J. Bradford DeLong's Blog, page 270

Tim Duy: Unpleasant: "The situation on Wall Street is, we...

Tim Duy: Unpleasant: "The situation on Wall Street is, well, unpleasant, and it in turn is creating considerable uncertainty about the outlook for monetary policy.... Powell & Co.['s]... outlook is fundamentally hawkish as it describes policy as continuing to tighten even as growth decelerates. Moreover, incoming data remains supportive of that outlook. This isn���t really a problem for rate hikes next year; the data could cut either way by March. It is a bit of a challenge for next week���s meeting as the Fed is loath to appear reactive to markets alone...

#shouldread

Monday Smackdown: Ezra Klein Smacks Down Paul Ryan as a Grifter, and Himself for a Griftee...

Very welcome to see: Remember: Fool me once, shame on you; fool my twice, shame on me: Ezra Klein: Speaker Paul Ryan Retires: His Legacy Is Debt and Disappointment: "Ryan says that debt reduction is one of those things 'I wish we could have gotten done'. Ryan, the man with the single most power over the federal budget in recent years, sounds like a bystander.... To understand the irony and duplicity of that statement, you need to understand Ryan���s career. After the profligacy of the George W. Bush years and the rise of the Tea Party, Ryan rocketed to the top ranks of his party by warning that mounting deficits under President Obama threatened the 'most predictable economic crisis we have ever had in this country'. Absent the fiscal responsibility that would accompany Republican rule, we were facing nothing less than 'the end of the American dream'. Ryan���s reputation was built on the back of his budgets: draconian documents that gutted social spending, privatized Medicare, and showed the Republican Party had embraced the kinds of hard fiscal choices that Bush had sloughed off. And Ryan presented himself as the wonkish apostle of this new GOP...

...For this, Ryan was feted in Washington society; the Committee for a Responsible Federal Budget gave him a ���Fiscy��� award for budget bravery; he was a member of the Simpson-Bowles commission (which he ultimately voted against); he became Mitt Romney���s vice presidential candidate. His reputation was so towering that when John Boehner stepped down as speaker, he told Ryan, ���You���ve got to do this job.��� I was among the reporters who took Ryan���s reboot seriously. ���To move us to surpluses,��� I wrote of his 2010 proposal:

Ryan���s budget proposes reforms that are nothing short of violent. Medicare is privatized. Seniors get a voucher to buy private insurance, and the voucher���s growth is far slower than the expected growth of health-care costs. Medicaid is also privatized. The employer tax exclusion is fully eliminated, replaced by a tax credit that grows more slowly than medical costs....

I didn���t agree with Ryan���s policies, but at least he was making the trade-offs of his vision clear. Here was a Republican who said what he was going to do, who admitted his health care plan included ���rationing,��� who offered something specific to argue with. That was progress. But to critics like the New York Times���s Paul Krugman, Ryan was an obvious con man weaponizing the deficit to hamstring Obama���s presidency, weaken the recovery, and snooker Beltway centrists eager to champion a reasonable-seeming Republican. Ryan, after all, had voted for Bush���s deficits ��� he was a yes on the tax cuts, on the wars, on Medicare Part D. He proposed a Social Security privatization scheme so pricey that even the Bush administration dismissed it as ���irresponsible.��� And his budgets, for all the hard choices, didn���t actually add up. They included massive tax cuts with underestimated costs and unspecified financing���which is what led Krugman to call him a charlatan back in 2010. Ryan waved this away as nitpicking.... But his critics predicted he would lose his appetite for hard choices the moment his party returned to power.... The numbers proved them right. Ryan was elected speaker of the House on October 29, 2015. Over the next three years, annual deficits increased by almost 80 percent. The added debt is Ryan���s legacy, not his circumstance. It is entirely attributable to policy choices he made....

