Quote of the Day: Math Is Hard

From Paul Ryan, explaining to Chris Wallace why he refuses to talk about the Romney tax plan in detail:

I don't have the time. It would take me too long to go through all of the math.

Well okay then! I guess we should all stop worrying our pretty little heads about this. After all, I'm sure Ryan and Romney's team of economists has been meticulous with their calculations.

Still, my great-grandmother was from Missouri, and I guess I'd like to see the arithmetic anyway. You never know, after all. It might turn out, for example, that Romney's plan would cut taxes on millionaires and raise taxes on the middle class, and he just doesn't want anyone to know this. Sounds crazy, doesn't it? But you never know.

Low Interest Rates, High Inflation, and NGDP Targeting

NGDP stands for nominal GDP, and it's the level of GDP without adjusting for inflation. It's become much talked about lately because of proposals that this is what the Federal Reserve should target. Not interest rates, not inflation, and not unemployment. Just make sure that NGDP rises steadily (say, 5% per year) and the economy will prosper. In some years, that might mean 4% real growth and 1% inflation, and in others it might mean 1% real growth and 4% inflation. Doesn't matter. It's all good.

Matt Yglesias explains how this works using an example of a company trying to decide whether to expand production:

You look to your left and you see a stack of dollars. You look to your right and you see a bunch of machines. Do you want to trade the dollars for the machines? It's a close call.

Now a little birdie from the Bureau of Labor Statistics shows up and tells you that the price level is going to surge over the next three years. Suddenly your decision is made for you. That stack of dollars isn't as valuable as you thought it was. Buy the machines!

But no, a second little birdie arrives this time from the Bureau of Economic Analysis and it's here to tell you that the level of real output is going to surge over the next three years. Suddenly your decision is made for you. That pile of machines is more valuable than you thought it was. So go buy them!

The point is that any information pointing toward higher NGDP at the margin points in the direction of marginally more investment.

It's worth adding a piece that got left out here. If this explanation were literally true, then all we'd need to spur economic growth is high inflation all the time. Weimar Germany would be an economic miracle instead of a millstone that continues to hang around Angela Merkel's neck a century after the fact.

But the missing piece is interest rates. Interest rates generally vary with inflation, so in the first example our befuddled CEO will stay befuddled. Sure, he figures, inflation will be up, but so will the returns his CFO can make by investing the corporate cash hoard. The knife edge between keeping money in the bank and spending it on increased production is still a knife edge.

The way this calculus changes is if the Federal Reserve keeps interest rates low and promises to keep them low for a good long time. This is the "expectations channel." If the Fed does this, and if you believe that they're dead serious no matter what, then you might as well buy the machines. Cash sitting in the bank is going to lose value, and if the decision was a close call in the first place, this will be enough to make plant expansion look like a better deal.1

Note that if it's not a close call, none of this matters. But the whole point of policies like this isn't to get everyone in the country to change their preferences. It's to change things on the margin. If 10% of the companies in America are on the fence about increasing production, and the promise/threat of low interest rates is enough to push them over the edge into increasing production by 10%, then that's 1% more overall production. And that's great for the economy.

The key here is credibility. Investors have to believe that the Fed is absolutely committed to its NGDP goal and won't back down even if inflation rises. And this, of course, is the problem with NGDP targeting: investors aren't idiots, and they know perfectly well that there's plenty of opposition to any policy that tolerates higher inflation. This makes it nearly impossible for a central bank to convince the markets that there's absolutely no chance that it will change its mind. Given the real-world political constraints here, I don't really see how this is likely to change in the near future.

1Put in different terms, the hurdle rate for the investment has gone down. For all practical purposes, the cost of money is negative, and this makes the financial case for spending money on plant expansion more favorable. It's really negative real interest rates that are doing most of the heavy lifting here.

Citizens United is Now the Right's Go-To Excuse for Labor Bashing

Here in the great state of California, corporate interests have been trying for years to pass a "paycheck protection" initiative that would prohibit unions from making payroll deductions for political purposes. They've failed every time, not because my fellow citizens are deliriously in love with public sector unions, but just because of the manifest unfairness of these things. Even people who aren't crazy about unions have a hard time swallowing an initiative that deliberately cuts off labor at the knees but does nothing to stop corporate spending.

