vast majority Sunday

White House Says Healthcare.Gov Finally Working for Most People by Jonathan Cohn

The White House says it met its Obamacare goal. There’s still more work ahead. by Sarah Kliff


Inflationistas at Bayes by Krugman

Minimum Wages, Bargaining Power, Poverty, and Work by Jared Bernstein

ACA

The corporate media misinforms. People with critical thinking skills can deduce the facts see through the BS.

Jeff Bezos' Newspaper Works With Republicans to Create Scandal Over Obamacare by Dean Baker

There’s only one way to win the war over Obamacare by Greg Sargent

why liberals blocked Summers

Summers lost because liberals don’t trust Obama on financial reform by Ezra Klein

Summers fell because at least five Democrats on the Senate Banking Committee doubted his bona fides as a bank regulator. But even that doesn’t get at the whole truth. Summers really fell because those Senate Democrats — and many other liberals — don’t trust the Obama administration’s entire approach to regulating Wall Street. For all the talk of Summers’s outsized personality and polarizing past, he really lost because he was a stand-in for Obama.

department of huh???? sucking up to the Clinton administration veterans

Careerism

AMERICAN CONSERVATISM’S CRISIS OF IDEAS: PROJECT SYNDICATE MONARCHY, PATRIARCHY, ORTHODOXY WEBLOGGING by DeLong

The big difference between the Malthusian conservative critics of social insurance in the early nineteenth century and the Chicago critics of the 1970’s is that the Chicago critics had a point: Providing public support to the “worthy” poor, and then removing it when they began to stand on their own feet, poisoned incentives and was unlikely to lead to good outcomes. 

And so, from 1970 to 2000, a broad coalition of conservatives (who wanted to see the government stop encouraging immorality), centrists (who wanted government money spent effectively), and leftists (who wanted poverty alleviated) removed the “notches” from the social-insurance system. Presidents Jimmy Carter, Ronald Reagan, George H. W. Bush, Bill Clinton, and even George W. Bush and their supporters created the current system, in which tax rates and eligibility thresholds are not punitive disincentives to enterprise.

Clinton's welfare reform was a dismal failure. As was his deregulatory ideology which allowed an unregulated shadow banking system to arise. Doesn't matter how much incentive there is to work if there's no work to be had.

Ideological Movements Need Accurate Reporting by Yglesias

And I do think there tends to be an asymmetry here. Last night I read a great piece by James Ridgeway and Jean Casella about how prison guard unions often stand in the way of criminal justice reform and about how since the guards are often part of larger umbrella unions such as AFSME or AFGE they can punch above their weight. And I didn't read it in a libertarian magazine where it would be a natural ideological fit; I read it in Mother Jones, whose readers' instincts are going to be cross-pressured.

It's the Third Wayers who need to be cross-pressured. Welfare reform failed. Robert Rubin was a failure. Renominating Greenspan was an epic failure by Clinton. I did like how Clinton blurbed Alan Blinder's new book which is critical of him obliquely. I like how Clinton worked to help re-elect Obama. Politicians can't hold grudges. And finally at the time I failed to realize how hard it was for Clinton to work with a Republican Congress that wasn't inclined to compromise. My bad.

Economists Discover that Fed Bond Purchases Affect the Budget by Dean Baker

People Driving West Are Getting Closer to Falling Into the Pacific Ocean by Dean Baker

Chronicles of a Reverse Helicopter Drop by Carola Binder

Will the Fed end up losing a boatload of taxpayer money on its QE programs? Would it matter? by Neil Irwin

So, suddenly, instead of being the most profitable bank in the land, the Fed could find itself with much less income to return to the Treasury, and maybe with no income at all.

Last year it sent $89 billion to the Treasury (see below). As Alan Blinder pointed out in his new book "After the Music Stopped" that's more profitable than the biggest oil and gas companies.

Fed Officials Debate Bank’s Losses Once Economy Mends by Binyamin Appelbaum

By law, the Fed sends most of its profits to the Treasury, and in recent years those profits have soared as the Fed has collected interest on its investments. Last year, the central bank contributed $89 billion to the public coffers — essentially refunding a significant portion of the federal government’s annual borrowing costs.