As speaker, Ryan had tremendous power. He could have, for instance, brought immigration compromises to the floor of the House but enforced congressional PayGo rules to bar any bills that increased the deficit from coming to a vote. Instead, he refused to bring immigration compromises to the floor while personally shepherding bills that betrayed the ideas that won him power. We are the choices we make���and Ryan made his. To be clear, I am not particularly concerned about deficits right now.... But I took Ryan seriously when he said he was. I covered the arguments Ryan made, the policies he crafted, and I treated them as if they offered a guide to how Republicans would govern. I listened when Ryan said things like, ���In Europe, generations of welfare-dependent citizens are hurling Molotov cocktails because their governments can no longer fund their entitlement programs. We can���t let that happen here.���...

Now, as Ryan prepares to leave Congress, it is clear that his critics were correct and a credulous Washington press corps���including me���that took him at his word was wrong.... Ryan proved as much a practitioner of post-truth politics as Donald Trump.... Three bills in particular.... The 2017 tax cut Ryan passed but didn���t pay for.... The spending Ryan passed but didn���t pay for.... The expansion of the earned income tax credit Ryan proposed but never even tried to pass.... Ryan proved himself and his party to be exactly what the critics said: monomaniacally focused on taking health insurance from the poor, cutting taxes for the rich, and spending more on the Pentagon. And he proved that Republicans were willing to betray their promises and, in their embrace of Trump, violate basic decency to achieve those goals....

Sooner or later, Trump���s presidency will end, and there will come a new generation of Republicans who want to separate themselves from the embarrassments of their party���s record. As Ryan did, they will present themselves as appalled by both their party���s past and the Democrats��� present, and they will promise to lead into a more responsible future. The first question they will face, and the hardest one to answer, will be: Why should anyone believe they���re not just another Paul Ryan?...

#shouldread

I have enormous respect for Ken, but I think he is largel...

I have enormous respect for Ken, but I think he is largely wrong here. In any dystopian or failed state, why would you want to accept RogoffCoin? or DeLongCoin? Or any of the other ICOs coming down the pike. Yes, there is a space for a blockchain-supported anonymous currency. But the currency that will be adopted will be one that has substantial backing from somewhere���either some large organization with real asset and payments that decides it want to use it (a "cameralist" valuation), or a central focal point (which BitCoin might hold). I can see BitCoin being worth a hundred dollars in the long run because having been first mover is a potential focal point. I can't see anything else having value in the long run. It is not "cryptocurrency coins" that are "lottery tickets that pay off in a dystopian future"; it is (maybe) BitCoin.

After all, the South Sea Company had detected a true market opportunity���there would be durable demand for standardized Gilts. But, as Ken says, "the private sector may innovate, but in due time the government regulates and appropriates": the profits were reaped not by the South Sea Company or any of its competitors but by the British Treasury.

In the meantime, of course, there are Greater Fools for Fools to sell to, and so folly has a chance of looking wise ex post: Kenneth Rogoff: Betting on Dystopia: "The right way to think about cryptocurrency coins is as lottery tickets that pay off in a dystopian future where they are used in rogue and failed states, or perhaps in countries where citizens have already lost all semblance of privacy. That means that cryptocurrencies are not entirely worthless...

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#shouldread #finance

Absolutely remarkable: Erik Larson and Christopher Cannon...

Absolutely remarkable: Erik Larson and Christopher Cannon: Madoff���s Victims Are Close to Getting Their $19 Billion Back: "A decade after Bernard Madoff was arrested for running the world���s biggest Ponzi scheme, the bitter fight to recoup investors��� lost billions has astounded experts and victims alike...

...While no one will ever collect the phantom profits Madoff pretended he was earning, the cash deposits by his clients have been the primary objective for Irving Picard, a New York lawyer overseeing liquidation of Madoff���s firm in bankruptcy court. So far he���s recovered $13.3 billion���about 70 percent of approved claims���by suing those who profited from the scheme, knowingly or not. And Picard has billions more in his sights. ���That kind of recovery is extraordinary and atypical,��� said Kathy Bazoian Phelps, a bankruptcy lawyer at Diamond McCarthy LLP in Los Angeles who isn���t involved in the case. Recoveries in Ponzi schemes range from 5 percent to 30 percent, and many victims don���t get anything, Phelps said....

#shouldread #finance

Blogging: What to Expect Here...

The purpose of this weblog is to be the best possible portal into what I am thinking, what I am reading, what I think about what I am reading, and what other smart people think about what I am reading...

