• Paul Krugman: Ketchup Economics and the Housing Bubble
• Patrick Nielsen Hayden: Mark Sanford Think His Sins Make Him the Star of a Cosmic Drama
  Mark Sanford is still sure it’s all about the exciting story of Mark Sanford and God: "COLUMBIA, S.C. (AP) — South Carolina Gov. Mark Sanford, still clinging to office after admitting to an extramarital affair, wrote in an opinion piece released Sunday that God will change him so he can emerge from the scandal a more humble and effective leader..."
• Father Stephen: You Are Not A Bible Character
  [T[he use of the Bible as a means for reflecting on one’s personal situation in life.... The problem with such use of Biblical imagination is that it simply has no controlling story. Nothing tells us which story to use other than our own imagination (which is generally a deluded part of our mind). A governor gets to play King David, and, surprise, he should be forgiven and not resign his office. A group of white settlers get to play conquering Israelites and feel no compunction about murdering men, women and children. A priest, likely in need of therapy, plays the role of Jonah before a crowd who has no idea they are in a play. The gospel is not preached... the Bible is simply brought into ridicule... There are no special circumstances that, as Bible characters, exempt us from... repentance and responsibility.... The words of Christ... are... “Repent! For the Kingdom of Heaven is at hand.” If such repentance should cost us a political office or even a continent – so be it.
• Eric Martin: We Chiseled and We Switched
  I don't envy President Obama's predicament in Afghanistan.  It's hard to think of a region that has been less hospitable to foreign interlopers... And yet despite this foreboding track record, it is unclear that President Obama is willing to deviate from that familiar, if tragic, path.... Not that Obama's options are all that attractive.  Bush left him with a mismanaged and directionless occupation.... The exact nature of the hoped-for success via a continued military occupation is hard enough to define, let alone achieve, yet withdrawal has its downsides as well - including the potential for an intense civil war and the return of repressive elements such as the Taliban.... So it is that Obama seems to be trading Bush's muddled vision of Afghanistan for his own, with a vague yet grandiose (if often contradictory) recitation of implausible goals and exaggerated fears, all buttressed by a refusal to acknowledge the costs of continuing our occupation....
• Scott Martens: Nestor Makhno and me
• James Wimberley: Communism I : forgetting about the Gotha programme entirely
• Peter Orszag: Calls to Delay Health Reform are an Effort to Kill It
• jeffrey Frankel: Designing a politically feasible multilateral climate change agreement

A failure to distinguish between the no-free-lunch and the price-is-right versions of the efficient market hypothesis has been the source of a great deal of very bad economics over the past generation:

What Thaler Said: The [Efficient Capital Markets] hypothesis has two parts, [Richard Thaler] says: the “no-free-lunch part and the price-is-right part, and if anything the first part has been strengthened as we have learned that some investment strategies are riskier than they look and it really is difficult to beat the market.” The idea that the market price is the right price, however, has been badly dented...

• Thers: Yes, Republicans Will Even BS You about the *Weather*
• Simplenote
• Alec MacGillis: Massachusetts Takes Big Step Away From Fee-for-Service - Massachusetts Takes Big Step Away From Fee-for-Service
• Jonathan Cohn: Elmendorf: More Cost Control; Orszag: We're Already On It...
• Matt Springer: Squirrely Physics
• Mark Kleiman: Hardball
  In 1993, Democratic "centrists"... helped defeat Hillarycare, believing that their power was unshakable... teaching the new President a lesson about who was boss. The Gingrich Revolution was condign punishment for them, though what the rest of us did to deserve it I don't know. For Gingrich and his allies, the health care debate was... really about... destroying the power of a Democratic President. It's not surprising that the Republicans have remembered that lesson, but it's disappointing that the "centrist" Democrats have forgotten it.... Harry Reid ought to enforce party discipline on the cloture vote. No on cluture should mean no subcommittee chair, no pork, and no money from the DSCC. Every Senator should be free to vote his conscience... on final passage, and on amendments. But no Democrat should side with the Republicans in denying the President an up-or-down vote on his top priority, which has been a central issue for Democrats going back to Harry Truman.
• Matthew Yglesias: The Logic of DeLong Care
• Lindsay Beyerstein: Coe's Boys: The Fellowship and the C Street Complex
  Another sex scandal out of the Fellowship's C Street Complex, a kind of fundamentalist flophouse for members of congress run by Doug Coe's elite sect, the Family. The resident to stray is Mr. Family Values himself, Rep. Chip Pickering. Sen. John Ensign and Gov. Mark Sanford are also C Street alumni.
• Lindsay Beyerstein: Jeffrey Goldberg smears Human Rights Watch
• Alex Tabarrok: The Return of the Puppet Masters
• Yves Smith: On the Unwillingness of Economists to Recant, Even in the Face of Evidence
• Paul Krugman: Larry Summers at IIE
  Now, you can argue that given the political realities it just wasn’t possible to pass a bigger stimulus, which may or may not be true. But that’s not the argument Larry is making — he’s saying that the plan was just right in economic terms. And I can only hope they didn’t really think that.

