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

Picking Up The Tab for Full Service Restaurants

In the news, great attention has been paid to the activities of fast food workers striking to increase their salary up from minimum wage, their plight with fast food restaurants, and their heavy reliance on public assistance to get-by. Included with fast restaurant workers whose employers are represented by the National Restaurant Association are full service restaurant workers who make up the bulk of the worker in the restaurant industry. The plight of full service restaurant workers is documented in an article by Sarah Anderson at IPS.

Of the 4 million people working in the restaurant industry, 50% rely on public assistance to get by at a cost of $9.5 billion. This rivals WalMart and other low wage retailers who also depend on public assistance and communities for their employees. While restaurants like Papa John’s complain about having to pick up the tab for healthcare insurance or having to raise prices 10 cents for a medium pizza, they fail to mention taxpayers are paying the hidden cost to their low wages. 8 of the 10 lowest paid jobs are represented by restaurant workers of which 5 are in the full service restaurant segment.

To supplement underpaid restaurant workers (which also subsidizes their employers) and is paid by taxpayers are public assistance programs such as Medicaid and CHIP health Insurance programs, the federal earned income tax credit (EITC), food stamps (SNAP), basic household income assistance (TANF), the national school lunch program, childcare assistance, low income home energy assistance program, section 8 housing, and housing choice vouchers. What has not been mentioned is a second form of subsidy to full service restaurants through the sub minimum wage, which also requires customers to pay these workers’ wages directly through tips.

The industry is not being decimated by rising costs, employment is expected to grow 10% by 2022 suggesting greater industry growth and translating into higher public assistance costs and less labor productivity. “Full-service restaurant workers are at the core of America’s growing low-wage economy; many of these workers’ earnings are far below what’s needed to meet their subsistence needs.” Greater than 21 percent of all tipped workers live in poverty representing 2.5 times the overall work force in poverty. At a cost of $9.5 billion to subsidize the industry, it may be worthwhile for taxpayers to decide whether to pay the money upfront rather than through government programs.

invisible hand Table 1 represents the five biggest players in the Full Service Restaurant business segment and the annual cost of public assistance subsidies. Along with Olive Garden, Darden owns six smaller chains: LongHorn Steakhouse, Capital Grille, Bahama Breeze, Seasons 52, Eddie V’s and Yard House. Darden employs 150,000 employees with over 1500 locations and serves 320 million meals annually. DineEquity is better known as IHOP and owns the Applebys chain. With nearly 3600 locations it is bigger than Darden; but, most of the restaurants are franchises. Brinker International is the parent company of the Chili’s as well as the smaller Maggiano’s Little Italy chain. By its name, you may recognize Bloomin Brands as the owner of Outback Steakhouse. Add to this, Carraba’s Italian Grill, Bonefish Grill, and Fleming’s Prime Steakhouse and Wine Bar. If you have not passed a Cracker Barrel in the southeast or while traveling south; then, your eyes have not been open. These companies are heavily subsidized through public assistance.

Are you going to end up paying more for a nice meal at many of these restaurants, the answer is yes you will. The cost of which will transition from the rear door where it is hidden and to which you are paying it anyways after being handled multiple times to the front door and “potentially” going directly to the restaurant worker serving you. Either you believe in a fair wage for a fair day’s work or you believe in keeping an underground of subsistence existence financed by you in the end and continued subsidizing of companies. It is appropriate to eliminate the tipped sub-minimum wage and raise the minimum wage. This is something ALEC the mouth piece for the National Restaurant Association and state governments have been fighting. A particular emphasis should be placed on raising wages at companies which use public assistance to supplement payroll wages. Continue to provide support programs for minimum wage workers. Actively encourage collective bargaining by restaurant workers as a buttress against large companies which today have legislature and private organizations such as ALEC at their backs. With the renewed emphasis, it is only then can Labor begin to reap some of the productivity gains denied them.

Other References: Picking Up The NRA’s Tab; The Public Cost of Low Wages In the Full Service Restaurant Industry

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A Non Veto Threat ?

