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Not even Americans For Prosperity can defeat Glenn Kessler’s love of "both sides"

by Robert Waldmann

Not even Americans For Prosperity can defeat Glenn Kessler’s love of “both sides”

I mean that he loves the phrase “both sides”. This fact check is pretty much “Opinions on shape of planet differ. Both sides overstate their case.” He is discussing a grotesquely dishonest ad by Americans for Prosperity about an Obamacare victim who ” told the Detroit News that her monthly premiums were cut in half, from $1,100 a month to $571. That’s a savings of $529 a month”

I am mainly objecting to this “Too many anecdotal stories, on both sides, have fallen apart under close scrutiny.” Before the cut and paste comment, I’d like to make a really rude question here. You do facts right ? OK how many pro ACA anectdotal stories have fallen apart.

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Why Are So Many Americans Confused About Obamacare? How a Video Produced by CBS’ Washington Bureau Misled Millions –Part 1 Updated

run75441: I have been out and about to Thailand and China again so I have had not had a lot of time to contribute. Just reading the many comments on Robert Waldman and Beverly Mann’s well written articles gives a snapshot of how many people do not understand the PPACA and really do not care if they do understand it or have the complete story. It is akin to a mob mentality amongst the opposition to it with the media and well funded opponents egging them on with more and more supposition, conjecture and innuendo. I have often quoted Maggie on Angry Bear Blog and covered her posts to give them greater exposure as I have yet to see her proven wrong. Lately she has taken up debunking many of the myths, falsehoods, and misconception being put forth by the media, the Republicans, the Tea-baggers, and the manure spreaders such as the Koch Brothers who are attempting to buy an election in Michigan with their funding.

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Investors backing off from housing market in Phoenix

The weather has been great in Phoenix for months, but even so, the housing market is slowing down. Nick Timiraos, Real Time Economics from the Wall Street Journal, has an article today that presents the Phoenix housing market as the canary in the coal mine. If the housing market in Phoenix cools down, then other housing markets will too.

“the number of homes sold in January fell 17% from last year, the sixth straight month in which sales have fallen from a year earlier.”

““Demand is really getting quite low. Each month it seems to get a little worse than I expect,” said Mike Orr, a real estate director at the W.P. Carey School of Business at Arizona State University.”

“After 25 straight month-over-month gains, prices have now stayed flat or fallen in each of the last four months.”

“Last year, the problem for builders was that they were running out of homes to sell. “Their biggest problem now is not having enough people coming through the sales offices with good credit,” says Mr. Orr.”

“Rising prices and big declines in foreclosed properties being offered for sale have led investors to lose interest. Investors accounted for just 19% of homes sold in December, according to Mr. Orr, down from a peak of nearly 40% in July 2012. Demand from Canadian buyers has also cooled as the exchange rate becomes much less favorable compared with a few years ago.”

“Mr. Orr says demand from entry level buyers is weak, and that younger households seem more inclined to rent, either because they can’t afford to purchase, they can’t qualify for a loan, or they simply aren’t interested in ownership. “There’s no shortage of rental demand,” he said. “Any rental that is reasonably priced is getting multiple people applying.”

Investors are backing off. Now the market depends more on regular ordinary people who on balance receive low labor share of income.

Sidenote: I continue to foresee consumption by aggregate capital income decreasing thru 2014.

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Are economist’s rational?

I just couldn’t skip this one…disinhibition and odd “metaphor” combined:

Lynn Parramour writes:


Thomas Ferguson and Robert Johnson of the Institute for New Economic Thinking, two economists who have tried to expose the problems in their field, remind us that even when you look at the evidence of recent reports of the trustees overseeing the program, Social Security’s fiscal fitness remains strong. At worst, if the economy were to grow relatively slowly over the next decades, there might be some shortfall in the Trust Fund way down the road, in 2030s. Even then, the fund would not be empty. Tax revenues would still cover approximately 75 percent of promised benefits until 2085. That’s hardly an emergency. All the Chicken Littles yammering about a potential shortfall are basing their views on predictions that may very well turn out to be totally off-base.

“Talk of the bankruptcy of Social Security,” Ferguson and Johnson conclude, “is hot air.”

But that has not stopped many economists and political allies from acting as if the program were going bankrupt, and that the only way to save it is to make cuts immediately. The fantasy of prediction, we will see momentarily, is followed closely by the fantasy of supremacy.

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Basic v. Levinson

From the New York Times

According to the plaintiffs in the new case, the Supreme Court has not overruled a statutory precedent in an area in which Congress has been active since 1961, in a tax case. But lawyers for the defendants said the 1988 decision was entitled to “lessened precedential weight” because it was “largely a procedural and evidentiary construct.”

