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contra Krugman

Paul Krugman writes that Keynesian thought has progressed.

I disagree in comments with the usual

I do not think that Keynesians accept that there is a natural rate of unemployment. The concept is inconsistent with hysteresis. OJ Blanchard and LH Summers are definitely Keynesians. They presented a model without a natural rate in 1986. I don’t know about Blanchard but Summers and his former student JB DeLong continue to stress hysteresis (with an open mind about the sum of autoregressive coefficients of unemployment on lagged unemployment so there model might or might not be consistent with a natural rate but with certainly no evidence of any faith in policy invariant stationarity). Also there is this guy named Krugman (have you heard of him) who shows no sign of faith in a natural rate and writes about life long (OK not permanent but life long) effects of low demand on labor market experience.

Finally Wren Lewis refers to the hysteresis effects of the Thatcher deflation when he isn’t referring to New Keynesian models with no such effects as successful cutting edge models and great progress on 1960 vintage Keynesian analysis of the possible Phillips curve (by Samuelson and Solow who extensively discussed both outward shifts due to increased expected inflation and outward shifts due to cyclical unemployment becoming structural).

Note also that without using the name “Phillips” because he wrote beforee Phillips, Keynes specifically warned that there wasn’t a stable relationship between output and inflation. He noted the case of “flight from the currency” not yet named “hyperinflation” by Cagan rather anticipating the work of say Sargent.

Now it is true that Keynesians were convincedby Friedman mostly that velocity is fairly stable and predictable. But it isn’t.

I assert that Keynesian thought hasn’t made a both scientific and theoretical advance since Keynes where by scientific I mean actually useful in predicting out of sample and by theoretical I mean not just new parameter estimates made with data not available to Keynes using computers not available to Keynes.

Some semi prominent New Keynesians were amused enough to try to come up with examples. They failed.

In any case certainly not the absense of a stable expectations unaugmented Phillisp curve (as predicted by Keynes) nor the discovery of the LM curve which uh you know doesn’t exist.

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No, the Greeks Aren’t Lazy. The Germans Are.

A lot of people out there seem to have the notion that Greece’s troubles are the result of laziness.

That really doesn’t seem to be true. OECD:

Average annual hours actually worked per worker 2000-2010

GermanyInformation on item 1473 1458 1445 1439 1442 1434 1430 1430 1426 1390 1419
GreeceInformation on item Information on row 2121 2121 2109 2103 2082 2086 2148 2115 2116 2119 2109

And no, labor force participation is not wildly different: 55% in Greece, 60% in Germany.

To quote my friend Katherine: “It’s those goddam hyper-efficient Germans with their ‘work smart not hard’ screwing things up for the rest of us.”

Tongue in cheek there, of course, but it does seem to be German productivity in a single-currency regime that makes it impossible for Greek banks to stay solvent.

And it’s not that Greek bankers, politicians, or workers are lazy. No matter how hard they work, the financial system doesn’t seem to make it possible for them to live a lifestyle in which they crush their grapes with their childrens’ feet. No matter how much they want the “liberty” to live that lifestyle.

Cross-posted at Asymptosis.

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John Roberts and Elena Kagan: Mirror Images of Each Other

The second biggest surprise of the day, after the survival of the Affordable Care Act, is that we’ve never really gotten over our collective crush on John Roberts. How else to explain today’s outpouring of praise, not merely for the decision but for the man himself, for his statesmanship and judicial modesty? All these years, it now appears, we’ve held it in our hearts; we’ve written it in our diaries, remembering every one of those sweet nothings he once whispered about “common ground” and “humility.” No, we never really gave up on Roberts. Not during that long judicial bender he took with the boys—Nino, Clarence, Tony, and Sam; not during the Citizens United argument, when he called the government “big brother”; not when he swept away a century’s worth of campaign finance regulations. So complete is our swoon, in the afterglow of the ACA ruling, that Bob Shrum has written that if Roberts had been Chief Justice in 2000, Bush v. Gore might have gone the other way.

To which I posted the following comment:

I write on legal and political issue issues for a left-of-center blog and have indicated there that I detest and really fear John Roberts because of his deeply diabolical nature and his checklist of ‘80s-era Federalist Society things-to-do.   Linda Greenhouse has written several columns, two or three of them within the last few months, highlighting those two quintessential John Roberts traits.  But Greenhouse, and I, predicted that Roberts would save the ACA because the case is so high-profile and the grounds for striking down the statute so utterly artificial that it would place more public scrutiny on the types of things he and his cadre normally get away with with virtually no public awareness.  I don’t think he did what he did out of a sense of statesmanship, nor in order to gut the Commerce Clause; I think the Commerce Clause ruling will have almost no practical effect, and he could have done the same thing with it simply by joining the other four conservatives in a 5-4 ruling striking down the ACA. 

