Opposites Day II

Today is the real opposites day.  David Brooks and Bill Kristol ! said almost sensible things about the Romney 47% are moochers secret video (no links) and Ezra Klein ! made an erroneous claim of fact !

It has not been forgotten, because it didn't happen that way.  Some time ago I totally lost it for many long boring posts when Ed Kilgore made the same mistake.  Klein is much more unambiguously wrong, because he is precise and included the date 1996.

The amazing thing is that Klein himself provided the proof that his claim is incorrect.  He discussed the reasons 47% of families pay no Federal Income tax.  He noted the role of Republicans -- there are big jumps following the 1986 tax Bradley Kemp tax reform (so half Republican) which he inexplicably ascribes to Reagan (no big deal not my point) and of the 2001 Bush tax cuts.

But his graph shows that nothing much happened to the share paying no income taxes in 1996.

In fact the work encouraging tax breaks were expanded in 1993 by the Clinton tax increase for the rich plus 4.7% a gallon gas tax increase plus earned income tax credit (EITC) expansion.  The work encouraging tax break expansion passed with 0 Republican votes.

The 1996 welfare reform push did not include any work encouraging tax breaks (at least no significant ones).

In the post with the graph, Klein also cites Bush's 2003 tax cut even though there is no sign that it affected the fraction of families who pay income tax. His claim
"you see huge jumps after Ronald Reagan’s 1986 tax reform and George W. Bush’s 2001 and 2003 tax cuts." is incorrect because of the words "and 2003,"  It is just an incorrect statement about the graph which he posted.  

Much less importantly, Reagan had a very passive role in the 1986 tax reform -- when there was a draft proposal, he was not aware that it included corporate income tax increases.   The proposal was made and pushed by the bipartisan team of Bill Bradley and Jack Kemp.  Also oddly Klein doesn't mention the ARRA making work pay tax cuts which explain part of the recent spike.   I am used to the fact that most US adults don't remember that the ARRA included major tax cuts, but I would expect Klein to mention that.  Notice the pattern -- Klein is trying to argue that Republicans used to support work encouraging tax cuts.    He's right about Jack Kemp but wrong about Gingrich and casually identifies Reagan with the whole US government.

But the main points are the two errors of fact  about 1996 and 2003.
I think Ezra Klein should correct his incorrect tweet and the mistake in his blog post.  Everyone makes mistakes (even Ezra Klein) but it is important to correct errors of fact.

Mitt Romney Victim of Society

I have always assumed that Romney must be smart, because of the way in which he acquired great wealth.  Yes he was ruthless and dishonest (the real scandal is what is legal).  But there are lots of greedy ruthless dishonest people and the vast majority are no where near as good at it.

But he's campaigning like an idiot. 

Affirmative action sometimes puts some people in very uncomfortable situations -- admission to a ruthlessly competitive University based on the assumption that a student's potential exceeds academic performance so far (due to say come on being taught at school in Malay-Indonesian  for much of one's childhood) puts gigantic pressure on some people.  One reacted by acquiring work habits and self discipline I can't even dream of.  

Being sole shareholder chairman of the board of directors CEO and President of a company can put people in a too comfortable position -- surrounded by flatterers and able to settle all debates by authority.  I suspect that this can lead to an erosion of the ability to think critically.  Romney seems to think that he still has the power to settle debates just by saying they are settled.  If so he can't campaign or govern.  

How many CEOs have ever gone on to be successful at anything else ?  Unless you define being a CEO as success by definition (as we do) how many have been successful CEOs ?  The only standard of comparison is other CEOs -- if they are generally incompetent because of vanity and lazy brain syndrome how would we know.  Is there any evidence against the wildly speculative hypothesis that  the vast majority have lost their ability to think straight, because of years of flattery 

Extreme claim on QE III

QE III is not just a shift towards more use of the expectations channel.  Aside from being open ended it is also qualitatively different from QEII, that is the quality of the MBS to be bought is lower than the quality of the 7 year Treasury notes bought as QE II.  There has been no shift from confidence in portfolio balance to confidence in expectations.

Also there is no evidence of any change at all in expected future monetary policy.  This evidence should appear as soon as the news in announced.  Lower expected future federal funds rates should cause lower expected 5 year T-bill rates which should cause lower 5 year T-note rates by now.

From Wednesday close (before the announcement) until Friday close (latest data) the 5 year rate changed 0.00 % (in fact it increased by 0.oo2 % so I am being charitable to those who think QE III is working through the expectations channel -- but that really is a microscopic tiny miniscule insignificant change in the wrong direction).

Now I admit that my approachof focusing on changes over 48 hours and then declaring the matter settled is not the same as the approach of Michael Woodford, the leading advocate of the focus on the expectations channel.  In his huge paper, he analysed transaction by transaction data and only looked at the day of the announcement.  Stretching out the horizon to 48 whole hours is cheating (otherwise I would report a big big but statistically insignificant and economically totally utterly insignificant decline of 5 whole basis points). 

