Karl Smith says his internal models strongly suggest a double-dip recession, but he just can't bring himself to believe it:

I look at a lot of fundamentals but at the end of the day the money markets drive my forecasts. The money markets are telling me in every possible way that recession is coming. Liquidity demand is rising, inflation expectations are falling, nominal interests rates are collapsing.

However, like Leamer in 2007, I am hard pressed to see what is left to recess? At the time Leamer doubted a recession because he didn’t think there were enough manufacturing jobs left to lose.

This time, I look at construction and local government and think the same thing. The cyclical employment sectors are already so far down. Are we going to start losing jobs in Health Care and Education at this point?

I don't know that I can bring myself to believe it either. Then again, in 1931, guess what? It hardly seemed possible, but things got worse! The truth is that as long as insane conservatives continue to drive our national economic policy, a double-dip recession is not only possible, it's likely. They simply show no signs of stopping their madness, and most of the mainstream press and punditocracy aren't numerate enough to recognize what's really going on. We are trapped in a cycle of insanity that's truly Kafkaesque.

LA Weekly's Jonathan Gold has some advice about tipping:

Tip 20 percent. Every time. Pre-tax? Post-tax? In practice the difference is no more than a buck or two....Yes, I know your parents still talk about when the recommended percentage used to be 15 percent, and that the practice is considered barbaric in Japan. But it's not 1973, and you're probably not in Osaka at the moment. 20 percent.

I figure this is something readers might know something about, so: When did this change? After 1973, apparently, but that's a little vague. And why? Do food servers make less in ordinary wages than they used to? I don't think that's the case, though I might be wrong. And just generally, tipping seems like it's perfectly designed to keep up with the cost of living. And it has: To geek out about this a bit, the chart on the right shows headline inflation vs. the inflation rate for "food away from home." There's a slight divergence during the recent recession, but that's it. Overall, the rate has been pretty much the same. Restaurant bills have gone up as much as everything else.

Anyway, I'm not trying to campaign for stingier tips for food servers. I'm fine with 20 percent, and it's certainly easier to calculate. But I'm trying to distract myself from the grim political news of late and just sort of curious about when and why the recommended practice changed. Or is Jonathan Gold wrong?

Shorter Fed: The economy sucks really badly, but we're not going to do anything about it. Have a nice day!

Shorter Republicans: Pain is good for you, so we're not going to do anything either. Or allow anyone else to do anything. See you next November!

Shorter Democrats: We'd like to do something but there's nothing we can do. Sorry, folks!

Shorter Obama: Prosperity is just around the corner. This time for sure. Clap louder!

There have been a lot of shortages of generic cancer drugs lately, and Ezekiel Emanuel says part of the reason is related to reforms that were part of the Medicare prescription drug legislation of 2003. The nickel explanation is that the act required Medicare to pay physicians based on a drug's actual average selling price, with price increases limited to 6% every six months:

The act had an unintended consequence. In the first two or three years after a cancer drug goes generic, its price can drop by as much as 90 percent as manufacturers compete for market share. But if a shortage develops, the drug's price should be able to increase again to attract more manufacturers. Because the 2003 act effectively limits drug price increases, it prevents this from happening. The low profit margins mean that manufacturers face a hard choice: lose money producing a lifesaving drug or switch limited production capacity to a more lucrative drug.

Megan McArdle says this is a good example of why it's a bad idea for bureaucrats to think they can control market forces:

Things like this are the root of my skepticism about technocratic rule-making. I have no doubt that the earnest people who drafted this rule spent a lot of time thinking about whether the allowed price increase should be 5% or 7%. But they somehow overlooked a rather significant feature of the market they were regulating, and the effect that their rule would have when it interacted with market reality. The more complex your system of rules is, the harder it is to keep track of these potential unwanted side effects.

Maybe. But I have one question: how do other countries handle this? That is, other countries like France and Germany and Sweden and Japan where price controls for pharmaceuticals are stricter than they are here? Emanuel answers this question later in his op-ed: "Most of Europe, where brand-name drugs are cheaper than in the United States, while generics are slightly more expensive, has no shortage of these cancer drugs." Then this: "A more radical approach would be to take Medicare out of the generic cancer drug business entirely. Once a drug becomes generic, Medicare should stop paying, and it should be covered by a private pharmacy plan."

In other words, making this particular segment of the pharmaceutical business more market-friendly might well be a good idea. At the same time, it's also obvious that every other country in the world seems to have addressed this problem without any of the difficulties we faced. Writing decent regs isn't impossible, and it's especially not impossible if you're willing to look at what other countries do and learn from them. This was, to put it gently, not something that the Republicans who designed Medicare Part D were willing to consider.

James Fallows was watching some old movies recently and has a question:

The language that the narrator, one Gayne Whitman, uses is florid enough. But his accent! It's instantly familiar to anyone who's seen old movies and newsreels from the 1930s and 1940s. But you cannot imagine a present-day American using it with a straight face. It's not faux-British, but it's a particular kind of lah-dee-dah American diction that at one time was very familiar and now has vanished.

