Adrian Wooldridge Is… the Vicar of Bray!: Hoisted from the Archives

Hoisted from the Archives: Adrian Wooldridge Is… the Vicar of Bray!:

“The Illustrious House of Hannover,
And Protestant succession,
To these I lustily will swear,
Whilst they can keep possession:
For in my Faith, and Loyalty,
I never once will faulter,
But George, my lawful king shall be,
Except the Times shou’d alter.”


Adrian Wooldridge, October 27, 2004: “[Bush’s] presidency has been momentous–two terms rolled into one, by any decent reckoning… transformed American policy… transformed American conservatism…. No Republican president has devoted so much attention to this ‘right nation’ within America…. The past four years have arguably brought more dramatic changes to conservative America than to America as a whole…. The most surprising change has been the rise of ‘big government conservatism.’…. The massive growth in the state during this presidency… is a deliberate strategy…. Before Mr. Bush, conservatives had assumed that the only way to win the battle against what Michael Barone has dubbed ‘soft America’ was to shrink government. Mr. Bush has pioneered a different strategy—to ‘harden’ government itself. Mr. Bush… has shifted power dramatically in favor of social conservatives…. A quarter of voters are born-again Christians–and Karl Rove blames his boss’s failure to win a resounding victory in 2000 on the failure of four million of these voters to turn up at the polls…. Mr. Bush’s boldest contribution to reinventing conservatism—foreign policy… the radicalism of America’s post-Sept. 11 foreign policy…. Mr. Bush has applied his doctrine of spreading democracy to an area of the world where the Reaganites feared to tread…. Yet there is one area where Mr. Bush has exceeded the expectations of everybody on the right—party building. He is arguably the greatest Republican party builder since William McKinley…”

Adrian Wooldridge, January 15, 2009: “[Bush] leaves the White House as one of the least popular and most divisive presidents in American history… approval rating… stuck in the 20s… the most catastrophic collapse in America’s reputation… deep recession…. Bush family name… now so tainted that Jeb, George’s younger brother, recently decided not to run for the Senate…. Bush’s presidency was also poisoned by his own ambition. Mr Bruni’s ‘timeless fraternity boy’ wanted to be a great president… hated anything that was ‘small ball’…. Facets of Mr Bush’s personality mixed with his vaulting ambition to undermine his presidency. Mr Bush is what the British call an inverted snob. A scion of one of America’s most powerful families, he is a devotee of sunbelt populism; a product of Yale and Harvard Business School, he is a scourge of eggheads…. He also styled himself, much like Reagan, as a decider rather than a details man; many people who met him were astonished by what they described as his ‘lack of inquisitiveness’ and his general ‘passivity’…. The fruit of all this can be seen in… partisanship, politicisation and incompetence. Mr Bush was the most partisan president in living memory…. Alberto Gonzales… only the most visible of an army of over-promoted, ideologically vetted homunculi…. The Iraq war was a case study of what happens when politicisation is mixed with incompetence…. A president who laboured to produce Republican hegemony ended up dramatically weakening the Republican Party…. A president who believed that America’s global supremacy was guaranteed by America’s unrivalled military power ended up demonstrating the limits of both…. Economic legacy is littered with wasted opportunity, bad judgments and politicised policy…. Good policy repeatedly took a back seat to Mr Bush’s overweening political ambition. Both the country and, ultimately, the Republican Party are left the worse for it…”


#journamalism #hoistedfromteharchives #smackdown 

Some Great Past First-Year Berkeley Economic History Course Papers

Economic history Google Search

Yes, some of these have been highly revised since they were submitted for a grade. Why do you ask? 🙂


#economichistory #berkeley 

Commonwealth Club: Annual Economic Forecast Event (January 25, 2019): Relevant Files

6a00e551f080038834022ad3b8c1ea200d

Commonwealth Club: Annual Economic Forecast

Short-Run Economic Forecast: The Economic Forecast: Commonwealth Club Non-Public Event Opening Statement

Talking Points and Snippets from Commonwealth Club January 25, 2019 Forecast Event

General Talking Points: Commonwealth Club Talking Points (January 25, 2019): Forecasting and Steve Moore Edition


Presenting Information:

  • Cranks and Charlatans: Stephen Moore and the Club for Growth: One of my very worst book-purchase investments is looking me in the face from the fourth middle shelf right now: a yellow-covered book called It’s Getting Better All the Time: 100 Greatest Trends of the Last Hundred Years…. It is a not very bad book because its thesis is wrong—I agree with the thesis, which is that in almost every respect things are a lot better today than they were 100 years ago. It is a very bad book because I cannot trust a word, a paragraph in it. Every time I read a sentence, every time I read a page, I have to step back and think, “Is this yet another place where Stephen Moore is trying to make me into a fool?”…

 

Finance:

  • Trying to blame poor nonwhite people and social democratic governance for the faults of Wall Street seemed to me several bridges too far back a decade ago. Yet Steve Moore and Larry Kudlow seem to have gained rather than lost influence on the right from their eagerness to do so. They very sharp Barry Ritholtz takes exception: Larry Ritholtz (2016): No, the CRA Did Not Cause the Financial Crisis:: “As Warren Buffett pal Charlie Munger says, ‘Invert, always invert’. Assume Moore and Kudlow are correct, and the CRA did require banks to lend to unqualified, low-income buyers…. Here’s what we should have seen…

 

Federal Reserve:

  • Why do people do this? Because it gets you invited back on to CNN. Why does it get you invited back on to CNN? That remains a mystery to me, and to others Brad Reed: Trump-Loving Economist Caught Red-Handed ‘Making Up Numbers’ by Ann Guest: “Washington Post columnist Catherine Rampell busted Trump-loving economist Stephen Moore on Friday when he falsely claimed that we are seeing vast ‘deflation’ in the United States economy…

 

2017 and Other Tax Cuts:

 

State-Level Outcomes:

  • Menzie Chinn (2014): Does a Low Tax/Right-to-Work/Low Minimum Wage Regime Correlate to Growth: “: “If a higher ALEC-Laffer ranking resulted in faster growth, then the points should line up along an upward sloping 45 degree line. This is not what I see…. The higher the ranking according to Arthur Laffer, Stephen Moore (currently chief economist of Heritage), and Jonathan Williams, the poorer the employment growth…

