A Change Is in the Air by James Kwak
"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister
"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."
- Daenerys Targaryen
"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"
- Tyrion Lannister
"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."
- Jorah Mormont
"These bad people are what I'm good at. Out talking them. Out thinking them."
- Tyrion Lannister
"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."
- Michael Barone
"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker
Sunday, December 25, 2016
Q: During the US election, a rather strange and heated debate took place between liberals that insisted the rise of Trumpism could be blamed on 'economic anxiety' or on racial resentment, as if it had to be one of the two. How would you theorize the relation between economic motivations for voter rebellion and other perhaps complementary causes for the huge transformations we saw in 2016? Do economic problems cause racism or nativism to emerge, for example? Historically how has this usually worked when inequality gets out of control?
M. I really do not think that the causality runs one way only: either from economic problems to racism, or from racism to economic problems. I think that the two work together. But I think that it was always wrong to blame support that Trump has received only on racism or misogyny. By doing this, one commits two mistakes: first, writes off that portion of the population as “irredeemable” since their racism or misogyny makes them impervious to any rational argumentation; and second, entirely plays down economic factors and thus fails to propose any change in economic policy. The view that nativism alone was responsible for the rise of right-wing populism in the US, or even more bizarrely the view held by some that the “losers” in rich countries should not complain because they are better off than workers in China, were just wrong answers to a very real problem.
Q. This kind of an interpretation has received strong pushback in the United States since Trump's victory, with mainstream Democratic supporters calling it either hopelessly leftist or tantamount to rationalizing away racism. Others point to the fact that many rich people supported Trump (as admittedly often supported other Republican candidates). What do you make of this criticism?
M. I do not understand the pushback. Do they really believe that Trump, Brexit, Le Pen, the rise of many right-wing populist parties in Europe etc. have nothing to do with economics? That suddenly all these weird nationalists and nativists got together thanks to the social media and decided to overthrow the established order? People who believe this remind me of Saul Bellow’s statement that “a great deal of intelligence can be invested in ignorance when the need for illusion is strong”.
Saturday, December 24, 2016
Tuesday, December 20, 2016
It’s not a struggling region. Updated by Matthew Yglesias
Monday, December 19, 2016
Saturday, December 17, 2016
Thursday, December 15, 2016
Must-Read: Let me disagree a bit with Paul: although evidence does suggest that we are near full employment, we are not at full employment--and the suggestion that we are near full employment is a very weak one. The unemployment rate is 4.6%--and six years ago I would have said that 5% unemployment is full employment. The prime-age employment-to-population ratio is 78.1%--and six years ago I would have said that an 80% prime-age employment-to-population ratio is full employment. It is possible to reconcile the two by saying that hysteresis has permanently knocked 2% of the prime-age population out of the labor force. But that claim is, itself, uncertain.
Paul rests his case for continued monetary policy at the zero lower bound and for fiscal expansion on the "precautionary motive". That case is there, and is very strong. But IMHO there is still a very strong case for continued monetary policy at the zero lower bound and fiscal expansion resulting from recognition of our uncertainty about the current state of the economy.
The downsides of further expansionary policy to see if full employment is an 80% prime-age employment-to-population ratio are small. The upsides are large. We should follow Rikki-Tikki-Tavi, and run and find out.and
More Expansionary FIscal Policy Is Needed: The Only Question Is Whether for a Short-Term Full Employment Attainment or a Medium-Term Full-Employment Maintenance Purpose
If the Federal Reserve wants to have the ammunition to fight the next recession when it happens, it needs the short-term safe nominal interest rate to be 5% or more when the recession hits. I believe that is very unlikely to happen withoutsubstantial fiscal expansion. No, at least in the world that Janet Yellen sees, "fiscal policy is not needed to provide stimulus to get us back to full employment." But fiscal policy stimulus is needed to create a situation in which full employment can be maintained. It would be a rash economist indeed who would forecast a short-term safe nominal interest rate above 3% when the time for the next loosening cycle arrives:
Thus if we do not shift to a more expansionary fiscal policy--and the higher neutral rate of interest that it brings--now, what do we envision will happen when the next recession arrives? Do we trust that congress and the president will then understand and react appropriately in a timely fashion and at the right scale to deal with the slump in aggregate demand?
Once again, it would be a very rash economist who would forecast that. An FOMC that does not press strongly for more expansionary fiscal policy now is an FOMC that is adopting a policy that threatens to make life very difficult indeed for their successors between two and six years from now.
And, of course, there is the chance--I see it as a substantial chance--that full employment is attained at a prime-age employment-to-population ratio of not 78% but 80%--or 81.5%. In that case, Janet Yellen is wrong to say that "fiscal policy is not needed to provide stimulus to get us back to full employment."
Friday, December 09, 2016
Monday, December 05, 2016
Yes, the Rust Belt demands an answer. But does anyone know what it is? by Jared Bernstein
Friday, December 02, 2016
Thursday, December 01, 2016
Socialize Finance by JW Mason
Blame the identity apostles – they led us down this path to populism by Simon Jenkins
Wednesday, November 30, 2016
Strong Dollar = Strong Economy ?
An excellent column from Christy Romer.
Tuesday, November 29, 2016
Sunday, November 27, 2016
Wednesday, November 23, 2016
Sunday, November 13, 2016
It's Rarely One Thing by Duncan Black
they’re going to keep losing by Freddie deBoer
Clinton suffered her biggest losses in the places where Obama was strongest among white voters. It's not a simple racism story
Monday, November 07, 2016
Tuesday, November 01, 2016
Sunday, October 23, 2016
Tuesday, October 18, 2016
Monday, October 17, 2016
Sunday, October 16, 2016
How Trump Happened by Joseph Stiglitz
What’s Behind a Rise in Ethnic Nationalism? Maybe the Economy by Robert J. Shiller
Saturday, October 15, 2016
Anyhow, in spite of my respect, I feel the need to call him out on trying to pull the wool over folks' eyes in a recent column. The column touts many of the positive measures (in my view) to help people at the middle and the bottom under the Obama administration, such as expansion of the earned income tax credit, the child tax credit, and most importantly the Affordable Care Act which has extended health insurance coverage to 20 million people and allows people with serious health conditions to get insurance at the same price as every one else. These measures have been paid for by higher taxes on the wealthy. This is all very positive and the Obama administration deserves credit for these measures, even if I would have liked to see it go much further.