Also this is the first time I've seen the Fed confirm it will raise interest rates on excess reserves:

When the economy grows stronger, the Fed plans to sell some of its vast holdings of Treasury and mortgage-backed securities. The Fed also plans to pay banks to leave some money on deposit with it to limit the pace of new lending.

Predicting a Crisis, Repeatedly by Binyamin Appelbaum

The problem with every attempt to look for debt limit thresholds has a name, and that name is Japan, a country that is able to borrow at one of the lowest average interest rates of any developed country despite a debt burden that is the largest, relative to its economic output, of any developed country. Nor is this an ephemeral anomaly. It has been true for years. 

Japan’s debts total about 230 percent of its annual output, and so far, investors don’t mind. 

In part, the authors address this in the traditional manner, by lopping off 5 percent of their 20-nation sample and simply declaring, “There is something very special about Japan.” 

This is quite possibly true. But because there are not very many developed countries — in this study Japan is just one of 20 — it also might cause a reader to wonder about the universality of any rules derived from the remaining 19 cases, particularly since half of the remaining sample share a currency and an economic union. They are not exactly independent variables. 

Furthermore, it’s quite possible that the United States also is something of a special case. 

Which brings us to the more important acknowledgment, buried deep in the paper: 80 percent is not a magic number. It’s not even a particularly good summary of past experience. Rather, it’s an average of widely divergent experiences. And it doesn’t necessarily tell us much more than common sense: countries with more debt run greater risks of losing the confidence of investors, and have less flexibility to deal with new economic problems. 

“We don’t know where the tipping point is,” Jerome H. Powell, a Federal Reserve governor, said in a response to the paper. But, he continued, “Wherever it is, we’re getting closer to it.”

Powell is a Republican governor who Obama appointed. What a joke. Clinton appointed Greenspan who was a disaster. He was the one who most responsible for the housing bubble/financial crisis.

As a commenter at Beat the Press writes:

Don't forget Greenspan's "Deflation is coming; give away the surplus!" scare that enabled Bush to cut taxes for the rich.

If that is Fed independence, I'll take a pass.

Democrats need to become much, much, much better in their appointments to the FOMC.

No Respite for Liberals by Pamela S. Karlan

How Liberals Win by Bill Scher

Health care was not an anomaly for Mr. Obama. His original stimulus package never faced well-financed conservative opposition in part because the United States Chamber of Commerce backed the business tax cuts in the package. We got a Consumer Financial Protection Bureau after Mr. Obama put Wall Street at ease by resisting proposals to cap the size of banks. New standards lifting average fuel-efficiency goals were set once the White House accepted the automakers’ demand for a review in 2021 and flexibility regarding light trucks. The food safety bill empowered the Food and Drug Administration to recall tainted items but won industry support by dropping a ban on bisphenol A, or BPA, a chemical used in food and beverage containers.

The necessity of forging coalitions with corporations is understandably difficult for progressives to accept. Every time it happens, corporations seem to quickly go back to their usual tricks. They lobby to weaken enforcement. They litigate to have rules overturned. They abandon politicians who risked compromise for them. Corporations are exasperating, irritating and untrustworthy partners.

But most of the time politics is exasperating and irritating, not euphoric and cathartic. As Roosevelt himself told a group of dissatisfied youth activists in 1940, “if you ever sit here you will learn that you cannot, just by shouting from the housetops, get what you want all the time.”

Obamacare or the PPACA was aimed at fixing two problems in the broken health care system: millions of uninsured and rising costs.

It helps more people get insurance and get the health care they need.

As Dean Baker writes:

The system put in place under the ACA would put the government in a position where it could squeeze money out of providers. It could specify prices for services and procedures and tell providers take it or leave it. Given the enormous and rapidly growing size of the Medicare market, most would likely take it.

If prices keep rising a public option can still be added to help keep them down. If that works voters may finally decide to follow advanced European countries by using a single payer system which delivers the most bang for the buck.

