Call me "Rip"

We're in the news again! Anyone want to play a game of "let's cut the national pension system's budget by 30% or it will be forced to cut its budget by 30%?"

Christy Romer Joins the Order of the Shrill

Another new inductee:

Christy Romer in Vanderbilt, by Brad DeLong: Soon she too will join the Order of the Shrill:

Former top economist: Economic inaction ‘shameful’: President Obama’s former top economic advisor sharply criticized the federal government for failing to take more aggressive action against unemployment.

I frankly don’t understand why policy makers aren’t more worried about the suffering of real families. I think there are tools we have tools we have that we can use, and I think it’s shameful that we’re not using them...

“We need to realize that there is still a lot of devastation out there,” Romer said, calling the 8.9% unemployment rate "an absolute crisis."

If I have a complaint about policy these days, it’s that we’re not doing enough. That goes all the way up to the Federal Reserve, [which] could be taking more aggressive action. It goes to the Congress and the Administration – there are fiscal policy actions they could be taking. And don’t tell me you can’t [take those actions] because of the deificit because I think there are fiscally responsible ways...

Romer suggested that extending the payroll tax break to the employer side of the payroll tax could spur the economy; she suggested that Congress simultaneously pass a comprehensive, long-term plan for reducing the deficit.

Ryan Avent Joins the Order of the Shrill

Brad DeLong inducts a new member:

Ryan Avent Makes so Much Sense That He Joins the Order of the Shrill, by Brad DeLong: Ryan Avent:

Guns and butter: About that deficit: MARK THOMA has an appropriately succint post up today which reads in its entirety (and I hope he'll forgive my quoting the whole thing):

We have enough money to pay for military action in Libya, but not for job creation?

It's hard not to be cynical about government policymaking.... [B]oth Republicans and Democrats are committed to cutting the government's budget in the current fiscal year... threaten programmes with positive economic returns.... [F]ew party leaders are seriously discussing new spending on programmes with positive economic returns. America has substantial infrastructure needs—current spending is inadequate to simply maintain critical infrastructure at its current state of repair—and yet the odds of passing a new transportation law to replace the one that was scheduled to expire in 2009 but which has since been extended repeatedly, well, they're close to zero. Why? No one can agree on a way to fund new infrastructure spending.

Libya poses no threat to America. It's far from clear that American intervention will yield positive outcomes for Libyans. And yet here America goes, launching massively expensive sorties....

[M]uch of official Washington—Democratic and Republican leaders, along with policy intellectuals and op-ed pages—has acted as though an immediate fiscal crunch loomed. This was never true. American debt levels may be an issue by the end of the decade, but they aren't now, and deficits are forecast to fall sharply for the next few years. Bond yields have rarely been lower. The fiscal problem is long-term, not short-term. And yet dire fiscal scenarios have been used to sell painful short-term cuts, some of which were necessary but could have been accomplished later, many of which weren't necessary at all. Americans have been told, by the president of the United States and his chief Republican antagonists, that in hard times the government, like households, must tighten its belt. And then along comes Libya to put the lie to all of these assertions.

The really, really troubling thing about this is that Washington will almost certainly ignore the inconsistency. I doubt any pundits will take the opportunity to observe that Washington leaders apparently don't actually believe that America faces immediate fiscal constraints (as it does not)...

He is, of course, completely correct.

Ph'nglui mglw'nafh Ryan Avent R'lyeh wgah'nagl fhtagn!!

David Brooks is Shrill!

Bobo goes bananas!

Resilient societies have a level-headed understanding of the risks inherent in this kind of warfare.

But, of course, this is not how the country has reacted over the past week. There have been outraged calls for Secretary Janet Napolitano of the Department of Homeland Security to resign, as if changing the leader of the bureaucracy would fix the flaws inherent in the bureaucracy. There have been demands for systemic reform — for more protocols, more layers and more review systems.

