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MACRO TENNIS

In re: this post, Brad DeLong says:

" . . . I both agree and disagree with Max. I agree: the small size of primary deficits for the next fifty or so years means that the U.S. does not face an inevitable destructive fiscal crisis as long as we can keep borrowing to pay the interest on our outstanding debt at low interest rates. We will be able to keep borrowing at low rates to pay the interest on our outstanding debt as long as speculators are confident that the credit of the U.S. is good--that there will be no destructive fiscal crisis.

But I also disagree: suppose speculators decide that there may be a destructive fiscal crisis, and begin demanding high interest rates to roll over and finance the payment of interest on outstanding U.S. debt? Then the primary surplus becomes irrelevant. And a destructive fiscal crisis becomes inevitable. . . "

Brad's point is well-taken, though the question sounds better (to me) when posed this way: if the debt to GDP ratio were to be stabilized for the forseeable future, which means zero primary deficits, why should holders of dollars fret? If they aren't up in arms now, when our budget outlook is FUBAR, think how great they would feel if we moved to a sustainable path (zero primary deficits)?

BIG CROCK CANDY MOLEHILL

by the Sandwichman

Tim Worstall at TCS Daily gets all dewy-eyed about the "American Social Model", based on the TRUTH ("There's only one small problem with this idea. It turns out not to be true."), FACTS ("there's one uncomfortable little fact...") and PROOF ("The latest empirical proof") contained in the Gary Becker-inspired data torturing exercise performed by Mark Aguiar and Erik Hurst for the Federal Reserve Bank of Boston. I suspect from its eager reception by Worstall, and earlier from the Economist , that the study's conclusions will soon become an article of faith for the you-never-had-so-good crowd.

There's only one small problem with Aguiar and Hurst's truefactproof: it's all a question of judgment and data quality. The authors at least have the integrity to say so in their conclusions, even if their abstract hypes the extent to which their interpretation "documents" what they suppose it does.

Page 30: "Any definition that distinguishes “leisure” from “work” is a matter of judgment." Check.

Page 33: "The ability to examine different patterns in time use over four decades hinges critically on the quality of data within each of the time‐use surveys." Check.

HEAR NO EVIL!

Remember welfare reform that imposed strict work requirements and time limits on welfare beneficiaries? Remember how some of us warned that this bill could lead to rising poverty and hardships among the families affected?

Well, no one is going to have to hear about whether or not these warnings prove to be right. The folks in the Bush administration came up with the brilliant idea of eliminating funding for the Survey of Income and Program Participation (SIPP) in the 2007 budget. This survey is the government's main tool for tracking the well-being of families receiving TANF, food stamps, and other income supports.

You have to give these people credit. It would be difficult (hard work) and possibly expensive to design policies that facilitate upward mobility for low income families. It is much easier to just eliminate the main government survey, and then we longer have to hear about the problem. (And, it saves money too.)

THE TAX CUTS ARE WORKING

. . . unless you care about jobs.

PGL at Angry Bear

Barry Ritholtz at The Big Picture

Menzie Chin at Econobrowser (here too)

Labor market genius Jared Bernstein (Mama MaxSpeak: "How come that Jared Bernstein person always gets quoted in the NY Times and you don't?")

The upshot is, the unemployment rate, which has fallen to a nice 4.7 level, is less informative than it used to be, given the downswing in labor force participation noted in particular by Ritholtz (see the last chart in the post).

UPDATE: William Polley chimes in., here and here.

DON'T PANIC, CONT'D

This follows up on my TPM Cafe post of yesterday.

In the latest Analytical Perspectives volume of the Bush Administration Budget for FY2007, we are given long-run projections of the deficit. I must begin with a word about the jive charts.

