Obamanomics: A Counterhistory by David Leonhardt

The Problem is a Collapsed Housing Bubble, Not a Financial Crisis #4306 by Dean Baker

However, contrary to what is widely asserted, for example by David Leonhardt in hiscolumn today, consumption remains high, not low. The saving rate averaged more than 8.0 percent of disposable income in the years prior to the rise of the stock bubble in the 90s. Currently, it is between 4 and 5 percent of disposable income. If anything, we should be asking why consumption is so high, not why it is low. 

It would be to absurd to expect bubble levels of consumption in the absence of the bubble. However this is what proponents of the financial crisis theory seem to be arguing. In short, the collapse of the bubble led to a gap of more than $1 trillion in lost demand due to the plunge in construction and the falloff in consumption. What if any part of this requires a story about the financial crisis?

This is a bit tricky for me. One way to think of the issue is to imagine an alternate timeline where there had not been a housing bubble.

Could there have been a bubble without the shenanigans in the financial industry?

NGDP (or short run versus long run)

The Short Run Is Short by Eli Duardo

The bottleneck by Ryan Avent

Oh NGDP, is there anything you can't do? by Angus

NGDP in the Long Run and Economic Plasticity by Karl Smith

The NGDP Dilemma Is a Good Dilemma by Yglesias

Economy, Heal Thyself by David Glasner

PARTISAN ASYMMETRY AND AMERICAN GOVERNANCE: SOMEHOW I DON'T THINK WE ARE IN WALES ANYMORE, DANIEL... WEBLOGGING by DeLong

What did Clinton do? Welfare reform? NAFTA? Financial deregulation? Greenspan? 

Bush gave us massive tax cuts, Bernanke, John Roberts.

Obama did the stimulus, ARRA, decent health care reform, and the Consumer Financial Protection Bureau.

Tim Cook Apologizes for Apple's Maps

A Political Football in the Classroom by A.O. Scott (review of "Won't Back Down")

YES, JIM MEDOFF MOVED THE NEEDLE by DeLong

Andy Harless: [T]he Medoff-Abraham paper… said was that there was not nearly as much “stag” in the stagflation as we thought. The labor market, it suggested, had been booming during much of the 1970’s despite the appearance of high unemployment. The implication was that the unemployment of the 1970’s was largely “structural”… once you realized that, the accompanying inflation shouldn’t surprise you.

Charles Lane Is Unhappy That the Fed Is Taking Steps to Create Jobs by Dean Baker

Work Sharing: The Hiddden Secret of Germany's Economic Success by Dean Baker

EconoTrolls: An Illustrated Bestiary by Noah Smith

THE KOCHERLAKOTA SHIFT AT THE FED IS A BIG DEAL... by DeLong

He reposts a tweet from Mike Konczal:

Last August Kocherlakota said that NAIRU was 8.7%, using "uncertainty" and DMP. Still proud of my feral counter-post:

 http://rortybomb.wordpress.com/2011/08/11/the-fed-dissenters-or-examining-narayana-kocherlakotas-gut/

Konczal also tweeted:

WTF !!! Evans Rule endorsement rt @Noahpinion Kocherlakota flips from the Hard-Money Axis to the Pro-Easing Alliance!!

Bullard Defends the Indefensible by David Glasner

(via Thoma)

A New Consensus by Ryan Avent

Defections

Narayana Kocherlakota Defects to Team Doves by Yglesias

Tim Pawlenty leaves his position as a Romney campaign co-chair to be the banks' head lobbyist.

The Enterprise's Two Greatest Captains Discuss the Problem of Utility Monopolies by Yglesias

1. John Roberts upholding Obamacare
2. Bernanke demonstrating some "Rooseveltian resolve" and adopting a Woodford/Krugman/Evans monetary policy approach (while the Republican Party goes all in on hard money-liquidationism)
3. Republicans nominating a Mormon vulture capitalist who enacted Obamacare and who dismisses 47 percent of Americans as welfare state dead-enders

and 2B. courtesy of DeLong:

WELL THIS IS A HUGE SWITCH!: FED HAWK MOLTS WEBLOGGING

When I consider what Kocherlakota was saying last spring to people…

Kocherlakota today embraced a proposal by Chicago Fed President Charles Evans to calibrate monetary policy based on specific economic goals. Evans advocates holding to near-zero rates until the jobless rate falls below 7 percent or inflation reaches 3 percent. 

THE DISAPPEARED: How the fatwa changed a writer’s life. BY SALMAN RUSHDIE

Charlie Rose interviews:

Rushdie

Martin Amis

Perspectives on Current Economic Issues by Charles Evans

(via Thoma)

The Age of Niallism (emphasis added):

...The damage from the Great Recession was substantial; and to date, the recovery has been disappointing. The real value of goods and services produced in the U.S. today is probably more than 5 percent below what economists call potential — that is, the economy’s ability to produce goods and services without generating inflationary pressures. The unemployment rate has been stuck at around 8 percent for nearly a year — well above the 5 percent to 6 percent level we would see if all of our resources were fully engaged. In the absence of further monetary stimulus or fiscal repair, the outlook would be for more of the same: moderate growth that is not strong enough to generate substantial improvement in the labor market; an unemployment rate that is likely to remain above its long-run level for a long time to come; and an economy that would be vulnerable to shocks at home and abroad.

