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

South Carolina: Bush and Carson Territory

You heard it here first. And before you laugh see that I pretty much nailed New Hampshire in the post and comments Christie is Done. But Wow! What a Parting Shot! where I only made two real mistakes. I overestimated Carson’s numbers and slightly underestimated Bush’s. So this is a corrective of sorts.

Carson never had a chance in New Hampshire. And so didn’t try. His hope was always to hit South Carolina with the God Botherer lane cleared out. And he has got that, Huckabee and Santorum are gone and of the main contenders only Cruz is competing for Evangelicals as such. I mean a lot of Fundies might like Trump but nobody with a lick of sense believes he is really Saved. Or even thinking he needs to be Saved. Whereas Carson is a full fledged member of the tribe. I may think him a Whack-a-Doodle but don’t underestimate his appeal to the Born Again. Sleeping Gentle Ben has a clear track into a top four result that propels him right into the South dominated March contests.

Which brings us to Bush. If it hadn’t of been for the Christie-Rubio murder-suicide I would have put paid to his candidacy. And even I thought Rubio would limp into fourth in New Hampshire. But Bush did pull down fourth and all he needs to do to get at least a fourth in South Carolina is to finish ahead of Rubio and Kasich. And Kasich has a lot of ground game to make up.

So here is my order of finish in South Carolina: Trump, Bush, Cruz, Carson. With Rubio and Kasich battling for fifth but both clinging on until March 15th when both Florida and Ohio vote.

Obviously I may have this wrong. A perfectly plausible order is Trump, Cruz, Kasich, Rubio, Carson, Bush. I just see structural advantages for Carson and Bush that are not reflected in their surface campaigning. Which frankly has sucked. Your Views not only MAY Vary but almost cetainly WILL Vary. So treat this as an Open Elections Thread

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Apparently there’s a special place in hell for Democratic politicians who criticize Barack Obama as insufficiently progressive. And a special place in heaven for politicians who have accepted $133,246 from the private-prisons industry but tell Black and Hispanic voters at a debate shortly before the Nevada caucuses and South Carolina primary that they want to end the private-prison system.

Nicholas Kristof 


Clinton is accusing Sanders of being anti-Obama. Feels fake and contrived to me, and rather nasty.

10:47 PM – 11 Feb 2016 Twitter


What worries me more than anything else about a Clinton general election campaign is her propensity to say obviously silly things. Elsewhere in that speech, in Clinton, IA on Friday, she again repeated her (and her daughter’s) complaint—without any hint of recognition of irony—that Sanders’ single-payer healthcare insurance plan would kill Obamacare.  As if it weren’t the very purpose of a single-payer healthcare insurance system to eliminate private healthcare insurance for the benefits that the single-payer plan provides.  As if the purpose of Obamacare was to create some living monument to Obama, rather than to provide healthcare insurance to people who had no access to it, and provide decent insurance to people who had policies that provided almost no coverage. [Italics added.]

Is it just me, or is the Clinton campaign’s take on how to appeal to African-American voters really demeaning, Me, Feb. 3, quoting myself in a Jan. 24 post.

Okay, good.  It’s not just me.  It’s also New York Times columnist Nicholas Kristof.  And David Strauss of Politico, who at 9:57 last night posted a short article titled “Clinton namechecks Obama over and over again.”  There was still an hour left in the debate then, so make that “Clinton namechecks Obama over and over and over and over and over again.”

But, hey.  All three of us are white.  And Black folk might not get what she’s doing.  And any who think they do would be wrong.  Like all of us women who mistakenly thought Clinton had, throughout her campaign, bludgeon-like, been asking women to vote for her because she’s a woman.

All those incessant Pavlovian references to women?  And last week, her declaration that Sanders must be the only person who thought she was a member of the political and economic establishment, because she’s running to be the first woman president and by dint of that fact clearly has no connection whatsoever to the politically and economically very, very powerful?  Or even to the slightly powerful?  She disabused us last night of the misconception that she was asking women to vote for her because she’s a woman.  Instead she was asking us to vote for her because she has no connection to the politically and economically powerful.