  • ProGrowthLiberal (2015): Stephen Moore Tries to Claim There Is a “Debate” About North Carolina Employment Statistics: “Another silly parade of disinformation…. Moore wants to claim employment has soared… says there was a ‘debate’ about how many people dropped out of the workforce…

  • Deron Lee: Why one editor won’t run any more op-eds by the Heritage Foundation’s top economist: “‘I won’t be running anything else from Stephen Moore.’ So says Miriam Pepper, editorial page editor of the Kansas City Star…

  • Jared Bernstein (2016): Kansas and the Myth Of Trickle-Down Tax Cuts: “Brownback was persuaded by some of the same folks now advising Trump to sharply cut state income taxes and to fully exempt pass-through income…. Reality has had almost no perceptible impact on the cuts’ architects…. Steve Moore, a key trickler that pushed the plan in Kansas, didn’t see that coming: ‘Sometimes it was legitimate, and sometimes it was a gaming of the tax system to pay the zero rate, so that loophole has to be closed’, he said. ‘Unless you have some rules about this, people really will shift income and they’ll find ways to legally avoid paying tax, and that was never the intention’. Who’d a thunk it?…

  • The Kansas Republican Governance Experiment. Or Is That “Governance ‘Experiment'”? Or Is That “‘Governance’ Experiment”?: Kansas is—in some strong sense—unbelievably loony. No sooner does Sam Brownback manage to plant his behind in the Governor’s chair in Topeka, KS than does Kansas’s share of American nonfarm jobs and people start to drop like a stone…. Kansas has seen none of the country’s net employment growth over the past decade…. There is no sense in which the share of U.S. nonfarm employment in Kansas was in any sort of long-run decline…. But since Brownback took the chair over from Kathleen Sibelius and Mark Parkinson, it has been down, down, down, down. A fall of 6%-points in the relative share of employment in little more than six short years is astonishing in its rapidity…

  • Ben Casselman et al.: The Kansas Experiment Is Bad News For Trump’s Tax Cuts: “The Kansas state legislature on Tuesday voted to override Gov. Sam Brownback’s veto and roll back $1.2 billion of tax cuts over two years. The vote marked a bipartisan repudiation of what Brownback had described as an ‘experiment’ in a particular brand of anti-tax fiscal conservatism…

 

Trade Wars:

  • Ben White: Morning Money: “Larry Kudlow and Steve Moore… [were] confident he and Kudlow could help nudge Trump away from his protectionist trade policies…. Moore noted that Trump has largely stopped talking about big tariffs on Chinese goods. Kudlow added: ‘I think Mr. Trump does not want to see a wall of tariffs. He’s actually pushed that rhetoric aside in recent months’…

  • Note to Self: The Heritage Foundation, the Club for Growth, and Stephen Moore Have No Principles Whatsoever. Why Do You Ask?: Now that Stephen Moore has signed up with Donald Trump, he is opposed to the Trans Pacific Partnership…. But… short months ago… Larry Kudlow, Arthur Laffer, and Stephen Moore (2015): “TPP Good For Both Sides Of The Pacific…

  • China’s (Lack of) Vulnerabilities: “As Karl Marx wrote in the middle of the nineteenth century: Imbalances in pre-capitalist economies do not produce aggregate demand crises and collapses. Why don’t they? Because Pharaoh can always command that another pyramid be built, the king can always set out on another crusade, and the bishop can always build another cathedral…

 

Covering Up Iraq War Destruction:

  • Everyone who gets a C in first-semester statistics knows that if your sample is random you do not have to double the number of data points when the population doubles. You do not have to increase the number of data points at all. And in the interest of trying to lowball civilian war deaths. Fake and fuzzy math in the service of trying to lowball civilian war deaths is not just stupid. It is evil: Stephen Moore (2006): 655,000 War Dead? A Bogus Study on Iraq Casualties: “The key to the validity of cluster sampling is to use enough cluster points…. Another study in Kosovo cites the use of 50 cluster points, but this was for a population of just 1.6 million, compared to Iraq’s 27 million…

 

ObamaCare:


#highlighted #publicsphere #economicsgonewrong #orangehairedbaboons #moralresponsibility #forecasting

Yes, There Are Individual Economists Worth Paying Respect to. But Is Economics Worth Paying Respect to?

Lorenzetti ambrogio bad govern det The Allegory of Good and Bad Government Wikipedia

Blush. To be one of fifteen good economists name-checked by Larry Summers genuinely makes my day—nay, makes my week.

But this gets into a topic I have been worrying at for a long time now. And so let me try once again to say what needs to be said, for I do have to admit that, contrary to what Larry maintains, Fareed Zakaria does have a point when he says that “events have hammered… nails into the coffin of traditional economics” and that, while the question mark at the end is important, it is time to speak of “the end of economics?”. Yes, there are very many good economists worth listening to. But does economics as a whole have any claim to authority, or is it better for outsiders’ first reaction to be to dismiss its claims as some combination of ideology on the one hand and obsequious toadying to political masters on the other?

Open right now on my virtual desktop, as has been true about 5% of the time over the past fourteen months, is an article forecasting the economic effects of the 2017 Trump-McConnell-Ryan tax cut by nine academic economists: Robert J. Barro, Michael J. Boskin, John Cogan, Douglas Holtz-Eakin, Glenn Hubbard, Lawrence B. Lindsey, Harvey S. Rosen, George P. Shultz and John. B. Taylor: How Tax Reform Will Lift the Economy: We believe the Republican bills could boost GDP 3% to 4% long term by reducing the cost of capital. It is, bluntly, unprofessional.

