Unlikely as it may seem, the plan suggests a net increase in regulatory agencies. In the US, this requires real ingenuity.

TO BE NOTED: From the FT:

"A thin outline of regulatory reform

By Clive Crook

Published: June 21 2009 18:43 | Last updated: June 21 2009 18:43

The Obama administration’s proposals for US financial regulation are pretty good, as far as they go. The problem is they do not go far enough.

Great care and intelligence went into the plan announced last week. It makes no stupid suggestions; recall Sarbanes-Oxley, a recent instance of unguided regulatory backlash, and you see this is no small achievement. But the plan’s comprehensiveness is a bit of an illusion. It ignores many issues, and has more loose ends and suggestions for further review than actual innovations.

Also, as in other areas, the White House is unwilling to confront the political barriers to fuller reform. You can call this pragmatism, or you can call it timidity. A crisis of this order demands big new ideas, and the leadership to push them through. In finance, if not now, when?

The administration asks Congress, which will have to write new laws for the plan to work, to fill some of the biggest holes in the existing structure. Systemically important financial institutions, whether or not they are banks in the old-fashioned sense, should be more tightly regulated by the Federal Reserve, says Mr Obama.

In addition, a new intervention regime should cover all such firms, modelled on the scheme run by the Federal Deposit Insurance Corporation for ordinary banks, says the plan. The idea is to wind up a failing bank early and in an orderly way, rather than facing the choice of bailing it out or letting it collapse and maybe drag others down with it.

The administration is right: these are big and necessary changes. But the details are vague. How exactly the tighter regulation of these “tier one financial holding companies” will work – what their capital and liquidity requirements will be, for instance – is for further study. Firms in this category will pay a regulatory surcharge, as they should. And the plan seems to favour counter-cyclical capital requirements too, which would brake lending growth in credit booms. Again this is right; again there are no specific proposals.

The plan calls for tighter regulation of securities markets. It proposes, for instance, that issuers of credit-risk securities should retain a share of the risk. It wants many over-the-counter derivatives to be traded on exchanges, which is safer, and proposes to bring “all OTC derivatives and asset-backed securities into a coherent and co-ordinated regulatory framework”. Quite right.

But what about Fannie Mae and Freddie Mac, the vast “government sponsored enterprises” that were instrumental in stoking the subprime boom? The plan bravely calls for a “wide-ranging initiative to develop recommendations”.

What about the credit-rating agencies, and the measurement of risk for regulatory purposes more generally? There is no point in telling financial institutions to set aside more capital if they are free to pump up their risks at the same time. The plan is thin. It wants better regulation of the rating agencies. Who doesn’t? But what would better regulation of the agencies look like? That needs further study.

“The financial crisis highlighted the problems associated with compensation structures that do not take into consideration risk and firms’ goals over the longer term,” says the plan. Indeed it did. The report says little on what to do about it, and next to nothing about wider bank corporate governance.

Fair-value accounting? Further review.

These are all complicated issues, and wide consultation is doubtless required to design the rules. So in a way it is unfair to complain about loose ends. It would be easier to feel that way if the administration had got things right at the organisational level. Unfortunately it has not. Perhaps the biggest disappointment in the plan is that it fails to address the bewildering complexity of the regulatory apparatus.

Unlikely as it may seem, the plan suggests a net increase in regulatory agencies. In the US, this requires real ingenuity. Recognising the issue of “jurisdictional disputes among regulators” – a problem that is going to get worse under these plans – it calls for a new Financial Services Oversight Council, chaired by the Treasury. This would advise the Fed on which firms should be regarded as systemically significant, and “facilitate information sharing and co-ordination”. Regulation by committee, atop a system of overlapping agencies unsure of their responsibilities, with financial firms still free to shop around for a regulator they like, does not inspire.

Crucially, it also militates against effective international co-ordination. Aside from poor oversight of the shadow banking system and the system-wide failure to account properly for risk, the biggest weakness in the existing regulatory scheme has been lack of cross-border co-operation by national regulators. The more complicated the domestic regulatory structure, the harder it will be for US regulators to work with their counterparts abroad.

