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The Fed Cares About Inflation 10 Times More Than It Cares About Unemployment

by 4ko9dra Posted on February 25, 2014

Mother Jones

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Ryan Avent, having exhausted his conventional analysis of the Fed’s 2008 transcripts, turns today to a more analytical approach: counting words. I think others have already made this point without numbers, but Avent’s most powerful finding is that the Fed cares way more about inflation than it does about unemployment:

There is only one winner in the dual mandate. The word “inflation” (or variants thereof, such as “inflationary”) was mentioned a cool 2,664 times in 2008; “unemployment” pops up just 275 times.

I’m assuming he played fair and also looked for variants of “unemployment,” like “employment” or “jobs.” In any case, I don’t think this comes as much of a surprise to anyone, since it’s been obvious for decades that the Fed not only doesn’t care about unemployment, but gets positively worried when too many people have jobs. That would mean the labor market is tight and workers might get paid more, you see, and that could be inflationary. Still, it’s nice to see this verified quantitatively.

Avent also found that there were fewer mentions of “recession” as the year went on, which seems odd but might not be. Early on, when it was still unclear if the economy was in recession, I suppose they argued about this a lot. By June, when there was no longer any question about it, they all took it for granted and no longer even needed to mention it.

As for the finding that laughter increased later in the year, I guess I can’t blame them. There’s only so much globe-destroying financial panic you can take without cracking a few jokes.

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The Fed Cares About Inflation 10 Times More Than It Cares About Unemployment

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President Obama Is Fighting Cuts to the Military, Not Demanding Them

by CharissaGerald Posted on February 25, 2014

Mother Jones

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From Dick Cheney, commenting on President Obama’s proposed military budget, presented yesterday by Defense Secretary Chuck Hagel:

I think the whole thing is not driven by any change in world circumstances, it is driven by budget considerations. He would much rather spend the money on food stamps than he would on a strong military or support for our troops.

This is, as Andrew Sullivan points out, loathsome:

He could have made an argument why he thinks we should maintain the stratospheric levels of defense spending that have been in place since 9/11; he could have argued that the US needs to maintain the ability to fight two major land wars simultaneously in perpetuity. He could have said a lot of things. But he decided to accuse the commander-in-chief of not supporting the troops and actually wanting to keep people in poverty. There is this belief out there that Republican extremism comes from the base and not the elites. But Cheney proves otherwise.

There’s more to this. You might disagree with Obama’s priorities, but Cheney’s claim is based entirely on the notion that Hagel and Obama are proposing military cuts. But they aren’t. Hagel proposed a change in force structure that would lead to a smaller Army, but his overall budget proposal is $115 billion more than the current sequester levels demanded by Republicans. Hagel is going to have plenty of fights on his hands, but mainly because he wants more money, not less. James Joyner explains:

Hagel, in a Pentagon speech on Monday, insisted that sequestration levels amounted to “irresponsible cuts” that would “compromise our national security for both the short- and long-term.” While acknowledging that they remain “the law of the land,” the secretary insisted that the only way to implement them “is to sharply reduce spending on readiness and modernization, which would almost certainly result in a hollow force—one that isn’t ready or capable of fulfilling assigned positions.” Hagel terms the administration proposal as “more reasonable and far more responsible” than the current approach.

….Further, the $115 billion figure actually understates the amount by which the proposal exceeds sequestration limits….another Base Realignment and Closure, or BRAC, round in 2017….proposed cut of 20,000 personnel from the Army National Guard by 2019….cancel the Army’s Ground Combat Vehicle program, end future upgrades to F/A-18 Super Hornet fighter and EA-18 Growler electronic warfare aircraft, and halt the buy of the Navy’s Littoral Combat Ship….mothball its entire fleet of A-10 close air support planes….capping pay raises for troops at 1 percent (while freezing pay for general officers).

….At the same time, slashing the Army to its smallest size since before World War II, which essentially guarantees that the United States could not take on two simultaneous major conflicts, is likely to be accomplished without much resistance.

In other words, Hagel is going to run into a buzzsaw because (a) he wants a bigger budget and (b) he wants to cut a bunch of wasteful spending that’s near and dear to every congressman whose district might be affected. Cutting the size of the Army is just one small part of the whole package.

