Marginal Utility

by Ken Houghton

During all the "gas tax holiday" contretemps last week, I kept asking if Obama had any plan, other than to sit there and let Johnny Mac run as a "populist."

The two responses were "Well, Obama said that the cut enacted in the Illinois legislature, of which about 60% went to consumer, did nothing to help the consumer" and "He wants to stop putting oil into the Strategic Petroleum Reserve."

I leave explaining the first to The Mendacity-Finding Duo of Greg Mankiw and Brad DeLong.

For the second, however, we now see (via Some Assembly Required), we find that stopping putting oil in the SPR is expected to do even less than the gas tax cut.

Waiting patiently for Stephanopoulos to ask Obama about that. (At least his response probably won't have all the economists in the blogsphere whining.)

Labels: 2008, Brad DeLong, ObamaNation, Oil, Republicans

by Ken Houghton

If you're going to read people (such as David Brooks) so I don't have to, could the excerpts please be shorter??

Five years? My brain hurts, a lot.

Labels: blogging, Brad DeLong, Journamalism, Meta

by Ken Houghton

From David Warsh's Knowledge and the Wealth of Nations:

During the administration of the first President Bush, [Larry] Summers became chief economist at the World Bank, then, after Bill Clinton was elected, rose steadily through the Treasury Department ranks, eventually becoming the youngest treasury secretary since Alexander Hamilton, and finally president of Harvard University. His old friend Andrei Shleifer moved to Harvard from the University of Chicago in 1992 to lead a U.S. mission to Moscow on behalf of the U.S. Agency for International Development. His deputy, J. Bradford Delong, moved to Berkeley, wrote a textbook, and started a widely-read blog.

After finishing the book, I'm not certain that Warsh doesn't believe that DeLong didn't make the best choices of the three. (Nor would I be inclined to argue with that conclusion.)

Labels: Brad DeLong, Economic Development

by Ken Houghton

UPDATE: De Long responds, accurately, here. Though I'm still inclined to believe that, at best, the U.S. fallout would have been even worse, his scenario is at least plausible from the Cuban perspective.

Catching up on my skimming (in preparation for having a while with time for reading), I find this Adam Clymer op-ed on the Panama Canal:

THIRTY years ago tomorrow, the conservative movement lost a major battle on the way to winning a larger war. On March 16, 1978, the Senate approved — 68 to 32, with just a single vote to spare — the first of two treaties that transferred the Panama Canal to Panama. Conservatives lamented the result, saying it threatened national security and might put the canal in Communist hands.

But losing the canal led to important victories for conservatives. The transfer of the canal to Panama provided the margins for defeat of five Democratic senators in 1978 and 1980, enough to give Ronald Reagan a Republican majority when he took office in 1981. That majority was essential to Mr. Reagan’s legislative successes.

And I am reminded once again of Cuba, and Brad De Long's reply to Jessica (#5) when she noted that "once that die was cast, I don't see where Castro ever had a chance to switch directions without risking not only US invasion, but vindictive and brutal US invasion":

As to when Fidel could have switched to a eurocommunist or social-democratic model without immediately losing his head--well, 1968 with Dubcek, or 1975 with Sadat, or anytime in the Carter administration, certainly.

The man who barely had enough political capital to get rid of an aging, increasingly less valuable resource does not seem likely to have been able to repel the Cuban Mafia's Calls for a Takeover.

Labels: Brad DeLong, History, Politics

by Ken Houghton

[Dissenting opinion below -- Ed.]

Via Brad De Long (but somehow now missing from his main page), Jon Alter continues his absurdist claim* with a roundelay of anti-democratic screed in support of his previous anti-democratic screed.

Meanwhile, Scott Lemieux beats his chest, rents his clothing and generally wails, while DeLong himself agrees with Alter, but at least does so with some style. So let's look at Scott's declaration:

So this thing will go on for another month, and the chances of a debilitating convention fight...that could seriously compromise the Democratic nominee in the general have increased.

Damn. "Debilitating" "Could seriously Compromise." Never have the glories of Gaming the System been stated so clearly as an asset.

Don't get me wrong. I have sung the praises of Rory Harper before, even after he posted That Unmentionable Video (first link above). But any pretense that Rory's vote being worth somewhere between slightly over 9% of a delegate and a whole delegate has anything to do with "the will of the people voting in the Democratic Primaries" is self-delusional. [The delegate in question is to the Texas state convention -- Ed.]

You may argue—I suspect Scott or Hilzoy, to name two, would—that Gaming the System for Delegates is The Idea.** If you want to do so, of course, and claim to argue consistently, you can't also declare that Bush v. Gore "should not be taken as articulating a legal principle at all."

