The global economy has gotten ever so slightly better this year. Hooray! Of course, even a slightly stronger economy means rising oil prices. Brad Plumer tells us what that means:

In 2011, as gas prices have risen, Americans have cut back on fuel consumption by about 1.8 percent. But that’s not nearly enough to offset the price increase: overall gas expenditures still rose 25 percent over the past year, or $102 billion. That essentially wiped out all of the benefits from President Obama’s middle-class tax cut.

....The amount that families are spending on gasoline has leapt dramatically since 2004, as fast-growing countries like China and India nudge up oil prices. In states such as Montana and Mississippi, where even routine trips are long and transit alternatives rare, a whopping 19 percent of median income now goes toward gas.

Stimulus is hard in an energy-constrained world. I confess that the more I think about this, the more I wonder if conventional fiscal/monetary policy has as much traction as we believe. I'm not an energy fundamentalist by any stretch, but the constraints are real. Ordinary stimulus measures still work, and we should be pursuing them more aggressively, but I can't help but suspect that we're entering an era where they're getting less effective all the time.

Obama and (Steve) Jobs

I can't help but be fascinated by these excerpts from Walter Isaacson's new biography of Steve Jobs:

Jobs, who was known for his prickly, stubborn personality, almost missed meeting President Obama in the fall of 2010 because he insisted that the president personally ask him for a meeting. Though his wife told him that Obama "was really psyched to meet with you," Jobs insisted on the personal invitation, and the standoff lasted for five days. When he finally relented and they met at the Westin San Francisco Airport, Jobs was characteristically blunt. He seemed to have transformed from a liberal into a conservative.

"You're headed for a one-term presidency," he told Obama at the start of their meeting, insisting that the administration needed to be more business-friendly. As an example, Jobs described the ease with which companies can build factories in China compared to the United States, where "regulations and unnecessary costs" make it difficult for them.

Jobs also criticized America's education system, saying it was "crippled by union work rules," noted Isaacson. "Until the teachers' unions were broken, there was almost no hope for education reform." Jobs proposed allowing principals to hire and fire teachers based on merit, that schools stay open until 6 p.m. and that they be open 11 months a year.

OK, three things. Regarding the first paragraph: Jeebus, what a dick Jobs could be. Regarding the second paragraph: We all know why it's easier for Foxconn to open a factory in China. I think I'll keep our child labor and environmental rules intact, thank you very much. And regarding the third paragraph: Just where does Jobs think the massive budget increase is going to come from that would allow schools to stay open ten hours a day and eleven months a year? Even if he's right about the dire effect of teachers unions, something with pretty scanty empirical evidence, I don't think that California, to pick a state at random, is really up for the $20-30 billion tax increase it would take to roughly double instructional hours. Besides, even a really good intensive preschool program would cost less than that and almost certainly deliver better results. Think different, people!

Other than that, though, Jobs sounds like a great guy.

Matt Yglesias is annoyed with a New York Times piece about Barack Obama supposedly trying to replicate George Bush's awesome reelection strategy of 2004:

I’ve written about this before, but the fact of the matter is that this theory is based on a largely mythical recollection of what happened in 2004. Democrats seem to have persuaded themselves that the hideously unpopular Bush won re-election by trashing the reputation of John Kerry. The fact of the matter is that Kerry’s vote share outperformed most fundamentals-based models. The solid foundation of Bush’s re-election strategy was that on Election Day most voters said they approved of Bush’s job performance. Kerry got an extraordinary 93 percent of the vote of Bush-disapprovers. The phenomenon of the anti-Bush voter who voted for him anyway out of disgust with Kerry’s flip-flopping was extremely rare.

I don't actually disagree with this much. Economic fundamentals matter a lot, and on that score it's true that Kerry did better than expected. (Just as Democrats did worse then even the lousy fundamentals predicted in 2010.) But I don't feel like writing about Muammar Qaddafi again, so I'm going to disagree anyway.