There will still be people uninsured after 2014 when much of the ACA takes effect. Expanding the ACA to Medicare-for-all would be a major further reform that would cover the remaining uninsured and help contain price increases.

Mexico

Yglesias has been pushing the idea that Mexico is growing faster than Brazil. Is the implication that Clinton's NAFTA worked?

Dean Baker writes:

The Post's prohibition of honest discussion of Mexico's economy is apparently continuing. In a piece on Mexico's elections today, the Post told readers:

"But annual growth during Calderon’s six years has averaged a middling 2 percent."

This statement gives a whole new meaning to word "middling." If we turn to the IMF's data and look at per capita GDP growth in the years 2006-2011, we find that on average Mexico's per capital GDP shrank by 0.1 percent annually over this period. This is not middling; this performance places Mexico dead last among Latin American countries (several countries in the Caribbean did worse.)

For some reference points, per capita growth in Argentina averaged 5.8 percent, Bolivia 2.8 percent, Brazil 3.1 percent, Ecuador 2.6 percent, and Peru 5.6 percent. There is nothing middling about Mexico's economic performance over this period; it was bad. 

Peter Edelman has a new book on poverty out.  He famously resigned from the Clinton administration in protest of welfare reform. The New York Times recently had an in-depth piece about how he was in the right in light of the recent increase in poverty after the downturn. (Looking at the number he was right even before 2008.)

The Stock Bubble Created the Budget Surplus: Not Bill Clinton's Tax and Spending Policies by Dean Baker

Greg Mankiw hides the role of government in redistributing income upwards by Dean Baker

This is no doubt how Mitt Romney and other wealthy people would like the public to see the debate. However the reality is that the government has implemented a wide range of policies that have led to a massive upward redistribution of before tax income over the last three decades. These policies have affected every corner of the market economy.

I heard comedian Judah Friedlander talking on the radio about the entertainment industry and he made a very good point about those who succeed are usually good schmoozers. The context was he said that it's part of the reason why comedy films are bad these days in that people who rise to the top are often good schmoozers but not good film-makers, actors etc. He then said it's true in every industry and line of work and I agree. They are smart about schmoozing and work hard at schmoozing and then once installed have sort of an inefficent crony capitalism.

I watched Parks and Recreation but didn't watch the first run of 30 Rock because I had a crush on Tina Fey during her "Weekend Update" and Sarah Palin impersonation years and it's very, very weird and wrong to have a crush on a TV personality. So you shouldn't encourage it. Friedlaner is on 30 Rock and lately I've been watching the reruns which are addictive.

One of the tenets of "Kenyan Socialism" is that the U.S. is a schmoozocracy. The ruling elite would have you believe it's a meritocracy but it's not.

I See No Way to Read This from Greg Mankiw Other than as the Strongest Possible Endorsement of Obama and the Democrats by DeLong

The New Republic’s New Boss by Lizzie Widdicombe

Hughes appears to be a certified liberal, much to the relief of most of the magazine’s staff, alumni, and readers. Though he has been involved in some forms of activism—he ran the social media operation for the 2008 Obama campaign, and his significant other, Sean Eldridge, is the former political director of the same-sex marriage advocacy group Freedom To Marry—his comments on the direction of the magazine have been non-ideological, heavier on tech-world jargon than political talking points. On the phone from the airport, he spoke of “meeting thoughtful, intelligent people in the media space,” “integrating platforms,” and “mission-driven startups.” His reading includes both the Huffington Post and The Economist. “I wouldn’t say I’m a political junkie in the way that some people are,” he said. “I try to read about political issues of the day, but also cultural criticism, good books, and good music.” His past year’s reading included biographies of Katharine Graham and Henry Luce.

Department of Huh?!?!

Moron blogger at "Tiny Revolution" twatted in reference to Lizza's Obama piece that "Krugman wasn't illusioned or ever a real ally. And on any non-crazy ideological spectrum, he's actually not especially liberal."