Naturally this is the part that Fox News focuses on and that Dick Cheney demagogues. But keep one thing firmly in mind: Even though it’s declined from its Iraq/Afghanistan peak, our military budget is still far larger than it was in 2000. Congress has made it clear that it wants further cuts, and in this case at least, Obama and Hagel are the ones fighting against the cuts. In his current proposal, Obama is asking for more money than current sequestration levels. He’s not cutting the military. Compared to what Congress asked for, he’s expanding it.

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President Obama Is Fighting Cuts to the Military, Not Demanding Them

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Vladimir Putin May Be Tough, But He’s Also Destroying Russia

by Rafael40Ru Posted on February 24, 2014

Mother Jones

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Steve Benen catches Bill Kristol saying this about Ukraine:

So, look; it’s nice for President Obama to say it’s not “a Cold War chessboard.” I don’t know why he says that with some disdain. That was not an ignoble thing for us to play on that chessboard for 45 years. We ended up winning that Cold War.

And I do think Putin thinks he’s playing chess. He thinks he’s playing even a rougher game than chess and we have to be able to match it.

I don’t know squat about Ukraine, and I don’t really know much about Russia either. So take what I’m about to say with a big grain of salt.

That said, here it is: do guys like Kristol ever learn? Yes, Putin is playing a rough game. But why does Kristol seem to think that’s something we ought to emulate? Does he not realize that Putin is basically destroying Russia?

During the Cold War, hawks like Kristol routinely warned that the Soviet Union was overtaking us. And they honestly seemed to believe it. But why? Did they really think that the Soviet Union’s command economy was producing faster growth and better weapons systems than ours? They seemed to, even while extolling the virtues of liberal democracy and free market capitalism. But in the end, it turned out that liberal democracy and free market capitalism really were better. The Soviet Union was collapsing before our eyes and we were barely even noticing it.

The same thing is happening now. Has Putin temporarily shored up Russia’s standing in the world? Maybe. But if he has, he’s done it at the expense of Russia’s long-term health. This is, after all, country with serious problems: terrible demographics, a rusty and aging industrial sector, and endemic corruption. Putin has done nothing to address any of this. Instead, he’s papered it over by building an economy based on oligarchy, mineral wealth, and relentless bullying of both neighbors and citizens.

Will that work for a while? Sure. Russia has a helluva lot of mineral wealth. But it won’t last forever, and in the background Russia is getting frailer and frailer. This is the result of Putin ignoring real problems and instead spending his time projecting toughness on the world stage.

That’s what Kristol apparently thinks we should do. But he’s wrong. Putin acts the way he does because he’s ruling from a position of weakness and has no real solutions to Russia’s long-term decline. In the end, the oil and gas will run out; Russia’s neighbors will revolt the same way Ukraine is revolting; the oligarchs will cling on for dear life; and Russia’s place in the world will continue to deteriorate. Anyone who thinks we should adopt even the tiniest piece of Putin’s approach is just being willfully crazy.

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Vladimir Putin May Be Tough, But He’s Also Destroying Russia

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If the Supreme Court Strikes Down Campaign Contribution Limits, It Might Help Kill Off the Tea Party

by MosesPolley Posted on February 24, 2014

Mother Jones

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The Supreme Court will soon hand down its ruling in McCutcheon v. Federal Election Commission, a case that could finish up what Citizens United started by striking down virtually all individual limits on campaign contributions to candidates and parties. Rick Hasen suggests there might be a silver lining to a decision that erased existing limits:

If the aggregate donation limits fell, party leaders would regain some advantage. They could start collecting huge checks from donors eager to have more direct influence than is possible when giving to outside groups. Party leaders would then be able to dole that money out to candidates and party committees. They would have more tools to control members scared of, or beholden to, super PACs. Republican leaders could fight back against tea party campaigns.

