American Conservatism’s Crisis of Ideas: Project Syndicate Monarchy, Patriarchy, Orthodoxy Weblogging

American Conservatism's Crisis of Ideas: Project Syndicate Monarchy, Patriarchy, Orthodoxy Weblogging

Brad DeLong

Let me note three things:

1. Most of what I have to say is highly, highly derivative from Mike Konczal and Mark Schmitt (and others);
2. The problem is not just that today's crop of AEI-conservative ideas is not politically sustainable, but that it is simply wrong--Cahn and Carbone's Red Families, Blue Families has convinced me that contra Murray America's (Blue) families are actually in pretty good shape (Red families that try to keep their daughters ignorant about family planning not so much), my take on Eberstadt is coming out in Democracy Journal later this month; and
3. Arthur Brooks seems to me at bottom simply lamenting that Democratic policies work and make people's lives better--that Republicans are losing their campaign to try to make America a worse-off place does not strike me as a minus.

And we are live at Project Syndicate:
American Conservatism's Crisis of Ideas: BERKELEY – On the back left corner of my desk right now are three recent books: Arthur Brooks' The Battle, Charles Murray's Coming Apart, and Nicholas Eberstadt's A Nation of Takers. Together, they constitute an important intellectual movement, which also happens to be a large part of the reason that American conservatism today has little that is constructive to say about managing the economy – and little purchase on the center of the American electorate.
But let's back up historically, to the founding of what we might call modern conservatism in early nineteenth-century Britain and France. There were some – Frédéric Bastiat and Jean-Baptiste Say come to mind – who believed that government should put the unemployed to work building infrastructure when markets or production were temporarily disrupted. But they were balanced by those like Nassau Senior, who spoke out against even famine relief: Although a million people would die in the Irish Potato Famine, "that would scarcely be enough."
The main thrust of early conservatism was root-and-branch opposition to every form of social insurance: make the poor richer, and they would become more fertile. As a result, farm sizes would drop (as land was divided among ever more children), labor productivity would fall, and the poor would become even poorer. Social insurance was not just pointless; it was counterproductive.
The proper policy was to teach people to venerate the royal throne (so that they would respect property), the paternal hearth (so that they would not marry imprudently young), and the religious altar (so that they would fear pre-marital sex). Then, perhaps, with women chaste for half or more of their childbearing years, the surplus population would diminish and conditions for the poor would be as good as they could be.
Fast-forward 150 years to post-World War II America, and to the original Chicago School critique of the New Deal version of social insurance – that it created "notches" that perverted economic incentives. The government, Milton Friedman and others argued, told the poor: make more money and we will take away your free housing, food stamps, and income support. People are rational, Friedman said, so they will not work for long if they get nothing or next to nothing for it.
The big difference between the Malthusian conservative critics of social insurance in the early nineteenth century and the Chicago critics of the 1970's is that the Chicago critics had a point: Providing public support to the "worthy" poor, and then removing it when they began to stand on their own feet, poisoned incentives and was unlikely to lead to good outcomes.
And so, from 1970 to 2000, a broad coalition of conservatives (who wanted to see the government stop encouraging immorality), centrists (who wanted government money spent effectively), and leftists (who wanted poverty alleviated) removed the "notches" from the social-insurance system. Presidents Jimmy Carter, Ronald Reagan, George H. W. Bush, Bill Clinton, and even George W. Bush and their supporters created the current system, in which tax rates and eligibility thresholds are not punitive disincentives to enterprise.
So what is the problem that America's new generation of conservative critics of social insurance sees? It is not that raising poor people's standard of living above bare subsistence produces Malthusian catastrophe, or that taxes and withdrawal of welfare benefits make people work, at the margin, for nothing and so provide massive incentives to slack off.
For Eberstadt, the problem is that dependence on government is emasculating, and that too many people are dependent on government. For Brooks, it is that knowing that public programs make one's life easier causes one to vote for non-Republican candidates. For Murray, it is that social insurance means that behaving badly does not lead to catastrophe – and we need bad behavior to lead to catastrophe in order to keep people from behaving badly.
The crucial point is that America's conservative elites today believe Brooks, Eberstadt, and Murray. To this day, Mitt Romney is convinced that he lost the presidency in 2012 because Barack Obama unfairly gave Latino-Americans subsidized health insurance; gave women free reproductive health coverage (excluding abortion); and gave other groups similar "gifts." He could "never convince them that they should take personal responsibility and care for their lives."
In fact, it would be a tough sell for any candidate to convince Americans who receive government benefits that they are dependent rather than empowered; that it is bad for people to vote for politicians who make their lives better; and that good public policy seeks to create human catastrophe rather than to avert it. The problem for American conservatives is not their choice of candidates or the tone of their rhetoric. It is that their ideas are not politically sustainable.

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Economists on the Minimum Wage

IGM Forum:

Question A: Raising the federal minimum wage to $9 per hour would make it noticeably harder for low-skilled workers to find employment. 

Agree: 34% 

Disagree: 32%

Question B: The distortionary costs of raising the federal minimum wage to $9 per hour and indexing it to inflation are sufficiently small compared with the benefits to low-skilled workers who can find employment that this would be a desirable policy. 

Agree: 42% 

Disagree: 8%

Full story here.

Yes, Thoughtful Economists Think Raising the Minimum Wage Right Now Is a Goo...

Yes, Thoughtful Economists Think Raising the Minimum Wage Right Now Is a Good Idea

via Brad DeLong by J. Bradford DeLong on 2/27/13

I would point out that the EITC and the minimum wage have different weak points--too high a minimum wage will have a substantial disemployment effect, and too high an EITC does create incentives to pad your hours. A mixed strategy helps attenuate both these flaws.
Steve Roth:

Leading Economists Vote on Raising the Minimum Wage: I'm delighted to see the U Chicago IGM Forum ask a really useful, non-softball question.

The panelists are evenly split on whether an increase to $9 would make it "noticeably harder for low-skilled workers to find employment."
A 4:1 majority thinks that weighing the costs and benefits, "this would be a desirable policy."

I note how many who commented bring up the EITC, suggesting that an increase in that support might be better than a minimum-wage increase. I note further that they apparently haven't read the very good reasoning and research suggesting that the two together very effectively address the problems of each. But Paul Krugman has. And his surprise helps explain why the others haven't thought about this:

Second — and this is news to me — the usual notion that minimum wages and the Earned Income Tax Credit are competing ways to help low-wage workers is wrong. On the contrary, raising the minimum wage is a way to make the EITC work better, ensuring that its benefits go to workers rather than getting shared with employers. This actually is Econ 101, but done right.

Disappointing to see Caroline Hoxby believing that our unemployment right now is structural:

Question A: Raising the federal minimum wage to $9 per hour would make it noticeably harder for low-skilled workers to find employment.

Unemployment among low-skilled workers is already high by historic standards, indicating that wages are already too high for market-clearing.

