Tyler Cowen links to a pair of papers that conclude that only 42 percent of the workers hired using stimulus funds came from the ranks of the unemployed. The rest came from other organizations or were hired straight out of school. Tyler concludes that this means the stimulus worked poorly:

One major problem with ARRA was not the crowding out of financial capital but rather the crowding out of labor.…You can tell a story about how hiring the already employed opened up other jobs for the unemployed, but it's just that—a story. I don't think it is what happened in most cases, rather firms ended up getting by with fewer workers.

There's also evidence of government funds chasing after the same set of skilled and already busy firms. For at least a third of the surveyed firms receiving stimulus funds, their experience failed to fit important aspects of the Keynesian model.

This paper goes a long way toward explaining why fiscal stimulus usually doesn’t have such a great "bang for the buck." It raises the question of whether as "twice as big" stimulus really would have been enough. Must it now be four times as big?

Maybe this is just my priors speaking, but I'd draw the exact opposite conclusion from this. First of all, a lot of stimulus spending went to states, where it was explicitly used to avoid laying off workers. That doesn't take anyone off the unemployment rolls, but it certainly keeps unemployment from getting worse. Second, no one expected ARRA to hire solely from the ranks of the unemployed. That's just not feasible, so these results hardly seem like a surprise to me. In fact, they seem pretty good. Third, yes, it's "just a story" that firms whose workers were hired away filled some of those new openings with the unemployed. But far from being some kind of weird fairy tale, it seems almost inevitable that this is partly true. And if even a third of those jobs were filled this way, it means nearly two-thirds of ARRA's total hiring (direct and indirect) was among the unemployed. And that's not even counting the effect of the increased spending from these newly hired workers that drives hiring in other firms

And fourth, my intuition says this result is an excellent argument that the stimulus should have been twice as big. Think of it this way. If the stimulus had been very small—say, $50,000—what would have happened? Well, if you could hire only one person, you'd almost certainly hire someone who was already working. There'd be lots of people to choose from, and it's a safer bet. At some point, though, you start to run out of good choices, and the currently employed are too expensive. So as the stimulus gets bigger you start to hire some of the best of the unemployed. Now make the stimulus super big, and cherry picking from the ranks of workers has played out almost completely. If 40 percent of the direct hires from the original ARRA spending were unemployed, I'd expect that something like 70 to 80 percent of the hires from a second trillion dollars of ARRA to be unemployed. What's more, all the newly employed people from that extra trillion would have created enough additional demand to benefit the rest of the economy as well.

Obviously, my intuition could be wrong. But overall, these results actually seem pretty positive to me. Probably at least half of ARRA's spending ended up in the hands of the unemployed, and if it had been bigger the vast bulk would have ended up in the hands of the unemployed. It's too bad we're not willing to try this out in real life to find out who's right.

Remember all those models that say presidential elections are won or lost based on the economy? The ones that increasingly make Barack Obama look like a doomed one-termer? Well, here's some good news for the Obama camp: a different model, from American University professor Allan Lichtman, "whose election formula has correctly called every president since Ronald Reagan’s 1984 re-election," says Obama is a shoo-in.

So how does that work? Well, Lichtman's model is based on 13 binary keys, and although Obama loses both of the keys that are based on economic performance, he wins nine others. Since any score of seven or more means the incumbent party wins reelection, Obama should prevail easily no matter who the Republicans nominate.

Is this right? Beats me. But you can't argue with seven successful predictions in a row, can you? Here are the nine keys that go in Obama's favor: (1) no primary challenge, (2) he's a sitting president, (3) no third-party challenge, (4) major policy changes enacted (healthcare and stimulus), (5) no social unrest, (6) no scandal, (7) no foreign policy debacles, (8) at least one big foreign policy success (killing bin Laden), and (9) no opponent with lots of charisma.

For what it's worth, you might plausibly argue with #4 on the grounds that both of these policy changes have been unpopular; possibly with #8 on the grounds that this isn't a big, lasting success (something that Lichtman has apparently changed his mind about over the past month); and possibly with #9 on the grounds that Rick Perry could turn out to be a pretty charismatic candidate. And you might argue that the economy is now looking so bad that it deserves more than one point.

