2013-11-20T21:09:29+00:00

How low an unemployment rate can we tolerate?

November 20, 2013/stevereads/Leave a comment

On the occasion of Jared Bernstein’s and Dean Baker’s publishing an essay on how low an unemployment rate we can tolerate before inflation spirals out of control, it’s worth linking back to a something I wrote in 2010 about James Galbraith’s views on the matter.

Even supposing that there actually is a NAIRU (i.e., a level of unemployment below which inflation will start accelerating), and even supposing that something bad will happen if we cross below that line, it’s not as though we lose control of the ship right then. At that point we know what happens: the Federal Reserve jacks up interest rates, unemployment skyrockets (particularly as mortgage rates rise and employment in the housing sector collapses), and inflation drops back down. It’s happened before. We have control over this. Doesn’t the Federal Reserve just need to signal that it takes its dual mandate seriously? If everyone believes that the Federal Reserve will bring the hammer down if inflation rises too high, what’s the big deal? Better to let inflation rise too high because unemployment was allowed to drop too low, and correct the problem later, than allow millions of people to remain involuntarily idle.

LazyWeb request: Uwe Reinhardt, “The Disruptive Innovation of Price Transparency in Health Care”

November 13, 2013/stevereads/Leave a comment

Sure would be nice if I could read this.

Hint.

Restaurant recommendation of the day: Giulia in Cambridge, near Porter Square

November 10, 2013/stevereads/Leave a comment

Just like it says up top: you should go to Giulia, in that part of Cambridge that is equally inconvenient to both Harvard Square and Porter Square; in that same little area are Simon’s (formerly the best coffee in Cambridge until Crema came to town), Marathon Sports, and the West Side Lounge. M’lady and I have gone to Giulia twice now, and had an absolutely lovely time both times. They have delicious cocktails, and plenty of lovely Italian small plates that even vegetarians such as myself can enjoy. The décor is warm, cozy, and inviting, such that I’m sure Giulia will be a welcoming destination in the dead of winter.

Highly recommended.

Dog bites man at The Economist

November 9, 2013/stevereads/Leave a comment

Credit to Krugman for giving France-bashing its due, but: when has [mag: The Economist] *not* claimed that unions or France, or French unions, were going to cause an imminent crisis?

Podesta’s new inequality institute

November 6, 2013April 21, 2026/stevereads/1 Comment

A think tank devoted to the study of inequality, headed by John Podesta (Clinton chief of staff, Obama advisor, and founder of the Center for American Progress), featuring Emmanuel Saez, Raj Chetty, and Brad DeLong? Wow. I am fascinated by where this will go.

(I have dropped off of Facebook and Twitter, so you might expect this blog to contain more in the way of “a link with a little commentary around it”.)

Inasmuch as universal health insurance is fundamentally about inequality, maybe here is the place to include a link to Jon Cohn’s great piece entitled “Obamacare Makes Men Pay for Maternity Care. Good!” The slam-dunk argument in the piece, and the moral principle that really ought to have universal appeal (but sadly doesn’t) is:

So you ended up XY instead of XX. Get over yourself. Even conservatives generally stipulate that insurance should protect people from the financial consequences of random events. But they seem not to recognize that being born a woman is a random event. Sorry, dudes, you had no control over that. Allowing insurers to discriminate based on gender means penalizing half the population, just because those folks ended up with one type of chromosome instead of another.

That’s liberalism in a nutshell: in whatever way works best, try to minimize the effects of random misfortune.

As I mentioned to a friend:

While we’re on the topic, John McDonough’s Inside National Health Reform is a must-read. It’s the book I think of whenever anyone says that “no one has read all of the Affordable Care Act.” McDonough’s book is what to read if you in fact want to understand every page of the ACA. It contains one chapter for each title of the ACA, along with a really patient explanation of the politics and Congressional procedure that led to its being the way it is. I want to buy a hundred copies of it and hand them out at parties.

I’ve not yet reviewed it, because I am a terrible person. I’ll let the above stand, for now, as the stub of a review.