In about one month, the US Supreme Court will announce a decision on King Vs Burwell in which the plaintiffs argue that subsidies may not be paid to people who purchased health insurance on exchanges operated by the US Federal Government. The risk that they will win terrifies, among others, Senator Ronald Johnson (R-Wisconsin) who is up for re-electoin in 2016. He proposes a special law — the re-elect Ronald Johnson act — to autorize the payment of subsidies in 2015 and 2016. To convince his fellow Republicans (and to be evil) he proposes eliminating the mandate that people buy insurance. This is clearly veto bait the aim of which is to Cause Barack Obama to veto the bill and be blamed by 8 million people for their resulting loss of subsidies.

I think that Obama’s optimal response is to, informally, contact health insurance executives (and their lobby AHIP) and tell them that he just might sign the bill. People don’t use the phrase “11 dimensional chess master” much any more (I wonder why) but it was originally introduced to refer to his 2008 proposal to reform health care without introducing a mandate. This would have destroyed the US Health Insurance industry. I’m sure his aim was to win the nomination and the election, but, once he won, it looked like accidental genius. The insurance lobby which had managed to block the Clinton attempted reform promised to support Obamacare if and only if there was a mandate.

I think it would make sense for Obama to tell them that he isn’t going to sacrifice his party to save them from Republicans, so they better handle it themselves.

I think that the informal deniable message might include the provision that if he is convinced that they did everything they could to terrify Republicans who might vote to eliminate the mandate, he might consider vetoing the bill. Even with intermediaries who can be repudiated, winks and nudges, it would not be wise to suggest that huge donations to the DNC, DSCC and DCCC would be part of the bare minimum required (that statement would be a crime).

Would it be a bluff ? Maybe. Did he already steal a huge pot with exactly that bluff ? Certainly.

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EITC vs MJ.ABW: Neo-Liberal Acronymic War

Cryptic enough? Well let me do some unpacking and straight out asserting and then turn this over to AB readers and commenters.

EITC is the Earned Income Tax Credit. Its open premise is that work should be rewarded. Its more hidden premise is that this reward should come as a premium over actual marginal labor productivity and so not come directly in the form of wages paid by the employer. Instead it becomes the obligation of society, or rather taxpayers as a whole. That is the promoters of EITC insist that the market works perfectly when assigning wages as a product of actual productivity but allow that the result is not socially equitable. I mean we can’t actually STARVE people even if the books suggest we should Amirite? After all we are good hearted Neo-Liberals.

EITC is often explicitly promoted as an alternative to increases in Minimum Wage. Which might provide the same or more reward or equity as EITC but are regarded as an economic distortion of actual market wages themselves set by some version of actual labor productivity. The problem here is two-fold. First it just concedes the underlying economic argument to the neo-liberal and classical liberals: that the Invisible Hand works when it comes to wage levels. The second problem is more pernicious. It comes into play when you realize that there is a lot of overlap between the ‘big-hearted’ economic liberals who allow that work should be rewarded even if those rewards are not specifically justified by the economics of the labor exchange and those who believe that taxation on corporations is both inefficient and inequitable. And who would make similar arguments about tax on capital in general. With results as seen in say the respective tax plans of Paul Ryan and Marco Rubio. The end result of this is that employers and capital in general propose to provide big ‘E’ Equity via EITC while shifting all responsibilities for its funding right onto labor share. Much as they propose to do with parallel proposals to shift taxes away from income to consumption. From this perspective all of EITC, and VAT, and FAIR Tax and Flat tax become a combined Acronymic War on labor by the controllers of capital.

In direct contrast to this jumble is the opposing acronym: MJ.ABW. More Jobs. At Better Wages. It too argues that work should be promoted and rewarded. But in the form of pre-tax wages rather than post-tax credits. And to those that would argue that this is just distortionary would simply reject the basic neo-liberal/classical assumption that wages are in practice set by some actual calculation of marginal labor productivity but instead recognize that they are and always have been by some combination of pure pricing power by employers mitigated only by residual wage market clearing power retained by workers. That is given any sort of labor market at all wages have to clear at or above subsistence, else people will just walk away. WHERE it clears above subsistence is some combination of actual labor supply and collective ability to demand higher wages. That is ultimately more of a purely political than economic calculation.

