I had a post on the federal deficit talks and the speeches made to ‘resolve’ the political emergency, perhaps to turn into a fiscal emergency, and surely to further idealogy. But this picture was so much more accurate.
1. You have to make the Republicans pay in terms of eroded public support before they will agree to cooperate at all. The president in particular has not played a long-run strategy, the Republicans have, and the results reflect this.
2. “Let’s agree that what matters isn’t how many jobs you ‘get caught trying’ to create.” Why should I agree to take as given the point being debated here? When we need jobs as bad as we do right now, making it clear the other side is standing in the way of that goal, and fighting for the policies you’d like to enact has more value than it did in the past.
3. To me, this is about leaders and followers, and the administration is not the one leading policy right now.
4. The other side is not shy about going public, and that was also true when they controlled the White House. If this advice is correct, why didn’t it hurt Republicans when they were in power?
5. Yes, jobs at election time would be best. But if the other side is pushing policies that work against that goal so that it is unlikely to be attained…making that clear to the public would hurt. [slightly edited; emphases mine]
As Yves said, can Ezra Klein should stick to being (slightly less but still) wrong about health care?
At this point, the list of Obama Administration Unforced Errors—Summers, Geithner, John Walsh, lack of nominations, etc.; see here—is so long I would be willing to swear they put a one-armed man on the tennis court.
UPDATE: Contrast the Obama Administration statements (and lack of same) with today’s Press Release from CGI America:
Today, President Bill Clinton opened CGI America, hosting a plenary session on job creation and announcing new programs that will help foster economic growth in the U.S.
Speaking to more than 700 leaders from businesses, nonprofits, and government at the opening session, President Clinton announced three “Commitments to Action” that will be implemented by CGI America participants. These commitments, presented by Kiva, Visa, Onshore Technology Services, and the AFL-CIO, will expand access to microfinance, train workers, and fund infrastructure development.
“When these commitments are fully funded and implemented, 140,000 people will receive access to job training, 1,000 information technology jobs will be created in rural America, and $3.5 million will be loaned to small businesses in the U.S.,” President Clinton said. “Initiatives like these prove that organizations and individuals around the country have the power to take action to spur economic growth.”
CGI America is the first Clinton Global Initiative (CGI) meeting focused exclusively on the U.S. The purpose of the event is to develop new ideas for spurring economic growth and to highlight existing programs that can be replicated and scaled.
Can’t anyone in the current Administration—Tim Geithner is attending CGI America—understand that Bully Pulpits are Meant to Be Used? The last Democratic Administration did.
*I should be fair to Bernstein, but he perpetuates the horse droppings about “people want to see spending cuts and see them they will.” The unemployed innumerate vote, sometimes, and they’re not going to cheerfully vote for someone who keeps them unemployed by doing what they said they want. That’s not leadership, as David Frum (whose ex-boss knew even less about leadership than BarryO does) noted.**
**Frum’s claim that Obama is not imaginative enough is clearly bollocks, and his toughness (as distinct from his determination) should be unquestionable too. But “not determined enough” has rung true since his Senate days, and the bad Gerald Ford imitation is wearing thin even with those who were originally nostalgic.
I’m not going to do this with graphics (at least for now), but the finger exercise seems intuitive.
How does that, as John Boehner declares, cost America jobs?
From Boehner’s site:
At least 30 percent of employers would gain economically from dropping coverage even if they completely compensated employees for the change through other benefit offerings or higher salaries.
This should be intuitive. If the company is paying $1,000 a month for my family’s health care along with my $800 a month,* it can raise my paycheck by $1,000 a month—employee compensation is employee compensation—and cut back on its health care administration. If I’m not a health-care administrator, it’s win-win.**
Aside: Reality will interfere. If we make the Baumolian assumption that cost of health insurance will continue to grow faster than GDP—at a slower rate, probably, but still faster—I’ll give you odds that the labor share of revenues will decline, cet. par. over time. But we’re talking about jobs, not profits.***
Any economist worth her salt should know that lower costs of employment increase overall employment (assuming there is not a demand-side problem).
