Tax cuts and spending increases can help boost the economy during a recession. But what if the economy is already in good shape? Tim Mahedy and Daniel J. Wilson of the San Francisco Fed review the literature for us:

A burgeoning economic literature has studied whether fiscal stimulus affects the macroeconomy differently in good times than it does in bad times….The predominant research finding is that the fiscal multiplier is smaller during expansions than during recessions….To put the above results in perspective, recall that the CBO, similar to other macroeconomic forecasters, expects the TCJA to boost 2018 GDP growth by around 1.3 percentage points, from 2.0% to 3.3%. The findings by Gross et al. suggest the true boost is more likely to be less than 1 percentage point, while the literature on fiscal spending multipliers suggests an even smaller boost, as low as zero according to some studies.

….Many analysts have forecast large increases in GDP growth over the next two to three years as a result [of the Republican tax cut]. However, recent research finds that the effects of fiscal stimulus on overall economic activity are much smaller during expansions than during downturns. This suggests these forecasts may be overly optimistic.

That’s OK. An economic boost was never the point of the tax cuts. Making rich people richer was the point, and that worked great.

UPDATE: Actually, CBO projected that the Republican tax bill would increase GDP by about 0.3 percent, so their forecast is roughly the same as Mahedy and Wilson. They’ve corrected their paper.

Ton Koene/VW Pics via ZUMA

Last night I linked to a New York Times story about how the Trump administration bullied Ecuador into withdrawing its sponsorship of a UN resolution to encourage breastfeeding. Are you curious about what the resolution actually says? Sure you are! Here it is.

The 71st World Health Assembly urges member states:

(1) to increase investment in development, implementation and monitoring and evaluation of laws, policies and programmes aimed at protection, promotion, including education and support of breastfeeding, including through multisectoral approaches and awareness raising;

(2) to reinvigorate the Baby-friendly Hospital Initiative, including by promoting full integration of the revised Ten steps to successful breastfeeding, in efforts and programmes aimed at improving quality of care for maternal, newborn and child health;

(3) to implement and/or strengthen national mechanisms for effective implementation of measures aimed at giving effect to the International Code of Marketing of Breast-milk Substitutes as well as other WHO evidence based recommendations;

(4) to promote timely and adequate complementary feeding in accordance with the guiding principles for complementary feeding of the breastfed child, as well as guiding principles for the feeding of the non-breastfed child 6–24 months of age;

(5) to continue taking all necessary measures in the interest of public health to implement recommendations to end inappropriate promotion of foods for infants and young children;

(6) to take all necessary measures to ensure evidence-based and appropriate infant and young child feeding during emergencies, including through preparedness plans, capacity-building of personnel working in emergency situations, and coordination of intersectoral operations;

(7) to celebrate World Breastfeeding Week as a valuable means to promote breastfeeding;

Basically, they want countries to encourage breastfeeding; end misleading advertising of formula; and support “appropriate” measures during emergencies. Naturally, Donald Trump had this to say about it:

The failing NY Times Fake News story today about breast feeding must be called out. The U.S. strongly supports breast feeding but we don’t believe women should be denied access to formula. Many women need this option because of malnutrition and poverty.

— Donald J. Trump (@realDonaldTrump) July 9, 2018

There is nothing in the UN resolution about denying anything to anybody. It merely encourages breastfeeding and opposes deceptive marketing of formula. As usual, Trump is lying about the whole thing.

So sad. After all the hard work President Obama did to make America great again, along comes Trump to put us right back into decline. Hopefully we’ll have better luck with our next president. Or maybe a new poll.

Stefano Guidi via ZUMA

According to the Wall Street Journal, Robert Smith is a fabulously successful investor who employs a secret formula when he snaps up yet another underperforming software company. One part of his formula is to make everyone take a few tests:

A personality test aims to determine which of them are suited to which jobs. Salespeople are better off being extroverted, and software developers more introverted. A proprietary cognitive assessment, similar to an IQ test, includes questions on logic, pattern recognition, vocabulary, sentence completion and math. The test inspires consternation and fear among existing employees, according to former employees. Vista primarily hires job applicants who do well, often young people with modest credentials or experience. These are its “high performing entry-level” workers, or HPELs.

….Most of the people Vista hires score highly on the cognitive test. Often they are young employees with less-impressive credentials or experience….A former sales manager at portfolio company Misys PLC, a banking-software provider now called Finastra, says the test kept him from hiring experienced candidates who received low scores. Instead, he says, he hired younger workers with less experience who were able to score highly on the test because they were recently out of school.

….Vista touts the tests to its investors as a great equalizer, helping make its companies diverse meritocracies. It says 35% of its portfolio-company employees are women—in line with what Facebook Inc. reports and higher than numbers from Alphabet Inc.’s Google and Microsoft Corp. Women also run two of Vista’s five funds, unusual in the male-dominated world of private equity.