It states that the tax cut:

reducing the corporate tax rate to 20% and moving to immediate expensing of equipment and intangible investment… conventional… economic modeling suggests… would raise the level of GDP in the long run by just over 4%. If achieved over a decade, the associated increase in the annual rate of GDP growth would be about 0.4% per year. Because the House and Senate bills contemplate expensing only for five years, the increase in capital accumulation would be less, and the gain in the long-run level of GDP would be just over 3%, or 0.3% per year for a decade…

Their phrases “conventional economic modeling” and “if achieved over a decade” entail in their background a 600 billion jump in the level of investment this year then maintained for the next decade. That was never going to happen. That hasn’t happened. The authors did not expect that to happen—if they had expected it, they would be very curious why their modeling approach had gone so wrong, and they are not so curious. As very sharp reporter Binyamin Appelbaum put it on twitter in a despairing cry:

Binyamin Appelbaum: I am not sure there is a defensible case for the discipline of macroeconomics if they can’t at least agree on the ground rules for evaluating tax policy. How does Harvard, for example, justify granting tenure to people who purport to work in the same discipline and publicly condemn each other as charlatans? What does it mean to produce the signatures of 100 economists in favor of a given proposition when another 100 will sign their names to the opposite statement?…

To which that snarky genius Amitabh Chanddra noted:

Amitabh Chandra: Harvard grants tenure to people who are willing to call other disciplines quackeries—so why not allow for this within disciplines too?…

And then went on to advise Binyamin to parse carefully who had and had not signed the oped. Harvard’s Robert Barro was on the authorial team, but:

Remember that [Martin] Feldstein and [N. Gregory} Mankiw (both conservatives who’re more knowledgeable about policy than Barro) didn’t sign the stupid letter…

Indeed, Greg Mankiw in his “Snake Oil Economics: The Bad Math Behind Trump’s Policies” came out attacking highballed estimates of the tax cut’s effects and endorsing the Congressional Budget Office’s conclusion—that it would have essentially zero effect on economic growth, while redistributing a substantial amount—1.5 trillion—from the rest of us to the rich over the course of the next decade.

Unfortunately, Mankiw’s attack on highball estimates did not land in December 2017, when the tax cut was moving through congress, and wen it might have done some good in the debate about public policy.

It came out, rather, a year later, in December 2018, as a review of a book by Arthur Laffer and Stephen Moore: Trumponomics: Inside the America-First Plan to Revive Our Economy.

By coincidence, I debated Steve Moore yesterday at San Francisco’s Commonwealth Club. I had debated him two years ago on Trish Reagan’s Fox Business show. Back in 2015, when he wanted to work for Marco Rubio, Steve was in favor of the Trans-Pacific Partnership. But by the time I debated him on Fox Business in 2016 he wanted to work for Donald Trump, who had called the TPP the second-worst trade deal in American history, and so Moore was strongly against it. Yesterday in 2019 he seemed to be for the TPP, and to regret that the U.S. had not joined it—at least he did acknowledge that the U.S. would have more leverage now in its negotiations with China over intellectual property if it were negotiating as part of the TPP group rather than, as we now are, going it alone.

So perhaps what Larry means is that smart, honest, honorable economists like the fifteen he name-checks—Janet Yellen, Raghu Rajan, Bob Shiller, Paul Krugman, the late Jim Tobin, Bill Nordhaus, Partha Dasgupta, Amartya Aspen, the late Tony Atkinson, Thomas Piketty, the late Milton Friedman, Andrei Shleifer, Dick Thaler, the late Charlie Kindleberger, a guy who really, really does not belong in that company, and tens of thousands of our colleagues have a great deal to say and add to human knowledge and the public debate, and that our tradition should not be ended but reinforced. With that I agree 100%, and more.

The problem, however, is that there is also the unprofessional How Tax Reform Will Lift the Economy: We believe the Republican bills could boost GDP 3% to 4% long term by reducing the cost of capital. It seems that every Yellen is offset by Holtz-Eakin, every Rajan by a Taylor, every Shiller by a Barro, every Krugman by a Boskin, and so on. And how is a Fareed Zakaria or a Binyamin Appelbaum supposed to disinguish those who have knowledge from those who have only ideology, or indeed from those who can and do switch their approval and disapproval of policies on and off upon changing demands from changing political masters?

Larry Summers: Has economics failed us? Hardly: “My friend Fareed Zakaria… writing… “The End of Economics?,” doubting the relevance and utility of economics and economists. Because Fareed is so thoughtful and echoes arguments that are frequently made, he deserves a considered response. Fareed ignores large bodies of economic thought, fails to recognize that economists have been the sources of most critiques of previous economic thinking, tilts at straw men and offers little alternative to economic approaches to public policy…

…Many critics of economics hold out the failure of the economics profession to predict the financial crisis as an indictment…. [But] market breaks are inherently unpredictable because one that was predicted would have already occurred as everyone moved to sell. Even so… Janet L. Yellen, Raghuram Rajan, Robert Shiller and me (2006, 2007, 2007, 2008), were concerned about risks to the financial system and the real economy in the years and months preceding the crisis. Fareed quotes Paul Krugman on the economics profession’s “blindness to the very possibility of catastrophic failures in a market economy.” Yet he quotes Krugman selectively. Krugman is indeed critical of economics but has also argued for many years that textbook macroeconomic theory could explain much of the financial crisis and its aftermath…. I have long shared Paul’s views on the excessive fetishization of mathematical elegance in macroeconomics, but this is very different from discarding textbook macro, which has stood up very well.

Fareed… attacks the economics profession for the use of GDP…. Yet all the serious efforts to move beyond GDP have their roots in research by card-carrying economists…. Jim Tobin and Bill Nordhaus… Partha Dasgupta on sustainability, Amartya Sen on… Human Development… Tony Atkinson and Thomas Piketty on inequality. It is argued that the common economic assumption that everyone is rational and optimizing is hardly valid. Of course…. Milton Friedman… talking about why people buy lottery tickets. Andrei Shleifer and I… on “noise traders” more than a quarter-century ago… speculative prices are not fully rational and reflect greed… amply clear in the writings of many others, including Kindleberger, Shiller, Thaler and DeLong…. Policy ideas like transactions taxes and “nudges” that are premised on irrationality have mostly come from economists…


#highlighted #economicsgonewrong #economicsgoneright #fiscalpolicy #publicsphere #moralresponsibility 

Talking Points and Snippets from Commonwealth Club January 25, 2019 Forecast Event

3 Month Treasury Bill Secondary Market Rate FRED St Louis Fed

Forecasting: Because of the shutdown, we are flying much more blind than we would like to be. We are not getting the normal data flow. Thus there is more than the usual level of uncertainty. Given that:

  • I believe there is something like an 80 percent probability that Europe is now in a small recession.
  • The Chinese government continues to say that all is well.
  • But somehow six percent fewer cars were bought in China in late 2018 than in late 2017.
  • Over the past half century the reliable recession signal has been yield-curve inversion—since 1965 eight inversion signals: one false (1998), one near-recession (1966), and six recessions.
  • There have been no recessions not signaled by a yield-curve inversion.
  • The Federal Reserve currently plans are to invert the yield curve in June.
  • Neither Steve Moore nor I understand why the Fed thinks that this is a good thing to do.

