Friday Night Music
Liveblogging World War II: May 25, 1943

Noted for May 25, 2013

Greg Ip: The week in American monetary policy: Parsing the Federal Reserve | Sarah Kliff: California Obamacare premiums: No ‘rate shock’ here | Nick Rowe: Monetary policy is not interest rate policy The Challenges of Mark Carney’s European "Mission Civilisatrice" | Pius IX: Syllabus of Errors | Alan Auerbach (2010): A Modern Corporate Tax | Martin Wolf: Why George Osborne should not be so complacent |

  • Matthew Yglesias: Obamacare implementation good news: "You heard it here first from me in April, but I want to reiterate that over the next 18 months you're going to read a lot of stories about problems with Affordable Care Act implementations. Many of those stories are going to be accurate. But fundamentally Affordable Care Act implementation is going to work out great, and people are going to love it. The latest evidence comes to us today from California… premiums for 'silver' and 'bronze' plans are both going to be lower than was previously expected. Far from a 'train wreck', in other words, the biggest single set of clients for the program is getting something like a nice, smooth high-speed train ride. There was also good news from Oregon recently…. And the Affordable Care Act's goal of slowing the growth in aggregate health expenditures is also coming true. Now of course not every state is going to have as happy an experience as California and Oregon. There are huge swathes of the country where public officials have been deliberately refusing to try to make the new law work well, and congressional Republicans are also doing their best to try to stymie implementation. Those efforts will succeed. Residents of California, Oregon, Maryland, Massachusetts, New York, and other eager implementers will see much larger gains from the new law than residents of Texas, Florida, and Alabama… this will be a real tragedy for the country. But even in those places, people are going to end up better off than they were pre-Obamacare…. Journalists tend to cover new programs relative to politicians' promises about them, while beneficiaries judge new programs in terms of the impact on their lives. And the bottom line here is that a small number of high-income individuals are going to pay more taxes on their investment income, while a large number of working-class Americans are going to get free or discounted health insurance. There are plenty of writers out there who I read and respect who quite genuinely believe that taxing rich people's investment income in order to bolster the living standards of the bottom third of the population is disastrous long-term public policy, but in concrete terms, this has all the hallmarks of a successful and popular initiative."

  • Ryan Avent: Busts: The wages of sin: "MUST we pay for past sins? Michael Kinsley thinks so: 'I don’t think suffering is good, but I do believe that we have to pay a price for past sins, and the longer we put it off, the higher the price will be. And future sufferers are not necessarily different people than the past and present sinners. That’s too easy.'But he isn't known for his economic bona fides. Matt Klein, who is, tries to put some meat on Mr Kinsley's argument… that 'we must pay for past sins'. As a first step, who is 'we'? It would seem to be the folks whose overoptimistic predictions led them to make big IT investments. What was their sin? I think that would be making IT investments that ended up yielding much less in returns than anticipated. And how were they made to pay? Well, by reaping less than anticipated returns, of course! Only, that's not the consequence Mr Klein identifies. Rather, he says that low post-crisis investment economy-wide was the cost, contributing to stagnant incomes and slow employment growth. But wait: those things affected everyone, including some people who probably thought the tech boom was ridiculous all along and who instead put their money into a 'real economy' stock like Ford, and others who didn't invest at all but just worked as bookkeepers or hotel desk clerks. So what did those people do wrong that necessitated punishment? We no longer seem to be talking about payment for sins. So let's strip the argument of its moral content and simply ask: must a financial gyration like the tech boom and bust cause economy-wide pain?… There are certainly ways that a financial mania could impair future growth potential. If the people getting the wrong kind of skills were a particularly large demographic cohort in their prime working years, then retraining might nonetheless leave the economy unable to grow as rapidly as it otherwise would have…. Had the dot come boom entailed the burning of all the world's coal or a misguided scheme to profit by salting the earth's arable land, that would have been problematic, but it didn't…. History clearly shows that whether necessary or not, financial meltdowns do tend to cause serious economic pain…. But it's important to point out that these consequences don't flow inevitably from poor past investment choices. Past 'excess' doesn't somehow break an economy; it just confuses the people who run it regarding what is supposed to come next. That might strike some as effective acknowledgement that booms necessarily require penance. If the only way to avoid a painful bust is to employ policy-makers who know just what to do in just the right circumstances, then there is no avoiding a painful bust. But there is an important difference. We, rather than some divine agent of economic karma or physical economic law, are the ones causing the pain. And just because we don't know any better now doesn't mean we'll never learn…. And so I dream of a day when the only people who suffer from money-losing investments are the money-losing investors, whose only penance is lost money."

  • Jonathan Schwarz: A Tiny Revolution: Michael Kinsley Can't Recall Michael Kinsley's Words of Wisdom: "What if Mitt Romney had come to adulthood in Nazi Germany? What if Hillary Clinton had gone to Moscow State University and married a promising young apparatchik? What if Barack Obama had been born in Kenya, like his father, where even now people are slaughtering one another over a crooked election? Which of them would be the courageous dissidents?… And which would be playing the universal human power game under the local rules, whatever they happened to be?… Most of them would be playing the game. What motivates most politicians, especially those running for President, is closer to your classic will-to-power than to a deep desire to reform the health-care system."… [and yet we Austerians are somehow different:] "[Paul Krugman] considers briefly, but seriously, that [my] problem might be simple “sadism,” but retreats from that daring charge to an only slightly more plausible conspiracy theory: that austerians don’t want the economy to recover until they’ve had the chance to use bad times as an opportunity to shred the social safety net. Either that or a psychological variant: they need bad times to continue in order to justify their status and their speaking fees. Amidst these far-fetched possibilities, let me propose one more: maybe austerians really, sincerely want what’s best for America and the world, and really believe that theirs is the better path than Krugman’s. Maybe austerians—poor, deluded creatures that we are—actually think that their path will result in less pain, not more."

  • Jim Tankersley: As rich gain optimism, lawmakers lose economic urgency: "Washington has all but abandoned efforts to help the economy recover faster — and lawmakers don’t seem worried that voters will punish them for it. There are no serious negotiations underway between the White House and congressional leaders on legislation to spur growth, and no bipartisan 'gangs' of senators are huddling to craft a compromise job-creation package. Yet economic growth remains slow by historical standards, and 11.5 million Americans are still looking for work. More than 4 million people have been unemployed for longer than six months. A Washington Post-ABC News poll found in April that two-thirds of Americans said jobs were difficult to find in their communities. But lawmakers appear to feel little electoral pressure to address those concerns…. There also is mounting evidence that the political donor class — wealthier Americans — is feeling a stock-market-fueled surge of optimism about the economy. It all adds up to inaction…. What’s more, lawmakers have taken actions that many economists say have actually slowed growth: They allowed the payroll tax cut to expire, raised income taxes and allowed the sequester to take effect."