J. Bradford DeLong's Blog, page 379

Comment-of-the-Day: Byomtov: Some Fairly-Recent Must- and...

Comment-of-the-Day: Byomtov: Some Fairly-Recent Must- and Should-Reads...: "If the tax cuts are going to create massive growth, why are conservative economists worried about the viability of Social Security? The intermediate scenario they cite assumes much lower growth than they think is coming..."

Should-Read: This is... what... thirty-five years since t...

Should-Read: This is... what... thirty-five years since there were credible rumors that Harvard Hall knew that Jorge Dominguez had told an associate professor that her tenure case was toast unless she came across? And in between then and now he has had big budgets and a vice provostship? Drew Faust and her predecessors have some explaining to do: Susan Dynarski retweeted: The Harvard Crimson: "The Faculty of Arts and Sciences has filed a formal Title IX complaint against Government Professor Jorge I. Dominguez, according to correspondence obtained by The Crimson..."

Should-Read: Mark Mazower: Opinion | Anti-Semitism and Br...

Should-Read: Mark Mazower: Opinion | Anti-Semitism and Britain���s Hall of Mirrors: "I am not sure that my grandfather would have seen much change in the Labour Party...

...The ongoing clash within its ranks between moderates and radicals would have been familiar to him. Nor would he have been very surprised to find prejudice extending left as well as right: This would not have affected his preference for the party of social justice. And since, as a Bundist, he had grown up in opposition to Zionism (Bundists and Zionists were locked in ideological combat from their birth onward), he would have regarded pretty searching criticism of Israel as a far more normal part of the political landscape than most people do today. But he could only have been disappointed at the immense change in the country that took him in, in Britain itself, losing its way in a hall of mirrors, distracted by secondary issues while the country���s fate hangs in the balance.

Should-Read: The thoughtful and intelligent Justin Fox lo...

Should-Read: The thoughtful and intelligent Justin Fox loses it. He reads what is best taken as an early April Fools joke���five Stanford economists making fools of themselves to informed readers while they try to fool their uninformed readers into becoming useful idiots. Justin's conclusion:

[The] Hoover Five... by��acting as if��tax��cuts aren't partly responsible for��the "string of perpetually rising trillion-dollar-plus deficits"... undercut their own credibility...��join... the��long-running Republican��disingenuousness.... Yes, I'm probably expending way too much time and energy on what is, after all, just an op-ed piece in the Washington Post. But... the dead end that respectable conservative economic thought has found itself in when four elder-statesmen economists and a��somewhat younger one (Cochrane)...��can't even bring themselves to write frankly about the nation's fiscal situation...

As I say, the most polite apt description is: unprofessional. And yes: I do think Stanford needs to start exercising some more serious intellectual quality control oversight over Hoover: Justin Fox: Beware Economists Who Warn of an Entitlement Explosion: "A��quintet of��notable Republican economists... Michael J. Boskin, John H. Cochrane, John F. Cogan, George P. Shultz and John B. Taylor...

...The five���all senior fellows at��Stanford University's Hoover Institution....

As is well-known, our deficit and debt problems stem from sharply rising entitlement spending.

They're right that��such spending is rising!... Put the current intermediate estimates for both Social Security and Medicare together, and you get a funding deficit that rises from 0.1 percent of gross domestic product in 2017 to 1.7 percent in 2035 and fluctuates��between 1.6 percent��and 1.8 percent for the rest of the century.... The federal budget deficit in fiscal-year 2017 already amounted to 3.5 percent of gross domestic product, and Congress passed and President Donald Trump signed a tax cut in December that,... will��add... more than 1.3 percent in fiscal 2019.... What do the Hoover Five have to say about the impact of the��Tax Cuts and Jobs Act��on the deficit?:

The recently enacted corporate-tax-reform plan is a good first step, as it sharply increases the incentive to invest and grow businesses, which will increase incomes. The revenue loss, which amounts to about 0.4 percent of gross-domestic product in 2025, is not by itself a budget buster, considering both the offsetting revenue reflow from higher incomes and the far larger long-run entitlement explosion. Moreover, over the next decade, the tax plan maintains or increases the federal tax claim on GDP compared with recent levels.

It's��curious that they picked 2025, given that most��of the individual tax��cuts in the Tax Cuts and Jobs Act are set to expire that year... [with] Republicans in Congress... already��pushing to make��the��temporary individual tax cuts permanent.... It's not of a��different order of magnitude��and (2) it's happening now rather than two decades in the future. So I'm a little unclear on why one��is an "entitlement explosion"��while the other is "not by itself a budget buster."...

It��does seem like��the U.S. also ought to expect federal spending, which has averaged 19.5 percent of GDP since 1950 and was 20.8 percent in fiscal 2017,��to rise��a bit as the population grays. Keeping Americans who are too old to work out of poverty and health-related misery is the decent thing to do, and government's share of the economy is still pretty low in the U.S. relative to other wealthy countries....