I think he’s, in a way, the mirror image of Elena Kagan, who in high-profile cases usually votes liberal but who, best as I can tell, almost never goes out on a limb for the “nobody” “cert” petitioner and actually fights to get a “cert grant,” as Sotomayor does, and who I’d bet doesn’t even vote very often to hear such cases.  Her priorities seem to be her own public image and being buddies with the “in” crowd on the Court, whereas Roberts’ priority is making as many dramatic changes to the law as he can, but doing so as much under the public’s radar as possible.  (I also think Kagan is a bit naïve on some issues because of her unfamiliarity with them—see, e.g.: federal habeas review of state-court convictions—and fairly easily snowed.)

So I agree with Ken Houghton in his post below that John Roberts is not the friend of progressives.  I disagree with Ken, though, that Roberts has set up some trap through which he will later orchestrate the striking down of the ACA as a violation of equal protection because of the way in which the Medicaid expansion is administered (if I understand Ken correctly) is nil.  Roberts ended his opinion with a statement saying that the proper manner in which to determine the ultimate fate of the ACA is through the political process, not the judicial process—and I think he means it.  There are two parts of Roberts’ opinion—the part concerning Congress’s regulatory powers under the Commerce Clause and the part concerning Congress’s power to enact federal-state partnership legislation a la Medicaid—that raise serious concerns about the impact on otherlegislation.  I wrote separate posts yesterday about each of these, and I’ll be writing another one on Medicaid issue later today. 

But any lawsuits concerning some aspect of how the law is working in practice, once it gets underway, would result in the possible tweaking of an HHS regulation or in the manner in which a particular state is implementing the Act, but I just don’t foresee a successful attack on the constitutionality of some provision in the Act itself. 

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The Enemy of My Enemy is Not My Friend, or John Roberts Plays the Long Game

It was only last week when liberal pundits were more alert.  Well, some of them weren’t—after all, we’re talking about people identified as “liberal” by those who consider Ross Douthat and David Brooks to be mainstream. What some of them knew about Arizona, all of them appear to have forgotten about PPACA. The Supreme Court decision last week invalidated three points of severe state overreach; even Anthony Kennedy couldn’t imagine that “you will carry your papers at all times” was reasonable.  But they left in place a fourth issue—collateral paper-checking for another reason—until it could go into effect.  After all, if it really was all about security, the police will act completely appropriately.  And if they do not, there will be a case that will reach the Supreme Court after the law is in effect and further revision will be possible.

Steve Benen (h/t Erik Loomis) appears to have gotten it correct: John Roberts took one look at the company he was keeping—and maybe spoke with a few hospital administrators—and flipped sides. Or, to quote Benen:

And yet, as of this morning, four justices — Alito, Kennedy, Scalia, and Thomas — insisted on doing exactly that. The four dissenters demanded that the Supreme Court effectively throw out the entirety of the law — the mandate, the consumer protections, the tax cuts, the subsidies, the benefits, everything.
To reach this conclusion, these four not only had to reject a century of Commerce Clause jurisprudence, they also had ignore the Necessary and Proper clause, and Congress’ taxation power. I can’t read Chief Justice John Roberts’ mind, but it wouldn’t surprise me if the extremism of the four dissenters effectively forced him to break ranks

What abides is that Roberts also knows that he will probably get a better case from which to dismantle “Obamacare.” It didn’t especially take contortion to call the penalty a tax. There is only one Federal enforcement mechanism—and the States were not required to put any penalties of their own in place, though it seems likely some will do so—and the agent of that enforcement is the Internal Revenue Service.  (This is, btw, one of the places where ObamaCare most clearly resembles RomneyCare—down to the penalty being too low to, in itself, convince people to buy insurance.)  For Roberts, it’s a small step to saying that it is enforced and administered in the same manner as a tax, and therefore it may be called a tax.  Voila; he doesn’t have to declare that we have returned to the 19th Century. He has those votes when he wants them: when the “tax” is administered “unfairly.”

But the first time anyone will have to pay the penalty tax for not being insured will be some time in late 2014 or early 2015, when 2014 Federal Income Tax forms are filed.

