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Crazification Factor Smashed

Kung Fu Monkey has a sad. Paul Ryan has totally crushed his crazification factor

h/t Kerry Eleveld

This issue has made Paul Ryan into the most unpopular politician in the country. At the start of the Trump administration he had a 33% approval rating, with 43% of voters disapproving of him. Now his approval has plunged to 21%, with his disapproval spiking all the way up to 61%.

I count this as a new event, because Ryan is very famous and 82% is respectably close to 100 %

But mostly, because I want to post this here

blue-eyesA

blue-eyesB

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Blinded by the Right — Literally

Patrick Ruffini tweeted a graph showing a break in the trend of health care cost inflation with the ironic comment “The “Affordable” Care Act sure has bent the cost curve.” In the graph he posted, it is broken not bent.

ruffini2

h/t @ChrisDeLong_

The trick is that the graph starts in 1996 & includes college tuition and software, so the huge change looks tiny.

In comments, it is clear that other people can’t see what is right in front of their eyes (good thing the ACA covers eye exams).

Jon Chait helps out by graphing inflation not the price level and leaving out other goods and services with huge changes.

chaitonruffini

I just asked Fred. I look at the ratio of health care PCE chained indes to the overall PCE deflator. Chait shows a huge decline in overall inflation, which isn’t relevant. Here is an (admittedly annual graph) which sure looks bent to me

fredonruffini

Ideology prevents people from seeing what’s right in front of their eyes.

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On @UnlearningEcon

Unlearning Economics is a person somewhere on planet earth. He or she has been debating with Simon Wren-Lewis and Nick Rowe (on twitter). Brad DeLong joined the discussion.

But what about me. Elisabetta Addis (we’re married) just returned from Palermo. I was eager to talk with a physically present human being having not done so all day. First I said “Hodor” (and had to explain). Then, looking for a topic, I said, “Unlearning economics is someone who is debating”.

She said “incredibile” and showed me her smart phone. On the small screen I could read (barely) the post by unlearning economics which I was planning to discuss.

OK now we are reading the post so that we can discuss it.

The world is highly connected. The 21st century is very strange.

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Accountability Bond Accounting

Recently I learned about a proposal for Euro denominated “accountability bonds”. They are basically a clever way to enforce the stability and growth pact. I don’t like the pact, so I don’t support the proposal which I made by Clemens Fuerst here . The idea is that borrowing beyond the level allowed by the stability and growth pact could be financed only by special junior bonds. Owners of those bonds would lose everything before owners of senior bonds lose or taxpayers who finance the ESM risk anything.

The key part (which I don’t support) is that currently outstanding bonds are senior to these new bonds. This means that the reform will cause a windfall gain to current bond owners. The value of their bonds will not be diluted by the junior bonds. The risk that it would be diluted by regular bonds issued above the stability and growth pact levels would vanish. Importantly, this windfall would not be openly paid by the Treasury issuing the junior bonds – on its face, the reform regulates only the interaction of those Treasuries with new investors. The windfall would be paid by other investors who value the old bonds more highly. The old bonds will be more valuable in case of default, because they will be more senior than the average outstanding bond (the average including the junior bonds). Since investors in junior bonds won’t pay this cost in (at least subjective) expected value, the issuing Treasury will.

If no junior bonds are issued, old bonds are average bonds so there is no windfall and no cost. Byt the reform appears to only regulate the interaction between issuing treasuries and investors in new bonds. It is a penalty to be levied by investors thinking of their own interests, so it is a penalty which will actually be levied.

I don’t like the windfall (which Fuerst might consider the whole point of the reform). It implies giving people who are on average wealthy something for nothing. It isn’t hard to come up with a proposal for junior and senior bonds, related to the stability and growth pact, which does not create a windfall. The problem (or whole purpose) is that old bonds are senior to the average bond. The solution is to require that, in case of default, recovery ratios for old bonds are equal to average recovery ratios.

My proposal is that as of the start date T, there is a limit on the issuance of new senior bonds. Beyond that limit, new bonds must be new junior bonds. In case of default, first payments (coupons plus face values of maturing bonds) are divided into the proportions due to newer than T and older than T bonds – so payments to old bonds are
(total payments)(amount owed on old bonds)/(total amount owed).

The remaining payments must first go to new senior bonds and any money left goes to new junior bonds.

Discussion of the effects of such a plan after the jump.

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Poor Salesman Great Grasp of Policy

I am aware of all internet traditions (with notably rare exceptions) and I think this might be another classic.