However, the reason my BS detector went off is that Furman tried to claim we had turned the corner in some big way on the upward redistribution of income from the last four decades. He tells readers:
"Partly as a result of these policy changes, the top 1 percent’s share of income after taxes was 12 percent in 2013 (the most recent year for which data are available), well below its 2007 peak and roughly equal to its share in 1997."
The problem with this story is that the 2013 numbers for the top 1 percent are skewed downward in a big way as a result of the tax increase on the rich that the administration put in place in 2012. The wealthiest 1 percent often have considerable control over the timing of their income. They knew the top tax rate would rise from 35.0 percent for 2012 to 39.6 percent in 2013. This gave them a very strong incentive to declare income in 2012 that would have otherwise appeared in 2013. This makes 2012 look really good for the 1 percent and 2013 much worse.
This shows up clearly in the data. According to the estimates from the Congressional Budget Office (Figure 7), the inflation-adjusted before-tax income of the top 1 percent rose by 37.9 percent in 2012. It then fell back by 22.0 percent in 2013. This is exactly what we would expect from this tax gaming. If we take the average of these two years, the before-tax income of the top 1 percent has risen by 73.3 percent from its 1997 level. On the plus side, it is down by 22.6 percent from the bubble peak of 2007.
I should point out that this tax timing issue is hardly a secret. CBO mentioned it explicitly in the summary of its report:
"In response to tax law changes that went into effect in 2013, some taxpayers—especially those at the top of the income distribution—shifted some income into 2012 to avoid the higher tax rates on that income in 2013."
Anyhow, it is too early to claim any big victories in turning around the rise in before-tax income inequality. (This is also the view of CBO which projects that the bulk of the wage gains in the next decade will go to high-end earners, as has been the case for the last 35 years.)
The Obama administration deserves credit for some big steps in the right direction, but we still have a very long way to go. This is why I wrote "Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer," coming this week to a website near you.
Friday, October 14, 2016
In the same way as with Brexit, the rise of Donald Trump and Bernie Sanders, the strength of rightwing nationalists in many European countries, Vladimir Putin’s strength in Russia and the return of Mao worship in China, it is hard to escape the conclusion that the world is seeing a renaissance of populist authoritarianism.
Sunday, October 09, 2016
Saturday, October 08, 2016
Sunday, October 02, 2016
Greg Ip: Fiscal Policy Makes a Quiet Turn Toward Stimulus:
Now... fiscal policy across the developed world is collectively turning more stimulative for the first time since the end of the recession...
...This may be the most underappreciated economic development of the year. While the scale of the stimulus is modest in dollar terms, it signals a more profound shift in the political winds. Globally, the rise of political populism has pushed deficits down the list of priorities while elevating tax cuts and benefits for the working class. With enough critical mass, such measures could persuade central banks to rethink their own super-easy monetary policies, which would undermine the case for today’s rock-bottom bond yields and pricey stocks.
The fiscal shift is easy to miss, because rhetorically at least, governments remain devoted to cutting their debts. But numbers tell a different story.... The near-term catalyst for the fiscal turn was Britain’s vote to leave the European Union on June 23. Not only did the resulting uncertainty threaten global economic growth, it also alerted centrist political parties to how unhappy voters are with the economic status quo....
For Japan, the impetus was both Brexit and the Bank of Japan’s introduction of negative interest rates this year, which failed to work as planned; the yen went up and stocks went down. In August, Prime Minister Shinzo Abe unveiled a $73 billion package of infrastructure spending, cash handouts to poor families, and other stimulative measures. In the U.S., budget caps enacted in 2011 have already been loosened. Meanwhile, Hillary Clinton, the Democratic nominee, is campaigning to boost spending on countless programs, from college education to infrastructure.... Mr. Trump’s rise demonstrates that austerity has lost the political energy it had in 2010....
Central bankers can take credit for the shift. As the benefits of zero to negative rates have shrunk and the side effects risen, they have exhorted finance ministers to take up the burden of supporting growth...
What DeLong and Ip don't tell us is that Hillary's plan of $275 billion over five years is too small. The Fed says it gave us the recovery it wanted for the most part.
Saturday, October 01, 2016
Hacked audio of a conversation between Hillary Clinton and donors during a February fundraising event shows the Democrat nominee describing Bernie Sanders supporters as "children of the Great Recession" who are "living in their parents’ basement."
Speaking at a Virginia fundraiser hosted by former U.S. ambassador Beatrice Welters, Clinton says in a clip released by the Free Beacon that many of her former primary opponent's supporters sought things like “free college, free health care,” saying that she preferred to occupy the space "from the center-left to the center-right" on the political spectrum.
During the conversation, also reported in the Intercept, Clinton confesses to feeling "bewildered" by those to her far-left and far-right in the election.
"There is a strain of, on the one hand, the kind of populist, nationalist, xenophobic, discriminatory kind of approach that we hear too much of from the Republican candidates," she said. "And on the other side, there’s just a deep desire to believe that we can have free college, free healthcare, that what we’ve done hasn’t gone far enough, and that we just need to, you know, go as far as, you know, Scandinavia, whatever that means, and half the people don’t know what that means, but it’s something that they deeply feel."
