Tea Party and Wall Street, on Policy and Ideology

Mar 21, 2014Mike Konczal

I have a piece on the Tea Party and Wall Street up at the New Republic. The Tea Party's theory of the financial crisis has absolved Wall Street completely, and this has serious implications for how the policy framework will evolve if the Tea Party gains in power in 2014 and 2016. I also got a chance to reference two pieces explaining various theories of the crisis which I recommend: Dean Starkman on the falsehood that Everyone Is To Blame and Adam Levitin's review of recent financial crisis books.

I hope you check out the new piece.

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I have a piece on the Tea Party and Wall Street up at the New Republic. The Tea Party's theory of the financial crisis has absolved Wall Street completely, and this has serious implications for how the policy framework will evolve if the Tea Party gains in power in 2014 and 2016. I also got a chance to reference two pieces explaining various theories of the crisis which I recommend: Dean Starkman on the falsehood that Everyone Is To Blame and Adam Levitin's review of recent financial crisis books.

I hope you check out the new piece.

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Reed, Obama and FDR

Mar 20, 2014Mike Konczal

I had a piece at The New Republic last week I haven't share here yet. It's a response to Adolph Reed’s long Harper’s piece about liberalism at this moment. You should check it out.

I wanted to clarify one thing because several historically-minded people asked me about it. I have a general rule that after I write something I should immediately delete the most “clever” thing I included, or at least go back and carefully edit it. In this piece I didn’t do that or make my point clear, and the glib results caused some confusion.

I opened the piece with a New Republic essay from 1940 criticizing Franklin Roosevelt from the left for leaving the economic problem unresolved. I had just read the essay in the (excellent, recommended) collection of New Deal Thought by Howard Zinn from the 1960s, and really thought it would be clever to include it in a current New Republic piece. What I ideally wanted the piece to reference was (i) pointing out that Reed's golden period of the late 1930s, where he has things working out well for the left, was more problematic at the time than he lets on, and in ways similar to where we are now.

But also (ii) point out that historical shifts often happen even when Presidents are floundering, as the “second New Deal” was formalizing an order that would reign for 40 years even though Franklin Roosevelt was making a mess of the late 1930s with his disastrous turn to austerity. As a result we can’t answer the most important question about President Obama - is he the beginning of a longer-term shift, or someone that forecloses the potential of that longer-term shift - by pointing to individual actions by him, which is the core of Reed’s argument. Also (iii) to reference the 1940 piece at the end of mine, with their smart observation about self-enforcing reform and the open question over whether Obamacare, etc. will ever have those dynamics.

[And as a personal fun point, I also like (iv) pointing out that the New Republic was pretty lefty back when within its own online pages.]

However I botched the intro, cutting for space, and wrote it in a glib manner that referenced it to dismiss valid criticism now and then. Some thought I was excusing the screwups of 1937, others comparing President Obama to FDR. And since it introduced the piece, it hung over the rest (which I’m pretty happy with). I’ll try better next time.

Richard Eskow had a nice response to the piece; I believe Reed will be on the next Belabored podcast as well, a great podcast you should be checking out.

I had a piece at The New Republic last week I haven't share here yet. It's a response to Adolph Reed’s long Harper’s piece about liberalism at this moment. You should check it out.

I wanted to clarify one thing because several historically-minded people asked me about it. I have a general rule that after I write something I should immediately delete the most “clever” thing I included, or at least go back and carefully edit it. In this piece I didn’t do that or make my point clear, and the glib results caused some confusion.

I opened the piece with a New Republic essay from 1940 criticizing Franklin Roosevelt from the left for leaving the economic problem unresolved. I had just read the essay in the (excellent, recommended) collection of New Deal Thought by Howard Zinn from the 1960s, and really thought it would be clever to include it in a current New Republic piece. What I ideally wanted the piece to reference was (i) pointing out that Reed's golden period of the late 1930s, where he has things working out well for the left, was more problematic at the time than he lets on, and in ways similar to where we are now.

But also (ii) point out that historical shifts often happen even when Presidents are floundering, as the “second New Deal” was formalizing an order that would reign for 40 years even though Franklin Roosevelt was making a mess of the late 1930s with his disastrous turn to austerity. As a result we can’t answer the most important question about President Obama - is he the beginning of a longer-term shift, or someone that forecloses the potential of that longer-term shift - by pointing to individual actions by him, which is the core of Reed’s argument. Also (iii) to reference the 1940 piece at the end of mine, with their smart observation about self-enforcing reform and the open question over whether Obamacare, etc. will ever have those dynamics.

[And as a personal fun point, I also like (iv) pointing out that the New Republic was pretty lefty back when within its own online pages.]

However I botched the intro, cutting for space, and wrote it in a glib manner that referenced it to dismiss valid criticism now and then. Some thought I was excusing the screwups of 1937, others comparing President Obama to FDR. And since it introduced the piece, it hung over the rest (which I’m pretty happy with). I’ll try better next time.

Richard Eskow had a nice response to the piece; I believe Reed will be on the next Belabored podcast as well, a great podcast you should be checking out.

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The Voluntarism Fantasy, Live at Democracy Journal

Mar 18, 2014Mike Konczal
The newest Democracy Journal is now online. In addition to pieces from Monica Potts on poverty, Richard Kahlenberg on community colleges, and Jason Furman on the tax code, I have a a big piece on the way conservatives deploy "civil society" and the voluntary state to justify massive cuts to social insurance. The name of the piece is the The Voluntarism Fantasy (fancy pdf here).
 
I've seen the idea that if we simply end the federal state, private civil society will step in and take over come up more and more. It's in random tweets by people like Tim Carney, implicit in arguments about sweeping away social insurance, and also involved in the way people like Paul Ryan deploy the term "subsidiarity." I wanted to take apart the history of this idea and why it failed, and would fail again. I also wanted to argue how the welfare state, spotty as it is, met the challenge of the Great Recession in a way that doesn't get enough credit. Finally, I wanted to push liberals to consider that the public will have to take a greater, rather than lesser, role in providing economic security in the future.
 
I'm very excited about this piece, and I hope you read, debate and share it. Check it out here.
 