But they never stop trying, and their latest effort is Proposition 32, which is on the ballot this November. The LA Times reports that it's way behind, mostly likely due to a brilliant ad that's been running around the clock on local stations in these parts. You can read the whole piece if you're interested, but I was especially charmed by this bit at the very end:

Although the measure would block the direct flow of money from corporations and unions to candidates, experts said businesses would be free to spend unlimited amounts on independent committees to boost or challenge candidates and ballot measures. Labor would be free to do likewise, but its fundraising mechanism would have been cut off.

"You can't keep big money out of politics," said Gary Jacobson, a political scientist at UC San Diego. "But you can make it harder for your opponent to raise money."

The initiative's backers acknowledge the measure's limitations, saying they went as far as existing law allows. The U.S. Supreme Court ended limits on political spending through independent organizations in 2010. The court ruled such contributions to be free speech, protected by the Constitution.

"Anybody who wants to get serious about campaign finance reform runs right into all of the cases under the 1st Amendment," said Michael Capaldi, a Republican attorney who helped draft Proposition 32.

Isn't that great? Corporate interests are now using Citizens United as their go-to excuse for why they have no choice but to be unfair. We'd really like to end corporate spending, honest we would. But the Supreme Court won't let us. It's sad. But at least we can go halfway and end union spending, and half a loaf is better than none, right? We're doing the best we can here, folks.

You could refloat the Titanic with the crocodile tears on display here. I can't help but admire their chutzpah.

Friday Cat Blogging - 28 September 2012

After a hard day of being a cat, there's nothing quite so satisfying as Marian coming home and pulling off her shoes so you can get a nice big snootful of that lovely foot aroma. Am I right or am I right? You know I'm right.

Romney Aides "Pretty Resigned" to Losing

Over at NRO, Denis Boyles passes along an anecdote from Sam Coates of the London Times, who says that everyone in Europe is now assuming that Mitt Romney will lose in November:

Coates said the assumption of a Romney defeat fit his own view of the Republicans surrounding Mitt, a pessimism he saw back when Romney was in London eating his foot while talking about the Olympics. “His aides were there,” he said, “and they were telling some of our political advisers that, really, they weren’t that optimistic about their guy’s chances. They’re pretty resigned to it not going well, and it’s interesting to see that people are already moving away from his campaign.

So what's the answer? You guessed it: Romney's being too damn moderate. He needs to let his tea party flag fly:

In fact, what Americans seem to want is more polarization, not less. Those Republicans who try to campaign by galvanizing and leading their base, instead of ignoring and avoiding it, must be feeling now the way Romney’s dour aides have apparently felt all along — “pretty resigned,” minus the pretty.

We're going to be hearing a lot more of this as time goes by and Romney's campaign looks ever more hopeless. Despite the fact that Romney has faithfully adopted virtually every position the tea party has demanded of him, the true believers are already preparing the ground for his increasingly inevitable election-day repudiation. And their story is going to be exactly what you think: Romney was never really one of them and the American public sniffed that out. They wanted a real red-meat conservative, and Romney wasn't that guy.

You see, true conservatism can never fail, it can only be failed. Welcome to 2013.

Nate Silver: Obama Got a Bump After Leaked Romney Video

If the election were held today, President Obama would win more than 52 percent of the popular vote, an increase that could be attributed to the release of Mitt Romney's "47 percent" video, according to political calculus done by Nate Silver of The New York Times' Five Thirty Eight blog.

Silver charted our Romney video, along with three other events he considers the most important political news of the last month: the Republican and Democratic National Conventions, and the attack on the US Consulate in Libya. His conclusion:

By Sept. 17, the date when the video of Mr. Romney’s remarks was released and received widespread attention, the momentum from Mr. Obama’s convention appeared to have stalled (although not necessarily reversed itself). Mr. Obama led in the popular vote by 4.1 percentage points on that date, according to the "now-cast." Since then, however, Mr. Obama has gained further ground in the polls. As of Thursday, he led in the popular vote by 5.7 percentage points in the "now-cast," a gain of 1.6 percentage points since Mr. Romney’s remarks became known to the public.

Silver's chart, below, does not include the effect of the national conventions or economic trends, which makes it useful for looking at the isolated impact of the Romney videos on the 2012 presidential election. Nate Silver, The New York TimesOver the coming weeks, political pundits will likely be interested in seeing an updated version of this chart, as Romney continues to feel the aftershocks of his remarks.