Megan McArdle:

What Did the American Taxpayer Get for its Billions? - Megan McArdle: A fellow journalist emails:  "I badly want someone to explain to me whether the taxpayer realizes any benefits from BoA, Citi, Goldman, etc.'s profits. Or was this just a massive "Thanks for nothing, Tim" moment?" Hard to say.  On the one hand, as a wise economist said to me last fall, "You can't bail out the financial system without bailing out those who are long financial assets".  In other words, banks and bankers.  And not bailing out the financial system has been pretty conclusively demonstrated to have ugly, ugly results...

Hey! You can quote me by name, you know...

The Eatwell Farm turnip truck makes us happier and healthier by once a week delivering a large box of (a) very fresh organic California produce containing (b) many things that are absolutely delicious and (c) some things that we would never, ever voluntarily purchase--but once we have them residual Yankee thriftiness requires that we find some way to actually eat them before they go bad.

This is by and large a very good bargain for us.

But this week: four heads of cabbage? Some of us fled the shtetl and crossed the North Atlantic precisely to avoid having to eat four heads of cabbage n a single week...

Paul Krugman thinks that the Economist doesn't give the Pragmatists enough credit for the analyses of financial crises that they did in the late 1990s and early and mid 2000s:

Views on shape of macroeconomics differ: [T]he common claim that economists ignored the financial side and the risks of crisis seems not quite fair--at least from where I sit. In international macro, one of my two home fields, we’ve worried about and tried to analyze crises a lot. Especially after the Asian crisis of 1997-98, financial crises were very much on everyone’s mind. There was a substantial empirical literature from economists like Carmen Reinhart and Graciela Kaminsky (with Ken Rogoff joining in latterly); there was modeling from Guillermo Calvo, Jose Andres (grrr) Velasco, Nouriel Roubini, Paolo Pesenti, and others, including yours truly.... I saw the housing bubble and expected the bust; but I hadn’t appreciated in advance either the vulnerability of the shadow banking system or the leverage of American consumers. Once the crisis was underway, however, I had a more or less ready-made intellectual framework to accommodate these revelations: at a meta level, this was very much the same kind of crisis as Indonesia 1998 or Argentina 2002.... [T]he prevailing trend now is to assert that there are more risks in the economy than were dreamed of in our philosophy; I don’t think that’s fair.

At least where I sat, the prevailing view was that the U.S. housing bubble was (a) not very big and (b) could be easily managed by the Federal Reserve, because (c) a panic and a domestic surge in demand for high-quality assets could be easily met by the Federal Reserve's printing money. The prevailing view was that the truly dangerous financial crisis would be one produced by the unwinding of "global imbalances"--a collapse in the dollar and a panicked flight not toward but away from dollar-denominated cash--that could not be handled by the Federal Reserve because in such a crisis the assets that it would create would be assets that nobody wanted to hold. So I think--surprise, surprise--that Paul Krugman is right here: Pragmatists weren't ignoring the risks of crisis, but they were watching out for the wrong crisis because we had no clue how bad the state of risk management in America's investment banks had become and we overestimated the power of the Federal Reserve. Our analyses were wrong, but not because we were cluelessly off the page.

But Paul has a more serious bone to pick with the Economist:

The Economist reaches, I think, for a false symmetry [between Pragmatists and Purists], and glosses over too easily the sheer ignorance that has become obvious in the debates over fiscal policy...

Here too I think Paul Krugman is right (I really should just abbreviate the phrase "HtItPKir").

When I first ran into the "Purists" back when I was in graduate school, they were gathered under the banner of the so-called "policy ineffectiveness result": maintaining that neither systematic fiscal nor systematic monetary policies could have any effect on production or employment, and that the only thing that either the fiscal or the monetary authority could do was to add pointless and welfare-reducing variance to production and employment by randomly and destructively injecting surprise disturbances into the economy.

The underlying argument went something like this: (i) There is no sense talking about anything like "involuntary unemployment": markets clear, and at all times people work as much as they want to work and firms produce as much as they want to produce. (ii) Workers work more relative to trend when they think their real wages are high, and firms produce more relative to trend when they think real prices for their products are high. (iii) Workers work less relative to trend when they think their real wages are low, and firms produce less relative to trend when they think real prices for their products are low. (iv) Workers and firms have rational expectations, so if they expect government fiscal or monetary policies to expand (or contract) nominal demand they will expect nominal wages or prices to rise (or fall) accordingly. (v) Thus if a predicted government-driven expansion (or contraction) raises (or lowers) nominal demand and thus their nominal wages or prices, they will understand that their real wages or prices have remained unchanged--and hence will not work more or less, and will not produce more or less. (vi) Only if nominal wages or prices rise (or fall) in an unexpected fashion will workers or firms get confused, and work and produce more (or less) than the trend. (vii) But with rational expectations the only cases in which government policy produces unexpected rises or falls in wages and prices is if the government policy is random. (viii) In which case its effects are random. (ix) And so government policies--not just fiscal but monetary policies too--cannot be stabilizing but only destabilizing. (x) Hence the best of all policies sets a predictable and constant rule for monetary and fiscal policy and does not deviate from it no matter what.