….Strong political parties have more incentive to cooperate than oppose each other under certain circumstances because they care about their electoral prospects. Look at how Speaker John Boehner pushed through a “clean” debt-limit increase with the help of Democrats in the House and how Senate Minority Leader Mitch McConnell voted to break a Sen. Ted Cruz filibuster of this legislation. Party leaders know that it is in their interest to cooperate and keep the government moving so that voters do not abandon them as obstructionist.

I don’t know if I buy this, but I figured I’d pass it along. There’s a good chance the Supreme Court will indeed finish the job of gutting campaign finance limits, and if that happens we’ll all need a bit of solace. This might be the best we can do.

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If the Supreme Court Strikes Down Campaign Contribution Limits, It Might Help Kill Off the Tea Party

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Chained CPI Was Never Going to Happen, And Now It’s Still Never Going to Happen

by SheilaGellert Posted on February 21, 2014

Mother Jones

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Chained CPI is the dog that didn’t bark. President Obama’s latest budget proposal doesn’t include a switch to chained CPI, and this absence has put chained CPI back in the news. Does that make sense?

Probably not. In any case, you probably don’t care much about what chained CPI really is. I’m sure I’ve written up a technical explanation in the past, but I’m too lazy to—oh hell. Hold on. Here it is if you’re interested. Or you can just google it. Long story short, it slightly reduces the way we calculate inflation. And since Social Security benefits are indexed to inflation, it would slightly reduce future Social Security payouts.

Obama has proposed in the past that we adopt chained CPI. On its own, this is a terrible idea. However, under certain circumstances, it might be a good thing. At a minimum, those circumstances are threefold: (1) There would be some kind of adjustment to prevent low-income retirees from taking a hit. (2) It’s part of some broader deal on Social Security. (3) It’s adopted everywhere, including in the tax code, where it would raise taxes slightly by slowing down the inflation indexing of tax brackets. Hey, if it’s good for the goose, it’s good for the gander. Chained CPI is either more accurate or it’s not, and if it is, then we should use it everywhere.

If these circumstances were met, I’d have a certain amount of sympathy for switching to chained CPI beyond the purely wonkish consensus that it’s a more accurate measure. One reason is that it forces everyone to put their money where their mouths are. And by “everyone” I mean today’s retirees. You see, one of the things that pisses me off about discussions of Social Security is that it’s always future retirees who are supposed to take one for the team. We’re supposed to believe that Social Security is in crisis mode, a true threat to the republic, and therefore we have to cut benefits. But look. If this is really such a huge crisis, then we should all pitch in to save Social Security, including current retirees. If current retirees think their existing benefits are too generous, then they should support cutting them. If they don’t think that, then why should they get to keep their current benefits but cut them for future retirees?

They shouldn’t. Either benefits are too high or they aren’t. And one of the features of chained CPI is that it would have a small but immediate effect on benefits, cutting future COLA increases slightly every year. If that’s acceptable to current retirees, then I figure I can accept a cut too. If not, then I want the same benefits they’re getting. Deal?

In any case, none of this matters, because Republicans have never shown the slightest willingness to cut a broader deal. They want chained CPI, but they want it only for future retirees and they want it only for Social Security. They are willing to make precisely zero concessions in return for this. So as Jonathan Chait points out, it really doesn’t matter if Obama includes chained CPI in his budget proposal:

In reality, the fundamentals of the situation have not changed at all. Last year, Obama was willing to adopt C-CPI in return for concessions Republicans would never, ever make. This year, Obama is still willing to adopt C-CPI in return for concessions Republicans would never, ever make. Putting the compromise in his budget was merely Obama’s way of locating the blame for the reality that Republicans in Congress will never, ever, ever strike a fiscal deal with him. The disappointed deficit scolds sitting just to Obama’s right, and the joyous progressives just to his left, are committing the same fallacy. They are mistaking a step premised on an impossibility for a semblance of reality.

One thing I’m curious about in an academic sort of way is whether Obama ever really truly supported chained CPI. He’s enough of a wonk that he might have. Or, it might merely have been a bargaining chip that he knew would never go anywhere. We’ll probably never know.

