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February 4, 2013

Latest Posts from Economist's View


Latest Posts from Economist's View


Posted: 21 Jan 2013 12:33 AM PST
Progressives should cheer up:
The Big Deal, by Paul Krugman, Commentary, NY Times: On the day President Obama signed the Affordable Care Act into law, an exuberant Vice President Biden famously pronounced the reform a "big something deal" — except that he didn't use the word "something." And he was right..., if progressives look at where we are as the second term begins, they'll find grounds for a lot of (qualified) satisfaction.
Consider, in particular, three areas: health care, inequality and financial reform.
Health reform is, as Mr. Biden suggested, the centerpiece of the Big Deal. Progressives have been trying to get some form of universal health insurance since the days of Harry Truman; they've finally succeeded. …
What about inequality? ... Like F.D.R., Mr. Obama took office in a nation marked by huge disparities in income and wealth. But where the New Deal had a revolutionary impact, empowering workers and creating a middle-class society that lasted for 40 years, the Big Deal has been limited to equalizing policies at the margin.
That said,... through new taxes ... 1-percenters will see their after-tax income fall around 6 percent... This will reverse only a fraction of the huge upward redistribution that has taken place since 1980, but it's not trivial.
Finally, there's financial reform. The Dodd-Frank reform bill is ... not the kind of dramatic regime change one might have hoped for… Still, if plutocratic rage is any indication, the reform isn't as toothless as all that. …
All in all, then, the Big Deal has been, well, a pretty big deal. But will its achievements last? ... I ... think so. For one thing, the Big Deal's main policy initiatives are already law. ... And ... the Big Deal agenda is, in fact, fairly popular — and will become more popular once Obamacare goes into effect...
Finally, progressives have the demographic and cultural wind at their backs. Right-wingers flourished for decades by exploiting racial and social divisions — but that strategy has now turned against them...
Now, none of what I've just said should be taken as grounds for progressive complacency. The plutocrats may have lost a round, but their wealth and the influence it gives them in a money-driven political system remain. Meanwhile, the deficit scolds (largely financed by those same plutocrats) are still trying to bully Mr. Obama into slashing social programs. ...
Still, maybe progressives — an ever-worried group — might want to take a brief break from anxiety and savor their real, if limited, victories.
Posted: 21 Jan 2013 12:24 AM PST
Tim Duy:
Is There a Big Inflation Mystery in Greece?, by Tim Duy: Tyler Cowen confuses me:
The rates of price inflation in Greece have been running in the range of 0.8% to 2%...It's funny how many people pretend to understand what is going on here. If Greece were seeing a stronger bout of price deflation, the situation would be much clearer.
This seems to me to be a case of trying to find a problem where none exists. Greece consumer prices excluding energy:
Greece1
What part of the deflation is not clear? Seems like any inflation is being driven by energy costs:
Greece2
So what going on in the energy sector? Stories like this:
Greeks cutting back on household expenses are turning from oil to wood to heat their homes, but in turn are filling the night air with potentially hazardous pollutants, health care officials have warned.
The coalition government, under pressure from the EU-IMF-ECB Troika to impose more austerity measures, has pushed the price of heating oil to about 1.50 euros per litre by raising the tax on heating oil by 40 percent. Besides being a revenue-raiser, the government said the tax was meant to deter people from putting the oil in their cars instead of more expensive diesel.
And:
Greece raised electricity prices for households by up to 15 percent this year to help state-controlled power company PPC cover costs for transmission rights, the government said on Sunday...
...They come after a 9.2 percent average increase in prices last year.
PPC is the dominant player in the Greek energy market, and the country's EU and IMF lenders are pressing the government to make room for private companies. The company's tariffs are regulated by the state.
The Troika is remaking the energy sector, with the consequence of rising prices in a way that looks like a sectoral supply shock that is very obviously distinct from the demand side disturbance. What exactly is the big mystery here?
Posted: 21 Jan 2013 12:06 AM PST
Posted: 20 Jan 2013 11:21 AM PST
Robert Shiller says Obama needs a new metaphor expressing his vision and policies for the economy. He doesn't like the 2008 slogan "Change we can believe in," or the 2012 slogan "Forward." Same for "Hope" or "Yes we can!":
Obama Needs a New Deal, by Robert Shiller: ...Obama's slogans are examples of "dead metaphors": They are not part of an overall conceptual scheme. By contrast, in the 1930s, President Franklin Roosevelt used a metaphor that remains very much alive today. The idea of a "new deal"... Apparently, Roosevelt, or his speechwriters, borrowed it from A New Deal, a book by Stuart Chase that was published in 1932 and adapted the same year into a cover story for the New Republic. ...
Formulating a good metaphor for Obama's second term ... might embody the idea of an "inclusive economy."... Opinion polls show that, above all, what Americans want are jobs— the beginning of inclusion.
The parallel to Chase's book today is the 2012 bestseller Why Nations Fail by ... Daron Acemoglu and ... James Robinson. Acemoglu and Robinson argue that in the broad sweep of history, political orders that include everyone in the economic process are more likely to succeed in the long term. The time seems ripe for that idea, and it fits with the triumph of inclusiveness symbolized by Obama himself. But another step in metaphor-building is needed to encapsulate the idea of economic inclusion.
The biggest successes of Obama's first term concerned economic inclusion. The Affordable Care Act ("Obamacare") is providing more people with access to health care ... than ever before... The Dodd-Frank financial reforms created the Consumer Financial Protection Bureau... And he signed the JOBS Act,... which aims to create crowdfunding Web sites that allow small investors to participate in start-up ventures. ...
The right metaphor would spin some of these ideas, or others like them, into a vision for America's future that, like the New Deal, would gain coherence as it is transformed into reality. On January 29, Obama will give the ... State of the Union address... He should be thinking about how to express—vividly and compellingly—the principles that have guided his choices so far, and that set a path for America's future.
This is a pretty good window into Shiller's thinking. He talks about the ACA, Dodd-Frank, and crowdfunding for small investors -- what else does he mean by inclusion?:
We have not reached the pinnacle of economic inclusion. There are hundreds of other possibilities, including improved investor education and financial advice, more flexible mortgages, better kinds of securitization, more insurance for a broader array of life's risks, and better management of career risks. Much more progress toward comprehensive public futures and derivatives markets would help, as would policies to encourage the emerging world to participate more in the US economy.
Pretty heavily weighted toward financial markets, and not exactly what I think of as "inclusion." Where are the steps, for example, to increase opportunity, a necessary condition for broader inclusion? As he says, people want decent jobs. How does all this talk about inclusion in financial markets, investor education and the like, help with that? (Then again, maybe all of this concern with financial markets does, in fact, expose the "principles that have guided [Obama's] choices so far.")
Posted: 20 Jan 2013 10:17 AM PST
Paul Krugman comments on the Joe Stiglitz' claim that inequality is stifling the recovery:
Inequality and Recovery, by Paul Krugman: Joe Stiglitz has an Opinionator piece arguing that inequality is a big factor in our slow recovery. Joe is an insanely great economist, so everything he says should be taken seriously. And given my political views and general concerns about inequality, I'd like to agree.
But -- you knew there was a "but" coming -- I've thought about these issues a lot, and haven't been able to persuade myself that this particular morality tale is right. ...
I wish I could sign on to this thesis, and I'd be politically very comfortable if I could. But I can't see how this works.

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