Boston and race

November 2, 2013April 21, 2026/stevereads/Leave a comment

(Attention conservation notice: 1400 words about the city I love and its baseball team.)

Speaking of the Red Sox, as we were … I’ve just returned from the jovial Red Sox victory parade, which was a blast (thanks to the two lovely people with whom I was attending it). Along the way, we got to talking about why the Sox just couldn’t win a World Series for 86 years. My friend Olivia relayed an idea from a 2003 documentary, namely that one big reason the Sox failed to make it is that they were the last team in Major League Baseball to admit black players.

This may explain why even today, among the 30,000-plus fans in the stands, it is often hard to find even one black person. As much as I love Fenway, and love attending games there, it reminds me of many things that disgust me about Boston: the 1970s’ busing crisis (which, on the positive side, yielded one of the two or three greatest books I’ve ever read); the fact that the city is largely run by, and despite every MIT and Harvard technocrat’s best intentions, will always be run by, the sort of people who attend Sox games; and the city’s parochial feel: it’s broken in a lot of very obvious ways, but it’s broken in ways that those who live here have grown comfortable with. I’ve long said that Boston is like a very well-worn baseball glove: sure, it’s careworn to the point of being threadbare, but it’s yours, and you know it practically as well as you know your own skin.

Except for a 15-month interval in Washington, D.C., I’ve lived in Boston from April of 2001 until now. I’m never going to be viewed as a native here; if I go into a bar in Charlestown, or along McGrath Highway in Somerville, I’m going to be eyed suspiciously or worse. Maybe it’s like this in every other city. Every city has its problems, and every city has racism to its core (New York: stop and frisk much?; I needn’t mention L.A.). I can think that other cities will be better than this one, and maybe they will be. But in all likelihood, they’ll just be bad in different ways. I don’t want to contend that the grass is greener elsewhere, but neither do I want to write off every other city because the grass there is likely to be brown. Best just to be honest about the flaws of the place you live. And I do think there’s virtue in finding a real home. Unlike anywhere else I’ve ever lived, Boston is very much my home. Fenway is “a lyric little bandbox of a ballpark”, wrote John Updike, and on its better days I think of Boston as a lyric little bandbox of a city. Much of the rest of the time, I agree with George Packer (who wrote a book about my specific neighborhood) that “The city has a thousand charms, but it has always been easier to like than to love.”

To the extent that they think about it at all (it’s fine; I don’t think about Denver much), those who live outside Boston likely think about it for only a couple of reasons. (I’ve long said that Boston needs a mythology.) It’s got the universities, and it’s got the Revolutionary War stuff. But a lot has happened since 1776. And a lot of ugly things have happened. I think everyone who lives here owes it to himself to read Common Ground; apart from being one of the very best books I’ve ever read, it’s a heartbreaking introduction to some parts of Boston’s history that many people would rather forget.

There’s still more to learn, of course. For my part, I think I’m going to spend the offseason reading Shut Out: A Story of Race and Baseball in Boston. One day after we honored Celtics great Bill Russell with a statue, I’d like to understand what led the man to write that

To me, Boston itself was a flea market of racism . . . If Paul Revere were riding today, it would be for racism: ‘The niggers are coming! The niggers are coming!’ He’d yell as he galloped through town to warn neighborhoods of busing and black homeowners.

I often feel this sort of conflict about Boston: on the one side, filled with brilliant people and lovely places; on the other, closed-minded, provincial, and racist.

And yet. And yet. I haven’t written about the Boston Marathon bombing, but I’ve meant to. It’s hard to overstate the effect it had on me. Those outside of Boston might not be aware of just how special Patriots Day is. One year I woke up well before the crack of dawn to watch a re-enactment of the battle of Concord, which led into a pancake breakfast in Concord, which led into watching the Marathon from Coolidge Corner, which would have led into watching the traditional afternoon Sox game if I had gotten my stuff together early enough. It’s a joyous day. I almost always watch the Marathon from Coolidge Corner, a couple miles from the finish line, along with thousands of my friends. We’re cheering on strangers who’ve almost finished an incredibly difficult task, we’re welcoming the spring after a seemingly endless winter, we’re celebrating the start of a new Red Sox season, and we’re rejoicing in being Bostonians.

And then the bombing happened. I was in Vancouver at the time, with cell service on my phone turned off so that I wouldn’t burn through expensive foreign minutes. I was waiting for my girlfriend outside a bathroom at the Vancouver Aquarium, so I turned on WiFi and promptly received dozens of iMessages from friends who were both concerned about my city, and afraid that I — per usual — was waiting along the Marathon route. That was an extremely awful way to learn that someone had just shattered my lyric little bandbox. And outside the library, no less! My library. The various faces of that library read “MDCCCLII FOUNDED THROUGH THE MUNIFICENCE AND PUBLIC SPIRIT OF CITIZENS”, “THE PUBLIC LIBRARY OF THE CITY OF BOSTON BUILT BY THE PEOPLE AND DEDICATED TO THE ADVANCEMENT OF LEARNING A.D. MDCCCLXXXVIII”, and “THE COMMONWEALTH REQUIRES THE EDUCATION OF THE PEOPLE AS THE SAFEGUARD OF ORDER AND LIBERTY”. Every time I see these, I choke up a little bit, even more since the bombing. It’s a “Commonwealth”, not some mere state. This land has been really special, the city upon a hill, for four hundred years. And someone had just torn bodies to shreds in front of what, to me, is its most beautiful landmark.

I took it very, very personally — much more personally than I expected. They did this to what David Ortiz immortally labeled “our fucking city”. This is our fucking city. Our busted-ass, conflicted, often intensely frustrating city.

I think of all of this after the Red Sox won the Series, not because of “Boston Strong” (which I’ve honestly found kitschy), but because the Red Sox are indissolubly part of Boston. It’s important that Fenway Park is tucked into a corner of Brookline; I can walk over there in about 40 minutes, and walk back after stopping off for a couple of cocktails at one of several amazing bars. Having moved here in 2001, I didn’t start following the Sox until their disastrous ALCS game 7 in 2003; after learning about the game and the players, I realized that I could start a conversation with virtually anyone who wore a Red Sox cap on the T. They’re in this city’s bones.

So congratulations, Red Sox, and thanks for a great season. Now we face the winter alone, as the late Commissioner of Baseball A. Bartlett Giamatti (father of the actor Paul Giamatti) put it:

It breaks your heart. It is designed to break your heart. The game begins in the spring, when everything else begins again, and it blossoms in the summer, filling the afternoons and evenings, and then as soon as the chill rains come, it stops and leaves you to face the fall alone. You count on it, rely on it to buffer the passage of time, to keep the memory of sunshine and high skies alive, and then just when the days are all twilight, when you need it most, it stops. Today, October 2, a Sunday of rain and broken branches and leaf-clogged drains and slick streets, it stopped, and summer was gone.

Let’s go Red Sox!

October 31, 2013/stevereads/Leave a comment

I am very happy right now.

The government can spend money without spending money

October 24, 2013/stevereads/Leave a comment

This is a good example of the perniciousness of tax expenditures. That is, the government nowadays spends lots of money just by lowering people’s tax bills; this is called a ‘tax expenditure’. The government tries to encourage homeownership, for instance, by lowering your monthly mortgage expense; it does this by allowing you to lower your tax bill every month by however much you pay for interest on your mortgage, to the tune of $106 billion per year. That’s an expense, just as it would be if the government had instead spent $100-plus-billion directly paying money for homes.

It’s even worse for health insurance: when your employer pays for your health insurance, it’s giving you income on which you don’t pay income taxes *or* Social Security. As Edward Kleinbard helpfully shared, the health-insurance tax expenditure costs Social Security $100 billion every year. That’s $100 billion that doesn’t show up in the usual accounting.

And yet:

> Catherine Frazier, a spokeswoman for the senator, confirmed the coverage, which Goldman said was worth at least $20,000 a year. The senator is on his wifes plan, which comes at no cost to the taxpayer and reflects a personal decision about what works best for their family, she said.

That $20,000-a-year plan is a benefit that the senator’s wife gets in lieu of salary, essentially. But it’s not taxed as salary. If she had been paid an extra $20,000, she would have had to pay taxes on it, and those taxes would likely have come to 30% or so of the $20,000, or around $6,000.

That a senator — or at least a member of a senator’s staff — is not aware that the government spends money when it fails to tax people for a benefit they receive is surprising. Though perhaps this gets down to a matter of ideology: the Republican Party has built a brand identity around opposing all taxes, so it probably doesn’t believe that foregone taxes are the same thing as money spent directly on services. This is unfortunate, because the effect is the same: people spend too much on health care.

And there’s an uglier side to paying for health care in this way: wealthier people get more help. That is, Senator Cruz’s wife is, in a very real sense, suckling at the public teat more than a poor person is. Suppose you’re in the lowest tax bracket, and that you’re lucky enough to have health insurance (unlike one in four people in your income bracket). Suppose, somehow, that you’re lucky enough to have a $20,000-a-year plan like Mrs. Cruz does. Well then U.S. taxpayers are subsidizing you to the tune of about $2,000. So Mrs. Cruz and her family draw about three times as much from the public trough as you do, even though she and Ted can likely afford it far more than you can.

Republicans have in the past objected to tax withholding, on the grounds that Americans don’t experience Federal sticker shock when they pay little by little throughout the year. If the goal is to make Americans know what they’re paying, and what they’re getting for it, then we should drop tax expenditures entirely and pay directly for what we get.

Teresa Ghilarducci, When I’m Sixty-Four: The Plot against Pensions and the Plan to Save Them

October 22, 2013April 21, 2026/stevereads/Leave a comment

Golden egg with a crack in it
Skip it. Read Sass’s The Promise of Private Pensions instead. Ghilarducci’s writing is clunky, the book is overloaded with numbers that distract rather than inform, and it’s studded throughout with offset boxes that give you “numbers to digest” or “bottom line”s; these end up sounding condescending and annoying and distracting, rather than informative. The book generally feels like a hastily assembled and incompletely edited collection of miscellany, rather than a coherent story about pensions.

Throughout the entire book, Ghilarducci refers to her solution to the retirement-security problem, namely a defined-contribution scheme to augment Social Security; this solution appears in chapter 10. It would be a progressive alternative to the failing 401(k) system, which doesn’t encourage people to save and instead just gives prosperous people a tax-advantaged place to park money that they would have saved anyway.

So that’s a fine idea, but … why not just expand Social Security and be done with it? The only real objection Ghilarducci raises to this expansion is that it suffers from Social Security’s pay-as-you-go approach — i.e., that Social Security transfers from current workers to current retirees, rather than setting aside an account for each worker. But as Ghilarducci lays out repeatedly, this isn’t really a problem: Social Security’s trustees use very conservative assumptions when measuring the program’s solvency; and even under those assumptions (which, to repeat, are likely overly cautious), any solvency problem can be fixed by little tweaks. E.g., removing the cap on earnings subject to FICA. So her only objection to expanding Social Security is that it may have a funding problem that it doesn’t actually have.

On the other side, she freely admits that her defined-contribution benefit scheme — since it is explicitly designed to be funded in advance, rather than pay-as-you-go — will not be able to help those who are going to retire soon; they won’t have any time to contribute to her defined-contribution scheme. So the downside to her plan is that it leaves out most everyone who’s retiring today. The downside to simply expanding Social Security benefits up to what other countries use for their pension schemes is … nothing noticeable.

Had Ghilarducci just advocated expanding Social Security and being done with it, the book would have been very short. Better to skip it and read elsewhere about expanding Social Security. I’ll try to find a good book to recommend in that direction.

Steve Reads

Author: stevereads