Bonus: I only got to include a sentence from this amazing February, 1931 speech by President Hoover. Do you notice how some conservative think we can try and provide relief and spending in our current difficult economic times, but only if its done by private, voluntary, charitable organizations or local, as opposed to federal, government? Here is Hoover saying the same exact thing in 1931:
This is not an issue as to whether people shall go hungry or cold in the United States. It is solely a question of the best method by which hunger and cold shall be prevented. It is a question as to whether the American people on one hand will maintain the spirit of charity and mutual self-help through voluntary giving and the responsibility of local government as distinguished on the other hand from appropriations out of the Federal Treasury for such purposes. My own conviction is strongly that if we break down this sense of responsibility of individual generosity to individual and mutual self-help in the country in times of national difficulty and if we start appropriations of this character we have not only impaired something infinitely valuable in the life of the American people but have struck at the roots of self-government. Once this has happened it is not the cost of a few score millions, but we are faced with the abyss of reliance in future upon Government charity in some form or other. The money involved is indeed the least of the costs to American ideals and American institutions.

1931. This is when food riots were breaking out in American cities. Unemployment would be over 15 percent that year, climbing to 25 percent the next. In 1932 you'd also see Douglas MacArthur, Dwight Eisenhower and George Patton leading an army to destroy the encampments of thousands of people occupying Washington DC demanding relief.

The world was falling apart, liberal democracy was facing its worst challenge in decades, and Hoover wouldn't budget on the idea that there was any role for the public or the federal state in meeting the challenges of mass economic insecurity. This is what many conservatives still believe, and it's important to dissect why it fails and what we can do about it.

Follow or contact the Rortybomb blog:

  
The newest Democracy Journal is now online. In addition to pieces from Monica Potts on poverty, Richard Kahlenberg on community colleges, and Jason Furman on the tax code, I have a a big piece on the way conservatives deploy "civil society" and the voluntary state to justify massive cuts to social insurance. The name of the piece is the The Voluntarism Fantasy (fancy pdf here).
 
I've seen the idea that if we simply end the federal state, private civil society will step in and take over come up more and more. It's in random tweets by people like Tim Carney, implicit in arguments about sweeping away social insurance, and also involved in the way people like Paul Ryan deploy the term "subsidiarity." I wanted to take apart the history of this idea and why it failed, and would fail again. I also wanted to argue how the welfare state, spotty as it is, met the challenge of the Great Recession in a way that doesn't get enough credit. Finally, I wanted to push liberals to consider that the public will have to take a greater, rather than lesser, role in providing economic security in the future.
 
I'm very excited about this piece, and I hope you read, debate and share it. Check it out here.
 
Bonus: I only got to include a sentence from this amazing February, 1931 speech by President Hoover. Do you notice how some conservative think we can try and provide relief and spending in our current difficult economic times, but only if its done by private, voluntary, charitable organizations or local, as opposed to federal, government? Here is Hoover saying the same exact thing in 1931:
This is not an issue as to whether people shall go hungry or cold in the United States. It is solely a question of the best method by which hunger and cold shall be prevented. It is a question as to whether the American people on one hand will maintain the spirit of charity and mutual self-help through voluntary giving and the responsibility of local government as distinguished on the other hand from appropriations out of the Federal Treasury for such purposes. My own conviction is strongly that if we break down this sense of responsibility of individual generosity to individual and mutual self-help in the country in times of national difficulty and if we start appropriations of this character we have not only impaired something infinitely valuable in the life of the American people but have struck at the roots of self-government. Once this has happened it is not the cost of a few score millions, but we are faced with the abyss of reliance in future upon Government charity in some form or other. The money involved is indeed the least of the costs to American ideals and American institutions.

1931. This is when food riots were breaking out in American cities. Unemployment would be over 15 percent that year, climbing to 25 percent the next. In 1932 you'd also see Douglas MacArthur, Dwight Eisenhower and George Patton leading an army to destroy the encampments of thousands of people occupying Washington DC demanding relief.

The world was falling apart, liberal democracy was facing its worst challenge in decades, and Hoover wouldn't budget on the idea that there was any role for the public or the federal state in meeting the challenges of mass economic insecurity. This is what many conservatives still believe, and it's important to dissect why it fails and what we can do about it.

Follow or contact the Rortybomb blog:

  

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Quits Won't Tell Us Anything About the True Unemployment Rate (Vacancy Chains 1/2)

Mar 12, 2014Mike Konczal

(Wonkish. Part One of Two. This part covers theory, part two some data.)

Can the number of people quitting their jobs tell us anything useful about slack in the labor market? No. At most, it tells us to focus even more on the stuff we already knew to be watching.

Evan Soltas has argued that the rate at which people quit their job tells us all we need to know about the unemployment rate, in particular how likely it is that the long-term unemployed and people who have left the labor force could be brought back into the labor force. There were several responses from Dean Baker, Jared Bernstein, and Cardiff Garcia.

As a reminder, there are currently 2.5 million Americans who want a job but aren’t looking, and as such are counted as “marginally attached to the labor force” instead of unemployed. There’s a major debate about how much of the collapse in the labor force participation rate is due to de facto unemployment, or people who will come back into the labor force if it gets better (with much of the research pointing to about half).

We should distinguish between what quit rates can tell us about the employed and what they can tell us about the status of the unemployed. What’s the theory of quits in which they tell us what the “true” unemployment rate is? Soltas: “Think about the decision to quit. It's a function of your confidence that you'll find a better job quickly -- which embodies some unobserved but holistic measure of labor-market tightness.” If quits go up, then the long-term unemployed, in this view, “no longer [have] the power to restrain wage growth or discourage the employed from quitting and switching jobs.”

If I understand this correctly, this assumes that quits are a measure of people first becoming unemployed and then looking for a new job (trying to “find a better job quickly”).[i] But I don’t think this is right. A very large percentage, perhaps half, of quits are people moving job-to-job rather than becoming unemployed.[ii]

Under Soltas' view, quits make it more difficult for the existing unemployed to find jobs by increasing unemployment. But doesn’t a quit create a job opening? As such, doesn’t it create an opportunity for an unemployed person, rather than a limitation? Also, even if the employed became unemployed, would that mean that the long-term unemployed couldn’t find work, or just that they are at the end of a very long line?

Vacancy Chains

Let’s try to develop a more firmly grounded theory of quits. What can quits tell us about unemployment as a matter of economic logic? Well, first off, every person who quits his or her job creates a job opening. Someone has to do the work that person was doing. So we should think of “vacancy chains” -- a term made famous by George Akerlof, Andrew Rose, and Janet Yellen (!) back in 1988 -- and their characteristics.