While stressing the need to not serve as a "wet blanket on idealism," Clinton paints fans of the then-surging Vermont senator as political newbies attempting to deal with an economy that has fallen short of their expectations.
"Some are new to politics completely. They’re children of the Great Recession. And they are living in their parents’ basement," she said. "They feel they got their education and the jobs that are available to them are not at all what they envisioned for themselves. And they don’t see much of a future."
Clinton added: "If you’re feeling like you’re consigned to, you know, being a barista, or you know, some other job that doesn’t pay a lot, and doesn’t have some other ladder of opportunity attached to it, then the idea that maybe, just maybe, you could be part of a political revolution is pretty appealing."
"I think we all should be really understanding of that," Clinton said.
The audio, which according to the Free Beacon was "revealed by hackers who breached the email account of a campaign staffer," surfaces the same week that Sanders hit the campaign trail to try to win those same young voters that Clinton has struggled to attract since clinching the Democratic nomination.
Editor’s note: The headline and lede of this story have been changed to better reflect Clinton’s tone. The audio was originally published on Sept. 27, not Friday as first reported.
Sunday, September 25, 2016
Mr. Corbyn, a 67-year-old hard-left politician, won 61.8 percent of the more than 500,000 votes cast, up from the 59.5 percent he won a year ago, when his victory shocked and divided the party....
Friday, September 23, 2016
Thursday, September 22, 2016
Wednesday, September 21, 2016
Monday, September 19, 2016
Sunday, September 18, 2016
It is hard to overstate how much of a departure the “Star Trek” franchise’s eighties-and-nineties-straddling incarnation, “The Next Generation,” was from the original series. It retained much of the nomenclature and established codes (the inscrutable techno-scientific babble, the ship’s name, the naval ranks, the canonical alien species) but swung almost entirely toward the second, more cerebral form of science fiction. It had no anchor in the present, nor did it genuflect before America’s frontier myths. “The Next Generation” was wholesale utopia, a thought experiment on how humans would behave under terminally improved material circumstances. Civilization, and the future, had won.
And what a future! At the end of the show’s first season, the new captain, Jean-Luc Picard, laid bare his world’s parameters. In “The Neutral Zone,” a reverse-time-travel episode, cryogenically preserved twentieth-century humans awake on the Enterprise. One of them, a take-charge Wall Street tycoon, is particularly eager to reclaim his stock portfolio and his status as master of the universe. “People are no longer obsessed with the accumulation of things,” Picard tells him—and us, the audience—sternly. “We’ve eliminated hunger, want, the need for possessions. We’ve grown out of our infancy.”
Friday, September 16, 2016
Thursday, September 15, 2016
Monday, September 12, 2016
Sunday, September 11, 2016
How much more do we need to invest? For the foreseeable future, there is no danger that the US will overinvest in infrastructure. An increase in investment of 1 per cent of gross domestic product over a decade would total $2.2tn and permit substantial steps both to catch up on deferred maintenance and embark on new projects.
Saturday, September 10, 2016
Center for Budget and Policy Priorities
Wednesday, September 07, 2016
Okay, they only consider the latter a mystery, but for those who follow the data both are equally mysterious. The piece was titled "an economic mystery: why are men leaving the workforce?" The piece noted the reduction in the percentage of prime-age men in the workforce from nearly 100 percent in the 1960s to 88.3 percent at present. It then said that no one really knows why there has been this decline.
Actually, it really is not much of a mystery. While the piece wants to attribute it to the peculiar situation men face in the labor market, it is worth noting that there has also been a sharp decline in the percentage of prime-age women in the labor market. (Actually, a better measure is simply looking at the share of people who are employed. Many workers stop saying they are looking for jobs when they are no longer eligible for unemployment benefits. With a sharp reduction in eligibility for benefits over the last three decades, people who are not working are now much less likely to say they are looking for work.)
The figure below shows the percentage of prime-age women that are working since 1990.
The chart shows that after rising sharply from 1993 to 2000. It then fell sharply following the 2001 recession and again in 2007–2009 recession. It has since risen in the recovery but it is still 3.8 percentage points below the peak hit in 2000. The pattern among prime-age men is similar, although the employment rate is now 4.8 percentage points below the 2000 peak. (Remember the EPOP for women had been rising before the 2001 recession and was projected at the time to continue to rise.)
The fact the EPOP for men and women has followed a very similar pattern since 2000, and the declines have been associated with weak demand in the economy, suggests that the explanation might be weak demand. In other words, the problem is not too many men getting disability or lacking the skills needed in a 21st century economy, but rather just not enough demand.
If we could get the trade deficit down or got the government to spend more money then we could boost demand and get the prime-age men discussed in this piece back to work. We would do the same for prime-age women. (We could also follow the German model and reduce the length of the average work year, thereby spreading around available work.)
So the villains are not lazy men, but rather folks like Paul Ryan, Peter Peterson, and the Washington Post who insist that we have to keep our budget deficits low even in a context of near record low interest rates and very low inflation.
It is also worth mentioning that the lazy welfare cheat story doesn't fit the data at all. Benefits of various stripes have gotten more stingy over the period when men's EPOPs were declining. Also, as the report cited in the piece from the President's Council of Economic Advisers notes, the United States ranks near the bottom among wealthy countries in the generosity of benefits. It also ranks near the bottom in prime age EPOPs.
Friday, September 02, 2016
Monday, August 29, 2016
Thursday, August 25, 2016
Sunday, August 21, 2016
Since adjusting currencies are an essential part of a "free-trade" regime, a real trade deal should have rules against currency management. While the exact provisions are more than I have time for just now, Fred Bergsten (the president emeritus of the Peterson Institute for International Economics) and his colleague Joe Gagnon give us a good start here.
Must-Read: Very good thoughts in a Kaleckian mode...