Still, Lichtman is the expert, and he says, "Even if I am being conservative, I don’t see how Obama can lose." So there you go.

POSTSCRIPT: A bit of googling shows that Lichtman has been forecasting an Obama win since March of last year. So I guess this is nothing new. Still interesting, though.

Earlier today, after noting that the federal government can borrow money at negative interest rates, I wrote that only an idiot turns down free money. The Washington Examiner's Kevin Glass tweets a response:

That reminds me: the hypocrisy allegations lobbed at Republican governors who accept money from federal programs they oppose are pretty shoddy. As I said last year about the stimulus act, "Once the bill has been passed and the money is going to be spent whether you like it or not, there's nothing wrong with getting your fair share of the pie." And then, again, a few months ago:

The point of laws is to provide a level playing field, and no one is a hypocrite for following existing law even if they think it should be changed. That goes for congressmen who accept earmarks even though they think earmarks should be banned, it goes for drivers who park for free on city streets even though they think parking meters should be installed, and it goes for rich people who pay taxes at the current rate even though they think that rate is too low.

But I guess you can't say this too often! So today I'll go even further. You can fight tooth and nail against legislation that provides some benefit or another, but once the bill is passed and taxpayers from your state are funding it whether they like it or not, it would be serious malfeasance not to make sure your state gets its share of the goodies. What's more, this remains true even if you continue to oppose the program. Republican governors who refuse to set up healthcare exchanges because they oppose the Affordable Care Act, for example, aren't being principled, they're being negligent. They owe it to their state's residents to provide them with the services they're paying taxes for, even if they didn't want those services created in the first place.

There are exceptions, of course. If you believe that some federal program isn't just a bad idea, but a moral wrong, or that it imposes unreasonable requirements on your state, then you might be justified in turning down a few specific kinds of federal handout. But those are pretty rare occurrences.

My mother was just on the phone complaining that it's impossible to find anything other than seedless watermelons these days. Is this true? As a summertime public service to her and all the rest of my melon-loving readers, here is Jane Black's investigative reporting on this vital issue in the Washington Post last year:

According to the National Watermelon Promotion Board, only 16 percent of watermelons sold in grocery stores have seeds, down from 42 percent in 2003. In California and the mid-South, home to the country's biggest watermelon farms, the latest figures are 8 and 13 percent, respectively. The numbers seem destined to tumble. Recently developed hybrids do not need seeded melons for pollination — more on that later — which liberates farmers from growing melons with spit-worthy seeds.

....I decided to do a side-by-side comparison of seeded, seedless, yellow and the newly popular "personal" watermelons from Melissa's Produce and one seeded melon from a local farmers market. The local melon was the runaway favorite....The runner-up was a seedless personal melon, which was sweet and refreshing but lacked the concentrated flavor of the local melon. Next came the seedless red and yellow melons, which were inoffensive but whose primary asset was being cold on an August afternoon. Bringing up the rear was the California seeded melon, which was mealy and tasteless with more seeds than flesh, though in this case that wasn't a bad thing.

So there you have it. Not only is seeded watermelon hard to find, but it's hardest to find here in California. My mother is right. On the other hand, if the California seeded melons are as bad as Black says, maybe that's not such a bad thing. Still, that just leads to another question: why are California seeded watermelons so terrible?

I don't know, and since I don't like watermelon in the first place, I don't have much incentive to find out. But my mother will thank you if you provide an answer in comments.

Bruce Bartlett lists several reasons why a payroll tax holiday might not be such a great idea. Here are the first two:

First, the tax cut only helps those with jobs. While many have low wages and undoubtedly are spending all their additional cash flow, those with the greatest need and most likely to spend any additional income are the unemployed.

Second, the payroll tax cut helps many workers who have no need for it and will only pocket the tax savings.

