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September 2012

The Dynamics of Political Language: Partisan Asymmetries Weblogging

Comment on Jacob Jensen, Ethan Kaplan, Suresh Naidu, and Laurence Wilse-Samson, "The Dynamics of Political Language": as prepared for delivery:

Let me pick up and expand on the line of discussion initiated by David Gergen's excellent comment.

I think this paper does an excellent job of documenting and helping us understand ideological polarization.

I think this paper does not do a good job of understanding partisan polarization.

Theodore Roosevelt in 1896 was a Republican attack dog, denouncing Democratic Presidential candidate William Jennings Bryan as a mere puppet of the Alien Communist Anarchist John Peter Altgeld. Bryan, Roosevelt said:

would be as clay in the hands of the potter under the astute control of the ambitious and unscrupulous Illinois communist... free coinage of silver... but a step towards the general socialism which is the fundamental doctrine of his political belief... He seeks to overturn the... essential policies which have controlled the government since its foundation...

That's language as extreme as any we hear today--and this comes from somebody who is shortly to be Vice President, not from mere Secretary of State of Kansas Chris Kobacs saying that he is thinking of kicking the President off the ballot because he is a Kenyan Muslim and not a natural-born citizen.

Theodore Roosevelt, however, was very happy to make deals with Democrats--to put himself at the head not just of the Republican Party but of the bipartisan Progressive coalition, and try to either yoke them together or tack back and forth to achieve legislative and policy goals.

By contrast, Obama--and Clinton before him--have not been able to get people like Collins, Snowe, Voinovich, McCain to vote for their very own campaign finance and climate change policies.

Obama has not been able to get Mitt Romney to endorse his own health care plan.

Obama has not been able to get Paul Ryan to endorse his own IPAB Medicare cost-control proposal.

Why not? Because their party leaders have told them not to.

That partisan polarization seems to me to be very different from the ideological polarization, which is what we saw in the New Deal 1930s and the Progressive Era 1900s.

And this partisan polarization is not exclusively but largely concentrated among the Republicans. There are no signs that the Feinsteins, the Lincolns, the Nelsons, and so forth have been willing to sacrifice their policy preferences at all in order to give their president a victory or give the president of the opposing party a defeat. Things appear very different on the Democratic and the Republican sides.

Things I Said and Things I Did Not Say at the BPEA

(1) Thoughts on Case, Shiller, and Thompson: I would argue for use of the time machine to go back to 2000 and add more questions to the past decade's surveys. What we want to see are not the expectations of the average home buyer, but of the marginal buyer and the marginal non-buyer. In interpreting the surveys, I find myself trying to mark down the trimmed-mean of the survey to the expectations of the marginal buyer, and wondering how that markdown changes over time.One thing this paper has made me think is that I should place greater weight on credit standards in understanding the bubble. There will always be people who are overoptimistic.


And even if you are not overoptimistic, radical uncertainty about the long-run has powerful implications for how people should invest in long-duration assets like housing. In a non-recourse state like California, the optimal housing strategy is obvious: (i) build good relationships with your children so that you trust them with your assets, (ii) buy the largest house possible, (iii) mortgage it to the gills, (iv) pass all your assets--including claims to future earning power--down to your children, and (v) sit back and wait, and either be rich or live off your children. (In recourse states things are more complicated.)


This means that credit standards--especially when combined with the fact that the professionals in the housing business are all neither agents of the buyer nor agents of the seller but rather agents of the deal--seem to be even more important than I thought they were before I looked at this paper.

Continue reading "Things I Said and Things I Did Not Say at the BPEA" »

David Glasner: Two Cheers for Ben Bernanke

David Glasner:

Two Cheers for Ben: I admit that I have not been kind to Ben Bernanke. And although I have never met him, he seems like a very nice man, and I think that I would probably like Mr. Bernanke if I knew him. So, aside from my pleasure at seeing a concrete step taken toward recovery, I am happy to be able to say something nice about Mr. Bernanke for a change. And it’s not just me, obviously the stock market has also been pleased by Mr. Bernanke’s performance of late, and especially today.

Continue reading "David Glasner: Two Cheers for Ben Bernanke" »

Like a Dog to Its Vomit: Romney Economic Supporters Edition

The twitter machine says:

And let me turn the microphone over to Barry Ritholtz, with the observation that its publishing this piece alone makes it a sin to pay money to the Washington Post corporation for any reason:

REVIEW: Quit Doling Out That Bad-Economy Line | The Big Picture: It's been exactly [4 years] since the single dumbest newspaper column ever published appeared in The Washington Post. Breathtaking in its ignorance, shocking in its fallibility, astonishing in its author’s perversely misperceived world view, it stands as a monument to sheer cluelessness as an economic discipline.

It wasn’t merely off — its simply hard to find anything market or economic related in it that wasn’t 180 degrees wrong. It is a monument to why economists should never allow their politics to influence their day jobs.

I was otherwise occupied when this fetid pile of foolishness was published. [Four years] later, it reads even more ridiculously than it did on 9/14/08.

Let’s take a closer look at this, sentence by sentence, and see if we can find anything of value in it. (My comments are ALL CAPS AND BOLD):

Continue reading "Like a Dog to Its Vomit: Romney Economic Supporters Edition" »

Liveblogging World War II: September 14, 1942

Michael K. Jones, Stalingrad: How the Red Army Triumphed:

‘This was the crucial moment’, Mereshko continued. ‘Chuikov suddenly and dramatically pointed at the city map, speaking with real authority: “Here is my HQ – on this side of the river--800 metres from the Germans. Here is the position you will occupy – 500 metres from the Germans."' Suddenly everyone, including the recalcitrant officer, got the point they were all in this mess together….

Chuikov gave instructions for a counter-attack to regain the Mamaev Kurgan. His orders were not obeyed. It was feared that defenders charged with stopping the Germans reaching the Volga had simply walked off, abandoning their posts. German machine gunners were pushing towards the river embankment and had the central crossing in their sights. Chuikov's original intention was that Rodimtsev would take his troops across the Volga at nightfall. In fact, Mereshko admitted, it was no longer possible for the army to hold out that long:

After we lost the Mamaev Kurgan we had to change our plans – it simply wasn’t feasible to wait until dusk any more – and Chuikov and Rodimtsev decided that some of the 13th Guards would have to cross right away.

The first battalions would be shipped over immediately, in full view of the massed enemy aircraft hanging over the Volga, which were bombing and machine gunning everything that moved. With considerable courage, Rodimtsev insisted he would personally lead his men across. Their embarkation was put forward to 5.00 p.m., in broad daylight….