Saturday, August 20, 2016
Thursday, August 18, 2016
Now, I’m not saying that we shouldn’t try. I’d argue, in particular, for substantially more infrastructure spending than Mrs. Clinton is currently proposing, and more borrowing to pay for it. This might significantly boost growth....
Wednesday, August 17, 2016
Nominal Demand Ain't What It Used to Be by David Beckworth
Must-Read: Martin Sandbu: Trump Supporters on the Couch:
Economic anxiety can make voters more prone to racial resentment...
It is, of course, an old trope in social thinking that economic pressure makes it easier to wind masses up against a scapegoated group perceived as “other”. Conversely, times of widespread and rising prosperity are good for liberalism and tolerance. Brad DeLong is quite right that this is a good time to pick up Ben Friedman’s prescient pre-crisis work on the moral consequences of economic growth....
Racial status anxiety and economic anxiety can be one and the same phenomenon, insofar as the economic pressure is perceived as affecting a particular social group. Much is said, all correct, about how the American white working class, and Trump supporters in particular, are well off compared with minorities and the real poor. But over the past generation, the trajectory of the white working class has no doubt changed the most for the worse, compared with the previous generation.
That is true in material, indeed plain physical, terms: while black mortality rates remain higher than those of whites, it’s only for the white working class that the secular mortality decline has gone into reverse. And it is surely true that, as a result, the relative social status of working-class whites has fallen noticeably. That reflects a sharpening of class difference with widening inequality and an unequivocally welcome reduction in racial status difference.
All told, that is a story of tremendous progress. But there is no need to dismiss the economic roots of the racial backlash we now see...
Sunday, August 14, 2016
Tuesday, August 02, 2016
Monday, August 01, 2016
SENATOR SANDERS’S PROPOSED POLICIES AND ECONOMIC GROWTH by Christina and Paul Romer
CBO Forecasts: What’s Under the Hood? by J.W. Mason
Tuesday, July 26, 2016
There is lot of interest in Jeremy Corbyn here. Most of the nonsensical British media coverage has not impacted on ordinary Americans and they see him as a progressive insurgent on the Sanders model with Sanders uncanny ability to enthuse idealistic young people. Sanders’ program, with priorities like a higher minimum wage, government health care, breaking up big banks and rebuilding infrastructure, is also very similar to the current Labour leadership.
Thursday, July 14, 2016
Lead actress in a drama:
Keri Russell, “The Americans”
But Maslany should win!!!
Lead actor in a drama:
Rami Malek, “Mr. Robot”
Bob Odenkirk, “Better Call Saul”
Matthew Rhys, “The Americans”
Liev Shrieber, "Ray Donovan" is good too.
Bryan Cranston, “All the Way”
Lead actress in a limited series:
Kirsten Dunst, “Fargo” | Video
Lead actor in a comedy:
Anthony Anderson, “black-ish”
Will Forte, “Last man on Earth
Thomas Middleditch, “Silicon Valley”
Jeffrey Tambor, Transparent
Lead actress in a Comedy:
Julia Louis-Dreyfus, “Veep”
Tracee Ellis Ross, “black-ish”
Amy Schumer, “Inside Amy Schumer”
”Game of Thrones”
Outstanding Limited Series
“The Night Manager”
“All the Way”
Outstanding Supporting Actor In A Comedy Series
Louie Anderson, “Baskets”
Tony Hale, “Veep”
Matt Walsh, “Veep”
Outstanding Supporting Actor In A Drama Series
Peter Dinklage, “Game of Thrones”
Outstanding Supporting Actor In A Limited Series Or Movie
Jesse Plemons, “Fargo”
Bokeem Woodbine, “Fargo”
Hugh Laurie, “The Night Manager”
Outstanding Supporting Actress In A Comedy Series
Allison Janney, “Mom”
Kate McKinnon , “Saturday Night Live”
Anna Chlumsky, “Veep"
Outstanding Supporting Actress In A Drama Series
Maggie Smith, “Downton Abbey”
Lena Headey, “Game Of Thrones”
Emilia Clarke, “Game Of Thrones”
Maisie Williams, “Game Of Thrones”
Outstanding Supporting Actress In A Limited Series Or Movie
Jean Smart, “Fargo”
Monday, July 11, 2016
Thursday, June 30, 2016
Vox weenies on Corbyn
Peter Frase on the center-left:
a moribund but still institutionally powerful neoliberal order that uses its accumulated power to compensate for its complete lack of compelling answers to contemporary political questions.Corey Robin on the Clinton forces:
The Clinton forces want nothing more than to make all of American politics—not just in this election but for the foreseeable future—into a battle between a racist, ethno-nationalist right and a multicultural, neoliberal center. Our job is to make politics into a struggle between a multicultural neoliberal center and a multicultural, multiracial socialist left.
Monday, June 27, 2016
"Your son was butchered at the Red Wedding, Lord Manderly, but you refused the call.
You swore allegiance to House Stark, Lord Glover, but in their hour of greatest need you refused the call.
And you, Lord Cerwyn, your father was skinned alive by Ramsey Bolton. Still, you refused the call.
But House Mormont remembers. The North remembers! We know no king but the King in the North whose name is Stark! I don't care if he's a bastard. Ned Stark's blood runs through his veins. He's my King from this day until his last day!"
SPOILERS SPOILERS SPOILERS
Tyrion becomes Hand of the Queen as the Targaryen forces sail towards Westeros including Yara Greyjoy's fleet, the Unsullied, the Dothraki, and three dragons. Daenerys's advisers include Missandei, Grey Worm, Varys the Spider and Theon Greyjoy. Jorah Mormont is off looking for a cure to Stonescale (I would like to see him reunited with Lyanna Mormont). Daario Naharis and the Second Sons have stayed behind in Meereen.
Varys has brokered an alliance with the Dornish and Lady Olenna Tyrell (and also the Reach with Randall Tarly?).