In a generally very good article in Politico Tim Alberta wrote “Ryan is poor salesman with a great grasp of policy” [skip] “After he unveiled the bill, leading health care experts on the right like Yuval Levin and Avik Roy trashed it as a poorly conceived mess; ”

So having a great grasp of policy is consistent with writing an immensely important poorly conceived mess. I am googling [Ryan salesman "great grasp of policy"] which only gives 142 results. Does seem twitter has taken over the snark industry. This thread burns. Also at least 1% of the US Senate took Alberta to task.

update: I was wrong. The classic is actually

TimAlberta

So the fact that Ryan’s polics don’t withstand scrutiny shows that Ryan has a great grasp of policy. OK I fell for it. Tim Alberta is just trolling me. He. will. not. make. my. head. explode. No he won’t.

end update:

I think the crazy claim shows a few things. One is that conventional wisdom is invulnerable to evidence. Ryan has been declared a super wonk by the cool kids, so the assertion is riskless. Another is that Alberta wasn’t thinking about policy (he wrote almost nothing about the content of the AHCA). Another is that he assumes that the problem for Ryan with Levin and Roy was that he didn’t flatter them enough and not that his bill was a poorly conceived mess (the preceding sentence was “There was no such effort on Ryan’s part, and it showed. (Several allies argued he had done some outreach, but they failed to provide any specific examples.)”). Finally, symmetry is dangerously tempting. The whole crazy claim is “If the bill failed because Trump is a great salesman with a poor grasp of policy, it also failed because Ryan is a poor salesman with a great grasp of policy.” This is symmetry at the expence of accuracy. Ryan is a brilliant salesman who has a weak grasp of policy.

I foolishly said that ignoring policy and discussing inside baseball is what Politico does, then found out that they also published an excellent article by Harold Pollack “Paul Ryan Failed Because his Bill was a Dumpster Fire”

update: Ouch

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No One Knows What It’s Like to be Paul Ryan

Who can tell us how he feels knowing that no one likes his health care reform ?
The Who can tell us how he feels knowing that no one likes his health care reform !

This is some cause for optimism, as we can note The Who’s further forecast that, by the last verse, he will recognize the importance of access to emergency medical care and the moral imperative to share with those in need.

No one knows what it’s like
To be the bad man
To be the sad man
Behind blue eyes

ryan

No one knows what it’s like
To be hated
To be fated
To telling only lies

But my dreams
They aren’t as empty
As my conscience seems to be
I have hours, only lonely
My love is vengeance
That’s never free

ryansad

No one knows what it’s like
To feel these feelings
Like I do
And I blame you

No one bites back as hard
On their anger
None of my pain and woe
Can show through

But my dreams
They aren’t as empty
As my conscience seems to be
I have hours, only lonely
My love is vengeance
That’s never free

ryanlaughs

When my fist clenches, crack it open
Before I use it and lose my cool
When I smile, tell me some bad news
Before I laugh and act like a fool

And if I swallow anything evil
Put your finger down my throat
And if I shiver, please give me a blanket
Keep me warm, let me wear your coat

coats

No one knows what it’s like
To be the bad man
To be the sad man
Behind blue eyes

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Constitutional Crisis ?

To Recap what everyone knows now (in case anyone reads this months from now)

On January 27th Donald Trump signed an executive order suspending the refugee admission program for 120 days and blocking US entry for citizens of 7 countries for 30 days.
The order was written without input from the Justice, Homeland Security, State and Defence departments. As written it banned entry for legal permanent residents (with green cards) who were travelling abroad when it was issued. It also banned entry for people who were on airplanes flying to the USA when it was signed.

On January 28th dozens (to hundreds ?) of people were detained in Airports. Tens of thousands of ordinary Americans went to the airports to protest the new policy (there is hope). Also hundreds of lawyers spontaneously went to airports to attempt to represent (pro bono) the people who were detained and at risk of being put on planes returning to the foreign point of departure.

Early January 29, some aspects of the execution of the executive order was temporarily stayed by a judge


Judge Ann Donnelly of the U.S. District Court in Brooklyn granted a request from the American Civil Liberties Union to stop the deportations after determining that the risk of injury to those detained by being returned to their home countries necessitated the decision.

3:00 AM January 29th, the Associated Press reported — something. It is not clear to me if the recent event is a constitutional crisis or just an absurd lie alternative fact.

The Ap reported

Stephen Miller, a senior adviser to the White House, said that nothing in the judge’s order “in anyway impedes or prevents the implementation of the president’s executive order which remains in full, complete and total effect.”

