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Pre-Debate Contest: Guess which one of Sanders’ past or present policy positions or legislation he supported that Clinton will misrepresent most outlandishly tonight [Updated!]

UPDATE: To see the winning Clinton claim, read my my comment to Robert Waldmann’s post above. 


Last week when Chelsea Clinton made he now-infamous statements about Sanders’ single-payer healthcare insurance plan—specifically, the one he proposed as a bill in 2013, but presumably a blueprint for the one he plans to propose—I wondered how Sanders had managed to enlist her in the service of his own campaign.  Most memorable was the part about the horror that would be life without private healthcare insurance and the stripping of healthcare insurance frommillions and millions and millions of people by providing universal, comprehensive, and nearly identical insurance to all American citizens and legal residents.

To refresh your memory, she said (among other things):

Sen. Sanders wants to dismantle Obamacare, dismantle the [Children’s Health Insurance Program], dismantle Medicare, and dismantle private insurance.  I worry if we give Republicans Democratic permission to do that, we’ll go back to an era — before we had the Affordable Care Act — that would strip millions and millions and millions of people off their health insurance.

But in my opinion, that wasn’t even the oddest part of her trip down the rabbit hole.  This was:

Sen. Sanders wants to devolve the authority to set up state health insurance programs to individual state governors. Now maybe if I lived in a place like New Hampshire, with your governor, I would feel okay about that. But if I lived in a state that had a Republican governor, particularly a Republican governor who already turned down Medicaid expansion matching funds, I don’t think I would be comfortable, right? Because I don’t want to live in a country that has an unequal health care system again.

Sooo, I said when I read that, Chelsea Clinton wants to move to France.  Or Canada.  Or Scandinavia, or Germany, or Thailand.  Or one of the many other Western-style democracies that has an equal health care system.  Which is what she will have to do under this country’s current system if she feels that strongly about not wanting to live in a country that has an unequal health care system.

Sanders’ 2013 proposal no more gives the states the option to join or decline to join the program than does Obamacare—the program Chelsea and her mother champion and want to preserve rather than move to a single-payer-healthcare-for-all system—give states the option of participating in the state-based marketplaces that have minimum coverage requirements and mandate acceptance of patients irrespective of preexisting medical conditions.  The Medicaid-expansion option that states have under the ACA has no analogy in Sanders’ 2013 single-payer proposal.  Chelsea was parroting her mother on this bald misstatement.

And having no healthcare insurance is not the same as having healthcare insurance.  Unless of course the medical care you need is not covered by the insurance you have, because the deductibles and co-pays under your employer-provided insurance or under the policy you bought through a state marketplace under Obamacare for a premium low enough that your employer or you could afford it, means (unlike more comprehensive plans that others have but you do not) that you must pay those medical bills yourself.

Apparently, Chelsea Clinton doesn’t get out much these days.

But then, neither, it appears, does her mother, who has claimed repeatedly, including in comments in defense of her daughter’s odd statements about Sanders’ single-payer concept, that the only expenses—the only money people pay—that actually matters to them is money paid to the government.

No other expenses count as money—as loss of income or as other expenditure that actually effects your and your family’s financial bottom line and therefore standard of living.  Money paid to UnitedHealthcare or Anthem Blue Cross in premiums, and to hospitals, physicians and medical labs in co-pays and deductibles, don’t count.  That’s not money paid to the government, see.  So it’s wayyy better to pay more for less-comprehensive coverage to private insurance companies, and still be financially insecure about medical expenses, than to pay less money in healthcare costs to the government and be financially secure about medical expenses.  Because, y’know … the government.

Which—I wish Sanders would point out—is exactly what Clinton saysAgain and again. Just like the Republicans do.

Hillary Clinton should get out more, too.

Okay, Clinton of course doesn’t want you to realize that that’s what she’s saying.  She wants you to think she’s saying that the large price tag for Sanders’ plan is in addition to private insurance premiums and deductables and co-pays.  But her own daughter says that Sanders wants to end private insurance.  Clinton should check with her daughter. Best to get the story straight.

What Chelsea Clinton did, in other words, is highlight the two reasons that her mother’s campaign is flailing: that the candidate sees even issues as important to people’s lives as the costs and breadth of healthcare coverage as something to mislead about as a campaign tactic, and that at bottom she, like Republicans, believe that the only thing that matters as personal or family expenditures is the amount paid to the government.  And according to a New York Times report today, Bill and Hillary Clinton both believe that the mistake Clinton and her campaign made is that they didn’t begin these tactics months before they did.  (Shucks!  The public loves to be played like toys about really important things. Why didn’t our consultants figure that out earlier?  What are we paying them for?!)

So, buckle your seatbelts, folks.  What will the biggest sleight of hand, the most outlandish assertion or inference about Sanders’ policy proposals, be?

