It must be a major embarrassment to the profession that us lowly MMs turned out to be more correct during the crisis than any other major group (New Keynesians, New Classical, RBC-types, etc.) and indeed more accurate than other groups on the fringes (old Keynesians, old monetarists, Austrians, MMTers, etc.):
1. It’s now obvious that Fed, ECB, and BOJ policy was far too tight in late 2008 and early 2009, but MMs were just about the only people saying so at the time.
2. We correctly pointed out that fiscal austerity in 2013 would not slow growth in the US because of monetary offset, whereas in a poll of 50 elite economists by the University of Chicago, all but one gave answers implying it would slow growth.
3. We pointed out that massive QE would not lead to high inflation, while many other economists on the right said it would.
4. We correctly predicted that the BOJ and Swiss National Bank could depreciate their currency at the zero bound, while many on the left said monetary policy was pushing on a string at the zero bound.
5. We pointed out that the ECB’s tightening of policy in 2011 was a huge mistake, which now almost everyone recognizes.
I'm a little puzzled by this. Unless I'm misremembering badly, prominent lefty economists like Paul Krugman and Brad DeLong have been saying most of these things all along. And while I'm not really quite sure if these guys think of themselves as New Keynesians or Neo-Paleo Keynesians or modified Old Keynesians or what, they're basically Keynesians.
The only one of Sumner's five points where there's disagreement, I think, is #2, and I'd argue that this is a very difficult point to prove one way or the other. My own read of the evidence is that the modest austerity of 2013 might very well have had a modest effect on growth, but frankly, a single year of data is all but impossible to draw any firm conclusions from. However, it's certainly true that there were no huge changes in the trend growth rate.
As for the others, the Keynesian types argued strongly that (a) conventional Taylor Rule calculations called for much looser Fed policy in 2008-09, (b) QE would not lead to inflation in the face of a huge demand shortfall and continued deleveraging, (c) monetary policy in countries with their own currency still had traction, but fiscal policy had a powerful role too at the ZLB, and (d) the ECB's tight monetary policy in 2011 was nothing short of a cataclysmic disaster.
I'm sympathetic to the market monetarist advocacy of NGDP level targeting, but then again, so are folks like Krugman and DeLong. So in a way, it's sometimes unclear to me exactly how far they diverge in practice, even if they subscribe to different theoretical fundamentals. My own tentativeness about NGDPLT is mostly practical: it's not clear to me that central banks can even target inflation as powerfully as many people think, let alone NGDP levels. Part of the reason is that I simply have less faith in the expectations channel than many NGDPLT advocates. It seems like something that will work fine until markets test it to find out if the Fed really has the independent power to set NGDP levels anywhere it wants even in the face of investor panic, and then suddenly it won't work anymore and the Fed's aura of invincibility will be broken. And that will be that. But that may simply reflect a lack of understanding my part. Or perhaps just a lack of faith.
Majority of U.S. public school students are in poverty
By Lyndsey Layton
For the first time in at least 50 years, a majority of U.S. public school students come from low-income families, according to a new analysis of 2013 federal data, a statistic that has profound implications for the nation.
The Southern Education Foundation reports that 51 percent of students in pre-kindergarten through 12th grade in the 2012-2013 school year were eligible for the federal program that provides free and reduced-price lunches. The lunch program is a rough proxy for poverty, but the explosion in the number of needy children in the nation’s public classrooms is a recent phenomenon that has been gaining attention among educators, public officials and researchers.
The headline is wrong, even though Layton gets the facts pretty much right: 51 percent of kids are eligible for free or reduced-price lunches, which are available only to low-income families. That's an important story. But participation in the federal lunch program is, as she notes, only a rough proxy for poverty: you qualify if you have a family income less than 185 percent of the poverty line. For a family of four this comes to about $44,000, which certainly qualifies as working class or lower middle class, but not poverty stricken.
But it's more complicated than that! The 51 percent number is attention grabbing because it's a majority, but perhaps the more important number is that 44 percent qualify for free lunches. For a family of four, that's $31,000, just barely over the poverty line. If you got rid of the word "majority," it would be safe to use the phrase "near poverty." And frankly, I wouldn't be bothered much if you just called it poverty, even if that's not quite the official federal government definition.
But wait! It's even more complicated than that—and this part is important. On the one hand, lots of poor kids, especially in the upper grades, don't participate in school lunch programs even though they qualify. They just don't want to eat in the cafeteria. So there's always been a bit of undercounting of those eligible. On the other hand, a new program called the Community Eligibility Provision, enacted a couple of years ago, allows certain school districts to offer free meals to everyone without any proof of income. Currently, more than 2,000 school districts enrolling 6 million students are eligible, and the number is growing quickly. For example, every single child in the Milwaukee Public School system is eligible. Overall, then, although the official numbers have long undercounted some kids, CEP means they now increasingly overcount others. Put this together, and participation in the school lunch program becomes an even rougher proxy for poverty than it used to be—and any recent "explosion" in the student lunch numbers needs to be taken with a serious grain of salt. This is especially true since overall child poverty hasn't really changed much over the past three decades, and if you use measures that include safety net programs it's actually gone down modestly since the end of the Reagan era.