Starting on page 186, we get deficit projections under alternative assumptions about health care spending. Deficits grow to impossible levels of 10 or 15 percent of GDP under some scenarios. These are jumped up because they include interest costs that compound over time. The gap presented is overstated. If you closed it, you would end up with budget surpluses. A more instructive presentation would be limited to what's known as the primary deficit, which is program spending (not including net interest) minus revenues. All economists know that if you eliminate the primary deficit, the remaining debt (with some simplifying assumptions) does not grow faster than GDP. It's sustainable indefinitely.

I DREAMED I SAW HOWARD DEAN LAST NIGHT

Since I'm a nerd, I dream in charts.

Related note, regarding my assumptions: Brian M. Riedl of the Heritage Foundation is shrill on the topic of Bush spending.

THE NEXT VOICE YOU HEAR
AND HEAR
AND HEAR

The Federal budget is out, and every year at this time I become a huge media personality for about two weeks. First bite is a radio spot on KNX in L.A. (live feed here), TODAY at 4:30 EST. In about 25 minutes.

OUR MOTTO:
"OPINIONS ARE LIKE ASSHOLES;
EVERYBODY HAS ONE"

At Daily Gloss, it is alleged by an anonymous diarist of unknown credentials that Saudi Arabia is behind the wave of protest over cartoons depicting Muhammed.

At Juan Cole, a professor of Middle East studies, not so much.

THEY DON'T PAY FOR HEALTH,
THERE ARE NO SAVINGS,
AND THERE ARE NO ACCOUNTS

It's the answer to a Linda Richman question. The president may not care about health care, but we do. Joe Paduda dissects health savings accounts. Maybe preforming an autopsy would be better terminology.

MO' MONEY

I have another budget post at the spiffy new TPM Cafe site.

WILL THE GOP RUN ON BUDGET CUTS?

The newest George Bush Budget comes out today. The story will be big cuts in non-defense spending. This is not a new story. As I have documented here for years, the process used to run like this: the Administration issues a budget with minimal or no increases in domestic spending. Critics on the left bemoan the proposals, conservatives on the right applaud. Meanwhile, the Republican Congress ignores the budget and jumps up spending regardless. Then the President signs off on the results -- not one veto in five years -- and tells us how generous he is. Then small-gov types piss and moan, then tell their supporters to vote for the GOP anyway. Nice, huh?

This year may be different. To start with, the proposed cuts will be larger. Second, a head of steam has built up among small-gov people that could result in some pressure on Congress. Third, as the "Law and Order: Capitol Hill" show plays out, the Republican congress is under some pressure to stiffen at the base, hence the erection election of Rep. Boehner. (Sorry, I can't help myself.) Fourth, the Bridge to Nowhere episode has put new light on the growing abuse of appropriations and lobbying. So maybe the cuts this year will be bigger.

Over and against all this is the simple fact that it's an election year. Can the GOP campaign be founded on austerity? It would be a change of pace. The timing could also be inopportune in light of possible weakness in the economy reflected in the fourth quarter GDP reports.

There's a lot more that the Gov could be doing for the general welfare, and a lot that it is now doing that we could do without. As far as the spending totals go, there is no purpose what-so-ever in pursuing cuts in the manner of the Administration. Those cuts have zero impact on the long term budget picture, do nothing to prepare us for the important choices ahead -- chiefly defense, health care, Social Security, and taxes.

The reality is we have a decade or so to straighten out. There is no need to panic. The prerequisite is to get rid of the clowns in power, and not replace them with new clowns wedded to bankrupt Democratic Party budget orthodoxy. Which takes us back to the election. Will the Democrats run on austerity? Will the choice be austerity versus austerity-plus-tax-cuts? Can you guess who wins that one?

SOLIDARITY WHENEVER

Your humble correspondent has been delinked by Daily Kos. An inquiry was met with a note insulting our honor. This after our support for a few of his more dubious blog adventures. His stated reasons were our lack of a front-page blogroll and our participation in Pajamas. I think it's because we use too many big words. You can take our comments on the shortcomings of Kos henceforth as sour grapes. But it will be fun.