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Drum on Drum on Sanders on Welfare Reform

I have the impression that this new post by Kevin Drum is a response to objections to his earlier post made, among other places, here at angrybearblog. I get the impression that I wasn’t one of many who made the same objection.

In any case it is a big improvement. Also I learned stuff I should have known already from it.

I think it is very worth reading and advise you to click the link.

update: Kevin Drum has yet more on the topic here.

Following Drum (and snipping from his blog) I will comment on a figure from “$2.00 a Day: Living on Almost Nothing in America,” by Kathryn Edin and Luke Shaefer.


Drum commented

The green line is the one to pay attention to if you want to know the comprehensive effect of all changes to the social welfare system over the past couple of decades. And what it shows is that the percentage of households with children in extreme poverty increased from about 1 percent to 1.5 percent. That represents an increase of fewer than 500,000 households.

In other words, if we simply handed over $10,000 to every household with children in extreme poverty, it would cost only about $15 billion. Given that we spend about $1 trillion annually on social welfare benefits, this is peanuts. It’s not money that prevents us from addressing deep poverty, it’s political preference. Welfare reform was very deliberately crafted to reduce payments to people who don’t work, and one of the effects of that is a small increase in extreme poverty.

Now I don’t consider a 50% increase a small increase.

At his blog I commented again.

I think this post is a mostly satisfactory response to my criticism of your earlier post.

I certainly agree with your current theory of Sanders- that he “doesn’t really want to dive into this because he knows it’s a big hot button.” I’d add your earlier point that a lot of working class whites hate welfare. I am sure that it would be unwise for any egalitarian to discuss welfare reform during a campaign.

On the other hand, I have two criticisms of your current relevant graph (which is a huge improvement over the graph in the earlier post).

First somewhat 500,000 US families with children living on less than $2 a day *including SNAP* is not a small problem. They include over a million people.

But second, the inclusion of SNAP makes a huge difference. I have argued against looking at the poverty rate and welfare reform because AFDC and TANF benefits don’t get families over the line. But once you include SNAP it is very hard to not get over $2 a day each (as the graph shows).

Finally your point that the money needed to eliminate severe poverty is tiny compared to total social welfare spending is my point (I stressed it). Similarly each of us has repeatedly written things to the effect that “It’s not money that prevents us from addressing deep poverty, it’s political preference.” I did most recently yesterday in my comment here there posted here and also in this different more pointless post here

However, income including SNAP and section 8 housing vouchers under the poverty line implies grim poverty. It is a level which was introduced in the 50s (before SNAP and section 8) as a level below which no one should have to be. I’d be interested in a graph of the fraction of households whose income including SNAP and section 8 is under the poverty line. I don’t have the micro data, but I will google.

The point is a single point in the distribution (poverty line without SNAP or $2 each a day with SNAP) can be highly misleading. The narrowing gap between the red and blue curves shows a huge proportional change due to welfare reform. I think if the line was moved from income including SNAP less than $2 each a day to income including snap less than $2 a day plus maximum SNAP benefits, then a similarly huge proportional change would be observed. I think $2 a day plus maximum SNAP is a reasonable definition of severe poverty.

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Monetary Policy in an Open Economy

by Joseph Joyce

Monetary Policy in an Open Economy

The recent research related to the trilemma (see here) confirms that policymakers who are willing to sacrifice control of the exchange rate or capital flows can implement monetary policy. For most central banks, this means using a short-term interest rate, such as the Federal Funds rate in the case of the Federal Reserve in the U.S. or the Bank of England’s Bank Rate. But the record raises doubts about whether this is sufficient to achieve the policymakers’ ultimate economic goals.