Presidential elections, of course, aren't won by national vote shares. They're won in the electoral college. And if John Kerry had won Ohio, he would have won the election and become the lucky overseer of our economic catastrophe in 2008. (And John McCain would probably be president right now.)

So what happened in Ohio? Obviously economic fundamentals played the same role there that they played everywhere else. But there's also this: Kerry lost Ohio by only 120,000 votes. This means that a switch of 60,000 Kerry voters to the Bush column was enough to give him a second term. And Ohio was, infamously, ground zero for saturation TV ads from the Swift Boat Veterans group about how Kerry was a conniving, lying, phony war hero who didn't deserve his military decorations and, in fact, was something of a coward who connived to get his fake bronze stars so he could skedaddle out of Vietnam as soon as he could.

The Swift Boat smears ran in heavy rotation in Ohio. Did that make a difference of 60,000 votes? Political scientists might say no: TV ads don't have a huge effect, and they especially don't have a huge effect months before an election, which is when the ads ran. But I'm not so sure. In a state like Ohio, these ads left a very sour taste in a lot of mouths. They not only took away Kerry's aura as a decorated war hero, but actively tarred him as the worst kind of sniveling opportunist, a man who used fake wartime decorations to grease his way up the political pole. I don't have a hard time believing that this might have switched 60,000 votes out of the 5 million cast in Ohio.

So yes, fundamentals matter. But sometimes campaigns matter too. I think the 2004 presidential campaign is actually pretty good evidence for both.

From Lisa Jackson, head of the EPA:

Since the beginning of this year, Republicans in the House have averaged roughly a vote every day the chamber has been in session to undermine the Environmental Protection Agency and our nation's environmental laws.

These are, of course, all symbolic votes, since none of these bills are going anywhere in the Senate. Still, symbolism is a pretty good way of getting a read on what a party's real priorities are. And you never know: if they win control of the Senate next year, Republicans might turn out to actually be serious about this stuff. Best not to take chances, I think.

Physicists are notorious for believing that other scientists are mathematically incompetent. And University of California-Berkeley physicist Richard Muller is notorious for believing that conventional wisdom is often wrong. For example, the conventional wisdom about climate change. Muller has criticized Al Gore in the past as an "exaggerator," has spoken warmly of climate skeptic Anthony Watts, and has said that Steve McIntyre's famous takedown of the "hockey stick" climate graph made him "uncomfortable" with the paper the hockey stick was originally based on.

Read also: the truth about Climategate.Read also: the truth about Climategate.

So in 2010 he started up the Berkeley Earth Surface Temperature project (BEST) to show the world how to do climate analysis right. Who better, after all? "Muller's views on climate have made him a darling of skeptics," said Scientific American, "and newly elected Republicans in the House of Representatives, who invited him to testify to the Committee on Science, Space and Technology about his preliminary results." The Koch Foundation, founded by the billionaire oil brothers who have been major funders of the climate-denial machine, gave BEST a $150,000 grant.

But Muller's congressional testimony last March didn't go according to plan. He told them a preliminary analysis suggested that the three main climate models in use today—each of which uses a different estimating technique, and each of which has potential flaws—are all pretty accurate: Global temperatures have gone up considerably over the past century, and the increase has accelerated over the past few decades. Yesterday, BEST confirmed these results and others in its first set of published papers about land temperatures. (Ocean studies will come later.) Using a novel statistical methodology that incorporates more data than other climate models and requires less human judgment about how to handle it (summarized by the Economist here), the BEST team drew several conclusions:

  • The earth is indeed getting warmer. Global average land temperatures have risen 0.91 degrees Celsius over the past 50 years. This is "on the high end of the existing range of reconstructions."
  • The rate of increase on land is accelerating. Warming for the entire 20th century clocks in at 0.73 degrees C per century. But over the most recent 40 years, the globe has warmed at a rate of 2.76 degrees C per century.
  • Warming has not abated since 1998. The rise in average temperature over the period 1998-2010 is 2.84 degrees C per century.
  • The BEST data significantly reduces the uncertainty of the temperature reconstructions. Their estimate of the temperature increase over the past 50 years has an uncertainty of only 0.04 degrees C, compared to a reported uncertainty of 0.13 degrees C in the most recent Intergovernmental Panel on Climate Change report.
  • Although many of the temperature measuring stations around the world have large individual uncertainties, taken as a whole the data is quite reliable. The difference in reported averages between stations ranked "okay" and stations ranked "poor" is very small.
  • The urban heat island effect—i.e., the theory that rising temperatures around cities might be corrupting the global data—is very small.

