Archive

Posts Tagged ‘Matthew Yglesias’

Cloud Connection

December 20, 2011 1 comment

There’s an upcoming service on KLM Royal Dutch Airlines that sounds “horrible” to Matthew Yglesias:

[Passengers] will soon be able to use their Facebook and LinkedIn profiles to find passengers with similar interests—as long as there’s mutual consent in viewing personal information.” – Rachel Klein in Fodors.

He asks, “Why would anyone ever want to do this?”

Umm… Mile-High Club?

(Bruce Dale, National Geographic)

Categories: Travel Tags:

The Failure of Localism

October 23, 2011 Leave a comment

In Mitch McConnell’s CNN interview with Candy Crowley, the Senate Minority Leader argued that the federal government shouldn’t send relief to states to prevent layoffs of policemen, firefighters, and teachers.

I certainly do approve of firefighters and police. The question is whether the federal government ought to be raising taxes on 300,000 small businesses in order to send money down to bail out states for whom firefighters and police work. They’re local and state employees. […] The question is whether the federal government can afford to be bailing out states. I think the answer is no.

Matthew Yglesias explains why the federal government can afford to help local and state employees keep their jobs.

At the moment for localities to raise funds to pay teachers and firemen is quite costly. Households and small firms are in a fragile state, and taxing then at higher rates to support public service could be very damaging. The federal government, by contrast, can currently borrow money at negative seven-year real rates.

Aside from McConnell being wrong about what the federal government can afford, the Kentucky Republican demonstrates a bias that’s worth challenging further. Local control of government has advantages, but as with other American dogmas, its enthusiasts overlook the downsides. When public services are locally funded, those services can only be as good as what the locality can afford. And since poor people both need more services and have less revenue for taxes, the services don’t match the needs of America’s most impoverished citizens – the system itself clarifies why we need the term “disadvantaged.”

In Edward Glaeser’s book, Triumph of the City, he points out the injustice of this system for cities.

Rich enclaves have often formed right outside of urban political boundaries, where the prosperous can be close to the city without having to pay its taxes or attend its schools. A level playing field means that people should be choosing where to live based on their desires for neighborhood or opportunity not based on where they can avoid paying for the poor. 

A nation’s poor are every citizen’s responsibility, not just the people who happen to live in the same political jurisdiction. It is fairer, both to the poor and to cities, if social services are funded at the national rather than the local level.

Maybe the firefighters, police, and teachers losing their jobs aren’t directly protecting McConnell or teaching his children, but the families affected by his preference for local spending will still suffer.

Ride of the Volckery

September 20, 2011 7 comments

I’ve returned from my hike across the beautiful Crawford Path. Sunday night, slightly sore and groggy, I read Paul Volcker’s warning in the New York Times to not pursue an inflationary monetary policy to solve our employment crisis.

My point is not that we are on the edge today of serious inflation, which is unlikely if the Fed remains vigilant. Rather, the danger is that if, in desperation, we turn to deliberately seeking inflation to solve real problems — our economic imbalances, sluggish productivity, and excessive leverage — we would soon find that a little inflation doesn’t work. Then the instinct will be to do a little more — a seemingly temporary and “reasonable” 4 percent becomes 5, and then 6 and so on.

What we know, or should know, from the past is that once inflation becomes anticipated and ingrained — as it eventually would — then the stimulating effects are lost.

Reading his op-ed left me slightly more sore and groggy. It is important to notice that Volcker implies that inflation would be stimulating in the short-run. I can’t for the life of me understand why he doesn’t consider 9% unemployment a “real problem,” but let’s move on. Volcker never explains why keeping inflation at 1 or 2 percent is optimal policy – he only worries that 3 or 4 percent will lead policymakers to try higher and higher rates. I guess once the Fed gets a little hit of that inflation soon they’ll be desperate for more only to keep up with those expectations. It’s only a matter of time, I suppose, that the abuser will be stagflating on the treasury room floor.

But is this gateway drug theory of inflation accurate?

I can’t be the only one that notices that inflation goes up and down. Every time we hit 3% inflation, we didn’t get hooked and ruin our longterm economy, right? Every person that takes a painkiller doesn’t become an oxycontin addict. Even though Volcker knows some junkie from the ’70s we shouldn’t conclude that sick people shouldn’t take medicine.

Here’s some other commentary on Volcker’s column:

Read more…

Street Vendor Cartels and their Illegal Product

March 30, 2011 Leave a comment

Matthew Yglesias explains why in India chauffeurs and street food are so cheap, which helps account for the popularity of fast food restaurants over street vendors in the US:

Average productivity in the US is much higher than average productivity in India, so wages are much higher in the US. But American drivers are no more productive than Indian ones, so chauffeurs are unaffordable here and affordable prepared food needs to economize on labor with fast food techniques.