Or, you can argue that, since the system is set up so that a majority of the voter-selected delegates does not guarantee one the nomination, that it is a perfectly reasonable strategy to campaign for broad-based voter support (which may well cost you some delegates, since votes and delegates are not apportioned proportionately; see Rory above) and to use that to convince the Superdelegates that they should support you.

But that, in the Alter/Scott world, is Evil.*** (Stephen Schlesinger appears to know better.)

Apparently, even though more delegates does not mean more voters (i.e., the delegate selection process is often anti-democratic), it would be anti-democratic for superdelegates to consider the actual will of the voters.

So let's rehash the guiding principles:

1. Disproportionate allocation of delegates is perfectly fine, even when it means that the loser of the popular vote ends up "winning." [WTF? --Ed.] [Example: Nevada's delegate split, or TX's - kh]
   
2. Superdelegates choosing to vote for the good of the party—especially in a case where the presumptive nominee has less general support but a plurality of the delegates due to Gaming the System—is mean, evil, and anti-democratic.
   
3. As previously discussed, voters who choose to vote when their primary was scheduled are not important, because they should have known there would be a demand for a "do over."
   
4. Brad De Long's disparagements of HRC (when, it now appears, that the dispute was at least in part over whether NAFTA or Health Care should be the Administration's First Priority) are definitive, while Todd Spivak's interactions with Obama (including details that suggest that his Legendary Effectiveness in passing the videotape-interrogations law is exaggerated) or Joe Wilson's noting that Obama's own words belie his "I always opposed the Second Iraq War" position are "hit jobs." [Update: h/t to The Smartest Woman I Know for the Spivak and dKos links]

Glad we got that straight. Later, Scott will explain (at LG&M) why spending the next four months having McCain and Ari Fleischer concentrating their attacks solely on Obama is preferable to a continued narrative that focuses on Democratic issues and Democratic candidates, and keeps people interested in the Democratic Convention as possibly more than just a coronation.****


Tom Begs to Differ:

1. Jonathan Alter's "Hillary's Math Problem" simply points out that, by virtue of having failed to land a knockout blow on Super Tuesday and subsequently losing a mess of primaries and caucuses, Hillary Clinton cannot win the remaining states by large enough margins to undig her hole with respect to the more-or-less democratically-selected delegates. If that's an "anti-democratic screed," then I don't know what is.

2. Insofar as Clinton's late break was, in part, the result of some negative campaigning, I'm with Scott Lemieux in not looking forward to what will emanate from Mark Penn's bottom in the next six weeks. I'd almost be willing to throw my support to Clinton if she'd only shitcan the lot of her incompetent campaign advisers.

3. A byproduct of point #1 is that, barring a spectacular and improbable Obama implosion, Clinton can win the nomination only by deploying the superdelegates (i.e., the least democratic element in the selection process) against the pledged delegates (the more democratic element).

4. The anomaly that the system can produce a nominee who won fewer aggregate votes but won more states at least mirrors an anomaly in the national election system; for the standpoint of November, winning big versus winning really big in New York and California is a less valuable skill than being a strong candidate in swing states. Clinton's Ohio performance is, really, the first sign that she has strength in the latter area.

5. Sure, some of the rules are stupid (see: DNC treatment of FL and MI), but they were preannounced. Not contesting a state under those circumstances is quite unlike the HRC campaign's failure to set up a geographically broader campaign in contestable states and therefore getting blown out. It goes without saying that certain Clinton campaign strategists have some words regarding open primaries in redish-to-red states now that two of them have saved their asses.


*He's not alone in this, of course, he's just "prominent" and "liberal."

**Or, alternately, that Mark Penn should have thought to do it.

***It appears to be so in Hilzoy-world as well, which is why I recently called her a member of the ABC camp. She claims otherwise, so I'm hoping someone will cite a post of hers that acknowledges that Superdelegates can and should make up their own minds.

****I'm assuming neither candidate is going to give his or her acceptance speech at 3:00 a.m., or fail to vet their VP selection. And that neither is going to enter a tank without appropriately-sized head gear being procured first.

Labels: 2008, Brad DeLong, Democracy, LGandM, ObamaNation, Politics

by Ken Houghton

I'm late with this—just finishing five days of flu—but can someone please explain how Brad DeLong, Tyler Cowen, and McMegan, to name three, have decided that there is a new country called "Northern Mexico"?

For some strange reason, I can't find it on the Penn World Tables. And certainly that trio would never cherry-pick data.

