Confessions of a Supply-Side Liberal

A Partisan Nonpartisan Blog

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Meet the Fed’s New Intellectual Powerhouse

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Here is a link to my 47th column on Quartz: “Meet the Fed’s new intellectual powerhouse.”

I have two related columns not directly linked in this piece: “Monetary Policy and Financial Stability" and my discussion of Janet Yellen’s views: "Janet Yellen is Hardly a Dove: She Knows the US Economy Needs Some Unemployment.”

What I say in the column about how a low elasticity of intertemporal substitution affects how the Fed should respond to risk premia is informed by the discussion I gave of a paper of Mike Woodford and Vasco Curdia at a Bank of Japan conference (which I mentioned and linked to here.) Claudia Sahm, Matthew Shapiro and I are working on literature review of empirical work on the elasticity of intertemporal substitution for our paper on that topic. I will have more to say on that in the future. 

Update: I wrote this column (which is about much more than Jeremy Stein himself) just in time. On April 3, 2014, Jeremy Stein announced he was resigning from the Fed. But we might see him again in the future in high government office. 

Filed under columns money finance

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One of the Biggest Threats to America’s Future Has the Easiest Fix

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Here is a link to my 46th column on Quartz, “One of the biggest threats to America’s future has the easiest fix,” coauthored with Noah Smith. I talked about some of the issues of capital budgeting addressed in this column a while back in my post "What to Do When the World Desperately Wants to Lend Us Money" and Noah has talked about the importance of infrastructure investment a great deal on his blog Noahpinion.

Other Threats to America’s Future: Our editor wanted to title the column “The biggest threat to America’s future has the easiest fix.” I objected that I didn’t think it was the very biggest threat to America’s future. I worry about nuclear proliferation. Short of that, I believe the biggest threat to America’s future is letting China surpass America in total GDP and ultimately military might by not opening our doors wider to immigration—a threat I discuss in my column "Benjamin Franklin’s Strategy to Make the US a Superpower Worked Once, Why Not Try It Again?" 

Technical Afterword to the Column (Please Read Column First)

There is a very interesting feature to our proposed capital budgeting system that we should highlight. How can the capital budget ever be negative? The capital budget plus the non-capital budget must add up to the total budget. So for a given total budget, a negative capital budget makes the non-capital budget bigger. What is going on is this: regular maintenance is like a quasi-entitlement within the non-capital budget. In any given year, regular maintenance as a component of the non-capital budget is fixed in advance and can’t be altered by the legislature. The only way it changes is that it is gradually reduced if the quantity of capital to be maintained gets lower, or gradually increased if the amount of capital to be maintained gets bigger.

In this lack of discretion about regular maintenance as a component of the non-capital budget, there is no real tying of the hands of the legislature: they could always choose to have a very negative capital budget, which would increase the non-capital budget enough to cover that maintenance. So if the legislature as a whole acted like a fully rational actor, this principle is not a constraint at all. But as political economy, it makes a difference, and a good one. The legislature can increase the non-capital budget and reduce the capital budget. But what the legislature can’t do is get more funds for other things by letting capital decay without it showing up in the accounting as an increase in the regular budget and reduction in the capital budget. 

Filed under longrunfiscal columns

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Actually, There Was Some Real Policy in Obama’s Speech

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Here is a link to my 45th column on Quartz, “Actually, there was some real policy in Obama’s speech.”

I briefly considered titling this post “The 2014 State of the Union Hints at Shifts in the Overton Window.” I say a bit about the “Overton window” in my post "The Overton Window." In brief, the “Overton window” is the set of “respectable” policies that are discussed by actual politicians and those closely associated with them. 

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The Case for Gay Marriage is Made in the Freedom of Religion

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Here is a link to my 44th column on Quartz, “The case for gay marriage is made in the freedom of religion.” 

This is a followup to my Christmas column "That baby born in Bethlehem should inspire society to keep redeeming itself."

I am not making a narrowly legal argument in "The case for gay marriage is made in the freedom of religion." It as addressed at least as much to current and future voters and legislators as to lawyers crafting arguments for judges.   

Filed under politics columns

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Gather ‘round, Children, Here’s How to Heal a Wounded Economy

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Here is a link to my 41st column on Quartz: “Gather round, children, here’s how to heal a wounded economy.” It could also be called “Electronic Money: The Coloring Book.”

Thanks are due to Donna D’Souza for her help in the cause of healing the economy, starting with education about electronic money.  

In case there are any problems with the SoundCloud links in the Quartz column, here is the audio of me reading the story aloud and the audio of me singing the operatic ballad that has the words of the story as the lyrics. 

Since I began writing about electronic money, many people have told me that the biggest issues with serious negative (nominal) interest rates and the subordination of paper currency to electronic money needed to make them possible are political issues. I agree. I have thought that the way to change the politics of negative interest rates is to keep explaining them, from many different angles. This is the children’s storybook angle. 

I think our storybook/coloring book works as a children’s story. There is an attempt to solve a problem that fails, then there is a twist that solves the problem from an unexpected direction—using a seeming curse that is actually a blessing. See what you think. 

Reactions:

Greg Mankiw writes on his blog:

If my favorite textbook hasn’t simplified things enough for you…

My friend and former student Miles Kimball takes a stab at explaining some basic macroeconomics through the vehicle of a child’s storybook.

Gerald Seib and David Wessel, in the Wall Street Journal, write:

University of Michigan economist Miles Kimball posts a downloadable coloring book and colored-in storybook to explain his simplified version of how the macro-economy and monetary policy work. [Quartz]

Filed under columns money emoney

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The Shakeup at the Minneapolis Fed and the Battle for the Soul of Macroeconomics

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Here is a link to my 38th column on Quartz, coauthored with Noah Smith, “The shakeup at the Minneapolis Fed is a battle for the soul of macroeconomics—again.” Our editor insisted on a declarative title that seriously overstates our degree of certainty on the nature of the specific events that went down at the Minneapolis Fed. I toned it down a little in my title above.

Filed under money columns class