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Chained CPI Was Never Going to Happen, And Now It’s Still Never Going to Happen

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Want Better Broadband? Unbundle the Local Loop.

by XOCKellieqnkfp Posted on February 21, 2014

Mother Jones

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Felix Salmon says we have plenty of bandwidth in America. Contra Tyler Cowen, we don’t need to spend a bajillion dollars rolling out a new nationwide network based on new pipes or new technology:

What we do need, on the other hand, is the ability of different companies to provide broadband services to America’s households. And here’s where the real problem lies: the cable companies own the cable pipes, and the regulators refuse to force them to allow anybody else to provide services over those pipes. This is called local loop unbundling, it’s the main reason for low broadband prices in Europe, and of course it’s vehemently opposed by the cable companies.

Local loop unbundling, in the broadband space, would be vastly more effective than waiting for some hugely expensive new technology to be built, nationally, in parallel to the existing internet infrastructure. The problem with Cowen’s dream is precisely the monopoly rents that the cable companies are currently extracting. If and when any new competitor arrives, the local monopolist has more room to cut prices and drive the competitor out of business than the newcomer has.

Cable companies have a thousand ready-made technical incantations to explain why they can’t possibly open up their networks to competitors. To listen to them, you’d think this would be akin to letting a five-year-old mess around with your electric wiring. This is delicate stuff! You can’t just let anyone start sending bits around on it.

It’s all special pleading, of course, of the same type that Ma Bell engaged in when people wanted to start putting answering machines on their phone lines. But everyone understands there would be technical requirements they’d have to meet, just as answering machines had to meet reasonable technical requirements back in the day. Regulators would have to be involved to make sure everyone plays nice with each other, but that’s far from impossible.

No, this is all about money, as you already guessed. Allowing other companies to use their last-mile pipes would (a) take away some of their broadband rents, (b) force cable companies to genuinely compete on price and features, and (c) allow competitors onto their network who couldn’t care less about cannibalizing TV business. If I were a cable company, I’d fight that tooth and nail too.

But that doesn’t mean the rest of us have to take their arguments seriously. The rest of us should be in favor of competition, not the profit margins of local cable TV monopolies.

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Want Better Broadband? Unbundle the Local Loop.

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Quote of the Day: Google Explains How to Act Normal

by PhoenixBrook3 Posted on February 19, 2014

Mother Jones

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From Andrea Peterson, summarizing some avuncular corporate advice to users of Google Glass:

With a few of these dos and don’ts, it seems like Google is trying to explain to users how to act like a normal human being in public settings.

In some industries, I guess that’s a legitimate topic for a FAQ.

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Quote of the Day: Google Explains How to Act Normal

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The FCC Takes Yet Another Crack at Net Neutrality

by JosephFinsch Posted on February 19, 2014

Mother Jones

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After losing a court battle over its effort to impose net neutrality requirements on broadband carriers, the FCC is taking another crack at it:

The Federal Communications Commission said Wednesday that it will craft new rules to prevent Internet service providers from charging companies like Netflix Inc. or Google Inc. a toll to reach consumers at the highest speeds.

The guidelines are expected to ban broadband providers from blocking or slowing down access to any websites. Supporters say the concept, known as “net neutrality,” is crucial to keeping the Internet open and allowing smaller companies to compete with the biggest content providers. But the courts have ruled against the FCC’s last two attempts to enforce net neutrality on companies like Comcast Corp. and Verizon Communications Inc. that provide Internet connections to households and businesses.

The Journal has an accompanying article about the feud between Netflix and the large backbone carriers that’s causing slowdowns in Netflix service:

Verizon has a policy of requiring payments from networks that dump more data into its pipes than they carry in return. “When one party’s getting all the benefit and the other’s carrying all the cost, issues will arise,” said Craig Silliman, Verizon’s head of public policy and government affairs.

The Internet has historically been built on arrangements in which big networks agree to swap each other’s traffic without charge, based on the assumption that it will all even out over time. But, America’s heavy use of video services like Netflix and Amazon.com Inc., as well as expanded online offerings from TV channels like ESPN, is making these old arrangements less tenable.

….The pendulum has been swinging toward the carriers in such disputes. In recent years several big Web companies, including Google Inc., Microsoft Corp., and Facebook Inc., have begun paying major U.S. broadband providers for direct connections that bring faster and smoother access into their networks. Netflix, so far, has held out.