In the last yield-curve inversion, in 2006, they were worried about an inflationary spiral breaking out because of rising oil prices—they should not have been worrying about it, but they were. In the yield-curve inversion before that, in 2000, they were worried about the dot-com bubble. There is nothing like either of those going on now.

Some people think the Federal Reserve is about to back off. Some people think that this time really is different—that the bond market is spooking at shadows this time. Give each of these a 25% chance of being right, and you have to say that there is a 50% chance the U.S. will be in recession in a year and a half. We hope the recession, if it comes, will be a small one. We hope we will, somehow, dodge the bullet and not have a recession.

But, at least as I see it, that is the forecast: a 50% chance of 1.5%-2.5% growth over the next year and a half, and a 50% chance of negative growth.

If you want a more precise forecast, my advice is to consult your Magic-8 Ball.


The Shutdown: Let’s review the bidding: Pelosi, Ryan, McCarthy, Schumer, McConnell, Trump reached a deal. Deal passes Senate unanimously. Trump watches “Fox and Friends”. Trump announces he won’t sign tghe deal. Paul Ryan—desperate not to embarrass Trump more—won’t let the House vote on the deal. Ryan goes out and Pelosi gets in on January 4, and Pelosi passes the deal through the House. But because it is a new congressional session, the Senate’s approval has expired. And McConnell—desperate not to embarrass Trump more—is now holding things up in the Senate.

From Pelosi and Schumer’s standpoint, the big problem is this: they reach a new deal with Trump, Fox and Friends finds some reason to slag it, Trump backs out again.

The right, rational response to this situation is for Pelosi, McCarthy, Schumer, and McConnell to strike deals and then pass them with veto-proof majorities. But McCarthy and McConnell are too scared of Trump and not concerned enough about the well-being of the country to do that.

2.5 million people aren’t getting their paychecks and 800,000 are getting very little work done. That’s about a 0.5% hit to the economy. We won’t see that because of oddities in the how the public sector is folded into official statistics, but it is there. Will there be a multiplier applied to it? In a year I will have the data so that then I will be able to look back and tell you. I cannot tell you now…


Reagan Revisionism: One thing that makes it very difficult to discuss things with Republicans is they see the Reagan administration through remarkably rose-colored glasses. Output per worker—GDP divided by the labor forcer—up by 4% under Bush I (one term), up by 20% under Clinton, up by 7% under Bush II, up by 14% under Obama, up by 16% under Reagan. The best performance is under Clinton: the 1990s. Reagan beats Obama—Obama, whom Republicans excoriate hourly for poor economic performance—by only a nose. It’s Bush I and Bush II who bring up the rear. And all in all since 1980 you have an average of 5.4% growth during a Republican presidential term and 8.5% growth during a Democratic presidential term.

If you look at the American middle and working classes, the numbers look worse for Republicans. Excluding the top 10% of the distribution, growth in output per worker gives us Reagan at 10%, Bush I at 3% (one term), Clinton at 17%, Bush II at 3%, Obama at 13%. Why then do Republicans worship Reagan? One reason is that if you look at the top 1%, the income per worker figures are: Reagan 78%, Bush I 11% (one term), Clinton 35%, Bush II 20%, Obama 25%. For the top 1% the Reagan years were a wealth bonanza—but that was overwhelmingly redistribution from the non-rich upwards, rather than exceptionally rapid growth…


“Border Security”: Steve, when you say “the American people will never let their politicians pursue a sensible immigration policy until they believe that the border is secure”, you have a big problem—but not with what is going on on the border, with Fox News.

The border is secure. Terrorists do not cross our border from the south seeking to kill us all. There are no prayer rugs that have been discovered by the Border Patrol—that is not reality, but rather a plot point in “Sicario: Day of the Soldato”. If you want to persuade more Americans that our border is secure, the sweet spot is not to spend money building a wall—which Mexico will not pay for—but rather to shift Fox News. Fox News has a profitable business model: scare the shit out of old people so their eyes stay glued to the screen so they can be sold fake diabetes cures and overpriced gold funds. If they weren’t being falsely told that there are large caravans of illegal terrorists coming over the border to kill them in their beds, we would have a different situation—we3 would have a situation in which Marco Rubio would once again be happy leading a bipartisan immigration reform effort, and we could get something done on immigration that is not-stupid. The pressure point on the border as a political issue is not the border—it is Rupert, his sons Lachlan and James, and their rather peculiar business model.

All the real border security expenditures and polices in the world won’t create a belief that the border is secure among those who vote for your political masters. Only Fox News changing its business model will create a belief that the border is secure among those who vote for your political masters…


Deficit: Back when interest rates were high, people like me convinced Democratic legislators to move heaven and earth to reduce the deficit. It required votes they saw as tough and unpopular, and those votes contributed to some of them losing their seats. Their appetite is gone. And the immediate need is gone too—you need to reduce the deficit when, as they were in the 1980s and 1990s, interest rates are high or when there is a good chance that interest rates are soon going to become high. That is not where we are. The deficit is a problem. It is not one of our twenty biggest problems. It will not become a big problem until interest rates become much higher than they are now. And when they do that will be the time to focus on the deficit…


Tax Reform of 2017?: Four times since 1980 Presidents have sold tax bills as things that will boost investment in America and generate a lot of supply-side economic growth. Reagan 1981, Clinton 1993, Bush 2001, and now Trump 2017. Adjusted for the effects of the short-run business cycle, investment in America fell after Reagan 1981 and Bush 2001 and rose sharply after Clinton 1993.