We’ve already had the Denmark-isn’t-a-capitalist-country-and-it-would-be-a-grave-mistake-and-unAmerican-to-emulate-them thing in the first debate, which sort of backfired when in the days following that debate the news media was filled with articles about Denmark’s vibrant capitalist economy, large number of small businesses, and high level of innovation.

We’ve had the no-industry-except-the-gun-industry-has-immunity-from-strict-liability-for-criminal-use-by-a-customer misrepresentation about the gun-manufacturer and gun-retailer legal immunity statute that Sanders voted for in 2005.  Actually, no other industry is strictly liable, in any state under state law, under such circumstances, a fact that got little media attention but enough, apparently, to cause Clinton to stop making the claim.

And there was, of course, the he-told-ME-to-stop-shouting-even-though-I-wasn’t-shouting-because-I’m-a-woman dust-up.  She didn’t accuse him of supporting legislation that would arrest women for disturbing the peace when they speak, but she came close to it.

In addition, of course, to the Sanders-is-coming-for-your-healthcare-insurance-and-is-out-to-lower-your-standard-of-living stuff.  Denmark! Somalia-level healthcare coverage!  Bankrupting the country because the $10 trillion (or whatever) currently spent annually on healthcare in this country WILL EVAPORATE upon enactment of Sanders’ single-payer plan, and so won’t be available to pay instead for the single-payer plan.

How about Denmark-level healthcare coverage?  For less than what is spent annually in this country for our current Swiss-cheese sandwich.  Which is what Sanders is proposing.

My bet is that one of tonight’s treasures will again be on the gun-industry immunity law, along the lines of a message to the media last week by Clinton Campaign chief John Podesta.  Podesta conflated manufacturing with sales.  Specifically, the level of control that the fast-food industry has over the content of the food it serves, and the level of control that gun retailers have over their customers’ later use of the purchased gun.

But there’s still time for you to enter this contest.  Okay, not much time; I should have posted this earlier.  But for all you very quick thinkers, that should not be problem.

The prize is an interview with the Clinton Campaign for a job as a campaign consultant.  The job will pay well, I’m sure.

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Why the “Proposed Koch gift to WCU is a Bad Idea”

invisible hand About a week ago , I wrote about the events leading up to the dilemma faced by Western Carolina University faculty and administration with being offered a $2 million grant from a Koch Brothers foundation. What I did not mention is the recent domination of the North Carolina university system by Republican minded-administrators such as Margaret Spellings former President Bush Secretary of Education adding to the complexity.

Mark Jamison continues with the depiction of the dilemma Western Carolina University faces and provides the argument as to why the faculty and administration should reject this Koch Brothers donation. This article can also be found in the“Smoky Mountain News” as a guest column by Mark.

Mark Jamison

The proposed $2 million gift from the Charles Koch Foundation to WCU for the establishment of a Center of Free Enterprise raises several questions.

• Are gifts like these from private donors appropriate at public institutions? Do they entail a certain quid pro quo regardless of protocols to ensure transparency?

• Are certain types of gifts within certain academic disciplines different in their impact on the mission and perception of the university?

• In an era when we have seen the highest concentrations of wealth in more than a hundred years and when there exists a growing concern about the impact of money on the accountability and accessibility of political institutions do these sorts of gifts further a trend away from democratic institutions and public goods? Is this trend health? Unhealthy?

In 1971 Lewis Powell, a corporate lawyer and member of eleven corporate boards, wrote a memo to the Director of the U.S. Chamber of Commerce. Two months after he submitted the memo, Powell was nominated to the Supreme Court. The memo was essentially a diatribe against American Liberalism and a call for action from American corporate and business interests. It recommended a concerted effort to develop an intellectual infrastructure that would support the interests of American corporatism.

The Powell memo has often been credited as the birthing document of the web of think tanks, associations, and groups that advance conservative thought in this country. Another consequence of the memo was a renewed focus on capturing government and making it work directly for the interests of corporate elites.

Over the last generation we have increasingly seen the effects of Powell’s advice in action; especially as economic gains have concentrated in the upper .01% creating a class of billionaires able to buy an outsized voice and presence in politics and policy making.

Not content to simply fund think tanks that use non-profits to promote, advocate, and espouse particular points of view, the billionaire class has moved into other areas. A recent piece in the New Yorker on the Ford Foundation noted that the Gates Foundation, with an endowment of forty billion dollars, has done notable work in the fight to eliminate malaria. But Gates also “spent two billion dollars over eight years in an effort to break up big public high schools and form smaller ones.” Resulting analysis showed the effort had little impact on educational quality but it did spend millions on creating charter schools. Gates has been called “the nation’s unelected school superintendent”.

Mark Zuckerberg of Facebook fame spent over one hundred million dollars in a similar effort in the Newark schools that ended in dysfunction and controversy.