Quick Budget Reporting Integrity Test

Medicare and Medicaid costs are projected to grow rapidly in the years ahead because the U.S. health care system is broken and has exploding costs. Social Security costs are projected to grow moderately, primarily because countries with rising living standards have rising life expectancies. Longer life expectancies mean longer retirements (holding the retirement age fixed) and therefore rising costs. There is little different about the projected rise in SS costs over the next 30 years from the last 30 years.

Integrity test -- adding together Social Security, Medicare, and Medicaid and linking rising costs to aging. Honest and competent reporters/policy types do not do such things.

LEISURE AS A FACTOR OF PRODUCTION

I. The butt-on-a-slide model
The canonical labor supply model is typically graphed to look like a minimalist line sketch of a butt on a slide. So I’ll call it the butt-on-a-slide model to afford it the disrespect it deserves.

II. Nemo contra deum nisi deus ipse
You can’t replace something with nothing. You can’t substitute a nullity for a theory. Except, it seems, in economics.

III. The marginal utility of evasion
By treating leisure as a "normal good" rather than as a factor of production, the canonical labor supply model opposes a theory not with another theory but with an evasion of what the earlier theory says.

IV. Life is excessively complicated
To the extent that Chapman’s analysis is "complicated" or an "amalgam," that might more constructively be laid to the nature of the problem Chapman was analyzing rather than any fault of his own.

V. Queensland's summary of Sandwichman's synopsis of Chapman's theory
The Sandwichman OWNS S.J. Chapman. I'm not happy about that but if you do a Google search on S.J. Chapman and Hours of Labour all you get (with the few exceptions I'll mention) is me droning on unrequitedly about the damn thing for six or seven years.

VI. Sandwichman's synopsis of Chapman's theory
The fastidious critic might object that a summary of a synopsis, followed by a synopsis, followed by a fragment of the original text (which is itself a summary of the "more technical parts" of the argument) is "repetitive." Not at all.

VII. Chapman's footnote
And now... drumroll... the moment you've all been waiting for: Sir Sydney Chapman's technical footnote itself!

EPILOGUE Economists! Wash your hands!
There hasn't yet been a "macroeconomics of fatigue and unrest" but perhaps there should be one.

REFERENCES (Coming soon)

LEISURE AS A FACTOR OF PRODUCTION: EPILOGUE

Economists! Wash your hands!

by the Sandwichman

...some of us who have an economic bent of mind get into the way... of thinking too much of the quantity of external wealth produced and too little of the balance between internal and external wealth. – S.J. Chapman

... as if the power of compelling or inducing men to labour twice as much at the mills of Gaza for the enjoyment of the Philistines, were proof of any thing but a tyranny or an ignorance twice as powerful. – Charles Wentworth Dilke

Ignaz Semmelweis was a physician at the Vienna Allgemeines Krankenhaus in the middle of nineteenth century. One day in 1847, his colleague, Dr. Kolletschka, cut his finger while performing an autopsy. Soon afterward, Kolletschka contracted a virulent fever and died.

The sad event nevertheless gave Semmelweis a clue to the mystery that had been bothering him: why did the first division at the hospital, operated by surgeons and medical students, have a much higher rate of maternal death from childbed fever than did the second division, operated by midwifes?

TRANSAUTOBIOGRAPHICAL INTERLUDE

by the Sandwichman

The journalist, as flâneur... makes it his business to let his hours of leisure on the boulevard appear as part of his work time, he multiples the latter and thereby the value of his own labor....

The sandwichman is the last incarnation of the flâneur. – Walter Benjamin

YOU'RE A GOOD MAN,
MESSENGER OF GOD

I can't get too worked up about the people worked up about the degradation of Islam found in the rotten state of Denmark. We ought to regret any blanket insults to ethnic, religious, and other groups. When it isn't gratuitous, it is a facilitation of reactionary politics. Some of the cartoons clearly play on stereotypes. It all exacerbates tensions in the world and makes reconciliation on difficult issues more difficult.