"Bring expertise, bring a willingness to learn, bring good humor, bring a desire to improve the world���and also bring a low tolerance for lies and bullshit..." ��� Brad DeLong

"I have never subscribed to the notion that someone can unilaterally impose an obligation of confidentiality onto me simply by sending me an unsolicited letter���or an email..." ��� Patrick Nielsen Hayden

"I can safely say that I have learned more than I ever would have imagined doing this.... I also have a much better sense of how the public views what we do. Every economist should have to sell ideas to the public once in awhile and listen to what they say. There's a lot to learn..." ��� Mark Thoma

"Tone, engagement, cooperation, taking an interest in what others are saying, how the other commenters are reacting, the overall health of the conversation, and whether you're being a bore..." ��� Teresa Nielsen Hayden

"With the arrival of Web logging... my invisible college is paradise squared, for an academic at least. Plus, web logging is an excellent procrastination tool.... Plus, every legitimate economist who has worked in government has left swearing to do everything possible to raise the level of debate and to communicate with a mass audience.... Web logging is a promising way to do that..." ��� Brad DeLong

"Blogs are an outlet for unexpurgated, unreviewed, and occasionally unprofessional musings.... At Chicago, I found that some of my colleagues overestimated the time and effort I put into my blog���which led them to overestimate lost opportunities for scholarship. Other colleagues maintained that they never read blogs���and yet, without fail, they come into my office once every two weeks to talk about a post of mine..." ��� Daniel Drezner

#workingmemory
#publicsphere
#internet
#weblogging
#weblogs

You cannot understand either globalization or internation...

You cannot understand either globalization or international migration without knowing the history. David and Jon know the history very very well: David S. Jacks and John P. Tang: Trade and Immigration, 1870-2010: ���global merchandise trade and immigration from 1870 to 2010. We revisit the reasons why these two forces moved largely in parallel in the decades leading up to World War I, collapsed during the interwar period, and then rebounded (but with much more pronounced growth in trade than in immigration)...

...We also document a large redistribution in the regional sources of goods and people with a shift from the former industrialized core countries���especially Europe���to those in the former periphery���especially Asia���as well as a very striking change in the composition of merchandise trade towards manufactured goods precisely dating from 1950. Finally, using a triple differences framework in combination with a dramatic change in US immigration policy, we find evidence that immigration and trade potentially acted as substitutes, at least for the United States in the interwar period....

#shouldread

Why we surf the internet: Abi Sutherland: Return of the D...

Why we surf the internet: Abi Sutherland: Return of the Dreadful Phrases: "Seneca is (dubiously) said to have told us that errare humanum est (to err is human) sed perseverare diabolicum, but to persist [in error] is diabolical...

oldster: Can I get a citation for that Seneca quote? I cannot find it. And I think it is vanishingly likely that he would use the word "diabolicum", which gets into Latin as a transliteration of New Testament Greek. So maybe he said something like "errare humanum est" somewhere, but I strongly suspect that second half comes much later than Seneca. I feel bad for being so pedantic. But then again, the "dreadful phrases" threads are natural display-cases for pedantry, so maybe it is less out of place here?

abi: Oldster, I cannot find a citation for it, but it is universally attributed to Seneca. Diabolicum is not a common Latin word, but the Greek word �������������������� means "slanderous" or "lying". (It's also not common; I can see no references to it before the common era in Perseus. I'll amend the entry to say it's attributed to Seneca.

oldster: I'm afraid that between us we are illustrating the saying of St. Ambrosius, "to err is human, but to make a big deal pointing out other people's errors is, like, being a jerk." I'm pretty sure it was St. Ambrosius? I could be wrong. As Martin Luther said to the Pope in his 95 theses, "yeah? well, you know, that's just like, your opinion, man."

abi: Oldster, you are correct; it is Ambrosius who wrote errare humanum est, sed volgo errores aliorum indicare equidem crudelis est. It's in De Officiis Ministrorum, Book IV, De Mediis Sociabilibus.

oldster: ah, yes: the de Mediis Sociabilibus. Part of his projected summa, left incomplete at his death, de Tela Totius Terrae, vel de origine mali humani. An amazing visionary, Ambrosius! He it was who first laid down that golden precept, troglodytae non pascendae sunt...