Even without watching the clip, you probably know exactly what he's talking about. I always assumed that this was an artificial construction, and one of Fallows's readers confirms this:

The accent you are wondering about is the Transatlantic accent, also called the Midatlantic accent. This was not a regional accent. Rather, it's an accent that was taught to actors and announcers. I learned about this accent from Amy Walker's "21 Accents" video on YouTube. She starts using the Transatlantic accent at the 2:12 mark.

I assume that this accent was an artifact of live theater that got transplanted into movies during their first few decades, and it's the main thing that makes old movies nearly unwatchable to me. Obviously everyone has their own idea of what makes acting great, but for me it's first, foremost, and almost exclusively voice: the ability to precisely control tone, pace, pitch, timbre, tempo, modulation, resonance, accent, and so forth. Actors who can do this are great even if they have limited proficiency in all the other arts of acting; actors who can't are terrible no matter what else they do well.

That's how I respond to acting, anyway, and the Transatlantic accent in movies of the 30s and 40s almost entirely ruins them for me. Anyone else feel this way?

In the face of implacable Republican obstruction to any kind of fiscal stimulus, I asked last night what Barack Obama could or should do to get the economy moving again. Jared Bernstein answers:

I like FAST! [Fix America's Schools Now, a national infrastructure program to repair, retrofit, insulate and “green-up” the nation’s stock of public schools] and recommend he runs with that, or some other idea that meets these criteria: it can be stood up quickly, it’s labor intensive with a decent bang-for-buck re jobs, people get it and feel good abut it right off the bat (so, as much as I like the infrastructure bank idea, I’m not sure it works here).

“But wait!,” you shout. We’re out of bullets—there’s no more money for such things—and Congress will refuse to add any of this to the deficit. How can you advise the President to block everything else out and call for measures Congress will refuse to consider?!?

That’s the kind of second guessing, negotiating-with-yourself that has us stuck in the mud. The President needs to decide what this economy needs, make sure it meets the above criteria, especially the one about the solution being easy to understand and feeling good, and fight for it nonstop from here until the unemployment rate starts to steadily decline.

That sounds great, and I agree that writers and pundits should be demanding this kind of thing. But it doesn't change the fact that House Republicans will flatly refuse to even debate such a bill. So what's the real idea here? Not so much that it will actually help the economy, but that it might help Obama's reelection by firmly putting him on the side of the working man against a do-nothing Congress.

Which is fine with me. Because frankly, if the economy gets much worse, Obama runs a pretty strong chance of losing in 2012. But I have to say: if you're going to go down, you might as well go down fighting. Besides, a really ambitious program would give all the rest of us something to rally around, it would unite the Democratic Party, and it would give the chattering classes something to chatter about. In other words, it might actually use all the channels I talked about yesterday to move public opinion. And you know what? It might actually make a difference and, in the end, force Republicans into action. It's worth a try, Mr. President.

UPDATE: Matt Yglesias (and others) suggest using Fannie and Freddie, which are now wards of the state, to help "refinance or restructure a large number of outstanding mortgages in a way that will hasten the deleveraging process." In other words, unilateral executive action to help folks with underwater mortgages. That's more in the spirit of what I was asking last night: something aggressive that (a) doesn't require congressional action and (b) might actually make a difference.

What Should Obama Do?

Everyone wants Barack Obama to get off his ass and do something:

Dana Milbank, on today's stock market plunge: "It’s not exactly fair to blame Obama for the rout: Almost certainly, the markets ignored him. And that’s the problem: The most powerful man in the world seems strangely powerless, and irresolute, as larger forces bring down the country and his presidency."

Michael Tomasky: "In [Alan] Brinkley’s words, Obama’s presidency 'is failing, and in danger of collapsing.' Lacerating battles await him on the budget (surprise: the debt deal didn’t solve everything!). The economy is grounded. Obama needs to quit trying to transform politics and just focus on winning fights on behalf of a careworn middle class. Otherwise, politics is going to transform him into a nicely intentioned one-term president."

Paul Krugman: "Earlier this week, the word was that the Obama administration would 'pivot' to jobs now that the debt ceiling has been raised. But what that pivot would mean, as far as I can tell, was proposing some minor measures that would be more symbolic than substantive. And, at this point, that kind of proposal would just make President Obama look ridiculous."

Matt Yglesias, asking what the White House plans to do that's comparable to FDR's executive order devaluing the dollar by raising the price of gold: "Where’s your Executive Order 6102? Serious people acknowledge the existence of big political constraints. But leaders who feel constrained look for ways forward."

All of this criticism might be well taken. Let's just stipulate that it is. Here's the question: what is it that you think Obama should do?

We can all name things we think he should have done in the past. But that's water under the bridge. Right now, the economy is what it is, and the Republicans who control the House flatly won't allow Obama to do anything about it. It hardly matters why. Maybe it's because of legitimate ideological differences. Maybe it's because it's not in their interest for the economy to get better before next November. Maybe they're just nuts. Regardless, they aren't going to allow any action that might improve the economy in the short term. End of story.