Cersei is Queen and holder of the Iron Throne, along with Jaime, Bronn, Qyburn, and Gregor Clegane. The Sparrows and Faith Militant are gone. So is Kevan Lannister.
But the Freys are gone also, following the traitorous and disloyal Boltons into oblivion. Will Edmure Tully - now freed - and Riverrun rejoin the Starks? What about Sandor Clegane and the Brotherhood without Banners? Where is Melisandre the Red Priestess heading?
Jon Snow holds the North. Advisers include Sansa, Ser Davos, Tormund, Brienne, Podrick Payne, Lyanna Mormont and the other leaders of the Houses of the North. The Knights of the Vale and a dissatisfied Petyr Baelish. Bran Stark and Meera Reed head south past the Wall. (They know the Night King is heading south as Winter has arrived.) Samwell Tarly is studying at the Citadel. Dolorous Edd is leading the Nights Watch at Castle Black. Uncle Benjen/Coldhands is beyond the Wall.
Both Jon Snow and Sansa Stark know and like Tyrion Lannister, Hand to the Queen.
What will Euron Greyjoy do? Where will Arya head to next?
Friday, June 24, 2016
And the risk of high inflation in the UK is zero. People are in a panic over this vote sort of like those poor people that heard a firecracker in the NYC's subway this week. I'm not saying there will not be self inflicted wounds that follow this vote but the vote itself does not mean that much. Stupid trade protection would be a bad thing but it is odd that a lot of people who are off in this panic attack lauded protectionism here. Go figure.
Tuesday, June 21, 2016
Why the Creative Accounting in the Microsoft-LinkedIn Deal Is So Disturbing by Rana Foroohar
Finding examples of how companies use financial engineering—instead of the realengineer—to bolster their balance sheets is like shooting fish in a barrel. The latest involves the biggest deal of the moment: Microsoft’s acquisition of LinkedIn.
One of the reasons that LinkedIn many have wanted to be acquired, as Andrew Ross Sorkin explained in yesterday’s New York Times, is that it has been using a rather deceptive method of accounting that allows employee compensation paid in stock to be ignored as an expense. That makes for a bottom line that looks better than it really is. (This is especially true given that the amount of stock based-comp paid out by the company in the last two years was nearly equal to operating revenue, according to an analyst source.)
LinkedIn isn’t alone in this sort of crafty accounting–most companies in the S&P now do it. (This piece is a great primer on how the funny math works.) But recently, Facebook started including stock comp in its reporting, and there’s a big push within corporate governance circles to get more companies to do that in order to get back to a more realistic version of earnings. After all, employee compensation, whether paid in cash or stock, is obviously an expense that should go on the balance sheet.
It’s worth understanding just why, and how, stock-based compensation became such a huge deal to begin with. It marked a turning point toward short-term decision-making in corporate America. Key legislative changes that fueled the trend happened under Democratic president Bill Clinton, whose administration passed a 1993 provision on corporate pay. The measure limited corporate tax deductions for regular salaried income to $1 million but exempted “performance-related” pay above and beyond that—pay that was typically awarded in stock options. Joseph Stiglitz, a former head of Clinton’s Council of Economic Advisers, remembers this move as “one of the worst things that the Clinton administration did.”
That’s because it created a tremendous incentive for companies to pay more compensation in options. This further fed the cycle of short-termism since executives would from then on be focused primarily on boosting stock prices, by any means necessary. As Stiglitz puts it, “It just opened up this huge span of bonus pay which was not for performance. I had written a lot about this before, that it was largely phony. I argued very strongly during the nineties that the whole stock option pay trend caused a lot of incentives for non-transparency, and that it was directly responsible for what I call creative accounting.” It allowed firms not just to deceive the market but also to avoid paying the taxes that they should have paid.
Why does this matter so much now? Because it contributes to growing inequality and a lackluster economic recovery, by putting more and more tax-free compensation into the hands of the wealthy (who tend not to spend it after a certain point, which is a problem in an economy based mostly on consumer spending). What’s more, says Stiglitz, the performance exception didn’t really reward “performance” as much as any number of other factors, such as monetary policy that boosted stock prices. “If you’re really talking about performance, you should not get higher pay when your stock price goes up because the interest rate goes down,” he explains. “I mean, maybe Janet Yellen should get higher pay for that, but CEOs certainly shouldn’t.” He wrote in his searing memoir of the time, The Roaring Nineties, that “as the Clinton years came to a close, I wondered: What message had we in the end sent through the changes that had been brought about in our taxes?”
The Microsoft-LinkedIn deal brings all this to the fore once again. It’s a topic the next president should tackle head on, no matter the party.
Rubin - who always sports a cool T-shirt - mentioned Daenerys's quote I have in my banner area about breaking the wheel. They had an interesting discussion of all aspects of the episode focusing on things that stood out for me as well: like the fact Rickon didn't follow a serpentine rout (like in the original In-Laws movie) when running from Ramsey's arrows; that Sansa didn't alert Jon Snow that the calvary might by coming; that Davos found Shireen's toy stag and he eyed Melisandre forbodingly. I wish they had done this show throughout the series. So good.
Friday, June 17, 2016
Tuesday, June 14, 2016
"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."
They discussed the different fanatics, the Sparrows and Faith Militant, the followers of the Lord of Light, even Jaime who is fanatical about Cersei if not his House. They forgot to mention mention Daenerys Targaryan: "I will take what is mine!"
Friday, June 03, 2016
Friday, May 27, 2016
Wednesday, May 25, 2016
Thee astonishing political emergence of Jeremy Corbyn, the left-wing leader of the British Labour Party, is the sort of thing that passes for normal in Western democracies these days. Since the economic crash in 2008, anti-establishment types have cropped up everywhere. Corbyn, a sixty-six-year-old socialist, had never held a position of authority in his party or in government before being elected last summer on a platform of benign economic populism. He is Syriza in Greece; he is Podemos in Spain; he is Sanders in America. His politics rebel against a Britain that is eager to join foreign wars and pallid in the face of social inequality. “There has to be some kind of a reckoning,” Corbyn told me recently. “You actually have to run an economy for the benefit of people, not run for the benefit of hedge-fund managers.”
