Relevant and even prescient commentary on news, politics and the economy.

TARP and Twitter

I had an interesting web experience. My tweet noting that the US Treasury made a profit on TARP got a relatively large number of replies. Many people were outraged in many contradictory ways.

Twitter is damaging the discussion. Trump on twitter lowered the level of debate. I am now a carrier of Twitteritis into the Angry Bear community, because I am brining a tweet debate here.

The discussion starts with this tweet


note it is the 5th of a series. Trying to summarize, I realize that I should quote

1. To those saying there is no such thing as a good Trump voter. Context man. Context
2. Imagine a scenario. You got two choices, as understood by you
. This is the key. This is how you see it, not how others think you see it
3. Vote for candidate
A) who will devalue you socially & economically
B) who might devalue economically, but will value you socially
4. What will the majority of any group do? Including blacks & Latinos?
If you don’t give them SOMETHING to vote for they won’t vote for it
5. Mistake is thinking that Trump voters believe they are getting anything economically out of a Clinton administration. (TARP cough TARP)

I will briefly summarize my impresssion of @Chris_arnade thoughts on the topic expressed on twitter.

Overall the point is that it is possible to understand why people voted for Trump. Consider TARP. Anger at TARP (and NAFTA) helped Trump. I agree entirely, and think this is important. Hatred of TARP helped Trump.

I am trying to get to responses to my tweet

“@Chris_arnade TARP was a Bush admin initiative and a gigantic success. US gov made a profit”

They do not include anyone suggesting it is unfair to Consider Clinton responsible for TARP (I agree — she deserves credit only for her yes votes in Senate roll calls). The fact that TARP was a Bush administration initiative is clearly considered irrelevant to the question of whether Democrats should be punished for TARPing.

I’m going to put alll of my thoughts after the jump.

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Donald and Deportations

This post is partly inspired by “The cracks are already starting to show between Donald Trump and Republicans” by Amber Phillips at The Washington Post. My general impression is that the article mainly shows that cracks are already starting to show between Donald Trump and Donald Trump. More generally, the fact that Trump and the other Republicans are lying a lot about what Obama has done makes it almost impossible to determine how they will change things.

A case can be made that there plan is to mainly stick to current policy (except by cutting taxes on rich people of course) and to rename the current policy and claim credit for what Obama has done and continue to claim he did something horrible. I wish I believed this is what will happen. I am sure they will make major changes. The point is that their statements are vague and often based on false factual premises, so it is impossible to figure out what they will actually do.

Consider deportation of undocumented aliens.

Trump: “What we are going to do is get the people that are criminals and have criminal records, gang members, drug dealers, a lot of these people, probably 2 million. It could even be 3 million,” he told CBS’s Lesley Stahl in a “60 Minutes” interview that aired Sunday. “After the border is secured and after everything gets normalized, we’re going to make a determination on the people that you’re talking about, who are terrific people.”

One plausible interpretation of this is “We are going to stick to current policy, and consider possible policy changes late in my second term”. Under current policy, people with criminal records are deported. Trump proposes sticking with that policy. He doesn’t explain how sticking with current policy will cause an increase in the rate of deportations. He doesn’t even claim that, under his policy, people will be deported at a higher rate than under Obama’s policies. He says 2 million people will be deported, but he doesn’t say when. According to ABC “President Barack Obama has often been referred to by immigration groups as the “Deporter in Chief.”Between 2009 and 2015 his administration has removed more than 2.5 million people through immigration orders, ” Trumps 2 maybe 3 million people claim is consistent with between two and three million in the next six years (with Trump assuming he will be re-elected).

The quoted statement is perfectly consistent with sticking to current policy including the conditions for deportation and the rate of deportations.

It is also possible that Trump proposing sticking with current policy but says the outcome will be bigly more winning, because Trump is a winner. He might argue that, because of his excellent management and winnerness, la migra will do things much more quickly.

It is fairly likely that Trump believes that applying the current policy will cause a large increase in the rate of deportations, because he doesn’t know what current policy is.