Much of the criticism has been contemptuous and hysterical. Various experts have gathered bits of Umar Farouk Abdulmutallab’s biography. Since they can string the facts together to accurately predict the past, they thunder, the intelligence services should have been able to connect the dots to predict the future.

Dick Cheney argues that the error was caused by some ideological choice. Arlen Specter screams for more technology — full-body examining devices. “We thought that had been remedied,” said Senator Kit Bond, as if omniscience could be accomplished with legislation.

Many people seem to be in the middle of a religious crisis of faith. All the gods they believe in — technology, technocracy, centralized government control — have failed them in this instance.

Well, David, may we suggest it's time for a different god? Hastur is accepting supplicants over in conference room 3.

James Kwak: A Partisan Post: You Have Been Warned!

A Partisan Post, You Have Been Warned « The Baseline ScenarioLast night I read a post by Brad DeLong that made me so mad I had trouble falling asleep. (Not at DeLong, mind you.) There’s really nothing unusual in there — hysteria about the deficit, people who voted for the Bush tax cuts and the unfunded Medicare prescription drug benefit but suddenly think the national debt is killing us, political pandering — but maybe it was the proverbial straw.

First, let me say that I largely agree with DeLong here:

I am–in normal times–a deficit hawk. I think the right target for the deficit in normal times is zero, with the added provision that when there are foreseeable future increases in spending shares of GDP we should run a surplus to pay for those foreseeable increases in an actuarially-sound manner. I think this because I know that there will come abnormal times when spending increases are appropriate. And I think that the combination of (a) actuarially-sound provision for future increases in spending shares and (b) nominal balance for the operating budget in normal times will create the headroom for (c) deficit spending in emergencies when it is advisable while (d) maintaining a non-explosive path for the debt as a whole.”

Now, let me tell you what I am sick of:

1. People who insist that the recent change in our fiscal spending is the product of high spending, without looking at the numbers, because their political priors are so strong they assume that high deficits under a Democratic president must be due to runaway spending. And it’s not just Robert Samuelson.

2. People who forecast the end of the world without pointing out why the world is ending. Here’s Niall Ferguson, in an article entitled “An Empire at Risk:” “The deficit for the fiscal year 2009 came in at more than $1.4 trillion—about 11.2 percent of GDP, according to the Congressional Budget Office (CBO). That’s a bigger deficit than any seen in the past 60 years—only slightly larger in relative terms than the deficit in 1942.” But does he mention that the reason for the 2009 deficit is lower tax revenues due to the financial crisis and recession? No. Here’s Ferguson on the 10-year projection: “Meanwhile, in dollar terms, the total debt held by the public (excluding government agencies, but including foreigners) rises from $5.8 trillion in 2008 to $14.3 trillion in 2019—from 41 percent of GDP to 68 percent.” Does he mention that, as early as January 2008, that number was projected to fall to 22%, and the majority of the change is due to lower tax revenues? No.

3. People who posture about our fiscal crisis who voted for the Bush tax cuts — shouldn’t shame require them to keep silent?

4. People who say, like Judd Gregg, “after the possibility of a terrorist getting a weapon of mass destruction and using it against us somewhere here in the United States, the single biggest threat that we face as a nation is the fact that we’re on a course toward fiscal insolvency,” as if this is a new problem, when it’s been around since 2004 (see Figure 1) — when, I might add, Judd Gregg was a member of the majority. (Tell me, was Niall Ferguson forecasting the end of the American empire in 2004, when everything he says now about long-term entitlement spending was already true? That’s a real question.)

5. People who say that we can’t pass health care reform because it costs too much, ignoring the fact that the CBO projects the bills to be roughly deficit neutral, ignoring the fact that the Senate bill has received bipartisan health-economist support for its cost-cutting measures, and ignoring the fact that our long-term fiscal problem is, and always has been, about health care costs (see Figure 2).

6. People who say the Obama administration is weak on the deficit (Ferguson refers to Obama’s “indecision on the deficit”, and he is gentle by Republican standards), when by tackling health care costs head-on — and in the process angering their political base — they are doing the absolute most important thing necessary to solve the long-term debt problem.

