say he hired the people who made these mistakes. But that is entirely different from suggesting that he had a direct role in these suspect transactions….

When you ponder [Kessler's] mass of verbiage, you realize that Kessler is conceding that Romney bore "some responsibility" for the company whose actions are now under the microscope in the years 1999 - 2002, even though he was obviously not fully engaged in managing every deal (although his signature appears on several filings). That's really all that is at issue here: responsibility and accountability. Jay Rosen has been watching the story unfold, and suggests the fairness-obsessed press will not be able to handle Romney's "post-truth" campaign….

[A} Ben Smith post from last year, about Kessler and other fact-checkers, is worth dusting off:

The new professional "fact-checking" class is, at its best, doing good, regular journalism under the pseudo-scientific banner, complete with made-up measurements. At their worst, they're doing opinion journalism under pseudo-scientific banners, something that's really corrosive to actual journalism, which if it's any good is about reported fact in the first place.

Today's Reasons to Vote for Barack Obama

Justin Wolfers says:

Ezra Klein:

7) The Romney who passed universal health care in Mass,could have squared this circle.

That embracing that kind of destructive dynamism requires embracing Scandinavian safety net policies the GOP won't accept.

6) I would love to see the campaign where Romney defends outsourcing, creative destruction, etc. The reason he can't is...

5) The campaign that did this can't complain about misleading attacks -- one reason they shouldn't have done that

4) This is one of the most devastating attack ads I've ever seen:

3) That Romney wasn't more ready on Bain and taxes is one of the great mysteries of this campaign.

2) The Romney campaign's preferred defense -- he was CEO in name only, and not responsible -- seems much more damaging than the actual act.

A few thoughts on Romney and Bain and outsourcing. 1) Anyone expecting a major swing in the polls from this will likely be disappointed.

The Romney campaign must be shocked that this campaign has turned negative. No way they could have predicted that:

Great post RT @jbouie:  The Fake Headlines: Neither Obama Nor Romney Is Against Offshoring

Apparently, the difference between freedom and tyranny is 4.6 percentage points on the marginal dollar: 

Crucial: “One of the consequences of having a Congress this abysmal is the extent to which it shapes our expectations"

This Congress is bad in such extraordinary ways that we sometimes miss how bad they are in ordinary ways

It's the incredibly basic failures: FAA shutdowns and approps bills and Fed confirmations and time wasting.

What I found unsettling when I started going through the 112th Congress's record closely wasn't the huge failures, like the debt ceiling.

And Then Stephanie Cutter Crossed the Line! She Used Intimation!

Monty Python's Flying Circus:

Vercotti: Anyway a week later they came back, said that the cheque had bounced and that I had to see Stephanie.
Interviewer: Stephanie?
Vercotti: Stephanie (takes a drink) I was terrified of her. Everyone was terrified of Stephanie. I've seen grown men pull their own heads off rather than see Stephanie. Even Dinsdale was frightened of Stephanie.
Interviewer: What did she do?
Vercotti: She used intimation. He knew all the tricks, dramatic irony, metaphor, bathos, puns, parody, litotes and satire…


The remarkable thing is that I do not think Stephanie Cutter wanted to accuse Mitt Romney of committing a felony. Her argument was:

  1. The SEC filings say that Romney was in control of and responsible for Bain--sole shareholder, CEO, chairman, and president.

  2. People don't typically lie to the SEC.

  3. There's a conflict between what Romney told the SEC and what the campaign is saying now--that Romney was not in control of and not responsible for Bain.

  4. Believe the SEC filings: Romney was in control, and is responsible.

The word "felony" appears in her argument simply to back up the point that people don't set out to lie to the SEC--it's not healthy.

In this context, however, the word "felony" does not apply. Unless I am very, very misinformed, there are not criminal but civil penalties only for filing erroneous registration statements.

And the truly odd thing is that now the world appears to think that Mitt Romney (i) was in charge of Bain between 1999-2002, and (ii) somehow because he was in charge he committed some sort of felony.