Labels: Brad DeLong, Economic Development

by Ken Houghton

Yes, it's another Clinton/Obama post. Feel free to skip, or wait for Tom's comment and read from there to here.

(On the plus side, Tom's attempt at pre-emption has saved me from having to discuss Mark Penn, about whom the less said the better, unless you are Lee Papa, which none of [the rest of] us is. Even if Papa does seem to share the ObamaNation double-standard that Their Man can go on Faux News every day, but HRC agreeing to debate him on there is Evil Calculated Pimping.)

Hilzoy continues the Cult* of Obama with a slagging of the HRC campaign almost worthy of Mr. Papa if he were taking his meds. And I blame Brad DeLong: partially because she does.

We learn, for instance, that "Hillary Clinton's seven years in the Senate have been pretty undistinguished." (Tom, for instance, knows better.) Of course, in fairness, Hilzoy disagrees with Tom about Terry McAuliffe's value: "Various Clinton insiders, including (according to Greene) Terry McAuliffe and Maggie Williams -- tried to get [Patty Solis Doyle] fired [after 2006]."**

When Hilzoy adds commentary, it is strange:

[T]he NYT story Greene quotes says that the campaign spent "$27,000 for valet parking, paid as much as $800 in a single month in credit card interest and — above all — paid tens of thousands of dollars a month to an assortment of consultants and aides."

$27,000 in valet parking, in a state that includes NYC, which was visited multiple times, in multiple locations, by multiple cars holding multiple people over multiple months? The only thing amazing about that is that it the number was so low.

Consultants? For someone doing a lot of internal polling, and probably preparing for a national run and higher office? I know Hilzoy and I do everything out of the goodness of our hearts, but the Mark Penns and Mark Kleimans get paid. (Unfortunately or not, they get paid win or lose. As Toby Ziegler says in the first episode of the second season of The West Wing (roughly) "I"m a political consultant." "How many races have you won." "None."

In fairness, the $800 in interest charges looks suspicious. The rest looks like the two make-up sessions for which John Edwards's campaign paid $400 ($200 each, which NYCites will assure you is a bargain) that have been miraculously transformed into "haircuts."

Then there is the evil of HRC herself. HIlzoy quotes Josh Greene—"[A]bove all, Clinton prizes loyalty and discipline, and Solis Doyle demonstrated both traits"—as if this were unique. (See Todd Purdum's Vanity Fair piece on Obama, for instance. Or find me any politician on the national stage who doesn't prize loyalty and discipline above all.***)

Hilzoy then invokes Brad DeLong's 2003 piec—the one I discussed extensively here,; the one that self-described "progressive" HRC haters (and, now, Obama supporters) continually invoke as "proof" of her evil. (In this, they are rather similar to the people who take Obama's admission of cocaine use in his younger days as defining his abilities and accomplishments.) The one that, until October of 2007, was missing its key paragraph (even if the 'graf was, allegedly, "hoisted from the archives"):

t is hard to tell how much power Hillary Rodham Clinton had. Certainly she did not effectively manage the process. But I did see Ira Magaziner in action. And it seems to me that the process was impossible to manage as long as Ira Magaziner was involved, and perhaps she did not have the power to fire him.

She did, presumably, have the power to fire Sollis Doyle, and has the power to fire Mark Penn, and much of Hilzoy's post is devoted to "she didn't do it, so she's a Bad Leader" ranting.****

After quoting the two articles at length, Hilzoy coming to rather a interesting conclusion:

[DeLong] later decided that he had been unfair: according to "her people", "she has done an awful lot more over the past fifteen years, and done almost all of it very successfully."

The sarcasm quotes around "her people" are, I hasten to note, not Brad DeLong's, and my previous, abundant respect for Hilzoy declines because of them. It is only the next sentence that causes that respect to fall off the cliff:

I have never really known what that "awful lot more" was, so I've never felt competent to judge what Hillary Clinton's people say.

Yes, this is the same woman who said (before inserting some long quotes from two others) that "Hillary Clinton's seven years in the Senate have been pretty undistinguished."

Quoting my fellow sufferer of Hansen's Disease:

I have read and heard plenty of good arguments making the case that Hillary Clinton will not be an ideal or even a good President. I've heard and read plenty of good arguments that she won't be the best candidate.

I have yet to read or hear a good argument making the case that Obama will be an ideal or a good President or even a better one than Clinton.

Mostly I've heard and read are arguments based entirely on the hope that he will be any or all of those things.

And I've heard and read a lot arguments based entirely on the fear of what the Presidential campaign will be like if Clinton's the nominee.