The "Purist" position left it unclear what exactly the rule should be: Should the monetary rule be a gold standard, a price-level target, an inflation-rate target, a nominal GDP target, a nominal GDP growth rate target, a nominal wage level target, a nominal wage growth rate target, a money-stock level target, or a money-stock growth target? A floating exchange rate? A fixed exchange rate? They did not have a view: any one should work just about as well as any other. Should the fiscal rule be a budget balanced all the time? A budget balanced on average over the cycle? A budget with a constant deficit that produced a stable debt-to GDP ratio? A budget that swung into surplus in booms and deficit in recession that produced a debt-too-GDP ratio that was stable over the cycle? The Purists did not have a view: any one should work just about as well as any other. The key was to be predictable, and not to deviate from the plan no matter what. The absolute condemnation of discretionary, seat-of-the-pants policy interventions that were not part of a previously well-known and well-specified rule--absolute condemnation of both discretionary fiscal and discretionary monetary policy tuned to the state of the business cycle--was the bedrock principle of the "Purists."

Critics of the Purists asked why--if fiscal and monetary policies could not have systematic stabilizing effects--we had business cycles, and why we had smaller business cycles than had been the case back before World War II. The Purists answered: (a) we had smaller business cycles because central banks and governments had learned their lessons and did less destructive discretionary policy to randomly disturb and surprise the economy; (b) we still had some cycles because policy was still somewhat discretionary, no completely rule-bound, and hence not properly predictable; and (c) we had some cycles because of cyclical fluctuations in productivity--that booms were booms because productivity was then high and people ought to be working harder and longer, and recessions were recessions because productivity was then low and people ought to be working shorter and lighter--the real business cycle wing's "great vacation" theory of high business-cycle unemployment.

We Pragmatists did not find these answers very convincing, or think that they were going to lead to a constructive research program.

So when the financial crisis began in the summer of 2007, we Pragmatists largely ignored the Purists, for they seemed to have nothing to say. The financial crisis was not accompanied by any sharp fall in productivity that reduced real wages, so the theories of the Purists' "real business cycle" wing had no purchase on what was going on. And the financial crisis was not associated with any sudden collapse in nominal demand--government-caused or otherwise--that pushed nominal wages and prices down and made workers and firms conclude that they should be working or producing less, and so the "monetary misperceptions" wing of the Purists had no purchase on what was going on. And for the first year or so the Purists largely remained silent. I would have expected them to rail against all of the extraordinary policy actions that Ben Bernanke's Federal Reserve was undertaking--these actions were not part of any pre-planned or generally-expected rule of behavior, and the bedrock Purist principle was that government policies that deviated from pre-planned and generally-expected rules of behavior were destabilizing and destructive. But the Purists remained quiet--the only peep I saw was Chari, Christiano, and Kehoe's (2008), "Facts and Myths About the Financial Crisis of 2008": an assertion that the Federal Reserve was making a tempest in a teapot, a mountain out of a molehill, criticized the Federal Reserve for making "mistaken inferences," and argued that:

even if current increase in [interest rate] spreads indicate increases in the riskiness of the underlying projects, by itself, this increase does not necessarily indicate the need for massive government intervention. We call for policymakers to articulate the precise nature of the market failure they see, to present hard evidence that differentiates their view of the data from other views which would not require such [aggressive discretionary] intervention, and to share with the public... logic and evidence... [supporting] the particular intervention they are advocating...

Then, in the late fall of 2008, the Purists surfaced again. But the Purists did not condemn the aggressively expansionary and highly discretionary monetary policy emergency moves that Ben Bernanke and his colleagues were putting into effect--they endorsed them. Somehow, discretionary monetary policy had become good. Yet there was no symmetry: the Purists did not endorse the aggressively expansionary discretionary fiscal policy moves that the incoming Obama administration was planning (and that the incoming McCain administration would have been planning had the election dice rolled differently)--they condemned them.

Why the Purists endorsed discretionary monetary and condemned discretionary fiscal policy moves never became clear. It wasn't the standard policy-ineffectiveness Purist position: that would have led to a condemnation of discretionary monetary policy as well. It was--well, it wasn't clear what it was. As Paul Krugman wrote last January, and htItPKir:

Economists, ideology, and stimulus: This has not been one of the profession’s finest hours.... What’s been disturbing... is the parade of first-rate economists making totally non-serious arguments.... John Taylor arguing for permanent tax cuts as a response to temporary shocks.... John Cochrane going all Andrew-Mellon-liquidationist on us.... Eugene Fama reinventing the long-discredited Treasury View.... Gary Becker apparently unaware that monetary policy has hit the zero lower bound. And you’ve got Greg Mankiw--well, I don’t know what Greg actually believes, he just seems to be approvingly linking to anyone opposed to stimulus, regardless of the quality of their argument.... [They] have... drop[ped] their usual quality-control standards when it comes to economic analysis. Has there been any comparable outbreak of mass bad economics from good liberal economists? I can’t think of one, although maybe that’s my own politics showing. In any case, what’s happening now is pretty disturbing...

It is in summarizing this episode, I think, that the Economist does its readers bad service, writing only that:

Economics: What went wrong with economics: [T]he financial crisis has blown apart the fragile consensus between purists and Keynesians that monetary policy was the best way to smooth the business cycle.... [S]hort-term interest rates are near zero... in a banking crisis monetary policy works less well. With their compromise [monetary policy] tool useless, both sides have retreated to their roots, ignoring the other camp’s ideas. Keynesians, such as Mr Krugman, have become uncritical supporters of fiscal stimulus. Purists are vocal opponents. To outsiders, the cacophony underlines the profession’s uselessness...