In the press release announcing the results, Muller said, "Our biggest surprise was that the new results agreed so closely with the warming values published previously by other teams in the US and the UK." In other words, climate scientists know what they're doing after all.

The BEST report is purely an estimate of planetary warming, and it makes no estimate of how much this warming is due to human activity. So in one sense, its impact is limited since the smarter skeptics have already abandoned the idea that warming is a hoax and now focus their fire solely on the contention that it's man-made. (And the even smarter ones have given up on that, too, and now merely argue that it's economically pointless to try to stop it.) Still, the fact that climate scientists turned out to be careful and thorough in their basic estimates of temperature rise surely enhances their credibility in general. Climategate was always a ridiculous sideshow, and this is just one more nail in its coffin. Climate scientists got the basic data right, and they've almost certainly gotten the human causes right too.

UPDATE: I didn't include the chart comparing BEST's results to those of the big three existing models, so here it is. As you can see, BEST's reconstruction is a bit lower than HadCRU's during the 19th century, where the measurement uncertainty is highest; tracks all three models very closely during the entire 20th century; and is somewhat higher than both the GISS and HadCRU models over the past decade.

Front page image: ClimateSafety/Flickr

Headlines Done Right

Nice work from the copy desks at the New York Times and the Washington Post tonight: these are nice, simple headlines that explain exactly what happened to the Democratic jobs proposal in the Senate a few hours ago. In the Times piece, the second paragraph explained that "Democrats needed 60 votes to overcome a Republican filibuster." In the Post piece, the sixth paragraph provided the background: "Under the rules of the Senate, 60 votes were needed to continue toward action on the bill."

This is clean and accurate. The headlines make it clear that Republicans blocked the bill, and the text makes it clear that you need 60 votes to move forward with legislation in the Senate. Good job.

So here's an irony. Stephanie Mencimer reports today that the birther movement has found a new target: GOP wunderkind Marco Rubio, who was born in Florida to Cuban parents:

Birther Charles Kerchner has a blog that was once devoted mostly to Obama, but lately, he's been on a campaign to illustrate that Rubio is not a natural born citizen, and thus, ineligible to enter the White House. Kerchner's logic is convoluted—something of a trend among the birther set. He claims that Rubio is actually a Cuban citizen, even though Rubio was born on American soil, in Miami, in 1971. But Rubio's parents were Cubans, who didn't become US citizens until 1975. (Kerchner went so far as to obtain Rubio's parents' naturalization papers from the National Archives to prove his point.)

The birthers may be nuts, but guess what? It turns out that the naturalization papers actually tell an interesting story — just not the one the birthers had in mind. Here's Manuel Roig-Franzia in the Washington Post today:

During his rise to political prominence, Sen. Marco Rubio (R-Fla.) frequently repeated a compelling version of his family’s history that had special resonance in South Florida. He was the son of exiles, he told audiences, Cuban Americans forced off their beloved island after “a thug,” Fidel Castro, took power. But a review of documents — including naturalization papers and other official records — reveals that Rubio’s dramatic account of his family saga embellishes the facts. The documents show that Rubio’s parents came to the United States and were admitted for permanent residence more than 2½ years before Castro’s forces overthrew the Cuban government and took power on New Year’s Day 1959.

Rubio [] mentions his parents in the second sentence of the official biography on his Senate Web site. It says Mario and Oriales Rubio “came to America following Fidel Castro’s takeover.” And the 40-year-old senator with the boyish smile and prom-king good looks has drawn on the power of that claim to entrance audiences captivated by the rhetorical skills of one of the more dynamic stump speakers in modern American politics.