McDonnell was Corbyn’s campaign manager last summer and is now the shadow Chancellor. (In British politics, the opposition creates a “shadow” cabinet to respond to the Government.) When I asked him if he could convey just how improbable it was that he and Corbyn were now in charge of Labour, McDonnell quoted Fredric Jameson, an American literary theorist and Marxist scholar. “It is easier for people to imagine the end of the earth than it is to imagine the end of capitalism,” he said. “And that is what we are about, aren’t we?”
Thursday, May 19, 2016
Tuesday, May 17, 2016
Economic platitudes about how trade is always worthwhile as long as the winners can compensate the losers are an insult in the age of inequality, where the winners increasingly use their political power to claim ever more winnings.
If we don’t deal with these costs by creating real, substantive, remunerative opportunities for those hurt by trade, some demagogue is sure to come along Trumpeting a case for xenophobia, walls, tariffs and protectionism. If he’s not … um … here already.
Monday, May 16, 2016
Saturday, May 14, 2016
Friday, May 13, 2016
History of the U.S. (1865-1918) Progressive Era (Wikipedia)
Progressive Era website
The Progressive Era was one of general prosperity after the Panic of 1893—a severe depression—ended in 1897. The Panic of 1907 was short and mostly affected financiers. However, Campbell (2005) stresses the weak points of the economy in 1907–1914, linking them to public demands for more Progressive interventions. The Panic of 1907 was followed by a small decline in real wages and increased unemployment, with both trends continuing until World War I. Campbell emphasizes the resulting stress on public finance and the impact on the Wilson administration's policies. The weakened economy and persistent federal deficits led to changes in fiscal policy, including the imposition of federal income taxes on businesses and individuals and the creation of the Federal Reserve System. Government agencies were also transformed in an effort to improve administrative efficiency.
In the Gilded Age (late 19th century) the parties were reluctant to involve the federal government too heavily in the private sector, except in the area of railroads and tariffs. In general, they accepted the concept of laissez-faire, a doctrine opposing government interference in the economy except to maintain law and order. This attitude started to change during the depression of the 1890s when small business, farm, and labor movements began asking the government to intercede on their behalf.
By the start of the 20th century, a middle class had developed that was leery of both the business elite and the radical political movements of farmers and laborers in the Midwest and West.
Monday, May 09, 2016
NYT comes around to @karpmj's argument two months later.
Bernie Sanders’s Legacy? The Left May No Longer Need the Rich by Nate Cohn
When Bernie Sanders started gaining in the polls, it was easy to place him in a long line of idealistic insurgents like Barack Obama, Howard Dean, Bill Bradley or Jerry Brown.
They built strong bases of support among white liberal voters, excelling in places like Boulder, Colo., and Vermont, but their chances of being nominated hinged on building a broader coalition that included nonwhite voters. Only Mr. Obama managed it.
Mr. Sanders, despite his success in Indiana this week, has effectively lost the Democratic nomination, and for a familiar reason: He didn’t do well enough among black voters. But he gained the enthusiasm of a subtly different — and potentially larger — coalition than his liberal predecessors.
His brand of progressivism played far better among white working-class voters than that of past liberal outsiders. At the same time, he fared far worse among the affluent Democrats who represented the core of Mr. Obama and Mr. Bradley’s coalitions.
Mr. Sanders’s weakness among affluent Democrats and his strength among working-class Democrats might seem unsurprising, given his class-focused message. Mr. Sanders himself anticipated it in an interview with The Upshot in July.
But in broader historical terms, it might be something of a turning point in Democratic politics: the moment when the party’s left no longer needs an alliance with wealthy liberals to compete in national elections.
Connecticut, which held its primary April 26, vividly illustrates the huge difference between Mr. Sanders’s coalition and that of past liberal challengers.
In 2000, a flagging Mr. Bradley lost the state by 13 percentage points to Al Gore. He lost badly among nonwhite voters — losing cities like Bridgeport and Hartford by more than 40 points. He lost by more modest margins in the rural, white, working-class eastern part of the state. But he won many of the state’s affluent areas — like Greenwich and New Canaan, along with much of the traditionally liberal western and northwestern part of the state near the border with New York and Massachusetts.
Mr. Obama won almost all of the same areas in 2008, but then added strong support from nonwhite voters — enough to give him a narrow victory over Mrs. Clinton in the state. He won places like Bridgeport and Hartford, even as he fared similarly to Mr. Bradley in places like Greenwich and New Canaan. He fared little or no better in the white, working-class parts of eastern and central Connecticut.
The Sanders-Clinton race reversed this map. Mrs. Clinton lost almost all of the white, working-class areas of rural eastern Connecticut to Mr. Sanders, even though she had won most of it in 2008, as Mr. Gore had in 2000. But she beat Mr. Sanders by huge margins in the affluent parts of western Connecticut where Mr. Obama and Mr. Bradley fared well. She won back the nonwhite voters she lost to Obama in 2008, giving her wins in Bridgeport and Hartford that nearly matched Mr. Gore’s victory in 2000. It was enough for a clear if modest 5.4-point victory.
It’s a pattern that has repeated itself across the country. Mr. Sanders was routed in the wealthy, liberal parts of New York where recent progressive heroes such as Bill de Blasio or Zephyr Teachout fared well — like the Upper West Side, Greenwich Village and parts of Brooklyn.
In Massachusetts, Mr. Sanders lost the affluent, liberal voters in the Boston area, and he might well lose the Bay Area, another enclave of the wealthy and liberal.