Continue reading "Liveblogging World War II: September 14, 1942" »

Don't Bomb My Country! It's Full of Hotties!! Weblogging


Sora Aoi attempts to return China to an understanding of what is really important:

Pornography and patriotism: OF ALL the positions with which Sora Aoi has excited her Chinese fans (and there have been many), this was among the more surprising. As anti-Japanese sentiment flared across China, the former porn star issued an online appeal, in fetching calligraphy, for Sino-Japanese friendship. One placard waved at anti-Japanese protests over the disputed Senkaku/Diaoyu islands read simply: “the Diaoyu islands belong to China; Sora Aoi belongs to the world.”...

Ms Aoi, unlike her government, has done nothing to hurt the feelings of the Chinese people, or at least the young men among them. She has more than 13m followers on Sina Weibo, a Chinese microblog, and her public appearances have caused near-riots with a rare pro-Japanese slant.

Yes, James Fallows Is Really Fed Up with Ryan-Romney. Why Do You Ask?

James Fallows:

Annals of Post-Truth Politics: Good for Norah O'Donnell: Relevant background point #1: Rep. Paul Ryan's fame has depended on his reputation as the man… of federal budget policy, and who was brave and honest enough to tell… the… truth…. Corollary #1: Therefore questions of selectively presented truth, or incomplete honesty, count against his reputation more than they would someone who is seen as a run-of-the-mill partisan….

Relevant background #2: In his speech at the GOP convention, Paul Ryan really laid on the "selectively presented truths," more than other major speakers from either party. Especially notable:

  • Slamming the Obama administration for Medicare cuts, without mentioning that his budget plan included the same cuts;
  • Slamming Obama for not doing more to support the Simpson-Bowles commission, without mentioning that Ryan was on the commission and voted against its recommendations;
  • Slamming the administration for the downgrade in the U.S. government's credit rating, without mentioning that the reason for that downgrade (as reported by Standard & Poor's when issuing the downgrade) was the threat by Ryan and other GOP House members to block a usually routine measure to raise the U.S. debt ceiling and therefore risk a default on U.S. sovereign debt.

Again, we expect politicians to shade and shape their version of reality. But getting a reputation for doing this, as Ryan is doing during the campaign, is a particular problem for someone who has been set up as a uniquely honorable truth-teller.

Which brings us to Ryan and Norah O'Donnell…. She presented him with… his slam of Obama for cutting defense spending, without mentioning that he has voted for these same cuts….

Relevant background #3. It is hard for political journalists to know enough about the substance of obscure budget votes to go up against a famed "numbers wonk" from the Budget Committee; harder still for a journalist to be sure enough of their knowledge, in the real-time pressure of live TV, to say "no, that's not right" to a national figure; and perhaps hardest of all for a mainstream network correspondent to take on the responsibility of saying, "This does not seem true," rather than just finding some credentialed "critic" to quote….

On the merits of what O'Donnell was asking Ryan about… Ryan's… rationalization… involves the deliberate omission of a major, elephant-in-the-room complicating truth…

Romney Seeks a Weaker Economy with Higher Unemployment--at Least fr Now

Pat Garafalo:

Romney Calls New Federal Reserve Actions To Boost The Economy ‘Artificial And Ineffective’

The Federal Reserve today announced another round of so called quantitative easing — QE3 — aimed at boosting the sluggish economy. Republicans have been warning the central bank against launching new measures, arguing that to do so would ignite inflation. However, inflation has been nearly nonexistent, Republicans concede that the Fed’s actions could help economic growth.

Presidential candidate Mitt Romney has been saying that the Fed should stay away from any new measures. In a statement following the Fed’s announcement, the Romney campaign called the central bank’s move “artificial and ineffective“:

"The Federal Reserve’s announcement of a third round of quantitative easing is further confirmation that President Obama’s policies have not worked. After four years of stagnant growth, falling incomes, rising costs, and persistently high unemployment, the American economy doesn’t need more artificial and ineffective measures. We should be creating wealth, not printing dollars. As president, Mitt Romney will enact bold, pro-growth policies that lead to robust job creation, higher take-home pay, and a true economic recovery."

The Fed estimates that the first two rounds of quantitative easing created about two million jobs. Romney’s economic plan, meanwhile, would kill 360,000 jobs in 2013 alone.


People Tell Me to Go Look at Bridgewater's Highly Successful Ray Dalio on How He Looks at the Economy

A Wicksell-Minsky approach with a dash of Abba Lerner thrown in…

A Conversation with Ray Dalio: Selections (edited):

(1) The economy works like a machine. There are cause-effect relationships. The problem is that most people encounter these relationships for the first time the very first time it happens to them in their life. But those same relationships have happened many, many times throughout history.

(2) There's such a thing as deleveraging. How does deleveragings work? There's a bubble. You know a bubble when you see a bubble. An economy is not a complicated thing. There's a transaction: Somebody makes a purchase of a good, a service, or of financial assets either with money or credit. When you make a purchase with money, you end the transaction: you don't owe anything. When you make it with credit, then there is a liability, a debt, a future obligation to deliver money…. Credit can be created. It's not created through the velocity of money, as is commonly believed. Credit can be created out of thin air. When I go into a store, or when I have somebody paint my house, then if I say I'm going to pay you later, I've created credit….

What we have is a credit cycle. If you don't have much debt, then you have the ability to borrow money. Let's say you earn a hundred thousand dollars a year and you don't have any debt. You can then borrow 10,000 dollars a year. You therefore can spend $110,000. Your spending of $110,000 is somebody else's income of $110,000. They earn $110,000, and the cycle becomes self-reinforcing. Debt rises faster than income. But debt can't rise faster than income forever.

What causes the debt cycle to stop? Traditionally, lowering interest rates has three positive effects:(i) lowering interest rates makes it easier to service debt; (ii) it makes items cheaper to buy on credit because the monthly payments are less; (iii) it has a present-value effect raising asset prices. That produces wealth and allows more borrowing. When you get to a situation where you can't lower interest rates anymore, that part of the cycle ends.

Then you go through a deleveraging you can't raise debt relative to income anymore, and so the cycle begins to work in reverse.

Continue reading "People Tell Me to Go Look at Bridgewater's Highly Successful Ray Dalio on How He Looks at the Economy" »

Jonathan Chait: Why Washington Accepts Mass Unemployment

Jonathan Chait: Why Washington Accepts Mass Unemployment:

In the years since the collapse of 2008, the existence of mass unemployment has stopped being something the economic powers that be even pretend to regard as a crisis. To those directly impacted, the economic crisis is an emergency, a life-altering disaster the damage from which will endure for years. But most of those in a position to address it simply have not seen it in such terms. History will record that the economic elite has viewed the economic crisis from a perspective of detached complacency....