I don’t know if this works or not, but it’s amusing to see how testing evokes such distinct reactions in different people. In New York City, mayor Bill DeBlasio wants to get rid of testing for the city’s elite high schools because he thinks it produces too little diversity. Smith says that his tests produce more diversity. Back in the 50s and 60s, corporations routinely used hiring tests. Today, testing is viewed as reductionist and culturally bound, and few companies do it. But blind testing of musicians has famously produced more diversity in elite orchestras.

As it happens, there’s a thread that runs through all of these things that’s dangerous to even mention: testing generally produces a greater number of women but fewer people of color. So you really do get both more and less diversity if you commit to a testing regimen. I wonder how that works out for Smith’s firm? He says that 35 percent of the employees in its portfolio of companies are women. But he doesn’t mention how many are black or Hispanic. That would be interesting to know.

By the way, I’m an INTJ. Do I get to keep my job?

Ha ha ha ha:

Of course Pruitt can make a comeback in Oklahoma if he feels like it. Or he can stay in DC and write his own ticket. A book deal from Regnery, on-air analyst for Fox, VP of the American Petroleum Institute, head of a Super PAC, VP for Environmental Affairs at the Heritage Foundation—you name it, it’s his. Pruitt is a conservative hero, all the more so for being hounded out of his job by the liberal media. His ethical lapses will be a plus for his future career, not a minus.

Today brings to my attention a new lead-crime study. What makes it interesting is that (a) it’s not about lead and crime, and (b) its results are basically negative, which makes me pretty happy.

So what is it about? Previous studies have demonstrated that shooting ranges contain a lot of lead dust and that this produces high blood lead levels in people who shoot frequently. A team of South African researchers took this a step further and measured the BLLs of shooters at several ranges in Gauteng and compared them to BLLs of archers at nearby archery ranges. Then they checked to see if there was any correlation not with crime, but with levels of aggression.

Now, this is a bit sketchy right from the start since there’s no way of knowing if shooters and archers have similar personalities in the absence of lead. The archers, for example, turn out to be substantially more educated, which could account for any differences all by itself. But let’s put that aside. The study finds that shooters have an average BLL of 8.5 μl/dl while archers have an average BLL of 2.7—a sizeable difference, though neither score is wildly high. Here are the basic results for aggression:

The authors measure aggression using the Buss-Perry Aggression Questionnaire, which is a widely-used survey instrument with 29 items. You can take it here if you’re curious about it. It’s worth noting that I filled out the survey and scored 56. The average for men is around 70-80. So we’re talking about pretty modest aggressiveness scores here for both the shooters and the archers.

That said, the authors claim that the difference between 54.7 and 47.3 is statistically significant. However, on a normalized basis it’s the difference between 16 percent and 22 percent, where the average is about 40 percent. It’s a very small difference in practical terms. Here’s what the paper says:

All factors were weakly yet positively correlated with BLLs. However, only anger was significantly correlated. In the regression analyses, the findings show that hostility scores were significantly elevated if lead exposure levels were 10 μg/dL. However, the associations with the other sub-scales (Physical aggression, Verbal aggression, and Anger) were not statistically significant in this study. Aggression and anti-social behavior in adolescence and children have been associated with elevated lead levels and lead exposure early in childhood. Ecological studies have pointed to an association between early childhood exposure and crime rates. Therefore, despite the findings from this study, the relationship between lead exposure and aggressive behavior in adults should be studied further.

This is what we should expect. Lead exposure is dangerous for infants and toddlers, but at moderate levels has little effect on adults. Anything below 10 μg/dl shouldn’t produce much difference, and in this study it didn’t. Hostility was somewhat elevated above 10 μg/dl, and that was about it.

Given the limitations of this study, it’s not clear to me that its results are especially meaningful in any case. For what it’s worth, though, its conclusions are consistent with both the lead-crime theory and the Atrios Corollary—namely that if lead exposure leads to higher crime rates, it should also lead to higher levels of aggression and general assholishness. Anecdotally, this corollary seems to be true, but as with the main hypothesis you only see an effect on people who were exposed to lead at a young age. There’s not much effect from adult exposure at moderate levels.

Ric Francis via ZUMA

Ladies and gentlemen, I present to you the Trump administration:

A resolution to encourage breast-feeding was expected to be approved quickly and easily by the hundreds of government delegates who gathered this spring in Geneva for the United Nations-affiliated World Health Assembly….Then the United States delegation, embracing the interests of infant formula manufacturers, upended the deliberations.

American officials sought to water down the resolution….When that failed, they turned to threats….Ecuador, which had planned to introduce the measure, was the first to find itself in the cross hairs. The Americans were blunt: If Ecuador refused to drop the resolution, Washington would unleash punishing trade measures and withdraw crucial military aid. The Ecuadorean government quickly acquiesced.

Health advocates scrambled to find another sponsor for the resolution, but at least a dozen countries, most of them poor nations in Africa and Latin America, backed off, citing fears of retaliation, according to officials from Uruguay, Mexico and the United States.

….In the end, the Americans’ efforts were mostly unsuccessful. It was the Russians who ultimately stepped in to introduce the measure — and the Americans did not threaten them.