It looks like Trump 2017 is going to be a lot more like Reagan 1981 and Busch 2001. The jump in cycle-adjusted investment as a share of production is not jumping up. The people with models are not forecasting any jump—in fact, the people with models were never forecasting any jump. The boosters without models—the John Taylors, the Mike Boskins, the John Cochranes—who were forecasting a big jump a year ago are now all very, very quiet. The people who track financial flows are now saying that any boost to U.S. production is going to be outweighed by lower taxes collected on profits earned by foreigners who have invested in America.

If you and yours are making more than 500,000 dollar a year each and are going to keep on making that, you are winners. If not, you are losers…


Trade War?: Not yet hurting—unless you are a steel user or a soybean farmer here in the United States, or Microsoft (it looks like China’s response has just been to ban its search engine Bing).

Is it hurting China? No. China appears to be reacting by snarfing up U.S. intellectual property to a much greater extent. They wanted to do this anyway, but were unwilling to start a fight to do it—but now that they are in a fight they are happy to proceed. Why is the Trump administration doing this? I think the answer is that Trump is not a wise man, that Navarro is a delusional man, and that Lighthizer is a corrupt man. I tell you, what the people who are wise, reality-based, and uncorrupt in the Trump administration really wish right now is that Trump had signed the TPP—then we would be negotiating with China over IP issues with 11 other countries backing us up and willing to impose penalties on China for misbehavior. As it is, we are going it alone.

Steve, you keep saying that Xi needs to deal because Trump is deadly serious on China and will not back down. Do remember that Trump declared victory on reforming NAFTA, “the worst trade deal in the history of the world”, with small adjustments on auto parts rules-of-origin. Small adjustment on auto parts were enough to transform NAFTA, in Trump’s mind, from the worst trade deal in the history of the world into something he is now very proud of. Xi has to to be thinking that he should deal with Trump the same way that Mexico did—hang tough, provide a few symbolic concessions only, and Trump will cave and go back to business-as-usual. What is there in the situation that would keep that from being the obvious strategy for Xi?…


China Trade and the Trans-Pacific Partnership: Steve, the Obama Administration was very interested in building leverage over China with respect to intellectual property. Look back at history, and you will see that this is something that always happens when you have rising industrializing superpower. Back in the nineteenth century e in the United States did not pay a cent to Britain for its intellectual property in textiles and steel. In the mid-twentieth century, when Japan was industrializing, they didn’t pay an awful lot of attention to our intelleCtual property and were annoyed. And now China is doing the same thing. We did it to Britain. Japan did it to us. Now China is doing it to us. It is a source of annoyance. It’s a thing to negotiate about. We push, we pull. But this source of friction and dispute doesn’t change the fact that the international trade relationship between britain and the United States in the nineteenth century or Japan and America in the mid-twentieth century or the U.S. and China today is an enormous win-win. We are arguing about the division of this enormous surplus from the global division of labor.

Now the Obama Administration decided that it wanted to take a harder line with China on intellectual property, That was appropriate. And it set out to do this in a sensible way. It formed this organization called the Trans-Pacific Partnership to would present a united front for negotiations with China: get a lot of other countries that also trade with China on your side, and get a lot of leverage. And back then during the Obama Administration you supported this TPP policy—I remember an article from you, Kudlow and Laffer with the title “TPP Good for Both Sides of the Pacific”. That TPP would have given us leverage to strike a deal with China on intellectual property.

Then, lo and behold, someone convinces Trump that the TPP is the second-worst trade deal in American history—indeed, that it is “almost as bad as NAFTA”. And you want to work for Trump. So you start saying—to me, on Trish Regan’s show—not “TPP is good for both sides of the Pacific” but instead that the agreement is not like NAFTA, is too long and is a bad thing.

Jared Kushner, somehow, finds the delusional Peter Navarro. And after Trump takes office there is a trade policy triumvirate of Trump, Navarro, and Lighthizer. Trump is… not a terribly wise person. Navarro seems to me to be simply delusional. Lighthizer—who was an effective trade-liberalization technocrat back in the Reagan and Bush administrations—is now adopting positions that I can only stand as the result of corruption. As I see it, only Trump, Navarro and Lighthizer in the White House actually like what they are doing with trade and China. The others are standing by, looking in in horror. Trump is insisting on bilateral balance with China. That ain’t going to happen. As long as the United States remains a low-savings country, we are going to run trade deficits. And if we became a moderate-savings country and had balanced trade, we would still have a bilateral trade deficit with China: China would then have a trade deficit with the resource- and component-making countries that supplied it; and it would be those resource- and component-making countries that would have a trade deficit with us.

The day he gets into office, Trump blows up the TPP—second-worst trade deal in the history of the world, he says.

And so he throws away his leverage to negotiate with China on IP.

Instead of having a coalition of 12 confronting China with a common front, it is just us.

Xi right now is looking at Trump. Xi sees the Trump caved on NAFTA. Xi sees that Trump caved on “wall” negotiations with Mexico. Xi sees that Trump just caved on the shutdown. Xi sees that Trump is demanding something—bilateral balance—that makes no sense. Xi sees that Trump is not wise. Xi sees that Trump talks an awful lot of nonsense—NAFTA was not a horrible thing for the United States, not the worst trade deal in history.

Xi will conclude: it’s hard to figure out how to even start to negotiate a deal with an administration where the decision makers consists of one guy who isn’t wise, one guy who’s delusional, one guy who looks to be corrupt, and a large group of others standing by watching the train wreck in horror. Xi has to think his beset option is to wait for Trump to come to him looking for a face-saving excuse to get out of the trap Trump has closed on himself.


Financial System Risks: I have a question for Professor Nancy Wallace. Let me channel the Treasury bureaucracy with respect to getting banks that we understand and that are insured back into the mortgage business to diminish risks.