The Obama administration has tried to prevail upon Edward DeMarco, the acting director of the Federal Housing Finance Agency, to offer lower mortgage rates to underwater home owners through Fannie Mae and Freddie Mac, which he controls. What interests me is not the proposal itself, nor even DeMarco’s obstinate refusal, but an editorial in the Washington Post applauding DeMarco for refusing to implement the program. The Post is the voice of the Washington centrist establishment, and the logic of the editorial is a telling signpost. The Obama administration had argued to DeMarco that the mortgage relief was a pure win-win. Not only would the lower mortgage rates provide relief to Americans desperate to keep their homes, and secondarily to give them more purchasing power for other things that would provide a small economic stimulus, it would save the government money: with lower mortgage rates, fewer would default on their government-owned mortgages. DeMarco replied that he believed the taxpayers would end up spending money on the deal: not much, but some. The Post’s thumbs-up editorial of DeMarco endorsed the reasoning that only a relief program that could be assured to cost the taxpayers nothing was worthwhile. It concluded, “with signs multiplying that the housing market may be finally bottoming out without this additional stimulus, perpetuating this particular battle does not strike us as the best use of the secretary’s time.”...

It’s important to respond to arguments on intellectual terms and not merely to analyze their motives. Yet it is impossible to understand these positions without putting them in socioeconomic context. Here are a few salient facts: The political scientist Larry Bartels has found (and measured) that members of Congress respond much more strongly to the preferences of their affluent constituents than their poor ones. And for affluent people, there is essentially no recession.... I live in a Washington neighborhood almost entirely filled with college-educated professionals, and it occurred to me not long ago that, when my children grow up, they’ll have no personal memory of having lived through the greatest economic crisis in eighty years. It is more akin to a famine in Africa. For millions and millions of Americans, the economic crisis is the worst event of their lives. They have lost jobs, homes, health insurance, opportunities for their children, seen their skills deteriorate, and lost their sense of self-worth. But from the perspective of those in a position to alleviate their suffering, the crisis is merely a sad and distant tragedy.

Jonathan Bernstein Is Naive: Not Only Does Today's Republican Party Not Know What Policy Competence Looks Like, Nobody Joining the Party since 1992 Knows What Policy Competence Looks Like

Only over-50 Republicans can possibly know what policy competence looks like--and so many of those over-50s who do that the remainder over-50s who do are pretending as hard as they can that they do not. I don't see any technocratic hope for the institution at all.

Jonathan Bernstein:

The Lessons of Akin: Klein writes that perhaps the Akin affair will be a "remembered as an important development for the conservative movement." Why?… What's interesting about Klein's piece is that instead of treating Akin as an aberration, Klein (quite correctly) lumps him in with Sharron Angle, Christine O'Donnell, and, yes, Sarah Palin, as examples of conservative heroes who weren't really up to the job…. I could make several criticisms of what Klein has to say, beginning with how he casts Paul Ryan as some sort of wonkish ideal -- as regular readers know, I'm with those who think that Paul's wonkery is, well, not especially impressive….

Continue reading "Jonathan Bernstein Is Naive: Not Only Does Today's Republican Party Not Know What Policy Competence Looks Like, Nobody Joining the Party since 1992 Knows What Policy Competence Looks Like" »

Worst Republican Candidates in 40 Years!

It's official: Ryan-Romney are worse than McCain-Palin.

Now I am not saying McCain-Palin were worse than Bush-Cheney. But they certainly were no better. And Bush-Cheney were certainly worse than Dole-Kemp, who were certainly worse than Bush-Quayle.

Whether Bush-Quayle were worse than Reagan-Bush is not clear. Quayle knew more policy substance than Reagan--but was not as good at hitting his marks and remembering his lines. But Reagan-Bush were certainly worse than Ford-Dole.

Which gets us back to Nixon-Agnew as the last time the Republicans offered us candidates less qualified to be president and vice president than these...

That is sobering.

Brad DeLong: Berkeley Friday Afternoon Political Economy Colloquium: Friday February 18, 2011: "Austerity" in the Context of the Global Economic Downturn

Brad DeLong: Friday February 18, 2011: "Austerity" in the Context of the Global Economic Downturn: Let me speak as a card-carrying neoliberal, as a bipartisan technocrat, as a mainstream neoclassical macroeconomist--a student of Larry Summers and Peter Temin and Charlie Kindleberger and Barry Eichengreen and Olivier Blanchard and many others.

We put to one side issues of long-run economic growth and of income and wealth distribution, and narrow our focus to the business cycle--to these grand mal seizures of high unemployment that industrial market economies have been suffering from since at least 1825. Such episodes are bad for everybody--bad for workers who lose their jobs, bad for entrepreneurs and equity holders who lose their profits, bad for governments that lose their tax revenue, and bad for bondholders who see debts owed them go unpaid as a result of bankruptcy. Such episodes are best avoided.

From my perspective, the technocratic economists by 1829 had figured out why these semi-periodic grand mal seizures happened. In 1829 Jean-Baptiste Say published his Cours Complet d'Economie Politique… in which he implicitly admitted that Thomas Robert Malthus had been at least partly right in his assertions that an economy could suffer from at least a temporary and disequliibrium "general glut" of commodities. In 1829 John Stuart Mill wrote that one of what was to appear as his Essays on Unsettled Questions in Political Economy in which he put his finger on the mechanism of depression.

Semi-periodically in market economies, wealth holders collectively come to the conclusion that their holdings of some kind or kinds of financial assets are too low. These financial assets can be cash money as a means of liquidity, or savings vehicles to carry purchasing power into the future (of which bonds and cash money are important components), or safe assets (of which, again, cash money and bonds of credit-worthy governments are key components)--whatever. Wealth holders collectively come to the conclusion that their holdings of some category of financial assets are too small. They thus cut back on their spending on currently-produced goods and services in an attempt to build up their asset holdings. This cutback creates deficient demand not just for one or a few categories of currently-produced goods and services but for pretty much all of them. Businesses seeing slack demand fire workers. And depression results.

What was not settled back in 1829 was what to do about this. Over the years since, mainstream technocratic economists have arrived at three sets of solutions:

  1. Don't go there in the first place. Avoid whatever it is--whether an external drain under the gold standard or a collapse of long-term wealth as in the end of the dot-com bubble or a panicked flight to safety as in 2007-2008--that creates the shortage of and excess demand for financial assets.

  2. If you fail to avoid the problem, then have the government step in and spend on currently-produced goods and services in order to keep employment at its normal levels whenever the private sector cuts back on its spending.

  3. If you fail to avoid the problem, then have the government create and provide the financial assets that the private sector wants to hold in order to get the private sector to resume its spending on currently-produced goods and services.

There are a great many subtleties in how a government should attempt to do (1), (2), and (3). There is much to be said about when each is appropriate. There is a lot we need to learn about how attempts to carry out one of the three may interfere with or make impossible attempts to carry out the other branches of policy. But those are not our topics today.

