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

Interview with Mark Thoma

Angry Bear readers are familiar with Mark’s writings:

Mark Thoma is a macroeconomist and time-series econometrician at the University of Oregon. His research focuses on how monetary policy affects the economy, and he has also worked on political business cycle models. Mark is currently a fellow at The Century Foundation, a columnist at The Fiscal Times, an analyst at CBS MoneyWatch, and he blogs daily at Economist’s View.

In the interview, Mark discusses:

  • What we can expect from gas prices this summer and beyond
  • Why clean energy won’t see an dramatic investment rival, for now
  • How political feasibility, not economic feasibility, drives the ethanol mandate
  • Why the ethanol mandate might eventually be nixed
  • How we weigh the free market against government intervention
  • Why there is little momentum for a US-wide carbon market
  • What we learned from the global financial crisis
  • Why our best hope for strong economic growth is in exports

Energy – Balancing the Bonanza: Interview with Mark Thoma

Mark Thoma puts Holtz-Eakin on (figurative) hot seat

by Linda Beale

Mark Thoma puts Holtz-Eakin on (figurative) hot seat

As most of the Angry Bear and ataxingmatter readers know, I do not frequently applaud the economic punditry of those freshwater economists who think the way to deal with the problem of failed market fundamentalism policies is to double-down on those failed policies.

I’ve noted that we tried that already.  We doubled down on  reaganomics policies of tax cuts/militarization/deregulation/& privatization throughout the Bush regime, and that got us into a witch’s brew of problems.

Because of that double-down mentality, where the neos told us war was good and greed was good and where we applied the laughable, made-up-out-of-whole-cloth “Laffer theory” that told us there was no evil that tax cuts (especially for the rich and big corporations) couldn’t conquer, the Bush regime very ably turned a budget surplus into a staggering deficit and a financil crisis that would guarantee more deficits and debt before we were done with it.

We ended up with failed (de)regulatory policies.  They allowed Big Banks and their big moneymakers to speculate their way into phantom billions of profits (all soaked up by the big jefes/big moneymakers).  But instead, we got a near-breakdown of the financial system, that forced all us ordinary taxpayers to subsidize the Big Banks’ losses without getting recompense from the banksters’ earlier oversized payouts.

We ended up with failed tax (cut) policies.  They cut taxes on big multinational corporations and the ultra rich, based on the claim that those are the “job creators” that we should reward.  But instead  they only ended up siphoning off needed revenues from programs that could build infrastructure and support quality education and research.  They privatized education by providing lots of federal loan money to students that went to for-profit schools, only to learn that those schools tend to be traps that don’t educate but just take money for the profit of the “education” business.  They quit funding the stuff we need, so they could subsidize those that didn’t need it.  And they kept the subsidy up–for Big Oil, for wealthy decedents–even when the money was just piling on for those that already had lots of it.

That’s what makes the current ultra-partisan Congress and the constant right-wing talk of deficits and debt as justification for stripping the safety net (while still conferring outsize gains on the ultra rich and Big Business) so disgusting.  The right still  refuses to pay attention to facts and justifies this oft-discredited, clearly wrong-headed market-fundamentalist and class-warfare orthodoxy as “plain as day” correct thinking.

ASIDE:  This seems sort of like the GOP’s plans for gaining the loyalty of our increasing diverse electorate by being careful to package their mostly white, Friedman-orthodox, oligarchy-favoring policies in the sheep’s clothing of multicultural spokespersons who avoid the “tell” of who they really are and use words that talk about ordinary people as though the policies were actually aimed at benefitting them.  Meanwhile they double-down on their claims that redistribution upward is all about job creation, and condemn those who talk about preserving the safety net by NOT reducing benefits as “socialists” who don’t understand the American way.

The American way they seem to be harking to is the era of the corporate titans of malfeasance that Teddy Roosevelt warned us against, who grabbed the gains of the market place well in excess of their productivity merit and didn’t give a damn about the rest of us. (Take Leland Stanford and the building of the great western railroads, subsidized by vast land grants and other programs from the federal government.  Stanford was quite willing to let the Chinamen he hired to use their explosive expertise to carve out railroad tunnels live in hunger because he withheld their pay and die because of inadequate safety , but meanwhile he lived a life of luxury supported by his corporate structure that sent all the money supported by the government subsidies his way and none of it theirs.)

