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Bush vs.Obama as spenders

From Teresa Tritch of the New York Times.

Can the Democrats make use of the Republican's irresponsibility?

They don't seem to be trying. Why don't I hear Democrats talking endlessly about how irresponsible it is of the Republican's to hold the country hostage by politicizing about the debt limit? To do so would require a bit of explanation. The Republicans have apparently convinced the public that not raising the debt limit is a good idea. And the Democrats are too politically incompetent to dispute that.

People are swayed by demagoguery, but they are also at least somewhat open to intelligent views. The Democrats should at least try it. They will never out demagogue the Republicans, so why not establish themselves as the party of clear thinking adults. There must be some sort of constituency for that.

The US is a low-tax country

From the Center for Budget and Policy Priorities.

Congress Continues Debate Over Whether Or Not Nation Should Be Economically Ruined

WASHINGTON—Members of the U.S. Congress reported Wednesday they were continuing to carefully debate the issue of whether or not they should allow the country to descend into a roiling economic meltdown of historically dire proportions. "It is a question that, I think, is worthy of serious consideration: Should we take steps to avoid a crippling, decades-long depression that would lead to disastrous consequences on a worldwide scale? Or should we not do that?" asked House Majority Leader Eric Cantor (R-VA), adding that arguments could be made for both sides, and that the debate over ensuring America’s financial solvency versus allowing the nation to default on its debt—which would torpedo stock markets, cause mortgage and interests rates to skyrocket, and decimate the value of the U.S. dollar—is “certainly a conversation worth having.” "Obviously, we don't want to rush to consensus on whether it is or isn't a good idea to save the American economy and all our respective livelihoods from certain peril until we've examined this thorny dilemma from every angle. And if we’re still discussing this matter on Aug. 2, well, then, so be it.” At press time, President Obama said he personally believed the country should not be economically ruined.

From (who else) The Onion

Government spending is for health care

The conservative American Enterprise Institute notes that

Between 1966 and 2007, the entire increase in the size of government relative to the economy resulted from growth in tax-financed health spending.

Median weekly earnings

Ouch!

According to Jared Bernstein, the median weekly earnings for full-time workers has fallen from $775+ to $755+ since 2009.

An unbalanced recovery

Meat Eaters Guide to Climate Change + Health

From Environmental Working Group. What not to eat: lamb and beef especially. More generally, most animal protein.

Volleyball without hands!

Incredible Shrinking Workers’ Income

David Frum notes that workers' share national income has collapsed and continues to do so.

It started with the recession at the start of the 80s. Reagan's presidency allowed it to stagnate at the recession level. During Bush I and Clinton I things got worse. Clinton's second term saw a partial comeback. But it's been pretty much downhill since then.

(Note that the Y-axis numbers are relative. 2005 is assigned a value of 100. Everything else is made relative to that.)

Yes, Virginia, Our Housing Stock Is Now Way, Way Below Trend...

Brad DeLong notes.

That should be good news for home-builders. It hasn't happened yet, though. XHB, the Homebuiding ETF, has pretty much tracked the S&P 500 for the past year, except that it's a bit more volatile.

Our Broken Escalator

From Nick Kristof's column in the NYT.

The United States supports schools in Afghanistan because we know that education is one of the cheapest and most effective ways to build a country.

Alas, we’ve forgotten that lesson at home. All across America, school budgets are being cut, teachers laid off and education programs dismantled. …

The Center on Education Policy reports that 70 percent of school districts nationwide endured budget cuts in the school year that just ended, and 84 percent anticipate cuts this year.

In higher education, the same drama is unfolding. California’s superb public university system is being undermined by the biggest budget cuts in the state’s history. Tuition is set to rise about 20 percent this year, on top of a 26 percent increase last year, which means that college will become unaffordable for some. …

Granted, budget shortfalls are real, and schools need reforms as well as dollars. Pouring money into a broken system isn’t a solution, and we need more accountability. But it’s also true that blindly slashing budgets is making the problems worse. As Derek Bok, the former Harvard president, once observed, “If you think education is expensive, try ignorance.”

Still, we nation-build in Afghanistan and scrimp at home. How is it that we can afford to double our military budget since 9/11, can afford the carried-interest tax loophole for billionaires, can afford billions of dollars in givebacks to oil and gas companies, yet can’t afford to invest in our kids’ futures?

The Clash of Generations

From Tom Friedman's column in the NYT.

The generation that came of age in the last 50 years, my generation, will be remembered most for the incredible bounty and freedom it received from its parents and the incredible debt burden and constraints it left on its kids.

Lawmakers, Armed and Dangerous - NYTimes.com

From Frank Bruni's column in the NYT. Speaking of an Arizona legislator, State Senator Lori Klein, who pointed her gun at a reporter (perhaps accidentally)

Her Ruger is pink, like a Barbie convertible. Showing it to Ruelas [the reporter], she reportedly said, “Oh, it’s so cute.”

No, Senator Klein, it’s not. It’s a potentially deadly weapon. When are you and the rest of the country going to wake up to that?

Apparently the only state that still forbids concealed weapons is Illinois!

Help repeal the death penalty in California

Fill in the petition here.

And he gets away with it!

John Boehner had this to say in response to the poor June jobs report.

Today’s report is more evidence that the misguided ‘stimulus’ spending binge, excessive regulations, and an overwhelming national debt continue to hold back private-sector job creation in our country. … Republicans are focused on jobs, and are ready to stop Washington from spending money it doesn’t have and make serious changes to the way we spend taxpayer dollars.

The Republican seem to have been so successful in convining people that black is white that Boehner says this sort of thing with no worries that anyone will call him on it. As Felix Salmon commented, Does John Boehner know what paychecks are made of? Salmon's answer, or course, is that paychecks are made of money which goes to people when it is spent(!) by those doing the hiring. No matter what you think about the long term deficit, cutting spending does not create jobs.

And Paul Krugman makes the point that government has been cutting spending for the past year. Look at the results!

Christian family values

Greg Carey, a Professor of New Testament at Lancaster Theological Seminary (PA), has a useful Huffington Post article about this subject.

Christian weddings rarely feature [biblical] passages that directly relate to marriage. Only one passage, Genesis 2:24, seems especially relevant, while other passages require us to bend their content to our desire to hear a good word about marriage. Things are so bad that the worship books for many denominations turn to John 2:11, where Jesus turns water into wine at a wedding feast, to claim that Jesus blessed marriage. …

So we know Jesus blessed marriage because he attended a wedding? That's the best we can do? No wonder it's common for couples to struggle over the choice of Scripture for their wedding ceremonies. The Bible just doesn't have much to say on the topic.

…

Unfortunately, many Christians use the Bible to support their own prejudices and bigotry. They talk about "biblical family values" as if the Bible had a clear message on marriage and sexuality. Let's be clear: There's no such thing as "biblical family values" because the Bible does not speak to the topic clearly and consistently.

It's high time people came clean about how we use the Bible. When Christians try to resolve difficult ethical and theological matters, they typically appeal to the Gospels and Paul's letters as keys to the question. But what about marriage? Not only did Jesus choose not to marry, he encouraged his disciples to abandon household and domestic concerns in order to follow him (Matthew 19:29; Mark 10:28-30; Luke 9:57-62). He even refers to those "who have made themselves eunuchs for the sake of the kingdom of heaven" (Matthew 19:10-13). Whatever that means, it's certainly not an endorsement of marriage. Paul likewise encourages male believers: "Do not seek a wife" (1 Corinthians 7:27, my translation) -- advice Paul took for himself. If neither Jesus nor Paul preferred marriage for their followers, why do some Christians maintain that the Bible enshrines 19th-century Victorian family values?