I'm not going to pretend that I'm especially outraged by this, although Rubio's explanation is pretty lame. (“I’m going off the oral history of my family,” he said. “All of these documents and passports are not things that I carried around with me.” Uh huh.) But the irony is that for years conservatives hoped that even if the birthers were wrong about Obama, perhaps his long-form birth certificate really was hiding something that was a little embarrassing. But no. It was all totally normal. Instead, it turned out to be tea party hero Marco Rubio who had something in his vital records that he'd just as soon have kept quiet. It's quite the Frankenstein's monster they've created over in crazyland, isn't it?

Here's an interesting little chart that requires a bit of explanation. For five different categories, it compares the number of households who think they have outstanding loans (solid lines labeled "SCF") vs. the number of loans that lenders think they've given out (dashed lines labeled "Panel"). It provides this comparison for six different age groups. Needless to say, the lender data is highly accurate, so any difference between the two lines means that borrowers are kidding themselves about whether they have any outstanding debt.

For example, the blue lines represent auto loans, and they're pretty close to each other for all age groups. This means that households have a pretty good idea of whether they owe any money on their cars. Ditto for mortgage loans, home equity loans, and student loans.

But then there's credit card debt, represented by the red lines. They're way far apart. In the four working age categories, about 50% of households think they have outstanding credit card debt, but the credit card companies themselves think about 80% of households have outstanding balances. And this shows up in the aggregates, too. Households think they have a total of about $390 billion in credit card debt, while credit card companies think that households owe them about $820 billion.

When I first saw this, I immediately thought I knew the problem. If I were surveyed about credit card debt, I'd report that I didn't have any. That's because I pay off my cards every month. But the card companies are probably totting up the charges I've already made this month and counting it as outstanding debt. Discrepancy solved!

But guess what? The Fed economists who wrote this report aren't idiots! They thought of this too:

Reasons for the greater than 50 percent raw difference in aggregate credit card balances may include that (i) unlike the CCP households, SCF households may not have any member with a credit report, (ii) unlike the CCP households, SCF households may omit credit card convenience uses that they intend to repay within the billing cycle and (iii) SCF households may not report business uses of personal credit cards that nevertheless appear on households’ combined credit reports. We make generous allowances for explanations (i) through (iii), including attributing all credit card charges observed within the most recent payment cycle to convenience uses, and find that a 34 percentage point gap in aggregate credit card debt remains.

So what is the answer? The authors don't have one. Those three explanations are all they have, and even when they control for them there's still a huge gap remaining. The simplest explanation is probably the right one: American consumers just don't have any idea how much credit card debt they have.

Via Counterparties.

Jack David, a former Defense Department official in the George Bush administration, is a member of the Committee on the Present Danger. CPD was originally a hardcore anti-communist group that opposed detente and various arms agreements, but when the Soviet Union fell it needed new enemies to fight. So a few years ago it was reborn with a mission to "stiffen American resolve to confront the challenge presented by terrorism and the ideologies that drive it." Today, David writes about the death of Muammar Qaddafi:

Will the defeat and death of Qaddafi be instructive to other tyrants — say, those in Syria, Iran, or North Korea?....[The most] likely response of the tyrants still in power would be to prevent the oppressed from ever having the chance of rising up against them. And, of course, the tyrants in Syria, Iran, and North Korea must ask themselves whether the oppressed Libyans would have had a chance of toppling Qaddafi without Western support — air cover and intelligence and aid — and whether that support would have been forthcoming had Qaddafi had WMD and the means of delivering it. More likely than not, the tyrants of the world will see Qaddafi’s defeat and elimination as more evidence that he was foolish to give up his nuclear and other WMD programs in the middle of the last decade.

Well, there you go. When George Bush invaded Afghanistan and Iraq, we apparently had no such worries about the possibility that this would merely stiffen the resolve of other tyrants. In fact, as I recall, Iraq was destined to be a showpiece of democracy that would topple Islamist dominoes all over the Middle East. Those were good times. But when Barack Obama takes out Libya? That's rather a different story.