As such I consider most proposals to address inequity via EITC or UBI or tax credits to be potential Trojan Horses. Because in the end the actual equity depends on the actual incidence of the taxes that fund those benefits, income guarantees and credits. And all too often the promoters of such things as EITC propose to couple that with a shift away from taxes on profits and capital gains paid by the 1% to wage and consumption taxes paid by the 90%. With the 91-99% alternately rewarded and screwed as serves the interest of the real bosses.

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Morality Tales and Capital Flows

by Joseph Joyce

Morality Tales and Capital Flows

When the Federal Reserve finally raises its interest rate target, it will be one of the most widely anticipated policy moves since the Fed responded to the global financial crisis. The impact on emerging markets, which have already begun to see reversals of the inflows of capital they received when yields in the U.S. were depressed, has been discussed and analyzed in depth.  But the morality tale of errant policymakers being punished for their transgressions may place too much responsibility for downturns on the emerging markets and not enough on the volatile capital flows that can overwhelm their financial markets.

Capital outflows—particularly those large outflows known as “sudden stops”—are often attributed to weak economic “fundamentals,” such as rising fiscal deficits and public debt, and anemic growth rates. Concerns about such flows resulted in the “taper tantrums” of 2013 when then-Federal Reserve Chair Ben Bernanke stated that the Fed would reduce its purchases of assets through its Quantitative Easing program once the domestic employment situation improved. The “fragile five” of Brazil, India, Indonesia, South Africa and Turkey suffered large declines in currency values and domestic asset prices. Their current account deficits and low growth rates were blamed for their vulnerability to capital outflows. There have been subsequent updates of conditions in these countries, with India now seen as in stronger shape because of a declining current account deficit and lower inflation rate, whereas Brazil’s situation has deteriorated for the opposite reasons.

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New America Foundation: Let the Sins of Grad PLUS Loans Be Visited Upon IBR


I ran across Matt Leichter and the Law School Tuition Bubble blog while doing some research on the Koch Brothers cozening up to CAP after having seen Beth Akers and Matt Chingos write for Brookings a think tank which in the past has been careful about what type of funding it receives and from where. You might not know; but, both Matt and Beth the same as Jason Delisle are indirectly funded by Lumina Foundation who has close ties with Sallie Mae and they write on student loans. That is a topic for another post. Back to Matt:

Matt Leichter received his J.D.-M.A. in law (2008) and international affairs (2009) from Marquette University, in Milwaukee, Wisconsin, and spent a semester and summer of law school at Temple University’s Tokyo campus in 2007. Before law school, he taught English at Omiya High School in Saitama, Japan, for two years. He started the Law School Tuition Bubble in May of 2010. Matt writes about student debt. I read his post on Jason Delisle’s critiqe on Income Based Repayment for Masters level graduates and felt it was worthy for AB. Income Based Repayment (IBR) caps the amount of money a graduate is to pay based upon income.

Grad PLUS and the IBR

Jason Delisle and William Holt did an opinion piece on the Washington Post and a similar argument by Jason Delisle has popped up over at the Washington Monthly. Jason has claimed the Income Based Repayment (IBR) plan in Student Loans has first cost the government $21 billion and then cost the government $19 billion.

While Alan Collinge would tell you the IBR is nothing to crow about as it takes forever to be free of the student loan, I think he might take issue with the costs cited by Jason which are brought into perspective by Matt Leichter on his blog Law School Tuition Bubble. Matt performs an excellent take down of Jason and William’s points which I will paraphrase here:

1. No evidence is cited by Jason Delisle showing the resulting $21 billion cost is the result of the IBR. This is supposition and conjecture on the part of Jason and meant to cause consternation on the part of the reader as to the alleged abuse. Matt Leichter of Law School Tuition Bubble blog takes issue with Jasons stance and attributes the $21 billion to changes to the model inputs reflecting less job growth or could potentially be the result of greater participation in the program. Without the evidence of where the numbers came from, Jason’s opinion piece is speculation.