So��... why didn't the Hoover Five bring up this need for more revenue, as well as suggestions for how to provide it? I guess it's partly because they really��wish entitlement spending��were lower. By��acting as if��tax��cuts aren't partly responsible for��the "string of perpetually rising trillion-dollar-plus deficits" that they warn about, though, they both undercut their own credibility with informed readers and��join in the��long-running Republican��disingenuousness��on��taxes that I think has made it much harder for this country to implement intelligent conservative tax and spending policies. Yes, I'm probably expending way too much time and energy on what is, after all, just an op-ed piece in the Washington Post. But��it seems indicative of the dead end that respectable conservative economic thought has found itself in when four elder-statesmen economists and a��somewhat younger one (Cochrane)��who styles himself (and often is) a plain-spoken truth-teller��can't even bring themselves to write frankly about the nation's fiscal situation.

I must say: I have not noticed many occasions on which John Cochrane has been a plain-spoken truth teller. Can you point some out to me

Now That John Williams Is President of the New York Fed, He Really Should Convene a Blue Ribbon Commission on What the Inflation Target Should Be

From June 2017: Fed Up Rethink 2% Inflation Target Blue-Ribbon Commission Conference Call: I hear four arguments for not changing the 2%/year inflation target, even though pursuing that target found us in a situation where monetary policy was greatly hobbled in its ability to manage the economy for a solid decade. And, as best as I can evaluate them, all four of these arguments seem to me to be wrong. They are:

The Federal Reserve, even at the zero lower bound, has powerful tools sufficient to carry out its stabilization policy tasks....

The problem is not the 2%/year target but rather pressure on the Federal Reserve... from substantial numbers of economists and politicians practicing bad economics and motivated partisan reasoning....

A higher inflation rate would bring shifting expectations of inflation back into the mix, distract people and firms from their proper task of calculating real costs and benefits to worry about monetary policy, and make monetary policy management more complicated....

The Federal Reserve needs to maintain its credibility, and if it were to even once change the target inflation rate, its commitment to any target inflation rate would have no credibility...

For the Weekend: Diana Rigg

Should-Read: Facebook needs to convince people that it���...

Should-Read: Facebook needs to convince people that it���all of it���even the advertising parts���are there to connect you in ways you want to be connected, rather than to hack your brain in ways you would rather not have your brain be hacked. This is a difficult task to accomplish. And I do not think Facebook has spent enough time thinking about how to do it: Josh Marshall: Is Facebook In More Trouble Than People Think?: "People aren���t fully internalizing that the current crisis poses a potentially dire threat to Facebook���s... core advertising business...

...Almost all of the company���s revenue comes from advertising that it targets with unparalleled efficiency to its billions of users.... The key driver is efficiency. If old-fashioned advertising shows my advertisement to 100 people for every actual buyer and other digital platforms show it to 30 people and Facebook shows it to 5 people, Facebook���s ads are just worth a lot more.... As one digital ad agency executive recently told me, even if Facebook jacked up the prices a lot more, his firm would likely keep using them just as much because on this cost to efficiency basis it���s still cheap. This is the basis of Facebook���s astronomical market capitalization which today rates at over $450 billion.... The advertising comes from the data and the artificial intelligence that crunches it and models it into predictive efficiency. But what if there���s a breakdown in the data?

Starting in a early March, a number of marketers running substantial sums on the Facebook ad engine, who���ve spoken to TPM, started noticing a new level of platform instability... price oscillations, reduced targeting efficiency and even glitches.... We���ve seen the most of this... with so-called DTC (direct to consumer) marketers.... In response to the rolling public relations debacle Facebook has already dramatically reduced or has announced that it will reduce advertisers��� ability to use third party ad data on the Facebook platform....

We already know that Facebook is making a lot of changes to how it uses data, especially third party data and how it allows advertisers to use data. Some of this is already public. Indeed, it���s getting discussed a lot in the trade press.... I suspect that Facebook is trying to rejigger its algorithm on the fly... to see if they can get it to work as effectively... without... data sources... they���ll lose access to in coming regulation. That is the most logical explanation of the instability....

Facebook's... market valuation rests on the assumption that it will keep... increasing the amount of money it makes hand over fist.... Keep in mind that Facebook isn���t just dealing with a reputational crisis. It���s having to clean up the reputational mess by rejiggering parts of its core revenue stream it���s not clear it really knows how to do. That creates a lot of unpredictability. More than most people seem to realize.

Should-Read: The only flaw in this piece is a lack of a p...

