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

The Relative Honesty of Clinton and Trump

Why am do I expect you to waste your time reading a post with such a silly title. Obviously, while opinions on Clinton’s honesty differ, everyone knows that Donald Trump is a pathological liar and a crook.

Oh Mr straw blog reader “everyone” eh ? Let’s ask Quinnipiac

“American likely voters say 53 – 42 percent that Trump is not honest. By a huge 66 – 29 percent margin, voters say Clinton is not honest.”

This is the same group of people among whom Clinton had a huge lead in voting intentions “In the battle of the unloved presidential candidates, Democrat Hillary Clinton tops the magical 50 percent mark among American likely voters, leading Republican Donald Trump 51 – 41 percent, according to a Quinnipiac University National poll released today. ”

Arithmetic says there is someone who thinks Donald Trump is honest (already appalling) that Clinton is not honest, and, yet for other reasons (too numerous to count) plans to vote for Clinton.

This poll suggests that a whole lot of people think Clinton is less honest than Trump but should be president because she isn’t an ignorant, spoiled, thin skinned, intellectually lazy, irresponsible, reactionary, racist, selfish, incompetent ….

Sorry to run on, I meant to type “Who plan to vote for her anyway.”

On the other hand Politifact begs to differ .

For a bit more detail, go to Robert [non Wald] Mann at


Trump is rated by the Politifact Mann colaberation as the most dishonest and Clinton as second most honest after Obama. Now I know that Mormon’s are notoriously lefty, but the figure has been clipped and posted and tweeted and (I guess) facebooked by many people more prominent than I.

So why do the people polled by Quinnipiac seem to have such a different view ? Why don’t we look at the sober essay “You Failed Chumps” by Josh Marshall, who shows that there is the doublest of double standards here. Trying to understand he wrote

Many reporters and editors simply take it as a given that Trump’s a crook. So stories about Trump’s corruption amount to what journalists call dog bites man stories – not really news because it’s the norm and wholly expected. The second related point is that many reporters and editors at a basic level don’t take Trump seriously as a real candidate.

I’m absolutely sure he is right. Reporters and editors don’t bother proving Trump is dishonest, because they think to themselves “everyone knows Trump is a lying crook”. But not everyone knows that. What they mean is that anyone who doesn’t know that is so far beneath me that I can’t even see that far. Which is distasteful, but wouldn’t bother me so much if I were confident that the people whom they consider beneath their notice won’t elect Donald Trump (they could go over to the upshot to check if their dismissal of Trump as a candidate is based on solid data (and over at the NY Times they are much more sanguine than fivethiryeight or the f*king Daily Kos for Chrissakes.

Trump may be absurd, but he is not a joke (who else was laughed at but turned out to be important ?).

OK so why is the political press doing such a terrible job of reporting on the relative honesty of Clinton and Trump ? I speculate after the jump

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From Small Town to Prison

With hard work, using publicly available data, not relying on off the record access to sources, Josh Keller and Adam Pearce have written an excellent important article which notes that from 2006 to 2013 the rate of new admissions to prison from high and medium population counties has sharply declined, but the rate of admission from low population counties has actually increased.


The first thing I learned from the article is that the New York Times still has some value aside from it’s role as fish wrap and publisher of Paul Krugman. I think this is journalism at its best. Oh and I note that the article is, in large part, data journalism (it’s not just for bloggers anymore).

The second is, well the fact, of which I was totally unaware.

There is also an excellent investigation of why this happened. Keller and Pearce note that this is *not* principally due to differences in differences in reported crime rates. They note the important role of capacity — prison crowding causes shorter sentences — the system keeps the prisons full but not vastly over capacity. They note the absence of alternatives to prison in small counties and the terrible shortage of drug treatment services (hmm I wonder if Hillary Clinton has recently proposed doing something about that ?). Of course they note the changing geography of drug abuse. But to an economist, their most interesting thought concerns misaligned incentives.

They quote Aaron Negangard, the prosecutor in Dearborn County, Ind (which “sentenced more people to prison than San Francisco or Westchester County, N.Y., which each have at least 13 times as many people.”). He said “My constituents are the people who decide whether I keep doing my job. The governor can’t make me. The legislature can’t make me.” Ah yes, he works for the people of Dearborn County which can use more than it’s share of space in state prisons without paying the state. The benefits are local, the budget is statewide, the decisions are made by local elected officials. There is a free riding problem. It is actually worse than it seems at first glance. There is also a non-budgetary spillover. If there is an extaordinarily severe county, professional criminals have an incentive toavoid it and commit crimes elsewhere. So people in Indiana minus Dearborn county pay (most) of the cost of scaring criminals from Dearborn county to other counties.

Now the state legislature and Governor Pence could deal with this problem effectively (and will when pigs fly). It is caused by prosecutorial discretion with laws which allow extremely long sentences combined with plea bargaining. If the sentence for the actual crime committed weren’t absurdly long, DAs would not be able to help their counties at the expense of the state.