If Miller meant what he said, he has declared that the Trump administration will order the executive branch to ignore the stay (that is the only way the order could remain in “total effect”. If so, there would no longer be rule of law in the USA. There would only be Trump’s orders and the decision by people in uniforms whether to obey them.

I am fairly confident that the US is still a nation of laws. I think that Miller’s statement is a simple blatant lie not the declaration of a coup. I think he is sayign that the Judges order would have no effect even if it were obeyed. I am pretty sure Miller is insisting that Donnelly didn’t order what Donnelly ordered.

In contrast the more official response by the DHS noted that the stay applies only to people in the USA or in the air at the time it was granted.

Also the DHS didn’t mention legal permanent residents. It is very clear that the DHS can’t block their entry to the USA. In fact, it is known that the DHS argued this immediately and was over-ruled by White House staff. The application of the order to legal permanent residents is very clearly blatantly illegal. Arguably, the executive order is completely illegal, but to ignore green cards is very clearly illegal.

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Donald Trump is a Miracle Worker

Somehow Trump manages to bring out the best in people. In the January 21 women’s march demonstrations, millions of ordinary Americans peacefully engaged in the political process, expressing a variety of consistent opinions with passion and humour. I was delighted.

But today I am amazed. It seems that Donald Trump has somehow managed to make Jasoh Chaffetz act like a statesman. Chaffetz is chair of the government oversight committee, where he has always acted as an aparatchik hack. He promised years of investigation of President Clinton and won’t “go on a fishing expidition” of President Trump. He decided that the most urgent investigation was of the head of the Office of Govermnment Ethics for critizing Trump’s conflicts of interest and not of Trump for profiting from his office and doing business with foreign governments and [uh oh going of on a tangent on Trump's corruption which will never end].

I was confident that Chaffetz cared not at all about the truth and was a pure partizan who always placed the interests of the GOP over the interests of the country, honesty about plain facts and all human decency.

But today he said

On the voter fraud issue that really happens at the county level. I don’t see any evidence, but the President has 100,000 people at the Department of Justice that if he wants to do an investigation, have at it. I just don’t see any evidence of it.

Chaffetz caring whether there is “any evidence of it” is almost a miracle.

I honestly never thought there was a crazy conspiracy theory too extreme for him.

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Legible version of How have Phillips Curves Shifted in the 15 Countries Which Were in The European Union in 1997 ?

First note strong evidence that the rate of wage inflation is mean reverting. This is a pooled regression with data from the Old EU 15 from 1960 through 2015. Indicator variables for countries are included but the coefficients aren’t reported. dw is the percent rate of wage inflation. ddw is the change of dw. The coefficient of ddw on lagged wage inflation is negative. Since wage inflation is not stationary, inference based on the conventional t-statistic is misleading, but it is very hard to defend excluding lagged wage inflation from regressions.

table1

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In all pooled regressions of the 15 countries, country indicators are included, but the coefficients aren’t reported.
Table 2 shows a simple wage Phillips curve regression in which an equal slope for all countries is imposed. ur is the unemployment rate.

table2

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Table 3 adds EcoFin’s estimate of the non wage inflatin accelerting rate of unemployment (nawru). It provides almost exactly zero evidence that the estimated NAWRU is useful when forecasting the acceleration of the rate of wage inflation.

table3

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Another way to present this is to regress the change of the rate of wage inflation on lagged wage inflation, the NAWRU and the difference between the unemployment rate and the NAWRU (ur_cyc_nawru). If the ewstimated nawru is the rate of unemployment corresponding to non accelerating wage inflation, its coefficient should be zero.

table4

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Results are fairly similar if lagged productivity growth in percent (lp00) and lagged personal consumption deflator inflation in percent (infpce) are included in the regression. When these variables are included, there is statistically signficant evidence that the EcoFin estimates of the NAWRU are of some use, but also very strong evidence that their estimate of cyclical unemployment is not correct.

table6

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table78

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table910

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European Pooled Panel Phillips Curve

This continues joint research with Marco Fioramanti. Our aim is to understand something about European natural rates of unemployment and whether the European Commissions estimated levels which they call NAWRU (for non accelerating wage inflation rate of unemployment) are useful approximations.

Here is a brief summary of work to date (prior to this note). Various subsets of us wrote at length here, here, here, here , and here.

In this note I look at a panel of the 15 countries which were in the European Union in 1997 (that is those for which long series of data are available) and ask if the Commission’s estimates of the NAWRU are useful if one wishes to forecast the acceleration of wage inflation. They don’t seem to be very useful at all.

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