I would say that the Purists are ignoring not just the ideas of John Maynard Keynes but of Chicago-School patriarchs like Jacob Viner and Milton Friedman as well. And I would say that us Pragmatists are not ignoring the Purists' ideas--I would say that I don't know what ideas the Purists have. For the life of me I don't. The basic quantity theory of money:

M * V(i) = PY

tells us that nominal demand PY depends on (a) the nominal money stock M, and (b) the velocity of money V, which (c) is an increasing function of the short-term nominal interest rate on government securities i. Monetary policy changes M, and so changes PY (but may, in circumstances like those of today, induce offsetting changes in i and V that neutralize its expansionary effect). Fiscal policy--government deficits--change the quantity supplied of government bonds, and by supply-and-demand things that change the quantity of something change its price, and the price of government bonds is this interest rate i, and so fiscal policy changes the velocity of money V, and so changes PY with no offsetting changes in M to neutralize its effect.[1]

[1] It is true that Robert Barro has an argument that deficits caused by transitory tax cuts ought to create offsetting increases in desired private savings (because the marginal utility of private consumption does not change) that neutralize the effect on bond prices of increasing the supply of government bonds. But I know of no argument that claims the same for deficits caused by transitory government-spending increases (increasing savings then lowers private consumption and raises the marginal utility of private consumption, unless the goods the government buys and distributes with its spending are perfect substitutes for private consumption) for which there is no such neutralization effect...

Why oh why can't we have a better press corps?

Attaturk comments:

Rising Hegemon: Chip off the old enabler: "...coming on Meet the Press allows you to frame the conversation how you really want to..." Yeah, God forbid David Gregory challenge your bizarro world view, the man calls himself a journalist after all.

From Wired:

“We completely understand the public’s concern about futuristic robots feeding on the human population, but that is not our mission,” stated Harry Schoell, Cyclone’s CEO...

I would not have thought it was possible.

Robert Waldmann has an interpretation of Karl Marx's "Critique of the Gotha Program" that I had never seen before.

Robert argues that the correct interpretation of Marx's phrase "from each according to his ability, to each according to his need," in context, is this Shorter Critique of the Gotha Program:

We socialists cannot now--and probably never will--inscribe on our banners the wacka-wacka primitive Christian slogan "from each according to his ability, to each according to his need." And the Lasalleans are really stupid for thinking that we can and should...

I agree with Robert at least to the extent of: Shorter Critique of the Gotha Program:

We socialists cannot now inscribe on our banners the slogan "from each according to his ability, to each according to his need." And the Lasalleans are really stupid for thinking that we can and should...

But Robert goes further, to a place where I do not think I can follow. The question is whether Marx is serious or sneering when he writes:

Critique of the Gotha Program: In a higher phase of communist society, after the enslaving subordination of the individual to the division of labor, and therewith also the antithesis between mental and physical labor, has vanished; after labor has become not only a means of life but life's prime want; after the productive forces have also increased with the all-around development of the individual, and all the springs of co-operative wealth flow more abundantly--only then then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banners: From each according to his ability, to each according to his needs!...

He might be dead serious and really looking forward someday to the attainment of such a "higher phase of communist society"--but someday, and not now. Or he might (as Robert thinks) merely be making a nasty little inside joke: sneering that the "higher phase of communist society" in which the Lasallean program would be attainable is nothing but the millennium of Christian fellowship, as described in "Acts of the Apostles"--which is where the phrases:

Acts 11:29: "Then the disciples, every man according to his ability, determined to send relief unto the brethren which dwelt in Judaea..." ("τῶν δὲ μαθητῶν καθὼς εὐπορεῖτό τις ὥρισαν ἕκαστος αὐτῶν εἰς διακονίαν πέμψαι τοῖς κατοικοῦσιν ἐν τῇ Ἰουδαίᾳ ἀδελφοῖς...")

and:

Acts 4:35: "And laid them down at the apostles' feet: and distribution was made unto every man according as he had need..." ("καὶ ἐτίθουν παρὰ τοὺς πόδας τῶν ἀποστόλων· διεδίδετο δὲ ἑκάστῳ καθότι ἄν τις χρείαν εἶχεν...")

come from.

I tend to read Marx as a Christian heretic--as writing in an eschatological mode in which the time when "labor has become not only a means of life but life's prime want; after the productive forces have also increased with the all-around development of the individual, and all the springs of co-operative wealth flow more abundantly" is exactly as real and near to him as the expectation of Paul of Tarsus that someday soon: "we which are alive and remain shall be caught up together with them in the clouds, to meet the Lord in the air: and so shall we ever be with the Lord..." (1 Thess. 4:17).

Robert disagrees, and hears a sneer whenever Marx says "come the Millennium" that I cannot...

Robert:

The Critique of the Golgotha Program: Marx famously declared "From each according to his ability, to each according to his needs." This is... the grossest distortion of a quote by removal of context.... The words are (a translation from German) of two prepositional phrases from a sentence from The Critique of the Gotha program (the absence of a verb is a hint that maybe some relevant context may have been removed).... A more accurate but still partial quotation (of a translation) is

not... inscribe on our banner "from each according to his ability to each according to his needs"...

