Category: Current Affairs
Some perspective on malfunctioning ACA exchanges
It is fairly pathetic that they may not be up and running in proper form by October 1, but it is not the main issue either. Dan Diamond has some good remarks, here are two excerpts:
Overwhelmingly, the Americans who will be shopping through the exchanges this fall are the ones who have pined for this moment for months, if not years: The chronically ill who wanted coverage but couldn’t get it, or the low-income Americans who couldn’t afford it. They likely won’t be deterred by a few software glitches.
That is a very good point, though I wonder if it will contribute to insurance company enthusiasm in the early stages of actual implementation. Dan also notes:
There already were a mix of offline ways to purchase coverage through the exchanges, whether through call centers or in person; the AP notes that 30% of applicants were expected to use paper.
But software delays may spur additional solutions, too. Oregon, for example, will rely on insurance brokers to help state residents obtain coverage until the state’s exchange website is ready to go.
And an enormous number of stakeholders want the exchanges to be successful, from insurers that are hoping to see new business to hospitals that want to lower their uncompensated care costs. Basically, CMS can raise a virtual volunteer army if necessary.
Meanwhile, the enrollment period runs through March 31. There’s no “early bird special” as Dave Morgan, a California employee benefits adviser, pointed out on Twitter; premium prices for 2014 will be the same whether you’re purchasing coverage on Oct. 1 or Dec. 15.
Dan adds, however:
All bets are off if the software problem isn’t fixed in a few days or weeks. The exchanges were touted with the promise that they’d be like Orbitz or Amazon, just for buying health coverage.
So I still say all bets are off.
Coming from other directions, Timothy Taylor offers some useful perspectives on ACA, which now it seems will cover only about 40% of the previously uninsured.
The meaning of Merkel’s victory
It is not possible to rerun the election under different economic policies, but still it seems pretty clear. German voters very much like low inflation and no Eurobonds, or in other words I call this the primacy of public choice and political economy over macroeconomics. The set of Eurozone options “on the table” was never that large to begin with, Merkel is not “history’s greatest monster,” and it is surprising that Eurozone (and German) policy has come as far as it has. The next time you are tempted to write “Government should,” or “Germany should,” try instead subbing in “short-term economic nationalists should” and see what the new sentence looks like.
Another way to put this is that short-term policy is long-term policy, relative to constraints. Nations and perceived national interests really do matter, and once we take that into account, it is scary to realize how much harder it would be to do better. Merkel understand this, many of her critics do not.
Model this taper and show your work, if only verbally
Shortly following the announcement of a delayed taper:
The rupee rallied 2.8 percent to 63.4950 per dollar, according to prices from local banks compiled by Bloomberg. Thailand’s baht rose 1.2 percent to 31.850, the Philippine peso gained 1.4 percent to 43.87 and Malaysia’s ringgit appreciated 1.2 percent to 3.29. Global funds pumped $5.7 billion into the stock markets of India, Indonesia, the Philippines, South Korea, Taiwan and Thailand this week, according to exchange data.
Pay special heed to quantitative magnitudes. For how long are we delaying the taper? One or two months? How much is the taper anyway, relative to the stock of relevant financial assets? Taking $10 to $15 billion off of $85 billion a month in purchases, when the asset stocks are in the trillions? Woo hoo.
Here are some interesting comments from Stephen Jen.
I’ll say it again: none of you understand what is going on here, and neither do I. I am not seeing enough admission of this basic fact.
Addendum: Scott Sumner offers a response.
The food stamps program
In an ideal policy world, would food stamps exist as a program separate from cash transfers? Probably not. But as it stands today, they are still one of the more efficient programs of the welfare state and the means-testing seems to work relatively well. And giving people food stamps — since almost everyone buys food — is almost as flexible as giving them cash. It doesn’t make sense to go after food stamps, and you can read the recent GOP push here as a sign of weakness, namely that they, beyond upholding the sequester, are unwilling to tackle the more important and more wasteful targets, including Medicare and also defense spending, not to mention farm subsidies. Here are a few basic numbers on when food stamps have grown and what has driven that growth. It has not become a “problem program” in the way that say disability has.