But as someone who rightly calls attention to the way dentists and barbers create cartels and restrict entry into the market drives up prices I’m surprised he failed to mention all the laws restricting licenses for street vendors.

Scott Sumner Vs. The World of Progressives

March 30, 2011 2 comments

In a recent post Scott Sumner challenges a number of progressive assumptions and calls them out for the “”faith-based” reasoning that they tend to deride in conservatives.” Sumner is a monetary economist that progressives should be required to read to see that rational critiques actually exist of their fiscal policies. Sadly, the mainstream conservative movement gave up on dispassionate evaluation of public policy.

Sumner’s “progressive wishful thinking” criticism defends Greg Mankiw’s posts that upset the standard liberal story on the progressiveness of the US tax regime and on fiscal stimulus. The defense credibly knocks down some of the more fragile volleys from the Left flank.

Lindert showed that Europeans were able to raise more tax revenue only by having more regressive tax systems than the US, i.e. tax systems that relied more heavily on consumption taxes. This is now pretty much common knowledge in the public finance area.

That is an important point to disrupt some common progressive assumptions, but I don’t think it directly counters Ygelsias’s and others’ point that the wealthiest “pay a huge share of the total taxes in the United States because they have a huge share of the money.” But it seems to me that Sumner is largely right that the US tax code has a progressive rate structure even compared to Europeans.

Sumner also weighs in on where the US sits on the Laffer curve:

I’d argue that this data is strongly supportive of the view that both the US and Europe are near to tops of the Laffer Curve for total taxation.  I did not say then, nor do I claim now, that we are precisely at the top.  But I also don’t see any reason to believe that if we raised taxes from 28% to 40% of GDP, that revenue would rise anywhere near proportionately, with no change in GDP per capita.

I do think the Laffer curve is “far-fetched” but I don’t deny that revenues always rise “proportionately, with no change in GDP per capita.” It is illustrative that Sumner doesn’t quote anyone making that claim he’s rebutting. Most popular proponents of the Laffer curve like to claim that tax cuts actually raise revenue not just that tax increases dampen receipts a bit. But the Left should think harder about challenging their assumptions with reference to European models if they’re going to argue for a much more progressive tax code. I’m with him on a progressive consumption tax.

Most interesting, and surprising, to me was Sumner’s claim that “for decades our best macroeconomists have been saying that that fiscal stimulus is a bad idea.” I really wish he cited something here because if true I’m embarrassed that I wasn’t aware of this. I always assumed economists like Christina Romer were true authorities on this, but I willing to confront a counter consensus of experts if it exists. Not that a consensus of experts is always correct but we should be giving more deference to it, as Bertrand Russell makes clear in Let People Think:

(1) that when the experts are agreed, the opposite opinion cannot be held to be certain; (2) thet when they are not agreed, no opinion can be regarded as certain by a non-expert; and (3) that when they all hold that no sufficient grounds for a positive opinion exist, the ordinary man would do well to suspend his judgment.

Sumner correctly emphasizes the need for more monetary action, which could be even more important than fiscal stimulus to help our economy. I haven’t neglected monetary policy but have focused mainly on the fiscal side because (1) it’s easier to convey (2) it’s more direct (3) it’s something that politicians (and, therefore, the public) have more influence over. Matt Yglesias is certainly right that progressives need to grapple more with Fed policy (must read) and that Obama’s biggest mistake might be his lack of focus staffing the Fed.

I’m extremely disappointed Sumner is taking a break from blogging. I hope he returns soon and continues to offer insightful and challenging commentary. I’ll be sure to rummage through his archives – others should too.

Graphs that Subvert Conventional Wisdom

February 4, 2011 Leave a comment
More GTSCW

Feelings vs Expectations

January 24, 2011 2 comments

I’ve spent a good amount of time distinguishing between different types of uncertainty and how they affect or don’t affect our economy. (e.g. here, here, and here) On a simlar topic Matthew Yglesias gives us the quote of the day discussing businessmen’s feelings versus rational expectations for business:

The notion that economic growth depends crucially on the subjective feelings of the business executive class is one of the most pernicious ideas to take hold over the past 12 months. One should distinguish this hypothesis from the accurate point that rational expectations matter in the economy. Expectations do matter. But this is often confused with the idea that if the waiters at Davos are rude this year the economy will go into a recession, but if Obama gives a CEO a really sensual back rub growth will return.