[T]here ought to be an absolute rule that while many words can be decently elided... "not" is not one of them.... The full (translation of) the quote is, IIRC:

It is not until work ceases to be a burden on life and becomes it's chief joy and purpose that we can inscribe on our banner "from each according to his ability, to each according to his need"...

Marx believed... "from each according to his ability, to each according to his needs" to the same extent that he was an anarchist... that is, rather less than not at all.... I think that Marx considered it a good proposal to eliminate the state and give to each according to his need to exactly the same extent that Arthur Laffer aims to increase the amount of money the federal government has to spend....

Over at the First International, Marx had a problem called Bakunin... [who] promised people no capitalists, no private property, and no state. Marx claimed that you could get everything Bakunin was promising from Marx, because in the long long long run the state would wither away....

Later Marx had this problem that his few German followers (the Eisenachers) decided to join with the Social Democrats who had the inexcusable fault of... [following] Lassalle not Karl Marx. Hence the Gotha program and its only lasting fruit "The Critique of the Gotha Program."... [T]he proposal [was] that all workers be paid the same equal wage. Marx said that was nonsense.... Only when (not if -- when) people just work out of public spirit and joy in labor can we even think about demanding perfect equality....

I don't believe Marx's promises about the withering away of the state and the joy of work (comparing our work efforts one can at least understand how Karl and I have very different views about work). I therefore interpret "The Critique of the Gotha Program as implying, in practice:

from each according to his ability, to each according to his needs, starting on the first of never...

OK, so what about those Apostles?... Marx is deliberately conflating [the Gotha Program] with a much much more egalitarian and extreme program as a rhetorical trick.... [T]he man was trying to insult the united Social Democrats and Eisenachers by conflating them with a bunch of lunatic extremists -- the Christians.... he phrases which can be translated (from Greek not German) as "from each according to his ability" and "to each according to his need" and fairly quoted without distortion due to removal of context come neither from "The Critique of the Gotha Program" nor from "The Gotha Program"... but from... "The Acts of the Apostles" which, quite frankly, makes "The Communist Manifesto" look like the McCain platform (with all due respect for McCain, Marx and the Apostles).

The Bible, New King James Version

Acts 4:35: ...they distributed to each as anyone had need...

Acts 11:29: ...the apostles, each according to his ability, determined to send relief to the brethren dwelling in Judea....

[H]istory is a prankster and karma is a bitch. Driven by envy and ambition, Marx decided to claim that when it came to wages Ferdinand Lasalle was an impractical impossiblist extremist just like Simon Peter. As a result, many people have decided that Karl Marx was an impractical impossiblist extremist egalitarian just like Simon Peter. This is crazy...

Jeet Heer emails:

How to Be a Conservative-Liberal-Socialist

by Leszek Kolakowski.

Motto: "please step forward to the rear!" This is an approximate translation of a request i once heard on a tram-car in Warsaw. I propose it as a slogan for the mighty International that will never exist.

A conservative believes:

1. That in human life there never have been and never will be improvements that are not paid for with deteriorations and evils; thus, in considering each project of reform and amelioration, its price has to be assessed. Put another way, innumerable evils are compatible (i.e. we can suffer them comprehensively and simultaneously); but many goods limit or cancel each other, and therefore we will never enjoy them fully at the same time. A society in which there is no equality and no liberty of any kind is perfectly possible, yet a social order combining total equality and freedom is not. The same applies to the compatibility of planning and the principle of autonomy, to security and technical progress. Put yet another way, there is no happy ending in human history.

2. That we do not know the extent to which various traditional forms of social life--families, rituals, nations, religious communities--are indispensable if life in a society is to be tolerable or even possible. There are no grounds for believing that when we destroy these forms, or brand them as irrational, we increase the chance of happiness, peace, security, or freedom. We have no certain knowledge of what might occur if, for example, the monogamous family was abrogated, or if the time-honored custom of burying the dead were to give way to the rational recycling of corpses for industrial purposes. But we would do well to expect the worst.

3. That the idee fixe of the enlightenment--that envy, vanity, greed, and aggression are all caused by the deficiencies of social institutions and that they will be swept away once these institutions are reformed--is not only utterly incredible and contrary to all experience, but is highly dangerous. How on earth did all these institutions arise if they were so contrary to the true nature of man? To hope that we can institutionalize brotherhood, love, and altruism is already to have a reliable blueprint for despotism.

A liberal believes:

1. That the ancient idea that the purpose of the state is security still remains valid. It remains valid even if the notion of "security" is expanded to include not only the protection of persons and property by means of the law, but also various provisions of insurance: that people should not starve if they are jobless; that the poor should not be condemned to die through lack of medical help; that children should have free access to education--all these are also part of security. Yet security should never be confused with liberty. The state does not guarantee freedom by action and by regulating various areas of life, but by doing nothing. In fact security can be expanded only at the expense of liberty. In any event, to make people happy is not the function of the state.

2. That human communities are threatened not only by stagnation but also by degradation when they are so organized that there is no longer room for individual initiative and inventiveness. The collective suicide of mankind is conceivable, but a permanent human ant-heap is not, for the simple reason that we are not ants.

3. That it is highly improbable that a society in which all forms of competitiveness have been done away with would continue to have the necessary stimuli for creativity and progress. More equaliity is not an end in itself, but only a means. In other words, there is no point to the struggle for more equality if it results only in the leveling down off those who are better off, and not in the raising up of the underprivileged. Perfect equality is a self-defeating ideal.