Let's not even go into some of the Bible's most chilling teachings regarding marriage, such as how a man's obligation to keep a new wife who displeases him on the wedding night (Deuteronomy 22:13-21), his obligation to marry a woman he has raped (Deuteronomy 22:28-30) or the unquestioned right of heroes like Abraham to exploit their slaves sexually. I wonder: Have the "biblical family values advocates" actually read their Bibles?

America Needs a Grand Bargain

Mohamed A. El-Erian of PIMCO writes that America Needs a Grand Bargain, But All It’s Getting Is a Mini Deal. A grand bargain would, in my view, establish what we as a nation want the role of government to be and how we expect to pay for it. Of course that's a lot to agree to, and it's not likely that Obama will find a perspective that today's politicians will buy.

One reason he will have a hard time is that the Republicans don't want a grand bargain. If Obama were to succeed in building a grand bargain, the Republicans could no long argue that he is a socialist—or whatever they are accusing him of being these days.

So don't get your hopes up for a grand bargain. Republican politics won't let it happen. But wouldn't it be nice if it did.

One thing Obama might try to do is to enunciate what he thinks such a grand bargain might look like and then let the Republicans reject it. At least he would be showing some leadership, which he has failed to do.

Sex, Violence and the Supreme Court majority

Timothy Egan writes about the Supreme Court case that found unconstitutional a California ban on selling violent video games to minors while keeping in place laws that prevent the sale of nudity to minors. Justice Stephen Breyer asked,

What sense does it make to forbid selling to a 13-year-old boy a magazine with an image of a nude woman, while protecting a sale to that 13-year-old of an interactive video game in which he actively but virtually binds and gags the woman, then tortures and kills her? …

What kind of First Amendment would permit the government to protect children by restricting sales of that extremely violent video game only if the woman — bound, gagged, tortured and killed — is also topless?

It's Scilia who is really sick.

So what if children’s active minds are engaged in decisions in which people are dismembered, decapitated, disemboweled, set on fire and chopped into little pieces.

Apparently it's ok as long as certain parts of their bodies are covered.

I tend not to favor restricting speech, but if it is to be restricted it makes no sense, as Egan put it, that "children should be free to slice a clothed Godiva to bits — on screen — but should be shielded from seeing her as she was when she rode through the streets of Coventry."

Altruistic grading?

Freakonomics published these two graphs of scores on language tests given nationwide in Poland to high school students. The tests are scored anonymously by multiple scorers, suggesting that favoritism is probably not involved.

The first graph shows scores for a test that requires 21 to pass. Failure means either taking the test again or perhaps losing the chance to go on to college.

The spike at 21 and the drop-off immediately below that suggests that perhaps graders were reluctant to fail students (whom they didn't know) who came close to passing.



The second graph is of a similar test that has no serious consequences for students. The spike and drop-off are missing.

Health care expenditures

Our government healthcare expenditures is as large as all but a few developed countries. Our private healthcare expenditures is larger than our public healthcare expenditures.

Here is life expectancy to the left paired with expenditures.

It sure doesn't look like we're getting our money's worth.

Popcorn exploding

Nathan Myhrvold recently published a multi-volume book about cooking. He gave a TED talk during which he showed this video of popcorn exploding. The end of the video has links to other very slow motion videos.

Obama must explain why the debt ceiling must be raised

I left a comment along these lines on a post at Capital Gains and Games.

President Obama should make it clear to the American people that if we don't raise the debt limit, we are risking severe repercussions. If he doesn't do that he isn't doing his job. Obama is the one person in the nation who is in a position to explain the meaning (and non-meaning) of the debt ceiling. The most important thing he can do is to explain to the American people why the debt ceiling must be raised. All other budget issues, while important, are not connected to the debt ceiling. He must take seriously his role as educator-in-chief and explain that to the American people.

Once he's done that he must then make it clear that it's up to Congress to act. As president he can't raise the debt ceiling. Congress must do it. He must get the American electorate to tell their representatives that the debt ceiling should be raised. Once he does that, it will happen.

So the real question is why isn't he doing this? I'm beginning to agree with the Republicans who keep saying that he isn't doing his job.

We have a Congress problem, not a deficit problem, in one graph

As Ezra Klein has pointed out in the past, if congress does nothing the deficit problem is fixed! So the real question is whether Congress will act responsibly and not make the problem worse.

What you’re seeing here is the differences between doing nothing and doing what we expect Congress to do. The blue slope at the base of the graph is what our deficit picture looks like if Congress goes on permanent recess tomorrow. Every colored chunk above that is a deficit-increasing policy that the CBO thinks Congress might pass. Here’s [Mark] Goldwein’s rundown of those policies. [Goldwein is the policy director at the Committee for a Responsible Federal Budget.]

Doc Fixes: Under current law, Medicare physician payments are scheduled to be cut by 30% as part of something called the Sustainable Growth Rate. The AFS (and CRFB’s Realistic Baseline) assumes politicians freeze physician payments instead.

AMT Patches: The Alternative Minimum Tax is a secondary tax meant to capture high earners with low tax burdens. However, for a number of reasons, it now technically impacts middle-income families and so politicians pass annual “patches” to avoid this from occurring. Under current law, patches will stop while under the AFS (and CRFB’s Realistic Baseline) they continue.
Tax Cuts: Under current law, the 2001/2003/2010 tax cuts expire at the end of 2012, as do a number of temporary “extenders”. The AFS assumes that policymakers make both permanent (while CRFB’s Realistic Baseline only assumes the 2001/2003/2010 tax cuts continue).

PPACA Cost Controls: The health reform law included a number of cost controls for Medicare and the exchange subsidies which are now part of current law but may prove unsustainable over the long-run. The AFS assumes that they are effective through 2021 but are overridden thereafter (CRFB’s Realistic Baseline assumes they are partially overridden).

Discretionary Spending Growth: By budget convention, the current law baseline assumes discretionary spending grows with inflation through 2021 (as does CRFB’s Realistic Baseline). The Alternative Fiscal Scenario instead assumes it grows with GDP.

Revenue Freeze: Were all the tax cuts (and AMT patches) to be renewed, revenue would still grow as a share of GDP due mainly to something called “real bracket creep” -- as well as due to the effect of the health care excise tax. However, the Alternative Fiscal Scenario holds revenue constant at 18.4 percent of GDP after 2021, essentially assuming that policy makers will enact future additional tax cuts.

War Drawdown: By convention, CBO’s current law baseline assumes all discretionary spending — including for the wars — will grow with inflation. However, the Alternative Fiscal Scenario (as well as CRFB’s Realistic Baseline) assumes that troops will gradually be drawn down.

As you can see on the graph, the Bush tax cuts and the patch to the alternative-minimum tax are the biggest contributors to our future deficits. Ignoring the proposed freeze in domestic discretionary spending comes next. Then there’s the doc fix, and a future cap on revenue that holds taxes to 18.4 percent of GDP.

I want to be very clear: The do-nothing scenario is not the best way to solve our deficit problems. It raises taxes too high, and does too little to reduce health-care costs in a sustainable way. The Medicare cuts are completely unmanageable. But if every time Congress votes to change one of those policies, it offsets the cost, our problems are solved. That means we don’t necessarily need grand bargains or debt-ceiling brinksmanship. We just need Congress to abide by PAYGO.

