Category: Current Affairs

Obama on Social Security and Medicare

Here goes:

"What we have done is kicked this can down the road.  We are now at the end of the road and are not in a position to kick it any further," he said.  "We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else's."

And on unions:

The president-elect also gave his support for legislation that would
make it easier for workers to unionize, but he said there may be other
ways to achieve the same goal without angering businesses. And while
many Democrats on Capitol Hill are eager to see a quick vote on that bill, he indicated no desire to rush into the contentious issue.

"If we're losing half a million jobs a month, then there are no jobs to
unionize, so my focus first is on those key economic priority items I
just mentioned," he said. "Let's see what the legislative docket looks
like."

Is that a "no"?

The real question for progressives to ask is why this is happening (in the interests of fairness, I should add that libertarians need to ask themselves similar questions about the Bush years).  It is too soon for them to vilify Obama, so you'll either hear mutterings about him not being bold enough or just not hear much at all.  The deeper reality is that Obama understands that this country was set up to be governed from the center and he'd rather start there than move there after two years of failed attempts to do something else.  Don't be taken in by those funny maps they show about how the Democratic legislators are further left than before; the more power you have, the harder it is not to govern from the center.

The bottom line: If I'm happy so far, a lot of you out there have to be unhappy.

Tabarrok at TED

I will be speaking on The Future of Economic Growth at this year's legendary TED Conference, TED 2009, which takes place in Long Beach, Feb 3-7.  Other speakers include Tim Berners-Lee, Oliver Sacks, Daniel Lebeskind, Herbie Hancock and Bill Gates.  In my session, I am paired with Nate Silver, Bruce Bueno de Mesquita, and Dan Ariely.  Yeah, I'm a little nervous.  Fortunately, TED provides a masseuse for speakers before they hit the stage!  I kid you not. 

Department of provisional Bayesian update

Today I read this:

Although Mr. Obama has not publicly identified which priorities will have to wait, advisers and allies have signaled that they may put off renegotiating the North American Free Trade Agreement, overhauling immigration laws, restricting carbon emissions, raising taxes on the wealthy and allowing gay men and lesbians to serve openly in the military.

Here is the article.  When it comes to health care, the prediction is that we get a "down payment" on future change but not yet the whole reform.

Obama at GMU

President-Elect Obama just spoke at GMU.  I was fortunate to have an invite.  He had a number of good lines including as good a one-line explanation and justification for Keynesian economics as you will find:

Only government can break the cycle that is crippling
our economy, where a lack of spending leads to lost jobs, which leads
to even less spending, where an inability to lend and borrow stops
growth and leads to even less credit.

He emphasized that jobs would be created in the private sector and saved in the public sector.  Nicely put.

His goal is "not to create a slew of new government programs, but a foundation for long-term economic growth."  Very good.

In terms of long-term investment, I was pleased to see him mention the smart grid in particular, an idea I pushed as recently as today.

Overall, my view is that the Obama fiscal stimulus plan is evolving in a sensible direction.  As promised, he is a pragmatist who is listening to a wide variety of well-qualified, centrist economists.

A substantial fraction of the fiscal stimulus is tax cuts, a substantial fraction is preventing state and local funding from plummeting, a modest but reasonable fraction is on maintenance and improvements of old infrastructure (projects that are mostly already on the books), and a modest (but increasing over time) fraction is on longer term projects which are likely to pay off in future returns.

At present, I see very little in the way of Keynesian pyramid building.  Nor do I see an attempt to grab the revolutionary moment by the horns and push the U.S. in a new direction.  Thus, thankfully, No New Deal. There is plenty of uncertainty in the economy but it’s not regime uncertainty.

Addendum:  Do note that I am
evaluating Obama relative to what we can expect given the situation and
our current politics and also relative to say the New Deal.

The Smart Grid and the Fiscal Stimulus

Earlier I pointed out that a) regulatory problems have prevented investment in the smart grid and b) subsidies to wind power in some states have driven prices to negative levels (yes, people are being paid to consume power).  These two problems are closely related.

The states control whether transmission lines get built but states with a lot of wind energy don’t have an incentive to build transmission lines to move the power out.  In effect, states with a lot of wind energy are preventing exports which lowers their own internal price of electricity but raises everyone else’s price and reduces the use of wind power. 