2. Matt continues the take down of Jason’s adding more points which the reader can dwell upon. Jason uses the $21 billion eye catcher to segue into graduate students abusing the IBR to back back less. The problem is Graduate Plus Loan Program causing the issue rather the IBR with its unlimited funding. While admitting this is an issue, Jason takes the opportunity to attack the IBR.

3. Grad students abusing the IBR program is more supposition on Jason’s part. He has not established a foundation of data and stats to support his contention. There is only a hypothetical with no data to support Jason’s conjecture. For example, some data might show how many Grad students are on the IBR, how many have high enough incomes to repay the loans in less than 5 years, and how many Grad students are on the IBR who could not afford to repay under the old programs.

Broad based data establishes a foundation to which we can ascertain how many students are abusing the IBR under its current rules. Answering the question of how many students are not paying back within 20-25 years as opposed to beneficiaries of the IBR may cause changes in the rules. Jason expects us to accept his hypothetical on pure faith.

4. To make his point Jason develops a hypothetical Law student just graduating, having $150,000 in debt and earning $70,000 annually.

Jason’s hypothetical student graduates with $150,000 in college debt and a $70,000 does little to bolster his argument. For example; while the $150,000 in debt is possible, the salary is not as it exceeds the median for a student just starting out as reported by the National Association for Law Placement, Inc. Matt correctly points out Jason’s hypothetical is in the upper 23% of household income for beginner lawyers. The true median income is ~$62,000 and would include part time workers and those unemployed as reported by the NALP.

Jason then add a spouse wife to the household to boaster his hypothetical. The spouse makes $80,000 annually which ratchets the couple into the top 10% bracket of houshold incomes. The question still remains of validity of this hypothetical as Jason never cites any data to support his contention. Once again we are left in the dark with Jason’s assumption.

Furthermore, the IBR does not take spousal income into account and Jason and William take the IBR to task for not doing so. Matt counters with an argument; “Are you shocked? Well, the response is, so what? Robert’s wife didn’t sign the master promissory notes any more than she would his gambling debts. If Robert wants to leave work to raise their kids, for example, it doesn’t imply that his wife would essentially assume his debts. Would the NAF say this if Robert were Roberta? How would unmarried Robert feel if he had to tell his bride-to-be that she’d be partly on the hook for his student loans if they got married? Again, what if Robert were Roberta, who would be more likely to take time off to raise children?

Delisle and Holts hypothetical do little to make their claim the IBR is at fault for this phenomena. In realty and as Matt correctly points out, the same could have occurred with a lottery winning by the parents or other gains neither of which have any influence on IBR policy. In the end, how many actually gain from the loophole in policy. Jason’s supposition again lacks data.

5. The claim of Graduates IBR being unfair beneficiaries is made again by Delisle and Holt and they comprise 50% of all recipients of the IBR program. Graduates also attend Bachelor programs (quelle surprise!). Here again no data is supplied and we are given an opinion of what may be taking it to the extreme. Jason creates another Pink Cadillac scenario, an image of graduates driving Pink Cadillacs to currency exchanges to cash their big checks are about all Delisle and Holt can conjure up. We are left in the dark to imagine this to be occurring on a regular basis.

6. IBR was never developed by lawmakers with Grad Plus Loans in mind. Rather than a problem with the IBR, the problem lies with the Grad Plus program which both Delisle and Holt overlook to make their attack. As Matt Leichter questions the credibility of the complainers contentions throughout their expose, no data is presented to support their claims of misappropriation of funds which is to the root cause. The claims are all hypothetical.