Now big city prosecutors will also resist reduction of sentences. They find the threat of absurdly long sentences useful, because then they don’t have to bother with trials. Defendents (including those whose innocence is proven beyond doubt years later) plead guilty to lesser offences to avoid the risk of long prison sentences. Obviously the job of a prosecutor is easier if he or she doesn’t have to actually prove guilt anywhere.

But Keller and Adam Pearce have demonstrated to all city dwellers who are paying attention and thinking (maybe I should have typed “both” not “all”) that they are paying a high price (first of all in dollars) to avoid the inconvenience of providing due process to those people.

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Premature anti Republicanism

This is an open thread inviting discussion of the very serious people who discuss how opinions differ on shape of planet, but no longer claim both sides have a point. I am old enough to remember when only shrill dirty fucking hippies argued that the GOP had gone crazy. After the Trump nomination, that fringe argument is made by centrist and many conservatives. However, the villagers who were wrong (again) remain prominent and expect to be taken seriously. I am not the first (or one of the first thousand) to note the similarity with semi repentant Stalinists who argued that they were wrong for the right reasons while anti Stalinists were right for the wrong reasons.

William Salaten is a very leading example. The always excellent Josh Marshall sent me to this William Salaten post whose central conceit is that the GOP is like a failed state and Trump is like a warlord. It is an interesting analogy. The post is generally excellent and well worth reading.

However, I felt the need to pound my head against the wall (and post here) when I read

“When did the collapse begin? Maybe it was in late 2008 and early 2009, when congressional Republicans decided to block anything Obama proposed. Maybe it was in 2010 …”

Here Salaten insists that way back in 2007, he was right and the DFHs were wrong, because the GOP was a serious party. He doesn’t even consider the possibility that the collapse began before 2008 when he was dismissing the argument that the GOP was collapsing.

So it is obvious that the GOP didn’t begin to collapse in 2003 when a Republican President ordered the invasion of Iraq, or in August 2002 when the CIA began to torture prisoners or in 2001 when George Bush signed the Patriot Act while also ordering the NSA to violate it, or in 2000 when Republicans denounced Gore’s efforts to steal the election in which he won the popular vote, or in 1998 when the House impeached Bill Clinton over a blow job, or in 1996 when Fox News was launched, or in 1995 when the GOP caused a government shut down to support their demand for Medicare cuts, or 1985 when, as Reagan said “mistakes were made” or in 1980 when the GOP embraced voodoo economics, or 1972 (watergate), or 1968 (Southern Strategy), or 1964 (Goldwater nomination) or 1946 (McCarthy elected).

The GOP has been collapsing for a long long time. Sober moderate Ballanced centrists are proud of the fact that they didn’t notice until Trump was nominated.

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Will the Fed be Able to Respond to the Next Recession

On the blogosphere, there is an interesting debate about whether, when the next recession arrives, interests rates will be high enough that the normal approach of cutting the target federal funds rate will be sufficient.

In chronological order David Reifschneider, Jared Bernstein, Paul Krugman and Dean Baker contribute their thoughts (and in the case of Reifschneider extensive calculations and new research).

In an influential (pdf warning) paper , Reifschneider cautiously comes close to concluding that, given current Fed policy and in particular the 2% inflation target, the safe short term interest rate will probably rise enough before the next business cycle peak that cutting it will be enough.

Jared Bernstein thinks very highly of the paper, but is not convinced by the conclusion.

“I am not much comforted. There are a lot of “ifs” in Reifschneider’s story (all of which he is totally straight up about).”

if [skip] if [skip] if the QE and guidance have the positive growth and jobs impacts the model says they do; if people’s expectations are truly moved by the forward guidance, which implies future Fed officials will maintain the program. Then sure, sounds good.

Importantly, Bernstein is not convinced that Fed forward guidance actually guides expectations.

I think I will just quote (his explanation is better than my effort)

But I’m skeptical. The figure below, from Bloomberg News, shows a real problem for “if” No. 1. It draws a line through the “dot plots”: the Fed’s own predictions about where rates will go. The 3 percent at the end of the figure is the perch Reifschneider assumes they’ll get to before the next downturn.


The other lines at the bottom of the figure are the problem. They show market expectations of the funds rate and the fact that they’re so low creates a double problem for the Fed. First, if the markets are right, the limited firepower problem will be acute. Second, credibility. Remember, forward guidance works through market participants altering their expectations. At this point, the markets don’t believe the Fed’s projections.

