2014

It looks like the economy might actually recover in 2014. But will it? by Neil Irwin

The good news for 2014 is that those headwinds--the ones we know about--are already priced in. U.S. government spending cuts and tax hikes took place, but there aren't likely to be additional ones next year. Emerging markets continue on their moderate growth path, but there doesn't seem to be a collapse in activity. Europe's problems may have finally bottomed out, and its sense of acute crisis has long passed.

In other words, the forseeable things that dragged down growth the last few years look unlikely to recur. So the good news is that the natural resilience of the world's leading economies should have a greater ability to assert itself, driving the kind of expansion embedded in projections from the IMF, the Fed, and presaged by the new OECD numbers. 

State and local governments are a slight tailwind. 

Many false dawns however, as Irwin notes. How hard did the sequester hit the economy?

2014

Valium for Obamacare Worriers  by Krugman

Suppose that healthcare.gov isn’t fixed by the end of next month. How bad is it for Obamacare? Would the program be doomed?

No, says Jonathan Cohn, because there are two layers of protection against poor signup. First, there is a system of cross-subsidies to insurance companies that was intended to prevent companies from surreptitiously gaining an advantage by only signing up healthy people (hey, our policy is available to anyone — but you have to sign up in our sixth-floor walkup office.) As it turns out, this system would end up compensating insurance companies in general if the risk pool is worse than expected. Second, the subsidies to individuals are designed to hold health costs down to 8 percent of income, which means that they will rise if costs are higher than expected.

Neither of these would be a good thing, since they would increase the budget cost, but they do mean that Obamacare’s survival probably isn’t on the line.

Actually, the biggest reason Obama and co. should be anxious to fix these things now, I’d argue, isn’t the fate of the program itself, which can survive even large early wobbles, but the midterm elections. If Obamacare is fixed, Republicans will be in the position of attacking a program that is benefiting millions of Americans; if it isn’t, they can still run against the legend, not the fact.

So a lot is riding on fixing the technological botch — but not in quite the way people imagine.

I think Chait is freaking out. Jared Bernstein responds also.

debt ceiling clown show

Dems think they’re killing debt limit GOP extortion for good by Greg Sargent

The question about the deal is this: Given that the next debt limit deadline looms just after the date on which government funding runs out, doesn’t this just mean we’ll find ourselves in roughly the same situation in a few months, with Republicans demanding concessions in exchange for averting default and economic chaos?

Senate Democratic aides tell me they think the possibility that conservatives will insist on another round of debt limit brinksmanship is very real. But they think they’re on the verge of rendering any such threat an entirely empty one. The idea: Decoupling the debt limit from the budget talks, and placing the debt limit deadline further out, will effectively isolate the debt limit debate and make another default extortion crisis even harder politically. By refusing any meaningful concessions in exchange for a debt limit hike this time — and earlier this year – Dems will have finally killed the “Boehner Rule” (which demands spending cuts in exchange for any hike) and driven home that GOP debt ceiling extortion will never be rewarded again.

“Of course extending the debt limit for a longer period of time would be preferable, but under the circumstances, with Republicans trying to figure out a way to get out of this mess, the idea that the debt limit has been defanged as an extortion tool was enough,” a Senate Dem leadership aide tells me. “Conservatives will still try to bring this up and they still may end up damaging the economy, because it’s been so ingrained that this is a tool that should extract concessions. But it will be hard for anyone to take that claim seriously.” GOP leaders included, presumably.

As I reported yesterday, Dem aides believe Republican tactics have delivered such a massive hit to the GOP that leaders will be even more wary of another default crisis once the 2014 elections are underway. As one aide told me, pressure from the right for another hostage standoff could divide Republicans — particularly if GOP leaders are even more eager to avoid a crisis – and put pressure on 2014 candidates to hew to extremism at an even worse political moment for the party.

hostage to fortune with Silver

Seth Ackerman attacking John Judis

In the last debt ceiling crisis, two years ago, the public expressed overwhelming revulsion and blamed the GOP by a wide margin; the next year, Republicans won the House again, and ended up with three-fifths of the governors and state legislatures. Most likely the same or worse will happen again in 2014.

2010 was post financial crisis with TARP etc.

2014 midterms

Poll: Basically Everyone Now Angry at GOP Over Shutdown by Dave Weigel

percentage of Americans disapproving of the way Republicans are handling negotations: 74 percent

Washington Post/ABC news poll for Oct. 9. On Sept 25 i was at 63 percent.

2014

Bruce Bartlett: This Government Shutdown Will Defeat the GOP in 2014

(via DeLong)

The Midterms: Sam Wang Weighs In by Krugman

"If the election were held today, Democrats would pick up around 30 seats, giving them control of the chamber. I do not expect this to happen. Many things will happen in the coming 12 months, and the current crisis might be a distant memory. But at this point I do expect Democrats to pick up seats next year, an exception to the midterm rule." 

...As he says, November 2014 is a long way away. But it’s at least possible that the Republican brand will get worse, not better, over the course of the year, in which case an upset will indeed be in the cards.  

Republicans could lose their House majority because of the shutdown by Sam Wang

A breach of the debt ceiling and they definitely lose the House.

I believe the Republicans are going to suffer much more than anyone realizes. They're assaulting the constitutional order of the American government. They're causing economic chaos. People are pissed and will be pissed. Polls show 70 percent of respondents disapprove of their handling of the shutdown showdown. Yglesias hedges:

One Piece of Good News About the Debt Ceiling

And so what this means is that if Republicans force us to default on payments that come due on November 1, that doesn't put the U.S. government in the legal position of having defaulted on all its debts. In principle, you could have a minor disaster on the 1st followed by a hasty congressional recognition of the error of its ways and then the problem is addressed on November 2 before the whole world burns.

The thing is this could all end in a second of Boehner would violate the Hastert rule again and allow a vote.

Virginia's Republican candidate for governor looks like he'll lose bigtime on Tues. Nov. 5th.