Suppose Amy works at Acorp, and she leaves her job to take a new one. Acorp now has a job opening. They hire Bill away from Bcorp. Now Bcorp has a job opening. So they hire Charlotte from Ccorp. Now Ccorp has a job opening. They hire Dan from Dcorp. Now Dcorp has a job opening.

Note: Amy, Bill, Charlotte and Dan are all counted as “quits,” though they wouldn’t count as having been unemployed.

So Dcorp hangs a sign that says “help wanted.” They can do one of three mutually exclusive things. They can (1) hire an employed person, which will create another quit, which will create another vacancy, which Erin from Ecorp will fill. Thus the vacancy chain is extended one more step. They’ll likely have to pay the employed person a higher wage than that person currently makes to change jobs (or at least in aggregate this will happen). Or they can (2) hire an unemployed person, which will not create another job opening, but instead just close the vacancy chain.[iii] Or, if they can’t fill the job with an employed person or an unemployed person, they (3) leave the job opening unfilled.

So let’s rephrase that. The only thing interesting about the quits rate in this context is what it is implying about the length and conclusion of vacancy chains. If the length of the vacancy chain is infinitely increasing, then wage growth must be skyrocketing. And if the unemployed aren’t capable of taking jobs and closing the vacancy chain, then the number of job openings must rise relative to the unemployment rate.

Which means the interesting things the quits rate tells us about unemployment are entirely captured in wage growth or the number of job openings relative to unemployment (i.e. the Beveridge Curve).

So where are we? Wage growth is still weak, and nowhere near what it was in the late 1990s. Meanwhile, the Beveridge Curve shifted at the height of the crash, but has been remarkably consistent since. The shifting of the Beveridge Curve has been thoroughly debated, with the complicating issues of circularity and endogenous firm search at the forefront. What stands out for me is that the Beveridge Curve hasn’t deteriorated in the past several years, which implies that the increasing duration and prominence of the long-term unemployed in the labor market isn’t showing up in increased job openings.

The quits rate is important. It hints at the lived experience of working throughout the Great Recession and points to the stagnating wages workers face. But from the point of view of the status of the unemployed, it doesn’t tell us the “true” unemployment rate. Rather, it is important because it flags the things we should be watching -- things that are slowly improving, as long as the Fed doesn’t put a stop to it.

[i] Soltas also has a statistical relationship between the two based over the past two business cycles, but if we can’t think of a good theory of what quits tell us about unemployment I’m not sure what weight we should put on this relationship.

[ii] The Census will start releasing job-to-job transition data in late 2014. Hurry Census! We need this data to be publicly digestible.

[iii] This is why Akerlof, Rose, and Yellen believe quits to be counter-cyclical to unemployment, as opposed to the pro-cyclicality predicted by search models. There are more unemployed hanging around to close chains earlier in a recession, reducing the number of quits necessary to close a vacancy chain.

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(Wonkish. Part One of Two. This part covers theory, part two some data.)

Can the number of people quitting their jobs tell us anything useful about slack in the labor market? No. At most, it tells us to focus even more on the stuff we already knew to be watching.

Evan Soltas has argued that the rate at which people quit their job tells us all we need to know about the unemployment rate, in particular how likely it is that the long-term unemployed and people who have left the labor force could be brought back into the labor force. There were several responses from Dean Baker, Jared Bernstein, and Cardiff Garcia.

As a reminder, there are currently 2.5 million Americans who want a job but aren’t looking, and as such are counted as “marginally attached to the labor force” instead of unemployed. There’s a major debate about how much of the collapse in the labor force participation rate is due to de facto unemployment, or people who will come back into the labor force if it gets better (with much of the research pointing to about half).

We should distinguish between what quit rates can tell us about the employed and what they can tell us about the status of the unemployed. What’s the theory of quits in which they tell us what the “true” unemployment rate is? Soltas: “Think about the decision to quit. It's a function of your confidence that you'll find a better job quickly -- which embodies some unobserved but holistic measure of labor-market tightness.” If quits go up, then the long-term unemployed, in this view, “no longer [have] the power to restrain wage growth or discourage the employed from quitting and switching jobs.”

If I understand this correctly, this assumes that quits are a measure of people first becoming unemployed and then looking for a new job (trying to “find a better job quickly”).[i] But I don’t think this is right. A very large percentage, perhaps half, of quits are people moving job-to-job rather than becoming unemployed.[ii]

Under Soltas' view, quits make it more difficult for the existing unemployed to find jobs by increasing unemployment. But doesn’t a quit create a job opening? As such, doesn’t it create an opportunity for an unemployed person, rather than a limitation? Also, even if the employed became unemployed, would that mean that the long-term unemployed couldn’t find work, or just that they are at the end of a very long line?

Vacancy Chains

Let’s try to develop a more firmly grounded theory of quits. What can quits tell us about unemployment as a matter of economic logic? Well, first off, every person who quits his or her job creates a job opening. Someone has to do the work that person was doing. So we should think of “vacancy chains” -- a term made famous by George Akerlof, Andrew Rose, and Janet Yellen (!) back in 1988 -- and their characteristics.

Suppose Amy works at Acorp, and she leaves her job to take a new one. Acorp now has a job opening. They hire Bill away from Bcorp. Now Bcorp has a job opening. So they hire Charlotte from Ccorp. Now Ccorp has a job opening. They hire Dan from Dcorp. Now Dcorp has a job opening.

Note: Amy, Bill, Charlotte and Dan are all counted as “quits,” though they wouldn’t count as having been unemployed.

So Dcorp hangs a sign that says “help wanted.” They can do one of three mutually exclusive things. They can (1) hire an employed person, which will create another quit, which will create another vacancy, which Erin from Ecorp will fill. Thus the vacancy chain is extended one more step. They’ll likely have to pay the employed person a higher wage than that person currently makes to change jobs (or at least in aggregate this will happen). Or they can (2) hire an unemployed person, which will not create another job opening, but instead just close the vacancy chain.[iii] Or, if they can’t fill the job with an employed person or an unemployed person, they (3) leave the job opening unfilled.

So let’s rephrase that. The only thing interesting about the quits rate in this context is what it is implying about the length and conclusion of vacancy chains. If the length of the vacancy chain is infinitely increasing, then wage growth must be skyrocketing. And if the unemployed aren’t capable of taking jobs and closing the vacancy chain, then the number of job openings must rise relative to the unemployment rate.

Which means the interesting things the quits rate tells us about unemployment are entirely captured in wage growth or the number of job openings relative to unemployment (i.e. the Beveridge Curve).