All of which goes to a point I’ve made before: We don’t really have a deficit problem. We have a Congress problem. Congress pretends otherwise, because they don’t want to take the blame for the deficit-effects of the legislation they plan to vote for, but that’s the truth of it.

Obama Health Care Law Gets Support in First Appellate Review

In its story on the first appellate of the Health Care mandate the NYT wrote (in the story's last sentence)

cost-shifting was inevitable as long as the federal government required hospitals to treat those who show up with life-threatening conditions.

That seems to me to be a decisive argument. If the Federal Government requires hospitals to treat those who show up with life-threatening conditions, and if that requirement is constitutional, then it is reasonable to ask where the money to pay for that treatment will come from. The individual mandate seems like a reasonable answer to that question, and on those grounds should be constitutional.

A modest goal

In this review of Scott F. Aikin's Epistemology and the Regress Problem (207 pp) Kelly Becker quotes Aiken as saying that "the baseline objective in this book is to work out a way for epistemic infinitism to appear better than obviously wrong." Becker notes that this is a modest goal.

High Frequency Trading and the news

David Fry of Dave's Daily says:

This is “the short-term memory market” and may be a suitable alternative headline. But, HFTs (High Frequency Traders) have programmed their HAL 9000s to search for terms like “Greece” and “approved” to launch buy programs.

Awareness

Buddhists encourage awareness. A nice practical example of awareness occurs when one savors food. Did you ever take small bites of a dessert as a way to make it last longer? Each bite filled your mouth with flavor and pleasure. A Black Forest cake, for example, mixes the tartness of cherries, the richness and lightness of whipped cream with the unique taste of chocolate—all built on a foundation of sweetness. Awareness is doing that about everything.

Well, some things are not as enjoyable as dessert. Who wants to savor boredom, pain, or anxiety? For those times think about it this way. You are going to die. The older you get the closer the day—and the more real the understanding of that fact—becomes. Savor the moments because, like a dessert, there will be a time when you've consumed it all.

One reason TED talks are good

Each is a talk backed up by visuals rather than visuals backed up by talk.

Warren Buffet's Import Certificates

Bill Gross's July Investment Outlook argues (a) that a liberal arts education is not worth it, (b) that the governments should be the employer of last resort, and (c) that we have to get our act together as an economy. In discussing our deficit he referred to what Warren Buffet called Import Certificates. (Gross mistakenly called them Import Credits.) Buffet's idea was that to import anything the importer would have to have an Import Certificate for the cost of the import. Where would she get it? Exporters would be given Import Certificates (ICs) matching the cost of everything they export. If adhered to rigidly this would balance imports and exports.

As Buffet pointed out there would be a very liquid market in Import Certificates. Their market price would depend on how grossly unbalanced our trade would be otherwise. The more naturally balanced our trade, the less valuable the certificates since there would be enough to go around. But if we were to import more than we export, there would be fewer certificates available, thus raising their prices. In fact, the price of the certificates would rise to the point that trade would be balanced.

Who would ultimately pay for those certificates? Foreign suppliers would probably pay some of the cost as a way to gain access to the US market. Another part of the cost would be paid by consumers in the form of higher prices on imported goods.

In addition, exporters could use the income derived from selling the ICs they earn to lower their prices, thus making them a bit more competitive.

This seems like a very interesting idea since it does not favor any products, companies, or countries. It simply balances imports and exports. The market would decide how the ICs would be paid for and which products would be penalized the most.

Of course ICs put a barrier of sorts in the way of free trade. Nonetheless it may be a good way to balance our trade without distorting the market too much.

To avoid an initial shock we could start by having the government issue more ICs than are justified by our exports. The number of extra ICs would be reduced year by year until only export-paired ICs would exist.

Soros on "The Enlightment Fallacy"

George Soros wrote a lengthy introduction to a new book on his Philanthropy. An excerpt was published in the June 23 issue of The New York Review of Books. Soros also sent a copy of it to a large mailing list.

Soros has long championed what he called reflexivity in financial markets, the idea that the action of the market participants themselves affect the market. In this introduction he extends that idea to world of politics. Just as the efficient market hypothesis has been shown not to be a good model for markets, the traditional enlightenment assumption that we will use our rationality to seek the truth is not a good model for the political world. (It has recently been argued that much of our ability to think abstractly grew out of our desire to win arguments rather than to seek the truth or understand nature.) Here's how Soros puts it, along with what he sees as the consequences. Unfortunately, he doesn't propose any real solutions.

[Karl] Popper had argued that free speech and critical thinking would lead to better laws and a better understanding of reality than any dogma. I came to realize that there was an unspoken assumption embedded in his argument, namely that the purpose of democratic discourse is to gain a better understanding of reality. It dawned on me that my own concept of reflexivity brings Popper’s hidden assumption into question. If thinking has a manipulative function as well as a cognitive one, then it may not be necessary to gain a better understanding of reality in order to obtain the laws one wants. There is a shortcut: “spinning” arguments and manipulating public opinion to get the desired results. Today our political discourse is primarily concerned with getting elected and staying in power. Popper’s hidden assumption that freedom of speech and thought will produce a better understanding of reality is valid only for the study of natural phenomena. Extending it to human affairs is part of what I have called the “Enlightenment fallacy.”

As it happened, the political operatives of the Bush administration became aware of the Enlightenment fallacy long before I did. People like me, misguided by that fallacy, believed that the propaganda methods described in George Orwell’s 1984 could prevail only in a dictatorship. They knew better. Frank Luntz, the well-known right-wing political consultant, proudly acknowledged that he used 1984 as his textbook in designing his catchy slogans. And Karl Rove reportedly claimed that he didn’t have to study reality; he could create it. The adoption of Orwellian techniques gave the Republican propaganda machine a competitive advantage in electoral politics. The other side has tried to catch up with them but has been hampered by a lingering attachment to the pursuit of truth.

Deliberately misleading propaganda techniques can destroy an open society. Nazi propaganda methods were powerful enough to destroy the Weimar Republic. Different but in some ways similar methods have been used in the United States and further refined. Although democracy has much deeper roots in America than in Germany, it is not immune to deliberate deception, as the Bush administration demonstrated. You cannot wage war against an abstraction; yet the war on terror remains a widely accepted metaphor even today. …

The election of President Obama in 2008 sent a powerful message to the world that the US is capable of radically changing course when it recognizes that it is on the wrong track. But the change was temporary: his election and inauguration were the high points of his presidency. Already the reelection of President Bush had convinced me that the malaise in American society went deeper than incompetent leadership. The American public was unwilling to face harsh reality and was positively asking to be deceived by demanding easy answers to difficult problems.

The fate of the Obama presidency reinforced that conviction. Obama assumed the presidency in the midst of a financial crisis whose magnitude few people appreciated, and he was not among those few. But he did recognize that the American public was averse to facing harsh realities and he had great belief in his own charismatic powers. He also wanted to rise above party politics and become—as he put it in his campaign speeches—the president of the United States of America. Consequently, he was reluctant to forthrightly blame the outgoing administration and went out of his way to avoid criticism and conflict. He resorted to what George Akerlof and Robert Shiller called the “confidence multiplier” in their influential book Animal Spirits. Accordingly, in the hope of moderating the recession, he painted a rosier picture of the economic situation than was justified.

