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Afternoon Must-Read: Martin Wolf: Why Abenomics Will Disappoint

Things You Should Read on the Evening of December 17, 2013


  1. Martin Wolf: Why Abenomics will disappoint: "Abenomics consists of 'three arrows'. The first is a monetary policy aimed at eliminating deflation. The second is a flexible fiscal policy, aimed at supporting the Japanese economy in the short run and at fiscal stability in the long run. The third is structural reform, aimed at raising investment and trend growth.... Supported by the new monetary policy, Japan is enjoying a cyclical upswing. Deflation may disappear. But hopes for faster trend economic growth are too optimistic and the discussion of structural obstacles too limited. Given its demography, Japan would do well to attain growth of 1-1.5 per cent a year. The country will be unable to combine economic dynamism with fiscal consolidation without a rise in consumption’s share in GDP. Since household savings rates are low, this can only happen if income is transferred from corporations. Nobody seems to be willing to recognise this challenge. It is assumed, instead, that Japan’s already excessive investment should rise still further. This is mistaken. How, then, can the first year of Abenomics be assessed? As an early success, but a far from complete one."

  2. Economist: The ECB’s online game: Being Mario Draghi: "A game to educate Europeans about monetary policy skips some detail.... The instructions have a clarity that induces nostalgia: “Keep the inflation rate just under 2% and stable. Raise the interest rate to push inflation down. Lower the interest rate to push inflation up.”... Extra guidance is provided by a ragtag group of advisers, including a hippy, a narcoleptic and a gambler—which may be how Bundesbank officials now view their euro-zone colleagues.... €conomia badly needs an update if the ECB really wants to educate Europeans about its current job. Players need more data on sovereign-borrowing costs, cross-border deposit flows and Target 2 balances. They should also have many more tools at their disposal, such as unlimited loans for troubled banks and programmes to buy unlimited amounts of sovereign debt.... Instead of stabilising the rate of euro-zone inflation, players should prevent any country from leaving the single currency. The crisis-hit countries will exit if they become trapped in recession but the northern-tier nations will quit if their domestic inflation rates exceed an annual average of, say, 3%. Anyone who succeeds should go on the shortlist to be the next ECB president."


  1. Mark Thoma: What is the best way to measure inflation?: "Is it better to focus on overall PCE inflation or on core PCE inflation that removes the effects of food and energy prices? The answer depends upon the question being asked. If the question is, "What is the rate of change in the cost of living for a typical household?" the answer is overall PCE inflation. Households, of course, spend money on food and energy products, so any measure of the cost of living changes hitting households must include these goods. But if the question is what will inflation be in the future -- which is what the Fed almost always wants to know due to lags in the effects of monetary policy -- core inflation is superior."

  2. James Forder (2008): The Historical Place of the 'Friedman-Phelps' Expectations Critique: "The 'expectations critique', usually attributed to Friedman or Phelps and dated towards the end of the 1960s, in fact originates much earlier. And rather than being an insight properly attributable to a particular individual, it was, by that time, a commonplace of economic discussion. This much is easy to establish. It is argued that the common attribution arises at least in part because the Keynesians unwisely chose to express their disagreement with Freidman in terms of expectations rather than in terms of the existence of the natural rate of unemployment. As a result, forty years later, it has become hard to see that two separate points ever existed."

  3. Sarah Kliff: Twenty-three states aren’t expanding Medicaid. Here’s who they leave behind: "The Kaiser Family Foundation... one of the most in-depth looks at the population that falls into this coverage gap, too poor to qualify for insurance subsidies... shut out of the traditional Medicaid program.... Kaiser estimates that approximately 4.8 million people will fall into this no man's land of health-care reform, where they do have the option to purchase private insurance on the individual market--but would have to do so without any financial help from the government.... The coverage gap population is majority minority: 53 percent of those left without financial assistance are either African American, Hispanic or another non-white ethnicity. Most of them have jobs... work for businesses with fewer than 100 employees, which tend to be less likely to offer insurance coverage....If there's any silver lining to this data set, it does suggest that those in the Medicaid gap are, from their self-reporting, in better health and potentially in less need of health care. That obviously doesn't protect against catastrophic events that have little to do with an individual's current health. The health-care law was supposed to offer such protection, but--for these millions of Americans--now it won't."

  4. Benjy Sarlin: How America's harshest immigration law failed: "'Illegal is illegal'. With that rallying cry, Alabama passed HB 56 in 2011, the harshest state immigration law in the country. The lead sponsor of the bill boasted to state representatives that the law 'attacks every aspect of an illegal alien’s life'.... The vast scope of the law turned Alabama into an unprecedented test for the anti-immigration movement.... Early reports suggested success: undocumented immigrants appeared to flee Alabama en masse. But two years later, HB 56 is in ruins.... When HB 56 passed, Albertville—where the booming poultry industry had attracted thousands of immigrants from Mexico and Central America—quickly became the national face of the crackdown.... It took just six weeks after HB 56 went into effect for state legislators to start having second thoughts.... On November 16, 2011, police in Tuscaloosa stopped a driver for not having the proper tag.... The driver did not have a license on him, only a German ID card, and that triggered what was supposed to be HB 56’s most powerful weapon against illegal immigration. Under the law, police were now required to arrest the man, haul him to court, and detain him until federal immigration authorities determined his fate, no matter how long that took.... The driver was an executive at Mercedes-Benz. The European car giant was one of several foreign auto companies in the state whose plants provide thousands of much-needed jobs. The incident was soon followed by another traffic arrest involving a Japanese Honda worker. Together, the auto blow-ups sparked an outcry from the business community.... The St. Louis Post-Dispatch ran an editorial inviting Mercedes to move their operations to the “Show-Me State” instead of the “Show me your papers” state.... Churches complained the law’s ban on providing aid to undocumented immigrants could criminalize everything from soup kitchens to Spanish-language Sunday services.... Simple tasks like renewing one’s vehicle tags now required proof of legal status, which generated long lines for citizens and non-citizens alike. Utilities were unsure whether they needed to cut off service to residents who couldn’t prove citizenship."