Richard Schmalensee puts my view concisely:

Question A: Raising the federal minimum wage to $9 per hour would make it noticeably harder for low-skilled workers to find employment.

There would surely be some [disemployment] effect, but "noticeably" seems a reach.

As does Richard Thaler:

Question A: Raising the federal minimum wage to $9 per hour would make it noticeably harder for low-skilled workers to find employment.

Yes, I know the Econ 101 answer but the evidence suggests the effect on employment is between small and 0.

Question B: The distortionary costs of raising the federal minimum wage to $9 per hour and indexing it to inflation are sufficiently small compared with the benefits to low-skilled workers who can find employment that this would be a desirable policy.

All methods of helping the poor cause distortions. This one not bad.

Paul Krugman:

Minimum Wage Economics: what should you know? First, as John Schmitt (pdf) documents at length, there just isn't any evidence that raising the minimum wage near current levels would reduce employment. And this is a really solid result, because there have been a lot of studies. We can argue about exactly why the simple Econ 101 story doesn't seem to work, but it clearly doesn't — which means that the supposed cost in terms of employment from seeking to raise low-wage workers' earnings is a myth.
Second — and this is news to me — the usual notion that minimum wages and the Earned Income Tax Credit are competing ways to help low-wage workers is wrong. On the contrary, raising the minimum wage is a way to make the EITC work better, ensuring that its benefits go to workers rather than getting shared with employers. This actually is Econ 101, but done right: given a second-best world in which you use imperfect tools to help deserving workers, two tools together can produce a better outcome than either one on its own.
So a minimum wage increase isn't some kind of counsel-of-despair way to help workers a bit in a dysfunctional political scene (although there's that too); it's actually good policy.

And Mike Konczal:

Interview with Dube; EITC and Minimum Wage as Complements: I still notice many people arguing that we should just raise the earned income tax credit (EITC) for the working poor rather than raising the minimum wage…. The EITC partially subsidizes employers, and as such the minimum wage is an excellent way to combat this. So it complements, rather than substitutes, for an EITC. Economists love to tell people that who pays a tax is independent of who Congress wants to pay it. The "Tax These Evil Corporations Act" might fall entirely on people buying stuff from those firms instead of their shareholders…. Jesse Rothstein did an estimate finding that for every dollar of EITC, a worker's wage only goes up 73 cents. That's a big capture by employers…. David Lee and Emmanuel Saez have a paper arguing that when this is the case (and if the EITC works primarily by bringing people into working, via an extensive margin, which it does), the minimum wage is an excellent complement to low-wage government transfers tied to work. Or as Dube says:

We have different polices designed for different distributional goals. We need to think not in terms of a single policy, but instead think in terms of what is the right portfolio of policies given the range of objectives you have.

The minimum wage is an excellent tool to boost the efficacy of government transfers, and it should be raised and tied to a cost of living raise. There's no magic bullet - there's just a variety of tools that reinforce each other.

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Stand Back

 Stand Back

via Conscience Warrior by Jonas Feit on 2/25/13

Inspired, or course, by this.

  

The Spending Problem

Jonathan B. Wight

Some critics of government would like services and regulations to be cut to the minimum—keeping modest defense and justice, but allowing everything else to devolve to the market.

That's a wonderful utopian ideal. But we shouldn't let the best become the enemy of the good. That utopian ideal did not work in the time of Adam Smith, who favored reasonable regulations and expenditures for public goods like education. And it makes even less sense today.

Since that time, strong forces have pushed us toward more government. Here are two reasons, both relating to wealth:

Population density. The world's population has doubled, and doubled, and doubled again. That growth has now slowed, but we have far higher population density and it will continue to increase in cities. People living on top of each other produce both positive and negative externalities. Since Pigou, economists have demonstrated how government intervention can deal with negative externalities through taxes, regulations, and so on.

Ronald Coase is often credited with discovering that the market, left to its own self-interest, could solve the problem of negative externalities without government—assuming property rights and low transactions costs for defending those rights. But Coase explicitly rejected this notion, writing: "The world of zero transactions costs has often been described as a Coasean world. Nothing could be further from the truth." -- Ronald H. Coase, The Firm, the Market, and the Law (Chicago: University of Chicago Press, 1988, p. 174).

Let us imagine we could magically bestow property rights and other human rights on the citizens of Beijing, as well as an impartial judicial system. One fundamental human right is the right not to be injured by others without cause. Beijing residents currently experience terrible health injuries from car and truck pollution. Even with rights and a reliable legal system for defending them, who is the citizen of Beijing going to sue? No single car or truck is the cause of the injury, but only in combination. The transactions costs for suing all the drivers would be enormous. The market cannot solve this particular negative externality. There is a need for government regulation or taxing to discourage activities that produce negative externalities when no property rights exist (the atmosphere) or where transactions costs are high.

Enlarging moral sentiments. The rise of wealth also enhances our abilities to connect with other human beings, as shown by Benjamin Friedman's, The Moral Consequences of Economic Growth (2006). Rising wealth led to the fall of slavery, the rise of women's rights, and the invention of the safety net. The old, the sick, and the unemployed are not forgotten or shuffled aside. There are always significant moral hazards, of course, leading to the notion of "welfare queens," and the backlash against the state.

The reality, however, is that most Americans strongly favor environmental and safety nets. Rather than spending cuts, most Americans want spending increases in these areas, as shown in this recent Pew survey:

It is not a moral failing that the American people should want to clean the environment and help others. The key problem is that people want such benefits without being able to pay for them. The PEW questionnaire doesn't help. The question should be: "How much additional tax would you be willing to pay to increase X spending?"

Another key problem is that the total effects of all these incremental increases in spending or regulation are rarely considered.  Like a frog in the pot of water, a little more heat doesn't matter, but the overall effect of incremental increases in heat could be destructive.

Why Does the Minimum Wage Have No Discernible Effect on Employment?

Center for Economic and Policy Research:

The employment effect of the minimum wage is one of the most studied topics in all of economics. This report examines the most recent wave of this research – roughly since 2000 – to determine the best current estimates of the impact of increases in the minimum wage on the employment prospects of low-wage workers. The weight of that evidence points to little or no employment response to modest increases in the minimum wage. [emphasis added]

Why Does the Minimum Wage Have No Discernible Effect on Employment?

Omitted Variable Bias: Slovenly Men Edition

What is unseen

Free exchange

STEPHEN DUBNER publishes a reader question:

I live with four guys in a house. We had no cleaning schedule until about a month ago, but the house was never cluttered, and was more than clean enough for actual women to feel comfortable visiting. Even the bathroom was clean enough for the girls to freely use it without vomiting. However since we have implemented our cleaning schedule the house has gotten into worse and worse shape. The toilet downstairs is even looking so bad I don't want to use it. What gives?

Mr Dubner comments:

Okay, everybody, let's hear what you have to say about private vs. public incentives, moral hazard, and the general cleanliness of men.