Why no effort to streamline the structure? The answer seems to be that Congress would object. A simpler organisation chart would strip its oversight committees of responsibility, and their members of influence. The White House apparently regards this as too much to ask. On health reform, the administration has given control of the entire project to Congress. On financial regulation, it is still trying to direct the policy – but from the outset within limits that respect the legislature’s preferences, however ill advised. That is a pity.

clive.crook@gmail.com"

In my view, there are worse things than Medicare for all – and the present system might be one of them.

TO BE NOTED: From the FT:

"Medicare for all may be the best cure for the US

By Clive Crook

Published: June 14 2009 18:35 | Last updated: June 14 2009 18:35

For the past few months, Barack Obama and his allies in Congress have been striding towards far-reaching reform of the US healthcare system without the public paying much attention. This is changing. Interested parties are studying draft legislation to see where they stand. In spite of the Democrats’ dominance in Washington, reform will not glide through unopposed.

Using a manoeuvre called reconciliation, the administration can get reform through Congress without a single Republican vote. But the Democrats themselves are divided.

They agree on several elements. At least to begin with, private employer-provided insurance will remain the norm. “If you like your present plan”, as most Americans do, “nothing will change”. New mandates, subsidies and a regulated insurance exchange would widen coverage, as in Massachusetts. But controversy surrounds three points: what the reform will cost, how it will be paid for and, especially, what role a new public insurance plan might play.

The nonpartisan Congressional Budget Office is known for its unhelpfully honest analyses. The agency is under attack on health reform even before it has released its numbers: Democrats think these will be unduly pessimistic. Some already want Congress to ignore the CBO and use “directed scoring” instead. (Under directed scoring, policies cost what you want them to.) Even on the administration’s own estimates, reform will cost more than $1,000bn (€714bn, £608bn) over 10 years. Standards have changed lately, but it is still a lot of money.

To their credit, Democrats have promised that the reform will not add to the long-term budget deficit, so taxes will have to go up. The question is, whose taxes? There is a lot to be said for cutting the tax subsidy for employer-provided insurance, which could raise a lot; but many Democrats, including Mr Obama, and most trade unions are opposed. The administration wants to curb tax deductions claimed by high earners, but many conservative Democrats object.

Most contentious is the proposed public insurance option – a government-run plan to compete alongside private insurers to press down on costs and “keep them honest”, as Mr Obama puts it.

Mr Obama is strongly backing the public plan idea and most Democrats in Congress agree with him. A significant minority of more conservative Democrats are sceptical. They worry that a public plan would crowd out private insurers and that the US would end up with a national government-run health plan: in effect, Medicare, the existing programme for the elderly, widened to cover everybody. Many left-leaning Democrats quietly agree with that prediction, which is why they like it.

In my view, there are worse things than Medicare for all – and the present system might be one of them. Medicare for all would give the US truly universal coverage and better control of costs. It would preserve choice of doctor and hospital, and private insurance for supplementary services could co-exist for those who wanted it. The demise of employer-provided plans would make labour more mobile and relieve workers of the worry that losing their job means losing their health insurance.

One obvious objection is that Medicare for all would politicise US healthcare to a degree that the country has not known. Controlling costs by denying expensive treatments and squeezing suppliers’ incomes is something Medicare for all could try to do, but this is a formula for perpetual political conflict – and if it were ineffective, taxpayers would pay the cost.

A less obvious objection is that a healthy private insurance market is worth preserving. The seething hatred many Democrats – and many other Americans of no fixed ideology – feel for private health insurers ignores the value they bring – and the extra value they could add if their incentives were better designed and their customers had the information they needed to make intelligent choices.

If competition is a good thing, competition among insurance providers is a good thing too. Yes, abolishing it reduces one kind of lump-sum administrative overhead, which is all some Democrats seem to care about. But it also abolishes pressures for innovation and other kinds of cost reduction. In other industries, competition pays for itself in spite of the apparent waste of marketing and other forms of duplicated effort. Healthcare is different – but not that different. At the very least, one should pause before shutting competition down.