earth wind map | Mark Thoma: The Social Safety Net Redistributes Income…That’s Why It Works | J. Bradford DeLong (2007): The Inheritance of Inequality Is Strikingly Large in America Today |

Should Be Aware of:

  1. Scott Lemieux: Four Takeaways from Yesterday's NSA Ruling: "Yesterday, U.S. District Court Judge Richard J. Leon ruled that the National Security Agency's extensive collection of 'metadata'—as revealed by Edward Snowden earlier this year—is likely to have violated the Fourth Amendment.... Judge Leon did... find that he had jurisdiction to hear the constitutional claims against the program. 'While Congress has great latitude to create statutory schemes like FISA', the opinion declares, 'it may not hang a cloak of secrecy over the Constitution'. On the merits, his arguments against the constitutionality of the program were compelling. Four points, in particular, are worth highlighting:... In its egregious decision earlier this year in Clapper v. Amnesty International, a bare majority of the Supreme Court created a Catch-22 for those looking to challenge government surveillance programs: Because they were secret, people... lacked the standing to sue. Judge Leon... noted that Clapper came down before the Snowden revelations, and the sheer scope of the searches Snowden uncovered means that the two plaintiffs—who were Verizon subscribers—had the standing to sue.... The NSA's Program Constitutes a "Search" under the Fourth Amendment.... The NSA's Program Violates A Reasonable Expectation of Privacy.... The Warrantless Searches Are Not Justified By Security Needs.... 'the Government does not cite a single instance in which analysis of the NSA's bulk metadata collection actually stopped an imminent attack, or otherwise aided the Government in achieving any objective that was time-sensitive in nature. In fact, none of the three "recent episodes" cited by the Government that supposedly "illustrate the role that telephony metadata analysis can play in preventing and protecting against terrorist attack" involved any apparent urgency.' This point is a particularly important one.... We can't simply assume that the searches are justified by compelling national security interests. Unless the government produces such evidence, the NSA's metadata program is particularly hard to justify."

  2. Ed Kilgore: How Republicans Will Make Commitment-Shy Men Come Around: "In my post yesterday about Ross Douthat’s 'daughter theory' of how upscale folk might be weened from liberalism, I observed there wasn’t much about the Republican agenda that seemed design to advance the interests of young women looking for a mate: 'Will deregulating Wall Street make him [the commitment-shy male) more interested in marrying and propagating? How about a war with Iran? Are SNAP benefits his kryptonite? And will taking away the reproductive rights of the women he exploits turn him around?' But fortunately, Amanda Marcotte spells it all out[:].... '1. Vote Republican. 2. Your elected officials chip away at women’s rights. 3. Once legal abortion is abolished and contraception is hard to get, the unintended pregnancy rate goes up dramatically. 4. Your daughter, being a human lady, ends up knocked up by accident (likeliest scenario). 5. Her Lothario, even though he secretly hates her—as all women are contemptible people who only have their bodies to offer men—graciously offers to marry her. 6. Happiness is achieved by being paired off at a young age with a man who secretly resents and loathes you! Of course, that’s just the likeliest scenario. Here is the idealized version of how it works: 1. Vote Republican. 2. Your elected officials chip away at women’s rights. 3. Once legal abortion is abolished and contraception is hard to get, the unintended pregnancy rate goes up dramatically. 4. Terrified of getting pregnant out of wedlock and making Daddy frown, your daughter tells her Lothario that he has to put a ring on it if he wants to tap that ass. 5. Her Lothario, even though he secretly hates her—as all women are contemptible people who only have their bodies to offer men—reluctantly agrees to marry her because he’s super horny. 6. Happiness is achieved by being paired off at a young age with a man who secretly resents and loathes you and kind of wonders if busting a nut was really worth a lifetime of being strapped to an icky, disgusting woman. He soothes himself by saying, “Well, at least someone cleans up after me.” Cue “Can You Feel The Love Tonight”.' I continue to wonder how the non-reproductive elements of the Republican agenda work into this save-the-daughters scenario, unless we are to deduce that reduced educational offerings and lower pay will help keep women home to 'clean up' after the resistant young man, improving his compensation for taking on the ball and chain from sex to sex with cleaning services. But maybe Ross will enlighten us further if he decides this theme is worth a series of columns or a book."


J. Bradford DeLong (2000): The End of the Inheritance Tax? | Emily Atkin: Why Reddit's Science Forum Banned Climate Deniers |