It’s not clear if net neutrality rules would affect this particular dispute or not. It probably depends on how the rules are written, and no details were provided today. I imagine the rules-writing process will take quite a while, so this isn’t going to be resolved anytime soon.

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The FCC Takes Yet Another Crack at Net Neutrality

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The Tech Revolution Might Kill Economic Growth But Make Us All Happier Anyway

by d3gz0t Posted on February 19, 2014

Mother Jones

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Matt Yglesias makes a point worth sharing about technology and economic growth:

It seems entirely conceivable to me that future technological progress simply won’t lead to that much economic growth. If we become much more efficient at building houses, that will increase GDP, because the output of the housing sector is selling housing. But the output of the health care sector is selling health care services, not curing illnesses, and sick people already buy a lot of health care services. People with cancer tend to buy cancer treatments. If those treatments become more effective at curing cancer, that’d be great for patients and their families but it’s not obvious that it would raise “productivity” in the economic sense.

Yglesias provides a couple of example of this ambiguity. The printing press didn’t do much for GDP growth, because books just aren’t a big segment of the economy and never have been. But that doesn’t mean the printing press wasn’t a revolutionary invention. Likewise, if someone invented a pill that cured cancer, that might actually reduce GDP by eliminating all the money we spend on cancer care. But it would still be a huge contribution to human welfare.

This is a point that plenty of economists have made, but it’s worth repeating. Facebook is a big deal, but it hasn’t added an awful lot to measured GDP. In terms of the market economy, it employs a few thousand people, owns some buildings, and operates some large server farms. That’s not a huge contribution. On the flip side, if 100 million people spend more time on Facebook and less time going to the movies or reading books, it could actually be a net GDP loser. Ditto for video games, which might reduce economic output if the time and energy spent buying games and game consoles is less than what people used to spend all those hours on.

This isn’t a bulletproof case. It’s just meant to illustrate a point. If, in the future, we spend a lot more time on activities that are relatively cheap to produce—social networking, video games, virtual reality, etc.—we could end up in a world where people are as happy as they are now (or happier) with far less in the way of the traditional production of market goods. I doubt that this dynamic has had much effect on growth yet, but it’s quite possible it will in the future. Living in the Matrix is pretty cheap, after all.

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The Tech Revolution Might Kill Economic Growth But Make Us All Happier Anyway

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More than 20 Million Families Would Benefit From an Increase in the Minimum Wage

by Margherit Posted on February 19, 2014

Mother Jones

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The CBO released a study today on the effect of raising the minimum wage to $10.10. The chart below shows their main finding: millions of families outside the upper middle class would see a net increase in income (partly from higher wages and partly from higher economic growth) while families in the top 20 percent would see a decline (primarily from having to pay slightly higher prices for goods and services):

The cost of this higher income is fewer jobs: CBO estimates that employment would fall by about 0.3 percent, or 500,000 workers. That strikes me as being on the high side of consensus estimates, but it’s probably in the right ballpark.

As economic policies go, that’s not bad. In the real world, there’s no such thing as a policy that has benefits with zero costs. There are always compromises. In this case, in return for the small job losses, 16 million workers would get a direct wage increase; another 8 million would get an indirect wage increase; and nearly a million workers would be lifted out of poverty. That’s about as good as it gets.

All that said, this is a report that I suspect CBO shouldn’t have bothered doing. Their value-add lies in assessing the effects of legislation that no one else is studying. But the minimum wage has been studied to death. CBO really has nothing to add here except its own judgment about how to average out the dozens of estimates in published academic papers. In other words, they aren’t adding anything important to the conversation at all. This report is going to get a lot of attention, but it really doesn’t teach us anything new.

UPDATE: This post originally said that 80 percent of all families would benefit from a minimum wage increase. But the CBO figures don’t actually say that. Families throughout the bottom 80 percent of the income spectrum would benefit, and each individual income bucket that CBO studied would see a net increase in income, but that doesn’t mean every single family would benefit. I’ve corrected the text to reflect this.

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More than 20 Million Families Would Benefit From an Increase in the Minimum Wage

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