To claim that the question is still open, however, would require those who stress the importance of the expectations channel to argue that a statistical method is perfectly fine when it gives them results of the sign they like (although always of trivial magnitude) but invalid when it gives the answer they don't like.    

To be as rude as possible, if they don't admit they were wrong (and I was right about the potential on Wednesday for further future guidance) their reasoning is like the argument that defence spending creates jobs but ARRA spending doesn't.  

By Woodford's rules, the debate is over and he lost.

Rude comment on Heroic Krugman

Krugman is a hero and I am a cad.  He blogged after flying with a cold and I commented as follows


You are a total hero for blogging with a cold after flying (ugh flying with a cold what a nightmare).  Also you are one of very few commentators who even mentions that MBS are not the same thing as 7 year notes.

However, I vehemently passionately contest one word in this post -- "mainly.  There is no evidence that Bernanke agrees that QE works mainly as forward guidance.  If he thought it worked mainly through portfolio balance and a bit through forward guidance, then the right policy would be to use both.

I will now jump the gun.  We have new relevant evidence on the effectiveness of QEIII as forward guidance about future short term rates.  Medium term rates are expected average short term rates plus a risk premium.  If there is more certainty that short term rates will be very very low, both terms should decline.  The 5 year rate is now changed less han one basis point since the Wednesday close.

The point estimate of forward guidance from the announcement is zero, 0.00%.  Now it is easy to argue that bond traders pay a lot of attention to the Fed while home buyers don't, but it's harder to make the argument the other way around (as you must).  You can argue that event studies are silly, or you can praise Woodford's paper, but not both.

I think it is clear that the QEIII announcement had a dramatic effect on expectations of many things but not on expectations of future conventional monetary policy.

The Struggle at the heart of our Times

Our New York Times.  Caught by surprise, the New York Times committed some actual journalism lifting the rock and showing the Romney campaign in all its repulsive inglory.  This can not stand, so the story was rewritten allowing an anonymous source (Lanhee Chen) to delete his revealing statements in exchange for being named in the sanitized quote.  Also, actual reporter David Sanger was booted and replaced by reliable courtier Peter Baker.  The story was just too unimportant to allow Times access to be threatened by actual reporting.

I am not Sparticus.  I am not even Josh Marshall.  However, I here copy and paste the original story in full (totally unfair use) and tell the Times that if they sue Marshall they will have to sue me too (I boldly say that assuming they will never read it).

WASHINGTON — To Mitt Romney, it seemed like an opportunity to draw a stark contrast: Protests were erupting in Cairo and Benghazi, Libya, apparently over an anti-Islamic video, the White House was in a nasty spat with the Israelis, and administration officials in Cairo had put out a statement urging religious tolerance. From the perspective of the Republican’s campaign, the time was ripe to cast President Obama again as someone apologizing for America who abandoned longtime allies and failed to defend American interests.

So on Tuesday evening, Mr. Romney, according to his staff, signed off on a blunt attack on a statement issued early in the day — before the first protests had happened — by the American Embassy in Cairo. The Romney comment characterized the embassy statement as a weak White House response to violence at American diplomatic facilities in Egypt and Libya that ended up claiming the life of the ambassador to Libya and three others.

“It’s disgraceful that the Obama administration’s first response was not to condemn attacks on our diplomatic missions, but to sympathize with those who waged the attacks,” said the statement, issued about 10:30 p.m.

But by Wednesday morning, as the sequence of events and the scope of the tragedy in Benghazi became more clear, Mr. Romney’s initial statement and ensuing comments were coming under attack as clumsy at best. By later in the day, even some Republican allies were declining to follow his lead, and some acknowledged that he looked as if he was trying to score points in the middle of a crisis.

For a country looking to understand how Mr. Romney, a Republican candidate with no foreign policy experience, would respond to a major crisis, this was a first glimpse. And as an adviser to the campaign who worked in the George W. Bush administration said on Wednesday, Mr. Romney’s accusation that Mr. Obama had invited the attacks because he had weakened America looked like “he had forgotten the first rule in a crisis: don’t start talking before you understand what’s happening.”

The statement that seemed to backfire on Mr. Romney was a team effort, his aides said, written by a group of aides who focus on policy, another that focuses on political strategy and another on communications. Mr. Romney himself signed off on it, they said. In fact, the Cairo statement he was linking to the violence — issued by the embassy, where the ambassador, Anne Patterson, is a career Foreign Service officer who was a favorite of President Bush when she was ambassador to Pakistan — was issued around 12:30 p.m. on Tuesday in Cairo, before any attacks had happened.

It was an effort to pre-empt protests by disassociating the United States government from an anti-Muslim video that was beginning to be viewed on the Web by Egyptians. “We firmly reject the actions by those who abuse the universal right of free speech to hurt the religious beliefs of others,” the statement said, a relatively routine statement, one that embassies frequently issued during the Bush years.

The first protests in Cairo, which resulted in a few protesters’ scaling the walls of the embassy before they were tracked down by the Egyptian police, came about six hours later. Nothing had yet happened in Benghazi.

