J. Bradford DeLong's Blog, page 222

Let me say that I am extremely disappointed that Janet Ye...

Let me say that I am extremely disappointed that Janet Yellen, Marty Feldstein, and Ted Halstead did not insist that this Financial Times story say that, while they believe that their proposal is much stronger than "Green New Deal" proposals, that the "Green New Deal" proposals would be a vast improvement over current policy. Extremely disappointed. Extremely: Leslie Hook: Surge in US Economists��� Support for Carbon Tax to Tackle Emissions: "The chances of passing a carbon and tax and dividend under the current administration are viewed as extremely slim.... 'I���m not expecting progress on this during this administration', said Ms Yellen. 'My hope is that under a future administration... there will be a call and a greater focus on doing something about climate change.... Businesses I think, are able to get behind this because it is preferable for most businesses to have a predictable environment in which there are a set of prices...���rather than have government regulations dictating what technologies must be used', Ms Yellen said...

#noted

The social safety net alleviates rural poverty. It does n...

The social safety net alleviates rural poverty. It does not cause it by creating indolence. The then-Whig and now-Republican idea that the rural poor were idle buggers looking for a handout was overwhelmingly false in early nineteenth-century Britain, and is false in early twenty-first century America today James P. Ziliak: Economic Change and the Social Safety Net: Are Rural Americans Still Behind?: "The U.S. economy has been rocked by major business cycle and secular shocks that differentially affected the fortunes of urban and rural areas... coinciding with... the dramatic growth and transformation of the social safety net.... How the... changes have interacted to at times exacerbate, and other times attenuate, well being across regions and over time is little studied.... The analysis here is descriptive...

#noted

Bespoke subsidies to individual firms plus lack of transp...

Bespoke subsidies to individual firms plus lack of transparency equals kleptocracy: Nathan M. Jensen and Calvin Thrall: Who���s Afraid of Sunlight? Explaining OppositiontoTo Transparency in Economic Development: "Why do some firms oppose transparency of government programs? In this paper we explore legal challenges to public records requests for deal-specific, company-specific participation in a state economic development incentive program. By examining applications for participation in a major state economic program, the Texas Enterprise Fund, we find that a company is more likely to challenge a formal public records request if it has renegotiated the terms of the award to reduce its job-creation obligations. We interpret this as companies challenging transparency when they have avoided being penalized for non-compliance by engaging in non-public renegotiations. These results provide evidence regarding those conditions that prompt firms to challenge transparency and illustrate some of the limitations of safeguards such as clawbacks (or incentive-recapture provisions) when such reforms aren���t coupled with robust transparency mechanisms...

#noted

Henry Farrell: The Transformation of Left Neoliberalism: ...

Henry Farrell: The Transformation of Left Neoliberalism: "Brad, Matt Yglesias and Ezra Klein... a formal acknowledgment of a shift that has been taking place for a long time.... They have plausibly changed from being left neoliberals to neoliberal leftists.... They tacitly or explicitly realize that preferred neoliberal means of policy delivery need to be embedded in a framework that is being built up by a broader social movement.... If they are pushing for market means towards social democratic ends, that is fine and good���markets can indeed sometimes be the best way to deliver those ends.... But one key lesson of the last couple of decades is that market provision of benefits makes it harder to build and sustain coalitions���private gain and public solidarity are at best uncomfortable bedfellows...

...It is clear why Brad and others are jumping ship���apart from the intellectual problems that Mike describes, there isn���t a politically viable there there to their right. But�� I am not as sure as I would like to be about the there there to their left either.... There are enormous obstacles.... First in the US (where the system seems almost deliberately designed to prevent the radical action required e.g. to tackle global warming, and where billionaires can credibly threaten to pull down the election if the Democratic candidate is not to their liking). Second, at the global level, where the soi-disant liberal order is in decay, and it is not clear that there is very much that is going to replace it. There may be no plausible choice in American politics other than the left right now. That doesn���t mean that the left has a very good chance of doing the things that it needs to do...