A socialist believes:

1. Yhat societies in which the pursuit of profit is the sole regulator of the productive system are threatened with as grievous--perhaps more grievous--catastrophes as are societies in which the profit motive has been entirely eliminated from the production-regulating forces. There are good reasons why freedom of economic activity should be limited for the sake of security, and why money should not automatically produce more money. But the limitation of freedom should be called precisely that, and should not be called a higher form of freedom.

2. That it is absurd and hypocritical to conclude that, simply because a perfect, conflictless society is impossible, every existing form of inequality is inevitable and all ways of profit-making justified. The kind of conservative anthropological pessimism which led to the astonishing belief that a progressive income tax was an inhuman abomination is just as suspect as the kind of historical optimism on which the Gulag Archipelago was based.

3. That the tendency to subject the economy to important social controls should be encouraged, even though the price to be paid is an increase in bureaucracy. Such controls, however, must be exercised within representative democracy. Thus it is essential to plan institutions that counteract the menace to freedom which is produced by the growth of these very controls.

So far as i can see, this set of regulative ideas is not self- contradictory. and therefore it is possible to be a conservative- liberal-socialist. This is equivalent to saying that those three particular designations are no longer mutually exclusive options.

As for the great and powerful International which I mentioned at the outset--it will never exist, because it cannot promise people that they will be happy.

• Paul Krugman: The paradox of thrift — for real
• Radley Balko: Andy McCarthy of National Review Cheers on the Commies
• James Hamilton: Back where we started
  BLS reported that the total number of Americans employed in June on nonfarm payrolls came to 131.7 million workers on a seasonally adjusted basis. That's below the June 2000 figure of 131.8 million with which we started the decade.
• Doug Merrill on Gold and Iron, by Fritz Stern
• Justin Fox: Breaking news: Regulators are (re)discovering that maybe speculation CAN be excessive
• Samuelson on Greenspan
  “But the trouble is that he had been an Ayn Rander. You can take the boy out of the cult but you can’t take the cult out of the boy. “
• Alan Greenspan: Economy, Housing Will Rise Together
• Steve Benen: Never Underestimate the GOP Rank and File
  Inexplicably quitting, for less-than-clear reasons, has managed to endear Palin to her party more. Somewhere, Mitt Romney and Mike Huckabee are probably smacking their foreheads, saying, "You've got to be kidding me."
• Topless Robot - Bonus! Rob's Transformers 2 F.A.Q.s!
• Conor Friedersdorf: Sarah Palin's Media Mafia
  Isn’t it actually the case that a good chunk of elite America loves Sarah Palin, or at least is willing to lend rhetorical and financial support to her? Why pretend otherwise?
• Meriwether Said to Shut JWM Hedge Fund After Losses
• Eric Rauchway: ¡Huelga contra WPA!

David Kurtz of TPM:

Glad He Cleared That Up: We've gotten an explanation from Rep. Steve King (R-IA) for why he was the lone vote against acknowledging the role of slaves in building the U.S. Capitol. He did it to protest "a several year effort by liberals in Congress to scrub references to America's Christian heritage from our nation's Capitol":

Our Judeo-Christian heritage is an essential foundation stone of our great nation and should not be held hostage to yet another effort to place guilt on future Americans for the sins of some of their ancestors.

So there you have it.

Paul Krugman has a chart:

and writes:

Bond panic subsiding?: Over the course of the spring there was a substantial rise in long-term interest rates; it was fed partly by talk of green shoots, but also, I suspect, by all the yelling about deficits and inflation. And, of course, the rise in rates was itself taken as evidence that inflation fears etc. were justified.

But the panic seems to be subsiding. Rates are still well above their post-Lehman lows, when credit markets were completely frozen and everyone was piling into govt. debt. But they’re low by historical standards, and not giving much ammunition to the worriers these days.

On the contrary, they are giving a significant amount of ammunition to the worriers--my brand of worriers, a different kind of worriers. We worry that the next two years are going to bring what happened after the end of the 2001 recession: something like this:

A recovery in which unemployment is higher two years later than when the recovery began is not much of a recovery. And I don't see what is going to keep the probability of such an eventuality low.

The lower are ten-year Treasury interest rates, the more are people trading in the bond market willing to bet their money that the future holds that kind of non-recovery recovery. And so I worry.

Why oh why can't we have a better press corps? Noah Milman:

Re-Entering the Palin-Drome: As someone who was quite enthusiastic about Sarah Palin for about 30 seconds, and then walked a long way back towards disliking her intensely.... I feel a certain obligation to make three points....

Point #1: There is an assumption running through Ross’ column that Palin, had she not been thrust into the arena too early and too quickly, might have developed into the kind of right-populist leader that the GOP really needs. That was, in fact, what I thought when I first heard of her (from Reihan, as it happens) some while before her sudden stardom: this looks like someone really promising, and... [McCain] needs to take a big risk because the safe choices aren’t going to do it, and she looks really promising. But it’s not what I think now, because I’ve seen how she actually performed. Ross is perfectly willing to say that she performed poorly. He doesn’t seem to be very willing to say that her performance reflects things about her fundamental character. Why?...