This is, perhaps, a bit too much nitpicking. Unfortunately, we're forced to use school lunch data as a proxy for poverty among school kids because we don't really have anything better. What's more, child poverty increased during the Great Recession and God knows that I'm all in favor of calling attention to it. In a country of our wealth it's a national scandal by any measure, and a massive problem that infects practically every aspect of education policy.
Still, it's a subject that can't easily be reduced to a single school lunch number. Both headlines and copy should do their best to treat the subject accurately.
Looky here: it's Hilbert plus the entire Drum clan. On the far left, that's me and my sister circa 1963 (my brother is there too, but Hilbert is hiding him.) Aren't we cute? In the middle are my parents, and on the right are Marian's folks. And I'm sure no one needs any help recognizing the youthful, bright-eyed newlyweds in the center.
In other cat news, my sister draws our attention to the fact that cats can save lives too. Here's the report from Russia: "An abandoned newborn baby was saved from freezing to death by the unlikeliest of hero — a stray cat. The tabby named Marsha climbed into the box the infant had been dumped in and kept the child warm for several hours as the mercury plunged below zero." Hooray for cats!
That 23% figure is a measure known as “vaccine effectiveness,” and it’s certainly on the low end of the spectrum. In the decade since experts began calculating a “VE” for flu vaccines, it has ranged from a low of 10% to a high of 60%.
....But the vaccine didn’t help everyone equally. Kids benefited the most — the VE for those between the ages of 6 months and 17 years was 26%. Among adults, the VE was 12% for people ages 18 to 49 and 14% for people 50 and older. The figures for adults were too small to be statistically significant.
Just my luck. This year was the first time I ever got a flu shot, and all I got out of it was a 14 percent lower chance of getting the flu. And my arm was sore for days afterward! Hmmph.
The Supreme Court will soon hear oral arguments in King v. Burwell, in which conservatives will argue that the text of Obamacare limits federal subsidies only to people who buy insurance from state-run exchanges, not from the federal exchange. Roughly speaking, there are two prongs of the conservative argument:
The law contains text that explicitly limits subsidies to state-run exchanges. Democrats may not have intended this, but they screwed up in the rush to get the bill passed. That's too bad for them, but the law is the law.
Democrats actually did intend to limit subsidies to state-run exchanges. This was meant as an incentive for states to run their own exchanges rather than punting the job to the feds.
The argument over #1 revolves around textual interpretation of the statute as a whole, as well as previous Supreme Court precedent that provides federal agencies with broad latitude in how they implement regulations. The argument over #2 relies on trying to find evidence that limiting subsidies really was a topic of discussion at some point during the debate over the bill. That's been tough: virtually no one who covered the debate (including me) remembers so much as a hint of anything like this popping up. The subsidies were always meant to be universal.
But the recollections of journalists aren't really very germane to a Supreme Court case. The real-time analyses of the Congressional Budget Office, however, might be. This is an agency of Congress, after all, that responds to questions and requests from all members, both Democrats and Republicans. So did CBO ever model any of its cost or budget projections based on the idea that subsidies might not be available in certain states? Today Sarah Kliff points us to Theda Skocpol, who took a look at every single CBO analysis of Obamacare done in 2009 and early 2010. Here's what she found:
CBO mostly dealt with overall budgetary issues of spending, costs, and deficits — or looked at the specific impact of health reform proposals on Medicare beneficiaries, health care providers, and citizens at various income levels. The record shows that no one from either party asked CBO to analyze or project subsidies available to people in some states but not others. In a June 2009 analysis of a draft proposal from Democrats in the Senate Health, Education, and Labor Committee, CBO treated subsidies as phased in. But even that proposal, which did not survive in further deliberations, stipulated that subsidies would be available in all states from 2014 — and CBO calculated costs accordingly.
After the Affordable Care Act became law in March 2010, members of Congress, especially Republican critics, continued to raise issues. In its responses, CBO continued to model exchange subsidies as available nationwide. No one in either party objected or asked for alternative estimations assuming partial subsidies at any point in the 111th Congress.
It's unclear whether this is something the Supreme Court will find germane, but it's certainly closer to being germane than the recollections of a bunch of reporters.
It's also possible, of course, that the court will focus solely on argument #1 and never even get to questions about the intent of Congress. Nonetheless, this is an interesting review of the CBO record. The conservative case that Democrats actively intended subsidies to be limited to state exchanges has always been remarkably flimsy. Skocpol's review exposes it as all but nonexistent.