You have to give them credit: big business gets what they pay for when they buy a Republican administration. But even big business can’t overcome Trump’s love for Vladimir Putin.

Richard B. Levine/Levine Roberts/Newscom via ZUMA

Remember credit default swaps? Roughly speaking, they were designed as a way of turning a low-rated bond into a higher-rated bond. You’d buy, say, a BBB bond, plus insurance from a third-party against the possibility of default, and for all practical purposes you’re paying a higher price but getting the security of a AAA bond.

These kind of swaps aren’t inherently bad, but they can turn bad if they’re misused or mispriced or misrated or become so widespread that you need to start worrying about the stability and honesty of the firm selling the CDS. With that in mind, check this out:

The Commodity Futures Trading Commission took an interest last year when Blackstone’s GSO Capital Partners LP disclosed it had taken out insurance on bonds issued by Hovnanian Enterprises Inc. wagering the home builder would default on its debts. Blackstone offered Hovnanian a low-cost loan and persuaded the builder to miss a small interest payment in exchange, which would trigger payouts on $333 million in Blackstone’s credit-insurance contracts and yield the firm tens of millions of dollars, depending on market factors.

The insurance contracts Blackstone took out, known as credit-default swaps, typically pay out when a company defaults, usually reflecting dire financial straits. But Hovnanian was healthy enough to pay its debts, so a default would be opportunistic.

Blackstone’s plan quickly became controversial….

Controversial? Give me a break. Blackstone provided a loan on condition that the buyer deliberately fake a default so that Blackstone could collect on its CDS. There are really only two options here:

• This is baldly illegal and some people should end up in prison over it.
• It’s not illegal and we should enact laws/regulations pronto to make it illegal

If you read the rest of the piece, you learn that Blackstone was sued by the company it bought the CDS from, which was none too pleased to learn that it was the target of a scam. But a judge ruled against them, suggesting that this kind of scam isn’t, in fact, illegal. This set off a countdown clock for the fake default to take place and for Blackstone to collect its reward. “That gave CFTC staff time to work with the parties to try to avoid a default—and a payout to Blackstone via the credit-default swaps—a possibility that worried the agency’s senior leadership.” In the end, that’s what happened:

The missed payment touched off a month of negotiations to unwind the credit-default-swap position. Blackstone first struck a deal with Goldman Sachs Group Inc., which was also caught on the other side of Blackstone’s trade, then settled with Solus shortly before the 30-day window ran out. The settlement, whose terms weren’t made public, compensated Blackstone for backing out of the default while prohibiting it from triggering the insurance Solus had written, people familiar with the matter said. Blackstone then released the Hovnanian interest payment, letting the credit-protection seller, Solus, off the hook and delivering the CFTC’s desired outcome.

So everybody made a little money, probably, and the CFTC got its fig-leaf public compromise. That’s all great, but if this doesn’t count as illegal market manipulation, I sort of wonder what does. Maybe nothing, anymore.

John Middlebrook/CSM via ZUMA

Bear with me for a few moments while I outline a probably dumb idea. But the possibility that Roe v. Wade might soon be on the chopping block has nudged it back into my mind again. My question is: how many women would likely be affected if Roe were overturned? Here’s a really rough guess:

• About 900,000 abortions are performed each year.
• A back-of-the-envelope estimate suggests that about 40 percent are performed on women who live in states like California or New York where abortion rights would remain strong. Maybe 500,000 women in other states would be affected.
• Of those, figure that maybe a third have incomes high enough that they aren’t seriously affected. So that leaves about 350,000 women.
• How much would it cost to provide all of these women with a free abortion? That is, pick them up at home, drive to an airport, have them fly to Los Angeles or New York or wherever, get an abortion, and then fly them back home. Maybe $2,000? $3,000?
• So the total cost for a year would be somewhere in the ballpark of a billion dollars.

If Roe were overturned, could an organization raise this kind of money? Mark Zuckerberg could do it all by himself. Ten gazillionaires could do it without even feeling it in their wallets. Are there ten liberal gazillionaires who’d be willing to do this? How much money could be raised from small-dollar donors? Etc.

I dunno. Maybe it’s just a dumb idea. A billion dollars a year is a lot of money, putting aside fantasies of Zuck funding it all by himself. But it’s a very concrete dumb idea. I wonder. Could liberals defang any reversal of Roe by simply ponying up enough money?

What kind of demands did Secretary of State Mike Pompeo make in North Korea? That depends on which translation you prefer of North Korea’s statement. Everyone agrees that they called the demands “regrettable,” but the North Koreans also included a more pungent description of the US demands:

• The Washington Post and Politico report that they were “robber-like.”
• The New York Times and the Wall Street Journal report that they were “gangster like.” Ditto for the Guardian, the BBC, and CNN.
• The Los Angeles Times reports that they were “cancerous.”
• Fox News left out that part of the statement entirely.

Overall, “unilateral and gangster-like” seems to have carried the day. But however you translate it, it did not suggest a lot of progress was made.