The tactic worked in making the recession shorter and shallower than would have been the case otherwise, but it had disastrous political consequences. The confidence multiplier is, in effect, one half of a reflexive feedback loop: a positive influence on people’s perceptions can have a positive feedback in its effects on the underlying economic reality. But if reality, for example the unemployment rate, fails to live up to expectations, confidence turns to disappointment and anger; that is the other half of the reflexive feedback loop, and that is what came to pass.

The electorate showed little appreciation of Obama for moderating the recession because it was hardly aware of what he had done. By avoiding conflict Obama handed the initiative to the opposition, and the opposition had no incentive to cooperate. The Republican propaganda machine was able to convince people that the financial crisis was due to government failure, not market failure. According to the Republican narrative, the government cannot be trusted and its role in the economy—both regulation and taxation—should be reduced to a minimum.

The Republicans had good reason to take this line: it is a half-truth that advanced their political agenda. What is surprising is the extent of their success. The explanation lies partly in the power of Orwell’s Newspeak and partly in the aversion of the public to facing harsh realities.

On the one hand, Newspeak is extremely difficult to contradict because it incorporates and thereby preempts its own contradiction, as when Fox News calls itself fair and balanced. Another trick is to accuse your opponent of the behavior of which you are guilty, like Fox News accusing me of being the puppet master of a media empire. Skillful practitioners always attack the strongest point of their opponent, like the Swiftboat ads attacking John Kerry’s Vietnam War record. Facts do not provide any protection, and rejecting an accusation may serve to have it repeated; but ignoring it can be very costly, as John Kerry discovered in the 2004 election.

On the other hand, the pursuit of truth has lost much of its appeal. When reality is unpleasant, illusions offer an attractive escape route. In difficult times unscrupulous manipulators enjoy a competitive advantage over those who seek to confront reality. Nazi propaganda prevailed in the Weimar Republic because the public had been humiliated by military defeat and disoriented by runaway inflation. In its own quite different way, the American public has been subjected to somewhat comparable experiences, first by the terrorist attacks of September 11, and then by the financial crisis, which not only caused material hardship but also seemed to seal the decline of the United States as the dominant power in the world. With the rise of China occurring concurrently, the shift in power and influence has been dramatic.

The two trends taken together—the reluctance to face harsh reality coupled with the refinement in the techniques of deception—explain why America is failing to meet the requirements of an open society. Apparently, a society needs to be successful in order to remain open.

What can we do to preserve and reinvigorate open society in America? First, I should like to see efforts to help the public develop an immunity to Newspeak. Those who have been exposed to it from Nazi or Communist times have an allergic reaction to it; but the broad public is highly susceptible.

Second, I should like to convince the American public of the merits of facing harsh reality. As I earlier wrote, I have from my childhood been drawn to contending with what may seem insurmountable challenges. Those in charge of Fox News, Rupert Murdoch and Roger Ailes, have done well in identifying me as their adversary. They have done less well in the methods they have used to attack me: their lies shall not stand and their techniques shall not endure.

But improving the quality of political discourse is not enough. We must also find the right policies to deal with the very real problems confronting the country: high unemployment and chronic budget and trade deficits. The financing of state and local governments is heading for a breakdown. The Republicans have gained control of the agenda, and they are promoting a misleading narrative: everything is the government’s fault. The Democrats are forced into fighting a rearguard battle, defending the opposite position.

To cure the deficit, do nothing

The Congressional Budget Office points out (again) that if we do nothing at all, the budget deficit will cure itself. Here's how Ezra Klein puts it.

If Congress lets the Bush tax cuts expire or offsets their extension, implements the Affordable Care Act as scheduled and makes or offset the Medicare cuts prescribed by the 1997 Balanced Budget Act — which CBO calls the “extended baseline scenario” — the national debt will be totally manageable.

If Congress passes laws extending the Bush tax cuts without offsetting the cost, repealing the Affordable Care Act and its cost controls and protecting doctors from Medicare cuts without making up the savings elsewhere — the “alternative fiscal scenario” — the national debt will be totally out of control:

Brad DeLong adds a comment.

Indeed.

If Obama were to pledge--and get everybody running for his seat to pledge--not to sign any bill that breaks PAYGO, we don't have a long-run deficit problem. If the majority and minority leaders of the Senate and their successors pledge not to let anything move through the Senate that breaks PAYGO, we don't have a long-run deficit problem. If the Speaker of the House and his successors pledge not to let anything move through the House that breaks PAYGO, we don't have a long-run deficit problem.

It boggles my mind why Barack Obama did not, on January 21, 2009, promise to veto everything that broke ten-year PAYGO. I am morally certain that this is what Peter Orszag told him to do. I am morally certain that this is what Jack Lew is telling him to do.

What a disappointment …

PAYGO is pay as you go, the policy adopted a couple of decades ago to tame the deficit. It worked then, and it could work now.

Changes in life expectancy for women in the US

From the LA Times.





Consider the correlation between changes in life expectancy and political party.

Tax rates and economic growth in one graph

Ezra Kleinquotes John Boehner

“We’ve seen over the last 30 years that lower marginal tax rates have led to a growing economy, more employment and more people paying taxes.”

But it’s very hard to find evidence for that view in the economy itself. Michael Linden at the Center for American progress graphed the economy’s average real GDP growth rate at different top marginal tax rates. Apologies to Speaker Boehner, but what we’ve seen over the past 30 years is that lower marginal tax rates have not led to particularly impressive economic growth, labor markets or revenues. Growth was actually more impressive back when marginal tax rates were higher.

I want to be very clear here: I am not saying, and no one should think, that high marginal tax rates drive growth. All else being equal, lower marginal tax rates are probably better for growth, though that can flip if they begin driving large deficits or starving important government functions. But what this graph suggests is that marginal tax rates don’t determine growth in either direction. As Linden concludes, “These numbers do not mean that higher rates necessarily lead to higher growth. But the central tenet of modern conservative economics is that a lower top marginal tax rate will result in more growth, and these numbers do show conclusively that history has not been kind to that theory.”

Too good to pass up

This post (Texas Prayed and God Answered) is by Larry Moran.

Back in April, Governor Rick Perry of Texas proclaimed a weekend of prayer (Friday, April 22, 2011, to Sunday, April 24, 2011). Texans were supposed to pray for God to relieve the terrible dought [Pray for Texas].

Bill Maher reminded me that it's been several months since Texans prayed so it's time to analyze the results.


On the site US Drought Monitor there are maps of the USA showing region of drought.

The top map below shows the regions with severe drought (dark brown) for April 26, 2011, right after all the praying.



The second map shows regions of drought on June 14, 2011.


It looks like God hates Texas and/or Rick Perry.

I'm told that Governor Perry is thinking of running for President of the United States. Is this a good idea?

---

It's Still the Economy, Stupid

Bill Clinton has 14 great ideas to help the economy.

Fourteen million Americans remain out of work, a waste of our greatest resource. The 42nd president has more than a dozen ideas on how to attack the jobs crisis.

We miss him as president.

Drew Westen: The Three Wings of the Republican Party

Drew Westen should be put in charge of framing the Democrats' message. He would make the following a statement in a public opinion poll. People would be asked whether they agree or disagree.

The best way to reduce the deficit is to put Americans back to work. There are 14 million Americans who've lost their jobs through no fault of their own, and they'd be happy to be paying taxes again instead of drawing unemployment insurance.

Peggy Noonan on Anthony Weiner: posting sexually suggestive pictures is worse than bribery and real (illicit) sex

Here's how she put it in the Wall Street Journal.