The end of the first, and the last, appears to be near the center of Patrick's analysis that left him "on balance I’m impressed. Not transported. Not uncritical. But impressed." with Obama. (The posting of Elise Matthesen's Straw Man, is presumably another story, one only compounded by Patrick's .*****)

Indeed, the closest thing we had to why Obama will make a good President was Hilzoy's post (cited with distinction by Patrick, Tom, and amanda as the first comment to Lance's post.) As Lance notes, "it basically makes a case I never doubted, that Obama has been one of the good guys." (My own doubts are public knowledge, and based on the public comments and publications of his circle of advisors, public [David Cutler, Cass Sunstein] and private [e.g., the "strong women" cited in Purdum's article]—but those are doubts that Obama is more a progressive Democrat than HRC, not that he'll do less harm than the Republican nominee.)

But Hilzoy's "Actually, I think we can" now appears to be selective advocacy presented as reasoned analysis.

I won't be crying that HRC (and especially Mark Penn) got out-triangulated. But it would be nice if people who claim to be Obama supporters were really more than HIllary bashers. (Tom, as noted before, does not fall into the latter category. I had hoped—apparently erroneously—that he was not alone in that.)

*Yes, Patrick, I'm calling it that; since your source asks why a man who continually invokes his religious beliefs is tagg[ed] with the term messiah,, I rest the case and await being pilloried)

**Hilzoy, among others, clearly agrees that it would have been better if HRC had followed that advice. But then I suppose she would have had to find something else about which to write.

***Barrack Obama, after all, is married to Michelle, who declared that she "might" support HRC if her husband loses the nomination, and then offered the bromide that "everyone in this party is going to work hard for whoever the nominee is."
****For the record, I'll go with DeLong and Ezra Klein on this one:

[T]he Clinton team has run a pretty good campaign. [B]etter, indeed, than what I thought they'd run. It may or may not prove to be enough, and looking back, there will surely be identifiable mistakes and botched opportunities.

which one can say of any campaign, even Obama's. Not that I would, since Lance and I already may be the only lepers left in the colony.

*****I assume it is clear that no one would accuse me of considering Obama a "starry-eyed idealist." If it isn't, see here. Warning: it's long.

Labels: 2008, Brad DeLong, Hillary Clinton, Mannion, ObamaNation, Politics

by Ken Houghton

Tom's defense of Obama got me thinking about Brad DeLong and Hillary Clinton. The result is not pretty.

June 2003:

My two cents' worth--and I think it is the two cents' worth of everybody who worked for the Clinton Administration health care reform effort of 1993-1994--is that Hillary Rodham Clinton needs to be kept very far away from the White House for the rest of her life. Heading up health-care reform was the only major administrative job she has ever tried to do. And she was a complete flop at it. She had neither the grasp of policy substance, the managerial skills, nor the political smarts to do the job she was then given. And she wasn't smart enough to realize that she was in over her head and had to get out of the Health Care Czar role quickly.

June, 2007, quoting without comment or update from a Harvard Crimson article on himself and Andrei Shleifer:

[DeLong] also played a role in the unsuccessful effort at creating universal health care, laying much of the blame for the legislation’s demise at the feet of then-First Lady Hillary Clinton, who had led the effort. In one of the most famous posts on his blog, DeLong wrote that, based on his experience working with Clinton, “there is no reason to think that she would be anything but an abysmal president.” He adds that she “had neither the grasp of policy substance, the managerial skills, nor the political smarts” to lead the effort.

In October of 2007, a new paragraph is miraculously inserted into what was previously this piece:

It is hard to tell how much power Hillary Rodham Clinton had. Certainly she did not effectively manage the process. But I did see Ira Magaziner in action. And it seems to me that the process was impossible to manage as long as Ira Magaziner was involved, and perhaps she did not have the power to fire him.

February, 2008 (edited to be Hillary-specific; nice comments about Barack Obama go without saying):

The arguments against Hilary Rodham Clinton are:

1. Her performance running Clinton-era health care reform in 1993 and 1994 gives no confidence in her ability to run the large organization that is the U.S. government.

The response...is by this point very convincing: [she has] demonstrated an ability to run an excellent political campaign. Running a successful presidential political campaign is not the same thing as governing a country, but [she has] demonstrated substantial administrative competence over the past two years...the Hilary Rodham Clinton who made such an administrative mess of health reform in 1993-1994 could not have run the campaign she has run over the past two years. Thus I am now confident that [she] has a reasonable shot of being in the top 20% of American presidents.

Anyone wonder why that first bullet is still prominent?