Should-Read: The only flaw in this piece is a lack of a proper definition of "conservative". And that leads the very sharp Henry Farrell into some fuzzy thinking here. Wanting to see a quarter of women in America hanged is not "conservative": it is radical: Henry Farrell: Who has any use for conservative intellectuals?: "The firing of Kevin Williamson has led, predictably, to outrage from other conservatives, and in particular from anti-Trumpers like Bill Kristol and Erick Erickson...

...I can���t help thinking that much of their outrage is rooted in fear. Conservative intellectuals are in a very awkward historical position.... The conservative movement perceived the need for intellectuals, both to hold their own fractious coalition together through ���fusionism��� and the like, and to justify their goals to liberals, who dominated the space of serious policy discussions, and could possibly stop them. Liberal policy types, for their part, needed to understand what was happening among conservatives, and perhaps hoped to influence it a little. The result was that conservative intellectuals were in a highly advantageous structural position, serving as the primary link between two different spheres, which didn���t otherwise come much into contact. As network sociology 101 will tell you, this allowed them a fair amount of arbitrage....

Now, however, the game is up.... Conservative intellectuals defected en masse from Trump, thinking that it was a fairly cheap gesture of independence, but Trump got elected. Not only did this damage these intellectuals��� personal ties with the new administration and the conservative movement, but it opened up the way for a conservatism that basically didn���t give a f--- about policy ideas and the need to seem ���serious��� any more. The result is that conservative intellectuals don���t have all that much influence over conservatism.... [And] without such influence over conservatives, these intellectuals��� capital with liberals and the left is rapidly diminishing too. If conservative intellectuals don���t have much of an audience within conservatism itself, why should people on the opposite side listen to them any more?

Their actual ideas are... mostly not that strong.... The only plausible case for paying attention to conservative-intellectuals-qua-conservative-intellectuals, is that perhaps the pendulum will swing back after Trump, and the old regime be restored..... You wouldn���t want to betting serious money on it.... Stephens, Williamson (up until this afternoon) and the others are running on fumes.... The actual liberals and leftwingers that are the audience for publications like the Atlantic don���t want anything to do with these people...

Should-Read: Noah Smith: "Yep. Restrictionists lie when t...

Should-Read: Noah Smith: "Yep. Restrictionists lie when they say that our current system is 'open borders'. Restrictionists lie when they say Democrats want open borders. Restrictionists lie, all the time, about everything.

@JeffFlake: To say that "Democrats want no borders" is inaccurate. Every senate Democrat voted for bipartisan immigration legislation in 2013 that included $40+ billion for border infrastructure, personnel & technology. Both sides of the aisle want reform. Let's do it.

Should-Read: The eminent and brilliant Mary Daly is one o...

Should-Read: The eminent and brilliant Mary Daly is one of the people on the shortest of my short lists of people who would be a good next president of the Federal Reserve Bank of San Francisco. Here she is talking in Phoenix, AZ: Mary Daly: Raising the Speed Limit on Future Growth: "Why aren���t American workers working?...

Some of the drop owes to wealthier families choosing to have only one person engaging in the paid labor market (Hall and Petrosky-Nadeau 2016). And I emphasize paid here.... Some of the lost labor market participation seems related to having the financial ability to make work���life balance choices. Another factor... is ongoing job polarization that favors workers at the high and low ends of the skill distribution.... Our economy is automating thousands of jobs in the middle-skill range, from call center workers, to paralegals, to grocery checkers.... These pressures on middle-skilled jobs leave a big swath of workers on the sidelines, wanting work but not having the skills....

The final and perhaps most critical issue.... We���re not adequately preparing a large fraction of our young people for the jobs of the future.... By 2020, for the first time in our history, more jobs will require a bachelor���s degree than a high school diploma (Carnevale, Smith, and Strohl 2013).... In 2016 only 37% of 25- to 29-year-olds had a college diploma (Snyder, de Brey, and Dillow 2018).... So where should we focus our efforts when it comes to getting more young people into college? One place to start is in working to equalize educational attainment across students of different races and ethnicities.... Given the important role that education plays... equalizing... educational attainment across these groups has big benefits....

The really good news is that education is generally a win���win, beneficial to individuals and to taxpayers. We know that those with a college degree are much more likely to become top earners during their career, regardless of their financial background (Daly 2012; Daly and Bengali 2013, 2014; and Daly and Cao 2015). They have lower unemployment rates, and they���re less likely to become unemployed during a recession. And while there���s no doubt the cost of college is a strain for many, the average time it takes to recoup that cost is 10 years (Abel and Deitz 2014). This means that, relative to many other investments, education pencils out, even if graduates don���t go on to earn top salaries. For taxpayers the math is even more straightforward. A detailed study by the OECD shows that college is a great investment for taxpayers (OECD 2017). The costs paid to educate are more than covered by increased productivity, longer and more stable work lives, and higher tax revenues from graduates.... Education is incentive compatible, good for everyone involved...