Reforming the Filibuster

December 23, 2010 2 comments

All of the Senate Democrats have signed onto a letter expressing their support for reforming the filibuster. This is great news. The filibuster isn’t a noble refuge for a principled Senator as glamorized in Mr. Smith goes to Washington; it is a devise of minority obstruction that prevents the legislature from legislating and undermines the system the Founding Fathers actually set up. Right now the electorate can’t actually judge the majority party on the policies they favor. Ezra Klein’s March Newweek piece remains one of the better recent cases against the filibuster.

[R]ecall that the filibuster is an accident, and there is nothing radical or strange about majority voting: we use it for elections (Scott Brown won with 51 percent of the vote, not 60 percent), Supreme Court decisions, and the House of Representatives. As for a majority using its power unwisely, elections can remedy that. And voters can better judge Washington based on what it has done than on what it has been obstructed from doing.

Say you’re a conservative and you want to repeal healthcare reform, privatize social security, simplify the tax code, or pass whatever else your heart desires, now imagine that in 2012 you keep control of the House, take over the Senate and end up with 59 Senators, win the presidency, and all those policy wishes are polling extremely favorably with the American public, which just completely repudiated the Democrats. Guess what? You can’t do any of it if the Democrats commit to a filibuster. And if the filibuster trend continues this seems like it will become a routine scenario.

Gumming Up the Works.jpg

In interest of fairness and bipartisanship here is the absolute best case against reforming the Senate rules that Matthew Yglesias wrote sometime early last April.

The story, as told by Randolph and recounted by Moncure Daniel Conway is that “Jefferson called Washington to account at the breakfast table for having agreed to a second chamber. ‘Why,’ asked Washington, ‘did you pour that coffee into your saucer?’ ‘To cool it,’ quoth Jefferson. ‘Even so,’ said Washington, ‘we pour legislation into the senatorial saucer to cool it.’”

Obviously, even to this day nobody would think of drinking coffee without first deploying their cooling saucer. That’s why every office in America has, in its kitchen, not only a coffee machine but also an accompanying cooling saucer. Visit your local Starbucks and ask about their cooling saucer. Now try to imagine the nightmare of coffee poured directly from the machine into the cup—that’d be your Senate-less America, a grim and scalding place.

The Most Important Lesson For Elected Officials

October 27, 2010 Leave a comment

In Ezra Klein’s recent post juxtaposing David Brooks from 2005 with David Brooks now is worth a read, but Klein writes 2 sentences that every politician should have tattooed to the inside of their eye lids (one on each?).

You don’t win elections in order to win more elections. You win elections in order to solve problems and make the country better.

Most people probably think that is self-evident, but it seems most politicians easily lose sight of that. Here’s Mitch McConnell forgetting,

The single most important thing we want to achieve is for President Obama to be a one-term president.

Don’t think Democrats don’t forget as well. Yglesias reminds Democrats that if they focused on governing better they wouldn’t be losing elections. Even if you’re self-interested enough and want your main goal to be reelection that shouldn’t prevent you from governing better – you just can’t be so myopic.

Speaking to The New York Times‘ Peter Baker for a profile published last week, Obama said his administration “probably spent much more time trying to get the policy right than trying to get the politics right” and drew the lesson that “you can’t be neglectful of marketing and P.R. and public opinion.”

Marketing and public relations are nice, but opinion is fundamentally driven by results. And on this, Obama has it backward.

[…]

The issue is not so much that the administration needed to be more or less moderate, rather that it needed to be more effective in boosting the economy and more mindful of the central role it plays in politics. This matters because, to point out the obvious, the economic outlook is still bleak. Enhanced post-election focus on marketing and PR won’t turn that around. In other words, all the marketing and PR in the world won’t succeed in moving public opinion, meaning Democrats could easily have another round of election losses to look forward to.

Martin Wolf feels similarly,

The president’s willingness to ask for too little was, it turns out, a huge strategic error. It allows his opponents to argue that the Democrats had what they wanted, which then failed. If the president had failed to get what he demanded, he could argue that the outcome was not his fault. With a political stalemate expected, further action will now be blocked. A lost decade seems quite likely. That would be a calamity for the US – and the world.

Every time an elected official compromises what he thinks will be best for the economy for political purposes he’s sowing the seeds of his own defeat. Certainly certain compromises might be necessary to pass a particular bill, but as Wolf points out, when you make it seem like you got what you wanted you’ve trapped yourself. Not only that, but Democrats willingness to give up the rhetorical fight for stronger stimulus (or for any stimulus) weakens them for the future. If they aren’t willing to defend the idea of stimulus (assuming they still actually think it can be productive) how do they think they can gain support for using fiscal policy in the future?

I really don’t understand the long-term strategy of not making the case for the policies you want. Obviously if you want them you think they are the best policies; by undercutting the case for those things you’re just making it harder to get what you want. President Obama continues to make policy compromises that weaken policy only to get no Republican votes, no acknowledgment of compromise, no positive electoral gains, and…. compromised and weakened policy. Here’s my advice.