The thing is, it's not as if DeLong doesn't speak with the Patricks and Tboggs and others who know that Hillary Rodham Clinton has been a United States Senator from New York for seven years, not just one, and was both elected in 2000 (when she ran an intense campaign, learned the issues that affect people in New York state, and planned accordingly) and then re-elected by a wider margin after serving her constituents's needs from 2001-2006.

Apparently, until this week, though, he forgot that it's not 1994 any more.

Labels: 2008, Brad DeLong, Hillary Clinton, Meme-A-Riffic, Politics

by Ken Houghton

Treading on Tom's bailiwick, James Inhofe (R - CloudCuckooLand) argues that selling cars internationally is not a good idea:

The lone Republican senator to attend the hearing, Sen. James Inhofe of Oklahoma, was the only one to come to the administrator's defense. Inhofe dismissed the proceedings as "more theater" and called California's law a "job killer" for the auto industry.

California's first-in-the-nation tailpipe rules would force automakers to cut greenhouse gas emissions by 30 percent in new cars and light trucks by 2016, with reductions starting with the 2009 model year.

Twelve other states have already adopted those rules - Connecticut, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington - with others preparing to do so.

Let's see if we have this straight:

1. There is increasing world-wide demand for more cost-effective cars
   
2. The mileage and emission standards required by California are remarkably similar to those required by Europe
   
3. Cars can be sold internationally.
   
4. Designing a car to fit two different standards is more expensive than designing it to fit one; economies of scale is still a truism.
   
5. Economies grow, per Brad DeLong's favorite dead economist, through "creative destruction":
   
   1. That implies that producing the same product ten years later while everyone else—e.g., Toyota—has been innovating and changing the model will lose you mark share.
      
   2. Losing market share generally reduces demand (or at the least, doesn't allow it to keep up with the natural expansion of the population.
      
   3. Not keeping up means that you have to cut costs.
      
   4. Cutting costs eventually means cutting jobs.
   
   
6. The preceeding notes (and remedial subnotes) do not jibe with Inhofe's "do nothing or it will cost jobs" argument.

Why does James Inhofe hate American automobile workers?

Labels: Brad DeLong, creative destruction, environmentalism, policy wonk, Politics, Trains Planes and Automobiles

by Ken Houghton

We (by which I mean Brad DeLong and Tom, but possibly not Chris Dillow or I) believe that economic growth thrives best in a democracy, or at least a democratic republic.* Strong institutions, respect for the rule of law, avenues of redress, all that rot.**

Marshall Jevons notes the imminent death of Suharto (the man whose rule began with Mel Gibson getting a hard knock in the eye), and asks the obvious:

Here's someone who has embezzled huge amounts (15 to 35 billion) of money from state coffers, still loved by the people? Does it really truly reflect the view of the Indonesian people? What lesson can development practitioners learn from it?

With all the talk of Second-Best Institutions, is it possible that Not Being a Democracy is a better choice for economic growth?

*I would prefer to believe it, but do not see the supporting evidence. I can't speak for Chris Dillow's preferences.

**Of course, this requires one to presume that, for instance, 11 Sep 1973 never happened, except to create a Miracle(tm). But I sidebar, if not digress.

Labels: Brad DeLong, Democracy, Economic Development, Politics, the rule of law

by Ken Houghton

Via the Social Science Statistics Blog, a flyswatter for the happy Milanophile.

As a bonus, the same post leads to (and features a picture of) a graphic-laden representation of What Georgie Wanted the US Budget to Be.

Which, given my recent obsession, leads to the obvious question (zoom in on the penny in the lower right corner): If "the cost growth per beneficiary in the Medicare and Medicaid programs has tracked cost trends in private-sector health-care markets" (h/t DeLong; the original is WSJ subscriber-only, though it was probably Digged), why was the Medicare budget only projected for a 5% (nominal) increase? Or does that question answer itself?

Labels: Brad DeLong, Bushonomics, Econometrics, Economists View, Health Care, Janelle, Politics, Statistics

by Ken Houghton

Chris Suellentrop—not Tobin Harshaw—tried pushing the Tom Maguire line yesterday:

Tom Maguire, who blogs at Just One Minute, has perhaps the most novel theory: it helps John McCain, Rudy Giuliani — and Hillary Clinton. Maguire writes:

Dare we state the obvious — this news takes the wind away from the Dems who have been asserting that Republicans will lead us inexorably to war with Iran....Meanwhile, insinuations that McCain or Giuliani (or Huckabee!?!) will take us to war with Iran have been dramatically undercut. [emphasis mine]

Unfortunately for the NYT and especially Maguire, the Rudy and his Advisors Are Not Insane Defense has already been undermined (h/t Sadly, No, of course)