It is very very clear that investors expectations about future Fed policy are not determined by FOMC forecasts of future Fed policy. At the moment, market participants expect a much lower Federal Funds Rate, but the point is that the listen, they hear, but they don’t necessarily believe. Regular readers know I totally agree and think this is a very important point. Also, I very much agree with “Re “if” No. 3, and again, Reifschneider is forthright on this point (I found his paper to be a model of clarity and caution), there are reasons to worry about whether monetary policy really has the growth and jobs punch the model says it does.” I have been worrying about overestimates of the effects of QE for 6 years now.

Paul Krugman agrees. As usual, he stresses asymmetric risks. He argues that “as Jared says, if the argument is wrong in any of several plausible ways — say, if the natural rate of interest is now much lower than it was in the past — this could be very wrong.”

Interestingly and unusually, Dean Baker disagrees with Krugman. Now I hate the fact that I almost never disagree with Krugman, so this raised my hopes.

Baker is brilliant as usual. He argues

… I can’t say I share their concern.

First, we have to remember that recessions aren’t something that just happens (like global warming :)). Recessions are caused by one of two things: either the Fed brings them on as a result of raising interest rates to combat inflation or a bubble bursts throwing the economy into a recession.

Taking these in turn, if the Fed were raising interest rates in response to actual inflation (and not the creative imagination of FOMC members) then we would presumably be looking at a higher interest rate structure throughout the economy. In that case, the Fed should then have more or less as much room to maneuver as it has in prior recessions.

The bubble story could be bad news, …

Baker then argues that it is possible to detect bubbles and prevent them from expanding to dangerous levels (sizes ? volumes ?) before they burst. This gives him another chance to remind readers of the many times he warned of the housing bubble before it burst, and of the fact that he warned that it would cause a severe recession when it burst.

I have some problems with this. First, I don’t think that even the very smart Dean Baker should be so confident.

Second it isn’t clear to me what should be done about a bubble which inflates without causing the economy to over heat. The housing bubble could have been restrained by high interest rates, but at the cost of high unemployment since it didn’t lead to extraordinarily low unemployment. And housing is the one sector which the Fed can most easily restrain. I’m not so sure that higher interest rates would have restrained dot com mania (fortunately the bursting of that bubble did little damage). I’d feel a whole lot better if I could think of a case in human history of a bubble which was restrained by the monetary authority (that is of a soft landing).

Third, and this is relatively important, it isn’t as if the USA has the exorbitant privilege of being the only economy which can initiate a world wide recession. There sure seems to be a huge construction bubble in China (a huge increase in leverage and also less concrete was poured in the USA in history than in the PRC in the last 3 hours or whatever). The USA doesn’t rely all the much on exports, but the correlation of GDP growth in different countries is much higher than that which can be explained through trade flows (writes Krugman who should know).

I am old enough to remember the Oil shocks. The recessions which followed the oil shocks look a bit like ordinary inflation fighting recessions, but, at the time, the unique features were very much stressed. I think it is in large part a coincidence that they followed periods of slack monetary policy, tight labor markets and accelerating inflation. I think such a shock hitting an economy with low inflation and anchored inflation expectations could cause a recession with low interest rates at the peak.

Finally what about total collapse of Europe ? It often seems possible over here.

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Of course some MSM journalists are hard working professionals. The Washington Post’s David A. Fahrenthold has worked very hard trying to find evidence, any evidence, of Donald Trump giving his own money away. Farenthold and Rosalind S. Helderman have a genuinely wonderful examination of alleged quid pro quo in which the Clinton’s did something for a donor to the Clinton foundation. That donor was Donald Trump (‘s foundation full of money given by other people).

“I said, ‘Be at my wedding,’ and she came to my wedding,” Trump said during a Republican primary debate in August. “You know why? She didn’t have a choice because I gave. I gave to a foundation that, frankly, that foundation is supposed to do good.’

So a [n officer of a] donor [foundation] did obtain some access. There is however a problem with Trump’s claim

Trump is wrong to suggest that these gifts to Clinton’s foundation came before Clinton’s decision to attend his wedding.

The gifts were in 2009 and 2010.

The wedding was in 2005.

So I guess that is quid post quo or something. Also some tempus itinerantur (says google translate).

Honestly it would be funny if he weren’t a major party candidate for President.

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The Pointlessness of US Political Journalism

US political journalism just receive the coup de grace and the Beutler did it.

Brian Buetler wrote “Hillary Clinton’s Relationship With the Press Is Broken—and It Can’t Be Fixed.” This doesn’t sound very enthusiastic, but I think the article shows that the problem is much much worse than the title suggests.

Beutler asks whose fault it is that Clinton doesn’t hold press conferences. He risks his guild card by arguing that the main problem is that she (and he) know that reporters would ask stupid questions based on “their fixations on trivia and optics.”