A new article in Technology Review makes the point. 

One effect of these regulatory moves was that companies had less incentive to invest in the grid than in new power plants, and no one had a clear responsibility for expanding the transmission infrastructure. At the same time, the more open market meant that producers began trying to sell power to regions farther away, placing new burdens on existing connections between networks. The result has been a national transmission shortage….

[Many states have a lot of wind potential]…But the existing transmission system doesn’t have the capacity to get that much electricity to the parts of the country that need it. In many of the states in the [wind] region, there’s no particular urgency to move things along, since each has all the power it needs. So most of the applications for grid connections are simply waiting in line, some stymied by the lack of infrastructure and others by bureaucratic and regulatory delays.

Hat tip to Andrew Samwick who writes:

The federal government is the entity that can resolve that failure, by taking the lead and making those expansions itself.  It can recoup its costs by levying a fee on subsequent power consumed through the grid.  I hope the fact that we need this investment isn’t a reason for it to be excluded from plans for fiscal stimulus.

Cass Sunstein to head OIRA

Mr. Obama also was poised to name Cass R. Sunstein,
an American legal scholar, to an existing White House post as the
administrator of the Office of Information and Regulatory Affairs. A
transition official said late Wednesday that Mr. Sunstein would oversee
government regulations and devise new approaches for government
efficiencies.

Here is the article.  Here is Wikipedia on Sunstein; he is the co-author of Nudge and a very well-known law and economics scholar.  He is now married to Samantha Power and he once had a pet Rhodesian Ridgeback.  I have had many interactions with Cass Sunstein and he has been unfailing intelligent and gracious.

If you wish (and you are warned), here is a left-wing critique of Cass Sunstein.

New Media Innovations

The Kauffman Foundation hosted a number of econ bloggers, including myself, at the AEAs to discuss blogging, communication and new media. Tim Kane at Growthology summarizes the stimulating discussion:

Some of things I learned include (1) the process of collaborative filtering is increasingly useful for discovery and evaluation, and a pioneer to watch is Slashdot, (2) commenting on blogs is arguably more valuable than posting for evaluating ideas … look for weighted commenting/evaluation systems to supplant formalized referee systems over time, (3) blogs are just part of the spectrum of idea sharing, as is journal publishing, and simply having a web page is now essential to be part of a research community, (4) good ideas can filter up much faster through the academic community thanks to blogs, (5) it is very difficult to determine what revenue models will sustain the print news media, but one possible trend to watch for is the return of ideological patronage (e.g. think tank magazines) — it’s not just advertising and subscriptions that will sustain the sector, (6) it’s still probably not advisable for graduate students or junior faculty to blog instead of focus on tenurable research … for now, and (7) if blogging is representative, then risk-taking entrepreneurship will thrive, even in a recession.

You will be happy to know that it was brought up in the discussion that the MR comment section is especially good so take it away readers.

Some do, some don’t

Some people enjoy running into an occasional primate or farm animal while shopping. Many others don’t.

That’s from The New York Times.  This very interesting article is about the growing debate over the role of service animals in public places.  I hadn’t known that parrots were being used to help medicated bipolar patients negotiate public situations.  In case you didn’t know, I would enjoy running into an occasional (non-human) primate or farm animal while shopping.  Not that I ever have.

I thank John De Palma and Michelle Dawson for the pointers.

Addendum: On service animals here is much more.

One ray of light, one bolt of gloom

Although the financial meltdown is a disaster for the country, Mr. Oros
said, “the opportunity going forward is unprecedented. It is fantastic.
It is as if I had been training for this for the last 40 years of my
career.”

Oros is currently a partner in a private equity firm.  The rest of the article, however, is deeply scary.  It’s about how much lawyers and lobbyists are benefiting from TARP and related measures.  Consider this form of optimism:

“It is a good time to be me,” said John L. Douglas, a partner in
Atlanta at the law firm Paul Hastings and a former lawyer for bank
regulators who helped create the agency that administered the last
federal bailout, the Resolution Trust Corporation.

We’re in a race to see whether politics will become the dominant means of allocating financial wealth in this country.  That could be the single biggest domestic issue today, but too few economists are speaking up about it.