But I entertain an even darker suspicion. It is that the intelligence community, which has for some years now been leaking material calculated to undermine George W. Bush,* is doing it again. This time the purpose is to head off the possibility that the President may order air strikes on the Iranian nuclear installations. As the intelligence community must know, if he were to do so, it would be as a last resort, only after it had become undeniable that neither negotiations nor sanctions could prevent Iran from getting the bomb, and only after being convinced that it was very close to succeeding.** How better, then, to stop Bush in his tracks than by telling him and the world that such pressures have already been effective and that keeping them up could well bring about "a halt to Iran’s entire nuclear weapons program"—especially if the negotiations and sanctions were combined with a goodly dose of appeasement or, in the NIE’s own euphemistic formulation, "with opportunities for Iran to achieve its security, prestige, and goals for regional influence in other ways."

Someone is still saber-rattling, and Tom Maguire should already be regretting his optimism.


*Either "Facts are stupid things" or W has been saying things that he should have known were not true, since "leaked" information has been distributed throughout the Administration already. Which is more likely is left as an exercise to the reader.
**Just as he was with that other I-r-a country.

Labels: 2008, Brad DeLong, Intellimigence, Iran, Politics, RudyG

by Ken Houghton

via Susan.

The Dante's Inferno Test has banished you to the Sixth Level of Hell - The City of Dis!

Take the Dante Inferno Hell Test

Could have guessed that from having gone to see The Golden Compass on Saturday night—at least as contextualised by Christianity Today, which seems to have the strange delusion that C. S. Lewis presented a worthwhile template for fiction instead of self-righteous delusion. (h/t Brad DeLong)

Labels: Brad DeLong, literature, movies, Religion

by Ken Houghton

Why I Don't Read Mankiw's blog any more.

With the lack of comments, Mankiw has become a clipping service. And the problem is that he's not a good one. For instance, why read Mankiw citing Ruth Marcus (offered without comment and no comments) when one can read Thoma, DeLong, Baker, or Krugman, all of whom actually look at and discuss the evidence? Why read Mankiw on NPR's sock story, when Felix Salmon destroys the same?

Keith Hennessey may have told Mankiw to "start a blog," but he should have told him not to use Instapundit as his template. (Exception noted.)

Labels: Brad DeLong, Economists View, PortfolioMarketMovers

by Tom Bozzo

Brad DeLong is very unhappy with Bob Herbert. Herbert's latest column says:

Bankruptcies and homelessness are on the rise. The job market has been weak for years. The auto industry is in trouble. The cost of food, gasoline and home heating oil are soaring at a time when millions of Americans are managing to make it from one month to another solely by the grace of their credit cards. The country has been in denial for years about the economic reality facing American families. That grim reality has been masked by the flimflammery of official statistics (job growth good, inflation low) and the muscular magic of the American way of debt: mortgages on top of mortgages, pyramiding student loans and an opiatelike addiction to credit cards at rates that used to get people locked up for loan-sharking...

DeLong's verdict:

This is at most one-quarter true.

I say:

Oh no, Good Brad DeLong has been transported beyond our workaday four to twenty-six ordinary dimensions to Earth-W [*], and an Evil Doppelganger has taken his place! (Note to Brad's colleagues: be on the lookout for unexplained facial hair and/or agitation over the need to "fix" the Social Security system.)

Let's take Herbert's claims one at a time:

Bankruptcies and homelessness are on the rise.

Check. Joe Stiglitz (h/t Felix Salmon) describes a "bankruptcy boom" in the new Vanity Fair. Stiglitz notes, "Between March 2006 and March 2007 personal-bankruptcy rates soared more than 60 percent." This is despite the 2005 bankruptcy "reform" legislation. Foreclosure rates likewise are soaring. (I suspect that this is what may be meant by "homelessness;" I won't argue with Brad that the NYT's copy-editing has gone to the dogs.) Actual homelessness statistics are hard to come by [PDF], but they appear to show increases in homelessness over the last 20 years or so. It would stand to reason that inability to pay one's mortgage is at least associated with an increased hazard of loss of housing of all sorts.

The job market has been weak for years.

Check. See again Stiglitz:

A young male in his 30s today has an income, adjusted for inflation, that is 12 percent less than what his father was making 30 years ago.

The labor market's generally lagging growth is a longstanding problem, as our Angry Bear friends have documented repeatedly.

The auto industry is in trouble.