On the importance of symbolic victories in politics
Harold Meyerson writes:
The Democratic Party’s romance with Wall Street may finally be breaking up. In the past 10 days, a diverse group of Democratic senators scuttled Larry Summers’s candidacy for Federal Reserve chair and New York Democrats voted for the mayoral candidate whose campaign was an attack on Michael Bloomberg’s care and feeding of the super-rich at the expense of the rest of the city. Former commerce secretary (and JP Morgan Chase executive) William Daley’s surprise withdrawal from the Illinois Democratic gubernatorial primary is one more indication of Wall Street’s diminished sway.
There is more at the link.
Yet I view it differently. As I observe the new equilibrium, the Left won a big symbolic victory by striking down the Summers nomination. But it was precisely that — a symbolic victory. When it comes to banking regulation, there is not much reason to believe that “Summers plus current political forces” would have been very different from say “Yellen plus current political forces” or for that matter Donald Kohn.
Symbolic victories are a relatively cheap way to buy off or appease interest groups, and arguably you can view this as part of a broader portfolio — from the Democrats too — to continue catering to Wall Street, for better or worse. After all, share prices did rise on the Summers withdrawal (which by the way does not have to mean he was a bad pick, perhaps Wall Street simply did not like the uncertainty of a highly politicized confirmation battle), so that is hardly a slap in the face to the Street.
One might also expect that, as political polarization increases, political agents will allow more such symbolic fights to arise, or perhaps even manufacture them deliberately. These symbolic fights make it easier to trade with the more extreme or dissident elements in a political party or movement.
The problem with the current budget negotiations is that the Republicans have not yet seized upon what would be the suitable symbolic victory to take home to some of their supporters. Yet likely such a symbolic “victory” (also known as “defeat”) exists and it will be found, and that is one reason why stock markets are up and interest rates remain low.
The delayed Fed taper, as experienced abroad
Emerging markets: on fire: Brazil yields down 40bps, real nearly 3% up Rupee 2.5% stronger. Zloty 1.5%, rand 2% etc
That is from Pawel Morski. I’ve read many pro-delay-the-taper posts, and agreed with the (domestic) analysis in most of them, but I haven’t seen anyone address the um…shall we call it a trade-off?…here.
The optimistic reading is that those are sustainable gains based on higher U.S. growth, and thus higher demand for developing country exports, but it’s very hard to get the numbers to add up, or anything close, for that kind of explanation. More likely the pricking of those bubbles has been delayed. Is that good or bad? (What happened to caring most about the poor?) To even raise such a question means we probably should be agnostic about what is going on, and that is hardly the most popular attitude in the economics blogosphere when it comes to monetary policy.
The Great Reset (free Facebook won’t make up for this)
In 2012, real median household income was 8.3% lower than in 2007, the year before the most recent recession.
Here is the link. There are further details here, which notes that the median family income was higher in 1989. Ryan Avent has some good charts.
Is New Zealand busting out of the Great Stagnation?
Or is this a terrifying novelty for a country which doesn’t have very strict liability law?
…a planned launch of a jetpack in New Zealand next year has bureaucrats scratching their heads, particularly as the machine’s makers say the thing can travel up to 7,000 feet in the air at speeds of 50 miles an hour.
“Think of it like a motorcycle in the sky,” says Peter Coker, chief executive of Martin Aircraft Co. Ltd., which has spent 30 years developing the Martin Jetpack here. The Martin jetpack is unique in that it is not rocket powered but has a gasoline engine driving twin-ducted fans. The latest P12 prototype, a far sleeker and shinier model than the earlier versions, will allow a pilot to fly for up to half an hour.
New Zealand is taking the prospect of jetpacks in its airspace seriously, even though the product’s price—more than $150,000—means that just a few dozen have been reserved. Most of those are going to overseas customers.
And yet there is a problem, even in “regulation light” New Zealand:
“If you land in someone’s paddock, you will always land on their prime sheep,” Mr. Kenny says, stressing that liability insurance for pilots is a must.
…Still up in the air is whether they will eventually be allowed to fly over built-up areas. The latest prototype has been certified for manned test flights in New Zealand, but it can’t be flown more than 20 feet above ground or more than 25 feet above water.