Finally, it is possible that he is just lying and plans to deport people who wouldn’t be deported under current policy.

Trump is so vague that it is not possible to prove that there is any “crack” separating Trump and Congressional Republicans. In fact, it is not possible to prove that there is any “crack” between Trump and Obama.

This also true of other policy issues. For example, Trump and the other Republicans agree that they will repeal Obamacare and replace it with something which protects people with pre-existing conditions and is based on consumer choice and markets. One reasonable interpretation of this is that they plan to replace Obamacare with Obamacare. This will come as no surprise to Obama who told us they would do this.

Also they continue to denounce the Obama stimulus and propose a big increase on infrastructure spending

McCarthy: McCarthy said on Fox News that “there is a place we could find common ground with Republicans and Democrats” on infrastructure. But he seemed unable to explain how Trump’s infrastructure spending plan differs from President Obama’s 2009 stimulus. “Obama never had infrastructure in his stimulus,” he said. (Infrastructure spending was a major part of Obama’s stimulus.)

So far this post has been wildly optimistic. Again, I don’t really hope that Republicans will mostly stick with Obama’s policies except for cutting taxes on the rich. I’m sure they will do horrible things. I am also sure that they haven’t told us what horrible things they will do, because they are still promising all things to all people. They haven’t switched from messaging to policy making yet. I hope wish they never make policy.

On the other hand, I think that the strategy of copying Obama while continuing to denounce him is likely to be politically successful. Republicans have managed to convince many Americans that Obamacare is horrible in some mysterious way. The hope was that people would notice that, for example, there aren’t any death panels. If Republicans stick with Obamacare but call it TrumpCare, there won’t be any new proof that Obamacare doesn’t have horrible provisions.

The public doesn’t know what current policy is. Many are convinced that Obama policy is extremly leftist and unsuccessful. This makes it easy for Republicans to convince them that the repealing Obama’s policies and replacing them with Obama’s policies is a huge improvement and that Republicans deserve credit for Obama’s gigantic accomplishments. The strangest thing is that I suspect that Obama is OK with that.

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Relatively not bad news about Health Care Reform

Via (one of) the brillian Waldmans

I find a very interesting and actually somewhat reassuring article by Caitlin Owens

“Obamacare repeal? More like Obamacare reform”.

I strongly recommend reading the article which considerably reduced my fear and loathing.

An excerpt

To be clear: Republicans will likely call whatever they end up doing Obamacare repeal, especially publicly. And when you end up with something vastly different, what’s the difference?

What they say they won’t get rid of:

Pre-existing condition coverage
Letting children stay on their parents’ plan until age 26
Lifetime caps on coverage
Medicaid expansion (but it will look different)

What they say they will go after:

Essential health benefits (insurers won’t have to cover as many things)

Age rating bands (bigger range of premiums will be allowed)

There’s no step-by-step plan yet — because they had never planned for a President Trump. “We’re in rapid detox of holy crap, we have to actually do this,” the first aide told me.

I love the “holy crap” quote. Now this is only somewhat reassuring for reasons. First, Owens talked to aids. They are people who actually know what is in the ACA, but they have no power. There is no reason to be confident that actual senators will listen to their aids. Second, people talk to reporters for a reason. The apparently very frank statements might be a trial balloon soon to be shot down by enraged conservatives. Third the list of what to keep doesn’t include exchanges, subsidies or a mandate. Even if the claims of the anonymous aids correspond to the decision of a majority of senators, they leave $ 60 billion questions open.

Partly, I love the article, because the anonymous aids confirm that Republicans have been post policy for years. I also liked this quote

Congress tested its repeal strategy last year using “reconciliation,” a procedural tool that prevents legislation from being filibustered in the Senate. Even this repeal bill didn’t get rid of the whole law. But one of the aides said this version of the bill was mostly about “messaging,” and that this time, “We’re not going to use that package. We’re not dumb.”

I am shocked shocked that congress passed a bill which they knew was “dumb” just for messaging.