Sometimes all of Washington has to put up its hand up like a traffic cop and say no. It has to say: That doesn't go here, it's not acceptable, it's not among the normal human transgressions of back stairs, love affairs and the congressman on the take. This is decadence. It is pornography. We can't let the world, and the young, know it's "politically survivable." Because that will hurt us, not him, and define us, not him. So: enough.

Think about that. Noonan says that sending off-color pictures—apparently not even pornographic—is less acceptable than "the normal human transgressions of back stairs, love affairs and the congressman on the take." Why is that? I'd much rather have a Congress full of Anthony Weiners than one full of "congressman on the take." Why is what Weiner did so much more uncomfortable for people than "the normal human transgressions of back stairs [and] love affairs"?

I think the answer is that what Weiner did revealed an inner yearning on his part that these other activities no longer do. When we hear of a congressman (or governor or other public figure) who has had a culturally illicit sexual encounter, we no longer think about the person's internal state. We have grown so accustomed to such affairs that we are able to put them into the "illicit sex" box and don't allow ourselves to think about the inner desires that brought them on. In Weiner's case, we don't have such a convenient box in which to put his actions. We are forced to think about what he must have been feeling when he sent those pictures. And we are not comfortable with thinking about people experiencing desire.

A couple of years about Daniel Bergner published The Other Side of Desire. In it he explores the lives of four people with what we would consider fetishes, perhaps perversions. A Salon.com story about him begins like this.

In a series of four stories, Bergner grants us entree into dark worlds of extreme lust and longing: there is the foot fetishist wracked by shame, the dominatrix so turned on by inflicting pain on others that she once roasted a man on a spit, and the stepfather capsized by lust for his 12-year-old stepdaughter. There is even a love story involving amputee fetish. But what's remarkable about Bergner's book is not the way these tales shock or confound or titillate (though they do those things sometimes), but how sympathetic their plights and hungers become. Bergner … is a keen storyteller but above all a humane one, and in his hands, these characters do not seem like freaks so much as shadows of ourselves.

We all have internal desires, and many of us are afraid to talk about them, even to acknowledge that they exist. When someone has his inner desires made public, to avoid acknowledging our own (often hidden) desires we resort to calling the person a pervert, as if no one by a freak could feel the way he apparently does.

This sort of reaction seems to be particularly Republican. Peggy Noonan's piece is a good example. Sending sexually suggestive picture over the internet as worse than bribery or actual affairs? Noonan, like so many of her conservative colleagues seems unable to look at the broad range of human desire and emotion and acknowledge that it exists.

Interview with Paul Krugman.

(Click the image for the full interview.)

… Then I read Hume’s Enquiry Concerning Human Understanding, this wonderful, humane book saying that nobody has all the answers. What we know is what we have evidence for. We do the best we can, but anybody who claims to be able to deduce or have revelation about The Truth – with both Ts capitalised – is wrong. It doesn’t work that way. The only reasonable way to approach life is with an attitude of humane scepticism. I felt that a great weight had been lifted from my shoulders when I read that book. …

[If] you ask a liberal or a saltwater economist, “What would somebody on the other side of this divide say here? What would their version of it be?” A liberal can do that. A liberal can talk coherently about what the conservative view is because people like me actually do listen. We don’t think it’s right, but we pay enough attention to see what the other person is trying to get at. The reverse is not true. You try to get someone who is fiercely anti-Keynesian to even explain what a Keynesian economic argument is, they can’t do it. They can’t get it remotely right. Or if you ask a conservative, “What do liberals want?” You get this bizarre stuff – for example, that liberals want everybody to ride trains, because it makes people more susceptible to collectivism. You just have to look at the realities of the way each side talks and what they know. One side of the picture is open-minded and sceptical. We have views that are different, but they’re arrived at through paying attention. The other side has dogmatic views. …

Politically [James] Tobin was very much a free-market, welfare-state Keynesian [emphasis added], as I am. We appreciate markets, we understand them, we don’t hate rich people, but we want a social safety net and you do need government intervention to avoid what we are going through right now.

Jared Diamond: Thoughts on Managing Change

“There are so many societies in which the elite made decisions that were good for themselves in the short run and ruined themselves and societies in the long run. For example, the most advanced society in the New World before Columbus was the Maya of the Yucatan Peninsula, Guatemala and Honduras. They ended up collapsing …. because of a combination of climate change, drought, water management problems, soil erosion, deforestation….So the Mayan kings had strong power.

Why didn’t the Mayan kings just look out the windows of the Palaces and see the forests getting chopped down, soil being eroded down at the valley bottom. Why didn’t the kings say `stop it’? Well the kings had managed to insulate themselves from the consequences of their actions – in the short run. Even while the forests were being chopped down, they were still being fed well by the commoners, they were in their wonderful palaces. And the kings didn’t recognize that they were making a mess until it was too late, when the commoners rose in revolt.

Similarly, in the United States at present, the policies being pursued by too many wealthy people and decision makers are ones that — as in the case of the Mayan kings — preserve their interests in the short run but are disastrous in the long run.”

Boeing and the NLRB

Andrew Sammick is an intelligent and respected economist. Yet he wrote in his blog that the Boing machinist union

filed a complaint in April alleging that Boeing decided to locate a new assembly line to build 787 Dreamliner jets in South Carolina because it was trying to punish union workers in Washington state for their past strikes. Boeing says the charge is groundless and has said it will fight the case to the Supreme Court.

I think the claim that failing to expand in a given area because it is cheaper to expand in another area is a violation of any law that is worth being upheld is going to be a tough one to make. It is further complicated, in this particular case, by the fact that there is no evidence that any specific workers have lost jobs in Washington, Boeing's home and the location of the existing assembly lines for the 787.

Ellin Dannin explains what's really going on.

The Boeing case began when the Machinists Union in the State of Washington filed a charge with the NLRB alleging that Boeing had retaliated against its Washington employees for past strikes by moving work to South Carolina. The right to strike is protected by law, and an employer’s retaliating against employees for exercising their legal rights violates the NLRA, the law the NLRB enforces.

After the charge was filed, the NLRB’s regional office in Washington investigated the case. That investigation involved taking sworn affidavits from witnesses and collecting other relevant evidence. Boeing had the right to present its evidence during the investigation. The evidence included public statements by Boeing officials – and reported in the Seattle Post Intelligencer Aerospace News and the Seattle Times – that they were angry that Boeing employees in Washington had gone on strike in the past. Boeing officials also said that they would, therefore, move work that was originally going to be done in Washington to a plant in South Carolina. This evidence, if credited by the judge at trial, supports a finding that Boeing violated § 8(a)(1) and (3) of the NLRA.
There is nothing in the case about one state being a right to work state or not.
That red herring was created by Boeing in its aggressive campaign against the NLRB. So far Boeing’s cynical strategy appears to be working. It has gotten congressional representatives to repeat the unsupported claims made by Boeing and to hold hearings and draft legislation that would hamstring the NLRB in doing its job.

Liar, liar pants on fire

Ezra Klein quotes Mitt Romney as saying, “We have seen the most anti-investment, antigrowth, antijob strategy in America since Jimmy Carter. The result has been it’s harder and harder for people to find work.”

Klein makes it clear that Romney is using the standard Republican strategy: lie.

By any measure, this is absurd. Taxes are at a 50-year low. The Dow has staged a roaring recovery. Business profits are near record levels. And the economy has gone from losing 780,000 jobs a month to gaining about 160,000 jobs a month. That is to say, it’s getting easier and easier for people to find work, even if it’s not nearly easy enough.