Our topic today is that, somehow, all three are now off the table. There is right now in the North Atlantic no likelihood of reforms of Wall Street and Canary Wharf to accomplish (1) and diminish the likelihood and severity of a financial panic. There is right now in the North Atlantic no likelihood at all of (2): no political pressure to expand or even extend the anemic government-spending stimulus measures that have ben undertaken. And there is right now in the North Atlantic little likelihood of (3): the European Central Bank is actively looking for ways to shrink the supply of the financial assets it provides to the private sector, and the Federal Reserve is under pressure to do the same--both because of a claimed fear that further expansionary asset provision policies run the risk of igniting unwarranted inflation.

But there is no likelihood of unwarranted inflation that can be seen either in the tracks of price indexes or in the tracks of financial market readings of forecast expectations.

Nevertheless, you listen to the speeches of North Atlantic policymakers and you read the reports, and you hear things like:

Obama said that just as people and companies have had to be cautious about spending, ‘government should have to tighten its belt as well...’

Now there were—and perhaps there still are—people in the White House who took these lines out of speeches as fast as they could But the speechwriters keep putting them in, and President Obama keeps saying them, in all likelihood because he believes them.

And here we reach the limits of my mental horizons as a neoliberal, as a technocrat, as a mainstream neoclassical economist. Right now the global market economy is suffering a grand mal seizure of high unemployment and slack demand. We know the cures--fiscal stimulus via more government spending, monetary stimulus via provision by central banks of the financial assets the private sector wants to hold, institutional reform to try once gain to curb the bankers' tendency to indulge in speculative excess under control. Yet we are not doing any of them. Instead, we are calling for "austerity."

John Maynard Keynes put it better than I can in talking about a similar current of thought back in the 1930s:

It seems an extraordinary imbecility that this wonderful outburst of productive energy [over 1924-1929] should be the prelude to impoverishment and depression. Some austere and puritanical souls regard it both as an inevitable and a desirable nemesis on so much overexpansion, as they call it; a nemesis on man's speculative spirit. It would, they feel, be a victory for the Mammon of Unrighteousness if so much prosperity was not subsequently balanced by universal bankruptcy.

We need, they say, what they politely call a 'prolonged liquidation' to put us right. The liquidation, they tell us, is not yet complete. But in time it will be. And when sufficient time has elapsed for the completion of the liquidation, all will be well with us again.

I do not take this view. I find the explanation of the current business losses, of the reduction in output, and of the unemployment which necessarily ensues on this not in the high level of investment which was proceeding up to the spring of 1929, but in the subsequent cessation of this investment. I see no hope of a recovery except in a revival of the high level of investment. And I do not understand how universal bankruptcy can do any good or bring us nearer to prosperity...

I do not understand it either. But many people do. And I do not understand why such people think as they do.

Liveblogging World War II: September 12, 1942

Michael Jones: Stalingrad: How the Red Army Triumphed:

[Stalin's] Order 227 had just been introduced, with its blocking detachments and penal companies, and Chuikov had been instructed to hold Stalingrad or die in the attempt. In his book, Beevor revealed a shocking piece of factual evidence, that on the Stalingrad Front during the course of the battle the Soviet authorities executed no less than 13,500 Red Army soldiers on charges ranging from desertion and cowardice to incompetence, corruption….

At the crisis point in the fighting in mid-September an NKVD report shows that 1,218 soldiers were held for attempting to leave the city without permission – of these 21 were shot, 10 arrested and the rest redistributed to different units. The army was always desperately under-strength and the blocking detachments responsible for enforcing this policy were frequently drafted into the frontline fighting.

Continue reading "Liveblogging World War II: September 12, 1942" »

Yes. Mitt Romney Is a Keynesian. Why Do You Ask?

Greg Sargent:

Romney’s Keynesian ad blitz:: I’m late to this, but it’s important: Romney’s latest ad blitz promises to protect and create jobs by ... protecting and increasing federal spending. Of course, the federal spending in question is defense spending, so somehow it doesn’t count. Romney said back in 2008 that spending cuts don’t help the economy; even in 2012 Romney has at times accidentally revealed his true beliefs. I didn’t expect Keynesianism — okay, “weaponized Keynesianism” — to show up in his ads, however.

Joe Gagnon Believes in Large Portfolio-Balance Effects of Quantitative Easing

Joe Gagnon: RealTime Economic Issues Watch | Michael Woodford’s Unjustified Skepticism on Portfolio Balance:

In his recent speech at the Federal Reserve’s annual Jackson Hole conference, Professor Michael Woodford of Columbia University attempted to pour cold water on the idea that the Fed’s purchases of long-term bonds (also known as quantitative easing) could lower bond yields. His contention was that the portfolio balance effect of such purchases would be minimal at best. I disagree, as do the bulk of central bankers.

This debate matters because, if Woodford is right, the Fed’s only tool for delivering more stimulus now is to commit to future policy actions that may be viewed as undesirable when they occur—such as promising not to raise interest rates when inflation returns. If the market were to doubt such a commitment from the Fed, the Fed would lose its ability to steer the economy. In reality, the portfolio balance channel gives the Fed a tool to guide the economy without unduly restricting future policy choices. This is not to deny, however, that Fed statements about future policy intentions may have important effects.

Woodford devotes several pages in his Jackson Hole remarks to discussing a paper I wrote two years ago with former Fed colleagues Matthew Raskin, Julie Remache, and Brian Sack. We showed that Fed purchases of long-term agency and government bonds in 2008 and 2009 lowered a range of long-term interest rates. We argued that most of those declines appeared to reflect a reduction in term premiums…. Woodford asserts instead that most or perhaps all of the declines in bond yields might have been caused by the market’s interpretation of the Fed’s statements and actions as indicating that the path of future short-term interest rates would be lower than previously expected.

Our paper, and more recent papers, presented evidence that counters most of Woodford’s empirical claims (D’Amico and King 2010, Neely 2010, D’Amico, English, Lopez-Salido, and Nelson 2011, Hamilton and Wu 2012, and Li and Wei 2012)…. Some Fed statements and actions clearly had no implications for the path of future short-term rates, and yet they still affected some asset prices. This evidence comes from a range of investigations, not solely from event studies, and the conclusion is not sensitive to changes in the underlying model used to identify movements in the term premium. These effects of Fed asset purchases are fully consistent with what would have been expected based on data from before the financial crisis, and with the portfolio balance view….

I focus on Woodford’s theoretical arguments against portfolio balance. I find them unpersuasive. For more theoretical arguments for and against portfolio balance, see a post by Jérémie Cohen-Setton and Éric Monnet on the Bruegel blog.