As with Arizona last week, there is a difference between “the benefit of the doubt” and “giving them enough rope with which to hang themselves.”

John Roberts had a choice today: he could vote with business interests, entrepreneurs, and hospitals who want to be able to make a reasonable estimate of their costs over the next several years—or he could overturn PPACA and with it establish his Court as the one that completely destroyed the possibilities of business certainty (or even labor cost control)  and a dependable macroeconomy (since the minority opinion, as Benen notes above, also strongly suggests the Federal government should not have the power of taxation).

As the man who literally Wrote the Book on Constitutional Law, Laurence Tribe (h/t Blue Texan) noted, John Roberts “saved an institution”—the Supreme Court itself—today.  But anyone who believes he also preserved national health care instead of giving it enough rope to hang itself is fooling themselves.

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Thank you, Judge Posner

The chief justice, echoing Justice Scalia’s “broccoli” comment at the oral argument, rejected (as did the four dissenters, and so that is now the view of a majority of the justices) the Commerce Clause ground for the mandate, saying that to accept that ground would mean that “Congress could address the diet problem by ordering everyone to buy vegetables.” This argument, reassuring though it is to our obese population, confuses separate constitutional provisions. The Commerce Clause would empower Congress to order everyone to buy vegetables, because the market for most vegetables is interstate, but the “liberty” protected against the federal government by the Fifth Amendment would doubtless be interpreted to forbid such an imposition, just as it would be interpreted to forbid a federal law requiring everyone to be in bed with the lights out by 10 p.m. in order to economize on the use of electricity and, by doing so, reduce carbon emissions from electrical generating plants.

— Judge Richard A. Posner, on Slate, 5:38 p.m. today

Amen. 

Justices Ginsburg, Breyer, Sotomayor and Kagan also made that point, in their concurrence today.

I’m thrilled to be in such exalted company.

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My opinion: Almost no practical limiting effect on Congress’s regulatory powers

Some people think Roberts cleverly used this case to severely limit Congress’s regulatory powers.  Others strongly disagree.

I’m with the others.

I think that as a practical matter, this will have almost no limiting effect at all on Congress’s regulatory powers.  I can’t think of any circumstance in which this limitation would apply and in which there would be no other enumerated power under which Congress could enact the law.  In this case, the other enumerated power is the taxing power.  In the case of, say, the Selective Service Act, the enumerated power is the power to provide for the national defense.  Etc.

The reason that this limitation is insignificant is that the Commerce Clause argument was really a disguised Fifth Amendment due process (liberty! broccoli!) argument, and Roberts flatly rejected that.  He said, no, the Commerce power doesn’t allow this but the taxing power does—and, no, it doesn’t violate fundamental constitutional concepts of freedom, of liberty!  There may be other things that could be compelled under the taxing power—broccoli purchases, maybe—that would violate Fifth Amendment due process concepts (freedom! liberty!) and thus be unconstitutional on that basis, just as there are things that could be compelled under the Commerce power that would violate that concept of due process and thus be unconstitutional on that basis.  But this does not violate that concept of due process (freedom! liberty!). 

No, Roberts didn’t specifically separate the two concepts—Commerce Clause limitations and Fifth Amendment due process—and, yes, he does almost seem to conflate them the language Scocca quotes.  But the bottom line is that he found no due process (freedom! liberty!) problem with the mandate and penalty, and therefore no slippery slope to broccoli in this instance, even though he says the Commerce power isn’t broad enough to authorize the statute.  

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The hint of the outcome during the first day of oral argument (on the impact of the Anti-Injunction Act on the Court’s jurisdiction to hear the ACA case)

I think there was a clue to Roberts’ thinking during the first day of argument—during the argument on the applicability of the Anti-Injunction Act, an obscure “jurisdictional” statute, which precludes courts from ruling on the constitutionality of a federal tax until after the statute becomes effective and the tax actually is due.  Roberts really indicated during that argument that he was interested in finding a way to rule that the penalty was a tax for purposes of Congress’s taxing power but not a tax for purposes of the Anti-Injunction Act.  That would remove the issue of whether the mandate was within Congress’s Commerce power, since if it is a tax, the mandate and penalty/tax are within Congress’s taxing power.  And then the only issue would be whether this violated the Fifth Amendment’s due process clause (liberty! broccoli!).