In related news, Rick Perry and Mitt Romney both refused to even mention Obama's name in their statements on Libya. And rising GOP star Marco Rubio made the conservative party line even more explicit: "Let's give credit where credit is due: it's the French and the British that led in this fight, and probably even led on the strike that led to Gadhafi's capture, and, or, you know, to his death." And Obama? Well, he didn't do enough and took too long to do it etc. etc.

Poor Barack Obama. The left isn't very happy about Libya because the left isn't all that thrilled with military interventions in the first place, and anyway, this one was done without congressional authorization. And the right isn't very happy about it because.....it happened while Barack Obama is president. The guy can't win.

I understand the left's problem with Obama's national security policy. But the right? What the hell is their problem? Obama has escalated our presence dramatically in Afghanistan; he created a massive drone air force that's all but wiped out al-Qaeda in Pakistan; he killed Osama bin Laden; he approved a multilateral military operation in Libya that ended up killing Muammar Qaddafi; he sent a SEAL team out to kill Somali pirates; he assassinates U.S. citizens in foreign countries who are associated with al-Qaeda; and he's done more to isolate and sanction Iran than George Bush ever did. Crikey. Just how bloodthirsty do they want the guy to be?

Of course, it's also true that Obama has suggested that Israel should halt new construction in West Bank settlements, and he hasn't yet turned Iran into a glassy plain. I suppose the former is enough to make him the second coming of Neville Chamberlain all by itself, and the latter is something to keep pushing for. Hope springs eternal.

But seriously guys. How much more militaristic do you realistically think an American president can be, especially after the military fiascoes of the past decade that you so enthusiastically backed? Get a grip.

What kind of monetary policy should the Fed follow? Scott Sumner has long argued that the Fed should set a target for nominal GDP—that is, GDP before corrections for inflation—and follow it come hell or high water. This has recently gotten some high-profile endorsements, including one recently from a Goldman Sachs team. And Paul Krugman recently gave the NGDP forces a boost on his blog:

And one thing the market monetarists may have been right about is the usefulness of focusing on nominal GDP. As far as I can see, the underlying economics is about expected inflation; but stating the goal in terms of nominal GDP may nonetheless be a good idea, largely as a selling point, since it (a) is easier to make the case that we’ve fallen far below where we should be and (b) doesn’t sound so scary and anti-social.

I think this gets it roughly right. The thing is, it's not clear to me how much real difference there is between targeting NGDP, targeting inflation, targeting real interest rates, dropping money from helicopters, or engaging in quantitative easing. This is what I'd like NGDP advocates to make clear. Instead of telling us what they're targeting, or what their preferred policy is called, tell me three things:

  • What do you want the Fed to say publicly?
  • What open market operations do you want the Fed to engage in?
  • Beyond that, is there anything else the Fed should be doing?

This would cut through a lot of the confusion. The Fed is not infinitely powerful: For both legal and practical reasons, it has only a certain set of activities it can engage in. So tell me what specific activities you think it should engage in. This isn't a panacea, of course. It would cut through a lot of the fog in one sense, but it would almost certainly create a whole bunch of new fog at the same time. Still, I think it would get us a bit closer to focusing on the underlying issues.

For more, see Robert Waldmann, who discusses in wonky detail just what NGDP targeting is and how it might work. See also Brad DeLong here, who has a useful discussion, though at the level of an IS-LM framework rather than the level of Fed mechanics. His conclusion:

To try to target nominal GDP using either only monetary policy or only fiscal policy seems hazardous. To coordinate—monetary and fiscal expansion, money printing-financed purchase of useful things—seems to be the winner.

I'm on board with this. Monetary and fiscal policy both have limitations, and using them in tandem is almost certainly more effective in a recession like the current one. What's more, why not? The downsides of expansionary fiscal policy are pretty small, so we'd be smart to simply throw everything we have at the problem.