Douglas Holtz-Eakin is a prime example of doubling down on failed policies by ignoring the facts of recent experience.  See Holtz-Eakin, We have to get US government spending under control, (Feb. 14, 2013).  Mark Thoma does a good job of putting him on the hot seat and telling it like it really is.  Read it at Holtz-Eakin Tries to Scare You. Don’t Let Him, Economist’s View (Feb. 14, 2013).  Here’s an excerpt:

Holtz-Eakin (in the Guardian essay): “Debt reduction produces jobs and better economic growth.”
Mark Thoma (in the Economist’s View take-down): “[R]eading that last line, he has learned nothing from the failure of the confidence fairy to appear.  Waiting to fix the debt–a problem driven mainly by health care cost escalation that won’t become severe for many years–is not risky, but his advice certainly is.”
Holtz-Eakin (in the Guardian essay): “Down with the orthodoxy.  It is time to get the deficit under control.”
Mark Thoma (in the Economist’s View take-down): “The notion that we are responding in the same way as in the 60s and 70s, and that we are faced [with] the same type of shock (that require[s] the same types of policies)–an oil price shock and other large supply-side distrubances from demography that we faced then–is wrong and he ought to know that.”…..”The ‘pundit orthodoxy’ he disses is from Paul Krugman.  Kind of funny, given how wrong Holtz-Eakin has been relative to Krugman … but Krugman can speak for himself, and has, on how wrong the ‘we’re about to become Greece!!!’ crowd has been.  There is, however, one thing he [Holtz-Eakin] is correct about.  Holtz-Eakin is right to say we shouldn’t listen to some pundits, especially those like himself who have been so wrong about how events would unfold at every step along the way.”

Holtz-Eakin does a lot more in the Guardian article that is just plain bad, such as claiming that the so-called  Affordable Care Act “entitlement” will contribute to the so-called “entitlement problem,” which will contribute to the “serious” problem that the “deficit orthodoxy” won’t acknowledge.  He then hammers on the right-wing orthodoxy’s pet do-away-with-it-if-we-can projects–Social Security, Medicare, and Medicaid, suggesting that “serious debt reform” requires “serious entitlement reform.” 

As I noted in another recent post, right-wingers like Holtz-Eakin love to talk about safety net programs as “entitlements”, whereas they talk about entitlements for the rich and MNEs, such as the percentage depletion allowance, the preferential capital gains rate, and the various subsidies that have handed outsize profits to big banks as though they were rightfully merited acknowledgements of the good those institutions do the rest of us! The talk about these safety net programs, when entering into a right-winger’s discussion of fiscal issues, is always lopsided.  It is always how we need to cut back on them, and never about how we need to consider if the programs are worthy, the funding currently provided needed or even currently inadequate, and, if the answer is yes, what means make sense, in a sustainable democracy to serve the people, to ensure the ongoing viability of the safety net.  Not reducing benefits but increasing revenues and decreasing rent-profit-taking.

So  Holtz-Eakin fails to acknowledge that actually the Affordable Care Act is a first step in addressing otherwise mushrooming health care costs which occur because we treat health care as a ripe field for rent-seekers to make rentier profits rather than acknowledging (like other advanced countries) that health care is at least a quasi-public good that must be heavily regulated to ensure accessibility.  And like all the right-wingers pushing the hand-wringing worry over deficits for which their own policies are the primary cause, Holtz-Eakin suggests that the core of what we have to do is, quelle surpise, “spending cuts and deficit control”, since “doing nothing or worse, increasing spending, is a profoundly anti-growth strategy.”

This is the doubling-down on failed policy orthodoxy that Americans should reject out of hand.  Spending cuts and efforts at “deficit control” that focus on taking away health care and pension benefits from retirees and others dependent on the safety net are perfect prescriptions for disaster.  We aren’t Greece.  But if the right-wingers like Holtz-Eakin get their way, we will be.

cross posted with ataxingmatter

Thoughts from economics writers on politics

Mark Thoma has put together some thoughts of his own as well as those of Bruce Bartlett, Brad DeLong, and Paul Krugman. I think it is worth a scan.

Bruce Bartlett on President Obama as ‘an old time Republican’ seems to fit the description, without the hyperbole of contentious issue debate:

In a little-noticed comment on Spanish-language television on December 14, Obama himself confirmed this typology of today’s political spectrum. Said Obama, “The truth of the matter is that my policies are so mainstream that if I had set the same policies that I had back in the 1980s, I would be considered a moderate Republican.”
I think this is correct and explains a great deal about why Obama refuses to use his leverage to pursue liberal policies and keeps inviting Republicans back to the negotiating table again and again on the budget. He wants a deal, he wants to cut spending and balance the budget if possible. This may or may not be a wise course for a Democratic president to follow, but that is who Obama is.