Shutting it down is not the purpose of the public plan, say its Democratic supporters: the public plan is just one more choice. This is disingenuous. If the public plan had to compete on truly level terms with private plans, how would it be able “to keep them honest”? If it is going to exert the pressure it is intended to and really make a difference, it will have to flex its political muscle, its ability to attract subsidy and its superior buying power: “accept this lower reimbursement or no Medicare patients for you”. A public plan cannot be just another competitor: it is anti-competitive, and meant to be.

As I say, the present system is so bad that Medicare for all might be an improvement. I think the US would do even better to build its reform around competition among intelligently regulated private insurers. But if Medicare for all is what this president and Congress really want, they should come clean, and be out there making the case.

clive.crook@gmail.com

Copyright The Financial Times Limited 2009"

Yet that inequality is less — probably much less — than it would be in the absence of schools.

TO BE NOTED: From Consider The Evidence:

"Do schools make inequality worse? May 21, 2009

“Far from leaning against economic inequality, U.S. schools make it worse.” This sentiment, from a recent Clive Crook op-ed, expresses a view that’s commonplace on both the left and the right, and among both proponents and opponents of school reform.

It’s wrong. Americans do leave the schooling system more unequal in cognitive and noncognitive skills than when they enter it. Yet that inequality is less — probably much less — than it would be in the absence of schools. Schools don’t increase inequality; they just don’t do enough to overcome the inequality produced throughout childhood by differences in families, neighborhoods, peers, and other influences.

How do we know that? First, children are vastly unequal in ability when they enter the school system at age five or six. This is due partly to genetics and partly to environmental differences.

Second, we have evidence from the natural experiment that is summer vacation. During those three months out of school, the cognitive skills of children in lower socioeconomic status (SES) households tend to stall or actually regress. Kids in high-SES households fare much better during the summer, as they’re more likely to spend it engaged in stimulating activities. In his book Intelligence and How to Get It, cognitive psychologist Richard Nisbett concludes that “much, if not most, of the gap in academic achievement between lower- and higher-SES children, in fact, is due to the greater summer slump for lower-SES children” (p. 40).

Without schools this pattern would be magnified, and the gap in cognitive and noncognitive abilities at age 18 almost certainly would be much greater than it now is.

This by no means implies that our educational system is doing fine. It could and should do much better at helping children from disadvantaged environments. But saying it currently makes things worse suggests the situation is hopeless. Instead of promoting reform, that undercuts it."

How much misery can a policy cause before it is acknowledged as a failure and reversed? The US “war on drugs” suggests there is no upper limit

TO BE NOTED: From the FT:

"A criminally stupid war on drugs in the US

By Clive Crook

Published: April 12 2009 17:41 | Last updated: April 12 2009 17:41

How much misery can a policy cause before it is acknowledged as a failure and reversed? The US “war on drugs” suggests there is no upper limit. The country’s implacable blend of prohibition and punitive criminal justice is wrong-headed in every way: immoral in principle, since it prosecutes victimless crimes, and in practice a disaster of remarkable proportions. Yet for a US politician to suggest wholesale reform of this brainless regime is still seen as an act of reckless self-harm.

Even a casual observer can see that much of the damage done in the US by illegal drugs is a result of the fact that they are illegal, not the fact that they are drugs. Vastly more lives are blighted by the brutality of prohibition, and by the enormous criminal networks it has created, than by the substances themselves. This is true of cocaine and heroin as well as of soft drugs such as marijuana. But the assault on consumption of marijuana sets the standard for the policy’s stupidity.

Nearly half of all Americans say they have tried marijuana. That makes them criminals in the eyes of the law. Luckily, not all of them have been found out – but when one is grateful that most law-breakers go undetected, there is something wrong with the law.

Harvard’s Jeffrey Miron published a study denouncing drug prohibition in 2004*. He noted that more than 300,000 people were then in US prisons for violations of the law on drugs – more than the number incarcerated for all crimes in Britain, France, Germany, Italy and Spain combined. Today the number is higher – according to some estimates, nearly 500,000. The far larger number of people who have been convicted, at any point, of a drugs offence face permanently impaired employment prospects and all manner of other setbacks: in the US, once a criminal always a criminal.