Repeat of warning: these are anonymous quotes from sources who may have influence but don’t have power and who are motivated by motives.

update: Waldman[n]s think alike.

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Patrick Ruffini’s Interesting Beliefs About a Regression

“Patrick Ruffini is a strategist, thinker, and organizer focused on data and technology’s disruptive impact on politics and business. “

Here is a tweet he just posted (retweets are not necessarily endorsements so don’t blame Barro)


Since the percent Asian + … + percent other always must add up to 100% the computer can’t estimate coefficients on all the variables. It excluded percent Asian. This means that, to the extent the country level (I assume) data tell us anything about ethnicity and voting, they say the shift in votes from 2012 to 2016 was similar for Asians, Blacks and Hispanics.

If the excluded grouu had been non college whites, then Black and hispanic would have been extremely predictive.

Nothing can be inferred from such coefficients without thinking about the excluded group.

Treating coefficients on an indicator as a measurement related only to the group indicated by the variable is absurd.

Now we know from exit polls that the percentages of votes for Romney and Trump of blacks were similar (both roughly zero) and the same for Hispanics (neither roughly zero). The only new information that the regression could give us regards turnout of blacks and hispanics.

Ruffinis conclusions are probably correct (say exit polls) but they are not supported by the regression results.

This is a top Republican data guy and his party just won it all.

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James Comey Must Go

Sari Horwitz and Ellen Nakashima at the Washington Post report

Senior FBI officials were informed about the discovery of new emails potentially relevant to the investigation of Hillary Clinton’s private email server at least two weeks before Director James B. Comey notified Congress, according to federal officials familiar with the investigation.

The officials said that Comey was told that there were new emails before he received a formal briefing last Thursday, although the precise timing is unclear.

The information goes beyond the details provided in the letter that Comey sent to lawmakers last week declaring that he was restarting the inquiry into whether Clinton mishandled classified material during her tenure as secretary of state. He wrote in the Friday letter that “the investigative team briefed me yesterday” about the additional emails.

Almost everyone who read Comey’s letter was mislead because “briefed me yesterday” is truth and nothing but the truth, but not the whole relevant truth. The word “yesterday” is accurate, but its only effect is to mislead. The statement “I was told something about the e-mails yesterday” is not logically inconsistent with “and also weeks ago,” but the normal rules for understanding ordinary English imply an interpretation inconsistent with the facts. James Comey is a very skilled lawyer. He knew what he was doing. He deliberately mislead Congress.

More importantly, the anonymous FBI personal talking to the Post can’t get their story straight.

Comey did not notify Congress as soon as he learned about the emails because officials wanted additional information before proceeding, the officials said.

If they were willing to follow proper Justice Department procedures, they would have also wanted, indeed insisted, that the election pass before proceeding.

But now everything is different because metadata.

Even after Comey received the desired information, major questions still remain — for instance, how many emails are related to Clinton or contain classified information.


It is unclear what FBI agents have learned since discovering the emails in early October. But officials say they gained enough information from the email metadata to take the next step, seeking a warrant to review the actual emails.

Comey also needed to get out of the period of 60 days before an election to take the next step. I assume that it was legal for the FBI to look at meta data. But it sure doesn’t seem that they have at least 2s weeks looking at metadata. it is clear what FBI agents haven’t learned since discovdring the e-mails. The sender and recipient of an e-mail are metadata. They should know if any of the e-mails were sent to or received from Hillary Clinton.

The current FBI position is that they learned something in the last two weeks of October *and* that they know nothing nothing. The anonymous source is taking advantage of the facts that he or she is anonymous (and not under oath). The explanation of the delay of over two weeks but not 11 days more is plainly false. Horwitz and Nakashima pretty much write this. In Postspeak “It is unclear” means “he’s lying” (or “she’s lying” but certainly not “s/he’s lying” because the “s/he” is even more unacceptable than the “lying”).

The utter contempt for Justice Department rules is underlined by this quote from the liar

“He needed to make an informed decision, knowing that once he made that decision, he was taking it to another level,” an official with knowledge of the decision-making process said.”