The owners of Hobby Lobby, famous for their suit against the ACA, have set up a multimillion-dollar foundation to create a Bible museum. The Atlantic has reported that as part of that effort the Green family has been acquiring ancient texts and antiquities, some in transactions that ignore international conventions in the trade of historical items. Scholars are concerned that access to these essential texts may be controlled in ways that limit research and scholarship.

The Walton family has placed a significant amount of its inherited fortune in nonprofit trusts, primarily as a way of avoiding taxes. One purpose of these trusts has been to create one of the largest private art museums in the world, Crystal Bridges. It seems we may be returning to a time before the Enlightment when the wealthy controlled arts and literature and the artist created at the whim of a patron.

In many ways these foundations act as a way of molding society in the image of a particular plutocrat. In some ways these foundations act as Super PACs, especially those that exist to advocate on behalf of political causes. There is one big distinction though, these foundations are created under nonprofit statutes so they are effectively subsidized by taxpayers to the tune of forty percent. The New Yorker piece quotes Judge Richard Posner on treating foundation assets as tax exempt,

”A perpetual charitable foundation . . . is a completely irresponsible institution, answerable to nobody. Unlike a hereditary monarch whom such a foundation otherwise resembles, it is subject to no political controls either. The puzzle for economics is why these foundations are not total scandals.”

The ubiquity of private think tanks and foundations assures that there is more than sufficient opportunity for the dissemination of political and ideological opinion. Here in North Carolina we suffer no lack of presence with Art Pope’s John Locke Society and Civitas.

Why then is it necessary to extend the reach of these essentially political organizations into the publicly funded university system? Even if one concedes that accepting donations from wealthy benefactors can be beneficial to a publicly funded university, does a difference arise with respect to what the benefactor chooses to fund?. Leaving the question of agenda setting aside it would seem that there is a fundamental distinction between funding a Center for Bioresearch and funding a Center for Free Enterprise. The one is largely a pursuit of empirically constrained hard science while the other, as indicated by its name, is a study of ideology. This becomes particularly evident when one looks at the specialty of the proposed director of the CFE, Professor Edward J. Lopez. Dr. Lopez focuses on a branch of economics that comes under the rubric of “Public Choice Theory.”

In his book, “Madman, Intellectuals, and Academic Scribblers” Lopez states,

“The basic idea of public choice theory is that economists shouldn’t have one set of theories for a person making a commercial decision and a separate set of theories for that same person making a political decision. Economists working in the public choice tradition argue that if we are going to look at market failure, then it makes sense to see if there is government failure, too. With this perspective in mind, it becomes clear why democracies so often generate inefficient policies and why they allow them to persist.”

The implication is that all the world, every facet of the human experience, is not a stage as Shakespeare wrote; but a market, a market where rational beings make rational choices based solely on profit and loss – maximization of utility.

This is more than merely economics, it encompasses the whole of social sciences as evidenced by a quote Dr. Lopez uses in a book of essays he edited. In “The Pursuit of Justice” (which oddly enough focuses not on theories of justice but on the idea that our legal systems and institutions are fundamentally corrupt because they are victims of pervasive and perverse incentives) Dr. Lopez quotes James Buchanan, one of the founders of the PCT school as saying;

“Public choice should be understood as a research program rather than a discipline or subdiscipline of economics.”

And in fact Dr. Lopez makes it clear throughout his writings Public Choice Theory (PCT) is “intertwined with philosophy, history, finance, psychology, development, linguistics, and other fields;” an all encompassing theory of everything – a dogma.

Matt Yglesias has suggested that PCT fits a syllogism (a logical argument that offers two or more propositions and a conclusion):

P1) Spread skepticism about government officials and their motives

P2) ?

C) Libertarianism

Indeed, this may be a good description of much of Dr. Lopez’s work. The question mark does a great deal of heavy lifting in his arguments but the first proposition is meant to gloss over everything else.

Consider the three questions Dr. Lopez poses in his book, “Madmen, Intellectuals, and Academic Scribblers:”

1. Why do democracies generate policies that are wasteful and unjust?

2. Why do failed policies persist over long periods, even when they are known to be socially wasteful and even when better alternatives exist?

3. Why do some wasteful policies get repealed (for example, airline rate and route regulation) while others endure (such as sugar subsidies and tariffs)?

The first question does not ask “Do democracies generate policies that are wasteful and unjust?”. It assumes that they do which certainly is true in some instances but the framing isn’t about discovering under what circumstances wasteful policies occur, there are no definitions of wasteful, and despite constant references to just or unjust actions Dr. Lopez never gives much of a definition beyond a nebulous reference to “rules” and “property rights”.

As an example Dr. Lopez writes approvingly in a couple of different papers of President Grover Cleveland’s 1887 veto of a disaster relief bill for Texas farmers wiped out by drought. Such aid was not, in Cleveland’s and apparently Lopez’s view, constitutional. Presumably, the implication still holds true.