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The Accelerator

I’ve decided to look at US economic aggregates using theory and statistical methods which were popular in the 1960s. I have long told students that the model of investment which best fits the data is the now ancient flexible accelerator. This is just a reduced form equation without theory. It just says that the ratio of fixed capital investment to GDP is high when GDP growth is high and low when the real interest rate is low. I tried to look up the parameters, and couldn’t find any estimates. So I decided to see how well US data could be fit with an old fashioned accelerator.

This means going back to very old style econometrics (which is just not allowed in peer reviewed journals these days in large part for good reasons). Very old style included trends as regressors, so the actual old regressions were (I guess) the investment to GDP ratio on the GDP growth rate, an estimate of real interest rates, and a trend. In any case they had better have included a trend since one is clear in the data. So this is very old fashioned econometrics with current data.

The old accelerator fits the data quite well — the R-squared of the regression is 0.745. This should be, at least, a stylized fact which micro founded models are supposed to match.

The ratio of US investment to GDP

The ratio of US investment to GDP

The amazing part is that the fit up through the early 80s is almost exact, yet this is exactly when the accelerator was replaced in the literature.

footnote and one more graph after the jump

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Yes, Potential output is lower… that is old news.

Yes, potential output is lower than people thought, much lower.

I have been saying for almost a year that potential output is lower. (link 1, link 2) Commentators on Mark Thoma’s blog thought I was nuts. Mark Thoma himself did not agree with me. Mark Thoma now offers one explanation to his class that the cause could be hysteresis, where long periods of unemployment make the economy more sluggish. But Eric Morath contradicts that view…

“The finding backs an emerging view that the relatively weak recovery is due to more than just the deep recession. Economists appear to have not accurately projected the impact of a number of trends, including demographic shifts and changes in the number hours worked per week, that were taking shape even before the recession took hold.”

Even David Beckworth recently (January 17th) wrote about natural interest rates and concluded using the Finance-neutral method that the output gap was still large.

“We cannot directly observe the natural interest rate, but there is evidence of ongoing slack in the economy. And since slack–or a negative output gap–is a key determinant of the short-run natural interest rate, it is reasonable to believe the natural interest rate has been depressed over the past five years.”

Even Paul Krugman believed potential output was little changed from before the crisis…

“…potential output is defined as the highest level of output consistent with stable low inflation. If you want to claim that an economy has grown unsustainably above potential, you need to show me the accelerating inflation.” (link)

“potential GDP is a measure of how much the economy can produce, not of how much people want to spend.” (link)

Yet, he makes a mistake. True potential does depend on how much money people have to spend. If not, then why doesn’t Chinese firms sell more to their domestic population? Well, it’s because people in the US have more purchasing potential.

As for inflation, if production is healthier than how much people have to spend, inflation will be muted. We live in a world of under consumption from fallen labor share in advanced countries. Europe and the US are concerned about weakening inflation.

Krugman needs to acknowledge the weakness in his potential output concept. He would have been able to foresee the reality of a small output gap.

So we see top economists making a crucial mistake in determining the output gap. Now the risks of easy monetary policy will become quite apparent. As Mark Thoma offers a warning to his class from the 30:00 to  31:30 minute points in this video

“If that is true (very small output gap), then they (the Fed) should back off the stimulus starting now.”

I based my calculations on labor share over a year ago and got it right. So this news about potential output being lower is not news to me.

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More on Julia Boonstra

Paul Krugman also comments on healthcare horror stories hooey:

by Robert Waldmann

More on Julia Boonstra

Glenn Kessler noted that the latest ad presenting an alleged Obamacare victim doesn’t add up right. Koch funded “Americans for Prosperity” broadcast an advertizement in Michigan in which Julia Boonstra complained that her old insurance was cancelled due to the ACA. Kessler notes that also as a result of the ACA her annual premium is $571 per month instead of $1100 a month.

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What is the Opposite of a Weasel Word ?

by Robert Waldmann

What is the Opposite of a Weasel Word ?

I need a metaphor and no one is answering at metaphor customer service.

I need a nuancing partner for weasel word. A weasel word is a qualifier which makes a statement so weak it is unfalsifiable without making it sound like “I don’t know either.” I think there is an equally seriously problem with words used only to set up straw men. There are words which can be used to make a perfectly reasonable claim false.

I am tempted to call them “berserker words” as only the sort of person who would go into battle unarmored would actually use them. On the other hand, berserkers were people and not at all like weasels. I also thought of “rabid lion words” but, come on, syllables. I think “wolverine words” might be good, since wolverines are closely related to weasels (who are ferocious and fearless so whose weaseling whom here ?).

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