The short-term interest rate does not directly affect investment and other expenditures. But it can lead to a rise in long-term rates, which will have an effect on spending by firms and households. The relationship of short-term and long-term rates appears in the yield curve. This usually has a positive slope to reflect expectations of future short-term real rates, future inflation and a term premium. Changes in short-term rates can lead to movements in long-term rates, but in recent years the long-term rates have not always responded as central bankers have wished. Former Federal Reserve Chair Alan Greenspan referred to the decline in U.S. long-term rates in 2005 as a “conundrum.” This problem is exacerbated in other countries’ financial markets, where long-term interest rates are affected by U.S. rates (see, for example, here andhere) and global factors.

Central banks that sought to increase spending during the global financial crisis by lowering interest rates faced a new obstacle: the zero lower bound on interest rates. Policymakers who could not lower their nominal policy rates any further have sought to increase inflation in order to bring down real rates. To accomplish, they devised a new policy tool, quantitative easing. Under these programs, central bankers purchased large amounts of bonds with longer maturities than they use for open market transactions and from a variety of issuers in order to bring down long-term rates. The U.S. engaged in such purchases between 2008 and 2014, while the European Central Bank and the Bank of Japan are still engaged in similar transactions. As a consequence of these purchases, the balance sheets of central banks swelled enormously.

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‘Both of us share the goal of this and that. But only one of us will try to score the goal.’

This is not about math — this is about people’s lives, and we should level with the American people.  Every progressive economist who has analyzed that say the numbers don’t add up. And we should level with the American people about what we can do to get quality affordable health care.

— Hillary Clinton, at tonight’s debate

Yes.  Leveling would be good.

Repeatedly tonight, Clinton said, as she has in earlier debates, that both she and Sanders share this goal, or that goal.  She shares the goal of universal healthcare coverage, for example.  She just doesn’t want there to actually be universal healthcare coverage, because that would increase the size of government.

She estimated that the government would grow 40 percent under Sanders’ proposed policies. Policy goals which she shares.  Just not the percent.

She’s leveling with the American people, though.  She does think universal healthcare coverage is a nice goal, although not one that she has any plans at all to accomplish.  Because this is about people’s lives.  Just not the people who are uninsured.  And not the people who are among the 90% who she incessantly says have healthcare insurance, but who struggle to pay the premiums and live in fear of actually needing healthcare and having to pay several thousands of dollars in medical bills before the coverage kicks in—a fact she is blind to.

Universal financial access to college is another of Sanders’ goals that she shares.  She absolutely leveled with the American people that she shares that goal.  As a goal.  Just not one she plans to score.

Good thing she’s just running for president.  Rather than, say, playing professional hockey or soccer.  Or football.  Some game in which players have to try to score.  The game she’s playing isn’t one of them.

She’s leveled with the American people about what, in her opinion, we can do to get quality affordable health care: Nothing further.  And that is what tomorrow’s headlines should say.

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Projecting a Recession from 2013

I woke up today to see oil below $27 a barrel, the US 10-year at 1.6% and the Dow down to 15,600. How quickly the economy is faltering. It is a crazy moment.

Oil below $29 a barrel creates Geo-political tensions that can create attacks of aggression. Other countries have already tried to negotiate with the Saudis to raise oil prices… and now oil is slipping to even new lows. A tense situation for oil producers.

The US 10-year hitting 1.6% so fast over the past month seems to be building downward momentum. The yield curve is trying hard to flatten even with short-term rates near zero.

Recession seems imminent. Will it happen?

I called a recession this year based on my assessment of effective demand. Others like Tim Duy and Janet Yellen do not see a recession this year. But they lack an understanding of effective demand.

I have seen this coming for a couple of years.

Back in September of 2013, using my Aggregate Supply- Effective Demand model, I saw that an effective demand limit was forming at a Real GDP around $16 trillion (2009 $$). The AS-ED model was only developed in April, 2013.

Here is an image from a post back then.


I saw that the effective demand lines were bunching together setting up a Long-run Aggregate Supply zone around $16.1 trillion, where the aggregate supply and effective demand lines would meet.