#noted

Put me down for "nobody has a reliable theory of politics...

Put me down for "nobody has a reliable theory of politics", and make it a true Daily Double, Alex: Cosma Shalizi (2011): Harmony of Means and Ends: "If I tried to back out a theory of politics from the practice of left neo-liberals, it would something like this: what matters most to the interest of voters is the over-all growth of the economy; as it grows, they will become more prosperous, and reward the political party which implemented those policies. They will also be willing to support unobtrusive welfare-state measures, especially if they look like they are run efficiently and go to the truly deserving, because prosperous people feel generous. So the most important thing is 'the economy, stupid', and making sure the voters know who is responsible for good economic times.... It seems oddly naive.... All of this can be boiled down to... 'When you tell us that (1) the important thing is to maximize economic growth, and never mind the distributional consequences because (2) we can always redistribute through progressive taxation and welfare payments, you are assuming a miracle in step 2'.... There are I think two reasonable defenses left neoliberals could make. One is to say that creating or strengthening any forms of countervailing power under modern American conditions would itself take a miracle.... The other would be to deny that anyone has a reliable theory of politics, in this sense, certainly none which could be used as a guide to action, and no hope of developing one; whereas we do know a bit about economics...

#noted

Put me, for one, down as welcoming a sensible technocrati...

Put me, for one, down as welcoming a sensible technocratic debts-and-deficits debate: Brendan Greeley: Give the Kids Permission to Fool Around: "Several weeks ago Alphaville was forwarded a panicked email from the Committee for a Responsible Federal Budget.... The subject... 'Be wary of mischaracterisations of Olivier Blanchard's debt report'.... Here's Mr Blanchard, in his own words, talking to Alphachat... 'use it for the right things. If the economy is very weak and monetary policy cannot be used, use it. If there is public investment to be done, the infrastructure is in terrible shape, use it.... It's a tool, it's not a tool you should avoid to use at any price. It's a tool you should use when you need to'.... He wants a 'richer discussion of the costs of debt and of fiscal policy than is currently the case'.... Alphaville believes that the discussion alone is what the Committee for a Responsible Federal Budget finds so alarming...

...Mr Blanchard calls this the "dominant view," prominent in Germany, Brussels and parts of Washington: debt is necessarily bad, and that the only conversation to be had about it is how quickly it can be reduced.... For a CFO, the idea that a company can have an optimal level of debt is uncontroversial.... But politicians don't talk that way about sovereign debt.... There's a lack of will to trust politicians with this conversation.... All Mr Blanchard is proposing is a kind of debt education class. Give the kids the best information you have. Make sure they understand the consequences. And then, he says, 'Relax. Don't relax too much, but relax'...

#noted

Kevin Drum: A Neoliberal Says It���s Time for Neoliberals...

Kevin Drum: A Neoliberal Says It���s Time for Neoliberals to Pack It In: "My fellow neoliberal shill Brad DeLong has declared that it���s time for us to pass the baton to 'our colleagues on the left'.... There���s less here than meets the eye..... Does DeLong intend to go along in areas where his neoliberal ideas are in conflict with the AOC wing of the Democratic Party? He plainly does not.... DeLong... has simply changed the target of his coalition building...

#noted

Red Rosa's finest hour: Rosa Luxemburg: Junius: "In the p...

Red Rosa's finest hour: Rosa Luxemburg: Junius: "In the prosaic atmosphere of pale day there sounds a different chorus���the hoarse cries of the vulture and the hyenas of the battlefield. Ten thousand tarpaulins guaranteed up to regulations! A hundred thousand kilos of bacon, cocoa powder, coffee-substitute���c.o.d, immediate delivery! Hand grenades, lathes, cartridge pouches, marriage bureaus for widows of the fallen, leather belts, jobbers for war orders���serious offers only!...