7. Jason takes this one-step further in his analysis, stating the Federal Government provides loans at a reasonable interest rate(?). This is so far from the reality of the situation it borders on the ludicrous. As I have stated before, no other loan made has such tight restrictions on it and can not be discharged through bankruptcy. The distinction between the two types of Loans is one can be discharged in bankruptcy and the other can not. Guess which one can be discharge? Students are bound by a signature to indentured servitude until the loan is paid off or 20-25 years pass of IBP. Matt make a common sense point on the real implicit contract between students, the government, and student loans; “the implicit contract was the Loans would make debtors into more productive workers filling higher paying and skilled jobs.” The evidence since the seventies does not support the advent of more and higher paying jobs to have happened and Jason’s version of contract has gone unfulfilled from the government side leaving many of its citizens economically harmed.

I can not add to Matt’s closing statement and will use it verbatim: “As far as contracts go, this one has been drafted in favor of the government. When its underlying assumptions are true, everyone wins, but when they’re not, the government won’t be held accountable for self-serving research, false promises, and reckless lending. Instead, attempts to help the debtors will face resistance by people like Delisle and Holt, who will howl at all the alleged benefits the supposed (me) lucky-duckies are getting—and right now we’re only talking about grad student debt! Consequently, you should expect the endgame for all this unpayable student loan debt to be really, really acrimonious.”


“New America Foundation: Let the Sins of Grad PLUS Be Visited Upon IBR”The Law School Tuition Bubble blog, Matt Leichter, February 2015.

“A student loan blind spot”Washington Post,

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Alan Collinge of Student Loan Justice on CAP’s Current Efforts to Revamp Student Loans

It has been a while since I had last talked to Alan. I knew at the time he was at issue with a stance the Center for American Progress was taking on Student Loans which surprising are supported by some of our more popular consumer advocates. Kind of makes sense as we now see the Center for American Progress cuddling up with the Koch Brothers? Not what I would call a marriage made in heaven benefiting us and I wonder who will own whom in the end. Law and Order Koch Brothers suddenly concerned about the incarceration rate in the US? Yeah, right! Save that one for another post. Anyhow, Alan moved from Tacoma, Washington to Washington, D.C. to confront CAP on their stance.

Amongst loans, it is no secret student loans make money and make even more money in default. from the Federal Family Education Loan Program (FFELP) student loan which comprises a majority of all outstanding student loans; the Department of Education can recover $1.22 (before collection costs, and the government’s “cost of money”) on every dollar loaned. Student loans are not a zero sum game as some critics might have you believe.


On refinancing student loans, one venture capitalist pointed out: It’s a trillion-dollar opportunity. You don’t get a lot of those,” gushes Brian Hirsch, cofounder of Tribeca Venture Partners, an early investor in CommonBond. (He sits on its board.)

Well, maybe not a trillion, but hundreds of billions. About 75% of the $1.2 trillion in outstanding student loan debt is eligible to be refinanced, and the creditworthy tranche of this debt–the part private investors are eyeing–totals at least $200 billion. So far Common Bond has made some $100 million in loans to current students and graduates of 109 M.B.A., J.D., M.D. and engineering programs at 50 brand-name schools. Another VC-backed company, three-year-old SoFi (for Social Finance), has refinanced more than $1 billion in student debt held by 13,500 graduates of 2,200 schools, making it the largest refinancer in the market. This leaves no doubt where some of the emphasis on refinancing student loans my be coming from today. I wonder if Moodys will rate it AAA as they did with tranched CDO/MBS and not care about the securty of the loan(s) in each tranche?

In particular the former statistic of payback after default refutes the arguments of student loan critics the likes of Jason Delisle (New America) and Brookings Beth Akers and Matt Chingos who advocate Fair Market Valuation of Student Loans to assess risk. It might make sense to do so, if a student loan was the same as a home mortgage or a piece of machinery in a factory; but, student loans are not the same. By a student’s signature, a student loan becomes a roach motel as there is no way out through bankruptcy. You can wait 20-25 years and get out of it on an IBP plan, die, become disabled, or do public service to get out of potions of it. If you default, the Government will garnish your wages, SS, Disability to collect their money besides disqualify you from any federal programs.

