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Any Economist Who Talks about Rational Investment is Full of Shit, Hoosier Edition

CPAC had a gathering of Republican Governors today. As Jennifer Hayden (@Scout_Finch) on Twitter noted, the Brownback/Walker/etc. panel was called “How to ruin your state’s economy with one easy tax cut.”

So naturally my thoughts shifted to the one way blowing up your state’s economy could be ameliorated: if some unearned windfall occurred. Could a Legislature be saved from itself?

Lo and behold, the PowerBall jackpot was won by a ticket in Lafayette, IN, last night. The Indianapolis Star (Dan Quayle’s ancestral paper, fwiw) notes that this is the second large-value ticket won in the Hoosier State in the past nine months:

A Powerball ticket purchased in Lafayette is worth about $435 million this morning, a Hoosier Lottery official said Thursday….

In July, another Hoosier hit a big jackpot in the Mega Millions game. That ticket, worth about $541 million, was sold at a Speedway gas station in Cambridge City.

One great thing about having people win nearly $1,000,000,000 in the lottery is the tax windfall for the State.

So what is the brilliant Indiana State Senate planning to do with those windfall profits? If you guessed “invest in human capital,” you must be an idiot or an economist (but I repeat myself):

A powerful Indiana Senate panel on Thursday slashed a proposed funding increase for a state program that sends poor children to preschool, jeopardizing a major pillar of Republican Gov. Eric Holcomb’s agenda.

The move imperils efforts by Republican and Democratic education advocates to help Indiana catch up with more than 40 other states that offer significant preschool programs, according to 2015 figures from the National Institute for Early Education Research at Rutgers University.

So much for that Rutgers-joining-the-Big-Ten thing meaning that Indiana State Senators pay attention to the needs of their constituents:

Increasing state funding for preschool programs was a major issue in the governor’s race last year. Democrat John Gregg called for a universal program, while Holcomb said he supported expanded access for poor kids. The state currently spends $10 million a year on a preschool pilot program, called On My Way Pre-k, which is offered in five counties. But advocates say demand far outstrips available funding and sought $50 million for preschool programs in the next state budget.

The Thursday vote by the Senate Appropriations Committee reduced a $10 million a year increase that Holcomb sought to $3 million.

Maybe that $7MM savings will go toward saving two more jobs at Carrier. Maybe the Fed could get interested; I hear an unpopular ex-Governor from that State might now have a position of power there.

The current pilot program was created at the behest of former Gov. Mike Pence, now the vice president, over the objection of many skeptics. But Pence shocked advocates when he opted not to seek $80 million in federal preschool funding for the effort.

Gosh, I wonder why he “shocked” them?

The adoption of a statewide program has proven politically difficult with tea party groups, religious conservatives and a network of home schoolers opposed.

Oh, right, because they were stupid enough to believe he cares about his constituents in the first place.

Short of destroying the entire Midwest with a neutron bomb, there is no chance those states will contribute positively to the economy this century. But economists will keep pretending that they aren’t destroying their seed corn, which may be even more pathetic.

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When to Stop Reading a “Non-Fiction” Article

(cross-posted from Skippy the Bush Kangaroo)

Mark Thoma sends us to Benjamin M. Friedman. Given that imprimatur, one expects precise analysis. (Mark, after all, is an econometrician by trade.)

So it was surprising to stop reading so early. Specifically, I gave up on this cretinous piece of garbage at:

especially during the president’s first year in office, when the Democrats held a filibuster-proof supermajority in the Senate

Just so you know I’m not pulling from context:

The most pressing among [other economic problems than that “roughly one in six Americans — 50 million in a population of 307 million — had no health insurance”] was, and remains, financial reform. Rather than advance its own set of proposals — especially during the president’s first year in office, when the Democrats held a filibuster-proof supermajority in the Senate — the administration largely left the matter to Congress.

So this is the usual argument. The stimulus had been passed, so “the Obama domestic agenda shifted to health care.” I consider this horseshit*, but your mileage may vary.

What is clearly horseshit though, except in the most technical of senses, is the claim that “the Democrats held a filibuster-proof supermajority in the Senate” as if that were for the entire first year of Obama’s presidency, not just from 07 July 2009 (when Al Franken was finally sworn in as the 60th Democrat) to 25 August 2009 (when Ted Kennedy died).

Less than two months isn’t even close to a year, and “a lie is a very poor way to say hello.”** It’s an even poorer way to premise the rest of your “but Obama didn’t try to deal with MY problems” article—especially when he did.

Billmon was correct ten years ago; the Washington Post should have been destroyed with fire and sword. (Indeed, Billmon just neglected to mention the need to salt the earth at 1150 15th street NW.) Jeff Bezos appears determined to continue the tradition.***

*The Administration did, after all, continue to support and argue for “financial reform”–the Consumer Financial Protection Board was founded on 21 July 2011.

**in the words of Edith Keeler and/or Harlan Ellison

***This is datapoint number 1,000,000 or so in favor of that.

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Tim Duy Explictly Declares Reality is Real

And confirms that his own position: is the same as that of Brad DeLong (et cetera.) and those of us who try paying bills

[T]he [Federal Funds Interest Rate target] debate has shifted in the opposite direction as market participants weigh the possibility of a rate cut. The Fed is probably not there yet, but internally they are probably increasingly regretting the unforced error of their own – last December’s rate hike. [emphasis mine]

Now he just has to come a few steps further to realize that the major U.S. money center banks remain insolvent. But that’s outside of his purview as Watcher to Feds, so we shouldn’t expect to see that in print anytime soon.