...The cannon fodder loaded onto trains in August and September is moldering in the killing fields of Belgium, the Vosges, and Masurian Lakes where the profits are springing up like weeds. It���s a question of getting the harvest into the barn quickly. Across the ocean stretch thousands of greedy hands to snatch it up.... Violated, dishonored, wading in blood, dripping filth���there stands bourgeois society. This is it [in reality]. Not all spic and span and moral, with pretense to culture, philosophy, ethics, order, peace, and the rule of law���but the ravening beast, the witches��� sabbath of anarchy, a plague to culture and humanity. Thus it reveals itself in its true, its naked form.

In the midst of this witches��� sabbath a catastrophe of world-historical proportions has happened: International Social Democracy has capitulated. To deceive ourselves about it, to cover it up, would be the most foolish, the most fatal thing the proletariat could do.... The aim of its journey���its emancipation depends on this���is whether the proletariat can learn from its own errors. Self-criticism, remorseless, cruel, and going to the core of things is the life���s breath and light of the proletarian movement.... The last forty-five year period in the development of the modern labor movement now stands in doubt....

The first time the polestar of strict scientific teachings lit the way for the proletariat and for its emancipation.... German Social Democracy was considered the purest embodiment of Marxist socialism. She had and laid claim to a special place in the Second International-its instructress and leader.... And what did we in Germany experience when the great historical test came? The most precipitous fall, the most violent collapse. Nowhere has the organization of the proletariat been yoked so completely to the service of imperialism. Nowhere is the state of siege borne so docilely. Nowhere is the press so hobbled, public opinion so stifled, the economic and political class struggle of the working class so totally surrendered as in Germany....

Friedrich Engels once said: ���Bourgeois society stands at the crossroads, either transition to socialism or regression into barbarism.��� What does ���regression into barbarism��� mean to our lofty European civilization? Until now, we have all probably read and repeated these words thoughtlessly, without suspecting their fearsome seriousness. A look around us at this moment shows what the regression of bourgeois society into barbarism means. This world war is a regression into barbarism. The triumph of imperialism leads to the annihilation of civilization....

Today, we face the choice exactly as Friedrich Engels foresaw it a generation ago: either the triumph of imperialism and the collapse of all civilization as in ancient Rome, depopulation, desolation, degeneration���a great cemetery. Or the victory of socialism, that means the conscious active struggle of the international proletariat against imperialism and its method of war. This is a dilemma of world history, an either/or; the scales are wavering....

Dearly bought is the modern working class���s understanding of its historical vocation. Its emancipation as a class is sown with fearful sacrifices, a veritable path to Golgotha... a dance of bloody shadows without number. All fell on the field of honor... eternally ���enshrined in the great heart of the working class.��� Now, millions of proletarians of all tongues fall upon the field of dishonor, of fratricide, lacerating themselves while the song of the slave is on their lips. This, too, we are not spared. We are like the Jews that Moses led through the desert. But we are not lost, and we will be victorious if we have not unlearned how to learn. And if the present leaders of the proletariat, the Social Democrats, do not understand how to learn, then they will go under ���to make room for people capable of dealing with a new world.���...

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"Passing the Baton": The Interview

I would say that Zack has it slightly wrong here. There is not one core reason for passing the baton: a political reason, a policy-implementation reason, and a we've-learned-about-the-world reason:

Here's Zack Beauchamp: Zack Beauchamp: A Clinton-era Centrist Democrat Explains Why It���s Time to Give Democratic Socialists a Chance: ���The Baton Rightly Passes To Our Colleagues On Our Left���: "DeLong believes that the time of people like him running the Democratic Party has passed.... It���s not often that someone in this policy debate ��� or, frankly, any policy debate ��� suggests that their side should lose. So I reached out to DeLong to dig into the reasons for his position: Why does he believe that neoliberals��� time in the sun has come to an end?...