Krugman calls his blog "Consience of a Liberal." And the moron blogger Jon Schwartz wrote a stupid post about Hitchens, bin Laden, and the Palestinians, basically stupid lefty rationalizations and "contextualization" for the terrorist attacks. His type just brings our side down and should be frowned upon even if they'll cry "hippy puncher!"

Atrios sort of echoes Schwartz which is why I don't like "ultras," and Firebaggers who believe Obama's health care reform was a sell out or that Obama just bailed out the banks.

Lizza writes:

He offered the President four illustrative stimulus plans: $550 billion, $665 billion, $810 billion, and $890 billion. Obama was never offered the option of a stimulus package commensurate with the size of the hole in the economy––known by economists as the “output gap”––which was estimated at two trillion dollars during 2009 and 2010. Summers advised the President that a larger stimulus could actually make things worse. “An excessive recovery package could spook markets or the public and be counterproductive,” he wrote, and added that none of his recommendations “returns the unemployment rate to its normal, pre-recession level. To accomplish a more significant reduction in the output gap would require stimulus of well over $1 trillion based on purely mechanical assumptions—which would likely not accomplish the goal because of the impact it would have on markets.”

Paul Krugman, a Times columnist and a Nobel Prize-winning economist who persistently supported a larger stimulus, told me that Summers’s assertion about market fears was a “bang my head on the table” argument. “He’s invoking the invisible bond vigilantes, basically saying that investors would be scared and drive up interest rates. That’s a major economic misjudgment.” Since the beginning of the crisis, the U.S. has borrowed more than five trillion dollars, and the interest rate on the ten-year Treasury bills is under two per cent. The markets that Summers warned Obama about have been calm.

Summers also presumed that the Administration could go back to Congress for more. "It is easier to add down the road to insufficient fiscal stimulus than to subtract from excessive fiscal stimulus," he wrote. Obama accepted the advice. This view—that Congress would serve as a partner to a popular new President trying to repair the economy—proved to be wrong.

At a meeting in Chicago on December 16th to discuss the memo, Obama did not push for a stimulus larger than what Summers recommended. Instead, he pressed his advisers to include an inspiring "moon shot" initiative, such as building a national "smart grid”—a high-voltage transmission system sometimes known as the “electricity superhighway,” which would make America’s power supply much more efficient and reliable. Obama, still thinking that he could be a director of change, was looking for something bold and iconic—his version of the Hoover Dam—but Romer and others finally had a “frank” conversation with him, explaining that big initiatives for the stimulus were not feasible. They would cost too much, and not do enough good in the short term. The most effective ideas were less sexy, such as sending hundreds of millions of dollars to the dozens of states that were struggling with budget crises of their own.

Lizza seems to be saying the facts showed that Krugman was right. These inside reportage tend to give a better view of Obama. He wanted a "moon shot" or to nationalize Citibank.

Obama should have done what the insouciant FDR when it came to going off the gold standard and blowing off his advisers who were horrified when he finally did it. Instead Obama listened to Summers, Orszag, and according to the memo to "Senior Federal Reserve" officials meaning probably Bernanke and Geithner. They warned that too big of a stimulus would "spook" the public.

In China they didn't worry about spooking the public, they just went ahead and did it.

Yglesias plugs Dean Baker's "Loser Liberalism"

Correcting the Correction of the Big Lie by Dean Baker

Barry Ritholz has a nice takedown of Mayor Bloomberg's claim that Congress forced the banks to make lots of money by selling bad mortgages. As Barry rightly points out, this is not a story that serious people can tell. It's like denying climate change or evolution.

However, there are two items worth correcting in Ritholz's account. First, the core problem facing the economy today is not the legacy of the financial crisis, it is the bursting of the housing bubble. While it was a lot of fun watching the banks fall like dominos in the fall of 2008, and seeing all the honchos who told us this could never happen staying up late on weekends trying to stem the crash, this is really secondary in the story of the economy's current problems.

Whatever the problems of the banking system, they are not holding down the economy. Creditworthy borrowers (by pre-bubble standards) can get mortgages at record low interest rates. The same is true for larger corporations who borrow directly on credit markets. Even few smaller businesses report access to credit as major problem.