I wrote in September, 2013…

“The blue dots along the bottom are real GDP on the aggregate supply curves increasing at an inflation rate around 2%. Real GDP will most likely continue this path over the next year, shown by lower dashed black line. The dashed black line above shows the effective demand limit coming steadily downward toward the LRAS zone. (LRAS is long-run aggregate supply). Real GDP and effective demand will meet at the LRAS zone. What will happen when they meet? … If real GDP keeps growing at around $100 billion per quarter as it did in 2nd quarter 2013, real GDP will enter the LRAS zone in mid 2014.
The recession of 1980 followed the same pattern. The effective demand lines had been pointing toward an effective demand limit for 3 years since 1975. Then Real GDP hit the ED limit in 3rd quarter, 1978. A recession began to form and was official 2 years later. (link) (Note: The red dots in this graph show Real GDP moving with core inflation.)

Eventually in a post in August of 2014, I projected…

“The projection now is for real GDP to enter the zone of the effective demand limit between $16.000 trillion and $16.160 trillion. This will happen before 2014 ends assuming the calibration of 0.762 for effective labor share is within a close margin of error.”

So what happened?


Update Note: The red dots in this graph show the crossing points between aggregate supply and effective demand. These red dots are different from the red dots in the previous graph. These red dots show the equilibrium so to speak between aggregate supply and effective demand. In both graphs, the crossing points expanded upward as Real GDP hit the effective demand zone (LRAS).

The equilibrium points began to rise when Real GDP hit $16.1 trillion. That is a sign of hitting the effective demand limit. This happened before the end of 2014, just as I had predicted. When effective demand rises in the LRAS zone, the dynamics of the economy are on the downside of the business cycle, just starting downward.

Ever since the end of 2014, the economy has been faltering. I predicted that the Dow would orbit 17,300 through 2015. And it did.  I gave a 70% chance of recession this year back in January. (link, see comments.)

If this cycle is like the cycle before the 1980 recession, we would see a recession about 2 years after hitting the effective demand limit… That would put a recession this year, 2016, in the summer or fall.

So I got glimpses of the effective demand limit upon Real GDP as early as September, 2013.  We have seen this coming for years.

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Drum on Sanders on Welfare Reform

Kevin Drum wrote “Here’s Why Bernie Sanders Doesn’t Say Much About Welfare Reform”
He presents a graph of total social welfare spending in the USA divided by the number of people in households under 150% of the poverty line.

He concludes

“There are two obvious takeaways from this. First, overall spending on social welfare programs has increased by 3x since 1980. That’s pretty substantial. Second, if the 1996 welfare reform act had any effect on this steady rise in spending, you’d need a chart the size of my house to make it out. Perhaps Bernie Sanders knows this, and understands that in the great scheme of things, welfare reform just isn’t worth fighting over anymore.”

I am trying to control my outrage which is all the more bitter, because I have such a high opinion of Kevin Drum. Briefly, I think his post has no merit whatsoever and is not defensible.

The title discusses the presidential campaign. On this point, I agree with commenter CAinDC that Sanders doesn’t discuss welfare reform, because he knows his position is extremely unpopular. It is a matter of politics (appropriate to a campaign) not policy. Politicians who hate and detest the 1996 welfare reform law don’t (and shouldn’t) mention it, because they know that, if forced to choose, many voters will choose welfare reform over them. I entirely agree with Sanders’s and Clinton’s decision to discuss the issue as little as possible. I think it is best to try to undo the damage of welfare reform by stealth, by proposing a new program and calling it anything but AFDC or welfare *and* by making sure that, even if it is less efficient policy, it doesn’t look at all like AFDC.

In fact, Kevin Drum knows this perfectly well. In 2014 he wrote

why does the WWC [white working class] continue to loathe Democrats so badly? I think the answer is as old as the discussion itself: They hate welfare. There was a hope among some Democrats that Bill Clinton’s 1996 welfare reform would remove this millstone from around Democrats’ necks,

With, at most, a moment of thought, he must understand why Sanders doesn’t talk about welfare reform — he answered the question in 2014.