The tragedy of it is that the Republicans tend to get away with it. When will the American people recognize lies and punish the liars for what they are?

Xefer Wikipedia Radial Graph

Continuously following the first link of any Wikipedia article will eventually lead to “Philosophy.” Try it here

That's neat, but I wonder what would happen if one used some other term as the stopping term. For example, what if one followed first links until one got to, for example, English? That wouldn't work because starting with philosophy one just gets back to philosophy. For example: philosophy, rational argument, reason, rationality, philosophy.

What this is really saying is that Philosophy is a basin of attraction for first word links. So the question becomes what are the other basins of attraction?

Bush tax cuts 10th anniversary: They've been a failure in every conceivable way

By Annie Lowrey in Slate Magazine

The massive Bush tax cuts mark their 10th birthday this week. Sadly, despite my best efforts to find something redeeming about them—honest!—there is little to celebrate. By nearly all of the metrics set out by President Bush himself, the cuts were a colossal failure.

In 2001, the Bush administration inherited a few years' worth of budget surpluses, so it decided to cut income tax rates, double the child-care credit, and sharply reduce the levies on investment income. The economy then slowed, even entering a brief recession. As a form of stimulus, the administration doubled down, expanding and hastening the 2001 changes. Bush promised that the tax cuts would do a whole lot more than put money in people's pockets—which, in fact, they did. He said they would 'starve the beast,' forcing Congress to reduce the size and scope of government. He promised they would increase the prosperity of all Americans. He also vowed: 'Tax relief will create new jobs. Tax relief will generate new wealth. And tax relief will open new opportunities.' …

[Besides that,] the benefits mostly accrued to the rich, according to the nonpartisan Tax Policy Center. The think tank reports that between 2001 and 2008, the bottom 80 percent of filers received about 35 percent of the cuts. The top 20 percent received about 65 percent—and the top 1 percent alone claimed 38 percent.

The argument for, and against, euthanasia

Ezra Klein has a very thoughtful post on euthanasia.

You could even argue that the option of physician-assisted suicide might reduce suicides: The promise of a painless and safe death, one with no chance of failure and no grisly spectacle for loved ones, might be enough to persuade people who want to swallow a bottle of pills now to wait and begin working with a doctor instead. That creates time between the intention and the act, and that’s time in which the individual might reconsider, and time in which a professional caregiver is going to attempt to help them find treatments to ease their pain. …

But Klein goes on to quote from a paper by Ezekiel Emanuel in which he worries that

the option of euthanasia will lead to worse care for the dying, and perhaps even subtle coercion on the part of loved ones and medical professionals who can no longer bear to see a patient suffer, or, more worryingly, can no longer afford to treat their suffering. “Broad legalization of physician-assisted suicide and euthanasia would have the paradoxical effect of making patients seem to be responsible for their own suffering,” he writes. “Rather than being seen primarily as the victims of pain and suffering caused by disease, patients would be seen as having the power to end their suffering by agreeing to an injection or taking some pills; refusing would mean that living through the pain was the patient’s decision, the patient’s responsibility.”

Stan Collendar on the debt limit

From Roll Call, reprinted on his blog.

The best indication of all that the market has already started reacting negatively is the current trading of credit default swaps on U.S. debt. As of late May, the number of CDS contracts — essentially insurance policies on the possibility of a default — had risen by 82 percent. Equally as important, the cost of a CDS — the best indication of how much riskier U.S. debt has become — rose by more than 35 percent from April to May. Last week I spoke to a number of people who calculate such things for a living, and they said this change means that the interest rate the U.S. government has to pay has already increased by as much as 40 basis points compared with what it otherwise would be. This means higher federal borrowing costs and deficits, and overall higher interest rates on everything from car loans to mortgages to credit cards.

What should S&P and Moody's do? Should they take seriously the possibility that the US will default? Everyone "knows" that this is all political gaming and it will never come to a real default. But then, that's always the case before something unexpected happens: no one believes it could possibly happen. If it does happen and S&P and Moody's hadn't taken the possibility seriously, they would be criticized for missing something that was obvious—in the same way they missed the mortgage meltdown. So they should take it serious—just as if it were happening in some other country that is immature enough that it may allow something like this to happen. And perhaps it will really happen.

Except when something unexpected occurs, the initial changes in market psychology and behavior start with just a few investors who act either because they are more or less risk averse, have better information, or are smarter. That means there are usually small signs of change before a market tsunami hits. In this case, there is now clear evidence that the uncertainty over the federal debt ceiling is already having the negative impact on financial markets that the Republican leadership has said will not occur. Just because it may not yet be obvious to everyone doesn’t mean it’s not happening.

Not only that, I'm sure I'm not the only person who has thought these thoughts. As the deadline approaches, more and more people are likely to become more and more uncomfortable and will look for a safe place to put their money. Where is that? I don't know. Not the usual place, U.S. Treasury notes. So where? Cash? That has to be stored somewhere. Money market funds won't do since they depend on Treasuries. Even bank deposits may seem unsafe since who knows what will happen to the banking system. Something solid like commodities or precious metals? Or perhaps companies that for one reason or another are likely to be needed after the crisis and are not likely to fall apart.

After all, the world will go on. We must all eat. It's not the case that everything will grind to a halt. And in the worst case, the Republicans will see how much damage they are doing and retreat—one hopes. But I'm sure quite a few people are right now attempting to imagine possible scenarios and looking for ways both to protect themselves and perhaps even to make money.

Peter Diamond's withdrawal from consideration

for membership on the Board of Governors of the Fed. Andrew Samwick sees of it as representative of our decline and fall.

When historians look back at our era and write about how a nation so blessed was able to squander those blessings so dramatically, they won't have to look much further than the U.S. Senate.  Words, polite ones anyway, cannot really express how how absurd it is that the nomination of Peter Diamond for the Board of Governors of the Federal Reserve System has come down to this.  Even without the Nobel Prize, his qualifications for the position were beyond question -- at least by anyone who could be persuaded by the answers.  I continue to wonder whether our society is resilient enough to withstand many more years of this institutionalized immaturity on important policy matters. 

With Austan Goolsbee's resignation as CEA Chairman, most speculation will turn to his successor and this summer's Senate confirmation process. And, no, I don't think President Obama will nominate Peter Diamond to be the CEA Chairman, though he is, once again, more than qualified for the position. The next CEA Chairman will have to be someone not currently associated with the Obama Administration, so that the confirmation hearings can be less of a retrospective on Obama's policies to date and more of a forward-looking discussion of what could and should be done. And I don't envy Goolsbee's successor, for two reasons. First, outsiders have a terrible time trying to be heard by those who have been around since the campaign and have developed trust and established ways of working together. Second, by the time this person takes office, the entire economic agenda will be driven by the 2012 election campaign and not the more thoughtful possibilities for crafting policy.

Rand Paul, Supposed Defender Of Civil Liberties, Calls For Jailing People Who Attend ‘Radical Political Speeches’

From ThinkProgress. Rand Paul "libertarian":

[If] someone is attending speeches from someone who is promoting the violent overthrow of our government, that’s really an offense that we should be going after — they should be deported or put in prison.

Really?!

Fantastic post about health care

Ezra Klein has a number of guest posters substituting for him while he is on vacation. Here is Karl Smith, assistant professor of economics and government at the University of North Carolina School of Government.

We spend a lot of time talking and, indeed, yelling at each other, over how we are going to pay for health care and who is going to buy what. What gets scant attention is the far more important question: [How] are we going to create and who is going to sell it?