Read more at Fiscal Times

Mark adds:

My guess is that Obama already knows that the outcome of that debate will be one in which he looks like he retreated over time. But I also believe that the place he retreats to will be where he wanted to go in the first place; indeed, I suspect he never believed he would get 100% of the Bush tax cuts reversed in the fiscal cliff negotiations. Note too that, to DeLong’s complaint, the next debate will again be an issue of how much austerity. And expect that Obama will allow the negotiations to drag out to the eleventh hour, thereby forcing both Republicans and Democrats to choke down a meal – some combination of tax hikes and entitlement cuts – they both find distasteful.

Biden…"I flat guarantee you"

Mark Thoma takes a poke at Joe Biden’s guarantees on SS  in  No Changes in Social Security:

I wish I could believe this.

Biden guarantees: ‘There will be no changes in Social Security’, by Michael O’Brien, NBC News: …”Hey, by the way, let’s talk about Social Security,” Biden said…”Number one, I guarantee you, flat guarantee you, there will be no changes in Social Security,” … “I flat guarantee you.” 

But the first time Republicans offer a trade (“tell you what, if you cut Social Security, we’ll stop cutting taxes”), will the administration take it? I’m afraid they will.

Here are several of Dale Coberly’s and Bruce Webb’s earlier posts on some of the matters and myths, somewhat at random from the dozens of informative posts on SS:

Social Security: Trust Funds, Actuarial Balance, Sustainable Solvency Posted by Bruce Webb 7/22/2012

Social Security: Simple story vs. myth busting Posted by Bruce Webb 2/18/2009

Reframing the Trust Fund  Posted by Bruce Webb  6/15/2008

Social Security For The Young  Posted by Dale Coberly  10/04/2011

DAMNED LIARS AND SOCIAL SECURITY Posted by Dale Coberly 4/11/2012

Mark Thoma goes ballistic

Mark Thoma goes ballistic:

I don’t understand why someone with such a clownish views is lauded as a policy wonk:

What did Ayn Rand teach Paul Ryan about monetary policy?, by Brad Plumer: In 2005, Paul Ryan explained that he often looks to Ayn Rand’s novel “Atlas Shrugged” as inspiration for his views on monetary policy.

[See Brad DeLong too: Reflections on Paul Ryan’s Transactions in Individual Bank Stocks in 2008.]

Romney and Ryan don’t approve of fiscal policy stimulus (unless it’s tax cuts for the wealthy), and Ryan would take away the ability of the Fed to respond to unemployment as well. Basically, they are telling us that if a recession hits and they have their way, nothing will be done. Not a thing. No fiscal policy response (except perhaps austerity to make it worse), and no monetary response (except, if Ryan has his way, interest rate increases based upon a misunderstanding of how the economy works — that would also make things worse). So it wouldn’t just be the “you’re on your ownership society” of Randian dreams, Ryan would have monetary and fiscal authorities making things even worse than they already are.

Ryan is not a well-informed policy wonk with new, exciting ideas. He’s a policy idiot. Don’t let this guy anywhere near the policy levers.


Brad DeLong offers a long post on economists on the Romney team.


Notes on HHMT: Kevin Hassett, Glenn Hubbard, Gregory Mankiw, and John Taylor, “The Romney Program for Economic Recovery, Growth, and Jobs”

HHMT: We are presently in the most anemic economic recovery in the memory of most Americans, with significant joblessness and long-term unemployment, as well as lost income and savings.
WRONG: We are in the worst downturn, but we are not in the “most anemic” recovery–the recovery of 2001-2004 was more anemic. HHMT should know: three of them held high federal office in the George W. Bush administration that managed that recovery,and back then all four attempted (uncovincingly, IMHO) to rebut claims from people (like me) that the early 2000s recovery was anemic and that more stimulative policies were then needed.Why don’t HHMT make the true claim that we are in the worst downturn? Why do they make the wrong claim that we are in the most anemic recovery? Because they do not want to talk about how back when they were in office they played their role in failing to use their leverage to argue for more expansionary fiscal and monetary policies to speed the then-recovery.Why weren’t HHMT arguing, back in 2001-4, either inside or outside the government, for more expansionary fiscal and monetary policies to speed the then-recovery? I don’t know.Those of us who were so arguing would have found their help most welcome.

The list is long for a post….worth reading.