Mr. Romney and his team, though, saw what they believed was an opportunity to underscore a theme Mr. Romney had sounded often about his Democratic rival.

“We’ve had this consistent critique and narrative on Obama’s foreign policy, and we felt this was a situation that met our critique, that Obama really has been pretty weak in a number of ways on foreign policy, especially if you look at his dealings with the Arab Spring and its aftermath,” one of Mr. Romney’s senior advisers said on Wednesday. “I think the reality is that while there may be a difference of opinion regarding issues of timing, I think everyone stands behind the critique of the administration, which we believe has conducted its foreign policy in a feckless manner.”

Mr. Romney and his aides stood by the critique even though the administration later said the Cairo statement had not been cleared by the White House. In a meeting with reporters on Wednesday, Mr. Romney said the statement and the administration’s disavowal of it “reflects the mixed signals they’re sending to the world.”

Mr. Romney also said repeatedly that the Cairo Embassy had put out a statement “after their grounds had been breached” by protesters. Though the statement was issued before any protesters were inside, embassy personnel evidently did reiterate the statement on Twitter after the protests and then sought to erase the message.

“I think it’s a terrible course to — for America to stand in apology for our values, that instead when our grounds are being attacked and being breached, that the first response of the United States must be outrage at the breach of the sovereignty of our nation,” Mr. Romney said. “Apology for America’s values is never the right course.”

The news that the American ambassador to Libya had been killed, along with three other embassy officers, led many other Republicans to condemn the attacks, but Mr. Romney’s brief news conference — sandwiched between appearances by Secretary of State Hillary Rodham Clinton and Mr. Obama — was used instead to repeat the political critique.

Mr. Romney left many policy questions hanging. Would he have countermanded any effort to issue a news release to the Egyptian people that tried to forestall a protest before it gathered outside the embassy? If Mr. Obama’s policies had created an air of weakness in the Middle East that encouraged attacks, how could he explain the many attacks on American facilities in the region under Mr. Bush, or the far larger attack on American facilities in Lebanon — killing more than 240 people — under President Ronald Reagan?

While many top Republicans steered clear of criciticizing the Obama administration, Mr. Romney did have some allies, including Senator Jon Kyl of Arizona, the No. 2 Republican in the Senate.

“I don’t know if you’ve ever been involved in victims’ rights, but this is like a judge telling the woman that got raped, you asked for it because of the way you dressed,” Mr. Kyl said. “For a member of our State Department to put out a statement like that? It had to be cleared by somebody. They don’t just do that at the spur of the moment.”

Opposites day II

Omigod.  Steve Benen makes an arithmetic mistake.  Even more oppositely on point 12 of the chronicle of Mitt's mendacity XXXIII Mitt is right and Steve is wrong

12. Romney added, "Does the America we want borrow a trillion dollars from China? No."

This continues to be misleading. The implication here is that U.S. debt is financed by the Chinese, but this isn't true -- China only holds about 8% of the nation's debt. No one has borrowed a trillion dollars from China; no one intends to borrow a trillion dollars from China; no one has recommended borrowing a trillion dollars from China.

8% of the US Federal debt is uh hmmm around a trillion dollars (actually more).  This time Mitt rounded down.  His claim is accurate.  Of course Romney's tax cuts cure for the common cold and debt to China would make this number higher than it would otherwise be, but it is over a trillion already.

"in July 2012, $5.3 trillion or approximately 48% of the debt held by the public was owned by foreign investors, the largest of which were China and Japan at just over $1.1 trillion each.^[7]"

Piling on the Associated Press

I suspect that the associated press's "fact check" of Bill Clinton's speech will end up as famous as lying Ryans Lying speech (whih means both will soon be forgotten except by political junkies).  It seems to me to be the epitome of both sides have a point journalism.

Of course the most famous example (which will certainly be famous for a while) is the assertion that Bill Clinton's accurate quotation of a Republican is contradicted by the fact that Lewinsky blew him

CLINTON: "Their campaign pollster said, 'We're not going to let our campaign be dictated by fact checkers.' Now that is true. I couldn't have said it better myself — I just hope you remember that every time you see the ad."
THE FACTS: Clinton, who famously finger-wagged a denial on national television about his sexual relationship with intern Monica Lewinsky and was subsequently impeached in the House on a perjury charge, has had his own uncomfortable moments over telling the truth.

I don't think that can be matched.  "your another" isn't fact checking.

But there is also this claim

THE FACTS: Clinton is counting on voters to recall the 1990s wistfully and to cast a vote for Obama in hopes of replicating those days in a second term. But Clinton leaves out the abrupt downward turn the economy took near the end of his own second term and the role his policies played in the setting the stage for the historic financial meltdown of 2008.