There is not a great deal of intellectual inquiry here. There is an assumption that we are all homo econimicus, that institutions are subject to the same incentives and rent seeking behavior that individuals always exhibit, and that the answer must therefore be a laissez faire version of society as encompassed entirely by the market.

Throughout his writings Dr. Lopez is adept at telling just- so stories leading us in the direction of his conclusions. For example, in his recent letter to SMN that began with a rebuttal to a previous writer’s assertions about BB&T’s actions during the financial collapse Dr. Lopez references BB&T’s repeated claims that they were forced to take TARP money, a claim that may have some truth but which also ignores the fact that BB&T was also found to be significantly undercapitalized and overleveraged.

Lopez is also much taken with Adam Smith’s metaphor of the invisible hand, perhaps one of the most overused, abused, and misunderstood phrases in the annals of economics. Lopez uses the phrase 11 times in his book while Smith used it three times in his entire body of work; once in a treatise on astronomy; once in “A Theory of Moral Sentiments” in the context of similar needs of both rich and poor for basic necessities ; and once in “The Wealth of Nations” in the context of comparing domestic and foreign manufactures. From those three examples and particularly in the last, a mythology of a self-generating and correcting marketplace has developed to the level of religious or iconic status.

Oddly enough, Lopez never seems to quote Smith during his many discussions of the problems of working folks and the disadvantages and inequalities that labor faces. For example, it is unlikely that Lopez would cite Smith’s take on progressive taxation:

“The rich should contribute to the public expense,” he wrote, “not only in proportion to their revenue, but something more in proportion.” Adam Smith

Dr. Lopez is also adept at portraying his intellectual heroes in the most positive light while subtlety poking figures he is in disagreement with. In one passage, he says about John Maynard Keynes, “He even took both sides in love, not terribly unusual among intellectuals of his circles in that day. As a young scholar, Keynes had male lovers, including the writer and critic Lytton Strachey. But, like Pareto, he later married a Russian woman, the ballerina Lydia Lopokova.”

This puts one in mind of the controversy that arose after the Harvard historian Niall Ferguson took a Keynes quote about how in the long run we are all dead badly out of context and then proceeded to point out that because Keynes was gay and had no children, he had no sensitivity to future generations. I’m not sure what Dr. Lopez hoped to accomplish with this observation but for the life of me I can’t understand how Keynes’s sexual preferences, Russian wife’ or reference to Pareto tell us anything about his economic thinking.

Perhaps Dr. Lopez was trying to make a point that Keynes often changed and adapted his positions, a point that would have been served by offering up this well known quote from Keynes;

“When the facts change, I change my mind. What do you do sir?”

Dr. Lopez has been quoted saying that academic inquiry should not be censored even if unpopular. I heartily agree with him and I would never suggest that his teaching be censored or limited. I would suggest that each instructor, particularly in a public institution, has an obligation to present material in the spirit of intellectual honesty and inquiry and that would include presenting a fair assessment of ideologies or systems that conflict with an instructor’s preferred ideologies or systems. In his book, “Madmen, Intellectuals, and Academic Scribblers” Lopez’s main theme is that ideas should win out in the marketplace. While the marketplace is only a small part of the world and human experience, a point on which Lopez and I would disagree, his basic construction is correct – good ideas; ideas subjected to empirical, logical, and philosophical testing; ideas that advance, expand, or illuminate our concepts of justice; and ideas that have been broadly and fairly debated and contested ought to win our respect.

But the question here is more than what Dr. Lopez teaches or even how he teaches it. At issue is not the legitimacy of one professor’s views. The issue is whether a publicly funded institution ought to take a gift to establish a program with the clear mission to teach a particular ideology, an ideology that is, in fact – broadly contested. This is especially true in a discipline like economics and especially when the proposed center and its proposed leader mix economics, political philosophy, and political science. Maybe the discussion ends up being framed differently if we were talking about a hard science, or medical research, or a purely technical discipline. Even then, there might still be questions about billionaires dictating an agenda but in a discipline that is entirely empirical there are fewer and different problems. The search for facts and the search for truth are two different endeavors; that distinction is both critical and germane to this specific proposal.

Transparency is not the issue, no matter how unstructured the grant the undeniable fact is that $2 million buys influence, it gets phone calls answered, and it gets preferences on the agenda. The simple fact is that one of the basic tenets of the ideology Dr. Lopez preaches is that money talks, it is the measure of the market. More to the point, the ideology that Dr. Lopez espouses argues that institutions, particularly public institutions, are subject to manipulation and perverse incentives. The proposed grant is a demonstration of whatever truth lies in public choice theory.

The land grant colleges and public university systems were built to serve as great equalizers. These public institutions were built to give average folks the opportunity to acquire knowledge and pursue intellectual inquiry. Sadly as our world has graduated from a market economy to a market society, much of the mission of our public institutions has been lost. In a world where billionaires and corporate sponsors face few constraints in their ability to dictate public policy and control public discourse we ought not blithely encourage yet another venue for indoctrination, no matter how much the enticement. I would make this argument regardless of the source of the money whether it comes from the Kochs or some liberal bogeyman like George Soros.