David Glaser tackles Art Laffer in Arthur Laffer, Anti-Enlightenmen Economist from the Wall Street Journal.

The importance of Social Security

Via Mark Thoma comes this study of the financial status of many Americans in the last part of their lives:

Social Security works:

Study: Many Americans die with ‘virtually no financial assets’, by Peter Dizikes, MIT News Office: It is a central worry of many Americans: not having enough money to live comfortably in old age. Now an innovative paper co-authored by an MIT economist shows that a large portion of America’s older population has very little savings in bank accounts, stocks and bonds, and dies “with virtually no financial assets” to their names.

Indeed, about 46 percent of senior citizens in the United States have less than $10,000 in financial assets when they die. Most of these people rely almost totally on Social Security payments as their only formal means of support, according to the newly published study, co-authored by James Poterba of MIT, Steven Venti of Dartmouth College, and David A. Wise of Harvard University.

Worth reading.

‘The One-Sided Deficit Debate’

Via Economist View comes James Kwak at Baseline Scenario on the early deal made on the the ‘fiscal cliff’:

‘The One-Sided Deficit Debate’

James Kwak is pessimistic about the deficit debate:

What’s more, the “consensus” of the self-styled “centrists” is what now makes the Bush tax cuts of 2001 and 2003 seem positively reasonable. With Simpson-Bowles and Domenici-Rivlin both calling for tax rates below those established in 2001, George W. Bush now looks like a moderate; even many Democrats now endorse the Bush tax cuts for families making up to $250,000 per year, which is still a lot of money (for most people, at least).

But some of the blame for this state of affairs must rest with Democrats, liberals, and their usual mouthpieces as well. For over a year now, the refrain of the left-leaning intellectual class has been that the only thing that matters is increasing growth and reducing unemployment, and any discussion of deficits and the national debt plays into the hands of the Republicans. It may be true that jobs should be the top priority right now, but the fact remains that many Americans think that deficits matter (and most of those left-leaning intellectuals would concede that they matter in the long term). Those Americans are currently getting a menu of proposals with Simpson-Bowles in the right, Paul Ryan and Mitt Romney on the far right, and Fox News on the extreme right. There is no explanation of how to deal with our long-term debt problem in a way that preserves government services and social insurance programs and protects the poor and the middle class.

Not All Economists are to Blame, But Some Are

Mark Thoma notes the discrepancy between pretty much standard economics and what the popular discussion considers ‘economics’ :

Not All Economists are to Blame, But Some Are 

A defense of some, but not all economists:

Why Some Economists Failed 

I assert that some economists got things mostly right about the recession and what was needed to fix it, but they have been ignored in policy discussions. Conversely, those who got things mostly wrong were given prominent seats at the policy-setting table where they continued to make errant forecasts even as the evidence piled up against them. One attempt at rebuttal is, I suppose, is to ask how we know who was correct? The answer is that unlike the economists who continue to promote austerity, fear of inflation, and so on, the assertion is based upon the empirical evidence on these issues. [See Paul Krugman for a related issue, why fear of inflation, deficits, and so on “resonates with a lot of people no matter how often and how badly the worldview fails in practice.” Part of my point is that I don’t think economists are free of blame for this.]

Republicans Want to Repeal Resolution Authority

Mark Thoma points us to

Republicans Want to Repeal Resolution Authority

the House Republicans on the Financial Services Committee just voted to repeal “resolution authority.”

Let’s review the history. When the crisis hit, the government bailed out many financial firms — shadow banks as they are known. That’s not what it does when an ordinary bank fails. When ordinary banks fail, the government takes over the bank, puts the good assets in one pile, the bad assets in another, then repackages the good assets into a new bank that is sold back to the private sector as soon as possible.

This has many advantages, including the ability to replace managers of failed firms instead of rewarding them with a bailout. So why wasn’t this approach adopted during the financial crisis? The Treasury argues that it did not have the legal authority to take over large shadow banks — these banks fell outside of the existing regulatory umbrella (there is dispute on this point, some people claim the government regulators could have twisted existing regulation to allow this, but government regulators insist otherwise). Thus, government regulators believed there were only two (bad) choices. Let too big to fail banks fail and suffer the economic consequences, or to bail them out, including bailing out the owners and managers who had led the banks to disaster. If it had resolution authority — the ability to step in take over when banks fail — the rewards to management could have been avoided, and taxpayers could have been better protected in other ways, but limits on legal authority gave regulators only two bad options. Do nothing, or bail the banks out.