If the McKinsey “study” were accurate—again, not the way to bet—we should expect overall employment to increase. As with the Earned Income Tax Credit, the expansion of HIEs will benefit firms, allowing them to reallocate capital into more useful areas.
The follow-on effects in that universe: more people joining the HIEs than expected, improvements in the measurement of “real” wage growth, greater transparency in the current health-insurance system, and arguably a larger contingency of workers demanding something closer to a single-payer solution,**** all improve efficiency and provide opportunity for economic expansion.
Which is supposed to mean more jobs, not fewer.
If the McKinsey presentation accurately reflects what companies will do given the opportunity—think the Wal-Mart Effect Writ Large—then the prospects for employment will be, if anything, increased.
Greater political pressure for cost-reduction that leads to single-payer becoming more politically viable is just lagniappe.
*Not the real numbers, of course.
**If I’m a Benefits Coordinator, I don’t lose my job, and I get to spend more time working on ensuring that the firm is competitive in other areas. If I were doing an economic model of this against employment, I would bet that the coefficient would be small but positive, so let’s be generous and assume it’s equivalent to zero, i.e., no effect on employment supply.
As an aside, this was in part the reasoning behind the Bear Stearns “bag of rubber bands, box of paper clips, go buy all your own supplies” thinking. It didn’t necessarily save on corporate expenses directly, but it meant not having to manage that area of inventory.
***If anything, the extra profits, cet. par., facilitate business expansion and more hiring. That the multiplier effect will not be 1:1 simply reflects what a poor social investment private corporations are.
****More people forced to use the HIEs=> more people demanding similar plans across state lines => more demand for a larger uniform baseline (especially as families move from state to state) => more interest in cost controls => greater need to control Administrative expenses => disequilibrium in service demand and supply => demand for service efficiencies that result in either single-payer or, at worst, unified Servicer processing.
For Mother’s Day, as it were, xkcd presents The Lawrence H. Summers Memorial History of Math and Science.
The problem I want Drek the Uninteresting—or anyone else who knows the research—to address: if we assume that mercury in the vaccine wasn’t the cause of the rise in autism, what are the causes that have been identified?
Maligning Tony Kushner by the Trustees of CUNY while he is on the cover of the current issue of his alma mater’s alumni magazine probably was not a good idea.
Update: The one I left out earlier: the Second Quarter Kauffman Economic Bloggers Survey is out (warning: PDF). I’m especially thrilled by Mark Thoma’s victory (p. 12), though surprised that the margin was so small. Suggestions that the 35% who voted for the second-best option were desperately attempting to deny incompetence are, of course, beyond the pale.
AB, late Thursday:
If you want to stop a dictator from killing his people, freeze any of his personal assets that are held out of the country.
In cases where the dictator is likely to fall, it sends a clear signal to other countries. (In cases where the dictator is likely to succeed, the worst case scenario is that banking relationships will be damaged, a consideration that the domestic government would have considered before making the decision to freeze the assets in the first place.)
The purpose of financial in lieu of military intervention is to balance the tradeoff. A dictator whose funds will remain unencumbered no matter how many of his people he kills will not change his behavior. A dictator who stands to lose a large (and increasing) portion of $70 billion faces a scenario where extending his time in office may well appear too costly.
Treasury, Friday night:
On Friday evening, President Obama took decisive steps to hold the Qadhafi regime accountable for its continued use of violence against unarmed civilians and its human rights abuses and to safeguard the assets of the people of Libya.
The President issued an Executive Order freezing the assets of Muammar Qadhafi and four of his children, as well as the Government of Libya and its agencies, including the Central Bank of Libya and the Libyan Investment Authority – the country’s sovereign wealth fund.
I report. You decide.