Woodford asserts that there can be no portfolio balance effect if two conditions hold: (1) the assets being bought and sold are valued only for their pecuniary returns, and (2) all investors can purchase and sell unlimited quantities of these assets. A third requirement he does not mention is that investors are rational, forward-looking, and fully informed…. These conditions are violated in clear and obvious ways in the real world. Indeed, Woodford acknowledges that money has a non-pecuniary return—transactions services—which is required for conventional monetary policy to work. There is no reason to assume that money is the only asset with a non-pecuniary return. The violation of Woodford’s second theoretical assumption is even clearer, as it requires that private agents have an unlimited ability to take short positions in the assets the Fed is buying. In fact, private agents seeking to borrow at any maturity face severe and binding collateral requirements and pay considerably higher interest rates than the Treasury. It is common in economics to make the benchmark assumption of rational, forward-looking, fully informed agents…. But it is one thing for investors to respond to a Fed announcement about imminent bond purchases and quite another for them to fully anticipate the implications of those purchases for their taxes and transfers in the distant future. Yet the case against portfolio balance requires precisely that knowledge…

Statement by the President on the Attack in Benghazi

Barack Obama:

I strongly condemn the outrageous attack on our diplomatic facility in Benghazi, which took the lives of four Americans, including Ambassador Chris Stevens. Right now, the American people have the families of those we lost in our thoughts and prayers. They exemplified America's commitment to freedom, justice, and partnership with nations and people around the globe, and stand in stark contrast to those who callously took their lives.

I have directed my Administration to provide all necessary resources to support the security of our personnel in Libya, and to increase security at our diplomatic posts around the globe. While the United States rejects efforts to denigrate the religious beliefs of others, we must all unequivocally oppose the kind of senseless violence that took the lives of these public servants.

On a personal note, Chris was a courageous and exemplary representative of the United States. Throughout the Libyan revolution, he selflessly served our country and the Libyan people at our mission in Benghazi. As Ambassador in Tripoli, he has supported Libya's transition to democracy. His legacy will endure wherever human beings reach for liberty and justice. I am profoundly grateful for his service to my Administration, and deeply saddened by this loss.

The brave Americans we lost represent the extraordinary service and sacrifices that our civilians make every day around the globe. As we stand united with their families, let us now redouble our own efforts to carry their work forward.

Yes. the ObamaRomneyCare Health Care Reform Is, So Far, Working as Predicted. Why Do You Ask?

Income, Poverty and Health Insurance Coverage in the United States: 2011 - Income & Wealth - Newsroom - U.S. Census Bureau:

The number of people without health insurance coverage declined from 50.0 million in 2010 to 48.6 million in 2011, as did the percentage without coverage - from 16.3 percent in 2010 to 15.7 percent in 2011.

These findings are contained in the report Income, Poverty, and Health Insurance Coverage in the United States: 2011. The following results for the nation were compiled from information collected in the 2012 Current Population Survey (CPS) Annual Social and Economic Supplement (ASEC)…

Yes. Mitt Romney Is Weasel-Scum. Why Do You Ask?

There is something very wrong not just with Romney, but with anybody who supports Romney.

In the inbox:

Key fact: the US Embassy Cairo statement that the Romney campaign was apparently referring to when it said: "It's disgraceful that the Obama Administration's first response was not to condemn attacks on our diplomatic missions, but to sympathize with those who waged the attacks" was issued by US Embassy Cairo before the incident at the Cairo Embassy. It was not a response to what happened at the Cairo Embassy, **nor to the murder at the US consulate in Bengazi.

Thanks for the slime, Romney.

From the NYT:

Bracing for trouble before the start of the protests here and in Libya, the American Embassy released a statement shortly after noon that appeared to refer to Mr. Jones: “The United States Embassy in Cairo condemns the continuing efforts by misguided individuals to hurt the religious feelings of Muslims — as we condemn efforts to offend believers of all religions.”… Apparently unaware of the timing of the first embassy statement, the Republican presidential candidate, Mitt Romney, put out a statement just before midnight Tuesday saying, “It’s disgraceful that the Obama administration’s first response was not to condemn attacks on our diplomatic missions, but to sympathize with those who waged the attacks…”

Hoisted from Comments: "The Art of Politics" by Paul Ryan

Lrellok said:

Brad DeLong: In Which Paul Ryan Runs for the Exit...: Sun Tzu said:

In 404 A.D., Liu Yu pursued the rebel Huan Hsuan up the Yangtsze and fought a naval battle with him at the island of Ch`eng-hung. The loyal troops numbered only a few thousands, while their opponents were in great force. But Huan Hsuan, fearing the fate which was in store for him should be be overcome, had a light boat made fast to the side of his war-junk, so that he might escape, if necessary, at a moment's notice. The natural result was that the fighting spirit of his soldiers was utterly quenched, and when the loyalists made an attack from windward with fireships, all striving with the utmost ardor to be first in the fray, Huan Hsuan's forces were routed, had to burn all their baggage and fled for two days and nights without stopping.

I have no clue why i would thing that was relevant here...

In Which Paul Ryan Runs for the Exit...

David Taintor:

AP: Paul Ryan To Begin Airing TV Ads For His Wis. House Seat: Rep. Paul Ryan, Mitt Romney's running mate, will begin airing ads defending his House seat in Wisconsin, the Associated Press reports. The ads will begin airing Wednesday.

If the ads touting him for Vice President aren't enough to win him House reelection, how can this possibly help?

This is doubt, fear, and panic overwhelming rationality…

And a 9/11 Present from Dick Cheney and George W. Buh...

You really think he would have Made His Apologies to the American people by now, wouldn't you?


Dick Cheney Bombshell: Barack Obama Caused 9/11 By Ignoring All His Daily Briefings: Good 9/11 Day to you, Wonkers, and May We Never Forget! Here is your ritual 9/11 gift, consisting of the retelling of the traditional 9/11 story by the Daily Caller explaining how Barack Obama never bothers with his PDBs — his Presidential Daily Briefings — and that is why he did the greatest Terror Attack on American soil, with his best friend Osama Bin Laden. Inpeach!

Former Vice President Dick Cheney took a shot at President Barack Obama late Monday night after it was reported that the president has attended fewer than half of his daily intelligence briefings. “If President Obama were participating in his intelligence briefings on a regular basis then perhaps he would understand why people are so offended at his efforts to take sole credit for the killing of Osama bin Laden,” Cheney told The Daily Caller in an email through a spokeswoman.

Hmmm, according to Marc Thiessen, who is a swell and very brilliant guy, Obama has only attended about half of his PDBs — you will remember the “PDB,” made famous by how George “el Macho” Boosh was all like “fuck it” to the guy who had come to warn him about Bin Laden being “determined” to strike inside the US, “You’ve covered your ass now.”

During his first 1,225 days in office, Obama attended his PDB just 536 times — or 43.8 percent of the time. During 2011 and the first half of 2012, his attendance became even less frequent — falling to just over 38 percent. By contrast, Obama’s predecessor, George W. Bush, almost never missed his daily intelligence meeting.