So where are we? Wage growth is still weak, and nowhere near what it was in the late 1990s. Meanwhile, the Beveridge Curve shifted at the height of the crash, but has been remarkably consistent since. The shifting of the Beveridge Curve has been thoroughly debated, with the complicating issues of circularity and endogenous firm search at the forefront. What stands out for me is that the Beveridge Curve hasn’t deteriorated in the past several years, which implies that the increasing duration and prominence of the long-term unemployed in the labor market isn’t showing up in increased job openings.

The quits rate is important. It hints at the lived experience of working throughout the Great Recession and points to the stagnating wages workers face. But from the point of view of the status of the unemployed, it doesn’t tell us the “true” unemployment rate. Rather, it is important because it flags the things we should be watching -- things that are slowly improving, as long as the Fed doesn’t put a stop to it.

[i] Soltas also has a statistical relationship between the two based over the past two business cycles, but if we can’t think of a good theory of what quits tell us about unemployment I’m not sure what weight we should put on this relationship.

[ii] The Census will start releasing job-to-job transition data in late 2014. Hurry Census! We need this data to be publicly digestible.

[iii] This is why Akerlof, Rose, and Yellen believe quits to be counter-cyclical to unemployment, as opposed to the pro-cyclicality predicted by search models. There are more unemployed hanging around to close chains earlier in a recession, reducing the number of quits necessary to close a vacancy chain.

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The Diversity of Arguments for a Higher Minimum Wage

Mar 3, 2014Mike Konczal

I have a piece in the new Boston Review on seven ways of looking at a higher minimum wage increase. I wanted to step back from the denser statistical arguments (though those are included) and get a sense of why the minimum wage is popular and an important feature of our economy. The diversity of reasons is remarkable. The seven ways I focus on are inequality, poverty, policy, feminism, conservatism, republicanism, and Catholicism's living wage. I hope you check it out.

I have a piece in the new Boston Review on seven ways of looking at a higher minimum wage increase. I wanted to step back from the denser statistical arguments (though those are included) and get a sense of why the minimum wage is popular and an important feature of our economy. The diversity of reasons is remarkable. The seven ways I focus on are inequality, poverty, policy, feminism, conservatism, republicanism, and Catholicism's living wage. I hope you check it out.

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Recent Writings, February 2014 Edition

Feb 19, 2014Mike Konczal

Recent Rortybomb enterprise updates:

- My last weekly column at Wonkblog went up a week ago. It's a review of Melissa Gira Grant's book Playing the Whore.

- I wrote about the minimum wage twice at the New Republic. The first time was on the Silicon Valley wage fixing scandal, and what it says about how labor markets work. (it's a nontechnical introduction to "dynamic monopsony" theory, if you are familiar with that.)

If you haven't read about the Silicon Valley scandal I highly recommend it. (I had assumed, falsely, that more people knew about it when I wrote my piece.) Mark Ames had the most comprehensive version when it broke; Josh Harkinson just did another piece on it. It's worth it just for the quotes you'll see from the digital Masters of the Universe.

- I also wrote about the CBO report that just came out on the minimum wage at the New Republic too.

- I also wrote a piece at Al-Jazeera America about what is at stake when liberals, including President Obama, replace a focus on inequality with a focus on opportunity.

Follow or contact the Rortybomb blog:

  

Recent Rortybomb enterprise updates:

- My last weekly column at Wonkblog went up a week ago. It's a review of Melissa Gira Grant's book Playing the Whore.

- I wrote about the minimum wage twice at the New Republic. The first time was on the Silicon Valley wage fixing scandal, and what it says about how labor markets work. (it's a nontechnical introduction to "dynamic monopsony" theory, if you are familiar with that.)

If you haven't read about the Silicon Valley scandal I highly recommend it. (I had assumed, falsely, that more people knew about it when I wrote my piece.) Mark Ames had the most comprehensive version when it broke; Josh Harkinson just did another piece on it. It's worth it just for the quotes you'll see from the digital Masters of the Universe.

- I also wrote about the CBO report that just came out on the minimum wage at the New Republic too.

- I also wrote a piece at Al-Jazeera America about what is at stake when liberals, including President Obama, replace a focus on inequality with a focus on opportunity.

Follow or contact the Rortybomb blog:

  

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The Politics of Children

Feb 19, 2014Mike Konczal

Not the politics of having children, but the politics of actual children. Long-winded, but three things.

One. Katie Baker has written some of the best things I’ve read this month, but one thing stands out: Here to Make Friends. It’s about the difficulty reality show television producers have in making children compete against each other for prizes, as the kids naturally want to cooperate.

“In the beginning, older Kid Nation contestants helped younger, weaker kids out and the dusty air was rife with auspicious anti-grownup sentiment … host Jonathan Karsh, a fully grown man, showed up halfway through the first episode and announced that the kids would be separated into a socioeconomic hierarchy … From then on, the kids were more interested in climbing the ranks of the pseudo-feudal class structure than subverting it.

[Although the] MasterChef Junior … structure was ultimately every-kid-for-themselves, the contestants still found ways to support one another by giving each other hugs and high-fives, tearing up when their new friends lost, and celebrating their competitor’s victories.”

It then goes into the Hunger Games. Definitely worth a read.

Two. From New York Daily News, 4 and 5-year-olds are taking standardized math tests. “Teachers said kindergartners are bewildered. ‘Sharing is not caring anymore; developmentally, it’s not the right thing to do,’ said one Queens teacher, whose pupils kept trying to help one another on the math test she gave for the first time this fall.”

Sarah Jaffe likes using this story as a good example of what people mean by neoliberalism subjectivity creation. There’s something awful in a teacher having to break up 5 year olds trying to help each other learn and overcome obstacles, saying that they can’t help other, but instead should be looking to compete and win.

Three. In early 2006, I decided I was going to visit a variety of churches across Chicago, both to see the ceremonies and as an architecture tour. I grew up attending a Catholic Church with an aggressively modern design that shocked the Poles in Chicago’s Gage Park when it arrived, so I always had a fascination with church architecture.

One stop I wanted to make was at First Unitarian Church of Chicago, in a gothic Hyde Park building. I checked their schedule and Melissa Harris-Lacewell was giving a talk on “The Ethics of Getting Away With It.” ("How can our diverse religious and humanist traditions help us to understnad why bad acts so often seem to bring prosperity and reward?") I had seen her give an interesting talk on public access when my DVR box recorded that instead of the normally scheduled Chic-a-go-go, and I was intrigued. (Harris-Lacewell is now Melissa Harris-Perry, of the weekend show on MSNBC. I debated trying to bring this story up during commercial when I was on that show, but thought better of it.)