[H]ere’s what I would be doing if I were organizing opposition to the Republican budgetary disinformation campaign. First of all, I would be holding hearings five days a week in the Senate Appropriations Committee and every other Senate committee on the impact of proposed Republican budget cuts. Whose benefits are going to be cut? What programs will be shut down? What are the real world consequences of the Republicans’ plans?
I have no idea and I have made an effort to try and find out. But there are undoubtedly people who know at the Office of Management and Budget and the various departments of government that are filled with assistant secretaries eager to testify before a congressional committee and respond in detail to the implicit Republican argument that spending can be massively cut without hurting anyone.
Another thing I would be doing is commissioning reports by the Congressional Research Service, the Government Accountability Office, and the Congressional Budget Office to provide data and analysis on the impact of Republican plans. And believe me, any request from the chairman of the appropriations committee gets the very careful attention of those who run these organizations for obvious reasons.
The next obvious step is to get all of the various organizations that represent farmers, defense contractors, health providers and so on to do their own analyses based on their intimate knowledge of how spending cuts will affect them. These people will also be more than happy to testify before a congressional committee on short notice.
Within a couple of weeks I think it would be very easy to put flesh on the bones of the Republican plans and mobilize the millions of people who will be affected but probably have no idea at this time that this is the case because no one has told them. I think the political dynamics could change quickly. But someone needs to get the ball rolling, get the analyses started, organize the hearings and so on. Why this isn’t already being done, is a complete mystery to me. [emphasis mine]
That no one has been willing or able to answer Mr. Bartlett’s question tells me all I need to know about who will be hurt by the cuts: the vast majority of the American people. We’re not just talking the people who scheduled a trip to DC after their kid was fascinated by Night at the Museum: Battle of the Smithsonian. We’re talking the kids, their parents, and their neighbors.
The silence from the DSCC members is deafening. And, in more than one sense of the word, Depressing.
If all goes well—and so far, it has gone much better than expected—from
One of the best rules in mathematics is that, to determine the value of all the variables, you need only as many distinct equations as you have variables. (previous sentence edited for clarity.) So let’s combine a couple of recent articles (h/t Mark Thoma for the first, Digby for the second.)
Richard Florida finds three studies of State Government Spending Multipliers. The three studies find multipliers of 1.5, 1.7, and 2.12. Let’s be nice (in context) and use the lower one. StateMultiplier = 1.5
David Dayden notes that budget cuts in just two (large) states can be matched against the Fed’s “stimulus” monies. Let’s see how much, putting the best face possible on the data (i.e., taking the most optimistic projections). CADeficit (ignoring “reserve”): $26.4B (12.5 + 12 + 1.9). ILDeficit: $19B (13 + 6).
That gives us a CA-ILEconomyCost of (26.4 + 19)*1.5 = US$68.1B
The Federal Stimulus is $55-60B. Again, let’s be optimists and say $60B. The required multiplier is then:
FedMultiplier * FedStim = CA-ILEconomyCost
FedMultiplier * $60B = $68.1B
FedMultiplier = 1.135
That’s the minimum multiplier needed just to counter those two states. Add in Texas (whose shortfall appears to be on par with California’s, and is larger than Illinois)and you’re at 1.77.
Only 47 states to go.
The maximum multiplier needed just to solve the CA-IL gap is 1.71. Add in TX and you’re at 2.63 with 47 states to go.
The Right-Leaning Econ Bloggers (e.g., Tyler Cowen and Greg Mankiw; I apologize to the former for linking him to the latter) argued in 2008-2009 that Federal Stimulus has a multiplier of 1.3 or less.*
1.3 would put the economy at neutral if the multiplier is 1.7 (median estimate) and most but not all of the CA ambiguities break the wrong way.
And that’s just eliminating the effect of those two states. Add in TX and the multiplier goes to 2.64—rather close to Christina Romer’s 3.0 that was attacked continually by Mankiw et al.