Incentives, right!? Beware unintended consequences! Only, I suspect omitted variable bias. If the house was previously neat and clean, why did the roommates feel the need to adopt a cleaning schedule? I suspect that an unobserved factor led the roommates to introduce a schedule and contributed to a deterioration in the neatness of the house. Perhaps one of the roommates, a neat freak, began a serious relationship and started spending lots of of time away from the house. Or perhaps he simply grew tired of doing all the cleaning and resolved to let the others do their share or live in filth. Or he sustained an injury. One must always be wary of spurious correlation!

Macroeconomic Models of Heterogeneous Agents

http://people.virginia.edu/~tm5hs/lectureBOJweb.pdf

Mississippi Takes a Bold Step into the 1870s

By KEVIN ROBILLARD | 2/19/13 7:28 AM EST

A hundred and forty-eight years after it became law, and 18 years after passing it, Mississippi officially ratified the 13th Amendment banning slavery.

The cause of the delay? A clerical error, according to The Jackson Clarion-Ledger.

In 1995, Mississippi was the only state not to have passed the 13th Amendment. While it passed unanimously, the resolution was never sent to the Office of the Federal Register at the National Archives, a required step.

Two University of Mississippi employees — Ranjan Bantra, a doctor who became a U.S. citizen in 2008 and Ken Sullivan, who works for the university’s body donation program — started researching after seeing “Lincoln,” about the 16th president’s efforts to pass the amendment through Congress. Sullivan eventually contacted the Mississippi Secretary of State’s office, which was able to fix the error. On Feb. 7, the Archives wrote back that Mississippi’s ratification was official.

“Now it’s officially filed and recorded,” Sullivan told the paper over the weekend. “There’s no asterisk by Mississippi anymore.”


via

Ron Paul's Money Illusion (Sequel)

Eighteen months after its original publication, this post is still apropos.  -Ed.


Ron Paul's Money Illusion (Sequel), by David Andolfatto

As I promised to do here, I am posting a sequel to my original column: Ron Paul's Money Illusion. I want to thank everyone who took the time to comment and criticize the views expressed there because it has led to me to sharpen my thinking on the matter. I doubt that what I have to say here will sway opinion one way or the other, but I at least hope that the nature of my criticism will be more clearly understood. 
  

Peter Temin: Macroeconomics Has Lost Its Way

Via Mark Thoma:

Here are a few passages from a much longer interview of Peter Temin:

Peter Temin in Conversation with The Straddler: ...In my opinion, macroeconomics has lost its way. The kind of models that many people use—general equilibrium models—start from assumptions of ... omniscient consumers, and various like things which give rise to an efficient economy. As far as I know, there has never been an economy that actually looked like that—it's an intellectual construct. But many people claim that the outcomes of that economy are natural outcomes. When you say "natural," you already have an emotionally laden term. Deviations from the "natural"—say, like, minimum wage laws, or unions, or governments that give food stamps, or earned income tax credits—are interferences with the natural order and are therefore "unnatural." ...

The general equilibirum view tends to lend support to those who want to make the economy more efficient in the sense of having fewer "distortions"—you know, all of these neutral economic words—from taxes, from labor unions, from minimum wages, and so on. Now, what has happened in the last thirty years—and this is what Hacker and Pearson note in their book [Winner-Take-All Politics]—is we have gotten ourselves into a feedback situation. As people have gotten richer, conservative people have funded organizations which generate economic research promoting their political views.

I recently reviewed a book [published by the Federal Reserve Bank of Minneapolis and] edited by Timothy Kehoe and Edward Prescott—a Nobel Prize winner in Economics—which had a very distinguished group of people writing about macroeconomics and depressions using the currently fashionable general equilibrium analysis. In my review, I argued that the answers that they got were terrible, that the model—however useful it is for other things—is not useful to analyze the conditions like the conditions today. And I even suggested [here Temin read from the review]:

Lurking behind these presumed inefficiencies appears to be a campaign for minimal government. Minimal government would not require many taxes as it would not have large expenditures; it would not interfere in labor markets, letting individual workers deal with large business firms as ordinary people deal with the grocery store. This is not an attractive place to live for some people, and this book appears to be supporting such an arrangement by stealth, rather than by direct argument. If this is an intended subtext, it would be appropriate for the authors and the Federal Reserve Bank of Minneapolis to bring it out into the open.[3]

The authors of the book deny that that's what they were doing, but I think it is implicit that current economics has a political stance, or at least political implications.[4] But these guys working at the Minneapolis Fed can say, well, you know, we're not partial, we're neutral scientists. ...

A real problem is that a lot of people don't know enough economic history. I'm an economic historian, which is a kind of endangered species. When I think about macroeconomics, I think about the Great Depression a lot because I worked on it and taught about it and so on. But, look, a lot of people in the 90s didn't have personal experience of the Depression. They didn't think it was terribly relevant. ...

To give you an idea about the state of the profession, here's a key piece of advice for getting published in top journals:

1. You always need to think carefully about the journal you submit to, and you need to research the kinds of papers that have been published there; whether the journal seems to be open to your type of work; who the editor is and what his or her orientation is; and who the associate editors are, because they are likely to be referees for your paper. 

This is basically saying that if your "orientation" is different from the editors, freshwater instead of saltwater for example, you can forget about publishing in that journal. Yet we hear about open-mindedness, and that "we're not partial, we're neutral scientists."

Posted by Mark Thoma on Wednesday, May 4, 2011

Demand Side Economics

via Conscience Warrior by Jonas Feit on 2/15/13

Conscience Warrior has a new reader in the person of Alan Harvey, chief cook and bottlewasher over at Demand Side Economics. He very generously mentioned us in the most recent episode of his podcast. While I don't subscribe to every last detail of his views, I think we are in broad agreement on the way in which the world works, and as to what the best solutions are to the problems we face.

He published Demand Side: The Book last year, which compiles the ideas of some of the great minds of economics past and present into a sort of field guide to modern markets and the macroeconomy.

Mr Harvey also maintains the excellent forecasting site re: Macro Baseline.

No, Marco Rubio, government did not cause the housing crisis

via Wonkblog by Ezra Klein on 2/13/13

In his response to the State of the Union, Sen. Marco Rubio said: "This idea – that our problems were caused by a government that was too small – it's just not true. In fact, a major cause of our recent downturn was a housing crisis created by reckless government policies."

Multiple-Peaked Papal Preferences and Arrow's Impossibility Theorem

Dylan Matthews:

NYU political scientist Joshua Tucker and PM at Duck of Minerva have compiled a good set of political science research into papal elections. It’s a sensitive subject because, as GWU professors Forrest Maltzman, Melissa Schwartzberg and the late Lee Sigelman put it in their paper on Benedict’s election, “Officially, Ratzinger’s selection was attributed to the will of God, a force not amenable to any empirical test that is in our power to conduct.”

... 

...a funny thing happened in 1996. John Paul II issued Universi Dominici Gregis, a document revising the two-thirds requirement. In filibuster parlance, he went nuclear.