The obvious parallel is the non-outrage in Islamic and Arab countries over stereotypes, attacks on non Islamic peoples, and other expressions of religious intolerance. For example, we have the Holocaust denial campaign of Iran's new ruler, all the while proclaiming no animus towards Jews, just Zionists. Or we have this gem, "If only we had murdered Salman Rushdie . . . " Islamo-dudes! Get over yourselves. People here make fun of Jesus on a daily basis.

It's hard to see any hope from those upholding this sort of stance. Freedom of expression still seems to be the most practical rule to fall back on. Willingness to negotiate over legitimate claims in other areas. Otherwise, we must seduce their youth with sex, drugs, rock 'n roll. And brace ourselves for more attacks.

STOP PRESS: THIS JUST IN FROM THE BOSTON FED

by the Sandwichman

Those three million missing unemployed that Dean frets about? Relax! It turns out they're just having fun. Especially less educated adults who have enjoyed "the largest gains in leisure" over the last 40 years ("Using our preferred definition of leisure..." ). Shorter version in the Economist.

LEISURE AS A FACTOR OF PRODUCTION VII

Chapman's footnote

by the Sandwichman

And now... drumroll... the moment you've all been waiting for:

Sir Sydney Chapman's technical footnote itself!

DO BAD NUMBERS HIDE BAD NEWS?

The Current Population Survey (CPS) is the Labor Department’s most important measure of the labor market’s health. It not only is the source of the monthly unemployment rate, it also provides the most widely used data on poverty rates, health insurance and pension coverage, and many other questions.

The CPS has suffered from a rapid increase in non-response rates – the percentage of people who do not answer the survey. In the early nineties the non-response rate was less than 5 percent, it was more than 8 percent by 2000, and it is now close to 11 percent. For certain demographic groups (e.g. young African American and Hispanic men) the non-response rate is more than 30 percent. If the non-responders to this survey are different from the responders, then this non-response rate can be a big problem.

John Schmitt, my colleague at the Center for Economic and Policy Research, did a study that compared employment data from the Census with the CPS. His analysis indicates that the CPS overstates employment by approximately 1.5 percentage points (@ 3 million people). Among young African American men the overstatement is 8 percentage points. This research implies that poverty rates are understated and health insurance coverage rates are overstated. Stay tuned.

LET'S PLAY SOLDIER

Aside from these celebrated cases, we now have Rep. Robert Beauprez (R-CO):

Location was Watkins, Colorado. Story is here.

HOUSE GOP HANDS JOB TO BOEHNER

The session began with the flag presentation by an honor guard led by Captain Standish. After some stiff competition among members, Rep. John Boehner thrust himself ahead of the pack to win the post of House Majority Leader. Boehner defeated Rep. Richard Wood, Rep. Roy Blunt, Rep. Norman Dicks, Rep. Nancy Johnson, Rep. Chris Cannon (the favorite), Rep. Randy Kuhl, Rep. Madeleine Bordello, Rep. John Schwartz, and surprise contender Rep. Mary Bono. Rep. Emanuel Cleaver came in last, and Rep Chris Cox had given up his seat to head the SEC. (Rep. J.J. Pickle has retired.)

House business turned immediately to the question of missile defense and pork.

LEISURE AS A FACTOR OF PRODUCTION VI

Sandwichman's synopsis of Chapman's theory

by the Sandwichman

The end is nigh. Not that end, silly, just the end of this series. The fastidious critic might object that a summary of a synopsis, followed by a synopsis, followed by a fragment of the original text (which is itself a summary of the "more technical parts" of the argument) is "repetitive." Not at all. In fact, a close reading might even detect discrepencies between the three summaries.

But the purpose of this seeming redundancy isn't to dwell on discrepencies. It is to enable a learning process that can only occur through a stereoscopic layering of similar but slightly different perspectives on the same subject matter. It is not content that governs the slow unfolding of understanding here as much as it is resonance. A three-chord progression, one might say. Or a cubist pedagogy. Recall Picabia's seemingly misanthropic complaint that "for you to like something it is necessary for you to have seen and understood it a long time ago." Taking that insight a step further, for you to recognize that you've seen something it is necessary for you to have seen it before.