Imagine for a moment that the price of health care suddenly dropped by 90 percent. Care that cost $1,000 could be had for $100. Not only that, but the cost curve began to bend the other way. The next year the care was $95. The year after that it was $90.

In that world, would it matter whether we had RyanCare or ObamaCare? Would it matter if most people had health insurance at all?

Such a world could only be achieved by changes on the supply side. Health care would have to become cheaper to produce. Indeed, health care stands in stark contrast to a portion of our economy that displays that property: information and communication technology.

This is striking, because health care essentially is information and communication technology. To get a glimpse of this, imagine the Universal Health App (UnHA) that comes with your next-, next-generation Android or iPhone. You point your phone at yourself and UnHA immediately tells you what diseases you have. If medication is available, she orders it. If a surgical procedure is needed, she schedules it. She knows your calendar perfectly and can interface seamlessly with the local hospital’s scheduling computer and the surgeon’s calendar.

When the drugs come, UnHA checks to make sure you have the right ones, reminds you when to take them, lets you know what to do if you miss a dose and monitors you for side effects. When you come home from your surgery, UnHA likewise monitors your recovery, making sure that everything is proceeding according to plan.

UnHA is personalized and travels with you everywhere you go. She carries all of your medical records and calculates your risk factors for every imaginable condition on a continuous basis. UnHA will even remind you of the expected increase in your individualized life expectancy from staying on the elliptical for 20 more minutes.

Perhaps most important is UnHA’s back end. UnHA’s server strips away all identifying information and runs constant statistical analysis on incoming data from a billion patients worldwide. When a news story generates a spike in blood pressures, UnHA’s server side can see the wave of tension traveling across the globe.

When more heart attacks come in within the next two hours, UnHA can trace them back to the exogenous event and calculate the effect stressors on the probability of a heart attack. In this way UnHA not only monitors patients but conducts continual scientific analysis. She picks up drug interactions and other effects that would have otherwise been too slight to notice.

Now, this isn’t meant to suggest that UnHA is coming soon to a phone near you. It’s to point out that health care is fundamentally an information and communication industry, yet it isn’t following the trend of collapsing costs.

The key question is why?

My baseline answer is that the current health-care system is riddled with regulation, litigation and occupational and pharmaceutical licensing. We have levels heaped upon levels of protection against bad drugs, bad doctors and bad health-care consumers. While all of these rules provide us with a sense of security, they most likely undermine the evolution of health care and make what care we do have outrageously expensive.

We’ve come to accept rising health-care costs as a fact of life. The CBO projects them going out to 2080. Yet, health care is an information and communication technology industry. It could be enjoying collapsing costs, if only we would set it free.

Why agent-based modeling is important

Here's a good example of the sort of thing that agent-based modeling can do that other approaches can't. This blog post from Capital Gains and Games talks about why

Mitch McConnell (R-KY) … announced—proudly—that he would not allow an increase in the debt ceiling without significant cuts in Medicare?

At first blush this may not seem like that big of a deal given the continuing demands from the GOP leadership in the House for substantial spending cuts before it will allow a debt ceiling increase. But it is. This is not a call for reductions in general; it's insisting on cuts in an exceedingly popular specific program. And it's not just any specific program: It's Medicare, the currently most politically sensitive program of all and the one that, because of the Republican plan to make substantial reductions, cost the GOP a House seat in upstate New York just barely a week ago.…

So why did he do it? According to the Stan Collender, the post author and a perceptive political observer,

1. McConnell likely can't stay as minority leader without unequivocal support from the GOP's tea party-like base and, in the wake of the widespread criticism of Newt Gingrich for abandoning the House GOP Medicare reduction plan (Newt was against it before he was for it), he used this statement and extreme position to shore up his own bona fides with that wing of the party.
2. McConnell wants to be majority leader if the GOP takes over the Senate and needs the base to do that.
3. McConnell is from the state that also elected Rand Paul to the Senate and he runs the chance of looking like a liberal Democrat in comparison to his junior senator if he doesn't make statements like this.

[Perhaps] McConnell has decided that the GOP winning the White House in 2012 isn't as important to him as the GOP getting the majority in the Senate and that requires continually energizing the base rather than trying to win over independents and Democrats.

If Obama wins and the GOP takes over the Senate, McConnell will be the most important and powerful Republican in the United States…Roger Ailes aside. That won't be true if there's a Republican president, of course. But if all of the best known GOP candidates lose the Republican nomination in 2012 and the 2012 nominee then loses in the general election, the next tranche of potential Republican presidential candidates will be at least two years away.

Only an agent-based model in which McConnell is modeled individually could account for that sort of action. No general model of relative political power could do anything like it.

Custom background image themes in Gmail doesn't work

Custom background image themes - Official Gmail Blog. This feature doesn't seem to work. When I try to select a Picasa-web image the select never terminates. I have to kill the entire transaction.

Are Taxes in the U.S. High or Low?

From Bruce Bartlett in the NYTimes.com.

Federal taxes are at their lowest level in more than 60 years. The Congressional Budget Office estimated that federal taxes would consume just 14.8 percent of G.D.P. this year. The last year in which revenues were lower was 1950, according to the Office of Management and Budget. …

The G.O.P. says global competitiveness requires the United States to reduce its corporate tax rate. But the United States actually has the lowest corporate tax burden of any of the member nations of the Organization for Economic Cooperation and Development.

Bartlett goes on to point out that our tax rates are not necessarily lower than those of other countries. It's just that the various allowances and deductions yield the lowest tax receipts than all other OECD countries.

More on the debt ceiling

In a previous post (and on Jared Bernstein's blog) I suggested that the Fed fund the Federal government if the Republicans block an increase in the debt ceiling. Here are a few more thoughts.

The Fed has a balance sheet of $2.76 trillion. If it prints that much money (as the government needs it) while simultaneously selling items from its balance sheet that would keep the government in business without affecting the money supply for quite a long time. In addition, even in the unlikely chance that the Fed exhausts it balance sheet before the debt ceiling issue is settled, the President could assure the world that once the debt ceiling is raised, the Treasury would borrow back the excess money and return it to the Fed. I think such a promise could be made believable. Then the Republicans would be in a position of either forcing the Fed to continue printing money—exactly what they complain about now with respect to "debasing the currency"—or finally realize that the debt ceiling is the wrong way to deal with spending issues.

I’m not clear whether it can be said that the government “owns” the Fed’s balance sheet. If so, or if a reasonably good case could be made along those lines, then selling items on the balance sheet would be comparable to selling any other Federal property. That’s exactly what the Republicans are suggesting. So let’s do it!

The Fed regularly returns to the Treasury most of the interest payments it receives on US Govt bonds that it owns. Thus there is a real precedent for having the Fed give money to the Treasury. It can refer to that precedent when it sells assets and gives that money to the Treasury.

An easy petition to sign.

From CREDO Action.

Earlier this month, 44 Republican Senators pledged to filibuster the nomination of anyone to head the Consumer Financial Protection Bureau unless the agency itself is significantly weakened.

This threat makes it much more likely that President Obama will have to use his constitutional authority to make a recess appointment to fill the top slot at the agency.

A number of great progressive groups and leading academics have signed a letter to President Obama supporting a recess appointment. And now I've signed it too.

I hope you join me in co-signing the letter. You can read it and add your name to it here.

Encourage the Republican crazies

Perhaps if enough Republicans go over the edge, the entire party will disappear. One way to encourage them is to support their petition drives. Here's one. They ask for money, but you can decline and still sign the petition. That's what I did.

