I spend a lot of time criticizing bad actors; so I thought I might take a moment here to praise two journalists who did the right thing.

So: props to Fareed Zakaria, for returning his award from the ADL, and making the case for tolerance.

And props too to Joe Klein, for acknowledging frankly that he sinned by not taking a stand against the Iraq war.

It often seems to be that the biggest problem we face in our politics, and our media, isn’t lack of expertise; it isn’t lack of generally good intentions; it’s lack of courage — the courage to stand up for what’s right.

But there is courage out there — and it should be honored.

I keep being asked whether a careful look at the CBO analysis of health reform would reveal whoppers comparable to the analysis of the Ryan roadmap. The answer is no.

Menzie Chinn had a good piece on this. A lot of the complaining involves the “doc fix”, the routine increases in Medicare payments required because the law consistently sets those payments too low. But that’s a fundamental logical fallacy. It’s true that the cost of the doc fix isn’t in the CBO score; that’s because it would have happened whether or not health reform passed. It’s not an incremental cost.

What complaints might you make about the scoring? Most of it is completely reasonable — for example, saying that we can save money by eliminating overpayments to Medicare Advantage, and that aid to hospitals that treat a lot of uninsured patients can be reduced once almost everyone is insured. The one thing you might worry about is the projected reduction in fee-for-service payments relative to baseline; achieving that would require that efficiency improvements thanks to evaluation of medical procedures for effectiveness actually materialize.

I think they will, and there’s a good chance that cost savings will be substantially larger than projected. But even if they aren’t, Menzie has it right: even if you discount the entire projected savings from lower payments, you still end up with an almost deficit-neutral bill.

The point is that while you can quarrel with some of the estimates — in both directions! — there’s nothing remotely comparable to counting only the deficit-reducing measures while taking the deficit-increasing measures off the table, or assuming drastic cuts in real per capita spending without a hint of how these are to be accomplished.

A scary but interesting article on how a couple of lost decades are remaking Japanese society for the worse. We’re well on our way to doing similar or worse damage to ourselves.

What Mark Thoma said: Ned Phelps’s declaration that “There are no symptoms of deficient demand, like deflation” is bizarre. Disinflation has been proceeding steadily in the face of high unemployment:

And where did I learn that high unemployment should lead initially to falling inflation, rather than to immediate deflation? I learned it from this guy.

Why would a temporary extension of the high-end Bush tax cuts be a highly ineffective form of stimulus? Coming into this economic crisis, I thought every macroeconomist understood why temporary tax cuts do little to boost demand, especially if those tax cuts are for people with high incomes. But as with so much else, this seems to be one of these economic insights that has been lost in our intellectual Dark Age. So what I thought I’d do is lay out, briefly, the basic logic.

Read more…

Ezra Klein says he agrees with me on my policy critique of Paul Ryan, but denies that he’s a flimflammer.

He’s wrong.

Long ago — basically when I started writing for the Times — I decided that I would judge the character of politicians by what they say about policy, not how they come across in person. This led me to conclude that George W. Bush was dishonest and dangerous back when everyone was talking about how charming and reasonable he was. It led me to conclude that Colin Powell couldn’t be trusted, back when everyone said his UN speech clinched the case for war. It led me to conclude that John McCain was unprincipled and self-centered, back when everyone said he was a deeply principled maverick. And yes, it led me to conclude that Barack Obama was a good man, but far less progressive than his enthusiastic supporters imagined.

And so I don’t care how Paul Ryan comes across. I look at how he has gone about selling his ideas, and I see an unscrupulous flimflammer.

Think about that CBO report: getting the CBO to score only the spending cuts, not the tax proposals, then taking credit for being a big deficit reducer, is simply sleazy. Not acknowledging that the zero nominal growth assumption, not the entitlement changes, is driving that 2020 score is also sleazy. And the whole pose of stern deficit hawk, when you know that there are real questions about whether your plan actually increases the deficit, is phoniness of a high order.

And about that Tax Policy Center report: it has been five months since that came out. Has Ryan tried, at all, to address the concerns the center raised? As far as I can tell, he’s offered nothing but vague assurances of good intentions. Why should we believe him? Because he comes across as a nice guy? So did Bush.

Flimflamming is as flimflamming does. And Paul Ryan shows all the signs.

Digby:

I am definitely naming my next cat after Paul Krugman. And the first mouse he brings in will be named Paul Ryan.

Aha — I just realized that I should probably post my predictions about Rep. Paul Ryan’s response to today’s column before I see the inevitable letter to the Times.

So, I predict a double-talk response similar to his response to the Tax Policy Center analysis. In that response, he declared that

The tax reforms proposed and the rates specified were designed to maintain approximately our historic levels of revenue as a share of GDP, based on consultation with the Treasury Department and tax experts. If needed, adjustments can be easily made to the specified rates to hit the revenue targets and maximize economic growth.

In other words, we think the tax part of the plan would leave revenue unchanged. But in that case, why not ask CBO to score the revenue, to see if it agrees? The answer given is that CBO refused to do an analysis beyond 10 years; OK, but why not at least have the 10-year analysis?