The part after "and" is odd as the idea is that people won't trust Obama who re-regulated Wall Street because Bill Clinton (and the Republican Congress) deregulated Wall Street helping  makethe disaster of 2008 possible.  But my main interest is the immediately preceding claim in a paragraph headed "THE FACTS"  The phrase "the economy" isn't precise but, without modification if it is meant to refer to a number which can move up or down it is almost always used used to refer to GDP

So here is GDP in Clinton's second term.  See the abrupt downturn ?

update: graph corrected thanks to aaron.  Also a closer focus on the end of that second term 

Monumental Sculpture in the USA

"My name is Ozymandias, king of kings:Look on my works, ye Mighty, and despair!"

What monumental sculptures could possibly stand in a democratic country ?  The art form is characteristic of monarchy, indeed of tyranny.  In Philadelphia in 1776 the congress could I think imagine two possibilities, that they would fail or that there would be no giant sculptures in the USA.

Now the face of one of them is carved on Mt Rushmore alongside a fellow slave owner and just across from the abolisher of slavery.  The first Democratic president peacefully sharing the mountain with the first Republican president.

Yet this is the closest we have come to Ozymandias.  The other huge sculptures in the USA represent folk heroes or those who fought against the US army.

At least Jefferson and Washington didn't fight against Lincoln, but Davis, Lee and Jackson did, yet they are represented carved in the rock of the country they betrayed in the largest bass relief in the world

I am both appalled by the choice of subject matter and delighted by how much more appalled Oxymandias (probably Ramses II) would have been to see a sovereign allow such a tribute to its enemies.

Now I must admit that, although their cause was as unjust as any ever, Davis, Lee, Jackson and their too numerous and too loyal soldiers fought with super human courage and determination against overwhelming odds.  But nothing like the odds contemned by Crazy Horse

OK this is it.  The epitome of monumental sculpture turning into the opposite of itself.  This is the worlds larges sculpture, in progress.  The plan is to have it end up looking like this

The amazing thing is that this is the result of individual initiative and by individual I refer to a totally crazy whacked out individual sculptor Korczak Ziolkowski who (I just learned along with along with Lakota chief Henry Standing Bear) decided that the worlds largest and most monumental sculpture would honor the defeated enemy of the US government Crazy Horse.

The result is a partially carved (with dynamite) mountain representing a native American clearly not at all thrilled to find himself under sovereignty of the US government.

And so big big big sculpture the absolutely characteristic sign of the triumph of the collective over the individual has become (well is becoming as they blast away) the triumph of the individual eccentric (OK totally nutso) in which the collective is relevant only because, while their URL ends .org not .com I betcha they take donations.

I hate re-Captcha

Like everyone I hate the captcha illegible letters one has to read to prove that one isn't a robot. I met it when commenting on Ed Kilgore (see below).  You know the one it says ReCAPTCHA stop spam read books with an arrow going aroudn and around and the one good part is the two arrows to ask for two more illegible "words"

The one redeeming feature used to be that one of the two words was often correctly spelled Italian. This made it easier for me to guess (altho my italiann speling aint up to stendard).

I think that after years of this some spammer noticed and programmed an Italian spell checker into the spambot.  In any case the second "word" I had to type to post comment on Kilgore below was
Atttone.  Atto is Italian for act. Attone would be a big act.  It's not real Italian, more like slang, but I typed it reflexively (I did it again before correcting myself in the line above).

so now ReCAPTCHA has no redeeming feature and has become a total hasssle.

Jon Chait insufficiently un disappointed by Obama

Jon Chait is not disappointed by Obama.  He has one "to be sure" disclaimer

Obama has screwed up plenty of things himself, most notably his doomed strategy of trying to secure a deficit agreement in 2011, his failure to keep pressing on financial reform, and his broad acceptanceof the Bush administration’s civil liberties rollback.

Later he goes on to compare Obama favorably with Kennedy

Kennedy campaigned on liberal priorities like federal aid for education and health care for the elderly, but found his agenda bottled up by conservative southern Democrats in Congress. Calvin MacKenzie and Robert Weisbrot, in their book The Liberal Hour, detail the tortured, arms-length relationship between the civil rights movement and Kennedy, who supported integration but need segregationist support to move his domestic agenda. Kennedy had promised during the campaign to end housing segregation “with the stroke of a pen,” but reneged, prompting activists to mail pens to the White House. He nominated segregationist judges and had a busload of Freedom Riders arrested (as a compromise, to keep them from being lynched), and met with civil rights activists who “scorched [him] with anger.” After his assassination, Americans came to look back on Kennedy’s presidency through a golden-hued nostalgia, which is what allows writers like Harris and Martin to present Kennedy as a glamorous poet-king who represented something larger than the pedestrian struggles that actually consumed his presidency.

I comment


I notice you didn't discuss Kennedy's legislative successes.  Or rather I think you discussed all of them and there weren't any (I don't remember clearly I wasn't even born when he was elected). Also what about the Bay of Pigs ? And sending "military advisers" to fight in Vietnam ?  There is no comparison.