So: what's the answer? Do you think a bunch of hard-hitting speeches would make a difference? Do you think there are executive actions he could take? Do you think there are pressure points he could bring to bear to pull some Republicans over to his side?

This is a real question. I'm not trying to defend Obama or score debating points. I really want to know. What should Obama do?

I wrote at length yesterday that I thought Drew Westen was off base to blame most of President Obama's problems on his inability to tell a good story. The fact is that Obama has told a good story. It's just not the one Westen wants. What's more, Obama's problems are much more ones of policy than of explication. What he really needs is a better economy, but he never put the policies in place to get it.

But I guess I'm feeling cranky today (can you tell?), because now I want to take the other side and push back a bit on some of the blunter suggestions that storytelling doesn't matter at all. Here's Will Wilkinson:

Turning a crowd from hostility to adoration through pellucid, charismatic truthtelling is a venerable Hollywood trope, a close relative of the slow clap. But here on Earth Prime,1 presidential talking has little effect on the constraints the president faces.

Political scientist John Sides backs him up: "There is precious little evidence that presidents accomplish much by rhetoric—least of all large shifts in public opinion. In fact, when presidents start giving barn-burning speeches and drawing lines in the sand, guess what often happens? It makes it harder for presidents to get things done."

Granted: presidential speeches don't have a big impact. Probably they never have, but in any case the media environment is far too croweded today for a presidential address to have much effect on public opinion.

But there's more to this. When Westen talks about building a narrative, there's more to it than just a speech here and there. Presidents really do have a unique pulpit, and they really do have an opportunity to move public opinion. First, they do it by agenda setting. Both the public and Congress tend to follow a president's lead. Second, by repetition. A single well-turned speech might not make a big difference, but a persuasive narrative delivered over and over can. Third, presidents succeed by leading their party and getting them to adopt the narratives he wants them to adopt. Fourth, he can influence other thought leaders: journalists, talking heads, church/union/academic leaders, and so forth. They can amplify a narrative far beyond the circle of high-information voters who actually pay attention to presidential speeches.

Put all this together and presidential narratives almost certainly can have an effect. Not a huge one, maybe, but public opinion underlies everything in a democracy, and moving public opinion even a few points can make a big difference in a closely divided country. Unfortunately, Obama has had little success with most of these channels. His story has been one about the dysfunctional partisanship destroying Washington and how to move beyond it, and he's told this story well and often. However, he hasn't succeeded in making this into a broader agenda item; he hasn't succeeded in getting his own party to adopt this narrative as its own; and he hasn't succeeded in getting very many thought leaders to spread it to their audiences. I don't know why. Maybe it's because it was the wrong story for the wrong time, maybe it's because getting liberals to agree on a message is like herding cats, maybe it's because the left doesn't have a good media megaphone, or maybe it's because Obama just isn't very good at the broader task of narrative building. But whatever the reason, it just hasn't worked so far. And although I don't think it's his biggest problem, I think it is something that makes a difference. Unfortunately for Obama, he hasn't yet succeeded in harnessing it.

1Note to non-geeks: "Earth Prime" = the actual earth we live on.

Matt Yglesias posts the chart on the right today, and it's a useful reminder that as bad as the Great Recession has been, it's still not within light years of being in the same league as the Great Depression. This has all sorts of implications for assessing things like monetary policy, Obama's ability to get things done, the depth of anger in the country, and so forth.

So yes: things are much better today then they were in 1933. Still, whenever I look at comparisons like this, I'm always struck by one way in which our situation today is worse. In 1933, nobody really knew what to do about a massive, persistent economic downturn. Keynes's theories hadn't yet gained wide currency, and conventional wisdom of the day was uniformly unhelpful. Certainly FDR was never a deliberate Keynesian: He did end up spending a lot of money, but mainly because he wanted to help people, not because he really thought that deficit spending per se was the answer to our problems. So in some sense it's forgivable that they didn't do a better job of combatting the Great Depression. They really didn't know any better.

Today we do, of course. And yet, we're still not willing to do what needs to be done. Partly this is thanks to mindless partisanship, partly because we just don't have the guts. It's pretty damn discouraging. At least our predecessors had the excuse of ignorance. What's our excuse?

Is today's stock market tumble a sign of concern over the national debt? Paul Krugman says no:

The “signature” of debt concerns should be stock and bond prices both falling; what we actually see is those prices moving in opposite directions. And that’s normally the signature of concerns about a weak economy and deflation risk (see Japan, decline of).

What triggered economy fears? To some extent I think this is a Wile E. Coyote moment, with investors suddenly noticing just how weak the fundamentals are. Also, the mess in Europe.

And maybe, maybe there is an S&P story — but not the one you think. Arguably, that downgrade will bully policy makers into even more deflationary, contractionary policies than they would have undertaken otherwise, which has the perverse effect of making US debt more attractive, since the alternatives are worse.

But all the Very Serious People, having totally misdiagnosed our problems so far, will probably double down on that wrong diagnosis as markets fall.

Roger that.