Back in 2008, Hank Paulson took advantage of a momentary opportunity to nationalize Fannie and Freddie, which for 40 years had grown fat on discount financing obtained by claiming they had a Treasury guarantee while ignoring any attempts by the Treasury to direct their activities. Treasury announced that in a year or two there would be a completely different system of backstopping housing finance. In reaction, a lot of banks pulled out of the business. They did not want to incur this large regulatory risk on a mortgage portfolio with a more-than-20-years duration. They decided to wait and see what happened, and reenter the market when the new system was set up. And nothing happened. Paulson left office. It wasn’t a Geithner priority. It wasn’t a Lew priority. It isn’t a Mnuchin priority.

And so non-bank banks that we do not understand now do the financing, creating risks known only to the mind of THE ONE WHO IS.

Should we all be on the phone to Steve Mnuchin this afternoon asking him to do something about this to get banks back in the game? And, if we should, what should we advise him to do to get banks back in the game?…


2017 Tax Cut: The tax cut has not produced the economy its boosters promised us it would fifteen months ago. Go back and read your Wall Street Journal from back then, and read the boosters—Robert Barro from harvard; the Stanford gang of John Taylor, Mike Boskin, George Shultz, John Cogan; a bunch of others. They were forecasting not 7% nominal investment growth but 30% nominal investment growth this year. It simply has not happened. There are a couple of reasons it did not happen. One is that such a big jump would have had to be financed by foreigners switching from buying our imports to financing investment and so generating an 800 billion dollar increase in the annual trade deficit—and that simply was never going to happen. Another is that the Republicans insisted on passing their bill through the Reconciliation process, which means the whole thing expires in a decade—and large chunks of it expire before then.

That means that the bill create a great deal of uncertainty about what the future of the tax code would be. And so, like the 2001 tax cut, it does not change business behavior much. Businesses get more cash, but with great uncertainty about what policy will be, the engage in an extraordinary orgy of stock buybacks rather than in boosting their investment.

Four times since 1980 presidents have sold tax bills as things that are gonna generate a lot of extra investment in America and boost long run growth: Reagan in 1981, Clinton in 1993, Bush in 2001, and now Trump in 2017. Adjusted for fluctuations up or down in unemployment, only one of these produced a sustained and significant boost to investment in America. Part of it was that Clinton was lucky. Most of it was that Clinton’s policies were actually competent: designed to work.

The people who have models are now forecasting that there will be no jump in American national income as a result of the Trump tax bill. They are, in fact, forecasting a decline—production will be unchanged, but the amount of money foreigners collect from us is going up because they are getting 1/3 of the direct benefits from the tax cut.


Yield-Curve Inversion: Because of the shutdown we are now largely flying blind—we are not getting the dataflow that we would have normally gotten over the past month. There is an 80% probability that Europe is in a small recession. The Chinese government says China is not in recession but somehow 6% fewer cars were bought in China in late 2018 than in late 2017.

The reliable recession signal is yield-curve inversion signals in 1966, 1969, 1974, 1978, 1989, 1998, 2000, 2006—8 in the last half-century or so. 1966 was followed by a near-recession. 1998 was a false alarm. Otherwise—yield curve inversion calls it, 6 of 8, with no unforecast recessions.

The Federal Reserve’s current plans are to invert the yield curve in June.

We do not understand why they are doing this—then they did this in 1989 and in 2006 they were worried about inflaiton, when they did this in 2000 they were worried about the stock price bubble, but nothing like that is relevant now.

There are people saying that the Fed will back off, and there are people saying that this time it really is different. Give each of those a 25% chance, and you got to say there is a 50% chance the U.S. will be in recession in a year. We hope it will be a small one. We hope that somehow we will dodge the bullet…


California Real Estate?: God, what a mess… After Howard Jarvis and Prop 13, the fact that property taxes were capped meant that local governments started looking at developments with fear: where are we going to find the money to provide services to all of these projects? The switch from local governments being boosters to local governments being NIMBYists has been the biggest governance disaster to afflict California in the past generation. If you own property, it’s great. If you can easily get permits, it’s great. Otherwise—we really need to fix this. It doesn’t look like tax reform is going to have big effects, however…


Employment?: David Autor has a three-part classification of where the new jobs will come from, as “shop floor” jobs ebb away: frontier, wealth, and “last mile”. Frontier jobs will, by and large, be good: people taking advantage of technology to do new things and to do things better. Wealth jobs—serving the wealthy—will be more important as people and as heirs and heiresses begin spending more out of the great wealth accumulations of the past generation in lots of ways (for example: tourism, housing, and personal enrichment—including funding things like the Commonwealth Club. So we like those). It’s “last mile” jobs—the husks left behind because the real work has been automated and computerized and there is only a small, boring part left—that’s the problem. The hope is that unemployment stays low enough that even those trapped in these “last mile” jobs have bargaining power. And that—keeping unemployment low—is, I think, the best way to deal with the employment problem…


California Jobs?: It’s a race between tech employment generation and housing construction. If we can make housing construction win, it’s a huge win for everyone. If not, we have bigger problems…


Federal Reserve Policy: Steve, you say Trump is focused on getting a really-tight labor market. Someone seeking to get a really-tight labor market would not have appointed Jay Powell to run the Federal Reserve. If Trump cared, he would have reappointed Janet Yellen, who was once described to me as “Ms. Dovey Dovey Labor Force Upgrading in a High Pressure Economy”. To say that Trump is seeking to get a really-tight labor market is to impose coherence and knowledge on Trump and his administration that they do not at all possess.

And your attachment to a high-pressure economy is something new, no? Before Trump took office, you used to denounce Janet Yellen for her easy money policies twice a month, no? I cannot remember anybody being more strident than you in denouncing Bernanke’s post-2009 policies as generating bubbles that would pop and crash…


#highlighted #publicsphere #economics #equitablegrowth #talks #talkingpoints 

Commonwealth Club Talking Points (January 25, 2019): Forecasting and Steve Moore Edition

The Embarcadero Google Maps

The Shutdown: Let’s review the bidding: Pelosi, Ryan, McCarthy, Schumer, McConnell, Trump reached a deal. Deal passes Senate unanimously. Trump watches “Fox and Friends”. Trump announces he won’t sign tghe deal. Paul Ryan—desperate not to embarrass Trump more—won’t let the House vote on the deal. Ryan goes out and Pelosi gets in on January 4, and Pelosi passes the deal through the House. But because it is a new congressional session, the Senate’s approval has expired. And McConnell—desperate not to embarrass Trump more—is now holding things up in the Senate.