On the other hand, I'm not sure I agree with 2 of your criticisms of Obama.  You criticize him for not pressing on financial reform and praise him for signing a major financial reform bill (the first in decades which did not consist of reforming regulation by gutting it).  Could more have been obtained ?  I mean financiers are rich and politicians like campaign donations.  The outcome was much less than we need but much more than could be reasonably hoped.

On the 2011 negotiations first not so much harm was done as the Republicans said no.  I would like to believe, and sometimes convince myself, that this was Obama's plan.  The result is that it is almost impossible for very serious centrists to deny that the Republicans are rigid fanatics with whom no compromise is possible (N Ornstein is as very serious as a centrist gets and works at AEI).  My hope was that Obama was securing his base among the well informed commentariate and that he would then move on to win the swing undecideds with a bit of populism (egalitarianism is very very popular).  This is what he has done (OK with a very very little bit of populism).  Reducing the harping from the very serious centrists who wish he would just try to compromise is worth something.  I (sometimes) think it was an OK 11 dimensional chess move.

Hurray for Bill Clinton and Ed Kilgore

I have had some problem getting over my distress about one long ago Ed Kilgore post so it is with great pleasure that I comment that I absolutely think he has found the diamond in the huge pile of jewels which was Clinton's speech.

He wrote

In the progressive takes on Clinton’s speech last night, I was impressed and gratified how much attention is being paid to the significance of the Big Dog’s discussion of Medicaid. Up until now, I’ve felt pretty lonely in excoriating Democrats for having largely ignored this topic (virtually unmentioned at the Convention, I think, until Sister Simone Campbell’s speech yesterday; even HHS Secretary Kathleen Sebelius failed to go into it).

and quoted the excellent Ezra Klein on a key point

As Clinton notes, much of Medicaid’s spending goes to nursing home care for seniors, and there’s no way Romney and Ryan can cut the program by a third without hurting the seniors who account for the plurality of Medicaid’s spending.

I comment


You are so so soooo right.  The fear of letting middle America know we care about poor people has made many Democrats so cynical that they are stupid.  Medicaid is very very popular.  Opposition to cutting Medicaid is almost as overwhelming as opposition to cutting Medicare
http://bit.ly/UuETlA (one of many many possible links).

The reason is that not all poor people are "those people."  A few months in a nursing home and a formerly middle class person is eligible for Medicaid.  I'm sure many people actually know this (roughly as many as accept that Medicare is a government program).

The Medicaid puzzle has always been how can there be a huge program for poor people in America.  The reason is, sad to say, based on class.  Medicaid money is not spent mostly on the underclass whose poverty is passed down generation to generation and who can be othered.  It is mostly spent on the newly poor made poor by chronic disease.  People can't other their mother and many know they would be paying for her nursing home care if it weren't for Medicaid.

I am slipping towards cynicism, but the point is that Medicaid is a great program which does absolutely necessary things for poor people who have been poor all their life and it is popular because it is also social insurance for people who were doing OK but now are chronically sick.  That's the ticket -- you can help the poor if the same program helps the middle class (or former middle class if one insists that class can change quickly).

Also and totally separately, I will fight to reverse the 1996 welfare reform and especially for a 10 fold increase in foreign aid.  But I will be careful to make it clear that I am arguing against the Democratic party when I do so. (can't punch hippies if there are no hippies to punch).

Ezra Klein wrong on Health Care Financing

Omigod Sept 4 2012 really is opposites day.  Ezra Klein made an incorrect claim of fact about health care financing.  He wrote

But I’m not going to make that argument. I’m on-record saying that trust-fund accounting is by and large a ridiculous way to look at the federal government’s finances, but both parties do it, and so Ryan isn’t committing any foul here. And within the trust-fund accounting rules, Obama is using his Medicare cuts to pay for the Affordable Care Act and Ryan is using his Medicare cuts to finance the Medicare program in the future.

My amazed comment follows.


I agree that trust fund accounting is absurd, but your trust fund accounting is totally wrong.  The balance of the Medicare plan A trust fund would be identical under the ACA and the Ryan budget.  There is just no difference at all.  The ACA did not take any money out of the Medicare trust fund to pay for anything.  That's why it extended the forecast time till the fund is empty by 8 years.

The ACA spending increases are, by trust fund accounting (which I agree is nonsense) separate from the Medicare spending cuts (and the Medicare tax increases).  The effect on the deficit is the sum.  The Medicaid expansion and the subsidies for insurance bought on exchanges are not at all funded by any money which would otherwise be in the Medicare plan A trust fund.

Amazingly uber wonk Ezra Klein is just wrong on a health care financing fact (a meaningless one I agree but you are just wrong).

Dougj full of hot air

Irony day continues.  Now Dougj at Balloon Juice entitles a post "

Facts are for the little people"

In that very post on contempt for mere facts he quotes Mark Halperin

 The Obama campaign believes it has neutralized the welfare attack. Romney is investing heavily in ads falsely claiming Obama gutted welfare reform. Dems initially viewed this as a threat. In their view, undecided voters were processing the attack as follows: The voters didn’t think this sounded like something Obama would do, but if it were true, it would worry them.