LEISURE AS A FACTOR OF PRODUCTION V

Queensland's summary of Sandwichman's synopsis of Chapman's theory

by the Sandwichman

The Sandwichman OWNS S.J. Chapman. I'm not happy about that but if you do a Google search on S.J. Chapman and Hours of Labour all you get (with the few exceptions I'll mention) is me droning on unrequitedly about the damn thing for six or seven years. The exceptions are the Derobert article in the Journal of the History of Economic Thought, a mere mention in a comment on Derobert by Spencer and a submission on the "Reasonable Hours" test case to the Australian Industrial Relations Commission from the government of Queensland. In print, you have to go back to Nyland's 1989 "now you see it, now you don't" story about the strange disappearance of Chapman's theory from neo-classical economics.

The Queensland government, it so happens, based its account of Chapman's theory on my discussion of it in "The 'lump-of-labor' case against work-sharing: Populist fallacy or marginalist throwback?" Anyone who has read all four previous posts in this series might have noticed that although I've been talking about Chapman's theory, I haven't actually described it yet. That's called building suspense. Now comes the denouement -- in three parts, no less.

Today, the "executive summary": the Queensland government's summary of my synopsis. Tomorrow, the "introduction": my synopsis of Chapman's theory. Friday, the illustrious "footnote" itself, supplemented by my four part reconstruction of Chapman's diagram.

COMPETENCE GAME

I beat this horse at further length at Josh's place.

DON'T TAKE MY WORD FOR IT

Something strange happened at The Corner. They let someone who is not a clown say something about economics. Turns out it's my buddy Kevin Hassett at the American Enterprise Institute. I reproduce it in full since it's my favorite comment on the SOTU, besides my own:

"The economic portion of the speech could have been better. Bush dodged his biggest problem — his profligate spending — and offered nothing substantive to reverse the striking recent growth of government. The savings he mentioned were laughably small.

The idea factory is almost running on empty. He called for another commission, this time to study the long run entitlement problem. The experience of the most recent tax-reform commission was so terrible that the next commission members will have to be drawn from individuals who have been lost at sea for at least two years. (Emphasis added. -- mbs) What we really need is a commission to study commissions, or at least an advisory panel to study whether we need a commission to study commissions. That panel would, of course, be bipartisan, and I am disappointed he did not mention it tonight.

He also wants to increase funding for hard sciences, a solid idea. We are running out of physicists, and we need more of them."

Kevin underscores a point I neglected -- the unmentionableness of Bush's Advisory Panel on Tax Reform. A member of this panel, Professor Edward Lazear of Stanford, just took the lead position at the Council of Economic Advisers. Now there's a good soldier.

WE WILL ACT BOLDLY
IN FREEDOM'S CAUSE
WHILE WE THROW OUT THAT LADY WITH THE T-SHIRT

I've seen reports in mainstream media that she a) unfurled a banner; b) talked in a way that disrupted the proceedings and wouldn't be quiet when asked; c) ignored warnings that T-shirts with slogans were not allowed in the gallery.

Cindy Sheehan says she did nothing more than take off a jacket, revealing an anti-war T-shirt.

Quoth Jeff Goldstein, Pajamaheddin champion of Freedom's cause:

"Sheehan removed from gallery. Charge? Who cares? Tried to unroll a banner. Being detained. My advice? Cuff her to a space heater and give her a plate of beans."

There's a job awaiting JG in the public affairs office of the Ministry of Love .

It is interesting to learn -- if indeed it is true -- that passive, non-disruptive political expression is not permitted in the gallery of the peoples' House, all the while Members and lobbying ex-Members are crawling all over the floor enjoying the right of political expression and conducting all manner of illicit transactions. (John Cole -- if you know Drudge is a shameless liar, why float one of his reports? -- yr pal, Max)

THEY'RE MAKING "HUMAN-ANIMAL HYBRIDS"?