From Pelosi and Schumer’s standpoint, the big problem is this: they reach a new deal with Trump, Fox and Friends finds some reason to slag it, Trump backs out again.

The right, rational response to this situation is for Pelosi, McCarthy, Schumer, and McConnell to strike deals and then pass them with veto-proof majorities. But McCarthy and McConnell are too scared of Trump and not concerned enough about the well-being of the country to do that.

2.5 million people aren’t getting their paychecks and 800,000 are getting very little work done. That’s about a 0.5%—10 billion over the past month—hit to the economy. We won’t see that because of oddities in the how the public sector is folded into official statistics, but it is there. Will there be a multiplier applied to it? In a year I will have the data so that then I will be able to look back and tell you. I cannot tell you now…


GDP Forecast: Because of the shutdown we are now largely flying blind—we are not getting the dataflow that we would have normally gotten over the past month. There is an 80% probability that Europe is in a small recession. The Chinese government says China is not in recession but somehow 6% fewer cars were bought in China in late 2018 than in late 2017.

The reliable recession signal is yield-curve inversion signals in 1966, 1969, 1974, 1978, 1989, 1998, 2000, 2006—8 in the last half-century or so. 1966 was followed by a near-recession. 1998 was a false alarm. Otherwise—yield curve inversion calls it, 6 of 8, with no unforecast recessions. The Federal Reserve’s current plans are to invert the yield curve in June, and we do not undertstand why they are doing this—then they did this in 1989 and in 2006 they were worried about inflaiton, when they did this in 2000 they were worried about the stock price bubble, but nothing like that is relevant now.

There are people saying that the Fed will back off, and there are people saying that this time it really is different. Give each of those a 25% chance, and you got to say there is a 50% chance the U.S. will be in recession in a year and a half. We hope it will be a small one. We hope that somehow we will dodge the bullet…


Deficit: Back when interest rates were high, people like me convinced Democratic legislators to move heaven and earth to reduce the deficit. It required votes they saw as tough and unpopular, and those votes contributed to some of them losing their seats. Their appetite is gone. And the need is gone too—you need to reduce the deficit when, as they were in the 1980s and 1990s, interest rates are high or when there is a good chance that interest rates are soon going to become high. That is not where we are. The deficit is a problem—it would be nice to have a lower fiscal deficit with its effects on employment balanced by lower interest rates—but it’s not one of our biggest twenty problems, and won’t be until we can see a future of much higher interest rates…


Tax Reform of 2017?: Four times since 1980 Presidents have sold tax bills as things that will boost investment in America and generate a lot of supply-side economic growth. Reagan 1981, Clinton 1993, Bush 2001, and now Trump 2017. Adjusted for the effects of the short-run business cycle, investment in America fell after Reagan 1981 and Bush 2001 and rose sharply after Clinton 1993.

It looks like Trump 2017 is going to be a lot more like Reagan 1981 and Busch 2001. The jump in cycle-adjusted investment as a share of production is not jumping up. The people with models are not forecasting any jump—in fact, the people with models were never forecasting any jump. The boosters without models—the John Taylors, the Mike Boskins, the John Cochranes—who were forecasting a big jump a year ago are now all very, very quiet. The people who track financial flows are now saying that any boost to U.S. production is going to be outweighed by lower taxes collected on profits earned by foreigners who have invested in America.

If you and yours are each making more than 500,000 a year and are going to keep on making that, you are winners. If not, you are losers…


Trade War?: Not yet hurting much—unless you are a steel user or a soybean farmer here in the United States, or Microsoft (it looks like China’s response has just been to ban its search engine Bing).

Is it hurting China? China appears to be reacting by snarfing up U.S. intellectual property to a much greater extent. They wanted to do this anyway, but were unwilling to start a fight to do it—but now that they are in a fight they are happy to proceed. Why is the Trump administration doing this? I think the answer is that Trump is not a wise man, that Navarro is a delusional man, and that Lighthizer is a corrupt man. I tell you, what the people who are wise, reality-based, and uncorrupt in the Trump administration really wish right now is that Trump had signed the TPP—then we would be negotiating with China over IP issues with 11 other countries backing us up and willing to impose penalties on China for misbehavior. As it is, we are going it alone.


California Real Estate?: God, what a mess…

After Howard Jarvis and Prop 13, the fact that property taxes were capped meant that local governments started looking at developments with fear: where are we going to find the money to provide services to all of these projects? The switch from local governments being boosters to local governments being NIMBYists has been the biggest governance disaster to afflict California in the past generation. If you own property, it’s great. If you can easily get permits, it’s great. Otherwise—we really need to fix this.

It doesn’t look like tax reform is going to have big effects, however…


Employment? California will not have a jobs shortage or a job quality problem over the net decade. We will and we already have a housing problem.

The country as a whole, however, may well have a job quality problem. David Autor has a three-part classification of where the new jobs will come from, as “shop floor” jobs ebb away: frontier, wealth, and “last mile”. Frontier jobs will, by and large, be good: people taking advantage of technology to do new things and to do things better. Wealth jobs—serving the wealthy—will be more important as people and as heirs and heiresses begin spending more out of the great wealth accumulations of the past generation in lots of ways (for example: tourism, housing, and personal enrichment—including funding things like the Commonwealth Club. So we like those). It’s “last mile” jobs—the husks left behind because the real work has been automated and computerized and there is only a small, boring part left—that’s the problem. The hope is that unemployment stays low enough that even those trapped in these “last mile” jobs have bargaining power. And that—keeping unemployment low—is, I think, the best way to deal with the employment problem…


California Jobs?: It’s a race between tech employment generation and housing construction. If we can make housing construction win, it’s a huge win for everyone. If not, we have problems…