Late in the argument on the mandate issue the next day, under questioning by Sotomayor, the challengers’ lawyer, Paul Clement, conceded that under its taxing power, Congress could do pretty much the same thing as it did under what Congress thought its Commerce power allowed it to do.  That effectively killed the due process (liberty! broccoli!) argument, since for purposes of that argument, it made no difference which Congress’s powers authorized it to enact the mandate and the related penalty.  

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The difference between Social Security/Medicare and Medicaid under the Spending Clause, in light of the ACA opinion

While the Court’s upholding the mandate is deservedly taking front stage in the media coverage, the Court’s decision to strike down a part of the Medicaid expansion may ultimately have broader jurisdprudential consequence.  That, at least, will be a subject of debate among lawyers and academics in the days and weeks to come.  This is the first time (as far as I know) that the Court has actually found a Spending Clause condition unconstitutionally coercive.  Whether it establishes principles that make many other programs vulnerable is a question that will require further analysis and debate.  Lyle Dennisten will start that analysis in an post later today or tomorrow morning.

— Kevin Russell, Medicaid holding may have broadimplications, SCOTUSblog

I one of the many updates to my initial post this morning, mentioned this exchange between Lyle Denniston and Tom Goldstein (SCOTUSblog’s publisher:

Lyle: The rejection of the Commerce Clause and Nec. and Proper Clause should be understood as a major blow to Congress’s authority to pass social welfare laws. Using the tax code — especially in the current political environment — to promote social welfare is going to be a very chancy proposition.

Tom: I dissent from Lyle’s view that the Commerce Clause ruling is a major blow to social welfare legislation. I think that piece of the decision will be read pretty narrowly.

 I wrote:

I’m almost always in agreement with Lyle’s analyses (as is, I’m sure, Tom Goldstein, who is the blog’s publisher and also a major Supreme Court litigator; Amy Howe, also a lawyer, is Goldstein’s wife).  But, like Goldstein, I disagree with Lyle on this one.  In order for the Court to interpret this opinion as limiting Congress’s authority to enact social welfare legislation, the Court would have to place in question a slew of current, longstanding social welfare programs.  I don’t think that was Roberts’ intent—really, I don’t—and I don’t think the opinion will be viewed that way.  Unless, of course, Romney wins and appoints a wingnut to replace, say, Ginsburg if her health does not hold out.  

Here’s what I think will happen: 

But first, I need to point out that Medicaid, unlike Social Security and Medicare, are programs structured as partnerships between the respective states and the federal government, each paying some portion of the cost, and that Medicaid has always contained a provision that makes state participation voluntary and that allows states to remove themselves from the program if they want to.  Social Security and Medicare, by contrast, are solely federally-funded and federally-run programs. 

The 26 states that challenged the ACA’s Medicaid provision argued that a provision in the Medicaid section of the ACA allows the federal government to withdraw all federal funds for a state’s entire Medicaid program—that is, the money it already is receiving—if a state opts out of the Medicaid-expansion part of the ACA.  The states argued that this was too coercive and therefore violates principles of state sovereignty.  Seven justices—the four dissenters, Roberts, Breyer and Kagan—agreed with that claim, and so they ruled that, while the federal government can put conditions on its funding of the new expansion, and can withdraw the money for that expansion if a state doesn’t comply with the conditions, the federal government can’twithdraw funding also for the earlier parts of Medicaid that the state already was receiving.
Sooo …. this ruling certainly (in my opinion) appears to have no effect whatsoever on any program funded entirely through, and administered by, the federal government.  And i tappears to have no effect on any social welfare program that is a partnership between states and the federal government as long as there is no threat by the federal government to withdraw funds already being given to the state for something else, in order to get the state to agree to participate in the new partnership, or in the new part of the part of the partnership.

I just don’t see how this restricts in any significant way Congress’s ability to enact social welfare programs.  I think that ruling is really very narrow.

As an aside, I want to mention the four dissents who wanted to strike down the entire ACA tried to at least persuade Roberts that the entire Medicaid-expansion part of the statute simply because that one provision in that part of the Act was ruled unconstitutional—even though, as Roberts points out, the Act includes what’s known as a “severability” provision providing that if any particular section of the Act is ruled unconstitutional, the section should be severed from the remainder of the statute, and the remainder should remain in force.  This let’s-see-if-we-can-get-the-tail-to-wag-the-dog-and-win-on-this-part-at-least tack of the minority was so transparently inappropriate that Roberts, in responding to it in his opinion, seems downright offended by it.  Good for him.  

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