He absolutely did not need to make a decision about whether to seek a warrant until next Wednesday. After making that decision, he was forbidden by department rules to take it to another level.

I’m shifting to wild speculation after the jump.

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Repairing Macroeconomics

Here are some vague thoughts on the state of academic macroeconomic research and how it might be improved*. The current mainstream macroeconmic research program has recently been severely criticized by so many extremely emminent econonmists, that it is hard to consider it the main stream. However, the many efforts to present an alternative approach (including this one) are vague and tentative. I am one of those who think a good first step is to go back to the old Keynesian research program, to research done 40 or more years ago, and pick up where Tobin, Solow and Samuelson left off.

To publish, researchers need to address questions which are neither too easy nor too hard. Answering an easy question is not significant original research, while answering a very difficult question is very difficult. I think macroeconmic research has suffered because the questions to be addressed are either too easy or too hard. I think it is very hard to answer any question about behavior which depends on long term expectations. I think it is too easy to understand macroeconomic issues which don’t depend on long term expectations. This is the view expressed 80 years ago in “The General Theory of Employment, Interest, and Money”. I think subsequent research has tended to demonstrate it to be valid.

The appeal of assuming rational expectations is that models with rational expectations are tractable but not trivial. I think the resulting advantages for the academic made the assumption irresistable. Unfortunately, I think it leads to a sterile research program. I think it might be wise for all macroeconomists to try at least once to understand economic aggregates without even any appeal the rational expectations assumption. I think this is a good way to realize how central it is. This isn’t my first attempt to do so, but I aim here to consistently avoid the concept of model consistent expectations.

Excessively Easy Problems

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On The new heavyweight macro critics

I strongly advise you to read this post by Noah Smith and then click his links and read all of Romer (I have) and Kocherlakota (I haven’t yet but advise myself to do it now).
update: Kocherlakota’s post is very brief non-technical and brilliant. I advise you to read it now.
end update.

Noah recalls that he has long argued that current mainstream academic macroeconomics is no good at all. I too have argued this. So have the somewhat better known Larry Summers and Paul Krugman. Relatively recently Paul Romer denounced his former field. Most surprisingly so has Narayana Kocherlakota (links in the post). Olivier Blanchard (pdf) and Simon Wren-Lewis are very polite but clearly agree (actually now that I re-read it Wren-Lewis is (finally) getting pretty frank). Robert Shiller, George Akerlof and Janet Yellen have long been at least as harsh as Kockerlakota (although no one is quite as snarky as Romer).

I have really one question. Given the extreme prominence of the critics of the current orthodoxy, how can the orthodoxy remain an orthodoxy ? In particular, all of the linked authors agree that the current mainstream consists of New Keynesian DSGE models. But collectively they are much more prominent than all New Keynesian DSGE modelers put together.

more after the jump

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Unskewing 538

Different data journalists have different estimates of the probability that Hillary Clinton will be elected. The numbers will be updates, so I type the current ones before discussing.

Five Thirty Eight polls plus 55.7%
Five Thirty Eight polls only 57.1 %
Daily Kos 63%
Upshot 75%
Princeton Election Consortium (Sam Wang) (random drift) 71%
(Bayesian) 81%

As usual Nate Silver and Sam Wang are the extremes with Silver estimating probabilities closer to 50%. This happens mostly because Silver estimates distributions of parameters which Wang assumes to be known constants. I have to admit I generally agree with Silver.

Silver explained at least part of the difference with other aggregators

High numbers of undecided and third-party voters are associated with higher volatility and larger polling errors. Put another way, elections are harder to predict when fewer people have made up their minds. Because FiveThirtyEight’s models account for this property, we show a relatively wide range of possible outcomes, giving Trump better odds of winning than most other statistically based models, but also a significant chance of a Clinton landslide if those undecideds break in her favor.

This is a bit reassuring to me. I think there are a lot of #NeverTrump voters who are very unenthusiastic about Clinton. These are voters who say he is unqualified and temperamentally unsuited to be President. I tend to guess many of them will reluctantly vote for Clinton if and only if it seems necessary and otherwise stay home of vote 3rd or 4th party. I remember 2000 (and some of these voters don’t) but I am not as alarmed as I would be without this argument.