Before the ceremony, the children in the audience were given a bunch of pieces of wrapped candy and told that they could pass them out or do whatever they want with them. And the kids handed them so that each person in the church got some. They didn’t stockpile them, or only pass them out to their friends, but ensured that there was something for everyone. A basic distributional concern that society would eventually try to remove from them.

Follow or contact the Rortybomb blog:

  

Not the politics of having children, but the politics of actual children. Long-winded, but three things.

One. Katie Baker has written some of the best things I’ve read this month, but one thing stands out: Here to Make Friends. It’s about the difficulty reality show television producers have in making children compete against each other for prizes, as the kids naturally want to cooperate.

“In the beginning, older Kid Nation contestants helped younger, weaker kids out and the dusty air was rife with auspicious anti-grownup sentiment … host Jonathan Karsh, a fully grown man, showed up halfway through the first episode and announced that the kids would be separated into a socioeconomic hierarchy … From then on, the kids were more interested in climbing the ranks of the pseudo-feudal class structure than subverting it.

[Although the] MasterChef Junior … structure was ultimately every-kid-for-themselves, the contestants still found ways to support one another by giving each other hugs and high-fives, tearing up when their new friends lost, and celebrating their competitor’s victories.”

It then goes into the Hunger Games. Definitely worth a read.

Two. From New York Daily News, 4 and 5-year-olds are taking standardized math tests. “Teachers said kindergartners are bewildered. ‘Sharing is not caring anymore; developmentally, it’s not the right thing to do,’ said one Queens teacher, whose pupils kept trying to help one another on the math test she gave for the first time this fall.”

Sarah Jaffe likes using this story as a good example of what people mean by neoliberalism subjectivity creation. There’s something awful in a teacher having to break up 5 year olds trying to help each other learn and overcome obstacles, saying that they can’t help other, but instead should be looking to compete and win.

Three. In early 2006, I decided I was going to visit a variety of churches across Chicago, both to see the ceremonies and as an architecture tour. I grew up attending a Catholic Church with an aggressively modern design that shocked the Poles in Chicago’s Gage Park when it arrived, so I always had a fascination with church architecture.

One stop I wanted to make was at First Unitarian Church of Chicago, in a gothic Hyde Park building. I checked their schedule and Melissa Harris-Lacewell was giving a talk on “The Ethics of Getting Away With It.” ("How can our diverse religious and humanist traditions help us to understnad why bad acts so often seem to bring prosperity and reward?") I had seen her give an interesting talk on public access when my DVR box recorded that instead of the normally scheduled Chic-a-go-go, and I was intrigued. (Harris-Lacewell is now Melissa Harris-Perry, of the weekend show on MSNBC. I debated trying to bring this story up during commercial when I was on that show, but thought better of it.)

Before the ceremony, the children in the audience were given a bunch of pieces of wrapped candy and told that they could pass them out or do whatever they want with them. And the kids handed them so that each person in the church got some. They didn’t stockpile them, or only pass them out to their friends, but ensured that there was something for everyone. A basic distributional concern that society would eventually try to remove from them.

Follow or contact the Rortybomb blog:

  

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Conservatives Concerned About the CBO and the Dignity of Work Should Consider a Higher Minimum Wage

Feb 13, 2014Mike Konczal

It’s a shame that Ron Unz’s conservative case for a higher minimum wage gets caught up in the debate over immigration politics, because the arguments are broader and more fascinating, and incredibly important to have as part of the debate. This is especially true in light of last week’s CBO report, which has sent conservatives running to the barricades over the impact of Obamacare on waged work in this country. The conservative case for a minimum wage would address the two main concerns the right has displayed on this topic.

Broadly speaking, as summarized by Josh Barro here, there are two separate elements of the conservative take on Obamacare and the CBO’s findings. The first is that it allows people to break “job lock” and leave the labor market. This means there are fewer people working, which concerns conservatives because, as Ross Douthat put it, paid wage labor is “essential to dignity, mobility and social equality,” and they “see its decline as something to be fiercely resisted.” [1]

The second is that, because of the subsidies that are given to low-wage workers, these workers face a higher marginal tax rate. If there are subsidies for low-wage workers, as those workers make more money those subsidies are phased out. The fact that they are losing money while earning more money, or that a higher income means a smaller subsidy, functions like a tax. And this means that workers will work a bit less. Liberals in general don’t like this (though they do like that both effects will increase wages, as well they should), but understand it is going to be part of any type of means-tested income support.

Where does the minimum wage come in?

To address the first complaint, it’s important to keep in mind that the “dignity of work” isn’t a static concept, but tied directly to the conditions of work itself. If you ask the people striking against their low-wage job right now, you’ll find that things like working unpaid hours or erratic scheduling are also part of their complaints. As a result of these conditions, the work is socially tagged as undignified, degrading, erratic, and unpredictable. [2]

So driving the wages straight up can help counteract this. As Ron Unz writes, “consider the impact of a sharp rise in the minimum wage, sufficient to remove the taint of poverty overhanging so many of our lower-tier jobs.” This would, in turn, make lower-tier service jobs more attractive from a social perspective, increasing the level of dignity for those who hold them. This would in turn make people much more likely to seek out and hold said jobs. As I’ve argued elsewhere, by reducing vacancies, encouraging job searches and tightening the low-wage labor market, a higher minimum wage would also de facto give low-wage workers more power in the workplace, which would help reduce the petty tyrannies that come with low-wage work.

The second issue comes from effective marginal tax rates, or the burden low-wage workers face as income support is phased out. And the common bipartisan alternative to the minimum wage, increasing the earned-income tax credit (EITC), doubles down on this. There are ways to manage it and make the effective tax rate have less of a bite. But it’s essential to the DNA of means-tested income support that it’ll eventually phase out, and as a result impose some higher marginal tax rate. Conservatives who support a higher earned-income tax credit play into this as well.

The minimum wage, however, poses no such higher effective tax rate. If you work more hours at the minimum wage, there’s no effective tax because the minimum wage doesn't phase out. So if the slight effect of higher effective tax rates of Obamacare is driving you up the wall, perhaps now is a good time to consider this positive side of the minimum wage.