Let Dr. Lopez teach what he wants but let WCU retain its integrity as a public institution, something it cannot do under any conditions if it accepts this gift.

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Champion tax avoider GE gets subsidized relocation to Boston

On Wednesday, General Electric announced that it was going to relocate its headquarters from Fairfield, Connecticut, to Boston beginning in 2016. Even without the headline, you probably already guessed that the relocation was subsidized — in this case, by both the state of Massachusetts ($120 million) and the city of Boston ($25 million). 800 jobs will move as a result of the deal, but no new jobs will be created.

Massachusetts has been historically a low-subsidy state, helped in large part by its highly trained workforce along with the Boston area’s 55 universities and colleges, the latter factor noted prominently in GE’s announcement of the move. Yet this is the largest subsidy package ever assembled in the state according to the Good Jobs First Megadeals database (download the December 2015 spreadsheet version here). In fact, the database shows that it is only the fourth package over $50 million in Massachusetts, and the very first above $100 million.

I asked Greg LeRoy, the founder and Executive Director of Good Jobs First, for his thoughts on the deal. His response:

GE’s press release is almost worth bronzing and mounting: the company clearly chose Boston because of its executive talent pool and research assets. Why on earth the state and city felt they had to throw $181,000 per job at the company is beyond me; that’s unconstrained federalism at its worst.

This dynamic is one I have discussed often: a company threatens to move to another state and suddenly you have an auction with numerous other states trying to pay a relocation subsidy, while the home is doomed to pay a retention subsidy as a best-case scenario. Frequently, as with GE, the company moves. Either way, collectively the states receive less tax revenue from the company which threatened to flee. Thus, the common question, “Was this a good deal for Massachusetts?” completely misses the point, which is that the country as a whole is worse off, due to the decreased tax revenue for no new jobs.

In this case, as I reported last summer, GE threatened to leave Connecticut over tax increases in the state budget. This is ironic/hypocritical/outrageous (take your pick) because, as the Hartford Courant (h/t Richard Florida) reported, General Electric pays only the minimum Connecticut corporate earnings tax of $250 per year. The Boston Globe (see first link in this post) reports that GE pays essentially no state corporate income tax in any state!

It’s tiresome to report yet another egregious example of this kind of corporate blackmail. It is depressing to see Massachusetts, with only 4.7% unemployment in November 2015, give its largest subsidy package ever under such circumstances. It’s past time for Congress to solve the job piracy problem once and for all.

Cross-posted from Middle Class Political Economist.

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Birther Schadenfreude: Backdoor Historical Vindication for Obama

Back in 2008, after he was elected but before he took office, I wrote a piece countering what I thought was the strongest attack on Obama’s Natural Born Citizen status. Even then I dismissed out of hand the ‘Kenyan Birth’ version since it required a rift in space-time plus a magical infusion of gold to enable young Stanley Ann Dunham Obama to travel back and forth to Kenya. But there was a reasonably sound case around the ‘Barry Soetoro’ narrative that only totally failed once you ran it through the screen of this little thing I call “U.S. Statutes”. And so was born a post with a laughingly naive subtitle: Nationality Act of 1940: Nipping wingnut memes in the bud

Well it didn’t nip wingnut memes, which in fact propagated even in the forms that were not passing factual laugh tests. But there actually was a reasonable case that Obama, even if you granted the fact that he was born in Hawaii to an American citizen had in fact had that citizenship abrogated by subsequent actions by his mother and step-father. And there is indirect evidence to this in that there is an honest-to-God authenticated school document that identifies a certain Barack Soetoro as being “Indonesian” in nationality and “Muslim” by religion. That is unlike the fever swamp/opium fueled dreams that actually had him born in Kenya (a physical and fiscal impossibility) there was a real document placing a six year old Obama in a place and status that made Birthers howl with triumph. But as it turns out none of that mattered, just as none of it probably matters for Ted Cruz. If you are born a naturalized American citizen exactly nothing your parents or even you can do will permanently void your citizenship. As long as you are back on American soil by the age of 23. Which both Obama and Cruz were. Period. End of Story. Just like I put ‘Paid’ to this back in 2008. Well if everyone had read Angry Bear like they are supposed to and paid attention to an unemployed blogger in Everett Washington. And why wouldn’t they? (Sigh)
Nationality Act of 1940

Sec 401: A person who is a national of the United States, whether by birth or naturalization, shall lose his nationality by: (a) Obtaining naturalization in a foreign state, either upon his own application or through the naturalization of a parent having legal custody of such person: Provided, however, That nationality not be lost as the result of the naturalization of a parent unless and until the child shall have attained the age of twenty-three years without acquiring permanent residence in the United States:

This language was made even MORE liberal by the Nationality Act of 1952

From and after the effective date of this Act a person who is a national of the United States whether by birth or naturalization, shall lose his nationality by — (1) obtaining naturalization in a foreign state upon his own application, upon an application filed in his behalf by a parent, or duly authorized agent, or through the naturalization of a parent having legal custody of such person: Provided, That nationality shall not be lost by any person under this section as the result of the naturalization of a parent or parents while such person is under the age of twenty-one years, or as the result of naturalization obtained on behalf of a person under twenty-one years of age by a parent, guardian, or duly authorized agent, unless such person shall fail to enter the United States to establish a permanent residence prior to his twenty-fifth birthday:

Cruz’s mother could have voted in every Canadian election for the last 40 years and Stanley Ann Dunham Obama Soetoro could have sworn allegience to Indonesia on behalf of herself and her first grade son. AND IT WOULDN’T MATTER.

Was despicable slimeball Ted Cruz a U.S. citizen at birth? If his mother was he was. Was he back on U.S. soil as a permanent resident by the age of 25? Then he regained or better retained his citizenship. Because you don’t lose that by some action by your parents or yourself as a minor. And the beauty of this for me is that every defense of Cruz is a backdoor vindication for Obama. Because every one of those defenses works double for him. And Birthers can suck on that.

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Forecasting the Markets thru Effective Demand

Most economists do not put stock in the stock market. That is to say that they do not include the stock markets in their analyses. Yet, economists should have a sense of what the markets will do if they are actually good economists.

Economists seem to think that the stock markets are ruled by psychology and irrationality. Maybe so, but they can still be understood. Economists do not seem to understand stock markets. However, Larry Summers says that economists and policy-makers should not ignore the stock markets. (link)

Tim Duy who is a respected economist stands by his prediction that there will not be a recession this year. (link) Yet he also predicted that the stock markets would rise modestly this year. (link) Who really thinks the Dow could make it back up to 18,000 this year? There would have to be massive easy monetary policy globally. Yet that would just make the markets that much more top heavy.

What economists really need is a way to measure the limits of the business cycle. I have the advantage of being able to measure an effective demand limit on the business cycle.

In 2014, I said that the Dow would orbit around 17,300 for the rest of the business cycle. Then I said last summer that the Dow would not go much above 17,300 and would eventually come down from that point into recession. After this past week, I can more easily repeat my prediction. It would take a lot of psychological healing from China to other parts of the world to bring back faith in stock markets to get the Dow over 18,000 before the next recession.

What did I do to make these correct predictions?

It is just an understanding of effective demand, which signals the natural top of the business cycle. My models are developing in order to foresee this top years in advance. I seem to be the only economist using a measure of effective demand to make correct predictions ahead of the markets. Other economists make correct predictions without using a measure of effective demand. But my point is that effective demand can be used to much easier.

If other economists are able to understand what I understand about effective demand, we might see better predictions and policies. Of course, the proof in the pudding will come if there really is a recession this year. Then my measure of effective demand hit spot on the natural top of the business cycle near the end of 2014.

Am I a great economist? No… but the great ones would be better if they understood effective demand.

Keynes emphasized effective demand in his great book, but does anyone but me put a number to it? Not that I see… and my numbers are hitting spot on… so far.

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Ted Cruz says that if one of his daughters as a young adult joins the Navy and her boat strays into the territorial waters of an unfriendly country whose own Navy then holds the boat and crew, he would want the president to torpedo diplomatic discussions for their release by speaking belligerently about it on national television hours after the incident began.*

I can’t remember which network I watched the State of the Union address on Tuesday night, but one of the post-speech commentators was Hugh Hewitt, a winger talk radio host whom I had never heard of until he participated as a questioner in one of the earlier Republican debates this cycle. Hewitt began his commentary by saying that the speech seemed very off to him because, well, first and foremost, Obama had been silent about the 10 sailors being held by Iran on their boats in the Persian Gulf since that morning.  Hewitt was shocked.  And angry.

Which caused me to wonder whether it had occurred to him that, y’know, intense diplomatic discussion for the prompt release of the sailors might be underway.  Or whether it had occurred to him but that he thought the sailors’ quick release wasn’t as important as public, verbal belligerence toward an unfriendly country.

Not sure about that; I haven’t followed Hewitt’s post-release-of-the-sailors-the-next-morning comments on the matter.  And anyway, Hewitt isn’t running for president.  Or for anything, to my knowledge, other than a radio-ratings sweepstake victory.

Ted Cruz, of course, is running for president.  I watched the debate last night for about a half-minute.  Literally; about 30 seconds.  That was the half-minute or so after one of the hosts asked Cruz his first question, something about the economy, and Cruz was beginning his answer by saying that he would answer the question about the economy in a moment, but first wanted to express his outrage that Obama had not mentioned the sailors Iran was holding in Iranian territorial waters in the Persian Gulf right during the very hour when Obama was addressing the country on the state of the union.  This was nearly 48 hours after the sailors had been released after being held on their own ships for about 24 hours.