[emphasis added]

Read the post; there's plenty more where that came from...

Still Say's Law After All These Years

Economics and Politics by Paul Krugman - The Conscience of a ...

When John Maynard Keynes wrote The General Theory, three generations ago, he structured his argument as a refutation of what he called "classical economics", and in particular of Say's Law, the proposition that income must be spent and hence that there can never be an overall deficiency of demand. Ever since, historians of thought have argued about whether this was a fair characterization of what the classical economists, or at any rate his own intellectual opponents, really believed.
Not being an intellectual historian myself, I won't venture an opinion on that subject. What I will say, however, is that Say's Law (Say's false law? Say's fallacy?) is something that opponents of Keynesian economics consistently invoke to this day, falling into exactly the same fallacies Keynes identified back in 1936.
In the past I've caught Brian Riedl and John Cochrane doing it; now Peter Dorman finds Tyler Cowen in their company.
Cowen can't see why corporate hoarding is a problem. Like Riedl and Cochrane, he concedes that there might be some problem if corporations literally piled up stacks of green paper; but he argues that it's completely different if they put the money in a bank, which will lend it out, or use it to buy securities, which can be used to finance someone else's spending.
But of course there isn't any difference. If you put money in a bank, the bank might just accumulate excess reserves. If you buy securities from someone else, the seller might put the cash in his mattress, or put it in a bank that just adds it to its reserves, etc., etc.. The point is that buying goods and services is one thing, adding directly to aggregate demand; buying assets isn't at all the same thing, especially when we're at the zero lower bound.
What's depressing about all this is that Say's Law is a primitive fallacy – so primitive that Keynes has been accused of attacking a straw man. Yet this primitive fallacy, decisively refuted three quarters of a century ago, continues to play a central role in distorting economic discussion and crippling our policy response to depression.

Richard III, Part Deux

NYT: Bones Under Parking Lot Belonged to Richard III

BBC: Richard III dig: DNA confirms bones are king's

PK: Archaeology Is Awesome

Charley James, from the PK blog post:

"It just occurred to me that it must have cost a fortune to get Richard III out of the lot after all this time. At £1.60 for the first half-hour and £1.10 for each additional half hour, it was probably enough to fund national health and the BBC forever."

No One Makes You Shop at Wal-Mart

Tom Slee: No One Makes You Shop at Wal-Mart: The Surprising Deceptions of Individual Choice: Chapter 1 — A World Of Choice:


We live in a world of choice.

We make choices every day. We choose the clothes we wear, the way we travel, the movies we watch, and the places we shop. From time to time we make bigger choices as well: the neighbourhoods we live in, the jobs or universities or schools we go to, and even the cultures we identify with. These choices give us a measure of control over our lives, and it seems natural to believe that individual choice is, almost by definition, a good thing.

Charts: What if Obama spent like Reagan?

Charts: What if Obama spent like Reagan?

Ezra Klein

In 10 of the past 12 quarters, total government spending and investment has fallen, dragging down the Obama economy. That's in large part because state and local cutbacks have been so severe, but it's also because federal spending and investment has, on the whole, been falling since 2010.
This isn't an unusual analysis. You can see the numbers for yourself if you head to the Bureau of Economic Analysis's GDP data and scroll through column 21 of table 1.1.2. It's simply a fact that real government spending fell in three of President Obama's first four years.
That made me curious: How does government spending and investment during Obama's first term compare to Ronald Reagan and George W. Bush's first terms? The answer is poorly. Whereas total government spending dropped in 10 out of the 16 quarters that comprised Obama's first term, it rose in 13 out of Reagan's first 16 quarters, and 13 out of Bush's first 16 quarters.


Or, to put it differently, over Obama's first term, falling government spending and investment snipped, on average, .11 percentage points of GDP off of (annualized) quarterly growth. During Reagan's first term, it added .68 percentage points, and during Bush's first term, it added .52 percentage points.


The point isn't that Reagan and Bush were big spenders while Obama favors austerity. If it were up to Obama, the federal government would have spent much more since 2010. Moreover, these numbers are, in large part, functions of the economies the three men inherited. Each saw a recession in their first term, but Obama's was by far the worst, and so it led to much more severe cutbacks in state and local spending.
Rather, these graphs simply establish a basic fact about Obama's term: While deficits have indeed been high, government spending and investment has been falling since 2010. This is, in recent presidential administrations, a simply unprecedented response to a recession. Just for fun, I took Obama's GDP growth, netted out the effect of government spending and investment, and then added the total government spending and investment numbers — which include state and local government — from Reagan's first term. The result is a significantly better economy, with growth since 2010 averaging 3.2 percent rather than 2.4 percent.


Basic economic theory would hold that you want a larger contribution from government spending during a big recession in which private demand is weak than you do during a mild recession or a healthy economy. But that's been the case in Obama's economy, and all signs are that the pace of government spending cuts will accelerate sharply over the next year.

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Joe Biden can't get no respect. But he deserves some.

Joe Biden can't get no respect. But he deserves some.

via Wonkblog by Ezra Klein on 1/11/13

For a 70-year-old man, U.S. Vice President Biden sure spends an awful lot of time winning the Internet. No other living politician has quite the same ratio of words spoken to memes inspired. Last week's contribution was the patter of joyously weird, occasionally creepy, one-liners he threw off while swearing in the 113th Senate.
"Spread your legs!" He told Sen. Heidi Heitkamp's husband. "You're gonna be frisked!"
"Mom, I'll see you in a little bit," he winked to Sen. Bob Casey's mother (he called all the mothers "mom"). "I hope I'll sneak over and see you."
Sen. Tim Scott's brother, a former football player, got this instant classic: "Need any help on your pecs, man, give me a call." Sen. Orrin Hatch's granddaughter was advised: "No serious guys until you're 30." To the brunette alongside Sen. Robert Menendez, it was: "You are so pretty. God love you. Holy mackerel." At one point, Biden turned to the crowd in the gallery above. "Anybody else want to be sworn in as a senator today?"
You could no more imagine President Obama delivering these lines -- save maybe the "pecs" one -- than imagine him eating pork rinds while watching "Two and a Half Men" enfolded in a Snuggie. Obama doesn't do backslapping bonhomie. But people love watching Biden do it. (Have you seen the gif, "This Is How Joe Biden Greets Babies"? Amazing.) That's why the White House Web site is featuring a petition to let Biden star in his own reality show. It's a good idea, I think. Why don't we call it the 2016 presidential campaign?
In the continuing drama that is the Obama presidency, Biden often appears as comic relief. He's the zany neighbor, the adorable uncle. As a result, his presidential ambitions, which burn brightly even today, have mostly been laughed off. Somehow, the sitting vice president of the United States, the former chairman of both the Senate Foreign Relations Committee and the Senate Judiciary Committee, a man who's on a nickname basis with many of the world's most powerful leaders, is seen in many quarters as lacking the gravitas to be president.
Yet just a few days before he was giving dating advice on C-SPAN2, Biden again proved himself perhaps the most effective member of the Obama administration. He reprised his role as the White House closer, the guy who can cut a deal with the Republicans after everyone else has failed. In the end, Biden got Senate Minority Leader Mitch McConnell to strike a deal that the White House was happy with. That's something neither Obama nor Treasury Secretary Tim Geithner had achieved. And it wasn't the first time. Biden also helped close the 2011 deal that lifted the debt ceiling and the 2010 deal that extended the Bush tax cuts in return for fresh stimulus.