Yep. I've never had a problem with payroll tax cuts being used to pay off debt instead of being used to buy more stuff. After all, weak demand isn't our only economic problem. Debt overhang is a big problem too, and reducing it is helpful for our long-term recovery. The problem is that a payroll tax cut is weakly targeted for both spending and debt reduction. Poor people, who are the most likely to spend the money, pay little or no payroll tax in the first place. And richer people, who are the most likely to save it, don't usually have any big debt problems. Most of the benefit of a payroll tax cut, therefore, is limited to a smallish segment of the public that's (a) rich enough to get a significant amount from a payroll tax holiday but (b) poor enough to either spend it all or use it to pay down debt. I don't know how big that segment is, but probably not more than a quarter or a third of the population. Much the same is true of other tax cuts.

So what to do? Bartlett again:

In my view, the $110 billion cost of the one-year Social Security tax cut would have been far better spent on measures that would actively raise spending in the economy. Public works would be the best way of doing that. Under current economic conditions, all tax cuts are essentially passive and do almost nothing to increase aggregate demand or economic output.

Sign me up! The only question is, can we get any Republicans to sign up too?

Matt Yglesias thinks that offering flood insurance to people who build houses in floodplains is idiotic:

The National Flood Insurance Program [NFIP] offers sub-market insurance rates to people who want to build houses in very flood prone areas. It’d be as if we had a special program to offer subsidized health insurance to people who refuse to wear seatbelts. Sounds nuts? And yet there it is.

Naturally, I was thinking about this over the past few days as Hurricane Irene was powering its way north, and I think the words we choose have an important effect on how we think about this stuff. If you call it "subsidized" flood insurance, it sounds like a boondoggle for morons. But what if you simply think of it as a safety net program for rare but unavoidable natural disasters? Then it doesn't sound so bad.

And that's probably the right way to think about it. There are a lot of floodplains in America, many of them in places that are economically important. If you think we should depopulate all of them, that's one thing. But assuming you don't think that, then there has to be some way to handle widespread flood damage when it occurs. Unfortunately, the private sector won't do it for the same reason the private sector won't offer individual health coverage to most people. Don Taylor explains:

Private companies could not compel the purchase of their product absent legislation, so would face tremendous adverse selection problems and/or no one buying their insurance. Into this situation stepped the federal government in 1968, and with a variety of modifications, it has remained the only flood insurance provider in the United States for the past four-plus decades.

NFIP can compel the purchase of insurance. If you live in a designated floodplain, you have an individual mandate to purchase flood insurance. And most of it isn't subsidized. Taylor again: "Around 80% of covered properties are assessed full-risk premiums based on Army Corps of Engineers models; the other 20% have subsidized premiums because the covered dwelling was built prior to the identification of SFHAs in 1974."

This doesn't eliminate the question of whether federal flood insurance is a good idea, whether any of it should be subsidized, or whether the public/private nature of NFIP is a good idea. But it does suggest that NFIP isn't flatly nuts. There are millions of dwellings currently insured for flood damage in over 20,000 towns and cities. There's just no way to take a wrecker to all those houses and raze all those towns. That means insurance has to be available to them, and the only entity capable of spreading the risk widely enough to make flood insurance efficient is the federal government. Thus NFIP.

Some decisions are hard and some decisions are easy. When someone offers you a thousand dollars on the condition that you pay back $900 in seven years, that's one of the easy ones. But as Ezra Klein writes today, that's the position we're in right now. The federal government's long-term borrowing rate is -0.34%:

Here’s what this means: If we can think of any investments we can make over the next seven years that have a return of zero percent — yes, you read that right — or more, it would be foolish not to borrow this money and make them.

....Our infrastructure is crumbling, and we know we’ll have to rebuild it in the coming years. Why do it later, when it will cost us more and we very likely won’t have massive unemployment in the construction sector, as opposed to now, when the market will pay us to invest in our infrastructure and we have an unemployment crisis to address?

....Everyone knows we have worthwhile investments to make. The real reason we won’t take advantage of this remarkable opportunity is ideology: Republicans argue that deficits are the only thing that matters for our recovery — unless anyone attempts to close them through tax increases, and then tax rates are the only thing that matters for our recovery. And Democrats have stopped even attempting to challenge them.

It's true that this money still has to be paid back, and principal repayments are as real as interest costs. Still, we're being offered free money. Only an idiot would turn it down.