And that is why George “el Macho” Boosh Kept Us Safe (Never Forget), Barack Obama didn’t, and Osama Bin Laden is still alive and plotting, because Barack Obama couldn’t be bothered to do his homework.

But what do Barack Obama’s people say about this very grave charge? Oh, just that he reads the PDBs instead. As if anybody would ever believe a president could read words, on paper.

As Benjamin Franklin Said: "A Rising, Not a Setting Sun": 911 Anniversary


The first 911 on which the dead can sleep somewhat easier.

Osama bin Laden is dead too…

Barry Ritholtz

9/11 Recollections | The Big Picture: This is the first anniversary of 9/11 where Justice has been served. It is 11 years later and the wounds still seem fresh. Even the NYC weather — bright, crisp autumnal sunshine — feels similar. Each year, I try my best to avoid writing anything about September 11th. Given the history, it has become nearly unavoidable. Rather than write something new, I will instead point you to my experiences that day (which I wrote on the evening of 9/11). I was the Market Strategist for a firm headquartered at 2 WTC. I was fortunate to be in the LI office as events unfolded. I managed to get my head trader on the phone, and he gave me a full play by play of what was occurring to him in real time, until the towers went down and broke our phone connection. I put all of what he said down on paper, and published it the next day: A Personal Recollection From a Day of Horror (September 12th, 2001).

There is nothing else for me to add…

Continue reading "As Benjamin Franklin Said: "A Rising, Not a Setting Sun": 911 Anniversary" »

The Supreme Court Justices Who Elected George W. Bush Have an Awful Lot of Explaining to Do: 911 Edition

Kurt Eichenwald:

The Bush White House Was Deaf to 9/11 Warnings: On Aug. 6, 2001, President George W. Bush received a classified review of the threats posed by Osama bin Laden and his terrorist network, Al Qaeda. That morning’s “presidential daily brief” — the top-secret document prepared by America’s intelligence agencies — featured the now-infamous heading: “Bin Laden Determined to Strike in U.S.” A few weeks later, on 9/11, Al Qaeda accomplished that goal.

On April 10, 2004, the Bush White House declassified that daily brief — and only that daily brief — in response to pressure from the 9/11 Commission, which was investigating the events leading to the attack. Administration officials dismissed the document’s significance, saying that, despite the jaw-dropping headline, it was only an assessment of Al Qaeda’s history, not a warning of the impending attack. While some critics considered that claim absurd, a close reading of the brief showed that the argument had some validity.

That is, unless it was read in conjunction with the daily briefs preceding Aug. 6, the ones the Bush administration would not release.

Continue reading "The Supreme Court Justices Who Elected George W. Bush Have an Awful Lot of Explaining to Do: 911 Edition" »

Mitt Romney Assumes a New Health Care Position: Mambo Number 5 Since Sunday Morning

Mitt Romney:

Well of course I’m going to repeal Obamacare. I’ve said that on the campaign trail, I think, every single day. Obamacare must be repealed – in its entirety. It’s bad policy, it’s bad law, and frankly, a $2 trillion entitlement we don’t want and we certainly can’t afford. I have my own health care plan, and it does not require Obamacare to make our health care system work better. Obamacare is a disaster in my opinion, and has to be repealed entirely. But that doesn’t mean that we can’t do some important things to improve our health care system, like, for instance, getting medical malpractice reform, taking actions to lower the cost of health care, and of course, people shouldn’t be able to be dropped from their insurance if they get ill. These are all parts of the plan that I put out in Michigan, oh, a year, year and a half ago, describing my health care plan. So, the Obamacare approach is the wrong way to go. We need – instead of having government choice, we need consumer choice, and I’ll repeal Obamacare and make sure we put in place the kinds of reforms that bring down the cost of health care, and make sure at the same time we return to the individual and to their states the responsibility for the care.

There's something wrong with this guy. Just saying…

Doesn't Anybody in the Romney Campaign Know How to Play This Game?

That Romney cannot hire competent campaign managers is a very interesting piece of information indeed…

Zeke Miller:

How Mitt Romney Is Losing The Debate Expectations Game: Romney has devoted at least four days off the campaign trail since the GOP convention for official debate prep, campaign aides said, and has held ad hoc strategy and briefing sessions since shortly after becoming the nominee. "We're going to be ready — very ready to face the president and we're going to win," one top Romney aide told BuzzFeed. The Romney campaign has chosen simply to exude confidence about the upcoming contests…. "I just think we're being honest," a top Romney advisor, Stuart Stevens, told BuzzFeed….

Obama’s campaign… [has] privately and publically been projecting a low-grade panic that the Harvard Law-educated president could flub the coming debates. One told BuzzFeed last week that the president has the tendency to get "testy" when challenged, and that given his dislike for Romney, "who knows what can happen." "There were some bad debates last time around," warned another. They are, meanwhile, talking up Romney’s abilities….

Continue reading "Doesn't Anybody in the Romney Campaign Know How to Play This Game?" »

Liveblogging World War II: September 11, 1942

Glantz, Armageddon in Stalingrade, p. 84 ff.:

The Stavka's concerns became a reality on 10 September when XXXXVIII Panzer Corps' 29th Motorized Division finally broke through to the Volga River at Kuporosnoe [south of Stalingrad]…. Overnight on 10-11 September.. Hoth's and Kempf's ardor cooled a bit:

the [29th's] battalion [at Kuporosnoe] lost the half mile adjacent to the river… when it was overrun by furious charges….

elements of 131st Rifle and 35th Guards Rifle Divisions…. Encouraged by Sixth Army's and XXXXVIII Panzer Corps' progress… Weichs late on 10th September ordered Fourth Panzer Army to reorganize its forces nd mount an advance northeastward directly into the southern half of Stalingrad city…. seize the city "piece by piece"…. Paulus and Hoth made final adjustments to their forces before commending their final assault on the city.>As Paulus was completing Group Stahel's relief of 389th Infantry Division, on 10th and 11th September Hoth shifted IV Army Corps's 94th Infantry division northward… to provide infantry support for XXXXVIII Panzer Corps' thrust into Stalingrad city. The 94th… relieved 245h Panzer Division late on 11 September…. [B]y this time the [24th Panzer Division] reported its combat strength was 8,714 men, as compared with its ration strength of 15,401 men, and it had only 14 operable tanks….

By this time, all of [Russian] 62nd and 64th Armies' formations and units had suffered severe attrition, which reduced the two armies' total strength from about 104,000 men and 200-250 tanks on 3 September to about 90,000 mean and 120 tanks on 12 September…. 35th Guards and 131st, 315th, 112th, and 399th Rifle Divisons numbered 202-5 percent of their authorized strength of 10,386 men and far fewer bayonets, and 87th, 98th, and 196th Rifle Divisions fielded about 800, 300, and 400 bayonets…. Clearly, if Southeastern Front was to mount an effective dense of the city, additional reinforcements were required….