I read recently that Cruz has expressed regret that he did not serve in the military. But the fact is that he did not serve in the military.  If he wins his party’s nomination and begins campaigning at VFW halls and events, Clinton or Sanders, the Dem nominee, should mention when campaigning at veterans events and meeting halls that Cruz thinks that the wellbeing of military personnel is trivial as compared with political opportunism.  As president, Cruz would rather score political points with tough-on-Communism-er-Mullahism bellicosity than secure the quick release of military personnel held then-only- briefly by an unfriendly nation whose territorial waters or land the military personnel had accidentally breached.

And that he’s now made clear that if an unfriendly country’s Naval vessel strays into U.S. territorial waters, he as president would shrug and politely allow them to go on their way.

In a race in which the top two Republican contenders are so very casual about the wellbeing of deployed members of the military—when Trump called John McCain a loser because he had been captured by the enemy in Vietnam when his plane was shot down, he insulted not only McCain but also (just as examples, from WWII) soldiers captured in the Philippines who died during the Bataan Death March and those who survived it, the paratroopers killed or taken prisoner after being dropped behind enemy lines in preparation for the D-Day invasion or the invasion of Leyte Island or Luzon Island or earlier at Guadalcanal, the Marines who died on Iwo Jima, those killed or captured during the Battle of the Bulge, the bomber and torpedo pilots killed or captured after taking off from one of the four aircraft carriers during the Battle of Midway, the many killed when their submarine or ship was torpedoed in the Pacific, those killed or captured as they stormed the beaches at Normandy, those killed in North Africa under Patton’s command, and so many, many more—this is a party whose base apparently does not actually care very much after all about the welfare of deployed military personnel.

The base’s standard bearers, in any event, have other priorities: their own political ambition. Deployed members of the military, current or former, are just like everyone and everything else. They’re fair game as collateral damage in the service of others’ political career advancement.

In the space of about 30 seconds last night, I’d seen more than enough.


*Title edited for clarity. (Minor editing elsewhere, as well.) 1/15 at 7:53 p.m.

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Dead Men Walking: a Handy Post Republican Debate Metric

I didn’t watch the debate but still managed to develop a resulting measure to divide the live and the dead. Take if for what it is worth or treat this as an Open Thread on all things Political.

If after last night you are still polling behind Hibernating Ben Carson you are more the Limping Dead than Walking Dead. Meaning Kasich, Bush and maybe Christie need to get out of this before their decaying flesh starts stinking out the joint.

As to the JV Table. Huckabee and Santorum need at least a third place in Iowa to avoid being laughed out of anything but a future Fox Gig. Fiorina needs at least a fourth place somewhere to avoid immediate relegation to the Veepstakes. I don’t see any of that happening. There are maybe four tickets out of New Hampshire with the fourth one being for a seat in the Second Class coach. And Bush, Kasich and Christie will be scrapping for that one.

What does all this mean for Dozing Dr. Carson? Who knows? Don’t wake him up and spoil the dream.

Did I say Open Thread? Meant to.

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Secular Stagnation Solutions

Larry Summers has been writing about Secular Stagnation for Two Years. This is the post which triggered the trialogue

It is an excellent and important post, but I will just take the non technical definition of Secular Stagnation

The core idea behind secular stagnation was that the neutral real rate had for a variety of reasons fallen and might well be below zero a substantial part of the time going forward. The inference was that economies might be doomed to oscillate between sluggish growth and growth like that of the 2003-2007 period that rested on an unstable financial foundation.

And click the link to Summers’s discussion of Lukasz Rachel and Thomas Smith’s recent research.

in which he wrote

they attempt to quantify most of the factors that I and others have enumerated in accounting for declining real rates. They note that since the global saving and investment rate has not changed much even as real rates have fallen sharply there must have been major changes in both the supply of saving and demand for investment. They present thoughtful calculations assigning roles to rising inequality and growing reserve accumulation on the saving side and lower priced capital goods and slower labor force growth on the investment side. They also note the importance of rising risk premia associated in part with an increase financial frictions. Rachel and Smith’s work is not the last word but it is the first important word on decomposing the causal factors behind declining real rates.

Here I note that the role of rising inequality in causing secular stagnation provides a new argument for increased progressivity of taxation. I have advocated increased progressivity for 35 years and did so when I thought the resulting reduction of savings rates was a drawback not an advantage. But the case is even stronger if it is a feature not a bug.

Second, secular stagnation can make risk premia which did not cause huge problems in the past extremely costly. If a risky rate required for full employment is much higher than the risk premium minus the rate of inflation, then full employment is not consistent with the lower bound on safe nominal interest rates. This means that a low neutral real rate is another reason why governments should bear (or hide) risk. This means that the risk of secular stagnation increases the strength of a case for a sovereign wealth fund through which the US Federal Government purchases risky assets. I have been arguing for one for 10 years, but the case is even stronger if secular stagnation is a risk. It is not necessary that risk premia have increased. The formerly

Summers made this argument here.