CAP’s How Qualified Student Loans Could Protect Borrowers and Taxpayers proposes returning bankruptcy protections to student loans. A closer examination of the plan reveals this program would disqualify many federal and private loans from having access to bankruptcy. Instead what is seen are alternatives to bankruptcy such as gainful employment, income based payment, service loan forgiveness, payment on tim interest reductions, etc. most plans of which are teasers with only a low percentage of applicants being accepted and successful. CAP and other liberal advocates push for these repayment programs which in the end result in the majority of people who try for the benefit being kicked out before anything is forgiven. CAP has recruited a former director of the Department of Education lending program David Bergeron who does not appear to have brought anything new to the discussion other than repayment programs which may cause more damage in the end. The issue still remains of bankruptcy protection in the form of what was given to big business and TBTF by Congress and in the end walked away from $billions in responsibility over the decades. Guess students do not get a benefit of the doubt.

Another proposal by David Bergeron and CAP is a federal refinancing plan for private loans. The plan would refinance private loans at lower interest rates, taking them over from private banks at book value and offering a better deal than what was offered to investment firms (made into banks by Geithner and given access to Fed money). Nonperforming loans would be included in this plan also as a bailout and makes the government a private industry bill collector for loans which more than likely should not have been made. The impact of this plan would help a few borrowers and in the end may hurt them as they lose protection under the statutes of limitations.

While Democrats favor the two aforementioned plans, Republicans are still stuck in the past of no bankruptcy protection for student loan holders, complaining of the high cost of repayment programs and the lending system, and suggesting private banks for student loans as subsidized by the Feds can do a better job. Students and parents would be at the mercy of the banks. Republicans would resurrect a taxpayer subsidized banking system such as what our venture capitalist would love and was put to its grave by Obama who stopped short of revamping the entire student loan system. There is no serious accommodation for middle and low income students coming from Republicans. Republicans have abandoned their free-market attitude by not affording students the same protection afforded TBTF and big business under bankruptcy and Democrats have embraced the past with people such as Bergeron from the Department of Education who help create today’s student loan and repayment environment.

What mostly brought the nation to today’s bad student loan environment is a Congress dead set against “supposed” lazy students escaping any responsibility for something they signed up for as 18 year-olds, a student loan system fraught with a profit motive forcing young people and their parents into an indentured servitude to banks with the Gov as the bill collector, nonprofit and for-profit colleges not having any responsibility for the loans offered to their students, uncontrolled college employee expenses due to the addition of staff beyond teaching staff, decreased state funding for colleges, federal grants and scholarships which have not kept up with inflation, etc. The only cost to have exceeded healthcare cost increases is that of the higher cost of education.

In the end, what many young college graduates earned in a living well beyond what could be made with just a high school education is far less when compared to decreased high school income and years previous. While the percentage difference may be the same, the actual income for college grads has decreased. Young couples with little or no student loan debt have accumulated higher levels of assets in comparison.

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In Which I try to Defend Janet Yellen from Brad DeLong

Fed Chair Janet Yellen said, among other things,

For this reason, if the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy. To support taking this step, however, I will need to see continued improvement in labor market conditions, and I will need to be reasonably confident that inflation will move back to 2 percent over the medium term.

After we begin raising the federal funds rate, I anticipate that the pace of normalization is likely to be gradual. The various headwinds that are still restraining the economy, as I said, will likely take some time to fully abate, and the pace of that improvement is highly uncertain. If conditions develop as my colleagues and I expect, then the FOMC’s objectives of maximum employment and price stability would best be achieved by proceeding cautiously, which I expect would mean that it will be several years before the federal funds rate would be back to its normal, longer-run level.

The news is that “some point this year” means “not next month” A possible increase in June 2015 used to be discussed a lot.

Brad DeLong argues that raising rates “sometime this year” would be crazy. The justification is that unemployment will be low and inflation will not be far below target. This would imply no normal reason to raise rates. Brad’s main point is that the speech includes no consideration of the risk of hitting the zero lower bound due to a shock after raising rates.

After quoting Brad, I’m going to go to a long boring comment. The main point, if any, is that a speech describing a sub-optimal plan for interest rates (as a function of future information) may be an optimal speech. But I also type about optimal control (both of us are trying to do math in our heads using plain English). I want to stress here that I think Brad is making a very important very valid point.