Obama is Still Killing It on InTrade

I don't really have any big point to make here, I'm just following up on a post I did last week that compared President Obama's standing among the InTrade punters at two points in time: (a) after Mitt Romney's flubbed response to the Cairo attacks, and (b) after MoJo's release of the secret fundraising video. Last week we only had a couple of days of data following the video release, but how we've got a full ten days. And it sure looks like the video has had a sustained effect that's even bigger than the Cairo gaffe.

I don't know if InTrade trends are very meaningful, so take this with a grain of salt. But it sure looks like that video has caused Romney a world of hurt.

Quote of the Day: Todd Akin Is a Cult Leader

Missouri Senate candidate Todd Akin is under fire this week for saying his Democratic opponent, Sen. Claire McCaskill, is not "ladylike," for comparing children's health insurance to the Titanic, and for alleging that the National Defense Authorization Act legalizes bestiality. So, kind of a typical week for him.

But this, from Akin's pollster Kellyanne Conway in an interview with the Family Research Council, may just take the cake. In attempting to explain Akin's resilience, Conway pulls up an odd analogy: the 1993 siege of the Branch Davidian cult compound in Waco, Texas:

I've expressed this to Todd as my client for a while now, I’ve expressed it to him directly—the first day or two where it was like the Waco with David Koresh situation where they’re trying to smoke him out with the SWAT teams and the helicopters and the bad Nancy Sinatra records. Then here comes day two and you realize the guy's not coming out of the bunker. Listen, Todd has shown his principle to the voters.

Sure, Todd Akin is a crazy cult leader. But he's our crazy cult leader.

(h/t Right Wing Watch)

Will Suburban Wingnuts Descend on the Inner City on November 6th?

Ed Kilgore writes today about True the Vote, a Houston-based tea party group that plans to deploy a million poll watchers to make sure that Democratic thugs don't try to steal the election this November. Ed is....concerned:

It's hard to imagine a more dangerous scenario than that of hundreds of thousands of self-righteous suburban wingnuts showing up in poor and minority neighborhoods to hassle would-be voters, with Fox News cameras on hand to record any random examples of Solid Citizens experiencing resistance from annoyed locals.

And if we head towards Election Day with Obama still enjoying a clear lead in the polls, you have to figure True the Vote's shock troops will be loaded for bear, viewing themselves as the last desperate defenders of "their" country against the barbaric hordes of looters and baby-killers who are already plotting to herd them into concentration camps during Obama's second term, after they close the churches and shut down radio talk shows. At a minimum, we can expect "poll-watchers" to come up with enough "documented" example of "voter fraud" to support a general post-election effort to de-legitimize the results.

I'll confess that I've excerpted this mainly because of the sheer rolling majesty of Ed's prose. Enjoy! But I'm going to officially dissent from both of the actual predictions here. First, my gut tells me that all these tea partiers are going to find their little field trips to the inner city a wee bit less exciting than they think. Organizers won't be able to round up as many volunteers as they think, and the folks who do head into the valley of the shadow of death probably aren't going to make much trouble. They'll be too busy being terrified of getting mugged.

Second, I've been hearing a lot about this idea that conservatives are gearing up for a huge effort to "delegitimize" the election if Obama wins. I don't see it. I think you can explain all their current actions as pretty standard fare for a hard-fought election. Poll watchers are nothing new, allegations of voter fraud are nothing new, smears are nothing new, racially motivated attack ads are nothing new, and even poll denialism isn't really all that new. If the election is as close as 2000, then sure: Republicans will fight to the death. But they fought to the death in 2000 too. Remember? More than likely, Obama will win by a modest but unchallengeable margin in November, and conservatives will despairingly accept the results and then repair to their dens to figure out what to do next. In other words, pretty much the same thing liberals will do if Romney wins.

Apparently Republicans Are Trying to Lose Weight

Hotline On Call has analyzed the beer drinking habits of American voters and produced the chart below. The first thing that struck me is that in nearly every case, the light version of a particular beer is more Republican than the standard version. (The only exception is Sam Adams, in the upper right.) Joshua Tucker noticed the same thing. Unfortunately, there's no data for Coors, but given how far right Coors Light is, the relationship probably holds there too. Anybody care to offer up some insultingly pop psych explanations for this?