The point (if any) of this post is that fivethirtyeight normalizes polls in which only Trump and Clinton are named to the standard of polls in which Johnson & Stein are also named. They will be on the ballot, but this seems to me to be a mistake. Respondents can volunteer that they will vote for another person if asked to choose between Trump and Clinton. I think the pressure due to naming only Trump and Clinton is weaker than the pressure of an upcoming election and fear of wasting a vote. So I’d guess polls which name only 2 candidates give more accurate forecasts. I think this is historically true (sorry no link). Certainly declared support for 3rd party candidates in September polls regularly vastly exceeds actual votes for 3rd party candidates.

I don’t know the fivethirtyeight correction term (sorry I could probably find it there if I looked). My impression is that Clinton averages 1 or 2% better in polls which name only Trump and her. Currently The Huffington Post says 1% nationwide (Clinton 4% ahead in 2 name polls 3% ahead in 3 name polls including Johnson (including Stein has to hurt Clinton)). Given the confidence interval and the fact that all aggregators assume normality, a 1% difference in means corresponds to about the difference between 57% and 75% (this is a very rough BS pseudo calculation).

An even more striking pattern over at The Huffington Post is that the fitted curve for the Clinton Vs Trump Vs Johnson is much smoother than the fitted curve for Clinton-Trump. This is partly due to their smoothing algorithm which smooths more if there are few data points (it is a compromise between don’t want to use very few points and don’t want to use very old data). But eyeballing, I am fairly sure it isn’t just that. Also the moderately smoothed Clinton support in 2 way polls varies more (including conventions roughly 44-48 for Clinton and 40-42 for Trump). I think this shows a lot of the variance is in the willingness of #NeverTrumpers to say they will vote for Clinton if pressed.

So after pychoanalyzing data ananylis, I conclude that the key issue is whether people who think Trump should not be elected, but don’t want to vote for Clinton end up reluctantly voting for Clinton. What an original thought. Bet no one has written that already in 2016.

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Damnable Diatribes on the Monstrous Macroecomic Mess Maelstrom

Being born on November 9th, I will get the end of this campaign for my birthday (tough luck Josh Barro of course this also means that I couldn’t vote in 1978 the year I turned 18 (but neither could J Barro so there)).

It also means that my astrological sign is scorpio, which is relevant to this post.

The humiliation of contemporary macroeconomics has become extremely acute. Leading macroeconomist Paul Romer ruthlessly mocked his own approximate field of study.

Now Daniel Drezner wrote in the Washington Post

The state of macroeconomics is not good

If you think international relations theory has problems, let me introduce you to the most influential and problematic subfield of economics.

Pwnd. Sick burn. I mean to be mocked by a fellow macroeconomist is bad, but for an professor of international releations to look down on macroeconomics with pity is humiliating.

I am afraid to check my horoscope. I expect it will read

Scorpio: Reading The Washington Post today will cause you to both laugh out loud and curse the day you chose your idiotic career (but mostly laugh).

Yes I just equated the scientific values of international relations theory, modern macroeconomics, and astrology.

The point of this post (if any) is that this isn’t new. Back in the 80s I entered an inner sanctum of economics — the NBER main office at 1050 Mass Avenue. This was a tiny researc on one floor of a medium sized building which had the right to host NSF grants & so was drowning in money. Many of the few offices had eminent occupants including Paul Krugman & Larry Summers. There was a main entrance but, after hours research assistants and such entered by side doors. Immediately after entering one, we saw a desk displaying a poster which claimed to illustrate an astrological model of the business cycle. It was used by one of the resident labor economists who had a very 21st century view of the scientific status of macroeconomics.

Brad DeLong also worked there and said in 1983 or so that he had decided not to concentrate in macroeconomics, because he thought the field had entered a blind alley where it would be stuck for decades. Thus he both denounced and displayed rational expectations.

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