UPDATE: Yes, and P.Z. Myers explains why it's a good thing.

I'M AFRAID THIS ONE'S GOT AWAY FROM US

The president said if the U.S. left Iraq, it would be taken over by Al Queda. Not the Shi'a or the Saddamists. If he doesn't really believe this, he's a flaming liar; if he does, he's a bloomin idiot. We report, you decide.

I was struck by the effort to force democracy (equals elections) and peace into one box. Hamas won an election, so now for some reason they are obliged to make peace with Israel. Free elections in Egypt would allow the emergence of liberal, secular forces. Oh really? Instead of the fundies? Like in Iran?

I thought Tim Kaine did fine, though I was waiting for his left eyebrow to go flying away. "I'm free!" it would cry in a tiny, fuzzy voice. He punted on the war, but there's no unified Democratic position of the war, so there wasn't much else he could do.

I'm tired of the competence meme. Doesn't anybody remember Michael Dukakis? "What matters is not ideology, but competence." Anybody can claim to be competent ex ante and shift blame ex post. The MaxSpeak Competence Theorem states that both parties are more or less equally competent to govern; what matters is their ideology. By ideology I mean broad principles for governing. People who think they have transcended ideology are in the grip of . . . ideology. They just may not be aware of which ideology.

The oil addiction thing was funny. No doubt somebody could switch on the wayback machine and find Republicans heaping scorn on anyone who bemoaned the nation's dependence on petroleum. I was hoping he would get into methane production, wherein the Nation could harness the mighty wind of Bovino-Americans. Overall I liked this part, even though he still can't pronounce "nuclear."

I've already commented on the jobs thing. I'm glad GB made the standard clear: U.S. performance is great because it's better than Europe and Japan.

Where was the big health care blitz? A sentence or two about Health Savings Accounts, also known as Yet Another Tax Cut, also known as a second IRA for healthy, well-off people.

Commissions. Hey kids, let's put on a commission! Remember those movies? A Baby Boom Commission, or BBC for short. There was the Greenspan Commission in the '80s; they fixed Social Security for all time. I sat through the proceedings of the Bob Kerrey/Danforth Commission on Entitlements in the 90s. Clinton had a Social Security/Entitlements Commission. GB had a Social Security Commission and a Tax Reform Commission. Maybe we need a commission to study commissions. Like that scene in Brazil, it would slowly build up speed and turn into a paperwork rainfall that we would stare up at, mouths agape.

THIS JUST IN

White House press spokesman Scott McClellan will resign and be replaced by Chris Matthews.

It could happen.

"Mr. President, may I massage your temples?"

LEISURE AS A FACTOR OF PRODUCTION IV

Life is excessively complicated

by the Sandwichman

The stories textbook authors tell are simple stories – the simpler the better.... Supply and demand are fictional characters added for pedagogical or ideological purposes. - David Colander

In his article, “On the Genesis of the Canonical Labor Supply Model,” Laurent Derobert (2001) mentioned Chapman’s theory in connection with Hicks’s description of it as “the classical statement of the theory of ‘hours’ in a free market...” Although Derobert rightly dismissed the Chapman analysis as a source for the canonical model, he overlooked the significance of Hicks introducing his so-called simplifying assumption. Whether intended by Hicks or not, it helped clear the way for the opportunity cost analysis and the butt-on-a-slide model because it papered over otherwise irreconcilable discrepancies and thus side-stepped a confrontation that could have revealed the inadequacy of the then as-yet-to-become-canonical approach.

Again, Derobert was technically correct when he argued, “there would be no use reproducing it [Chapman’s analysis] here,” but only to the extent that Derobert’s article was narrowly about the canonical butt-on-a-slide model and not broadly about the comparative merits of various theories of labor supply.

WE DON'T GIVE A ZHID

Go back to Russia! Oh, you're already there. Never mind. (via Atrios)