Biden's skills as a campaigner are also considerable. According to Nielsen, his speech at the 2012 Democratic National Convention won better television ratings than the addresses of either Bill Clinton or Obama (or Republicans Mitt Romney and Rep. Paul Ryan, for that matter). His debate performance against Ryan bucked up anxious Democrats and arguably stanched the bleeding from Obama's hapless initial appearance against Romney.
As a policy maker, Biden's reputation is more mixed. Those who've worked closely with him describe a dedicated workhorse eager to master details. Unlike Obama, however, who grasps policy minutiae instantly, Biden doesn't naturally think in charts and tables. At times, Biden goes with his gut rather than the evidence, a tendency that can lead him to embrace bad policy that sounds good. On the other hand, he is also known for choosing some of the best and most substantive staff members in Washington. A politician allergic to policy doesn't surround himself with the wonky likes of Ted Kaufman, Ron Klain, Jared Bernstein and Bruce Reed.
Biden has also proved himself an effective and trusted manager in the Obama administration. He was named top cop on the stimulus -- "Nobody messes with Joe," Obama grinned when appointing him -- and the funds were spent on time and shockingly free of graft and fraud. Subsequently, Obama put him in charge of other crucial tasks, including the current push for a viable package of gun-control policies, in which Biden just succeeded in bringing Wal-Mart Stores Inc. to the table.
If Biden can't quite match Obama's policy chops, he has an ease with other politicians that the president hasn't mastered. In negotiations, Obama's policy-centric approach is arguably a hindrance, leading him to spend much of his time lecturing Republicans about the myriad ways in which they're wrong. That Obama is often right on the policy merits doesn't diminish Republican feelings that a trip to the Oval Office is a date with condescension.
Biden produces different results. His success in negotiating with McConnell might be partly attributable to the Republican Party's loathing of Obama -- repeatedly bypassing Obama in favor of his vice president is, after all, a kind of insult to the president -- but it's also attributable to the fact that Republicans like Biden and feel he treats them fairly. "Does anyone down there know how to make a deal?" McConnell drawled when he called Biden to resolve the fiscal cliff. It was a rhetorical question, to which both men knew the answer: "Biden."
A bit over four years ago, Obama was elected on a promise to change Washington. He and his team argued that what politics needed was something new -- a post-partisan, post-boomer, post- racial president who could help the country move past old antagonisms and into a more united future. The Obama administration has had many successes, but ratcheting down partisanship isn't one.



The irony, of course, is that the one bright spot in the White House's dealings with Republicans has been Biden's old-school, back-slapping, Senate-steeped, Washington-lifer approach. Turns out that sometimes an old dog knows the right tricks.
So don't laugh when you hear that Biden wants to run for president. Biden is one of the most successful vice presidents in history, and one of the most successful politicians of a very difficult era. He may sometimes make himself a punch line, but he has the record of a heavyweight.

'Talk of Shirkers Echoes Victorian Past'

 

'Talk of Shirkers Echoes Victorian Past'

via Economist's View by Mark Thoma on 1/10/13

What causes poverty?:

Talk of 'shirkers' echoes Victorian past, by Tristram Hunt: ...the debate about how to cut back Britain's spiraling social security system is ... replete with echoes of the past. The language of "workers" versus "shirkers" is a straight lift from the mid-Victorian moralism of deserving and undeserving poor. Yet the most unfortunate rhetoric involves the return of "character" as the critical determinant of poverty. ...

This was the prejudice that first spurred Charles Booth, the Liverpool shipping magnate, to investigate the causes of poverty in 1880s London. Dismissive of socialist claims of mass unemployment, he established a network of researchers to pick over the lives of the poor.

It was a pioneering sociological investigation designed to prove Booth right: that poverty was limited and the poor were poor because of their alcoholism, lust or dislike of work. ... In fact, Booth's study revealed that circumstance not character dictated poverty. ...

Booth's study formed an important part of that New Liberal moment when Victorian laisser faire was exchanged for an interventionist state. In its wake came national insurance and the old-age pension. ...

From a post in November, 2007 on this topic:

 ...During 1817 ... a group of prominent New York merchants and professionals (many of them having formerly been the principle supports of such institutions as the New York Hospital and a variety of other worthy causes) officially and quite publicly began to rethink their habit of giving. Such previously generous philanthropists as DeWitt Clinton, Thomas Eddy, and John Griscom took their cue in this from British reactionaries. In so doing, they succumbed to the rhetoric of several hard-nosed British social thinkers, most notably Thomas Robert Malthus, Jeremy Bentham, and the Scottish conservative Patrick Colquhoun.
Twenty years earlier, all three of those gentleman had been instrumental in the founding of the London Society for Bettering the Condition and Increasing the Comforts of the Poor. Despite the burden of its long-winded name, the London Society specialized in the cutting off of funds for social welfare rather than the distribution of charity. Men like Malthus, Bentham and Colquhoun believed that a distinct line must be drawn between the "deserving poor" (those hit with hard times resulting from unfortunate histories) and "undeserving paupers," the latter being the drunk, lazy and whorish of society, to whom the provision of any form of aid was a reprehensible act of facilitation.
Another key concept underpinning the logic of the London Society was the presumption (for lack of a more accurate term) that paupers outnumbered the deserving poor by a factor of about 9 to 1. In reform meetings and from church pulpits, politicians and clerics again and again cited this astonishing though unverifiable statistic, which soon became accepted as fact. In time, the public mind became convinced that a mere ten percent of London's poor were the crippled and the orphaned, while 90 percent were degenerates. For every one individual in London's slums who genuinely needed aid, popular wisdom held that there were nine who required something else entirely: intolerance, punishment and correction. As a corollary to this line of thinking, logic dictated that 90% of the charitable aid previously offered was superfluous. In turn, wallets closed, and checks stopped being written.
The London Society remained a venerable body and dominant force in British life for decades: influential in the development of such institutions as workhouses and debtors prisons. It was likewise influential, through its example, in New York and other American cities. By the end of 1817, Clinton, Eddy, and Griscom, joined by hundreds of other New Yorkers, had formed a clone organization on the banks of the Hudson: the Society for the Prevention of Pauperism (SPP).
Several months before the founding of the SPP, New York's Humane Society (which at that time specialized in helping humans rather than dogs and cats) announced rather forlornly the result of recent research revealing a startling fact: no less than 15,000 men, women and children - the equivalent of one-seventh of the city's total population - had been "supported by public or private bounty and munificence" the previous winter.
In their book Gotham, historians Edwin Burrows and Mike Wallace have eloquently described the SPP's point of view, expressed in response to the above data. In the grand tradition of the London Society, the SPP said it believed that "willy-nilly benevolence" only made things worse. "Giving alms to the undeserving poor not only undermined their independence but also drove up taxes and sapped the prosperity of the entire community." Thus, "for their good as well as everyone else's … the SPP recommended that all paupers in the city be cut off from all public assistance forthwith." Soon the Humane Society itself announced its intention to disband, in the wake of its realization that the very act of giving charity had "a direct tendency to beget, among [the citizenry] habits of imprudence, indolence, dissipation and consequent pauperism."
"Tough love" was in. Cruelty equaled kindness. Frugality equality generosity. And all three were not only cheap, but easy. A few ministers sang out against the reverse-logic of the SPP, but far more praised the organization than damned it. God himself, it seemed was on the side of self-reliance. A generation later, Social Darwinists would express a similar point of view: that the strong must be allowed to flourish, and not be hamstrung by the needs of the clawing weak. Charles Darwin's The Origin of Species would not see print until 1859. Indeed, Darwin himself was but eight years old in 1817, and would not depart on the voyage of HMS Beagle until 1831. Nevertheless, the seeds of what was to become the philosophy of Herbert Spencer (born 1820), not to mention the nearly identical philosophy of the 20th century's Objectivist saint of selfishness, Ayn Rand, were quite evident in the grand pronouncements of the London Society and its New York equivalent, the SPP. ...