Additional:

I’ve seen many people point out that there’s an administrative simplicity and cost-effectiveness to the minimum wage over the EITC, amplifying the case for them to act as complements to each other instead of substitutes. But I had no idea that, according to the IRS and Treasury, the EITC’s improper payment rate is between 21 and 25 percent. This includes overpayments as well as underpayments.

That simply doesn’t happen with the minimum wage. And if you are a conservative who wants to “simplify” government, or if bringing the impact of government as close as possible to those who need help - say directly in the workplace rather than in the complicated and confusing tax code administered by a faraway IRS - is important to your subsidiarity view of policy, a bigger role for the minimum wage is essential.

[1] This will sound snarky, but I genuinely mean it: I want to see a conservative take on Nickel and Dimed, where maids cleaning bathrooms experience “social equality” with the people paying them.

[2] Remember that Dave Chappelle comedy skit about the person who gets a fast food job to impress his community, and finds that it isn’t quite as dignified as he thought?

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It’s a shame that Ron Unz’s conservative case for a higher minimum wage gets caught up in the debate over immigration politics, because the arguments are broader and more fascinating, and incredibly important to have as part of the debate. This is especially true in light of last week’s CBO report, which has sent conservatives running to the barricades over the impact of Obamacare on waged work in this country. The conservative case for a minimum wage would address the two main concerns the right has displayed on this topic.

Broadly speaking, as summarized by Josh Barro here, there are two separate elements of the conservative take on Obamacare and the CBO’s findings. The first is that it allows people to break “job lock” and leave the labor market. This means there are fewer people working, which concerns conservatives because, as Ross Douthat put it, paid wage labor is “essential to dignity, mobility and social equality,” and they “see its decline as something to be fiercely resisted.” [1]

The second is that, because of the subsidies that are given to low-wage workers, these workers face a higher marginal tax rate. If there are subsidies for low-wage workers, as those workers make more money those subsidies are phased out. The fact that they are losing money while earning more money, or that a higher income means a smaller subsidy, functions like a tax. And this means that workers will work a bit less. Liberals in general don’t like this (though they do like that both effects will increase wages, as well they should), but understand it is going to be part of any type of means-tested income support.

Where does the minimum wage come in?

To address the first complaint, it’s important to keep in mind that the “dignity of work” isn’t a static concept, but tied directly to the conditions of work itself. If you ask the people striking against their low-wage job right now, you’ll find that things like working unpaid hours or erratic scheduling are also part of their complaints. As a result of these conditions, the work is socially tagged as undignified, degrading, erratic, and unpredictable. [2]

So driving the wages straight up can help counteract this. As Ron Unz writes, “consider the impact of a sharp rise in the minimum wage, sufficient to remove the taint of poverty overhanging so many of our lower-tier jobs.” This would, in turn, make lower-tier service jobs more attractive from a social perspective, increasing the level of dignity for those who hold them. This would in turn make people much more likely to seek out and hold said jobs. As I’ve argued elsewhere, by reducing vacancies, encouraging job searches and tightening the low-wage labor market, a higher minimum wage would also de facto give low-wage workers more power in the workplace, which would help reduce the petty tyrannies that come with low-wage work.

The second issue comes from effective marginal tax rates, or the burden low-wage workers face as income support is phased out. And the common bipartisan alternative to the minimum wage, increasing the earned-income tax credit (EITC), doubles down on this. There are ways to manage it and make the effective tax rate have less of a bite. But it’s essential to the DNA of means-tested income support that it’ll eventually phase out, and as a result impose some higher marginal tax rate. Conservatives who support a higher earned-income tax credit play into this as well.

The minimum wage, however, poses no such higher effective tax rate. If you work more hours at the minimum wage, there’s no effective tax because the minimum wage doesn't phase out. So if the slight effect of higher effective tax rates of Obamacare is driving you up the wall, perhaps now is a good time to consider this positive side of the minimum wage.

Additional:

I’ve seen many people point out that there’s an administrative simplicity and cost-effectiveness to the minimum wage over the EITC, amplifying the case for them to act as complements to each other instead of substitutes. But I had no idea that, according to the IRS and Treasury, the EITC’s improper payment rate is between 21 and 25 percent. This includes overpayments as well as underpayments.

That simply doesn’t happen with the minimum wage. And if you are a conservative who wants to “simplify” government, or if bringing the impact of government as close as possible to those who need help - say directly in the workplace rather than in the complicated and confusing tax code administered by a faraway IRS - is important to your subsidiarity view of policy, a bigger role for the minimum wage is essential.

[1] This will sound snarky, but I genuinely mean it: I want to see a conservative take on Nickel and Dimed, where maids cleaning bathrooms experience “social equality” with the people paying them.

[2] Remember that Dave Chappelle comedy skit about the person who gets a fast food job to impress his community, and finds that it isn’t quite as dignified as he thought?

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The Three Big Questions Janet Yellen Should Answer in Today's Testimony

Feb 11, 2014Mike Konczal

Janet Yellen has her first Humphrey-Hawkins testimony today, where she’ll give a prepared speech, already released online, and testify before the Republican-controlled House Financial Services committee. What are the points that she’ll need to cover?

The first element is how and when she’ll manage the so-called “taper” of monetary policy. At the end of 2012, the Federal Reserve started an extensive program of monetary stimulus designed to boost the economy. They declared that this would stay in full effect until unemployment dropped to 6.5 percent.

We are close to hitting that threshold. The unemployment rate is at 6.6 percent, and will fall below 6.5 percent very soon. Yellen, in her testimony, emphasizes a broader picture of unemployment than just the headline rate, including the amount of people working part-time against their choice and the amount of long-term unemployed.

What’s even more interesting, and a bit new, is her statement that “it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the 2 percent goal.”

Hopefully Congress will ask her to consider these choices in light of the last two weak job reports. Isn’t it more appropriate to step on the gas rather than test the brakes? However, she’ll likely encounter a skeptical Congress, and as such it will be essential for Yellen to make the case that the weak job numbers, combined with the vagueness of what the headline unemployment rate is telling us, requires continued monetary action.

The second point is how she'll handle financial reform. Given that Yellen is considered a monetary dove, it’s been interesting to see the amount of questions she’s taken from Congress about where Dodd-Frank and other reforms stand. This will no doubt continue into this testimony.

Financial reform has hit an interesting point where much of the rule-writing from the Dodd-Frank Act is finished, and now there’s a transition to both enforcement and clean-up action. Yellen notes in her testimony that rules related to derivatives as well as capital requirements still remain in the works. It would be useful for Congress to ask her where she thinks capital requirements for the largest firms should ultimately end up. Does she think that this number is too high, or too low?