Continue reading "Liveblogging World War II: September 11, 1942" »

Yes, Mitt Romney Believes That Government Spending--and Thus the Americans Jobs Act--Boosts Employment. Why Do You Ask?

Paul Krugman:

Mitt Romney, Weaponized Keynesian - OK, I missed this. From Romney’s acceptance speech, attacking Obama:

His trillion dollar cuts to our military will eliminate hundreds of thousands of jobs, and also put our security at greater risk; His $716 billion cut to Medicare to finance Obamacare will both hurt today’s seniors, and depress innovation – and jobs – in medicine….

OK, so deficit spending hurts the economy — unless it’s spending on the military (or on the medical-industrial complex), in which case cutting spending destroys jobs…

Why the Economy Is Not Doing Better than It Is: Republicans

In a word, because of Republicans.

Paul Krugman:

The Jobs Program That Wasn't: Macroeconomic Advisers on the American Jobs Act, proposed a year ago:

We estimate that the American Jobs Act (AJA), if enacted, would give a significant boost to GDP and employment over the near-term.

  • The various tax cuts aimed at raising workers’ after-tax income and encouraging hiring and investing, combined with the spending increases aimed at maintaining state & local employment and funding infrastructure modernization, would:

    • Boost the level of GDP by 1.3% by the end of 2012, and by 0.2% by the end of 2013.
    • Raise nonfarm establishment employment by 1.3 million by the end of 2012 and 0.8 million by the end of 2013, relative to the baseline….

[H]aving blocked the president’s economic plans, Republicans can point to weak job growth and claim that the president’s policies have failed.

john Quiggin on the American Electorate

John Quiggin: Crooked Timber:

Andrew Gelman has a big data set…. Andrew kindly sent me the data, which classifies voters by education (5 levels), income (5 categories) and race/ethnicity(4), for a total of 100 categories, and gives, for each group the proportion voting Republican….

To focus on the claim about the white working class, I’ve divided the 100 categories into four roughly equal-sized groups:

  • working class whites (income less than 40K),
  • middle/high income whites with [college degrees]…
  • middle/high income whites without college degrees, and
  • all non-whites.

Then I’ve looked at how many votes the Republicans got from each group in 2008.

Continue reading "john Quiggin on the American Electorate" »

No. I Don't Think the Cato Institute Has a Future as Anything Other than a Propaganda Machine…

David Weigel sends me to Earl3d on Twitter reporting on the Cato Institute's incoming president John Allison:

At the Brook/Allison Q & A on CATO. #OCON

The old school 'Big L' anarchist/nihilist Libertarians a la Rothbard still are and have always been enemies of O'ism. (via @ybrook) #OCON

Brook says go to Rothbard' website and google his name to see what they think of him for more on that. #OCON

But many 'small l' libertarians have some good ideas and not all the bad/negative ideas of the old guard Libertarians. (Brook) #OCON

Now Allison is describing how positive on #AynRand are the Koch brothers. Particularly Charles. #OCON

Continue reading "No. I Don't Think the Cato Institute Has a Future as Anything Other than a Propaganda Machine…" »

Jesse Taylor on What Mitt Romney "Believes": Can't Any Republican Play This Game? Edition

Wonkette is a national treasure:

Mitt Romney Takes Four Different Positions On Pre-Existing Conditions In Twelve Hours: 9 AM EST: At one point, Gregory asked the Romney hive mind if it would keep any parts of Obamacare. Romney responded thusly:

Romney told Gregory he “likes parts of” Obamacare, and that he would leave in place the prohibition against excluding people with pre-existing conditions and the policy that lets young adults stay on their parents’ insurance policies “up to whatever age they might like,” Romney said, rather unbelievably. “I say we’re going to replace Obamacare. And I’m replacing it with my own plan. And even in Massachusetts when I was governor, our plan there deals with pre-existing conditions and with young people.”

This is really, really big news. Obamacare guarantees that you will not be discriminated against in terms of pricing or insurance issue if you have a preexisting condition, even if you were not covered while you had the preexisting condition. Because this is 2012 and we live in America, this is somehow still an issue that needs to be dealt with. Romney has never said this before, and so it is a massive shift in his stance on this issue. That means, of course, that it was actually a massive screw-up, and  it’s all the liberal media’s fault.

11 AM…. [zt]he Romney plan, two hours later, is this:

The preexisting coverage plan would prevent re-rating of patients or exclusion of coverage if they go from an individually purchased plan to an employer plan or the reverse. (ERISA already protects those who move from one group plan to another.) For those first entering the insurance market, states will have the latitude to develop mechanisms such as high-risk pools for those hard-to-insure individuals.

This is essentially the state of insurance as it currently exists under HIPAA, coupled with some vague nod toward insanely expensive state-run insurance pools for people who are unlucky enough to take jobs that don’t offer health insurance or who can’t afford to pay $900 a month for COBRA coverage after Bain loads up their employer with debt and then sells off the asset…. In other words, Romney’s plan is to do what we already do, but say it’s a new plan, and not grant any additional preexisting condition coverage to anyone.

4:55 PM: The National Review, however, did not get the above tweet, probably because they find Jen Rubin as insufferable as everyone else…. They asked the Romney campaign for a clarification, and this is what they got:

In reference to how Romney would deal with those with young adults who want to remain on their parents’ plans, a Romney aide responded that there had been no change in Romney’s position and that “in a competitive environment, the marketplace will make available plans that include coverage for what there is demand for. He was not proposing a federal mandate to require insurance plans to offer those particular features.” So now, Romney has flip-flopped on the part where he said young adults would be covered on their parents’ plans and also the part about the preexisting conditions. (Ed. – National Review edited out that part, Think Progress has the original edit.) THERE WILL BE NO PLANS FOR ANYONE TO GET ANYTHING SO SHUT UP AND NEVER EVER LOSE INSURANCE OR DON’T GO TO THE DOCTOR IF YOU DO, MKAY?

9:45 PM: Oops. Turns out the Romney campaign got confused by whatever question National Review asked (exclusive: it was a single text asking “WTF???”), and has the real real answer that it meant to give all along: “Gov. Romney will ensure that discrimination against individuals with pre-existing conditions who maintain continuous coverage is prohibited,” the aide said….

Mitt Romney will protect your right to be continuously insured as long as you have continuous insurance by doing absolutely nothing whatsoever because Congress already took care of that when he was just a failed Senate candidate.

The end.

Mitt Romney: 2 Plus 2 Really Does Equal 576! I Say So!!