But the post isn’t just a answer to the question about Sanders’s political strategy. It includes a discussion of welfare reform, and the assertion that welfare reform didn’t have a big impact on average US economic well being (confusingly the technical term used by economists for this is “welfare” which I will reserve for AFDC/TANF). I disagree with this assertion. Oddly I first saw the very very convincing evidence against the assertion in the current Kevin Drum post in an earlier Kevin Drum post which noted the dramatic increase in severe poverty (income below half the poverty line)*.

The post as written just will not do. Drum looks at a ratio of total inflation adjusted dollars to a number of people when discussing social welfare spending. If one thinks that the effect on well being of a dollar is about the same whether it goes to one person or another — that the total not the distribution matters — then one can conclude that welfare reform wasn’t very bad. One must also conclude that optimal social welfare spending is zero. The argument that AFDC disbursed a small number of dollars so it didn’t have a big effect on average economic well being can only be justified by the assumption that a dollar to the extremely poor is just like a dollar to someone at 1.5 times the poverty line. If this assumption, which Drum must make to argue that his graph is relevant, were valid, then there would be no justification for AFDC, TANF, the EITC, SNAP, or Social security. It is not OK to ignore inequality when discussing social welfare policy. This is, in fact, exactly what Drum did. Partly because of my great respect for Drum, I am putting this as politely as I possibly can after prolonged efforts to calm myself.

The point is that there has been an increase in inequality among people who receive means tested benefits. If one cares about the distribution of income at all, one should not ignore this. Consider a family with no cash income. They are not helped at all by the EITC or the minimum wage. They will get food stamps. They have a small chance of getting a rent voucher (one in 10 poor people live in a family which gets one). At least the children will get medicaid (not the parents in some states).

People can’t live on food and medical care alone. The increase in the cost of medical care (which includes both inflation and genuine increase in care provided as new treatments are discovered) can’t substitute for clothing and shelter.

Now one might ask if we can tell, for sure, whether welfare reform had large effects. The answer is yes, because there was a genuine experiment in Florida. It is now known, as well as anything can be known in the social sciences — that welfare reform killed people.

I stress that it is hard to generalize from the case of Florida, because the Florida reform included an extraordinarily high level of support for former AFDC recipients. It is almost certain that simple extrapolation of the solid experimental results would lead to an underestimate of the number of people who have been killed by welfare reform. It is very important that the deadly effects of welfare reform were reported by supporters of welfare reform who were surprised by the results — this makes the paper much more convincing.

Now one might argue that those deaths are no big deal. I suspect that, nationwide since 1996, they are not many orders of magnitude greater than 3000. If you think 9/11 was a minor matter, then you might consider welfare reform to be a minor matter too.

In any case, even if you decide you don’t believe in experimental results, you should understand that Drum’s post is indefensible. He bases his discussion of social welfare policy on the assumption that the distribution of social welfare spending doesn’t matter. If his graph is relevant, we shouldn’t mind if all social welfare spending were converted to a block grant to Bill Gates. The post is one huge category error and unworthy of Kevin Drum. Hell it would even be unworthy of me.

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Yes, she changed her vote

“You will not find that I ever changed a view or a vote because of any donation that I ever received.”


If you have not seen it, there is a youtube cut of a Bill Moyers show in which Senator Warren explains just how dramatically Hillary Clinton changed her vote.  It is dramatic, as Mrs. Clinton’s initial position actually resulted in her husband vetoing the bill in 2000.  But, once she became a New York senator….


Clinton has to know we live in the digital age?  Did she really think that she was safe with such a statement?  As Samantha Bee noted regarding the repubs failing a presidential test of walking to the podium…Clinton fails too.  And yet again shows that her campaign style is totally out of the repubs play book.

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Do Canadians and Scandinavians Really Not Work and Really Have No Children? (This is a rhetorical question for Kathleen Parker. Or maybe not rhetorical; you decide.)