#publicsphere #highlighted #berkeley #economics #equitablegrowth #economicgrowth 

Commonwealth Club: Annual Economic Forecast

The Embarcadero Google Maps

Commonwealth Club: Brad DeLong and Stephen Moore: Bank of America/Merrill Lynch Walter E. Hoadley Annual Economic Forecast | Commonwealth Club: “FRI, JAN 25 / 12:00 PM :: The Commonwealth Club :: 110 The Embarcadero :: Taube Family Auditorium :: San Francisco, 94105: With changes to taxes, trade wars with China and other countries, health care in flux, housing prices continuing to rise, continued governmental gridlock as well as international challenges to the United States, what does all of this mean for your business, your investments and the overall economy for 2019?…


#noted #forecast #publicsphere #berkeley 

U.S. Recession No Longer Improbable: No Longer Fresh at Project Syndicate

The World Economy Goes Hollywood by Anatole Kaletsky Project Syndicate

Project Syndicate: U.S. Recession No Longer Improbable: Over the past 40 years, the U.S. economy has spent six years in four recessions: in a downturn 15% of the time, with the odds that a current expansion will turn into a downturn within a year being one-in-eight. Of these four downturns, one—the extended downturn of 1979-82—had a conventional cause: the Federal Reserve thought inflation was too high, and so hit the economy on the head with the high interest-rate brick to stun it and induce workers to moderate their demands for wage increases and firms to cut back planned price increases. The other three have been caused by derangements in financial markets: the collapse of sunbelt Savings-and-Loans for 1991-92, the collapse of dot-com valuations in 2000-2, and the collapse of mortgage-backed securities in 2008-9.

Right now, inflation expectations appear to be well-anchored at 2%/year, with a Phillips Curve that seems unusually flat—excesses or deficiencies of production and employment from potential-output or natural-rate trends have little short-run impact on prices and wages. Right now both the gap between short-term and long-term safe interest rates and the level of short-term nominal safe interest rates are unusually low. And right now, with the recent decline in the stock market, Campbell-Shiller-like forecasts of long-run real buy-and-hold stock returns are between 4% and 4% per year—higher than their average CS-like forecast value over the past forty years.

Those are the background facts that everybody in the business of forecasting the arrival of and hedging against the possibility of the next U.S. recession must have in the front of their mind. They have several implications:

  1. The next recession is unlikely to come as a response to an uptick in inflation that triggers a Federal Reserve shift from trend-growth-nurturing to inflation-fighting policy. Something else that triggers a downturn is highly likely to occur as visible inflationary pressures are unlikely to build in less than half a decade.

  2. The next recession is likely to come as a result of the revelation of an unexpected weakness and an unexpected shock to financial markets that causes a sudden, sharp “flight to safety”. That is one pattern that has been generating downturns since at least 1825 and the collapse of that decade’s canal boom in England. That is most likely to be the active pattern now.

  3. The financial shock will be unanticipated. Investors, speculators, and institutions are generally hedged against possible shocks that are seen by the conventional wisdom as live possibilities. It was not the collapse of the mid-2000s housing bubble but the concentration of ownership of mortgage-backed securities that killed the global economy in 2008-9. It was not the deflation of the commercial real estate bubble of the late-1990s but the failures of regulatory oversight that had lead S&Ls to gamble for resurrection that triggered the stubbornly long downturn of the early 1990s. it was not the deflation of the dot-com bubble but the magnitude of tech-and-communications earnings “overstatements” in the late 1990s that triggered the early 2000s recession.

  4. The near-inverted yield curve, the low absolute value of nominal and real bond yields, and equity values that are now plausibly fairly-valued for the long-term tell us that financial markets in the U.S. are now pricing a recession as likely—and, to the extent that business investment committees are thinking like investors and speculators, it requires only a trigger for businesses to retrench investment spending and so bring a recession on.

  5. If that recession begins, the U.S. government will not have the tools to fight it: the president and congress will, once again, as they have for a generation, be inept at using fiscal policy as a countercyclical stabilizer; the Federal Reserve does not have enough room to cut interest rates to do the job; and the Federal Reserve lacks the nerve and perhaps lacks the power for truly effective non-standard monetary policy moves.

For the first time in nine years, Americans and investors in America need to be prepared for not a probable but rather a not improbable economic downturn—and for the likelihood that should such a downturn come, it will be a deep and prolonged one.


#projectsyndicate #monetarypolicy #recessionwarning #highlighted 

Forty Years of the Yield Curve

Cf.: Carmen Reinhart: The Biggest Emerging Market Debt Problem Is in America: “A decade after the subprime bubble burst, a new one seems to be taking its place in the market for corporate collateralized loan obligations. A world economy geared toward increasing the supply of financial assets has hooked market participants and policymakers alike into a global game of Whac-A-Mole…

The U S Stock Market Nominal

Be the Podcast You Want to See in the World!

We are going to need more monkeys Google Search

The very sharp Arindrajit Dube was, as one does, procrastinating on twitter:

Arindrajit Dube: Somehow I find the econ podcast space is mostly occupied by ideological right wingers, as opposed to people interested in an open minded, evidence informed economics. Who am I missing?

And my instantaneous reaction was: BE THE PODCAST YOU WANT TO SEE IN THE WORLD!

Brad DeLong: Let’s start a podcast!

Arindrajit Dube: Wait Brad, is this a serious offer? :-)…

And the public chimed in:

Suresh Naidu: Do it!
Matthew Yglesias: You guys should do this for real
Robert Waldmann: You really do have to do the podcast (or block me). I will tweet complaints until you do it.
Aaron Sojourner: It would be incredibly valuable service.
Erik: Do it!
Dr. A. Duus Pape: I’d subscribe in a heartbeat.

Arindrajit Dube: God damn it Brad now Matt Y is on board and I am seriously screwed…

So it looks like we may be doing this for real—once a week, half-hour chunks, starting out as amateur hour only. First topic: thinking a out what margional tax rates on the rich should be.

What say you all?


#noted #weblogs #publicsphere #economics #equitablegrowth #economicshomepodcast #highlighted