But his examples are much more appalling than one might imagine. Consider
“questions to ask about hacked DNC emails and the resignation of party chair Debbie Wasserman Schultz”, and “questions—about whether it was appropriate for the Clinton Foundation to operate as it did during her years at the State Department—and questions that could resolve lingering inconsistencies between her public statements about her email protocols and those of FBI Director James Comey. ”

Yes those are stupid questions about trivia and optics. They have nothing to do with policy. The issues will not be discussed in history books. I think it would be much better if she were asked about the facts that UnitedHealth and Aetna are cutting back health insurance offerings on the exchanges, the risk of an adverse selection death spiral, and what would she do about that if Congress refuses to enact a public option or Medicare buy in. Or what would she do about undocumented aliens. Or hey the globe is still warming — does she think Obama has done enough already ? I’d even settle for letting Matt Yglesias ask about nominal GDP targeting (because I am that desperate).

But the actually appalling thing is the quoted questions are Beutler’s examples of relatively substantive questions which he contrasts with the ones based on “trivia and optics.” Yes e-mail server protocols are as close as he can imagine the political press getting to issues which matter for ordinary people. The best questions he hopes address insider baseball, pseudo scandals and issues raised by GOP oppo researchers. He is a lot younger than I am, but he isn’t naive enough to imagine that policy proposals might be discussed at a press conference.

Also see two brilliant hard working young blogger/journalists writing about when Clinton will hold her next press conference.

The MSM is hopeless. Its only defense is that at least it is better than Twitter.

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Democratic Fund Managers Outperformed Republican Fund Managers

Straight from the Mercatus Institute, libertarian

Tyler Cowen notes that fund managers who donate to Democrats outperformed fund managers who donated to Republicans. The difference is small compared to the huge volatility of stock market returns, but it is not small compared to the variance of the performance of the two groups of fund managers.

In particular

The authors find that for the years 2004 to 2014, with the exception of one period, equity fund managers of the two political affiliations did about the same. [skip]

A second conclusion is that for one critical period of time, December 2008 to September 2009, the Democratic fund managers did much better. They earned 25.25 percent on average, compared with the Republicans’ 17.17 percent — a difference that, by the authors’ back-of-the envelope calculations, amounted to about $13.7 billion.

Needless to say, Paul Krugman told him so.


a separate (and harder to explain) period of superior Democratic performance from May 2003 to September 2003, when Republicans controlled the major branches of the federal government.

The data sample contained no comparable periods in which the Republicans did better, though I have heard anecdotal reports that conservative and libertarian-leaning managers had a much superior understanding of the late 1970s and the Reagan recovery of the 1980s.

Ah yes the Reagan recovery. Note the data which show superior performance by Democrats and the anecdotal reports or Republican superiority. Also note that for Republican economists, it is always 1973-1991 (except for 1981-2 which doesn’t count).

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Trump Train Tweets

As far as I can tell the Trump train tweet is authentic (and authentic click bait).

Checking his time line I found this more recent tweet


FRED begs to differ


The tweet might show Trump cherry picking (and cheating on “through”). After Bush and the Republicans (with assistance from Democrats including Bill Clinton) left the economy in ruins, it took a long time to recover (largely due to Republican imposed austerity). But the US economy has gotten through the spell of extraordinarily high long term unemployment. Actually, now that I think of it, it seems more likely that Trump tweeted about the ratio of long term unemployment to total unemployment and not the long term unemployment rate — an appalling but possibly sincere conceptual error

By Trump standards, the long term unemployment lie is unusually close to the truth. By I think it is important to avoid lie habituation.

The train tweet is after the jump. Click bait is OK, but I’m trying to pretend to be serious.

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Trump’s Son inLaw’s paper says Putin Hacked DNC to help Trump

This is genuinely amazing (h/t @jbarro)

New York Observer is a weekly newspaper… . Since July 2006, the paper has been owned and published by the American real‑estate figure Jared Kushner.

I quote without comment

It’s no secret that the DNC was recently subject to a major hack, one which independent cybersecurity experts easily assessed as being the work of Russian intelligence through previously known cut-outs. One of them, called COZY BEAR or APT 29, has used spear-phishing to gain illegal access to many private networks in the West, as well as the White House, the State Department, and the Joint Chiefs of Staff last year. Another hacking group involved in the attack on the DNC, called FANCY BEAR or APT 28, is a well-known Russian front, as I’ve previously profiled.



The answer then is simple: Russian hackers working for the Kremlin cyber-pilfered the DNC then passed the purloined data, including thousands of unflattering emails, to Wikileaks, which has shown them to the world.

This, of course, means that Wikileaks is doing Moscow’s bidding and has placed itself in bed with Vladimir Putin. In response to the data-dump, the DNC has said as much and the Clinton campaign has endorsed the view that Moscow prefers Donald Trump in this election, and it’s using Wikileaks to harm Hillary. This view, considered bizarre by most people as late as last week, is being taken seriously by the White House—as it should be.

It isn’t just fringe lefty pubs like the Washington Post and the New York Times. This is in a paper owned by Trump’s son in law.

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