Socialism has always appealed to the young, the cure for which isn’t age but responsibility. This usually comes in the form of taxes and children, both of which involve working and sacrificing for the benefit of others, the extent of which forms the axis upon which all politics turns. That Sanders never outgrew his own socialist-rebellious tendencies — We’re going to have a revolution! — is vaguely interesting, but not his best recommendation for commander in chief, among other presidential roles.

What Steinem, Albright, and Clinton don’t get about millennial women, Kathleen Parker, Washington Post, today

Okay, well, taxes and children, and healthcare insurance premiums and healthcare bills not covered by insurance, and day care and college costs for those children—all of which involve working and sacrificing for the benefit of others.

The extent of which forms the axis upon which all politics turns.  Well, post-trickle-down, Great-Recession, stagnant-wages, wildly-escalating-healthcare-and-college-costs, Citizens-United, politics anyway.

At least that seems to be the main message of this presidential primary election season. Although the message is encrypted and therefore indecipherable to a good many political opinion writers.

A fun parlor game for me (okay, I don’t have a parlor, so I play this game usually sitting in a rocking chair in my bedroom, laptop on my lap) has been reading the contortions that center-left or center-right political columnists employ by way of pretending that Bernie Sanders is a Communist, and trying to guess whom they think they will convince.  Most fun of all to read are the Washington Post’s cadre, and Kathleen Parker has been especially prolific in the last week.  A few days ago, in a column titled “The fight over Hillary Clinton’s speaking fees is ridiculous,” she wrote:

Unfortunately, the Democratic base has been electrified by the notion that the poor are poor because the rich are rich. To this zero-sum interpretation of income inequality, a friend always responds: How many poor people has Oprah created?

None, I’m sure.  But if Oprah were currently taxed at the rate she would have been during the Reagan administration—not to mention the Truman, Eisenhower, Kennedy, Johnson or Nixon ones—there likely would be far fewer poor people in this country, some of them, for example, having been able to afford to get a college degree at a public university funded primarily through taxes rather than by tuition and legacy donations that dramatically impacted admissions into the freshman class.

Actually, the Democratic base has been electrified by the notion that higher taxes on the wealthy will give them (and many others) a shot at entering or remaining in the middle class. And of having access to health care without fearing bankruptcy or having to forget about paying their kid’s college tuition this year. And of being able to afford good child care and be able to get the roof replaced.

That Parker never outgrew her own Commie-baiting tendencies is vaguely interesting, but not her best recommendation for another Pulitzer Prize.

Then there is Ruth Marcus, a Yale University and Harvard Law School alum, who in a column about Sanders late last month said that the proposition that “helping Americans get ahead with more skills, more jobs and more wealth,” and the proposition that “the deck is stacked against everyday Americans and we need to focus on breaking up Wall Street banks and raising taxes on the wealthy,” are mutually exclusive.  In referencing a recent poll by the self-styled centrist group Dumb Way—er, Third Wayshe wrote:

Given the choice of a candidate who promotes “helping Americans get ahead with more skills, more jobs and more wealth,” or one who emphasizes that “the deck is stacked against everyday Americans and we need to focus on breaking up Wall Street banks and raising taxes on the wealthy,” voters chose the growth message over the deck-stacked argument, 66 percent to 21 percent.

Because of course proposals to break up Wall Street banks and to raise taxes on the wealthy have nothing to do with helping Americans get ahead with more skills, more jobs and more wealth.  Those proposals are just for the sake of breaking up Wall Street banks and raising taxes on the wealthy.  As a hobby.  And if I had gone to Yale and Harvard I’m sure I would see this.  But I didn’t, so I stupidly think proposals to break up Wall Street banks and to raise taxes on the wealthy have everything to do with helping Americans get ahead with more skills, more jobs and more wealth.

Shows you what I know.  Silly me.  I even thought that Scandinavians and Canadians work and have children.  Instead it turns out that Scandinavians and Canadians are children. Who will grow up one day and finally begin working and having children of their own.  At which point they will no longer need healthcare.  Or want to avoid bankruptcy if they do.

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