1930s phantasms from the right: how to make up stories with numbers

Economists Harold Cole and Lee Ohanian have a piece in the Wall Street Journal that deserves a prize for the devious use of statistics. They want to argue that fiscal stimulus is bad, and the New Deal only made the Depression worse. This is a familiar argument on the right—and I even heard it once from a Marxist economist—but it’s just not true. Here’s the prize-eligible statement: But boosting aggregate demand did not end the Great Depression. After the initial stock market crash of 1929 and subsequent economic plunge, a recovery began… Read More

Was there a housing boom? Yes.

Matt Yglesias, striking that contrarian tone beloved of bloggers (something you’d never find here, of course!), declares that there was no housing boom. Or, more precisely, though there was a boom in house prices, there was no boom in construction. To make this point, Yglesias uses one on those ubiquitous St. Louis Fed graphs, this one of the history of housing starts since 1970. Sure enough, it sorta supports his point. But this is only a very partial view. Here’s a fuller one. First of all, the boom wasn’t just about new houses—there… Read More

Obama’s “progressive base”

I just read this in a magazine: “Obama will also need a push from the progressive base that elected him in 2008….” Wow. Sad. Give it up, guys. He’s just not that into you.

Quoted by the John Birch Society!

Yesterday, Noam Chomsky. Today, the John Birch Society! My post about the SF Fed study on how less than 3% of U.S. consumer spending is on Chinese-made products got picked up by the JBS’s The New American: Everything’s Made in China? Not Quite. Who knew they still existed? Actually, I did, but it’s kind of easy to forget sometimes.

Bernanke the steamroller

Comment on today’s Federal Reserve policy decision today, which among other things, included the extremely unusual statement that they’re likely to leave interest rates close to 0 through mid-2013, from Ricardo Perli of ISI, a very mainstream Wall Street research operation: For the first time in a long time, there were three dissents – Fisher (Dallas), Kocherlakota (Minneapolis), and Plosser (Philadelphia).  Up to now, FOMC chairmen strived to avoid more than two dissents.  The fact that this long-standing practice was disregarded means that Bernanke is becoming more determined to push through what in… Read More

Riots and stock values

An interesting comment from Jim Reid of Deutsche Bank in the wake of swooning stock markets and riots in London: Although not linked to the sell-off we can’t help thinking that we live in socially volatile times generally due to economic hardship. This is something that may eventually have ramifications for Europe’s future in the years ahead. If the person on the street and voters get fed up of the Euro straight [sic] jacket then days like yesterday in financial markets could look mild. Yup. There’s no doubt that the strength in… Read More

Not enough cows at the Treasury

A reminder of the great days of the mortgage bubble, from the same folks who brought you this afternoon’s U.S. Treasury downgrade, Standard & Poor’s: Official #1: Btw that deal is ridiculous. Official #2: I know right…model def does not capture half the risk. Official #1: We should not be rating it. Official #2: We rate every deal. It could be structured by cows and we would rate it. Of course, that’s because the dealmakers paid S&P for the ratings. Not so the U.S. Treasury—it gets S&P’s judgment for free.

Wild budget math

In 2000, we spent 3.7% of GDP on the military. The Pentagon didn’t have to hold bake sales. We’re now spending 5.4%. Merely going back to 2000 would save 1.7% of GDP, or $255 billion. If over the next decade we spent 3.7% of GDP instead of 5.4%, we’d save $3.6 trillion. That’s close to what many of the deficit hawks are aiming for. Let the Bush tax cuts expire and bump up the top rate a few points and everyone could have free child care and free college tuition! Of course to… Read More

Varieties of exhaustion

Having become the de facto leader of the Republican party, at least when it comes to fiscal policy, Obama is now turning—again (didn’t he do this before? I recall some nonsense about a “hard pivot”)—to job creation. And he’s going to do what needs to be done: take a bus tour of the Midwest and do a few photo ops at factories. You might think that with a stalling economy and a high unemployment rate that could start drifting higher any month now, that he might want to try something more aggressive… Read More

Austerity = moral renovation

Writing in today’s New York Times, Jennifer Steinhauer explains the politics of the debt melodrama: the parties are “jousting over the moral high ground on imposing austerity, with seemingly none of the political or practical motivations that have historically driven legislation.” Leaving aside the fact that half of one party (the Dems) have happily embraced the premises of the other—and also leaving aside the fact that the “high ground,” moral or otherwise, hasn’t much in evidence during this idiotic fight—Steinhauer is inadvertently onto something. Over the centuries, the period after the bursting of… Read More

What? Me benefit?

I just learned, via Kate Harding on Twitter (who got it from Boing Boing), that about half of beneficiaries of federal benefit programs don’t realize they’ve enjoyed benefits. See table 3, here. Exact numbers: 44% of Social Security beneficiaries say they “have not used a government social program.” Ditto 43% of those who’ve gotten unemployment benefits and Pell Grants, 40% of those on Medicare, and 25% of those on Food Stamps. The numbers are even bigger for what the author of the paper, Suzanne Mettler, calls the “submerged state”—benefits delivered via the tax code. So… Read More

The Economist, a “newspaper,” weighs in

Although for some reason I still subscribe to the thing, I’ve mostly stopped reading The Economist. If you read a good daily newspaper or three—I know, so old-fashioned—who needs all that attitude? I was reminded of why I don’t read the thing by reading a post from one “W.W.,” responding to the great Yglesias-Henwood debate, as excellently amended by Henry Farrell. It includes this remarkable observation: [F]rom my point of view the problem with jobs programmes, as compared to textbook monetary policy, is not that they increase the power of labour relative… Read More

McKinsey was mostly right (cont.)

When McKinsey released its survey showing that many employers were likely to drop coverage rather than comply with the mandates of Obamacare, there was a round of criticism from administration apologists saying the consultancy had gotten it all wrong. Even this august blog was hammered for credulously circulating corporate propaganda, or something like that, by reporting the study (Bye-bye employer health insurance) and declaring its findings “more right than wrong.” Paul Krugman, who is often critical of the Obama administration, nonetheless got into the act, criticizing McKinsey using some second-hand sources— thereby making it clear… Read More

Paulie cribs from me again

Krugman discovers rentier interests—finally. Only my version is better. Me, in Wall Street, 1996: [B]ehind the abstraction known as “the markets” lurks a set of institutions designed to maximize the wealth and power of the most privileged group of people in the world, the creditor–rentier class of the First World and their junior partners in the Third. Paul Krugman, today: I was originally going to end this post by saying something about stupidity, but that’s not right: the people at the BIS aren’t stupid. What’s going on here is something different and worse: we’re… Read More

Cantor short Treasuries

The Wall Street Journal reported the other day (here it is, but it’s behind a paywall) that as of his last disclosure form, House Republican leader Eric Cantor owned shares in a mutual fund that is short long-dated U.S. Treasury bonds. He is, in other words, betting that interest rates will rise, and hoping to make money off the fall in prices that would cause. (For my ancient primer on why bond prices fall when interest rates rise, see here.)   Cantor is in a position to help the U.S. default on its… Read More