Strict enforcement, Mr Miron explained, has reduced drug use only modestly – supposing for the moment that this is even a legitimate objective. The collateral damage is of a different order altogether. Violence related to drug crimes has surged in Mexico and in US cities close to the border, giving rise to renewed interest in the topic. Thousands are thought to have been killed by criminal gangs competing for the trade.

Many users also die because of tainted drugs, or because they share needles – consequences again of prohibition. There is an obvious national security dimension as well: in countries such as Colombia and Afghanistan, the huge surplus derived from prohibition supports terrorists.

The consequences of prohibition corrupt governments everywhere, and the US is no exception. Since a drug transaction has no victims in the ordinary sense, witnesses to assist a prosecution are in short supply. US drug-law enforcement tends to infringe civil liberties, relying on warrantless searches, entrapment, extorted testimony in the form of plea bargains, and so forth. Predictably, in the US the hammer of the law on drugs falls with far greater force on black people: whites do most of the using, blacks do most of the time.

Few policies manage to fail so comprehensively, and what makes it all the odder is that the US has seen it all before. Everybody understands that alcohol prohibition in the 1920s suffered from many of the same pathologies – albeit on a smaller scale – and was eventually abandoned.

The present treatment of alcohol, which is to regulate and tax the product, is the right approach for today’s illegal drugs. One could expect some increase in the use of the drugs in question, but also an enormous net reduction in the harms that they and the attempt to prohibit them cause. Adding the direct costs of prohibition (police and prisons) to the taxes forgone by the present system, the US could also expect a fiscal benefit of about $100bn (€75.7bn, £68.2bn) a year.

Is an outbreak of common sense on this subject likely? Unfortunately, no. Only the most daring politicians seem willing to think about it seriously. One such is James Webb, a refreshingly unpredictable Democratic senator for Virginia, who has called for a commission to examine the criminal justice system and the law on drugs. Politicians such as Mr Webb are very much the exception.

Elsewhere, signs of movement are minimal. Barack Obama has admitted that as a young man he used not only marijuana – and, unlike Bill Clinton, he inhaled; the whole point was to inhale, he joked – but also cocaine. This might suggest the president has an open mind on the subject. And in a departure from the previous administration, his attorney-general has said he will not bring federal prosecutions against the medical use of marijuana in states that allow it. But then at a recent event Mr Obama ran away from a question about the broader decriminalisation of marijuana under cover of a wisecrack.

For now, outright legalisation of marijuana, let alone harder drugs, is difficult to imagine. Even gradual decriminalisation – a policy that maintains prohibition but removes it from the scope of the criminal law – seems unlikely, though perhaps not unthinkable. A new study by Glenn Greenwald, a writer and civil rights lawyer, looks at Portugal’s policy of decriminalisation**. He judges it a success: “While drug addiction, usage, and associated pathologies continue to skyrocket in many European Union states, those problems – in virtually every relevant category – have been either contained or measurably improved within Portugal since 2001.”

Somebody in the White House should take a look. This national calamity is no laughing matter.

*Drug War Crimes, published by the Independent Institute. **Drug Decriminalization in Portugal, published by the Cato Institute

clive.crook@gmail.com"

If you want to understand the logic of the administration's position, have a look.

From Clive Crook:

"It depends what you mean by nationalize

26 Feb 2009 03:45 am

Not even the most generous observer would say that the Treasury and the Fed have done a good job of explaining the thinking behind their financial stability plan. I think this note by Douglas Elliott does a much better job than they have. If you want to understand the logic of the administration's position, have a look.

On the underlying analysis, Elliott is with Geithner and Bernanke most of the way, which lately puts him in the minority of commentators. The main difference is that he is willing to say that outright nationalization might be necessary for "one or two" large banks, whereas Geithner and Bernanke persist in giving the impression that they will avoid this if at all possible. Most economists who follow this subject now seem to be arguing for outright nationalization of many banks--or, as they put it, "the banks" (choose your own number). People often seem to be talking past each other. Elliott persuades me that some of the discussion of the Fed/Treasury plan is muddled by terminology.