And Glenn Kessler of the Washington Post Gets 5,723,695 Pinocchios: You Can't Have Retired If You Are Still Negotiating the Terms on Which You Should Retire Department

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

Sal Gentile:

Former Bain Capital partner says Romney was 'legally' CEO of Bain Capital until 2002: A former partner at Bain Capital, who worked at the firm when Republican presidential candidate Mitt Romney was in charge, acknowledged on Sunday that Romney was “legally” the chief executive officer and sole owner of Bain Capital until 2002, not 1999 as Romney has previously stated, and said that Romney was engaged in a “complicated set of negotiations” over his exit pay for at least two years after he says he left the firm.

“Mitt’s names were on the documents as the chief executive and sole owner of the company,” Ed Conard…. Romney's continued ownership of the firm enabled him to negotiate a better exit deal. "We had to negotiate with Mitt because he was an owner of the firm," Conard said…. “He’d created a lot of franchise value, and we were going to pay him for that,” Conard said, adding: “We had a very complicated set of negotiations that took us about two years for us to unwind. During that time a management committee ran the firm, and we could hardly get Mitt to come back to negotiate the terms of his departure because he was working so hard on the Olympics.”

Asked if Romney was driving a hard bargain during the negotiations, Conard said, “In part, yes, of course.” Romney legally remained the CEO and sole owner of Bain Capital until 2002…. Conard summed up Romney’s position this way: “'I created an incredibly valuable firm that’s making all you guys rich. You owe me.' That’s the negotiation.”

Romney has previously stated on financial disclosure documents that he “retired” from Bain Capital in February 1999. But Securities and Exchange Commission filings as well as a raft of other documents unearthed in the last two weeks by Talking Points Memo, Mother Jones, the Boston Globe and others list Romney as the “chief executive officer, president and managing director” of Bain Capital until 2002. Romney himself testified that he attended board meetings of companies Bain Capital had invested in after February 1999, according to the Huffington Post….

Asked whether Romney, as the legal president of the company between 1999 and 2002, could have ordered executives at Bain Capital at the time to put a stop to factory closures such as GST Steel, Conard said yes: “You’d have to presume that he was aware of it, yes. I don’t think he would have been aware of it.”

Asked if the factory closures and lay-offs that occurred between 1999 and 2002 were characteristic of Bain Capital’s record before 1999, Conard said, “I believe that’s true, yes. I think that Bain Capital does what Bain Capital does, which is try to make companies stronger and grow them faster.”

In 2002, Mitt Romney Retired from Bain in 1999

Taegan Goddard:

Romney "Retired Retroactively" from Bain: Romney adviser Ed Gillespie, seeking to explain discrepancies in the timeline when Mitt Romney actually left Bain Capital, said there "may have been a thought at the time that it could be part time, but it was not part time," The Hill reports. Said Gillespie: "He took a left of absence and in fact he ended up not going back at all, and retired retroactively to 1999 as a result."

Liveblogging World War II: July 15, 1942

Diving for the Secrets of the Battle of the Atlantic:

[O}n the afternoon of July 15, 1942. KS-520—a convoy of 19 merchant ships headed from Hampton, Virginia, to Key West, Florida–steamed about 20 miles off the North Carolina coast with war supplies. U-boats, at times hunting in wolf packs, had been viciously attacking the shipping lanes, especially off Cape Hatteras, sending 154 vessels to the sea floor along the East Coast.

Escorting the convoy were five naval vessels, two Kingfisher floatplanes and a blimp. Lying in wait was the U-576, a 220-foot-long German submarine that had been attacked days earlier, suffering damage to its ballast tank. But Hans-Dieter Heinicke, its commander, couldn’t resist attacking, firing four bow torpedoes. Two struck the Chilore, an American merchant ship. One hit the J.A. Nowinckel, a Panamian tanker, and the fourth tore into the Bluefields, a Nicaraguan merchant ship loaded with kapok (a ceiba tree product), burlap and paper. Within minutes, the Bluefields went to the bottom.