That’s why Dems responded so aggressively to debunk the claim;Dems believe the local press in the battlegrounds has handled the issue responsibly and has communicated clearly to undecided voters that it’s false.

then writes

I’m sure Clive Crook and Glenn Kessler and Charles Lane disapprove of the incivility of these actual journalists. 

In mere fact, Glenn Kessler rated the Romney campaign's claim about Obama and welfare a 4 Pinocchio lie.   Yes indeed his addiction to the "opinions differ on shape of planet" anti-prose style means he has to add the explanatory (for Romney) but there it is just above the 4 Pinocchios.

To be clear, I rate dougj's claim ust 3 Pinocchios :  totally and demonstrably false but not outrageous.

All things being equal, the Romney ad leans more toward four Pinocchios. There is something fishy about the administration’s process on this memorandum, but that does not excuse the Romney campaign’s over-the-top ad.

Four Pinocchios

(for Romney)

Beat "Beat the Press"

Dean Baker writes

When people thought the stock market would just keep rising (an assumption that was explicit in all the privatization proposals put forward in the 90s, including Clinton's plan to put Social Security money in the stock market),


I flip out in comments.

Just here, note that Baker describes public ownership of capital as "privatization".  Clinton proposed partial nationalization of US firms.


Your assertion is not true.  For it to be a good idea to put social security money in the stock market it is not at all necessary for the market to go up and up.  The SSA has a very long planning horizon.  What should matter to it is the long run.  Even if the stock market crashes from time to time, it remains true that it has beaten T-bonds over every 30 year period (including the one that started just before the crash in 1929).

One way to understand how massively wrong your criticism of Clinton is is to beat the Press -- the WaPo editorial board in particular.  They decided to claim that state and local public pension funds were grossly underfunded.  They must have noted that they have smaller balances of trust funds compared to future liabilities than the SSA.

They claim that this plain fact was hidden, because the liars claimed they could get 7% real over the long term investing in stock.  They noted that over the period they chose the market was up at an annual rate of 4% real.  Someone had to point out that stocks may dividends.

Notably the dividend yield is vastly higher than the return the SSA is getting on its portfolio of treasuries.  They would gain by shifting to stock if the stock market didn't go up at all (nominal).

The SSA investing in stock is very different from you or I investing in stock.  We won't live forever and will want to cash in when we retire.  THe SSA will live forever and won't have to cash in.

Now it is true that if the SSA invested in stock then the stock market boom of the 90s and the boom compared to reality of the 00s would not have caused such an increase in consumption (as it would have been hidden from Ricardian not at all equivalant real world people).  Nor would the crash have caused such a drop.  The risk born (really hidden) by the Federal Government is an automatic stabilizer.  It is better for the country for the Federal Government to bear (really hide) that risk than to get the same expected return without risk.

Of course there just must be some reason the SSA shouldn't invest in stock.  The problem is that no one has come up with the shadow of a hint of a possible simulacrum of an argument to that effect.

Your plainly false assertion is utter nonsense and par for the course.

Ed Rendell Lies like Paul Ryan

Rendell  is similar to Ryan


Rendell = Ryan

Ed Kilgore, acting like an inside the beltway reporter, considers the facts irrelevant.  He argues that Clintonites are not anti-Obama and, when doing so, repeats a lie written by Rendell without challenging it.

I lose my temper in comments.

As usual you are too kind to Clintonites.  My problem wth Rendell's statement "“How many Americans know that more than 40 percent of the stimulus spending was for tax cuts?“Hardly any, because it was never explained to them.”" is that it is absolutely false.  A lie.  along the lines of claiming he ran an under 3 hour marathon.

In fact Americans were told again and again and again that 40% of the stimulus was for tax cuts.  The claim that Obama didn't accurately claim, assert, report, and say that he and fellow Democrats had massively cut taxes is simply false. Rendell's claim is false and he must know that it is false.  He lied and slandered Obama.

Look I know only TV matters and I personally am not willing to google all TV stations.  But I did google Obama "tax cuts" at www.whitehouse.gov http://bit.ly/OVBQlX
and got approximately 34,400 hits.

Also, by the way, the Clinton's managed to use the bully pulpit to get support for health care reform from an overwhelming majority to a minority.

Your post demonstrates that Rendell is a liar who has nothing useful to contribute to any discussion.  But even as a Conservative discussing Paul Ryan, you ignore the facts entirely when discussing his lies.

You don't need a weatherman to see how little he knows

Senator Rand PaulVerified‏@SenRandPaul

Mad a/b the weather or bad forecasts? I wouldn't complain, Nat'l Weather Svc just ordered 46k hollow-point bulletshttp://bit.ly/NAd071 

The honorable Senator Rand Paul has discovered the subtle influence of Bill Ayers, the notoriously armed weatherman, on Barack Obama.  