Check. It's perhaps in less trouble per headline statistics than it might be, but the part of the industry associated with domestic union jobs certainly isn't helped by its reliance on manufacturing gas-guzzling trucks. Plus, it's only a few percent of the economy, even if it's a very visible few percent. The uncomfortable truth here is that the "macroeconomy" is an analytical fiction. This economy is composed of firms and individuals that may be grouped into somewhat less-fictional sectors, some of which are in or seemingly headed towards deep recessions (housing, housing-related finance), others that appear to be there (autos), and others that are hanging in or better. For now.

The cost of food, gasoline and home heating oil are soaring at a time when millions of Americans are managing to make it from one month to another solely by the grace of their credit cards.

Check. In non-elite world, putting a grand or two of extra expenses on plastic is a step towards the bankruptcy and/or foreclosure nightmares.

The country has been in denial for years about the economic reality facing American families.

This states a conclusion that may not require a response. It does, however, seem to be shared by a sizeable chunk of the non-elite country which has been expressing deep-rooted pessimism about the future of the economy.

That grim reality has been masked by the flimflammery of official statistics (job growth good, inflation low) and the muscular magic of the American way of debt: mortgages on top of mortgages, pyramiding student loans and an opiatelike addiction to credit cards at rates that used to get people locked up for loan-sharking.

Perhaps the reading that "flimflammery" implies that the official statistics are deliberately dishonest rankles. I think what Herbert is getting at is the spin on the official statistics, where flimflammery is plentiful. It's not like Herbert is alone here.

From the Center for American Progress:

In the second quarter of 2007, household debt amounted to 131.3% of disposable income, which is only slightly below the record high of 131.4% recorded in the fourth quarter of 2006. In the second quarter of 2007, families spent 14.3% of their disposable income to service their debt, up from 13.0% in the first quarter of 2001.

And Stiglitz:

The administration crows that the economy grew—by some 16 percent—during its first six years, but the growth helped mainly people who had no need of any help, and failed to help those who need plenty. A rising tide lifted all yachts. Inequality is now widening in America, and at a rate not seen in three-quarters of a century.

And the Federal Trade Commission:

A cash advance loan secured by a personal check - such as a payday loan - is very expensive credit. Let's say you write a personal check for $115 to borrow $100 for up to 14 days. The check casher or payday lender agrees to hold the check until your next payday. At that time, depending on the particular plan, the lender deposits the check, you redeem the check by paying the $115 in cash, or you roll-over the check by paying a fee to extend the loan for another two weeks. In this example, the cost of the initial loan is a $15 finance charge and 391 percent APR. If you roll-over the loan three times, the finance charge would climb to $60 to borrow $100.

And Elizabeth Warren (from 2005!):

Problems not even on the horizon when this bill was written are now front and center.

• Companies in Chapter 11 that cancel pension plans and health benefits, leaving thousands of families economically devastated
• Companies that continue to pay executives and insiders tens of millions of dollars, while they demand concessions from their creditors.
• Military families targeted for payday loans at 400% interest, insurance scams, and other forms of financial chicanery.
• Scandals have rocked the so-called non-profit credit counseling industry, exposing how tens of thousands of consumers struggling desperately to pay their bills and not file for bankruptcy were cheated.
• Sub-prime mortgage companies, financed by some of the best names in American banking, have unlawfully taken millions of dollars from homeowners, then fled to the bankruptcy courts to protect their insiders and bank lenders.

As I see it, Herbert has all of these things substantially right. Moreover, Herbert has been working a substantially thankless opinion beat, covering the plight of the non-elites. Brad owes him an apology.


[*] Earth-W is a hypothetical planet with mass, geography, concentration of atmospheric gases, flora, and fauna much like our own. However, on Earth-W, George W. Bush is a brilliant military tactician, World Scrabble Champion, and moral compass to the world. Also, at the Sermon on the Mount, the hypothetical Jesus-W said:

Cursèd are the uninsured, for their poor spending decisions unfairly burden the income taxpayer. Especially cursèd are middle-class uninsured children, for they should have chosen their parents better.

Where Max Sawicky and Greg Mankiw work on Earth-W is left as an exercise for the reader.

Labels: Brad DeLong, Economics, NYT

by Ken Houghton

Chez DeLong, discussing the David Brooks piece I mentioned hopefully yesterday (which will teach me to read the whole thing), Barkley puts Arms for Hostages, propping up dictatorships, facilitating the crack epidemic, supporting Saddam, and getting Marines blown up in Lebanon into context:

Compared to this Bush's foreign policy, Reagan's was a model of decorum and international reasonableness and respect for legality.