#shouldread

Note to Self: Should I be the first person to see if I ca...

Note to Self: Should I be the first person to see if I can get an airplane book entitled The Impeachment of Individual-1 on the shelves?

I used to think that the fact that the Senate is an insti...

I used to think that the fact that the Senate is an institution that has lost its purpose and now gives rural residents grossly excessive and illegitimate political power was no biggie.

Yes, the constituents of a Senate majority would have to be bought-off in any significant piece of legislation. But rural populations were poor, relatively speaking, and becoming poorer. Thus their excessive political voice partially cushioned them from the slings and arrows of outrageous fortune was not the worst thing in the world. But that would require that they be rational and somewhat public-spirited actors���not the easily-grifted victims of racist neo-fascist clowns.

We need Senate reform. It should start with Senate committee chairships automatically going to the senators from the most populous states. It should continue from there: Paul Krugman: The New Economy and the Trump Rump: "Why we went from regional divide to political chasm: ... A little over a year ago, Amazon invited cities and states to offer bids for a proposed second headquarters. This set off a mad scramble over who would gain the dubious privilege of paying large subsidies in return for worsened traffic congestion and higher housing prices. (Answer: New York and greater D.C.) But not everyone was in the running. From the beginning, Amazon specified that it would put the new facility only in a Democratic congressional district. O.K., that���s not literally what Amazon said. It only limited the competition to 'metropolitan areas with more than one million people' and 'urban or suburban locations with the potential to attract and retain strong technical talent'...

...But in the next Congress the great majority of locations meeting those criteria will, in fact, be represented by Democrats.

Over the past generation, America���s regions have experienced a profound economic divergence. Rich metropolitan areas have gotten even richer, attracting ever more of the nation���s fastest growing industries. Meanwhile, small towns and rural areas have been bypassed, forming a sort of economic rump left behind by the knowledge economy. Amazon���s headquarters criteria perfectly illustrate the forces behind that divergence. Businesses in the new economy want access to large pools of highly educated workers, which can be found only in big, rich metropolitan areas. And the location decisions of companies like Amazon draw even more high-skill workers to those areas. In other words, there���s a cumulative, self-reinforcing process at work that is, in effect, dividing America into two economies. And this economic division is reflected in political division.

In 2016, of course, the parts of America that are being left behind voted heavily for Donald Trump. News organizations responded with many, many, many profiles of rural Trump supporters sitting in diners. But this was, it turns out, fighting the last war. Trumpism turned America���s lagging regions solid red, but the backlash against Trumpism has turned its growing regions solid blue. Some of the reporters interviewing guys in diners should have been talking to college-educated women in places like California���s Orange County, a former ultraconservative stronghold that, come January, will be represented in Congress entirely by Democrats...

#shouldread #politics #orangehairedbaboons

Since 2008, it is clear to me, the unemployment rate has ...

Since 2008, it is clear to me, the unemployment rate has no longer served as a sufficient statistic for whether the labor market is loose or tight. We need to look, and look hard at those who do not have jobs and do not say that they are looking for jobs but who would take jobs if they existed. And we need to look very hard at hours: David Bell and David Blanchflower: Underemployment in the US and Europe : ���The most widely available measure of underemployment is the share of involuntary part-time workers in total employment. This column argues that this does not fully capture the extent of worker dissatisfaction with currently contracted hours. An underemployment index measuring how many extra or fewer hours individuals would like to work suggests that��the US and the UK are a long way from full employment, and that policymakers should not be focused on the unemployment rate in the years after a recession, but rather on the underemployment rate...

... The failure of wages to recover to their pre-recession growth rates in the developed world has been a continuing puzzle for economists.... The traditional explanation would be that wage growth was held back by high levels of unemployment. But... unemployment rates are low especially in the US (3.9% in August 2018) and the UK (4.2% in May 2018) and Germany (3.4% in July 2018).... In our interpretation of the concept, underemployment implies workers are off their labour supply curve...

#shouldread