Afternoon Must-Read: Paul Krugman: Bad Tayloring
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Noted for Your Nighttime Procrastination for January 31, 2015

Screenshot 10 3 14 6 17 PMOver at Equitable Growth--The Equitablog


Must- and Shall-Reads:

And Over Here:

  1. Paul Krugman: Bad Tayloring: "The world has turned out to be a much more dangerous place than [John] Taylor-rule enthusiasts imagined, so why impose a rule devised, we know now, by economists who completely misjudged the risks?... Taylor himself... claims that the whole financial crisis thing was because the Fed departed slightly from his version of the rule in the pre-crisis 2000s. But, as [Tony] Yates points out, this assigns an importance to monetary policy that is wildly at odds with the kind of modeling used to justify the rule in the first place... as Yates does not point out... the distinct whiff of someone inventing ever-more bizarre stories to avoid admitting having been wrong about something. This is not the kind of argument on which to base rules that permanently constrain policy."

  2. Paul Krugman: I See Very Serious Dead People: "[I am] annoyed... [at] the constant efforts on the part of Very Serious People to turn discussions away from monetary and fiscal policy, recessions and sluggish recoveries, to the supposedly more fundamental issues of structural reform and long-term growth. Rattner dismisses the austerity/stimulus debate as ‘simplistic’; Jeff Sachs calls Keynesian concerns ‘crude’; many... are eager to get away from all this deflation stuff and talk about how what they imagine to be, or wish were, the really important issues like Big Data and a world that’s even flatter. There were people like that during the Great Depression too.... So.... First, we’re now in year eight of a massive setback to economic growth, to living standards.... Technology hasn’t retrogressed; institutions haven’t suddenly gotten far worse. This is about the business cycle, and about business cycle policy. If you want to ignore all that... you’re exactly the kind of person Keynes was mocking.... Second... Keynesian macroeconomics... has worked very well in this long slump. While people were very seriously intoning that it was simplistic and crude to think that those little models could be of any use in a changing world yada yada, macroeconomists were making remarkable, counterintuitive predictions... that came true.... Third, what’s really striking about all the talk about... structural issues... is how fuzzy the thinking is.... The Very Serious seem remarkably casual about thinking things through. Finally, I know that people who airily dismiss the austerity debate and all that and demand that we focus on the long run think they’re taking a brave stand; but you know, they aren’t.... Face it, stimulus and austerity, QE or not, are politically charged issues where taking any kind of stand will get you attacked. And since they are also important issues, pretending that they aren’t is a form of moral cowardice."

  3. Josh Barro: Why Obama’s Proposal for 529s Had No Chance: "The first rule of modern tax policy is raise taxes only on the rich. The second rule is that your family isn’t rich, even if you make a lot of money. President Obama’s State of the Union proposal to end the tax benefits for college savings accounts ran afoul of these rules, which is why he abandoned it, under intense pressure from both political parties, within a week. Tax-free college savings accounts, like the mortgage interest deduction and the state and local tax deduction, principally benefit people who range from affluent to wealthy. In pushing its proposal, the White House pointed to Federal Reserve data showing that 70 percent of balances in the college accounts were held by families making at least $200,000 a year. In theory, tax reform is supposed to be built around cutting back preferences like these.... But in practice, politicians from both parties have made a point of holding the group you might call the ‘merely affluent’ harmless from tax increases. If you make $150,000 to $225,000, you make about two to three times the national median income for a married couple. The list of occupations that can get you into this income bracket--government official, academic, lobbyist, journalist--can sometimes make it hard for people in political circles to remember that 92 percent of American married couples make less than $200,000 a year... $200,000 is not a normal income, even in a prosperous suburban county like Westchester, N.Y., where 77 percent of married couples are somehow managing to get by on less. In Montgomery County outside Washington, the figure is 72 percent. These figures start to seem normal to politicians only because, when they’re not hanging out with ultra-wealthy donors, they tend to spend time with the sort of pretty-wealthy professionals who use 529 accounts. They also start to seem normal to reporters, perhaps because $200,000 is about what a married couple might make if both worked as correspondents for major news organizations. One reads frequently of the plight of living on $200,000 or more a year. Writing for The Fiscal Times in 2010, Karen Hube found that $250,000 ‘does not a rich family make,’ after you consider the cost of buying a home in an affluent suburb with a top school district like Bethesda, Md. (Of course, one option is to not live in Bethesda.) A Wall Street Journal article this September laid out how $400,000 isn’t a lot of money--after you spend it. Mr. Obama could still have tailored his 529 proposal... proposed to apply the same income and contribution limits that apply to Roths. That would limit the benefits to families making under $200,000 a year. Instead, perhaps because of the political firestorm, the White House dropped all plans to touch 529s..."