With 2014 now in the books, it's a good time to refresh our memories about the great conservative global warming hoax. Here's a look at the usual conservative presentation showing that the planet hasn't warmed even a teensy little bit over the past decade. Their go-to chart, which goes from 1998 through 2012, looks like this:
No warming! But how can that be? Well, if you cherry pick your start and end dates, you can show just about anything. Here's the same chart extended by a mere two years on either side. It goes from 1996 through 2014:
Warming! How about that? It's amazing how you can lie with numbers if you put your mind to to it. And here's the full chart since 1900:
The year 1998 was an outlier, an unusually warm year. If you choose this as your starting point, the next decade will look pretty uneventful. You can do the same thing with lots of other decade-long periods. For example, 1969-85 looks pretty flat, and so does 1981-94. This is typical of noisy data. Planetary warming isn't a smooth upward curve every year. It spikes up and down, and that allows people to play games with the data over short periods. Add to that the fact that warming really does appear to pause a bit now and again, and it's easy for charlatans to fool the rubes with misleading charts.
But in the end, physics and chemistry will do their thing regardless. Earth is warming up, as any honest look at the data makes clear. And 2014 is now yet another record-setting year. We'll see if that's enough to embarrass the Fox News set into giving up on the old 1998 chestnut.
A new survey from the Commonwealth Fund brings us good news and bad news. The good news is that, thanks to Obamacare, the number of people with serious medical debt issues has dropped from 41 percent to 35 percent. Hooray!
And the bad news? This barely gets us back to where we were a decade ago. We still have a long way to go.
I continue to be death warmed over, the result of a cold that won't go away acting in some kind of diabolical concert with all the usual chemotherapy crap. I may blog a bit later, or I may not. Hard to tell right now. But I'll get better eventually.
I'm sort of slowly catching up on things I missed over the past couple of days, and most of it at least makes sense. Wall Street panicked over a single bad economic report. Check. Boko Haram massacred another village in Nigeria. Check. Tea partiers still control the Republican agenda in Congress. Check. Mitt Romney is going to run for president again. Ch—
Wait. Mitt Romney is going to run for president again? Seriously? That's insane, isn't it? Can anyone aside from Romney's overpaid team of advisors and consultants actually make a good case that he can win?
I'm still a little woozy, so I'm not up to the job of trying to figure this out. But there's just no way. Parties don't rally around losers, and Romney is now a two-time loser. Ann Romney may still be nursing a planet-sized grudge about the way Mitt was treated in 2012, but that buys no votes. Besides, he'll be treated the same way this time around. Once a plutocrat, always a plutocrat. Maybe that's fair, maybe it's not, but nobody ever said life was fair.
So I guess I'm caught up. Except for this one thing. What the hell is Romney thinking?
There are some areas of consensus. The closing of open-air drug markets....revolution in urban policing....increases in drug and gun sentences....Various experts have also linked the fall in violence to the aging of the population, low inflation rates and even the decline in early-childhood lead exposure. But in the end, none of these factors fully explain a drop that occurred, in tandem, in much of the world.
“Canada, with practically none of the policy changes we point to here, had a comparable decline in crime over the same period,” said Franklin E. Zimring, a law professor and an expert in criminal justice at the University of California, Berkeley. He described the quest for an explanation as “criminological astrology.”
I'm happy to see lead at least get a shout out. Unless I've missed something, this might actually be the first time the New York Times has ever mentioned childhood lead exposure as a possible explanation for the decline in violent crime. Progress!
But while Eckholm is right to say that none of the other factors he mentions can explain a decline in violent crime that happened all over the world, he's wrong to include lead in that list. It's the one explanation that does have the potential to explain a worldwide drop in crime levels. In particular, the chart on the right shows the use of gasoline lead in Canada, which peaked in the mid-70s and then began dropping as catalytic converters became more common. Leaded gasoline was banned for good in 1990, and is now virtually gone with a few minor exceptions for specialized vehicles.
So what happened? As Zimring says, Canada saw a substantial decrease in violent crime that started about 20 years after lead emissions began to drop, which is exactly what you'd expect. I calculated the numbers for Canada's biggest cities back when I was researching my lead-crime piece, and crime was down from its peak values everywhere: 31 percent in Montreal, 36 percent in Edmonton, 40 percent in Toronto and Vancouver, and 53 percent in Ottawa. CompStat and broken windows and American drug laws can't explain that.
"Criminological astrology" is a good phrase to describe the relentless effort of US criminologists to explain a worldwide phenomenon using only parochial US data. But there is one explanation that really does work pretty well everywhere: the reduction in gasoline lead, which happened all over the world, but happened at different times in different places. And everywhere it happened, crime started to decline about 20 years later. No explanation is ever perfect, but this one comes closer than most.