Repeat after me: There was No “Second Stimulus.” If the economy is going to go into full recovery—i.e., can I have jobs with that?—it will have to be from Private Sector Investment, which has been (let’s be nice) on the sidelines so far,* and really doesn’t appear to be warming up to replace TARP.
*Strangely, this was not argued by them as an argument that the initial “stimulus” was too small for the even-then-obvious shortfalls in C and I; I can’t believe they thought MX was going to cover the difference, but that’s a side discussion, perhaps.
*We can quibble over whether that was and remains the correct decision. As has often been noted here, a lack of demand is not exactly an incentive to expand, unless you think that will be changing soon. A true recovery should have convinced firms that a change is gonna come.
Update: Brad DeLong looks at the data and suggests that the problem may be that the current President is as innumerate as the previous one.
Mark Thoma quotes James Kwak:
So no, I don’t think Obama is abandoning his principles for political advantage; I think these are his principles. And while I’m upset at him, I’m upset at him for being wrong on the policy level, not for abandoning anything or selling out…I always thought Obama was a moderate who looked like a progressive.
I’m with Kwak on that; it’s one of the reasons I supported the relatively-more-progressive Hillary through the primaries.*
Where I’m less sanguine is the base from which Mark let him start:
Obama is certainly in a decent position politically, and I would bet on him to be reelected comfortably in 2012.
In 1996, Bill Clinton had the advantage of Bob Dole—the 1996 equivalent of Newt Gingrich—being his opponent. Dole had been a known quantity to voters for over a decade (“Do you want Grits and Fritz or a Ford Dole?”) who supported Clarence Thomas, talked about Hideo Nomo of the Brooklyn Dodgers, and fell off the front of a stage—and still garnered more than 40% of the vote, losing the popular vote by only slightly more votes than Ross Perot won. And that was after the advantage of a virtually-uncontested primary, which Mr. Obama may not enjoy.**
Kwak later backtracks a bit:
I think two years would be enough time for labor markets to recover if we could expect policy supporting employment along the way. But we are likely to get just the opposite, deficit cutting measures and other policies that work against employment and hence work against electoral success for the Democrats. Toss in a compromise on Social Security that angers the Democratic base, a possibility that cannot be dismissed as Obama follows up on what appears to be a successful move to the center, and the future does not look as bright. Obama may think he is playing the game well now, but the game is far from over.
This is at least far more accurate than the declaration that Obama won when his opening g4 was followed by the Republican’s e5. And Thoma follows up with his expectation of Obama’s next move being f3:
That would put an end to any stimulus due to the tax compromise. Stimulating the economy was never the intent of the GOP when they agreed to the tax compromise, it was all about the estate tax and tax cuts for the wealthy. They will do what they can to decrease government spending over the next two years, starting in January, and if they are successful it will reverse any benefit the economy might have received from the compromise.
Given that we all agree on the likely next two years, it would be nice to see an economic model from either Mark or James Kwak that justifies the expectation that Obama is in a position “to be reelected comfortably in 2012.”
At the very least, I want to offer to bet with Mr. Kwak, at even odds, with proceeds to go to the charity of the winner’s choice. Here’s my choice.
*The other being that she would know from the start that she was hated, and be ready for bear at the outset. (As an aside: sorry, Scott, but hiring Mark Penn, while a mistake, is not a revelation of policy preferences. Or, if you want to argue it is, tell us what replacing Howard Dean and the 50-State Strategy with Tim Kaine and Suborning Democrats such as Sibelius and Napolitano into the Administration is.)
**I say this not only because I would like to see him challenged—his doing a Specter in 2011 is about the only hope for my grandchildren—but also because it makes sense to prepare the field for 2016 and beyond. It would be dumber of the Democrats not to have someone challenge him in the primary, leaving only HRC and Joe Biden as probably 2016 candidates, than it would be to unite behind him in the hope that Republicans nominate someone who is unelectable a la Dole in 1996.