Point #2: The column, and Ross’ writing about Palin generally, treats her not so much as an actual person so much as a symbol, a personification of a certain type of person. There’s an expression for that: identity politics.... I’m surprised by the degree to which movement conservative politics in this country have become entirely the politics of identity, and the Palin phenomenon is the best evidence thereof. I think Ross should be against this trend....

Point #3: Ross is critical of the idea of meritocracy.... I’m interested, though, in how Sarah Palin represented a meaningful response to that idea. Meritocracy, in practice, means the selection of the “best and the brightest” for positions of power and authority, primarily by means of testing and scholastic hoop-jumping... “Mandarins.”... [T]here are alternative roads to power and authority... work[ing] your way up slowly through an organization... nepotism... "Talents”... who distinguished themselves by achievement in an entrepreneurial fashion.... Sarah Palin would, presumably, be one of this last group. But what, exactly, is her achievement, beyond her one election to the Alaska governorship?... [W]hat exactly is the great counter-meritocratic message that Palin purportedly embodies, and that Ross wants to salvage (presumably for some future candidate) from the wreckage of her brief career on the political stage?

Not surprising, with Jonathan Weisman on the beat:

A Dig at Berlusconi?: Jonathan Weisman reports from L’Aquila, Italy: President Barack Obama had only been in Italy for a few hours before tongues began wagging over a perceived snub from the U.S. president to Italy’s colorful and embattled prime minister, Silvio Berlusconi.

In Rome just after noon, Obama stood next to the serious, elderly president of Italy, Giorgio Napolitano, a former Italian Communist Party leader, and praised him highly as a man “who has the admiration of the Italian people.” That admiration stems not just from the 84-year-old’s lifetime of service, the U.S. president continued, but because of “his integrity.”

“I had heard of the wonderful reputation of President Napolitano as somebody who has the admiration of the Italian people not only for his longstanding service but also his integrity, and his graciousness,” Obama said. “And I just want to confirm everything I have heard about him is true.”

With Berlusconi enmeshed in scandal over a teenager and alleged call girls caught on tape partying with the prime minister, Obama may not make mention of integrity when he meets the host of the summit of the Group of Eight leading economies here this afternoon.

But then again, the gregarious Berlusconi, always a showman for the cameras, isn’t likely to hold it against Obama.

Why oh why can't we have a better press corps?

• Bob Herbert: After the War Was Over
• Ezra Klein: An Interview with Henry Waxman - An Interview With Henry Waxman

Whether or not you think that it is good for the system for banks to buyback the preferred-stock investments that the Treasury has made through the TARP program, there is no argument at all that it is good for the system to buy back the equity warrants: we want banks to have more equity capital right now, not less. If you don't want the U.S. government holding them, sell them on the open market. But don't retire them until the financial crisis is two years past.

There's at least one chance in ten that the banks will hit the wall again sometime in the next couple of years if the recession turns out to be worse than forecast, and we may once again be desperate to have the banks have as much equity as possible.

And I haven't even reached the issue of what price the warrants should be valued at: just don't do it.

David Mildenberg:

U.S. TARP Warrant Plan Favors Banks, Professor Says: Policy makers want to speed the withdrawal of the government from the banking industry, rather than attempt to maximize returns for the taxpayers by waiting for share prices to rise, Washington banking lawyer William Sweet of Skadden, Arps, Slate, Meagher & Flom said last week. “The president has clearly stated that his objective is to dispose of the government’s investments in individual companies as quickly as is practicable,” the Treasury statement said. The Obama administration gave approval in June for 10 of the biggest U.S. banks, including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley, to repay $68 billion of TARP funds. When the money was first obtained, banks had to give the Treasury preferred stock plus warrants to buy stock at a future date at a specific price, called the strike price.

Wilson values JPMorgan’s warrants at $1.55 billion using the traditional method of determining how much the stock may gain in the next decade, compared with $1.33 billion set by Treasury, he said. The strike price for JPMorgan is $42.42, about 25 percent higher than yesterday’s closing price of $34.11 in New York Stock Exchange composite trading. Banks will have 15 days after retiring government stakes to propose a “fair-market value” for the warrants, the Treasury said last week. Should officials object to the estimate, up to three “independent advisers” will help set a price. If lenders don’t make an offer, the warrants will auctioned.

Negotiations as planned by Treasury open the door to political favoritism and corruption, Simon Johnson, an economist at Massachusetts Institute of Technology, said in an interview. Johnson favors public auctions. “The question is why wouldn’t you sell these on the open market and the answer is that the banks would probably lose,” he said. Treasury is bound by contracts with the banks that set out a specific negotiating process, spokesman Andrew Williams said.

Valuing the warrants may rile Congress because lawmakers including Sen. Jack Reed, a Rhode Island Democrat, have warned Treasury Secretary Timothy Geithner not to let banks buy back government stakes at discount prices. “I will be watching closely to ensure Treasury’s pricing system works both fairly and efficiently for the benefit of taxpayers,” Reed said in a June 26 statement. At least 10 smaller banks have negotiated warrant buybacks with Treasury, including First Niagara Financial Group Inc., which paid $2.7 million, according to a statement this week. It’s among the best prices Treasury has received so far, equal to 65 percent of what the warrants were actually worth, compared with an average of 48 percent for the 10 previous repurchases, Wilson said.