Via Steve Benen  (via Joe Sonka) who notes that Senator Paul should feel free to complain about weather forecasts "In reality, ammunition and targets were ordered for the NOAA Fisheries Office of Law Enforcement. There was a clerical error on the paperwork "

I thought the Senator had gotten over smoking weed and praying to Aqua Buddha, but it sure looks like he was zeriously Sonked when he tweeted that tweet (I'm assuming you are all too young to get Larry Czonka references)

QE huh ?

Brad DeLong excerpts something by David Glasner

Consider how Bernanke explains the way that the composition of the Fed’s balance sheet can affect economic activity. 

"In using the Federal Reserve’s balance sheet as a tool for achieving its mandated objectives of maximum employment and price stability, the FOMC has focused on the acquisition of longer-term securities–specifically, Treasury and agency securities…. Imperfect substitutability of assets implies that changes in the supplies of various assets available to private investors may affect the prices and yields of those assets….

Declining yields and rising asset prices ease overall financial conditions and stimulate economic activity through channels similar to those for conventional monetary policy. "

Bernanke seems to think that changing the amount of MBSs available to the public can alter their prices and change the shape of the yield curve. That is absurd. The long-term assets whose supply the Fed is controlling are but a tiny sliver of the overall stock of assets whose prices adjust to maintain overall capital market equilibrium. Affecting the market for a particular group of assets in which it is trading actively cannot force all the other asset markets to adjust accordingly unless the Fed is able to affect either expectations of future real rates or future inflation rates. If the Fed has succeeded in driving down the yields on long term assets, it is because the Fed has driven down expectations of future inflation or has caused expectations of future real rates to fall….

I totally lost it in comments.


Department of Huh ?  Update post huh ?  I think I understand Glasner's gross errors.  There are two, but the principal is a misreading of a simple phrase used by Bernanke.  It seems that when Bernanke wrote "the prices and yields of those assets" Glasner read "change the shape of the yield curve".  I object to his use of the word "curve" which must describe a one dimensional manifold and, in this case, safe yields as a function of maturity.  The red flag to me is that Glasner chooses to discuss the purchase of MBS.  He must understand that the MBS yield does not appear on the yield curve (as the phrase is used and for any use of the phrase consistent with the meaning of the word "yield").  Basically he seems to be assuming that anything which is true of purchases of 7 year treasury notes must be true of purchases of MBS.

Also I think the claim "a tiny sliver of the overall stock of assets" is simply false.  2 Trillion is not tiny compared to anything.  In particular it is not trivial compared to $ 13.7 trillion http://en.wikipedia.org/wiki/Mortgage-backed_security or the US Federal debt.

Glasner assumes that the point of buying MBS is to affect the price of other assets.  But the US has a special problem with home building (and public spending) and not with investment in general.  The claim that the price of MBS has no effect on mortgaging would be crazy, but Glasner assumes it.

I flag also "the only".  This is a very strong claim.  Finally I note that if Glasner were right then Bernanke might as well take a vacation.  According to his logic, the Fed can affect the economy only through short term safe rates and expected future short term safe rates.  Again by his logic, these are summed in long term rates.  In particular if Bernanke can't credibly signal what policy will be after his current term ends, then the room for further easing is bounded by the 5 year rate which is currently 0.69%.  According to Glasner Bernanke is almost pedal to the metal on QE just as he is pedal to the metal on conventional monetary policy.

I note that his confident assertions about the logic of QE are diametrically opposite to Joe Gagnon's.  Gagnon (and his humble undersigned follower) advocate the purchase of MBS and, in particular, a significant fraction of MBS outstanding.

OK finally Bernanke is partly responsible for Glasner's bizarre essay.  It makes sense as a critique of the logic of QE II.  Bernanke refuses to distinguish QE I from QE II or Twist.  Bernanke's argument is that some QE I worked so the sum of the effects of I II and twist was significant, so we should do something like QE II again.  The equivocation of QE I and QE II seems unavoidable so long as they are distinguished only by numbers.

Ah numbers.  It seems to me that the discussion (especially but not only Glasner's contribution) is contaminated by indifference to numbers such as the difference between hundreds of billions and billions, the difference between 5 year and 100 years, the difference between 0.67% and 2.3% (this is the range of 5 year rates over a period when the discussion of QE changed not at all).

And finally tools of our tools.  Many seem eager to use the concepts developed to discuss monetary policy in the past to discuss current policy.  So expected future inflation is a key concept and a $ 1 Trillion is tiny.

Debating Bernanke

Ben Bernanke who knows a lot more on the topic than I do claims that there is fairly strong evidence of stimulatory effects of Large Scale Asset Purchases LSAP also known as QE.  I have persistently noted that I   have found little evidence of such an effect of QE II as opposed to QE I. The first two LSAPs were very different, because the assets purchased were very different (also financial conditions were very different).  In QE I the Fed bought mortgage backed securities MBS.  At the time investors were terrified of MBS.  In QE II the Fed bought 7 year Treasury notes -- the asset closest to money which had a noticeably positive yield.  By Bernanke's reasoning about LSAT, QEI should have been vastly more effective per dollar created

His principal argument is

Imperfect substitutability of assets implies that changes in the supplies of various assets available to private investors may affect the prices and yields of those assets. Thus, Federal Reserve purchases of mortgage-backed securities (MBS), for example, should raise the prices and lower the yields of those securities; 

although he goes on to argue that "Large-scale asset purchases can influence financial conditions and the broader economy through other channels as well."