Should Be Aware of:


  1. Michael Kruse: Jeb 'Put Me Through Hell’: "In June, the medical examiner released Terri Schiavo’s autopsy which confirmed what the judges had ruled for years based on the testimony from doctors concerning her prognosis. Her limbs had atrophied, and her hands had clenched into claws, and her brain had started to disappear. It weighed barely more than a pound and a third, less than half the size it would have been under normal circumstances. ‘No remaining discernible neurons,’ the autopsy said. She couldn’t see. She couldn’t feel, not even pain. Forty-one years after her birth, 15 years after her collapse, Terri Schiavo was literally a shell of who she had been. Bush read the autopsy—then wrote a letter to the top prosecutor in Pinellas County. He raised questions about Michael Schiavo’s involvement in her collapse and about the quickness of his response calling 911. ‘I urge you,’ the governor wrote to Bernie McCabe, ‘to take a fresh look at this case without any preconceptions as to the outcome.’ McCabe, a Republican, responded less than two weeks later, saying he and his staff ‘have attempted to follow this sound advice’--without any preconceptions: ‘unlike some pundits, some "experts", some email and Web-based correspondents, and even some institutions of government that have, in my view, reached conclusions regarding the controversy...' McCabe’s assessment: ‘all available records’ were ‘not indicative of criminal activity...’

  2. Charles Pierce: Potential Presidential Candidate Jim Webb Has A Lot To Say About The Democratic Party Appealing More To White People: "Let us stipulate for a moment that Andrew Jackson also was a slaveholder and a genocidal madman, no matter how much the buckskin-shirt crowd loved him. Let us not return to his principles, thank you. And while FDR and Truman were fine presidents, who did some of all that they could have done, they still presided over a Democratic party that was the political and constitutional bulwark of the Jim Crow South. Neither one of them could break that dark alliance until the Civil Rights Movement shook the political order to the point where Lyndon Johnson could blow up the alliance entirely. Webb can't have this argument until he acknowledges: a) that the 'principles of the Democratic party' to which he appeals also had a Whites Only sign on them, b) that the commitment of the Democratic Party to equal rights was a titanic moral victory for the entire nation, and c) that a lot of the voters to whom he suggests reaching out remain sorry that the sign ever came down. In the days to which Webb has suggested returning, the Democratic party did not remotely stand for 'everybody' who needed it getting access to the corridors of power. The Democratic party only started standing for that at its 1948 national convention, and didn't fully stand for it until 1965..."

  3. Michael Kruse: Jeb 'Put Me Through Hell’: "Up in Washington, Congress debated the case of Terri Schiavo, searching for possible methods of federal intervention--with Frist and Speaker of the House Dennis Hastert, both of whom now say they don’t want to talk about it, vowing to work together through the weekend of Palm Sunday if necessary. A memo that came from Martinez’s office called it ‘a great political issue’ for Republicans. Frist, a surgeon from Tennessee, said on the Senate floor that Schiavo didn’t seem to him to be in a vegetative state, based on his viewing of the Schindlers’ video snippets. Senator Rick Santorum from Pennsylvania called the removal of the feeding tube ‘a sentence that would not be placed on the worst criminal.’ Majority Leader Tom DeLay led the way in the House. Santorum and Frist did in the Senate. Few members of Congress spoke against it. South Florida Congresswoman Debbie Wasserman Schultz was one. ‘There is no room for the federal government in this most personal of private angst-ridden family members,’ she said. Republican John Warner from Virginia was the only senator to speak against it..."

  4. Walter Bagehot: The English Constitution: "The present Conservative Government contains more than one member who regards his party as intellectually benighted; who either never speaks their peculiar dialect, or who speaks it condescendingly, and with an 'aside'; who respects their accumulated prejudices as the 'potential energies' on which he subsists, but who despises them while he lives by them..."

    1. MaxSpeak: Blogs are so over: "That’s what I’m hearing, after the pending demise of Andrew Sullivan’s venture. Well f--- that. F--- your monetization. F--- your SEO keywords. F--- your snackable content. F--- your clickbait. Clear your mind of trivialities and inanities. Don’t waste time arguing with idiots. Tune out the noise. Seek a higher level of consciousness. Get laid. I plan to leave my nine-to-five gig at the end of this year. And. This. Place. Will. Rock. I’m on Facebook and Twitter all the time, but I predict the endless drive to ‘monetize’ them will make them shittier and shittier. There will always be an audience for discussions deeper and more substantive than are possible on FB or Twitterville. I don’t need thousands of people to have a rewarding conversation, and I don’t need to get rich. Maintain, people. We have work to do.. About MaxSpeak: Older than dirt. Rutgers, Class of '71. Ph.D. in economics, University of Maryland. Suburban soccer dad spouting like a rec room bolshevik."

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