Jonah Goldberg isn't happy about all the attention some of us pay to so-called experts:

The cult of experts has acolytes in all ideological camps, but its most institutionalized following is on the left. The left needs to believe in the authority of experts because without that authority, almost no economic intervention can be justified. If you concede that you have no idea whether your remedy will work, it's going to be hard to sell it to the patient. Market-based ideologies don't have that problem because markets expect events in ways experts never can.

No president since Woodrow Wilson or Franklin Roosevelt has been more enamored with the cult of expertise than Obama. That none of his economic predictions have panned out is not surprising. What is surprising is that so many people are surprised.

What's remarkable about this column is that Goldberg isn't disparaging a particular kind of expertise or a particular kind of bias he finds endemic. His specific shots are limited to economists and climate scientists, but the column is basically a takedown of all expertise. (Which he conflates with prediction, but never mind.) In the conservative world Goldberg prefers, it's apparently much better to ignore the experts and just let events unfold.

Next week's column will undoubtedly be an attack on liberals for claiming that Republicans are anti-science — with no sense of irony at all. I can't wait.

Science and Human Life

Pascal-Emmanuel Gobry on the great abortion question of our time:

The biological, moral and legal status of the unborn child isn't a question of metaphysics.

Whether life begins at conception isn't a matter of religious faith, it's a scientific question, and the answer isn't very hard. Of course, you can choose to disbelieve it, just like you can choose to not to believe that CO2 molecules redirect infrared variations.

Now, science isn't a moral guide. The fact that a fetus is a living human being doesn't necessarily entail that it should receive legal protection. But again, resolving this issue requires no recourse to metaphysics.

It requires asking what are the criteria for qualifying as a person endowed with rights.

I'm afraid there's some semantic hairsplitting going on here. Of course a fetus is life; so is a human egg, and so is a human sperm. That's never been at issue. But in the context of abortion, life is just shorthand for human life, and whether a blastocyst or a fetus qualifies as human is very much a religious and metaphysical question. It's certainly not a scientific one.

The list of criteria for being a person endowed with rights starts with being a human being. Those of us in the pro-choice camp don't believe that the mere presence of cellular machinery and a human genome makes one a human being. Those in the pro-life camp do — though I'd note that for many of them, their actions don't back up this professed belief.1 But whichever camp you're in, this isn't a question that science can answer. Pretending otherwise is little more than a tawdry rhetorical trick designed to give your arguments an authority they haven't earned.

1If you really, truly believe that a fertilized egg is a human life, your opposition to abortion will be absolute with the sole exception of abortion that's necessary to save a mother's life. You won't support exceptions for rape and incest any more than you'd allow the killing of a child who was the product of rape or incest. You'll also oppose fertility treatments, which routinely create and destroy more fertilized eggs than they use.

Some pro-lifers do indeed feel this way. But many don't. At a visceral level, these semi-opposers obviously have an aversion to abortion that stems from some source other than a belief that human life begins at conception.

According to the Kaiser Family Foundation, healthcare reform is getting steadily more popular among Republicans and steadily less popular among Democrats. Weird, huh? But as the chart below shows, the popularity of ACA peaked among Dems in January and then started declining, while it bottomed out among Republicans in March and then started rising. Using advanced mathematical techniques, I can forecast that ACA will be equally popular among both Democrats and Republicans in March 2012:

Just kidding, of course. But I think this goes to show what happens when something falls out of public view. Roughly speaking, I think that ACA has been replaced on the cable shoutfest circuit with other topics, which means it's becoming less of a tribal totem. So you no longer say you hate it just because you're a Republican and Fox News says you're supposed to hate it. You only say you hate it if you really do. Ditto in reverse for Democrats. It's becoming less of a culture war issue and more a simple question of whether it provides you any benefits that you care about. And on that score, it's always been better for conservatives than they think (they get their doughnut hole removed just like everyone else) and worse for liberals than they think (most of them won't really see much difference in their healthcare).

This immediate trend won't keep up (the 2012 campaign is likely to put ACA back on the partisan front burner), but this kind of convergence is still pretty likely over the long term. After all, is there much of a partisan split these days about whether you like Medicare or not?