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November 28, 2012

Latest Posts from Economist's View


Latest Posts from Economist's View


'Four Magic Tricks for Fiscal Conservatives'

Posted: 24 Oct 2012 12:42 AM PDT

Jeffrey Frankel:

Four Magic Tricks for Fiscal Conservatives, by Jeffrey Frankel, Commentary, NY Times: ...Aspiring fiscal conservatives ... might be interested in learning four tricks that American politicians commonly use when promising to cut taxes while simultaneously reducing budget deficits. ...
The first ... was coined by Reagan's budget director, David Stockman..., because the numbers in the 1981 budget plan did not add up. "We invented the 'magic asterisk,'" ... Ever since, the magic asterisk has become a familiar American device. ...
[Second,]... the conjurer ... resorts to the rosy scenario: since he cannot find enough tax loopholes to eliminate, he must claim that ... stronger economic growth will bring in the additional revenue. ..
Right on cue, it is time for the famous Laffer hypothesis – the proposition ... that reductions in tax rates ... so stimulate economic growth that total tax revenue ... goes up... One might think that the Romney campaign would not resurrect so discredited a trick. ...
The final trick, "starve the beast," typically comes later, if and when the president has enacted his tax cuts and discovers ... tax revenues have not grown... The audience is now told that losing tax revenue and widening the budget deficit was the plan all along. The performer explains that the deficit is all the fault of congress for not cutting spending and that ... "Congress can't spend money it doesn't have." This trick never works...
By the time the crowd realizes that it has been conned, the magician has already pulled off the greatest trick of all: yet another audience that came to see the deficit shrink leaves the theater with the deficit bigger than before.

Links for 10-24-2012

Posted: 24 Oct 2012 12:06 AM PDT

The 'Old News' on Inequality and Growth

Posted: 23 Oct 2012 12:46 PM PDT

A professor of sociology at Berkeley, Claude Fischer, says all the recent talk about inequality causing a reducing in growth is "old news":

A cost of inequality: growth, by Claude Fischer: A recent story in The New York Times, back in its business section, had important news about inequality: "Income Inequality May Take Toll on Growth." A couple of economists at the IMF reported research (here) showing that, across many countries, periods of greater income inequality tend to be followed by slow-downs in economic growth.  ...
This is, actually, old news. About twenty years ago the research literature already showed that inequality probably damped the economy (see pp. 126ff here). But this remains important to repeat – not just because reporting the baleful effects of inequality now has the imprimatur of the IMF, but also because so many people still resist the news; they insist instead on believing the opposite, that inequality stimulates the economy, to the benefit of everyone. And, of course, this insistence has political implications right now. ...
To the extent that facts matter in such a politicized debate, it is becoming increasingly clear that equality rather than inequality is a better policy for economic growth. ...

'The Health Mandate Romney Still Supports'

Posted: 23 Oct 2012 10:01 AM PDT

Eliminate boredom at meetings blogging -- quick one -- Bruce Bartlett on Mitt Romney's (silly) claim that the individual mandate for health insurance is unnecessary because people can get the care they need at emergency rooms:

The Health Mandate Romney Still Supports, by Bruce Bartlett, Commentary, NY Times: Republicans ... are adamantly opposed to government paying for health care or a mandate requiring people to buy health insurance. At the same time, they recognize that they cannot say ... that if a dying person shows up at an emergency room without insurance, that person will be left to die in the street. Thus they support a little-known mandate requiring hospitals to treat the uninsured, the Emergency Medical Treatment and Active Labor Act.

Often referred to as Emtala, the bill ... was signed into law by Ronald Reagan... It was enacted because, previously, people had in fact been left to die in the street... Since then, Republicans have routinely cited Emtala as a key reason that the United States already has de facto national health insurance...

In fact, the Emergency Medical Treatment and Active Labor Act isn't even remotely a substitute for health insurance... It does not demand that all hospitals care for whoever walks in, only those who require urgent care to avoid serious injury or life-threatening consequences. Only hospitals that both participate in Medicare and have emergency rooms are covered by the law...

A new report ... found that hospitals continue to engage in a practice known as "patient dumping" – turning away uninsured patients from emergency rooms despite the law. One reason they are able to do so is because in 2003 the George W. Bush administration eased the rules regarding Emtala. ...

The ... mandate on hospitals ... is a very inadequate and inefficient substitute for health insurance – something Mr. Romney used to acknowledge – and every bit as much a violation of Republican principles, which oppose unfunded mandates, as the individual mandate that they abhor.

Inflation and Unemployment

Posted: 23 Oct 2012 07:47 AM PDT

I have a bunch of meetings this morning -- you know how those go. That will give me a chance to think about these graphs:

This is a graph of PCE core year-over-year inflation versus unemployment since 2007 (the scatterplot with headline rather than core PCE is a noisier version of this, but the basic pattern remains):

Inflation-Unemp-since-2007

The same graph since 2008 eliminates many of the observations in the upper left part of the graph:

Inflation-Unemp-since-2008

And, since 2009:

Inflation-Unemp-since-2009

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