Now, I am an optimist. I think we can do better than this gloomy outlook. That is why action is important. A great deal of state-of-the-art analysis — done both inside and outside of the Fed — indicates that the severe downturn in 2008–09 was mainly the result of a large drop in aggregate demand which left the economy operating below its potential. Research also shows that better and more accommodative policies have the power to reverse these setbacks and raise employment, output and incomes.[2] In other words, more accommodative policy can deliver a stronger economy and the resiliency we are seeking. Furthermore, appropriate policy can deliver these better outcomes without generating inflation that is significantly higher than the Fed’s long-run goal of 2 percent.

There are many who believe otherwise. In their view, our current low output and high unemployment are the hallmarks of an economy that has lost its competitiveness — an economy that experienced permanent disruptions in its infrastructure, the skills base of its work force and its technological capability. In such a dismal view of the economy, monetary policy is powerless and cannot generate a stronger, more robust expansion. Any attempt to increase aggregate demand through more accommodative monetary policy would simply lead to higher inflation rather than better resource allocation.

I see little evidence to support such a pessimistic view of the world. And I refuse to be so nihilistic in the absence of strong evidence of permanent disruptions. It is very hard to believe that millions of people who were working productively just a few years ago have suddenly become unemployable. And while many of the pessimists have been predicting higher inflation for several years, it hasn’t materialized. Indeed, core inflation has been under 2 percent since the end of 2008; and except for some near-term transitory movements in food and energy prices, most forecasters do not see any major change in inflation over the next few years.

Rahmbo caves

Why Wait a Year For It To Show Up in the New York Times? by Doug Henwood

Chicago Teachers Largely Prevail In Strike—Now How Will The City Pay? by Ygelsias

We should do international comparisons and look at the success stories of other countries as we do with health care systems and monetary/fiscal policy or demand management.

Catherine Rampell and Doug Henwood (above) had good pieces on this subject. Countries that perform well like Finland have strong unions and higher pay.

We Voted for Obama and Got Rahmney

Rahm is suing to end the Chicago teachers’ strike. Does he have a case? by Dylan Matthews

Rahm’s case, then, is anything but a slam dunk. And even if he wins in court, that won’t change the fact that a huge majority of Chicago public school teachers voted to strike, and presumably won’t stop making trouble for him after they return to work.

(via Henwood)

As Chicago Strike Goes On, the Mayor Digs In by Monica Davey

Emanuel pushed legislation through the Illinois legislature that hiked the percentage of votes teachers in the Chicago district need to call a strike to 75 percent. And the CTU got 90 percent to call for a work stoppage. Why would any Chicago unions back Ramney?

A Future with Swords not IPhones by Alessandra Stanley

Along with George Will, Robert Samuelson is a founding member of my Rogues Gallery.

Robert Samuelson Is Tired of Stimulus by Dean Baker

Commenters at various blogs - Dan Kervick, etc. - have been echoing conservative Samuelson about monetary policy for years now. Do they have some relatively prominent blogger who shares their views or no? Naked Capitalism?

Bernanke has said unconventional monetary policy has helped create (or save?) 2 million jobs. That's not nothing. It's better than tax cuts for the rich. Where is Samuelson's evidence that this is wrong?

Recently Bernanke has made a qualitative change in policy in response to the weakness of the labor market. We'll see if it works. I'd like to think he changed his mind in part due to the tireless efforts of the community of bloggers and economists - like Krugman and Mr. Baker! - who discuss the issues day in and day out. No thanks to the naysayers like Robert Samuelson or various commenters who believe fiscal stimulus is somehow going to arrive one day flying on the back of a unicorn all rainbows and sunshine.

I'm tired of Samuelson. We should place David Brooks, George Will and Samuelson in a rocket ship and launch them into space. 

Romney Will Solve the Crisis with the Exact Same GOP Plan of 2008, 2006, 2004... by Mike Konczal

Konczal gets a nice shout-out in today's Krugman column:

Hating on Ben Bernanke 

Professor Bernanke Reemerges

When the Fed Chair is an Academic by Kash Mansori

The big economic news of the week was, in fact, big economic news: the Fed's announcement of significant changes from past practice in the the quantity of its next round of large scale asset purchases ("unlimited"), and in the timing of any future reversal of this expansionary policy ("a considerable time after the economic recovery strengthens").

I view this as a pretty fundamental shift in how the Fed hopes to affect the economy.  Rather than trying to push economic activity one way or the other through its management of interest rates (which can alter economic activity through its portfolio-rebalancing and wealth effects, for example), the Fed is now quite explicitly trying to affect economic activity by altering interest rate and inflation expectations.  As Krugman has put it, the crux of the matter here is that this is pretty close to a "credible promise to be irresponsible".

(via Thoma)

Can the Chicago Teachers’ Strike Fix Democratic Education Reform? by Richard D.Kahlenberg

If Labor Dies, What's Next? by Harold Meyerson