Finally I hand him the mike

If your control variable has a bound–like the zero lower bound on interest rates–the optimal control policy is different. The fact that you cannot lower your control variable below its bound adds an extra term to the math. This extra term makes it unpleasant to be even near the bound. So you should take steps to stay away from it–which means lowering your control variable closer to the bound as you get near it. And the nearer to it you are, the more you lower it below what it would be if there were no bound constraining it.

this bound principle has the implication that if do you wind up at the bound, you want to get off of it as soon as possible in a way that makes it highly unlikely you will wind back at it. Hence you stay at the bound until your optimal policy in the absence of the bound is well away, and then you move your control variable rapidly until it once again is expected to drift only slowly.

Thus Janet Yellen’s declaration today makes no sense: from an optimal control of you, you want to wait to raise interest rates until the economy is sufficiently strong that the appropriate interest rate raise is a substantial one.

I think the last words should be “is sufficiently strong that the interest rate which would be appropriate if there were no lower bound is substantially greater than zero” Way at the end of the post, I explain why this is different from what Brad wrote.

Most of my comment is after the jump

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Jeb Bush discovers a hypothetical he’s willing to address—and assures us that he, unlike Obama, would have ensured a second Great Depression. Jeb for President!

Questioned by a voter inside a sports bar about whether there is “space” between himself and his older brother on any issues, Bush offered a clear critique.

“Are there differences? Yeah, I mean, sure,” Bush said. “I think that in Washington during my brother’s time, Republicans spent too much money. I think he could have used the veto power — he didn’t have line-item veto power, but he could have brought budget discipline to Washington, D.C. That seems kind of quaint right now given the fact that after he left, budget deficits and spending just like lit up astronomically. But having constraints on spending across the board during his time would have been a good thing.”

—  Jeb Bush: George W. spent too much money, Eli Stokols, Politico, yesterday

Okay, so Bush has now found a hypothetical that he wants to discuss.  Two hypotheticals, actually: (1) what his fiscal policies would have been between Jan. 2001 and Jan. 2009; and (2) what his fiscal policies would have been between Jan. 2009 and, oh—at what point did the federal budget deficit decline dramatically?  2013? And … what is the deficit now, as compared with the Bush years?  And what role did the Bush tax cuts play in that?

But really, since these are to separate hypotheticals, we—well, the people who actually can ask and maybe get an answer (i.e., the news media; Hillary Clinton)—should ask two sets of questions.

First, we (they) should ask what spending, specifically, Jeb Bush would not have authorized during his brother’s presidency that his brother authorized.  The military spending for the wars in Afghanistan and Iraq?  The massive spending on increased security after 9/11?  The Medicare Part D prescription-drug law?  The frantic stopgap finance-industry bailout that George Bush’s Treasury secretary, Henry Paulson, put together in the fall of 2008 in order to try to fend off a near-complete collapse of the banking system?

Or maybe the initial part of the auto-industry bailout, without which George Bush said the unemployment rate would have jumped to about 20%?

So, would Jeb Bush—knowing then what we know now, about the near-collapse of the banking system, and of the economy, late in his brother’s presidency, and the fact that the Iraq war went on and on and on—have supported his brother’s two massive tax cuts, mostly for the wealthy, during his first term?

Just askin’.  Although I’d bet that’s a hypothetical that he’d take even longer to answer than the five days it took him to answer the infamous Iraq one.  Maybe even as long as 18 months.

Then, of course, there’s that second hypothetical that Bush answered yesterday—the one in which he said the budget deficits at the end of his brother’s term seem “kind of quaint right now given the fact that after he left, budget deficits and spending just like lit up astronomically,” indicating that he (Jeb) thinks Obama, in the face of the collapsing economy and banking system, should have … what, exactly?

Cut funding for unemployment compensation, or capped it at its 2007 level?  Refused to allow extensions of it?  Cut funding for food stamp access, or capped it at its 2007 level?