This is the first time since 1992 that there’s been a real split between the progressive left and affluent liberals in a Democratic primary. In that race, an iconoclastic outsider, Mr. Brown, excelled among liberals in places like Ann Arbor, Mich., with a progressive message (including opposition to trade agreements), while a more technocratic candidate, Paul Tsongas, won in wealthy liberal areas like Montgomery County, Md., which includes many suburbs northwest of Washington. Bill Clinton easily prevailed over a divided left-liberal wing of the party with strong support among working-class white Democrats and black voters.
Why did affluent liberals support Mrs. Clinton?
One possibility is simple class politics: Mr. Sanders’s class-oriented message didn’t resonate among this group. If true, a candidate of the progressive left would struggle to reunite the left-liberal coalition against an establishment challenger in future Democratic primaries.
But the left might have a better opportunity to reassemble the left-liberal coalition with a different progressive candidate if the problem were Mr. Sanders, not his views. (Anecdotally, I run into a lot of Hillary Clinton supporters who supported Mr. Obama in 2008 and say they would have supported Elizabeth Warren, who’s more technocratic and policy-focused than Mr. Sanders.)
Equally important to the future of progressives in the Democratic Party is Mr. Sanders’s strength in the white working-class areas where Mr. Bradley, Mr. Obama, and both Mr. Brown and Mr. Tsongas faltered. It was Mr. Sanders’s strength among these voters that let him stay fairly competitive, even though he lost half of the traditional left-liberal coalition.
Mr. Sanders won white voters without a college degree by a double-digit margin in Connecticut, as he did in Maryland, Wisconsin, North Carolina, New Hampshire, Illinois, Oklahoma, Indiana, Vermont and Michigan. He probably did so in Rhode Island as well (no exit polls were conducted there).
Outside the South, Mrs. Clinton probably won white voters without a college degree only in Ohio (the exit polls there show she prevailed with that group by one point).
One possible explanation, again, is policy. Income inequality has become a vastly more important issue to Democrats since the Great Recession, and it’s reasonable to assume that white working-class Democrats might be especially drawn to the issue. This is the best case for the progressive left; it would mean that a future progressive populist could count on similar levels of support with a strong, class-oriented message.
The evidence for this view is somewhat mixed. According a compilation of exit polls, around 40 percent of white voters without a college degree wanted more liberal policies than those of Mr. Obama, and Mr. Sanders won these voters handily. The highest number was in Vermont, where 46 percent of white voters without a degree wanted more liberal policies than Mr. Obama’s.
That’s a big bloc that progressives can count on in the future, but it’s not a majority and it’s less than Mr. Sanders’s share of white voters without a degree. That’s in part because Mr. Sanders also won among those white working-class voters who wanted less liberal policies than those of Mr. Obama, a fact that makes Mr. Sanders look as much like a protest vote against Mrs. Clinton as the harbinger of a new Democratic socialism.
But it is nonetheless striking that so many white Democrats without a degree wanted more liberal policies than Mr. Obama’s. In fact, white voters without a college degree were often more likely than either college-educated white voters or minorities to support more liberal policies.
That’s consistent with the notion that white working-class Democrats really have become more receptive to a progressive candidate over the last decade, in some cases even going from being the principal impediment to a left-liberal coalition to the strongest bloc in favor of a more progressive agenda.
According to exit poll data, liberals represented a majority of white Democrats without a college degree in nearly every primary contest. It’s a huge change from just a decade or two ago, when so many white working-class Democrats were conservative (check out this 1995 Pew Research typology of voters if you want to see what the Democratic base used to look like). Mrs. Clinton tended to win “moderate” white voters without college degrees in these states, but she lost among the self-described liberals.
A lot of this is a generational divide. Mrs. Clinton won among white voters without a college degree who were over age 30, but she was pummeled among those who were younger.
Whether Mrs. Clinton was so weak among young white voters because of her weaknesses or the appeal of Mr. Sanders’s policy message will probably decide whether the “Sanders Coalition” can be replicated in a future Democratic primary.
The exit polls, again, send a mixed message. Around half of young white voters didn’t think that Mrs. Clinton was liberal enough, or they wanted policies that were more liberal than Mr. Obama’s. But Mr. Sanders also won among those younger voters who thought Mrs. Clinton and Mr. Obama were liberal enough; her weakness might have had as much (or more) to do with questions about ethical governance as about policy.
Either way, Mr. Sanders’s success — in spite of weakness among wealthy Democrats — is important. There hasn’t been a viable candidate of the progressive left in a Democratic primary in a long time.
Elite Democrats in places like Manhattan; Cambridge, Mass.; and Santa Monica, Calif., have been anchors of liberal politics in the United States for decades. The ability to build a robust progressive coalition without these voters — or their donations — is a new phenomenon, and it could free candidates to pursue progressive policies in future Democratic primaries, and win.
The Democratic Party has moved far enough to the left where it’s possible to imagine a candidate of the progressive left cobbling together a majority without much support from affluent liberals. It isn’t easy — Democrats are basically satisfied with Mrs. Clinton and Mr. Obama’s positions — but it’s possible.
Saturday, May 07, 2016
This fact has largely been missing from reporting on the issue. For example a Washington Post piece warning of the end of the world if Trump tried to negotiate on the debt, told readers that the government would pay roughly $255 billion this year in interest on the debt. This includes the $113 billion that the Federal Reserve Board will receive and refund back to the Treasury. That leaves a net interest burden of $142 billion, a bit less than 0.8 percent of GDP. By comparison, the interest burden was over 3.0 percent of GDP in the early 1990s.