"Where Have All The Mensches Gone?"

More from Krugman.

Newt Gingrich declared that anyone who quoted him accurately was lying; and now Tim Pawlenty, who, aside from saying a whole lot of false things while declaring himself a truthteller, pulled a Gingrich when Rush Limabaugh correctly pointed out that he wasn’t a true Tea Partier a few years ago.

It’s possible to believe that someone is completely wrong on policy while respecting his or her character. But policy aside, these are just contemptible people.

Republican in Wonderland

From a blog post by Paul Krugman.

We’re in a strange state now where people who actually take textbook economics and simple arithmetic seriously are seen as dangerously radical and irresponsible, while people who believe in invisible bond vigilantes and confidence fairies, who claim to know what the market will want even though there’s no sign of that desire in current asset prices, are viewed as Very Serious.

Why do libertarians support school vouchers?

Gary Johnson is running for the Republican nomination for president. Johnson was the governor of New Mexico for 8 years around the turn of the century. He is considered one of the purest libertarian politicians. He favor the legalization of drugs, for example. One of his "signature" issues is school vouchers. He worked hard for them in New Mexico when he was governor. The way school vouchers work is that the government gives kids (or their families) vouchers with which to pay tuition at the private school of their choice. It's understandable that a libertarian would favor private schools over public schools. What I don't understand is how libertarians justify having the government pay for those private schools. Why isn't the libertarian position that if someone wants education—for himself or his children—it is up to that person to find a way to get it. That seems more consistent with libertarian principles.

I left a note on Johnson's web site asking that question. So far, no reply.

The larger question is what libertarians think the role of government should be. Should the government run a fire department? If not, must we have private fire departments that protect us. What if a house whose owner does not buy protection from a private fire department catches fire—and endangers the houses near it. Do the neighbors have the right to ask their private fire departments to spray water on the burning house? Doesn't that violate the property rights of the person who owns the burning house? What if he wants it to burn? Presumably he would be liable for damage the fire caused to the neighbors' houses. But what if he doesn't have the money to pay for those damages? Must we then buy insurance to protect ourselves from "uninsured homeowners?" I can just imagine the legal battles that will generate. We will need 10 times as many lawyers as we have now. And we will all be far worse off.

So what should the role of the government be according to libertarians?

More about microbes

From J. Craig Venter on Edge.

We live on a microbial planet. There are one million microbial cells per cubic centimeter of water in our oceans, lakes and rivers; deep within the Earth's crust and throughout our atmosphere. We have more than 100 trillion microbes on and in each of us. The Earth's diversity of life would have seemed like science fiction to our ancestors. We have microbes that can withstand millions of Rads of ionizing radiation; such strong acid or base that it would dissolve our skin; microbes that grow in ice and microbes that grow and thrive at temperatures exceeding 100 degrees C. We have life that lives on carbon dioxide, on methane, on sulfur, or on sugar. We have sent trillions of bacteria into space over the last few billion years and we have exchanged material with Mars on a constant basis, so it would be very surprising if we do not find evidence of microbial life in our solar system, particularly on Mars.

Life’s deliberate typos

From Not Exactly Rocket Science | Discover Magazine. Transcription from DNA to RNA is not only not precise, the errors—or at least some of them—are consistent and frequently not consistently edited out. Presumably these produce protein results that we depend on for our survival. Life is even more complex than the complexity we imagined. No matter where one looks, more is going on that we imagine.

This reminds me of Carl Zimmer's disappointingly short (less than 100 pages) new book on viruses, which says that there are trillions of viruses in the ocean and that they kill (cause to decompose) half of the billions of bacteria every day. But of course the bacteria reproduce so fast that they replenish the supply.

There used to be a time when people thought the oceans are pretty much virus-free. But now we realize that there might be, say, maybe a billion viruses in every teaspoon of water. And they're attacking the bacteria. There's lots of bacteria in the ocean. And so they will just do a slaughter of these bacteria every day. Of course, the bacteria grow back pretty fast, but still it's a tremendous thing because all those bacteria contain carbon and lots of nutrients. And so they're constantly cycling all this to the ocean and into the atmosphere.

Think about how much is going on that we hadn't even imagined—and how dependent we are on it happening!

HuffPost now has gold stars!

See HuffPost badges. Very clever. Will probably motivate people to be more involved.

No debt ceiling increase? Print the money.

I just left this comment on a post by Jared Bernstein.

Let's assume Congress doesn't raise the debt ceiling. As you said, the Fed could just print the money. What would be the consequenc­es of that? It seems to me there would be no negative consequenc­es and a number of positive consequenc­es.

The most significan­t potential negative consequenc­e is that the world would lose faith in the Dollar as a stable currency and would treat it as one likely to face run-away inflation. But the administra­tion could combat that threat by stating that once the debt limit is raised, we would sop up the extra money by borrowing it back. I think the administra­tion and the Fed (although not the Congress) have the credibilit­y to make a promise of that sort.

The positive consequenc­e would be additional stimulus. We would be injecting lots of money into the economy without having to borrow it. That would increase the supply of money,whic­h would lead to increased demand, increased asset values, and even lower (long term) interest rates.

So why shouldn't Obama say that if Congress doesn't raise the debt ceiling, the administra­tion will simply print the necessary money until Congress acts?

Of course this whole issue is silly. As you said, there is probably no other country in the world with a debt ceiling. But as long as we're being silly, why not go all the way!

Here's a follow-up I posted.

In effect, the government would be (implicitly) borrowing money from the Fed, which it would pay back when the debt ceiling is raised. To reduce the inflationary effect, the Fed could, in turn, sell items on its balance sheet into the market. By selling the same amount that it "lent" to the government, it would, in effect, be providing a way for the government to borrow without actually issuing new debt, i.e., it would be providing a debt laundering service for the government. This could go on until the Fed ran down its balance sheet—which would take quite a while.

Hayek on Regulation

Ezra Klein quotes Friedrich Hayek on regulation. That led me to this Wikipedia section on Hayek.

''The Road To Serfdom'' is often cited today for the proposition that government should not intervene at all in free markets. …

Although Hayek believed that government intervention in markets would lead to a loss of freedom, he recognized a limited role for government to perform tasks of which free markets were not capable:

The successful use of competition as the principle of social organization precludes certain types of coercive interference with economic life, but it admits of others which sometimes may very considerably assist its work and even requires certain kinds of government action.

While Hayek is opposed to regulations which restrict the freedom to enter a trade, or to buy and sell at any price, or to control quantities, he acknowledges the utility of regulations which restrict allowed methods of production, so long as these are applied equally to everyone and not used as an indirect way of controlling prices or quantities:

To prohibit the use of certain poisonous substances, or to require special precautions in their use, to limit working hours or to require certain sanitary arrangements, is fully compatible with the preservation of competition.

He notes that there are certain areas, such as the environment, which cannot effectively be regulated solely by the marketplace:

Nor can certain harmful effects of deforestation, of some methods of farming, or of the smoke and noise of factories, be confined to the owner of the property in question, or to those who are willing to submit to the damage for an agreed compensation.

The government also has a role in preventing fraud:

Even the most essential prerequisite of its the market's proper functioning, the prevention of fraud and deception (including exploitation of ignorance), provides a great and by no means fully accomplished object of legislative activity.

He concludes:

In no system that could be rationally defended would the state just do nothing.

The extracts are all from

Hayek, Friedrich August (1994). The road to serfdom. University of Chicago Press. ISBN 9780226320618.