Note "MBS" in Bernanke's discussion of how LSAP might work.  Note that he didn't write "7 year Treasury Notes" or "30 Year Treasury Bonds."   

When he discusses the effects of LSAP Bernanke tends to lump QE I QE II and operation Twist together. There are a few exceptions 

 For example, studies have found that the $1.7 trillion in purchases of Treasury and agency securities under the first LSAP program reduced the yield on 10-year Treasury securities by between 40 and 110 basis points. The $600 billion in Treasury purchases under the second LSAP program has been credited with lowering 10-year yields by an additional 15 to 45 basis points.

He then notes that estimates of the sum of the effects of the three programs are economically significant.  I do not think a 15 basis point decline in the 10 year rate is economically significant.  The evidence cited by Bernanke does not, according to Bernanke, include proof that QE II had an economically significant effect.  Even 45 basis points is very small compared to the effects of aggressive normal monetary policy (and I mean effects on the 10 year rate).

Then Bernanke writes

Importantly, the effects of LSAPs do not appear to be confined to longer-term Treasury yields. Notably, LSAPs have been found to be associated with significant declines in the yields on both corporate bonds and MBS.¹⁴ The first purchase program, in particular, has been linked to substantial reductions in MBS yields and retail mortgage rates. 

My bold. What a shocker buying MBS causes reduced mortgage rates (what we need) while, if buying 7 year notes and 30 year bonds did anything like that, Bernanke didn't bother to mention any evidence.

There it is, probably the worlds number one expert on the topic (before he became Fed chairman) and he relies on lumping together programs which, by his own logic, were very different.

Note that when he discusses what's wrong with the economy Bernanke doesn't mention anything that would be noticeably helped by a 15 bp or even a 45 bp reduction in the 10 year rate.

 I see growth being held back currently by a number of headwinds. First, although the housing sector has shown signs of improvement, housing activity remains at low levels and is contributing much less to the recovery than would normally be expected at this stage of the cycle. Second, fiscal policy, at both the federal and state and local levels, has become an important headwind
[snip]
Third, stresses in credit and financial markets continue to restrain the economy. Earlier in the recovery, limited credit availability was an important factor holding back growth, and tight borrowing conditions for some potential homebuyers and small businesses remain a problem today.  [snip stuff on Europe]

OK we have "housing"  and "some potential homebuyers and small businesses" .  This sure doesn't sound like a problem with the 10 year Treasury rate.  Sounds to me rather specific to housing.  Seems to me to be a no brainer that future LSAPs should be of MBS. 



Can Bernanke explain why QE II consisted of purchases of 7 year notes ?  Can anyone  ? Is there any conceivable logic ?

I say the evidence, as presented by Bernanke, suggests that buying MBS works.  

He barely kinda sort of claims that buying long maturity treasuries had an economically significant effect, but he doesn't present evidence which, if taken at face value, proves that claim.

Wish I'd typed that

governing America requires partisan deals that are also impossible. @mattyglesias

On Yglesias on Money agan

Yglesias has a post here.  He has a much more provocative tweet here

Matt Yglesias ‏@mattyglesias

Michael Woodford knows how to create jobs. Does Ben Bernanke? 

Both refer to Woodford's Jackson Hole speech 



I have read only the concluding section of Woodford's paper.  In it he expresses no firm opinion about whether a nominal GDP target would have a significant (or even detectable) effect on GDP.  There is a lot about how QE without promises about future policy makes no sense, but he presents no evidence that statements about policy in the fairly distant future have any effect on anything.  The reason is simple, no central bank has attempted to cause an increase in expected inflation.

So far I am attempting to interpret Woodford.  I don't agree with everything which he implies.  He suggests that we have essentially no information about the effects of medium and long term policy guidance from central banks.  In fact we have a lot of information (see key weasel "an increase" in the paragraph above).  In the late 70s and early 80s monetary authorities tried very hard to convince people that they were absolutely determined to achieve low inflation.  If the expectations channel works even when other channels don't this would have caused low expected inflation even without direct effects through gigantic safe short term interest rates, severe recessions and record setting unemployment.  The evidence is overwhelming that monetary authority statements about their medium term targets and goals have never worked without policies which bypass the expectations channel.

As far as I know, neither you nor Woodford has explained why this historical evidence is not relevant and doesn't amount essentially to a refutation of our confident claims and his diffident claims that we don't have relevant data.

I see no justification for your tweet that "Woodford knows ..." I think this is a problem with epistemology.  What do you mean by "knows" ?  Doesn't it have something to do with proof (in mathematics) and evidence (in everything else).