I'm always amazed at how little the debate, generated in large part by ideology and the belief in false facts about the poor, has changed since the 1800s.
This is from a post in June, 2007. It's an earlier history the deserving/undeserving distinction:

... In the early mercantilist period there was an ideological continuity between the intellectual defenses of mercantilist policies and the earlier ideologies that supported the medieval economic order. The latter relied on a Christian paternalist ethic that justified extreme inequalities of wealth on the assumption that God had selected the wealthy to be the benevolent stewards of the material welfare of the masses.[4] The Catholic church had been the institution through which this paternalism was effectuated. As capitalism developed, the church grew weaker and the governments of the emerging nation-states grew stronger. In the early mercantilist period, economic writers increasingly came to substitute the state for the medieval church as the institution that should oversee the public welfare. ...
The people could no longer look to the Catholic church for relief from widespread unemployment and poverty. Destruction of the power of the church had eliminated the organized system of charity, and the state attempted to assume responsibility for the general welfare of society. ...
Poor laws passed in 1531 and 1536 attempted to deal with the problems of unemployment, poverty, and misery then widespread in England. The first sought to distinguish between "deserving" and "undeserving" poor; only the deserving poor were allowed to beg. The second decreed that each individual parish throughout England was responsible for its poor and that the parish should, through voluntary contributions, maintain a poor fund. This proved completely inadequate, and the pauper problem grew increasingly severe.
Finally, in 1572 the state accepted the principle that the poor would have to be supported by tax funds and enacted a compulsory "poor rate." And in 1576 "houses of correction" for "incorrigible vagrants" were authorized and provisions made for the parish to purchase raw materials to be processed by the more tractable paupers and vagrants. Between that time and the close of the sixteenth century, several other poor-law statutes were passed.
The Poor Law of 1601 was the Tudor attempt to integrate these laws into one consistent framework. Its main provisions included formal recognition of the right of the poor to receive relief, imposition of compulsory poor rates at the parish level, and provision for differential treatment for various classes of the poor. The aged and the sick could receive help in their homes; pauper children who were too young to be apprenticed in a trade were to be boarded out; the deserving poor and unemployed were to be given work as provided for in the act of 1576; and incorrigible vagrants were to be sent to houses of correction and prisons.[8]
From the preceding discussion it is possible to conclude that the period of English mercantilism was characterized by acceptance, in the spirit of the Christian paternalist ethic, of the idea that "the state had an obligation to serve society by accepting and discharging the responsibility for the general welfare."[9] The various statutes passed during this period "were predicated upon the idea that poverty, instead of being a personal sin, was a function of the economic system.[10] They acknowledged that those who were the victims of the deficiencies of the economic system should be cared for by those who benefited from it. ...

However, as noted above, the view that the poor "were the victims of the deficiencies of the economic system" died out, and was replaced by the idea the character problems are the main reason people are poor. This variation in attitudes about the poor -- it's the system, it's the individual -- goes back and forth over time, and we are currently seeing an attempt from the right to re-impose older Victorian attitudes -- and with some success (I recently wrote about the blame the individual versus blame the system distinction and how it has changed during the recession, see the end of this post).

Against Public Choice, For Public Virtue

http://thinkprogress.org/yglesias/2011/10/13/342924/against-public-choice-for-public-virtue/

Via the Economist

Barbarous Relics

Barbarous Relics

Economics and Politics by Paul Krugman - The Conscience of a ...

This is not a rational argument.

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Kids with guns: Almost 20 years later, Art Spiegelman’s New Yorker cover seems oddly prescient

Kids with guns: Almost 20 years later, Art Spiegelman's New Yorker cover seems oddly prescient

Dangerous Minds

As the "arm the teachers" rhetoric surrounding the Newtown shootings refuses to go away, I remembered this old New Yorker cover by Maus author and illustrator, Art Spiegelman.
For a guy whose opus was about his father's experience during the Holocaust, he managed to outdo himself in disturbing imagery with this one. And yet it doesn't seem that far from what's being suggested in 2013…

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A Republican’s idea of a ‘tip’?

A Republican's idea of a 'tip'?

Dangerous Minds

Just the tip..?
Via Early Onset of Night

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Be Ready To Mint That Coin

Be Ready To Mint That Coin

Economics and Politics by Paul Krugman - The Conscience of a ...

And put Boehner's face on it.

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'The Blame the Community Reinvestment Act Industry'

'The Blame the Community Reinvestment Act Industry'

Economist's View

Dean Baker:

The Blame the Community Reinvestment Act Industry, by Dean Baker (Creative Commons License): One of the major occupations for economists these days is blaming efforts to help poor people for the housing bubble and bust. The main villains in this story are Fannie Mae, Freddic Mac, the Federal Housing Authority (FHA) and the Community Reinvestment Act (CRA). A reader recently sent me another work in this proud tradition.

I just did a quick reading of the paper, but it seems that the smoking gun in this one is that banks subject to the CRA appeared to do more lending in CRA tracts in the periods where their lending behavior was being scrutinized by regulators. Just to remind folks, the CRA requires banks to make loans in the areas from which they were taking deposits, in particular focusing on areas that are disproportionately African American or Hispanic. The authors take this timing result, which is especially pronounced in the peak bubble years of 2004-2006, as evidence that the CRA played a major role in the pushing of bad loans on moderate income people. As they note, the loans issued in these tracts in these periods had a much higher default rate than other loans.