The central banks of Europe and Japan need to be clear that their biggest risk is a further slowdown. They must indicate a willingness to be creative in the use of the tools at their disposal. With bond yields well below 1 per cent it is very doubtful that traditional QE will have much stimulative effect. They must be prepared to consider support for assets that carry risk premiums that can be meaningfully reduced.

For political reasons, the possible public purchasers of risky assets currently commonly considered* are central banks and not the Social Security Administration but the substance is the same.

*”real rate required” was an alliteration I tried to avoid, but I added the two in this sentence as jokes.

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“Executive Actions to Reduce Gun Violence and Make Our Communities Safer”

President Addressing Weapon Safety: Link New Executive Actions to Reduce Gun Violence and Make Our Communities Safer

To me this is “mostly” a reiteration of what is already out there for law with restrictions plus some enhancements. President Obama appears to be calling for enforcement of what is already there for law. There are adders such as linking Social Security to NICS, allowing HIPAA restrictions to be viewable by NICS, additional funding for mental health, more staffing in critical areas, internet tracking, “smart-weapon” technology, etc. much of which depends upon funding by Congress. I do not see these enhancements as any more restrictive than what is in place today.

Just so you know and before you comment to this post; please recognize, I shoot bullet-spewing-weapons and I am X-military who has been to a war. Spare me the diatribe and the rant. I do not care about prying the weapon from your dead hands or your anecdotal information on who done what down the street. In my opinion doing nothing today and into the future is not going to fly forever and will only lead to something else far harsher being crammed down your and my throat later.

I believe I have captured the 4 points from President Obama’s Executive Order and the associated data below.

1. Keep guns out of the wrong hands through background checks.

– Where ever business is conducted — from a store, at gun shows, or over the Internet; if you are in the business of selling firearms, you must get a license and conduct background checks.

– No specific threshold number of firearms purchased or sold that triggers the licensure requirement.
– Even a few transactions can be sufficient to establish that a person is “engaged in the business.”
– Without the required license, subject to criminal prosecution and can be sentenced up to five years in prison and fined up to $250,000.
– Dealers are also subject to penalties for failing to conduct background checks before sales.

– Require background checks for people trying to buy some of the most dangerous weapons and other items through a trust, corporation, or other legal entity.

– Individuals have been able to avoid the background check requirement by applying to acquire these firearms and other items through trusts, corporations, and other legal entities. The number of these applications has increased over the years — from fewer than 900 applications in the year 2000 to more than 90,000 applications in 2014.

– Sent a letter to States highlighting the importance of receiving complete criminal history.

– Overhauling the background check system to make it more effective and efficient. Improvements include processing background checks 24 hours a day, 7 days a week, and improving notification of local authorities when certain prohibited persons unlawfully attempt to buy a gun. FBI will hire ~ 230 additional examiners and other staff to help process these background checks.

2. Make our communities safer from gun violence.

– Federal prosecutors to continue to focus on smart and effective enforcement of our gun laws.

– FY2017 budget will include funding for 200 new ATF agents and investigators to help enforce our gun laws.

– Establish an Internet Investigation Center to track illegal online firearms trafficking and is dedicating $4 million and additional personnel to enhance the National Integrated Ballistics Information Network.

– Dealers who ship firearms must notify law enforcement if their guns are lost or stolen in transit.

– Encourages every U.S. Attorney’s Office to renew domestic violence outreach efforts and prohibited persons from obtaining firearms.

3. Increase mental health treatment and reporting to the background check system.

While individuals with mental illness are more likely to be victims of violence than perpetrators, incidents of violence continue to highlight a crisis in America’s mental health system. In addition to helping people get the treatment they need, we must make sure we keep guns out of the hands of those who are prohibited by law from having them.

– Proposes a new $500 million investment to increase access to mental health care.

– Social Security Administration has indicated that it will begin the rule-making process to include information in the background check system about beneficiaries who are prohibited from possessing a firearm for mental health reasons is reported to NICS.

– Finalizes a rule to remove unnecessary legal barriers preventing States from reporting relevant information about people prohibited from possessing a gun for specific mental health reasons. The Department of Health and Human Services issued a final rule expressly permitting certain HIPAA covered entities to provide to the NICS limited demographic and other necessary information about these individuals.

4. Shape the future of gun safety technology

– Directs the Departments of Defense, Justice, and Homeland Security to conduct or sponsor research into gun safety technology to reduce the accidental discharge of weapons.

– Directs the departments to review the availability of smart gun technology on a regular basis, and to explore potential ways to further its use.

Like I said, most of this is old stuff which you have had to live with already. Maybe it is time to enforce it more rigorously.

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