Seung Min Kim:

Mitt: Math does add up: Pressed by NBC's David Gregory in an interview that aired Sunday on “Meet the Press”…. “Governor, where are the specifics of how you get to this math?” Gregory asked. “Isn't that an issue?”

“Well, the specifics are these which is those principles I described are the heart of my policy,” Romney replied. “And I've indicated as well that contrary to what the Democrats are saying I'm not going to increase the tax burden on middle income families. It would absolutely be wrong to do that.”

Asked to identify a tax loophole that he would close, Romney replied: “Well, I can tell you that people at the high end, high-income taxpayers, are going to have fewer deductions and exemptions.  Those numbers are going to come down. Otherwise, they'd get a tax break. And I want to make sure people understand, despite what the Democrats said at their convention, I am not reducing taxes on high income taxpayers.”

Josh Marshall: Mitt Romney's Big Problem

Josh Marshall:

TPM Editors Blog: Mitt Romney is embroiled in a bizarre controversy over unfurling, seemingly, three or four different and contradictory positions on ‘Obamacare’ and the fate of people with pre-existing medical conditions. Some of this is a sign of a disorganized campaign… some is new evidence of Romney’s ingrained flipfloppery. But some of it…. There have been many signs over the course of this long campaign that Romney remains very proud of his role bringing health care reform to Massachusetts… he still thinks it’s awesome. But of course his entire campaign has been based on squelching those feelings.

Only every once in a while it slips out. Remember a short while ago his press secretary got in trouble by pointing out that if those Steel Workers put out of work by Bain had had RomneyCare, everything would have been cool…. Romney gets the basics of how health care markets function — that you can’t solve things like pre-existing conditions and the rest without having everyone buy into the pool. He has to publicly say that mandates are the antichrist and that the national version of RomneyCare is an abomination. But the fact that he doesn’t really believe either keeps tripping him up…. [T]he logic of the campaign has perhaps asked too much of him. He can’t quite let go.

Can Anything Persuade John Cochrane to Do His Homework Before He Writes Again?: Monetary Policy "The Fed Has Did What It Could--NOT!" Edition

It's not just fiscal policy. It's monetary policy as well. Outsourced to David Beckworth:

Macro and Other Market Musings: Here is the first of Cochrane's statements:

Mike [Woodford] recognizes, as I do, that the Fed can do nothing more to raise nominal GDP today. Rates are at zero. The Fed has did what it could.

This is not Woodford's view.   He is a firm believer in the power of expectations to create immediate and meaningful monetary stimulus, even at the zero-bound.  Woodford makes this point very clear early in the paper….

[P]eople’s expectations about future policy are a critical aspect of the way in which monetary policy decisions affect the economy…. [E]ven when the current policy rate is constrained by the lower bound, a variety of different short-run outcomes for the economy should remain possible, depending on what is expected about future policy.

This is why Woodford endorsed a NGDP level target.  He sees it as a practical way for the Fed to conditionally commit to a future path of monetary policy that would raise aggregate nominal expenditures today….

Continue reading "Can Anything Persuade John Cochrane to Do His Homework Before He Writes Again?: Monetary Policy "The Fed Has Did What It Could--NOT!" Edition" »

Mitt Romney Announces that He Holds All Possible Positions on Affordable Care Act Implementation Simultaneously

Paul Krugman:

Health Care Gymnastics: As of this morning, as I understand it, Romney has announced that he would guarantee coverage; walked that back; walked back the walkback; and it seems, walked back the walkback of the walkback.

All of which reflects the fact that he’s got nothing.

If you are supporting this clown, there is something very, very wrong with you.

Jim Hamilton: Portfolio Balance Effects, Michael Woodford, and QE3

Jim Hamilton:

Econbrowser: Woodford and QE3: Michael Woodford's paper at the Fed's Jackson Hole conference last week made the case that more large-scale asset purchases by the Fed would by themselves do nothing, and suggested that instead what really matters is the Fed's communication of its future intentions. There's a fair bit in Woodford's analysis that I agree with. But unlike Woodford, I think that asset purchases can be an important part of what the Fed could do in the here and now. Here I explain why.

Continue reading "Jim Hamilton: Portfolio Balance Effects, Michael Woodford, and QE3" »

Liveblogging World War II: September 10, 1942

Case Blue:

After a fierce four-day battle, the seaport of Novorossisk falls to the Nazis. The Soviet 47th Army still holds the heights south of the port as well as several strategically-important coastal roads.

Future attempts to push out of Novorossisk will be repulsed.

This will be Field Marshall List's Army Group "A"'s final victory in the Caucasus, and an incomplete one.

Continue reading "Liveblogging World War II: September 10, 1942" »

In Which Kansas's Insurance Commissioner Sandy Praeger Trolls Governor Brownback...

Ann Marie Marciarille

Missouri State of Mind:: Last week, the Insurance Department of the State of Kansas held a three-hour hearing to collect public input on what should constitute the state's essential health benefits benchmark plan under the ACA. No, Gov. Brownback did not attend….

What's at stake? A great deal, apparently. Under the ACA, the states may choose to participate in the creation of the models or templates for minimum essential benefits to be offered through their state exchanges, or the federal government will perform this function for them. Each state has until September 30th… [(]there are rumors of some give on that date[)]. A number of states have been busy benchmarking existing coverage in their states and developing recommendations on minimum essential benefits…. If you're interested in seeing the work being done on this in other states, you could look here…

States… must meet certain federal guidelines and benchmark off of certain popular basic insurance plans found in the state. For Kansas, this would likely mean… a basic health insurance plan significantly richer than its current Medicaid benefit. That may be the rub.

Can't Anybody Play This Game?: Harvey Rosen and Martin Feldstein Work for the Romney Campaign Edition...

… ran out onto the field eager to attack the analysis of William Gale et al. of Romney's tax promises, which concluded that it is arithmetically impossible for Romney not to give a tax cut to those making more than $200K/year in AGI. They simply do not have enough deductions and loopholes that Romney has not yet taken off the table for any conceivable base-broadening to collect enough revenue from the $200K/year crowd to offset the tax losses from the rate cuts.

The first odd and extraordinary thing about both Feldstein and Rosen is that they claim to be disproving Gale et al., and yet they do no such thing. Taking their analyses at face value (which you shouldn't do), they say that if Romney keeps his tax-policy promises it is arithmetically necessary for him to give a tax cut to the $200K/year and above crowd, but that it is also arithmetically possible for him to pay for that by raising taxes on the $100K/year - $200K/year crowd, leaving the less than $100K/year "middle class" and "working class" untouched. For both Feldstein and Rosen to spin that as "Romney won't cut taxes on the rich" seems to me for each of them to do himself substantial damage…

Continue reading "Can't Anybody Play This Game?: Harvey Rosen and Martin Feldstein Work for the Romney Campaign Edition..." »