The article has other points of interest. Here are related pieces.
Why Michael Woodford supports monetary tapering (Kaminska wins)
In an excellent, follows up on my original question, there should be more of this kind of reporting piece, Matthew Klein writes:
“For Woodford, the most important point is that the Fed’s balance sheet cannot keep growing without imposing costs on the financial system and broader economy — even when inflation is low and unemployment is high. While Woodford didn’t explicitly tell me what those costs were, a possible explanation can be found in this brief passage from the paper he presented at last year’s Jackson Hole Economic Symposium:
An increase in the safety premium obtained by making “safe assets” (in the relevant sense) more scarce would in itself be welfare-reducing. If Treasuries provide a convenience yield not available from other assets (including bank reserves), then reducing the quantity of Treasuries in the hands of the public reduces the benefits obtained from this service flow.
In other words, Treasury bonds are uniquely useful for savers. When the Fed makes these securities more expensive — or restricts their supply through asset purchases — the central bank harms regular savers without doing much to boost the broader economy. Moreover, the relative scarcity of newly-issued Treasury bonds has been causing havoc in the repo markets.
Woodford suspects that the Fed agrees with him. In fact, he thinks that the pace of tapering will (and should) be determined almost exclusively by the size of the balance sheet rather than the health of the economy:
This explains, in my view, how it was possible for Fed officials to indicate that it would likely be time to begin slowing the rate of purchases later in the year, even while admitting that it was not yet time for the tapering to begin last spring. The point was not so much that they felt confident that they could already predict labor market conditions in the remainder of the year, but rather that they could already predict how large the balance sheet would have gotten by later in the year — and they knew that, barring substantial unexpected developments with regard to economic conditions, they would be concerned by then about allowing the growth of the balance sheet to continue too much further.
Hopefully this explains why someone known as a monetary “dove” can support tapering without being inconsistent.”
TC again: To keep the difference between Klein and Woodford especially clear, I have refrained from indenting the block of material as a whole.
Wilson.cat and the movement for independence for Catalonia
The Catalonian “human chain” was yesterday, and it drew hundreds of thousands of people, a large number for a single region. According to the Washington Post, it was more than one million people.
If you would like to read more on this — by economists and other social scientists — Wilson.cat is one intellectual resource for independence. The site represents writings of prominent scholars favoring independence — or at least an informed referendum — for Catalonia.
I am surprised this initiative is not receiving more attention. If you were to ask in which ways economists today are having the most influence on the world, this movement would be close to the top of the list. Among the economists involved are Andreu Mas-Colell, Pol Antràs, Jordi Galí, and Xavier Sala-i-Martin, all of whom are extremely well known in the profession.
Personally, I am still waiting to hear why Catalonian independence would not bring the fiscal death knell of current Spain, and thus also the collapse of current eurozone arrangements and perhaps also a eurozone-wide depression. Otherwise I would gladly entertain Catalonia as an independent nation, or perhaps after the crisis has passed a referendum can be held. When referenda are held during tough times, it is often too easy to get a “no” vote against anything connected with the status quo.
Is the view simply that “now is the time to strike” and “it is worth it”? Obviously, an independence movement will not wish to speak too loudly about transition costs, but I would wish for more transparency. Or is the view that Spain could fiscally survive the shock of losing about twenty percent of its economy, with all the uncertainties and transition costs along the way? That could be argued, but frankly I doubt it, OMT or not, furthermore other regions would claim more autonomy too. An alternative, more moralizing view is that the fiscal problems are “Spain’s fault in the first place” and need not be discussed too much by the pro-independence side, but I am more consequentialist and marginal product-oriented than that.
This piece, in Catalan, does cover the fiscal implications of debt assumption for an independent Catalonia. The site also links to this somewhat spare piece by Gary Becker, but I still want more of a discussion of the issues raised above.
Keep in mind that two clocks are ticking. The first is that education in Catalonia is becoming increasingly “hispanicized,” the second is that as economic conditions in Spain improve, or maybe just become seen as a new normal, getting a pro-secession vote in a referendum may become harder. It doesn’t quite seem like “do or die” right now, but overall time probably is not on the side of Catalonian independence.