Stop looking at the next election, close your eyes and recognize why you’re in office.

TARP, the Louisiana Purchase, and my Low Bar for Success

October 8, 2010 1 comment

Can something be considered a success if its intended goals aren’t all met? Just yesterday, I was defending TARP to a friend who was suggesting TARP was just a giveaway to Wall Street and “theft” from “the people” (I assume he means average taxpayers). Taking my cues from people like Matt Ygelsias, I wrote,

I’m not crazy about how the bailouts were structured either. But of course, that’s looking at it in hindsight. Given that TARP was rushed through on the edge of complete financial collapse it seems that the bill was remarkably successful. So successful in fact that it seems the money that went to the banks will not only be repaid but could actually net taxpayers a profit (yes, you read the correctly).

In fact, what will end up costing taxpayers money are the funds that went to car companies and homeowners – but the cost is justified since it helped middle and working class people. Yet let’s not pretend that saving the nation’s largest banks from going under didn’t help middle and working class people – imagine what our economy would look like if the financial system collapsed. Who do you think would bear the brunt of that suffering? The rich? Try again…

But just today DiA has an excellent post taking people to task for writing things like,

TARP has been one of the most successful single pieces of legislation in the history of American government. It saved the world financial system for somewhere between $66 billion and $0 (or, perhaps, a profit of a few billion dollars).

I didn’t write quite that of course, but I admit that was largely my sentiment. The most recent DiA goes on to quote Felix Salmon approvingly on why TARP isn’t obviously a success and really a failure if you consider the goals of the policy.

[It] failed to get banks lending again; it failed to do anything about the foreclosure crisis; it failed to make any kind of a dent in the unemployment crisis; it failed to hold bankers accountable for their actions; and it succeeded in generating a broad-based mistrust of institutions: the government and the financial-services industry certainly, and the judicial system possibly as well.

TARP was always a rushed, ad hoc policy; even its architects never really had much of a vision for how it should be used. As such, its failure comes as little surprise. But let’s not try to pretend that it was some great success. Yes, it’s good that most of the money is likely to be repaid. But that’s neither necessary nor sufficient for TARP to be considered a success.

I walked right into the trap of falling into agreement with “those experts whose opinions support our ideological prejudices” when no expert consensus exists. I hope airing this disagreement about the policy will aid me in getting out of that ideological pitfall. But at risk of cutting my own ladder let me make a gambit and redefine success.

Salmon is right that TARP failed at everything he lists – most notably, bank lending. But while recognizing that it isn’t very courageous or impressive to lower standards or to redefine success in hindsight consider 2 scenarios. 1. TARP never passed. 2. TARP passed.

In scenario 1, there are devastating bank failures, unemployment is far worse, and the world economy is in a much bigger hole than it is in now – in other words the banks aren’t lending, the foreclosure crisis is worse, and all the other “failures” of passing TARP are pretty much the same, worse, or don’t even seem like concerns in comparison. In scenario 2, we saved the banks at little to no cost (or even a profit) for taxpayers, held the economy from catastrophe, and set up a situation where government could have, theoretically, come in and used fiscal and monetary stimulus to jump start the recovery.

Looking at those options, the public after all isn’t calling for a better TARP they say they would have preferred no TARP, is it fair to call scenario 2 a failure?  If Rep. Brad Miller is right that if a similar situation happens again anything like TARP can’t be passed, Salmon and others will be wishing for a failure on the order of the original TARP. This isn’t to say that critics have no place to point out the failures of TARP so we can learn from them and hope to improve on them if something like that is needed again – but I just don’t think TARP as a whole can be called a failure.

If you told a policymaker in a vacuum that they could pass a policy that costs either very little, nothing, or earns money and saves the financial system and wider economy from collapse and depression, who wouldn’t jump at the chance to support that? Some critic could come along and say, “true, but this policy also doesn’t make banks lend, doesn’t increase employment, and doesn’t solve the housing crisis!”  That policymaker might reasonably wonder if the critic is also hung up on the fact that Thomas Jefferson didn’t get more from the French in the Louisiana Purchase. If Jefferson had set out to also get the land northwest of the Louisiana Purchase’s boundary, should we consider it a failure? Keep in mind, many thought the Purchase was unconstitutional, it may have weakened state’s rights, and it increased the slave holding states. I still think anyone who calls the Louisiana Purchase for those reasons a failure is unappeasable. Can’t we just work on those specific breakdowns with subsequent legislation?

I hate having a low bar, but if all legislative failures were like TARP, we’d be in a much better place.

%d bloggers like this: