I haven’t been weighing in on the ACA hearing at the Supreme Court; I’m not a lawyer, and while most legal experts seem to think that the case for striking the law down is very weak, these days everything is political.

But I guess I should give my take, which is really quite simple. We know, or I think we know, that a single-payer system — in which the government collects taxes, and uses the revenue to provide health insurance — would be constitutional. I mean, I don’t think the court is about to strike down Medicare.

Well, ObamaRomneycare is basically a somewhat klutzy way of simulating single-payer. Instead of collecting enough revenue to pay for universal health insurance, it requires that those who can afford it buy the insurance directly, then provides aid — financed with taxes — to those who can’t. The end result is much the same as if the government collected taxes from those under the mandate and bought insurance for them.

Yes, the system is surely less efficient than single-payer, both because it’s more complex and because it introduces another layer of middlemen. That’s what happens when you have to make political compromises. But it is in no sense more interventionist, more tyrannical, than Medicare; it’s just a different way of achieving the same thing.

Just a small note about today’s column: doing the research, I found myself feeling as if I had turned over a rock and found a lot of creepy-crawly things underneath. This is really upsetting stuff.

Look, in particular, at the semi-secret history of the Arizona immigration law. A legislator goes into a closed-door meeting with corporations, including a big operator of private prisons, and soon afterwards submits legislation that … sends lots of people to those private prisons.

If you read the corrections to that report, you see that ALEC and/or its clients went over the piece with a fine-toothed comb to find anything that they could attack; sure, you can’t prove that Corrections Corporation of America inspired the law, or that ALEC lobbied for it. Hey, it could all be a coincidence.

But this is really, really creepy — and scary.

Ryan Promises To Close Tax Loopholes, But Won’t Say Which

Appearing on two Sunday talk shows, the GOP’s top budget guru Rep. Paul Ryan promised to close enough loopholes to pay for the large tax cuts in his budget blueprint unveiled last week — but he repeatedly refused to specify any.

Give that man an award for fiscal responsibility!

Oh, my:

Mr. Katainen, the 40-year-old leader of one of the euro area’s last remaining triple-A-rated countries, spoke more optimistically in his public comments of “growsterity,” a form of austerity that allows for some targeted measures to encourage growth, like Finland’s decision to grant tax relief for research spending by companies despite sharp budget cuts elsewhere.

“It’s clear that if you cut expenditures and raise taxes, it will weaken the growth in the short term,” he conceded. “But at the same time it will strengthen the credibility of the country. And once you earn back the credibility, the growth will follow, as we have seen in Ireland, for instance, or in Latvia, especially.”

Hmm:

Latvia has grown some in the past two years; so did the US in 1933-35. But it’s still a deeply depressed economy. And as for Ireland, there were some very premature victory celebrations in the early fall; remarkably, the claim that Ireland was recovering seems to have settled into the consciousness of Europe’s VSPs, while the subsequent demonstration that it was all a blip never got through.

OK, I wasn’t going to post anything else, but as Robert Farley says, this WaPo piece on underworked college teachers is outrageous.

Yes, people like me have a very nice life — and if you want to condemn the luxurious lives of faculty at elite research universities, fine.

But the idea that faculty at big state schools, let alone community colleges, have it easy is just mind-boggling. I’ve visited a lot of these places and talked to a lot of these people, largely, I’m sorry to say, because they buy lots of textbooks. But I like the people — smart, highly educated people without the ego things all too common at more prestigious schools — very much. And I always come away awed by just how hard they work — how many class preps they have to do, how much time they spend with students, all for salaries that are a fraction of what people with similar qualifications earn in the private sector.

Of all the people to pick on …

Stressful column-writing, so no substantive posts today.

But non-substantive — hey, I can do that. Because economics warps your brain.

We saw that a while back when Brad DeLong wondered why the Riders of Rohan didn’t have a logistics train. And now, having seen The Hunger Games, I worry about the arithmetic of exploitation. Neither District 12 nor District 11 seem to have had more than a few thousand people; if the rest are similar, there just weren’t enough exploitees to support the number of exploiters we saw in The Capitol.

Aside from that — and the question of where, in a post-apocalyptic Appalachia, Peeta found hair gel — it was actually a terrific movie.

So, is there still a lot of slack in U.S. labor markets? On the face of it, that seems an absurd question to ask, given the persistence of very high unemployment and an employment-population ratio far below pre-crisis levels. Yet it is being asked, partly because we don’t see strong evidence of falling inflation.

But how good a criterion is that? Sharply rising inflation would be one thing — but we don’t see that either. And there’s actually pretty good evidence that inflation tends to stall out at low but positive levels in the face of prolonged slumps.

Let me add something more to the mix: the case of Canada in the early 1990s, the subject of a classic analysis at the time by Pierre Fortin.

Read more…

One of key arguments made by the proponents of fiscal austerity, even in a deeply depressed economy, has involved a sort of macroeconomic version of Pascal’s wager. Yes, the more open-minded admit, borrowing costs are very low in the US and the UK. Yes, the arithmetic suggests that cutting spending now will do very little to improve the long-run fiscal prospect. But you never know – maybe the last trillion dollars of spending will be what causes a sudden loss of market confidence, turning you into Greeeeeeece. (Cue scary noises).

Leave on one side the enormous difference between countries that do and don’t have their own currencies (and debt in their own currencies). Let me instead point out that there are other risks in the world.

Specifically, if allowing an economy to remain persistently depressed reduces long-run growth prospects — and there’s pretty good evidence to that effect — then austerity in a depressed economy has enormous costs, and may even lead to a vicious circle of shrinking potential leading to even more austerity and so on. Indeed, maybe that’s happening to the Cameron government right now.

So will the austerians admit that they might be making a terrible mistake, that far from safeguarding the future they may be destroying it?

Chutzpah, according to the old definition, is when you murder your parents, then plead for mercy because you’re an orphan. I found myself thinking of that definition when reading Justin Fox’s description of recent remarks by Jean-Claude Trichet. (Via Mark Thoma).

Trichet laments what he says was the failure of macroeconomics to yield useful guidance in the crisis. On the whole, I’m sympathetic to that view — a lot of modern macro proved not just useless but actually harmful, because it undermined the workable macro consensus we used to have, a consensus that could and should have led to a better response.

But from Trichet? After all, his hallmark during the crisis was his willingness, even compulsion, to throw the things we actually do know out the window. He tossed everything we know about aggregate demand out in favor of the fundamentally implausible (and now failed) doctrine of expansionary austerity. He ignored what we know about inflation and the difference between transitory shocks to raise interest rates in the face of an obviously temporary blip.

And now, having willfully rejected and ignored what macroeconomics had to say, he complains that macroeconomics doesn’t offer useful policy guidance. Awesome.

Not a connection you might have expected — and yes, there’s a bit of Kevin Bacon about it. But when I heard about the (inspired) choice of Jim Kim for the Bank’s presidency, I immediately saw it. Kim is a co-founder of Partners in Health, an organization profiled in Tracy Kidder’s Mountains Beyond Mountains. And the book in turn inspired an Arcade Fire song off their latest album (AF are big PIH supporters, and Regine Chassagne is of Haitian ancestry):

Joe Weisenthal has a very nice report about the wonderful FRED data website. I truly wish that Eurostat — an excellent source, which I’ve been using a lot — were a tenth as user-friendly.

No, I haven’t lost my mind. He’s still the same flim-flamming fiscal phony he always was.

Where I was at least somewhat wrong was in my expectations about how the Very Serious People would treat his latest outing. I thought they would still treat him as a heroic deficit hawk, never mind the fact that his plan is really about transferring money from the poor to the rich, with no credible deficit reduction at all. That, after all, is what they did last year — he even received an award for fiscal responsibility.

But I’m not seeing that this time. Overall, the response seems muted, maybe out of embarrassment. But leaving aside the predictable right-wing cheerleaders, it looks as if the emperor’s nakedness is now common knowledge.

There will, of course, be no admission of past naivete; nor will I personally be forgiven for taking Ryan’s measure too soon. But better than I feared.

Noah Smith has a post on the current state of the macro controversy that’s justifiably getting a lot of attention.By and large I agree with his points: Keynesian revivalists like Brad DeLong and yours truly have not managed to get a dramatic reversal in policy, nor have we persuaded the freshwater side that it’s all wrong. But we have managed to change the conversation.

And by the way, I really like the analogy to Louis XIV’s wars, which involved many great battles but little change in borders.

That said, I think Noah underestimates how much this continuing argument matters even in the short run.

On the policy side, major new stimulus may not be in the cards — but there is a real divide in the US between modest stimulus proposals that have some chance of getting implemented and major austerity moves that also have some chance of being implemented. The difference between those two policy variants could be the difference between unemployment below 7 percent two years from now and unemployment back above 9 percent. So this argument has real short-term policy relevance.

And in Europe, the question of whether harsh austerity remains the only tool is very much up in the air. Again, the argument among economists matters.

On the academic side: look, to a first approximation nobody ever admits being wrong about anything. But my sense is that a lot of younger economists are aware, even if they don’t dare say so, that freshwater macro has been a great embarrassment these past four years, and that liquidity-trap Keynesianism has done very well. This will affect future research; it will, over time, break the stranglehold of decadent Lucasian doctrine on the journals.

And the giggles and whispers thing — in which anything resembling non-microfounded Keynesian analysis was the subject of automatic ridicule — is already, I think, over. Look at Delong/Summers on fiscal policy: the analytical core is, yes, the IS-LM model.

In a better world, Brad and I and our fellow-travelers would have achieved an immediate transformation of both policy and doctrine. We don’t live in that world. But I think we are winning the argument, in ways that will make a difference.

Yes, I know it’s actually morning. But an early musical posting given today’s column:

DeLong and Summers on fiscal policy in a depressed economy is out. The headline point is the argument that austerity when you’re in the liquidity trap may well worsen, not improve, your long-run fiscal position; I’ve been making the same point for a couple of years, but Brad/Larry present some evidence from the birth of Eurosclerosis and the downgrading of US potential output estimates since the crisis began.

They also emphasize the crucial point that even if austerity doesn’t literally worsen the long-run position, it does at best very little to improve that position — yet imposes large current costs. So the cost-benefit analysis is overwhelmingly in favor of stimulus as long as you’re in the liquidity trap.

And what that says, in turn, is that the embrace of austerity by policy and political elites in late 2009 and early 2010 was an almost inconceivably terrible blunder. The result of that embrace was the imposition of huge economic and human costs, with little if any benefit.

I’ve been posting various versions of a scatterplot showing the relationship between one indicator of fiscal policy and growth since the crisis began. Here’s a version restricted to eurozone countries and countries maintaining a fixed exchange rate against the euro, with many of the countries labeled:

(All data from Eurostat).

No, I haven’t fitted a regression line, for a couple of reasons. On one side, this is an imperfect measure of fiscal policy; austerity countries have been raising taxes and slashing transfer payments too, so this only gets part of the story. Also, there is some reverse correlation, with the countries that had the biggest bubbles forced into the deepest austerity.

Still, is this the kind of outcome you would have expected if you believed what the Austerians were saying? Or is it what you would have expected if you’d been reading those of us horrified by the turn to austerity?

What gets me about all of this is the incredible, unwarrented arrogance of the austerians. They decided that they knew better than textbook macroeconomics, even though none of them had predicted the crisis or even seen the possibility of such a crisis.

And the wreckage now lies all around us.