It would also be fascinating for someone to ask Yellen about the recent wave of “postal banking” coverage, and the role the government can play in providing essential banking services to unbanked and underbanked Americans.

The third and most important is how the Federal Reserve will transition to prevent periods of mass unemployment like we are currently experiencing. Is a 2 percent inflation target either high enough, or the right target, for the job?

Sadly, this will be the topic least covered of them all. However, it’s the one that is most essential for preventing the economy from falling back into the situation it now finds itself in.

Mike Konczal is a Fellow at the Roosevelt Institute.

Follow or contact the Rortybomb blog:

  
Image via Federal Reserve

Janet Yellen has her first Humphrey-Hawkins testimony today, where she’ll give a prepared speech, already released online, and testify before the Republican-controlled House Financial Services committee. What are the points that she’ll need to cover?

The first element is how and when she’ll manage the so-called “taper” of monetary policy. At the end of 2012, the Federal Reserve started an extensive program of monetary stimulus designed to boost the economy. They declared that this would stay in full effect until unemployment dropped to 6.5 percent.

We are close to hitting that threshold. The unemployment rate is at 6.6 percent, and will fall below 6.5 percent very soon. Yellen, in her testimony, emphasizes a broader picture of unemployment than just the headline rate, including the amount of people working part-time against their choice and the amount of long-term unemployed.

What’s even more interesting, and a bit new, is her statement that “it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the 2 percent goal.”

Hopefully Congress will ask her to consider these choices in light of the last two weak job reports. Isn’t it more appropriate to step on the gas rather than test the brakes? However, she’ll likely encounter a skeptical Congress, and as such it will be essential for Yellen to make the case that the weak job numbers, combined with the vagueness of what the headline unemployment rate is telling us, requires continued monetary action.

The second point is how she'll handle financial reform. Given that Yellen is considered a monetary dove, it’s been interesting to see the amount of questions she’s taken from Congress about where Dodd-Frank and other reforms stand. This will no doubt continue into this testimony.

Financial reform has hit an interesting point where much of the rule-writing from the Dodd-Frank Act is finished, and now there’s a transition to both enforcement and clean-up action. Yellen notes in her testimony that rules related to derivatives as well as capital requirements still remain in the works. It would be useful for Congress to ask her where she thinks capital requirements for the largest firms should ultimately end up. Does she think that this number is too high, or too low?

It would also be fascinating for someone to ask Yellen about the recent wave of “postal banking” coverage, and the role the government can play in providing essential banking services to unbanked and underbanked Americans.

The third and most important is how the Federal Reserve will transition to prevent periods of mass unemployment like we are currently experiencing. Is a 2 percent inflation target either high enough, or the right target, for the job?

Sadly, this will be the topic least covered of them all. However, it’s the one that is most essential for preventing the economy from falling back into the situation it now finds itself in.

Mike Konczal is a Fellow at the Roosevelt Institute.

Follow or contact the Rortybomb blog:

  
 
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In 2013, the Fed Showed Why Fiscal Policy is Still Important

Jan 10, 2014Mike Konczal

Last April I had a piece in Wonkblog saying we’d get to see whether or not the expansion of monetary policy in fall 2012 would offset 2013 fiscal austerity. I concluded that it wasn’t looking too good at the start, that QE3 was a smart idea anyway (and should go further), and, most importantly, that a fiscal multiplier would be in effect, and we should run a larger deficit and cancel out things like the payroll tax cut while the economy is still fragile. It received a lot of responses at the time (see the endnotes here for a list).

Recently, there’s been a wave of posts by Scott Sumner and David Beckworth calling me and others out, saying that the votes are in and it's a victory for the market monetarists, the team that said monetary policy would offset austerity in 2013 and fiscal policy wouldn't matter. (There have also been responses from Brad DeLong and Noah Smith.)

I don’t see it. I’m willing to be convinced, but the two clearest tests I saw the market monetarists put forward in early 2013 have resulted in failure. Let’s go through them:

1. “Paul Krugman Will Not Like These Figures,” David Beckworth, December 2, 2012, Macro and Other Market Musings

At the end of 2012, David Beckworth told the Keynesians they were wrong. In a provocative post, he argued “that nominal GDP (NGDP) growth has been remarkably stable since about mid-2010 despite a contraction in federal government expenditures" and that "the Fed has been doing a remarkable job keeping NGDP growth stable.” He posted a graph showing year-over-year NGDP growth at a steady clip.

My Wonkblog column was addressed to Beckworth specifically, and he reiterated the same exact data graphic in his response, arguing, “The U.S. series shows a stable NGDP growth rate.”

Even though the approach of examining year-over-year NGDP growth drew criticism, I like this test because it draws a line in the sand and it also fits with my understanding of how the market monetarists view the situation. The Federal Reserve picks the NGDP path it wants, as if it was off a menu, no matter what is going on with the rest of the economy.

So how did this line in the sand turn out? Here’s the data updated through 2013, with year-over-year (Beckworth’s line) and two quarters showing:

It was stable, until it wasn’t. You can see the year-over-year stable at 4-5 percent from 2011 through part of 2012, but when government spending starts to fall in late 2012 and through 2013, this falls as well. NGDP growth was lower in the first two quarters of 2013 than it was in 2012.

The third quarter did spike, but it was mostly the result of inventories, which, as Yglesias says, is probably bad news. Even more interesting, there wasn’t any additional government austerity in this quarter. Government spending actually increased slightly as state and local spending increased, which more than canceled out declining federal spending. (If continued, this would be an excellent trend, like the opposite of the downturn in which state and local austerity canceled out additional federal spending. I was hoping we'd have more data before we started this conversation.)

I’d note Beckworth didn’t mention this data or his old approach at all in his victory lap. Scott Sumner used this graph and data for his "Most Important Graphic of 2013," but didn’t include any of the 2013 data.

1.a Another related way of judging how the economy evolved in 2013 is to compare it to the Federal Reserve’s projections of it. As some market monetarists believe (e.g. Ryan Avent), these projections are an engine, not a camera -- they aren’t neutral projections of inflation and growth but also a communication of what the Fed thinks about what it can accomplish, which in turn will have an impact and determine what happens in the economy.

How did the Fed's projections for 2013 turn out? Did the economy end up how the Fed said it would when it announced expanded monetary policy?