Rather the economy's problem is that there is no source of demand to replace the consumption driven by housing bubble wealth that has now disappeared or the housing construction that resulted from hugely inflated bubble prices. We would be in pretty much the same situation today even if there had been no financial crisis. This can be seen by the example of other countries, most notably Spain, that had a much better regulated financial system. Like the United States, Spain had a huge housing bubble that burst, as a result it is still facing double digit unemployment even though it had no financial crisis.

The other item that needs correction is Ritholz's comment that Greenspan and the rest believe that leaving the market to run itself is the best way to manage the economy. In fact, Greenspan and other alleged free marketers have no interest whatsoever in the free market. They totally support explicit insurance, in the form of deposit insurance and implicit insurance in the form of "too big to fail" guarantees. The banks have taken advantage of the latter insurance in a big way in the last three years.
What we are really fighting over is not a free market, but rather whether the banks will have to pay for the insurance that they get from the government and also face restrictions on their actions as a result of this insurance. (The company that insures my house prohibits me from setting up a fireworks factory in the basement.)

It is understandable that banks, that want to get their government insurance for free, would like to pretend that they just want a free market, but people who don't share the banks' agenda should be not be fooled by this claim.

Quick Thoughts on the Obama Administration's Opposition to a Financial Speculation Tax by Baker


The End of Loser Liberalism available for free here.

Jared Bernstein has a blogpost about Baker's new book.

As Dean sees it, conservatives are not at all the free market advocates they claim to be.  You’ll be hard pressed to find Adam Smith’s invisible hand anywhere in the story he tells, but you’ll see conservatives’ thumbs on policy scales throughout the economy.

There’s the anti-inflation bias at the Fed, which puts more weight on price stability than on low unemployment, thus providing greater protection to the assets of the wealthy than to the livelihoods of working families.  There are the strong dollar and trade policies that put our manufacturing workers at a comparative disadvantage to our competitors.

There’s anti-union bias, the government bailout backstopping the biggest banks, government-provided patent monopolies, corporate liability protections, favorable tax rates for non-labor income, and housing policies that disperse the biggest benefits to the richest homeowners.

In every case, the wealthy have used their money, power, and clout to tweak the politics and the market in ways that make money float up.  Yet their rhetoric is all free markets, with lots of deep caterwauling against liberals and their socialist ways.

Dean’s argument is not, however, that liberals should embrace true free market ideology.  While he wants the market to work out the details around those issues that markets handle most efficiently—pricing commodities, for example—he has no beef with structuring market returns.  He just wants them structured on behalf of the broad middle-class on down to the poor.

E.J. Dionne on Elizabeth Warren and George Will

(via DeLong)

Pragmatic Politics

At the beginning of the movie Happy-Go-Lucky the protagonist and her friends are dancing at a club to Pulp's Common People.



If one is holding up the liberal-left-social-democratic side of the rope in the political tug of war, you support economic and legal policies that pragmatically support the common people. This is what I try to do, which means not being ideological about, say, government regulation or taxes or unions.

And when I read a cri de coeur by an AIG executive, like this, I want to play the world's tiniest violin about his hurt feelings and complaints about "the environment," i.e. constant bashing of AIG management.

On the foreign policy front, though, my views differ from the ones common on the left-liberal side. I saw Ridley Scott's Body of Lies and thought it was a pretty good movie although many who are sympathetic with the common people will see it as warmongering propaganda. The scene where Leonardo DiCaprio is arguing with his girlfriend's sister over Iraq is especially good, because the sister is a "common person" who's against American foreign policy in the Middle East and yet I agreed with the arguments of DiCaprio's character and could see where he's coming from.

Russell Crowe is good in the movie as a CIA officer in Langley, as is Mark Strong who plays a Jordanian spy chief. Strong was also great in Guy Ritchie's RocknRolla and will be in Ritchie's upcoming Sherlock Holmes movie which opens Christmas. (see Hitchens on Arthur Conan Doyle.)