It's not clear that this gun is smoking quite as much the paper implies. First, it is important to remember that the biggest peddlers of subprime loans were mortgage lenders like Ameriquest and Countrywide. These lenders were for the most part not subject to the CRA since they were not banks (they raised money through the capital markets, not by taking deposits). Therefore the CRA was not a gun to the head of these lenders forcing them to make bad loans.

However even for the banks to whom the CRA did apply the evidence in this paper is less compelling than it may seem. Let's assume that banks do care about their CRA ratings for the reasons mentioned in the paper. (The CRA rating would likely be a factor that would come up when a bank was interested in a buyout or merger.) Let's also imagine that banks time their loans to CRA tracts so that they can show more loans in the periods where their compliance is being reviewed. Let's also hypothesize that in total the CRA doesn't get banks to make any more loans to CRA tracts than they would otherwise.

In this case, we would get exactly the sort of pattern of lending found in this study. Banks that are subject to the CRA would refrain from focusing on CRA tracts when they know no one is looking. Then when the light is on, they would make a stronger effort to make loans in the neighborhoods covered by the CRA. If banks engaged in this sort of timing of loans to CRA tracts, we would find that loans during CRA review periods were higher than in other times, even if there was no net increase in loans as a result of the CRA.

As a practical matter, I would be surprised if the CRA had no effect whatsoever on lending to the covered tracts. But it's not clear how this paper can distinguish a timing effect from a situation where banks actually increased lending to CRA tracts beyond what they would have done without the law.

In the process of prosecuting the case against the CRA, the paper produces some exonerating evidence for Fannie and Freddie. It finds that the CRA effect was strongly associated with private securitization because the investment banks had lower standards than Fannie and Freddie. It comments on this finding:

"We conjecture that banks are more likely to originate loans to risky borrowers around CRA examinations when they have an avenue to securitize and pass these loans to private investors after the exam."

And, just to remind folks, the FHA became almost irrelevant in the peak bubble years, with its share of the market dwindling to almost nothing. At the time it was derided as an outmoded relic since the private sector was so much more efficient in providing loans to low and moderate income families.

Anyhow, I don't think there is any doubt that the efforts to push homeownership went seriously awry in the bubble years. Many of the organizations that encouraged moderate income families to buy homes at badly inflated prices as a wealth building strategy should be wearing bags over their heads for the next three decades. But there is no escaping the fact that the main motivation for issuing the bad mortgages was money: the banks were booking huge profits in these years. And no believer in the free market can think that bankers have to be told by government bureaucrats to go out and make money.

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The End of Economists' Imperialism

Sent to you by jonas via Google Reader:

The End of Economists' Imperialism

via Economist's View by Mark Thoma on 1/4/13

Justin Fox says the age of economist's imperialism is ending:

The End of Economists' Imperialism, by Justin Fox: "By almost any market test, economics is the premier social science," Stanford University economist Edward Lazear wrote just over a decade ago. ...

Lazear went on to describe how economists, with the University of Chicago's Gary Becker leading the way, had been running roughshod over the other social sciences — using economic tools to study crime, the family, accounting, corporate management, and countless other not strictly economic topics. "Economic imperialism" was the name he gave to this phenomenon (and to his article, which was published in the February 2000 issue of the Quarterly Journal of Economics). And in his view it was a benevolent reign. "The power of economics lies in its rigor," he wrote. "Economics is scientific; it follows the scientific method of stating a formal refutable theory, testing theory, and revising the theory based on the evidence. Economics succeeds where other social scientists fail because economists are willing to abstract."

Triumphalism like that calls for a comeuppance, of course. ...

He goes on to describe how "I've found myself talking to and reading a little of the work of sociologists and political scientists, and coming away impressed with how adept they are in quantitative methods, how knowledgeable they are about economics, and how willing they are to challenge economic orthodoxy," and he gives several examples of other disciplines working in what is traditionally the realm of economists (with teasers of more to come). He ends with:

What's going on is probably not the incipient overthrow of economics. As described by Lazear, its imperialistic power has in large part been the result of its uniformity of approach over the past half century. (That, and economists have actually been right about some things.) As best I can tell, there is no such methodological consensus in sociology, political science, anthropology, or history at the moment. But the economists' consensus is wobblier than it's been in a while (especially in macro), there is ample motive for insurrection, and the non-economists' stores of intellectual ammunition are growing. Economics may well have reached the stage of imperial overstretch. Interesting times lie ahead.

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What's mediocre about America?

Sent to you by jonas via Google Reader:

What's mediocre about America?

via Noahpinion by Noah Smith on 1/2/13

Umair Haque has written an article bemoaning the mediocrity of America. Some excerpts:

[W]hat is America still the best at? 

Consider this thought experiment. If you were really, really, really rich — say, not just part of the routinely opulent 1%, but a card-carrying member of the eye-poppingly decadent .01% — what part of your life would be American? If you had the money, I'd bet you'd drive a German car, wear British shoes and an Italian suit, keep your savings in a Swiss bank, vacation in Koh Samui with shopping expeditions to Cannes, fly Emirates, develop a palate for South African wine, hire a French-trained chef, buy a few dozen Indian and Chinese companies, and pay Dubai-style taxes. 

Were to you have the untrammeled economic freedom to, I'd bet you'd run screaming from big, fat, wheezing American business as usual, and its coterie of lackluster, slightly bizarre, and occasionally grody "innovations": spray cheese, ATM fees, designer diapers, disposable lowest-common-denominator junk made by prison labor, Muzak-filled big-box stores, five thousand channels and nothing on but endless reruns of Toddlers in Tiaras — not to mention toxic mega-debt, oxymoronic "healthcare," decrepit roads, and once-proud cities now crumbling into ruins. Sure, you'd probably still choose to use Google on your iPhone to surf the web — but that's about far as it'd go.

Well...

Snarky response #1: "This list is totally cherry-picked. It was probably written using American-made software on an American-made operating system running on a (possibly American-brand) computer with an American-designed and American-made microprocessor, making use of American cloud-computing resources. It was written for an American magazine produced by an American university, to which the author will most likely want to send his kids. And if he really feels like splurging, he'll fly them there on an American-made private jet, which will navigate using American GPS satellites. His kids, of course, will dream of starring in American movies made with American digital cameras, and driving American-made electric sports cars. If they happen to crash those cars, they'll be treated by American surgeons. Etc. etc. etc."

Snarky response #2: "OK, so if America's government launched a massive project to make sure that our country made the highest-quality, fanciest, most expensive cufflinks in the world, then we'd get a spot on Haque's list right next to British shoes and Italian suits, and so avoid the whole line of criticism?"

Snarky response #3: "British shoes??? Ha ha. Ha. Somebody has a sense of humor."

OK, but enough snark. In all seriousness, I just don't think that making niche brand-name luxury goods for the super-rich is an appropriate measure of greatness. By definition, the 0.01% of which Haque speaks are very rare; even in a world as unequal as ours has become, the middle classes spend most of the money. That's why Toyota is the world's #1 carmaker and Ferrari doesn't even crack the top 20.