Oh, and about “adjustments can be easily made” — when, exactly? Based on a careful look at the numbers? In that case, why tell the CBO not to do that careful look? After the tax cuts are enacted? On my planet, Republicans never consider it advisable to undo tax cuts once they’re law. And notice the weasel phrase “to hit the revenue targets and maximize economic growth.” In practice, this would surely mean no increase in rates, ever.

Ryan engaged in similar double-talk — a cloud of words, never actually addressing the criticism — after he said something really dumb about monetary policy in his interview with Ezra Klein.

So I think we can expect some world-class obfuscation.

Oh, and let me make another prediction: not one of the self-proclaimed centrists who have hailed Ryan for his truthtelling will admit that they were taken for a ride.

I have no insight into Christy Romer’s departure from the administration. But I do think it’s worth going to the tape over the critical discussion, early on, about how strong a policy response to offer. Here’s Ryan Lizza:

Read more…

This is disgusting: Senate Republicans holding up Peter Diamond’s nomination to the Federal Reserve Board on the grounds that he may not be qualified to make monetary policy. Aside from the fact that the same Senators cheerfully confirmed Bush nominees who didn’t know much about economics of any kind, this is especially stupid right now.

Why? Because right now one of the hot topics is whether the apparent shift in the Beveridge curve signals a rise in structural unemployment — and Diamond wrote the seminal paper on the whole subject — the top result on Google scholar.

Diamond is exactly the man we need — which, given the way things have been going lately, probably means he won’t get confirmed.

Update: Some commenters note, correctly, that there’s an ongoing dispute over what the rise in vacancies without a corresponding fall in unemployment means. But that’s precisely the point: we want Peter Diamond, who pioneered the whole study of this subject, in the Fed, where he can help make sense of the situation.

One thing that has been overwhelmingly obvious in the discussion of Paul Ryan’s roadmap is that lots of people who should know better — including, alas, reporters at the Washington Post — don’t know how to read a CBO report. They think you can just skim it and get the gist; and people like Mr. Ryan have taken advantage of that misconception.

Read more…

Why, you ask? To go with tomorrow’s column.

The new Medicare Trustees Report is out. Comparing Table IIIA-2 in this year’s report and last year’s report, we get this:

Medicare Trustees

In other words, the Medicare actuaries believe that the cost-saving provisions in the Obama health reform will make a huge difference to the long-run budget outlook. Yes, it’s just a projection, and debatable like all projections. And it’s still not enough. But anyone who both claims to be worried about the long-run deficit and was opposed to health reform has some explaining to do. All the facts we have suggest that health reform was the biggest move toward fiscal responsibility in a long, long time.

If we could wave away political reality, I’d let all the Bush tax cuts expire, and use the improvement in the budget outlook to justify a large, temporary increase in public spending. Unfortunately, that’s not going to happen. Given the political realities, I’d go for a temporary extension of the lower-end cuts, and just letting the upper-end cuts expire.

Why?

It comes down to the dual fiscal problem the U.S. economy faces: short-term, the government needs to do all it can to prop up spending; long-term, it needs to reduce the deficit. The latter concern means that it would be a terrible idea to make the high-end tax cuts permanent; that would be a huge drain on the public finances, serving no good purpose. But why not a temporary extension? Because it would do very little to promote spending.

The basic framework we have for thinking about consumer spending goes back to none other than Milton Friedman, whose “permanent income” hypothesis says that people will save most of any income change they see as merely transitory. Telling rich people that we’ll keep their taxes low for a couple more years is, for them, a transitory income gain; they’ll save the bulk of it.

Isn’t the same true for lower-income people? Not to the same extent. Permanent-income reasoning doesn’t fully apply when some people are “liquidity-constrained” — they have depressed income, which would make them want to spend more than they earn right now, but they’re out of assets and unable to borrow, or unable to borrow except at relatively high interest rates. People in that situation will spend much or all of any temporary windfall.

So if we give money to people likely to be liquidity-constrained, they are likely to spend it. That’s why aid to the unemployed is an effective stimulus; it also suggests that tax cuts for lower-income workers will be relatively effective at raising demand. But the affluent, who typically have lots of assets and good access to borrowing, are much less likely to be in that situation. So tax cuts for the lower 60 or 80 percent of the population are an OK, not great but OK, form of stimulus; tax cuts for the top 2 percent, not at all.

So: let the high-end Bush tax cuts go.

Via Ezra Klein, I see that the latest thing on the right is to compare the economic recovery from the 1981-2 recession with our current state and claim that it proves the superiority of conservative economic policies.

This shows why I can’t maintain the pretense that we’re having any kind of intelligent, or remotely honest, discussion.

The 1981-2 recession was a very different kind of event from the 2007-9 recession: basically, it was a recession deliberately created by the Fed to bring down inflation. The Fed raised interest rates sky-high, causing a plunge in home construction, which was the main driver of the slump. When Paul Volcker believed that we had suffered enough, he cut rates, housing sprang back — and it was housing that mainly drove the recovery. Reaganomics was basically irrelevant.

The 2007-9 recession was driven by the collapse of a huge housing bubble, and the resulting financial fallout. The Fed couldn’t cut rates sharply, because they weren’t all that high to begin with; there couldn’t be a housing boom, because housing was already overbuilt. Here’s the picture:

Is Dan Mitchell unaware of all that? My guess is not — he knows, but he hopes you don’t. There’s a lot of that going around.