He writes:

We do not need a second stimulus plan: As the US unemployment rate has risen to 9.5 per cent from 8.1 per cent since the $787bn fiscal stimulus package was enacted in February, many Democrats have become very nervous. They say that another large stimulus may be needed to keep unemployment from rising.... Another stimulus would be a grave mistake. The first one was justified by extraordinary circumstances. But it must be given time to work. People should not allow their impatience to lead to the adoption of policies that will not only fail to reduce unemployment this year, but could stoke inflation in the not-too-distant future....

The forecast also showed the unemployment rate peaking at 8 per cent with the stimulus and 9 per cent without. Obviously this was wrong. Yet it would be incorrect to conclude that the stimulus was doomed to failure, as many Republicans and conservative economists argued.... [T]he Romer-Bernstein document presents reasonable estimates of how quickly different forms of spending would raise gross domestic product. Tax cuts and government transfers are slow to have an effect and have a low multiplier, raising GDP less than $1 for every $1 increase in the deficit even when fully effective after two years. By contrast, government purchases stimulate growth much more quickly and have a higher multiplier, raising GDP by $1.57 for every $1 spent. Unfortunately, the low-impact spending has been the fastest to come online while the high-impact spending is dribbling out very slowly.

In a recent report to the International Monetary Fund, Doug Elmendorf, Congressional Budget Office director, looked at the rates of spending for different components of the stimulus package. He estimates that by the end of fiscal year 2009, which falls on September 30, 32 per cent of the income transfers for things such as food stamps and extended unemployment benefits will have been spent and 31 per cent of the tax cuts will have been disbursed. By the end of fiscal year 2010 virtually all of the money allocated to these programmes will have been spent.

However, just 11 per cent of the discretionary spending on highways, mass transit, energy efficiency and other programmes involving direct government purchases will have been spent by the end of this fiscal year. Even by the end of 2010 less than half the funds will have been disbursed and by the end of 2011 more than a quarter of the money will be unspent. Consequently, it is hardly surprising that five months after the stimulus bill passed it has not yet affected the unemployment rate....

What all this means is that it is foolish to think that any sort of stimulus that is enacted now will have an impact on the economy any time soon. We just have to wait for the medicine we have already taken to work. Pushing ahead with another stimulus will only make it harder to tighten fiscal policy down the road to keep inflation in check.

It's a balance of risks. Any second stimulus package passed this fall would have little impact on the economy until late 2010, that is true. But come late 2010 we might really need more demand to curb unemployment. On balance the inflationary risks of having an extra stimulus hit the economy in late 2010 if it is not needed are outweighed by the deflationary risks of not having an extra stimulus hit the economy in late 2010 if it is needed.

It is like driving a car with its windshield painted black by looking in the rear view mirror.

Last December I said that a $1 trillion stimulus looked appropriate but that the incoming administration should get a second stimulus into the budget resolution, with appropriate triggers so that it would be sprung if things turned out to be worse than we then expected.

If the Obama administration had done so, right now we wouldn't be trying to persuade a political system that a stimulus designed for an 8% peak unemployent recession is too small for the 10% unemployment recession we have--let alone the 12% peak unemployment recession we fear.

I wish I weren't so smart...

Laura Tyson adds her voice to the good guys:

naked capitalism: Submitted by Edward Harrison of Credit Writedowns. Laura Tyson, an advisor to President Barack Obama, said in a speech to day in the lead up to the –8 conference that the ground work for a potential second stimulus bill must be laid now. To be sure, the G-8 leaders are expected to recommend continued policy accommodation worldwide. However, Vice President Joe Biden recently suggested that the Obama Administration has no plans for a second stimulus bill on the political TV show Meet the Press (transcript here).  So, which is it – stimulus or no stimulus?

The U.S. should consider drafting a second stimulus package focusing on infrastructure projects because the $787 billion approved in February was “a bit too small,” said Laura Tyson, an adviser to President Barack Obama.

The current plan “will have a positive effect, but the real economy is a sicker patient,” Tyson said in a speech in Singapore today. The package will have a more pronounced impact in the third and fourth quarters, she added, stressing that she was speaking for herself and not the administration.

Tyson’s comments contrast with remarks made two days ago by Vice President Joe Biden and fellow Obama adviser Austan Goolsbee, who said it was premature to discuss crafting another stimulus because the current measures have yet to fully take effect. The government is facing criticism that the first package was rolled out too slowly and failed to stop unemployment from soaring to the highest in almost 26 years.

Obama said last month that a second package isn’t needed yet, though he expects the jobless rate will exceed 10 percent this year. When Obama signed the first stimulus bill in February, his chief economic advisers forecast it would help hold the rate below 8 percent.

]]> http://blogs.trust.ua/delong/2009/07/07/8/Second-Stimulus-Program/ http://blogs.trust.ua/delong/2009/07/07/10/links-for-2009-07-07/ Tue, 07 Jul 2009 11:03:51 +0300 delong http://blogs.trust.ua/delong/2009/07/07/10/links-for-2009-07-07/

• Reihan Salam: I wouldn’t exactly be surprised if [Sarah Palin] turned blue, sprouted several additional arms, and decided to become America’s chief advocate of a forceful Hindutva politics
• Deborah: Monday Movie Review Rerun: To Have and Have Not