...The core reason, DeLong argues, is political. The policies he supports depend on a responsible center-right partner to succeed. They���re premised on the understanding that at least a faction of the Republican Party would be willing to support market-friendly ideas like Obamacare or a cap-and-trade system for climate change. This is no longer the case, if it ever were.... The result, he argues, is the nature of the Democratic Party needs to shift. Rather than being a center-left coalition dominated by market-friendly ideas designed to attract conservative support, the energy of the coalition should come from the left and its broad, sweeping ideas. Market-friendly neoliberals, rather than pushing their own ideology, should work to improve ideas on the left. This, he believes, is the most effective and sustainable basis for Democratic politics and policy for the foreseeable future....

Here's me: We are still here, but it is not our time to lead.... Barack Obama rolls into office with Mitt Romney���s health care policy, with John McCain���s climate policy, with Bill Clinton���s tax policy, and George H.W. Bush���s foreign policy. And did George H.W. Bush, did Mitt Romney, did John McCain say a single good word about anything Barack Obama ever did over the course of eight solid years? No, they f---ing did not.... While I would like to be part of a political coalition in the cat seat, able to call for bids from the left and the right about who wants to be part of the governing coalition to actually get things done, that���s simply not possible...

And: Our current bunch of leftists are wonderful people.... They���re social democrats, they���re very strong believers in democracy. They���re very strong believers in fair distribution of wealth. They could use a little more education about what is likely to work and what is not. But they���re people who we���re very, very lucky to have on our side. That���s especially opposed to the people on the other side, who are very, very strange indeed. You listen to [Never Trump conservatives]... about all the people they had been with in meetings, biting their tongues over the past 25 years, and your reaction can only be, ���Why didn���t you run away screaming into the night long ago?���...

And: We learned more about the world. I could be confident in 2005 that [recession] stabilization should be the responsibility of the Federal Reserve. That you look at something like laser-eye surgery or rapid technological progress in hearing aids, you can kind of think that keeping a market in the most innovative parts of health care would be a good thing. So something like an insurance-plus-exchange system would be a good thing to have in America as a whole. It���s much harder to believe in those things now. That���s one part of it. The world appears to be more like what lefties thought it was than what I thought it was for the last 10 or 15 years. ..

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#politics #politicaleconomy #moralresponsibility #highlighted #orangehairedbaboons

That the Bernanke Fed responded to hitting the zero lower...

That the Bernanke Fed responded to hitting the zero lower bound by lowering its inflation target always struck me as not sane. Yet that is what it did. It went from a 2.5%-per-year core PCE chain inflation target to an asymmetric 2%-or-less-per-year core PCE chain inflation target:

Paul Krugman back in 1999 demonstrated that a flexible-price economy in which Say's Law holds reacts to hitting the zero lower bound on interest rates with an immediate and discontinuous drop in the price level in order to generate the inflation it needs for the zero nominal interest rate to generate the right neutral real interest rate so that full employment can be maintained. A central bank has one major job: to make Say's Law true in practice even though it is false in theory by pushing the real interest rate to the neutral rate.

Thus there are two not-wrong ways to deal with the zero lower bound problem:

Keep your inflation target high enough that you do not hit the zero lower bound.
If you do hit the zero lower bound, immediately do everything you can to push the inflation rate up until the zero nominal interest rate you have generates the neutral rate interest rate you need.

The Federal Reserve did not do either of the two not-wrong things in the early 2010s. The Federal Reserve's forthcoming "fundamental rethink" will not include an acknowledgement that the Bernanke Fed did a wrong thing in the early 2010s. And according to Gavyn Davies it has already taken the possibility of adopting a policy of doing the right thing���doing either of the right things���off the table. This is not good:

Gavyn Davies: Federal Reserve���s Fundamental Rethink About Inflation: "One idea for avoiding the Japanese deflationary trap is simply to raise the existing inflation target... Clarida has specifically ruled this out.... When prices fall below the long-run 2 per cent target during a recession, the Fed would credibly commit to compensating for this error during the subsequent recovery... the short run inflation rate may exceed 2 per cent while the catch-up to the long-term path occurs...

#noted #monetarypolicy #economicsgonewrong