Labels: Brad DeLong, Economics, policy wonk, Politics

by Ken Houghton

Tim Duy nails the reality, but missed the overriding rule of the Failed Paulson Treasury:

In my mind, the argument for a rate cut hinges on one crucial assumption – that the market is expecting a rate cut, and the Fed will not want to disappoint.

Dear Tim,

This is the Fed that chose triple-witching day (August 17th) to give the bank a "Get Out of Risk Management free" pass. This is an Administration that talks about stock market gains and tax cuts, not jobs, growth, or inflation.

And this is a Lame Duck Administration: what comes next is at best the All-Too-Loyal Opposition, at worst (one hopes) a transition from the Democratic Republic of my ancestors, relatives, and, one hopes, descendants.

I'm not saying that 2:45pm tomorrow is going to feel as if it undermines 376 years of family history; that would be hyperbolic. But an Administration that plays style over substance, appearance over reality, and "us[es] 1984 as an operations manual" (h/t DeLong).

I haven't been so certain there would be a Fed rate cut since the first month Wayne Angell came to Bear. I hope I'm wrong, but, as Mark Thoma notes, that's not the way to bet.

Labels: Brad DeLong, Economics, Economists View, monetary policy, Politics

by Ken Houghton

Stanley Fish tries to be fair and balanced:

At least as an on-camera presence, Maloney is polite, unflappable and relentless. He borrows some techniques from Michael Moore, but rather than resembling a giant donut, Maloney has the lean boyish looks that could earn him a role in “Oceans 14″ alongside Brad Pitt and Matt Damon. So when he ambles into a university office in search of an administrator who will explain why there is no Men’s Resource Center at a university where The Women’s Resource Center flourishes, a viewer is likely to ask, Why won’t they even talk to that nice young man? [emphasis Fish's; underscore mine]

but makes a point that Bruce Bartlett (via DeLong) appears to have missed:

Political diversity (a more honest label for what Maloney, following David Horowitz, calls “intellectual diversity”) means that in terms of its partisan affiliations, a university faculty should look like America and display the same balance of Democrats and Republicans as can be found in the country’s voting rolls. But this requirement of proportional political representation makes sense only if you can predict what and how a professor teaches from his or her partisan identification: absent such a correlation, the political makeup of the faculty is not a legitimate pedagogical concern.

More later...

Labels: Academia, Brad DeLong, Politics

by Ken Houghton

The argument that government-provided health insurance "crowds out" the private sector actually has two components: (1) is this happening and (2) if so, is it worse than the alternatives?

The second part is often seriously overlooked by some economists, who only use Pareto-optimal in one direction. Jonathan Gruber is one of those who has argued most vehemently that there is crowding out. But his recent NBER paper with Kosali Simon*, an update of Gruber's 1996 AER paper with David Cutler*, notes what we have always known about the model of private health insurance, that its preference to insure declines with the need for that insurance**:

We also find that recent anti-crowd-out provisions in public expansions may have had the opposite effect, lowering take-up by the uninsured faster than they lower crowd-out of private insurance.

The graphic of this is left as an exercise to the reader, but the English version is that the Administration argument against S-CHIP will (as Jason Furman notes at Greg Mankiw's blog) help children in poorer families more than it will provide any subsidy to higher-income families. (UPDATE, appropriate quote, which I missed last night, but which was highlight by Brad DeLong, quoting from Mankiw's blog:

The Democrats and a substantial number of Senate Republicans support a proposal whose principal focus is covering low-income children who are currently eligible (3.2 million according to CBO) plus expanding coverage modestly to new children (600,000 according to CBO). In total 85 percent of the coverage expansion is for those who are already eligible but are not getting coverage either because the funding limits assumed in the baseline are projected to be reached leading states to turn away currently eligible children or because families simply do not sign up for the coverage that is available to them. [emphasis mine]

If economists (or Class of 1975 HBS MBAs) really believed in Pareto-optimal solutions, expanding S-CHIP would be acknowledged as a clear winner.

*Anyone know of a free version for either of these papers? Perfectly willing to add a link.
**This is an intuitive corollary of The Market for Lemons argument.

Labels: Brad DeLong, Economics, Health Care, Optimal Resources, policy wonk, Politics

by Ken Houghton

Yes.

This has been another MU version of "Simple Answers to Simple Questions."

The longer answer is that he's thoughtless and ignorant as a fox: he wants another tax cut.

The even longer answer, which I don't have the time or opportunity to research right now, is:

How many real economists have ever gone from arguing that everything is perfect to arguing for a 75bp rate cut in less than three months, especially if GDP for the previous quarter was 4% annually? And, if the answer is not the null set, were any of them ever correct?

Labels: Brad DeLong, Economics