Friday, May 06, 2016
Thursday, May 05, 2016
Wednesday, May 04, 2016
Ben Bernanke and Democratic Helicopter Money
by Simon Wren-Lewis
“The fact that no responsible government would ever literally drop money from the sky should not prevent us from exploring the logic of Friedman’s thought experiment, which was designed to show—in admittedly extreme terms—why governments should never have to give in to deflation.”
The quote above is from a post by Ben Bernanke (who, in case anyone does not know, used to be in charge of US monetary policy). I put it up front because it expresses a macroeconomic truth that no one should ever forget: persistent recessions and deflation are never inevitable, and always represent the failure of policy makers to do the right thing.
There are many useful points in his post, but I just want to talk about one: Bernanke is in fact not talking about helicopter money in its traditional sense, but what I have called elsewhere ‘democratic helicopter money’.
When most people talk about HM, they imagine some scheme whereby the central bank sends ‘everyone’ a cheque in the post, or transmits some money to each individual some other way. It is what economists would call a reverse lump sum tax, or reverse poll tax: the amount you get is independent of your income. That makes it different from a normal tax cut.
In practice the central bank could only really do this with the cooperation of governments. It would not want to take the decision about what everyone means on its own. (Do we include children or not. How do we find everyone?) But once those details had been sorted out, a system would be in place that the central bank could operate whenever it needed to.
Bernanke suggests an alternative. The central bank sets aside a sum of newly created money, and the fiscal authorities then spend it as they wish. They could decide to use all the money to build bridges or schools rather than give it to individuals. There might be two reasons for doing HM this way. First, for some reason the fiscal authorities are reluctant to spend if they have to fund it by creating more debt, so it may allow them to get around this (normally self-imposed) ‘constraint’. Second, a money financed fiscal expansion could be more expansionary than a bond financed fiscal expansion. Lets leave the second advantage to one side, as the first is sufficient in a world obsessed by government debt.
I have talked about something similar in the past (first here, but later here and here), which I have called democratic helicopter money. This label also seems appropriate for Bernanke’s scheme, because the elected government decides on the form of fiscal expansion. The difference between what I had discussed earlier under this label and Bernanke’s suggestion is that in my scheme the fiscal authorities and the central bank talk to each other before deciding on how much money to create and what it will be spent on (although the initiative always comes from the central bank, and would only happen in a recession where interest rates were at their lower bound). The reason I think talking would be preferable is simply that it helps the central bank decide how much money it needs to create. 
Imagine, for example, you had a fiscal authority in one country that wanted to spend the money on ‘shovel ready’ public investment projects, and an authority in another country that wanted to spend it on some temporary tax cuts for the rich. The impact of the two different stimulus policies on demand and output are very different. If the two economies were in similar conjunctural positions, then the central bank with the tax cutting fiscal authorities would want to create a lot more money than would be required in the other economy.
In some countries it is easier for central banks to talk to the fiscal authorities than in others. When it is difficult, Bernanke’s scheme may appear attractive, but it leaves the central bank somewhat in the dark about how much money it needs to create. The big advantage of the more popular conception of HM (a cheque in the post) is that the impact of any money creation is much clearer. (As it is important to end recessions quickly, waiting to see what happens is not helpful advice.)
When central banks and governments do happily talk to each other (as in the UK, for example) then my version of democratic HM becomes an option. Arguments that this makes the central bank less independent are spurious in my view. The central bank initiates the discussion, in clearly defined circumstances. They simply ask what the government would spend any newly created money on. This question should be accompanied by the central bank’s current view on what the multipliers for various fiscal options are. The government then makes a choice, and the central bank then decides how much money to create.
While democratic HM is not talked about much among economists (Bernanke excepted), I think there are good political economy reasons why it may be the form of HM that is eventually tried. As I have said, conventional HM of the cheque in the post kind almost certainly requires the involvement of government. Once governments realise what is going on, they may naturally think why set up something new when they could decide how the money is spent themselves in a more traditional manner. Democratic HM is essentially a method of doing a money financed fiscal expansion in a world of independent central banks.
Which brings me back to the quote at the head of this post. The straight macroeconomics of most versions of HM is clear: all the discussion is about institutional and distributional details. If it is beyond us to manage to set in place any of them before the next recession that would be a huge indictment of our collective imagination, and is probably a testament to the power of imaginary fears and taboos created in very different circumstances.
 A sequential set-up of the kind Bernanke suggests is also more vulnerable to cheating: the government uses the money to finance something they were going to do anyway, and in effect largely offsets the money creation by reducing its own borrowing.
Tuesday, May 03, 2016
Euron stops Balon on a bridge between the castle's towers in a storm.
Balon: Let me pass. Step aside for your king.
Euron. Haven't I always, brother?
Balon: I thought you'd be rotting under some foreign sea by now.
Euron: What is dead may never die.
Have the customs changed since I've been gone? Aren't you supposed to repeat the words.
Balon: You can mock our God without my help.
Euron: I don't mock the Drowned God ... I *am* the Drowned God. From Oldtown to Qarth when men see my sails ... they pray.
You're old, brother. You've had your time. Now let another rule.
Balon: I've heard you lost your mind during a storm on the Jade Sea. Your crew tied you to the mast to keep you from jumping overboard.
Euron: They did.
Balon: And when the storm passed, you cut out their tongues.
Euron: I needed silence.
Balon: What kind of Ironborn loses his senses during a storm?
Euron: I am the storm, brother. The first storm and the last, and you're in my way.
Balon stabs at Euron with his dagger and Euron throws him over the edge.
Saturday, April 30, 2016
In January 2009, at the beginning of Obama’s first term, the nonpartisan Congressional Budget Office issued a 10-year forecast for the U.S. economy, including such indicators as unemployment, gross domestic product, the budget deficit, government debt and interest rates. Here’s a table comparing the CBO’s expectations for the year 2015 to what has actually happened:NGDP forecast to grow 33 percent, actually grew 22 percent.
Real GDP, forecast 20 percent, actual 10.