Ended the financial industry bailout begun under his brother?

Let Detroit go bankrupt?  (That wasn’t such a winning tack for Mitt Romney.  But, I mean, ya never know. …)

Ah. Maybe he means the stimulus bill, which provided funding for job training and college for hundreds of thousands of people, especially in states hardest hit by the collapse of the economy.  States like Michigan, Ohio, Nevada, Florida.  And the direct spending from that bill, on infrastructure projects and such.  Y’know, the stuff that virtually all mainstream economists now say helped keep the unemployment rate from reaching Great Depression levels and helped start the recovery.

It’s not surprising, I suppose, that the political media played up Bush’s comments yesterday–at least in headlines and soundbites if not in the actual reportage itself by reporters who wrote full articles about the comments (see, e.g. the quote at the opening of this post, and the title given the article)–as Bush Brother v. Bush Brother.  Because of course it’s the family saga, not the specifics of the policies, that matter, right?*

And some mainstream political reporters, including a couple of them from Politico, where (unrelatedly) the above quotes were originally published, couldn’t analyze their way out of a paper bag.  And Clinton herself pretty clearly has settled on a campaign of mindless clichés, Republican soundbites about federal regulation, and cutesy gimmicks.  Does she really not understand that most small business red tape has nothing at all to do with federal regulations? Or does she just think that most people don’t know the difference between private-bank business-loan operations and federal regulation, and between state and local business regulations—a.k.a., red tape—and federal regulations?  And that no one will ask her what regulations, exactly, she thinks are holding back small-business owners and aspiring small-business owners?

On that last point, she may be right, since she has almost no direct contact with the press and no contact at all with everyday Americans who haven’t been prescreened as props.

So maybe Bernie Sanders or Martin O’Malley—or Elizabeth Warren—will question the specifics of Jeb Bush’s answers to those hypotheticals.  And the specifics of Clinton’s claim that federal regulations are hindering small business.  Like, which federal regulations, specifically?  And maybe, at least regarding Bush’s, a Dem SuperPAC that is not coordinating with Clinton and her silly campaign, will run web ads or TV ads eventually that do that.

And maybe Sanders, O’Malley, Warren, or a progressive Democratic SuperPAC will point out that the biggest hindrance to small business loan availability, by far, is not federal regulation, or even state or local regulation, but instead federal deregulation—of the banking system.  Specifically, the disastrous repeal of the Glass-Steagall Act.  And mention the incessant Republican push to repeal the Dodd-Frank bank-regulation law, and their fight against instituting the Volker Rule.

Clinton is right that “[t]oo many regulatory and licensing requirements are uneven and uncertain” and that “[i]t should not take longer to start a business in the U.S. than it does in Canada, Korea, or France.” But small-business regulation is mostly, and licensing is entirely, state and local, not federal.  So maybe she’ll get around to pointing that out and detailing what she, as president, would propose as a national fix.  In any event she should not further the Republican misrepresentation that small-business regulation and licensing is done by the federal government. With the exception of federal tax laws, including FICA tax laws, and environmental laws and worker-safety laws, “cutting the red tape that holds back small businesses and entrepreneurs” means tackling state and local, not federal, red tape.

As for my earlier dismay at Clinton’s senior policy adviser Jake Sullivan’s Fox News-ish claim that Democrats support obstacles for small businesses, and are against small businesses having easy access to loans—we don’t want them to compete with Walmart, see—I now get it.  Sadly. Blame imagined Democratic anti-small-business sentiment, and big federal gummint, rather than the deregulated banking industry, for the labyrinthine high-hurdle event that is the small-business loan situation now.

Clinton speaks of her father’s success in opening and running a very profitable small business. His business loans, though, weren’t from banks competing for profits with multinational hedge funds masquerading as JPMorgan Chase Bank, Citibank and Bank of America.

But, as for Jeb Bush, at least he’s honest.  He’s told us now that had he, instead of Obama, been president in the aftermath of his brother’s presidency, he’d have ensured a complete collapse of the economy.  Vote for Jeb!

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