If anyone connected with the independence movement could point me to source materials addressing my questions, I would gladly cover it more on MR.
Here is Edward Hugh on the Catalan Way explained. And here is more from Hugh.
What would Michael Woodford say?
Or rather what did he say? He is (justifiedly) considered one of the high priests of monetary expansion. Yet when it comes to recent events:
He welcomes the Fed’s intention to taper off its purchases of Treasury securities and mortgage debt, though he says the central bank could be clearer about the rationale.
“As the Fed’s balance sheet gets bigger, the bar to justify additional purchases does start getting higher,” Woodford says. “This could have been made clearer from the beginning, avoiding confusion about the significance of tapering now.”
The full story is here.
The stunning growth in part-time employment
John Lott points out the following: “So far this year there have been 848,000 new jobs. Of those, 813,000 are part time jobs…. To put it differently, an incredible 96% of the jobs added this year were part-time jobs.”
In addition to all of this underemployment, today’s job market report shows the labor force participation rate is down to its lowest level since 1978 (when fewer women wanted to work, of course). And population growth is outpacing job growth, as indeed it had earlier in the oughties before the financial crisis and recovery. Perhaps that is the new normal? (Here are a few graphs from the new numbers.) Here is a passage from my forthcoming Average is Over:
Those laid off workers have been absorbed, into new jobs, at a much slower than usual rate, following a recession. They can’t get their old jobs back, even though the worst of the crisis is over and corporate profits are back up. Most importantly, the new jobs being created are more likely low wage than mid wage. In essence, the American economy is learning that — for structural reasons — it can’t afford as many mid wage jobs as it used to have. Businesses will make higher profits by slotting those workers elsewhere, but not back in other high or mid wage jobs, where they had been before.
Monetary policy is fine, and I see no significant costs from having a higher rate of price inflation in the United States, but stimulus can fix these problems to only a limited degree.
Addendum: As Ben Engebreth points out, based on these BLS charts, the correct number seems to be 59% not 96%, though the higher estimate does still seem to hold in Lott’s (more cumbersome and less transparent) sources.
The American fertility rate is no longer declining
The sharp decline in the country’s fertility rate during the economic downturn has come to an end, federal data show, as an improving economy encouraged Americans to resume having babies.
The number of babies born in the United States in 2012 remained flat, the first time in five years that the number did not significantly decline, according to the National Center for Health Statistics.
The leveling off capped a 9 percent decline in the fertility rate from 2007 to 2011, a drop that demographers say began after the recession took hold and Americans started feeling less secure about their economic circumstances.
By the way, economics really does seem to be a factor in these changes:
…the only state to show a slight increase in fertility between 2008 and 2009 was North Dakota, which had one of the lowest unemployment rates in the country.
The teen birth rate is falling, which is further good news. Here is more.
Unpopular thoughts about obstructionist Republicans
It now seems quite possible that the Syria resolution fails in the House of Representatives. If so, that would be the fault of unreasonable, obstructionist Republicans. (When was the last time a Presidential request to use force was denied by Congress?)
Now, I do understand that this would not be the best path to “not attacking Syria.” (If you doubt that, imagine how such a vote would change Israeli incentives and policy toward Iran.) Still, I can quite readily imagine that a “no” vote on the Syria resolution would be for the better, all things considered. Much could go wrong from an attack, nor would the Congressional vote, the way the process has been conducted, represent much of a victory for constitutionalism.
In any case the net effect of having unreasonable, obstructionist Republicans could well be welfare-improving on a massive global scale, all things considered.
You might prefer to “have your cake and eat it too,” namely by having “reasonable but wise on Syria” Republicans, but that was never on the menu. And you won’t find it among the Democrats, so you do seem to need the unreasonably obstructionist tendencies to get to…actual obstruction.
I still can imagine that the resolution will pass, in which case we could criticize Republicans for not being unreasonable and obstructionist enough.
The whole point of checks and balances is that sometimes the tendency to be unreasonable and obstructionist pays off big time. It’s worth a lot of gridlock to get those gains.
Ronald Coase has passed away
Very sad news, he was one of the true greats, notice is here. Here is one good appreciation.