In other words, a country doesn't necessarily get rich by catering to the rich. Nor is capturing the adulation of the 0.01% the only measure of a business' technical acumen and quality. Sure, it takes quality workmanship to make a nice luxury shoe. But how much more quality workmanship does it take to make thousands and thousands Boeing jumbo jets that fly thousands upon thousands of times with a nearly perfect overall safety record? Sure, the super-rich probably turn up their noses at Boeing and fly on Gulfstream private jets (another American company, btw). But Boeing is the higher-tech, more impressive company, because successfully catering to all those middle-class masses is hard. Similarly, Wal-Mart has cheap products and ugly stores, but absolutely amazing logistics. And Caterpillar's machines may dig unglamorously in the dirt, but they are a marvel of engineering compared to even the nicest Italian suit. As for spray-cheese, well, just ask a 5-year-old kid whether she prefers that or a nice glass of South African wine.

Still - and I wouldn't have written this blog post otherwise - I think Haque does make a very good point. America does have a serious problem with our acceptance of bland mediocrity.

It's not our businesses or our products that are mediocre, it's our institutions. Our infrastructure, health care system, schools, and cities are, with a few exceptions, disgustingly mediocre. Haque mentions most of these. He makes a very good point.

Take a trip to Japan, and you'll be stunned at how easy it is to get anywhere. The train system is quiet, clean, comfortable, amazingly convenient, and runs on time. Even if you're out in the boonies and need to take a bus, those are much nicer than their American cousins. And it's nice to be able to use a bullet train to get from Osaka to Tokyo in three hours, without wasting two hours waiting for an airplane. (Note that these trains cater to the middle class, not the super-rich.)

Now, much of America is spread out, so it makes more sense to use care rather than trains in many areas. But our auto infrastructure, once the world's best, is decaying, and we're not spending the money to replace it. Meanwhile, in places where a Japan-style train system would make sense, I'm stuck paying $38 for a round trip to New York City on a train that averages about 30 miles per hour and uses old-fashioned paper punch cards. A better system would cost money that we are not willing to allow our government to spend.

Meanwhile, one has only to look at the international education rankings to know where we stand. A few simple reforms, like year-round school, increased teacher pay with more stringent qualification requirements, longer school hours, fewer vacation days, and increased ability to fire bad teachers, could probably bring us way up in the rankings. But we do not do these things. These things cost money that we are not willing to allow our government to spend.

Our health care system, in contrast, is reknowned for its waste. In the case of health care, although the super-rich can enjoy the world's top surgeons, the average American gets worse health outcomes than Europe for a much higher price tag. We're willing to spend the money on health care, but we're not willing to bring in government to control costs.

And don't even get me started on urban blight. Just look at pictures of Detroit.

America's mediocrity does not stem from the failure of its companies. It stems from the failure of its governments - federal, state, and local. If we want to become an excellent country in all respects - if we really decide that we've had enough of mediocrity - it is our government which we must focus on improving.

...Oh, and guess what. America does make the world's fanciest cufflinks. What up now, Britain??

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David Frum: Americans for Insurrection

Sent to you by jonas via Google Reader:

David Frum: Americans for Insurrection

via Brad DeLong by J. Bradford DeLong on 1/2/13

David Frum: Americans for Insurrection:

In National Review Online before New Year's, Kevin Williamson explained that the Second Amendment guarantees the right of individual Americans to launch an insurrection against governments they believe tyrannical.

There is no legitimate exception to the Second Amendment for military-style weapons, because military-style weapons are precisely what the Second Amendment guarantees our right to keep and bear. The purpose of the Second Amendment is to secure our ability to oppose enemies foreign and domestic, a guarantee against disorder and tyranny.

To deliver the rebuttal, we welcome guest blogger Abraham Lincoln. In his first message to Congress, July 4, 1861, the sixteenth president explained:

Our popular government has often been called an experiment. Two points in it, our people have already settled,--the successful establishing and the successful administering of it. One still remains,--its successful maintenance against a formidable internal attempt to overthrow it. It is now for them to demonstrate to the world that those who can fairly carry an election can also suppress a rebellion; that ballots are the rightful and peaceful successors of bullets; and that when ballots have fairly and constitutionally decided, there can be no successful appeal back to bullets; that there can be no successful appeal, except to ballots themselves, at succeeding elections. Such will be a great lesson of peace; teaching men that what they cannot take by an election, neither can they take it by a war; teaching all the folly of being the beginners of a war.

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The Benefits Tax View

The Benefits Tax View

Economist's View

Richard Green:

"We are all in it together," and benefits taxes, by Richard Green: Tyler Cowen says that the Republican Party should propose raising taxes on everyone because, "we are all in it together."

To some extent, this is a benefits tax view--a view that we should pay to society our fair share of what we get from society.  But the implication of this is not necessarily that everyone should sacrifice in order to put us all on a sustainable fiscal path.

With Ronald Reagan's election in 1980, the US saw a sea change in tax and regulatory policy.  While the policy was suppose to benefit everyone, it clearly hasn't.  For the bottom quintile of the income distribution, income has risen about 5 percent since 1982 (the first year in which Reagan's policies bit); for the next quintile, it has risen 8 percent; for the next, 11 percent, for the next, 20 percent, and for the highest, 45 percent.  But most of the highest quintile didn't do so well--the top 5 percent has seen average household income rise by 68 percent.

These data are before tax, and come from the US Census, Table H-3.  Before anyone suggests that this means that everyone has benefited, I should point out that average income in the lowest quintile of the income distribution is $11,239, which is right at the Federal Poverty Level for a single person household.  In a benefits tax view of the world, people who haven't sufficient income to live should not be taxed (they are living at subsistence levels as it is, and taxing them makes thing worse).

So let's begin by holding the bottom quintile harmless in doing any kind of deficit reduction.  But what of the remaining quintiles?  If we look at the share of income growth by quintile (excluding the meager income growth of the bottom quintile), we find that 3 percent went to the second quintile from the bottom; 7 percent to the next; 18 percent to the next, and 73 percent to the top quintile.  So little has gone to the second and third quintile from the bottom that one could make a case that they should be left along as well.

The fourth quintile, though, has seen a material improvement in incomes, so it is probably OK to ask this group for something--this includes people who nearly everyone would consider middle class.  Nevertheless, the lion's share of the benefits of the policy changes of the early 1980s has appeared to go to the top quintile, and so the top quntile should pay the most to put us on a sustainable fiscal path.

One last calculation--the top 5 percent got 57 percent of the income growth within its quintile.

It is true that households move in and out of quintiles, but as Dalton Conley shows, not as much as we would like to think,  In any event, we have not been all in it together when it has come to benefitting from the policies of the past 30 years.

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On the Economics and Politics of Deficits

On the Economics and Politics of Deficits

Economics and Politics by Paul Krugman - The Conscience of a ...

Grand Bargain or Great Scam.