It fell, both in real GDP and especially core inflation. Which leads me to the second test…

2: “The Federal Reserve's New Yield Curve,” Matt Yglesias, January 21, 2013, Slate

One way to read 2012’s monetary actions was that the Federal Reserve really wanted to hit a 2 percent inflation target. First they announced said target, then they announced open-ended purchases, then they announced that 2 percent wasn’t a ceiling and that they’d tolerate inflation above 2 percent.

Many people considered this an important part of the Fed’s ability to boost the economy (e.g. “the commitment to allow higher inflation in the future is one of the key methods through which the central bank can have a positive effect on an economy stuck at the zero lower bound”). I had written a lot about the Evans Rule, and why it would be a good idea for people to support, so I was watching this closely.

Yglesias, in the linked post, pointed to higher inflation projections in the short- and medium-term as of January as a success story. But, as you can see above, we then went on to have inflation rates collapse, leading to some of the lowest inflation rates in decades.

Regardless of what you think the Fed wanted in late 2012, they certainly weren't trying to generate lower inflation. If the Fed truly is omnipotent, we shouldn't see this. You can say that the bickering over the taper caused these problems, but this is precisely, as Michael Woodford has pointed out, one of advantages of fiscal stimulus in these situations (as I said in last year’s piece, “Using fiscal policy also avoids the expectations problems that plague monetary policy”).

To reiterate, I think the Federal Reserve should be doing more. I’d love to see Yellen enact a genuine regime change at the Fed. But we shouldn’t doubt that fiscal policy, at this moment, is making a difference in the giant slack that still smothers our economy and is collapsing our labor force.

Follow or contact the Rortybomb blog:

  

 

Last April I had a piece in Wonkblog saying we’d get to see whether or not the expansion of monetary policy in fall 2012 would offset 2013 fiscal austerity. I concluded that it wasn’t looking too good at the start, that QE3 was a smart idea anyway (and should go further), and, most importantly, that a fiscal multiplier would be in effect, and we should run a larger deficit and cancel out things like the payroll tax cut while the economy is still fragile. It received a lot of responses at the time (see the endnotes here for a list).

Recently, there’s been a wave of posts by Scott Sumner and David Beckworth calling me and others out, saying that the votes are in and it's a victory for the market monetarists, the team that said monetary policy would offset austerity in 2013 and fiscal policy wouldn't matter. (There have also been responses from Brad DeLong and Noah Smith.)

I don’t see it. I’m willing to be convinced, but the two clearest tests I saw the market monetarists put forward in early 2013 have resulted in failure. Let’s go through them:

1. “Paul Krugman Will Not Like These Figures,” David Beckworth, December 2, 2012, Macro and Other Market Musings

At the end of 2012, David Beckworth told the Keynesians they were wrong. In a provocative post, he argued “that nominal GDP (NGDP) growth has been remarkably stable since about mid-2010 despite a contraction in federal government expenditures" and that "the Fed has been doing a remarkable job keeping NGDP growth stable.” He posted a graph showing year-over-year NGDP growth at a steady clip.

My Wonkblog column was addressed to Beckworth specifically, and he reiterated the same exact data graphic in his response, arguing, “The U.S. series shows a stable NGDP growth rate.”

Even though the approach of examining year-over-year NGDP growth drew criticism, I like this test because it draws a line in the sand and it also fits with my understanding of how the market monetarists view the situation. The Federal Reserve picks the NGDP path it wants, as if it was off a menu, no matter what is going on with the rest of the economy.

So how did this line in the sand turn out? Here’s the data updated through 2013, with year-over-year (Beckworth’s line) and two quarters showing:

It was stable, until it wasn’t. You can see the year-over-year stable at 4-5 percent from 2011 through part of 2012, but when government spending starts to fall in late 2012 and through 2013, this falls as well. NGDP growth was lower in the first two quarters of 2013 than it was in 2012.

The third quarter did spike, but it was mostly the result of inventories, which, as Yglesias says, is probably bad news. Even more interesting, there wasn’t any additional government austerity in this quarter. Government spending actually increased slightly as state and local spending increased, which more than canceled out declining federal spending. (If continued, this would be an excellent trend, like the opposite of the downturn in which state and local austerity canceled out additional federal spending. I was hoping we'd have more data before we started this conversation.)

I’d note Beckworth didn’t mention this data or his old approach at all in his victory lap. Scott Sumner used this graph and data for his "Most Important Graphic of 2013," but didn’t include any of the 2013 data.

1.a Another related way of judging how the economy evolved in 2013 is to compare it to the Federal Reserve’s projections of it. As some market monetarists believe (e.g. Ryan Avent), these projections are an engine, not a camera -- they aren’t neutral projections of inflation and growth but also a communication of what the Fed thinks about what it can accomplish, which in turn will have an impact and determine what happens in the economy.

How did the Fed's projections for 2013 turn out? Did the economy end up how the Fed said it would when it announced expanded monetary policy?

It fell, both in real GDP and especially core inflation. Which leads me to the second test…

2: “The Federal Reserve's New Yield Curve,” Matt Yglesias, January 21, 2013, Slate

One way to read 2012’s monetary actions was that the Federal Reserve really wanted to hit a 2 percent inflation target. First they announced said target, then they announced open-ended purchases, then they announced that 2 percent wasn’t a ceiling and that they’d tolerate inflation above 2 percent.

Many people considered this an important part of the Fed’s ability to boost the economy (e.g. “the commitment to allow higher inflation in the future is one of the key methods through which the central bank can have a positive effect on an economy stuck at the zero lower bound”). I had written a lot about the Evans Rule, and why it would be a good idea for people to support, so I was watching this closely.

Yglesias, in the linked post, pointed to higher inflation projections in the short- and medium-term as of January as a success story. But, as you can see above, we then went on to have inflation rates collapse, leading to some of the lowest inflation rates in decades.

Regardless of what you think the Fed wanted in late 2012, they certainly weren't trying to generate lower inflation. If the Fed truly is omnipotent, we shouldn't see this. You can say that the bickering over the taper caused these problems, but this is precisely, as Michael Woodford has pointed out, one of advantages of fiscal stimulus in these situations (as I said in last year’s piece, “Using fiscal policy also avoids the expectations problems that plague monetary policy”).

To reiterate, I think the Federal Reserve should be doing more. I’d love to see Yellen enact a genuine regime change at the Fed. But we shouldn’t doubt that fiscal policy, at this moment, is making a difference in the giant slack that still smothers our economy and is collapsing our labor force.

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