7. People who cite “financial ruin” purely, absolutely, incontrovertibly as a political tactic to try to kill health care reform (courtesy of DeLong and Brian Beutler)...

8. Joe Lieberman.

Dean Baker, Yog-Sothoth Professor of Political Economy at Miskatonic University, on the Washington Post and the Stimulus

Beat the Press Archive | The American Prospect: Given the quality of the economics reporting, parents would be well-advised to prohibit their children from reading the Washington Post so that they don't get confused on basic arithmetic concepts. The Post doesn't want more stimulus and is willing to say anything to push its case.

The lead editorial tells readers that: "government has managed to blunt the recession, but at a cost -- a higher national debt burden, which future Americans must pay off by working harder and saving more than they otherwise would have." Actually, future Americans will own the debt that will be paid off. This is not a generational issue, it can be a distributional one.

There is a point that some of the debt is held by foreigners. This will be a burden on the country, but the issue here is the trade deficit, not the budget deficit. If we had no government debt, but foreigners bought up $4 trillion of private capital in the United States, it would pose the same burden on future generations as if foreigners bought up $4 trillion of government debt. Remarkably, the Post is not concerned about the trade deficit and the burden it poses on future generations and actually does not want the cause of the deficit -- the over-valued dollar-- to be fixed.

The Post also gives the bizarre argument that:we should wait on further stimulus because "the government still hasn't run through half of the $787 billion in tax cuts and spending increases enacted this year." Of course, for those of us who passed our third grade arithmetic class this argument is just plain silly.

The stimulus is already being disbursed at its maximum rate and therefore having its full impact on the economy. The additional spending will provide no further boost.

To see this point, imagine my rich uncle promises to give me $2,400 over two years in installments of $100 a month. I may originally be slow to change my consumption, but after 3 or 4 months I will likely have fully adjusted my spending in accordance with this monthly gift of $100. Once I have reached the 8th month, I will almost certainly be at my maximum spending rate, even though two thirds of the gift is yet to come.

This is where we stand right now. We have spent close to 40 percent of the stimulus with more than 60 percent yet to come, however the rate of spending will not be increasing from this point forward. Therefore, it will provide no further net boost to the economy. People who write editorials for major newspapers should understand this fact.

It is worth noting that the Congressional Budget Office (CBO) projections showing a 10.2 percent unemployment rate for 2010 and a 9.1 percent rate for 2011 include the impact of the stimulus. Perhaps the Post's editors know something that CBO doesn't, in which case they should share this information with their readers.

Miskatonic University Bulletin: Fall 2009

The leaves are turning here in Arkham, Massachusetts, as we welcome to his padded cell our new Dread Cthulhu Professor Health Policy, Thomas Levenson. Watch his mad ululations beneath the uncaring stars:

It’s not that McArdle can’t read... it’s that she can’t (won’t) think: part four (and last, thank FSM). « The Inverse Square Blog: OK, by now it’s clear that this is overkill.  One post by Megan McArdle does not need this kind of rant; it’s like using a howitzer to plink a tin can off a fence.  [For grotesque demonstration of my logorrhea problem, check out parts one, two, and three of this series]

But in some sense, all I’m doing is channelling my inner John Foster Dulles:  McArdle, and her ilk are not going away.  Sadly, no amount of day-by-day debunking seems able to evoke the kind of respect for their claimed craft that would produce even a smidgeon more care and honor in their ongoing attempt to write into reality their unexamined assumptions.  So, after Dulles, consider this a kind of blogospheric massive retaliation, an attempt to shock and awe the recalcitrant into the virtues of intellectual honesty.

Which brings us to one more thing that McArdle did not do in her attempt to recruit what she claims as the gold-standard of authority, the academic literature, to bolster her assertion that any attempt to control drug expenditures in the US medical system is tantamount to a pact to kill nice old people...

Ph'nglui mglw'nafh Levenson R'lyeh wgah'nagl fhtagn!!