Just after firing, the U-576 popped to the surface only a few hundred yards from the Unicoi, an armed merchant vessel that fired upon it. The Kingfisher aircraft dropped depth charges and soon after sailors from the convoy saw the U-boat upend, props spinning out of the water, and spiral to the bottom.

Hoyt thinks it could be the only site off the coast where an Allied vessel and a German U-boat sank so close to each other...

The State of "Modern" "Macro"

Via Lars Syll. Bob Solow:

Dumb and dumber in modern macroeconomics: [When modern macroeconomists] speak of macroeconomics as being firmly grounded in economic theory, we know what they mean … They mean a macroeconomics that is deduced from a model in which a single immortal consumer-worker-owner maximizes a perfectly conventional time-additive utility function over an infinite horizon, under perfect foresight or rational expectations, and in an institutional and technological environment that favors universal price-taking behavior …

No one would be driven to accept this story because of its obvious “rightness”. After all, a modern economy is populated by consumers, workers, pensioners, owners, managers, investors, entrepreneurs, bankers, and others, with different and sometimes conflicting desires, information, expectations, capacities, beliefs, and rules of behavior … To ignore all this in principle does not seem to qualify as mere abstraction – that is setting aside inessential details. It seems more like the arbitrary suppression of clues merely because they are inconvenient for cherished preconceptions …

Continue reading "The State of "Modern" "Macro"" »

How Mitt Romney and Glenn Kessler Swift-Yachted Themselves

More extraordinary even than the Mitt Romney saga here is the Glenn Kessler of the Washington Post saga.

David Weigel on the Mitt Romney saga:

David Weigel: What confounds me about the Bain Capital/Romney story's current iteration is that there's such a long, uncontested record describing Romney's ties to the company through 2002…. So who gave people the idea that Romney had completely severed ties with Bain in February 1999? The Romney campaign! On May 14, bristling at the first Obama/Bain attacks, the Romney campaign (via spokeswoman Andrea Saul) sent out a kitchen-sink debunking statement. The argument, made VERY LOUDLY in bolded sentences, was that Romney "left Bain Capital" in 1999. The sentences in question:

The Bankruptcy And Layoffs At GS Industries All Occurred AFTER Governor Romney Had Left Bain Capital in February 1999. 

After Agreeing To Head The Salt Lake Olympic Committee In February 1999, Romney Said He Will Leave Running Day-Today Operations To Bain’s Executive Committee.

Fact Checkers Have Stated That The Facts “Exonerate Romney” From Allegations Relating To Any Bain Deals In The Early 2000s. 

You can see how people got the idea that Romney was out, see-ya, exit-state-left when it came to Bain. But here's the weird part. The articles being cited clearly said that Romney had left the company but would provide some advice when it was needed.

Continue reading "How Mitt Romney and Glenn Kessler Swift-Yachted Themselves" »

Eschaton: Netflixed

Duncan Black: Netflixed:

I don't think this piece on Netflix makes clear the real point: absent a different legal regime, streaming video might be the future of how people watch rental videos generally, but it's pretty obvious that there is no successful business model for subscription streaming that isn't essentially owned by the content makers. Well, unless net neutrality goes away and the cable cos get to throw their monopoly weight around in this area.

Streaming might kill Netflix DVD-by-mail eventually, but Netflix won't fix that problem with streaming. They'll never make money there.

"Microfounded" and Useful Models

To have fake micro foundations for your model is not a feature, but a bug.

Mark Thoma, last March:

Economist's View: "Microfounded and other Useful Models": More on today's apparent theme, at least for the moment, economic methodology. This is from Simon Wren-Lewis:

Microfounded and other Useful Models.... This title harks back to... Blanchard and Fischer’s Lectures on Macroeconomics. That textbook was largely in the mould of modern microfounded macroeconomics, but chapter 10 was not, and it was entitled ‘Some Useful Models’. One of their useful models is IS-LM…. [H]ow can something more ad hoc be more useful?… Can Krugman’s claim that they can be more useful than microfounded models ever be true?…

Let me pick on my friends here:

Continue reading ""Microfounded" and Useful Models" »

Adam Ozimek Gives Three Cheers for "Outsourcing"; I Give Minus Three Cheers for Bain Capital-Style LBOs

Adam Ozimek:

DeLong On Outsourcing: The political battle between Obama and Romney camps on outsourcing has prompted a lot of commentary… litigating whether Mitt Romney was responsible for outsourcing done by Bain Capital. Most people engaging in this issue, including many who absolutely know better, seem content to let outsourcing be used as mud….

Continue reading "Adam Ozimek Gives Three Cheers for "Outsourcing"; I Give Minus Three Cheers for Bain Capital-Style LBOs" »

FLASH: Allan Meltzer Has Failed to Mark Any of His Beliefs to Market

Paul Krugman:

Is Our Economists Learning?: David Glasner is unhappy with Allan Meltzer, who wrote an absurd op-ed in the WSJ in which Meltzer, among other things, just makes stuff up — claiming that markets are signaling fear of inflation when they are in fact doing no such thing…. But it’s actually much worse than Glasner acknowledges. Meltzer has been banging the same drum for more than three years…. You might think that the complete failure of the predicted inflation takeoff to materialize would at least give him pause. But no: his dogmatism is completely unshaken. And the thing is, he’s typical….

[H]as even one prominent economist or economic prognosticator who got everything wrong admitted it, or shown even a hint of humility? Has anyone perhaps hinted that the policy recommendations he was making might not be right, given the total failure of events to go the way he predicted?

I can’t think of one.

Glasner suggests that Meltzer has been corrupted by Murdoch’s influence. I disagree; I hold no affection for Murdoch, but one of the many unpleasant things we’ve learned in this crisis is that there was plenty of intellectual corruption in the economics profession from the get-go.

No, Mitt Romney Did Not Commit a Felony: Gets 1792 Pinocchios

Brando Simeo Starkey asks:

Did Mitt Romney Commit a Felony?: Romney supposedly left Bain Capital in 1999 and filled out certified paperwork affirming this to be true.  But the Boston Globe has a report out (that it stole from Mother Jones and without giving the proper credit) that claims that Romney headed Bain as late as 2002. claims that Romeny "would be guilty of a federal felony by certifying on federal financial disclosure forms that he left active management of Bain Capital in February 1999."

It is indeed possible for Romney to retain--as he told the SEC--the status of "sole stockholder, CEO, chairman, and president of Bain Capital" while being on a "partial leave of absence" (with no acting CEO, no acting chair, no acting president in place)and yet for Romney to also--as he told th FEC--no longer be an active manager of Bain Capital. That is a very fine needle to thread, but it can be done, and certainly nobody can prove beyond a reasonable doubt that Romney failed to do it. is wrong.

Mitt Romney is not guilty of a federal felony.

And FactCheck is wrong in another dimension as well. It claims that Romney bears no responsibility for anything Bain Capital did unless he was an active manager of Bain Capital at the time.

That is even sillier than's claim that Romney is guilty of a federal felony.

There are two roads you can go down:

  1. The formal-legal--the person who holds the title and has the legal authority and responsibility is responsible until there is a formal and legal transfer of authority and responsibility to somebody else--in which it is Romney's watch until relieved, and he bears responsibility until relieved, and he wasn't relieved until 2002.

  2. The practical--the person who chooses the personnel and establishes the company's standard operating procedures bears responsibility for what the people he hired did according to the standard operating procedures he established until enough time passes that his imprint on the company die away. If you build a company and run a company, then you bear partial responsibility for what the company does after you stop showing up at the office very day even if you do not remain sole shareholder, CEO, chairman, and president.

Both the formal-legal and the practical points of view lead to the same place--and it is not the place claims that it does.

1792 pinocchios to

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

Jeff Sachs Calls for Ponynomics!


Jeff Sachs:

[W]e need new economic strategies to overhaul broken systems of finance, labour markets, taxation, ecological management, budget management and investment incentives…. The new approaches must be long-term, structural, sensitive to inequalities of skills and education, aligned with the need for more sustainable technologies and “smarter” infrastructure (empowered by information technology) and congruent with long-term demographic trends…