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The Fed Continues Trying to be Insane

The Fed did the right thing, and moved in the right direction, though in part for the wrong reason today.

Go to Tim Duy for the rational approach. For me, I quote the Fed

Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. [emphases mine]

check the market


and conclude that, with one exception, the only question worth asking is, “What color is the sun on the planet of the Fed Governors?”

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When He’s Right, He’s Right

Brad DeLong (via Mark Thoma, since my desktop is dead and I saw Mark’s post first):

I question Noah [Smith]’s description of the people as “brightest”. If you insist on trying to understand business cycles by requiring a single consumption Euler equation (rather than, say, risk-averse rich 70-somethings with short horizons; myopic middle-class 40-somethings, and the liquidity constrained); if you insist on trying to understand business cycles by requiring that firms engage in Calvo pricing; If you insist on trying to understand business cycles by requiring rational expectations (rather than anchored, adaptive, extrapolative, perfect-foresight, and Panglossian)–well, then you really aren’t very bright at all, are you?

Only two quibbles: Brad opens his piece by describing Noah as “smart young whippersnapper” and then eviscerates him. In Brad’s previous [immvho, failed] attempt at evisceration, Alex Seitz-Wald* was described as “a smart man.” So the quibbles are:

(1) What does Brad have against smart people?

ETA: This appears to be The DeLong Tell. He (correctly) praises “the very-sharp Tim Duy.” No reference to “smart” at all. If he were playing poker, this would be the equivalent of eating the Oreo.

(2) Alex is 29. I’m not certain of Noah’s age, but he (1) graduated undergraduate and spent three years in Japan and (2) received his Ph.D. in 2012 (four years ago). So my minimum guess for Noah would be:

graduated at 21 + 3 years in Japan + 3 years earning/finishing** Ph.D. + 4 years since then = 31.

And if you’re setting the morning line there, I’m taking the over.

So how is Noah a “smart young whippersnapper” and Alex a “smart man,” when the former is clearly a few years older than the latter?

*In the interest of full disclosure, I note that Alex married into my wife’s family this past Memorial Day. Also, in the interest of accuracy, I note that Brad is dead wrong in his framing of Alex’s piece. [That’s for another posting.] But, heck, even smart people like Brad make mistakes.

**This assumes some of the time in Japan was spent on work that directly contributed to completing his Ph.D. This seems an optimistic assumption.

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If You Thought 2010 was Recovery Summer, Wait until you see 2016!

Cue the Fed Taking a Dump in the Empty Punch Bowl

In May, the civilian labor force participation rate decreased by 0.2 percentage
point to 62.6 percent. The rate has declined by 0.4 percentage point over the
past 2 months, offsetting gains in the first quarter.

But the headline number is “at full employment,” if you are determined to be stupid or the President of the Boston Fed (which did not used to be redundant).

The only thing that could save Janet Yellen’s reputation now would be if she became impaired or died before the 16th.

Meanwhile, the [ETA: major U.S. money-center] banks remain insolvent.

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I’m Buried, but This Deserves Another Look

Erik Loomis at LG&M notes that Forbes is attempting to encourage age discrimination (no we’re not; wink, wink, nod, nod).

And it made me think of this post from Lance Mannion, which deserves to be read every day you can:

You get up for a stretch, wander out onto the floor to get a cup of coffee, give people the eye, remind them you’re here, still the boss. Not that they need the reminding. Good people. Hard workers. You hardly have to say a word to some of them. Work their asses off for half the money, which, you know, you’d like to pay them. Business is good, as in ok, but it’s not like you’re making the bucks so fast you can’t find space to put it all, it’s piling up so fast….

Sid. Look at him. Geezus. Five years younger than you and looks like he could be your father. Ok. That’s a bit of an exaggeration. But he’s not looking too good these days, is he? Too bad. He used to be such a dynamo. Worked like a hero. Put in seven days a week if you’d let him. Best you had. Then he turned sixty-five and it was like he hit a wall. Bam. Just knocked him flat and he’s never been able to get up again, not really. Mostly, for the past year, he comes in, goes through the motions. He’s become a real drag on the business. He really should hang it up. But what’s he gonna do? You always paid him a fair chunk of change. Never was going to make him rich, but he got by pretty well. But 2007, 2008. Everybody’s 401(k) took a big hit, then his wife got sick, and their house went under water. He’s going to need to collect full benefits on his Social Security. He needs to stick it out for one more year.

Oh wait. It’s 2020 now, isn’t it? They raised the retirement age for people Sid’s age back in 2011. He can’t collect full benefits until he’s 69. So he’s going to stick around for three more years!


Think about it. His wife’s health is shaky. Sid’s is none too good. No way he can make up for the difference in medical costs for what the vouchers won’t cover. Sid needs to work here till he drops just for the medical plan, which is no great shakes, it costs you both an arm and a leg, but it’s not like it’s suddenly got cheaper to go the doctor’s. Even a simple check-up dings you, never mind if you need something big taken care of.

No, Sid’s here for life, unless…

Nah, you couldn’t do that to Sid. Not after all the years he’s put in.

Could you?

There are many reasons I say people should hit his tip jar–he’s too good to be one of the people Brad DeLong but this one keeps coming back as one of the best, one of the two best posts ever on the Internet about working.* Read the whole thing. And hit his tip jar if you can.

*The other is Mark Thoma’s description of what it’s like to be downsized in a Company Town and have to look for a new job. Which, as usual, I haven’t been able to find recently.

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