This week Bernanke said nationalization is "when the government seizes the bank, zeroes out the shareholders, and begins to manage and run [the] bank, and we don't plan anything like that... I think that this debate over nationalization kind of misses the point." ("Bernanke Pushes Back Against Nationalization", said the headline in the WSJ.) But he does not exclude bigger public stakes (with taxpayer upside) and strong control rights: indeed, that is what he is proposing. So, as Elliott says, a lot depends on exactly what you mean by nationalization.

Elliott also explains the "franchise value" and "legal complexity" arguments for avoiding full nationalization unless it is really necessary; Bernanke mentioned those points in testimony this week but did not elaborate. The paper carefully goes through the pros and cons of full nationalization. I've been leaning towards that solution but the paper did make me pause. This is how it wraps up.

It] may prove necessary as a last resort for one or two of the larger banks, but should only be undertaken when, and if, it is clearly necessary. More widespread nationalization is unlikely to be needed unless the economy performs substantially worse than most economists expect. Although we all crave certainty, it would be better to wait until we knew that this pessimistic case was likely before nationalizing more widely, given the serious social and financial costs of that extreme step.

Beyond the very small number of full nationalizations that may prove necessary, it may well make sense for the government to take substantial stakes now in additional large banks in a form that some may view as a partial nationalization. The Administration's plan to perform a rigorous, uniform "stress test"on the nation's largest banks is a good one...

[If] it becomes clear through the stress test that a bank is already insolvent or is at high risk of becoming insolvent, then it would be better to go directly to the step of full nationalization...

Many observers would say that most of the banking system is "already insolvent" or "at high risk of becoming insolvent". The Fed and the Treasury evidently think otherwise. ("If a bank does become insolvent then the FDI, of course, will intervene," Bernanke said on Tuesday, "but we're not close to that. All the banks are above their regulatory capital.")

Perhaps Citi and Bank of America--to name two large banks--are or will be insolvent on any plausible scenario; for the rest of the industry it still hinges on the timing and strength of the recovery. Hence the Fed/Treasury stress test. Is the "adverse" case in that exercise--an output decline of 3.3% this year and 10% unemployment in 2010--adverse enough to tell us what we need to know? I wonder. It's not difficult to imagine a worse case than that.

Anyway, take a look at Elliott's article. Even if you don't agree with the conclusion, I think you'll find it helps to clarify the issues."

Me:

I thought that it was a good article, but I'd like to make a few points:

1) What he details as the conditions for nationalizing some large banks is what many of us who backed a version of the Swedish Plan were calling for in September. In other words, we weren't calling for banks to be immediately seized, but for setting up a process that could do so for large banks if it became necessary. Not setting up such a plan has been a huge mistake.
2) These large banks do have assets, but my understanding is that nobody trusts them enough to buy from them. Buyers would need a subsidy from the government or fire sale prices. That's the current situation as I understand it. They are trying to unload some of these assets.
Initially, I thought that the stress test might ease some of these buyers concerns by having the government, in essence, vouch for their bottom line. But there is a potential problem, which is that the government will lose trust and, even if we take these assets over, we're going to be unable to sell them for anything but pennies on the dollar. In other words, there could be a downside in waiting if conditions deteriorate.
3) The taking over one or two banks is preferable, but we keep hearing about a contagion. Once again, the whole point of having the conditions spelled out clearly, as in a version of the Swedish Plan, would have made this much less likely to occur.
I mention this because I believe that we might be paying a terribly high price for letting fear of nationalization get the better of pragmatism, and we might well be continuing to do so.

Posted by: Don the libertarian Democrat | February 26, 2009 10:32 AM

I will have to think about that one...

From Clive Crook:

"Dismal science, revisited

10 Feb 2009 04:52 pm

Paul Krugman and Robert Barro have both responded to my column accusing them of putting politics first. Paul wonders what has happened to me.

Clive used to be a reasonable guy; in his mind he probably still is a reasonable guy. But he has misunderstood what it means to be reasonable. He now apparently believes that it means declaring, in all circumstances, that Democrats and Republicans are equally in the wrong, even if the Democrats are talking Econ 101 and the Republicans are being led by the crazy 36.

And it means hysterical attacks on yours truly for actually taking sides in this debate, with the ostensible basis for the denunciation being a wonkish blog post -- it says so in the title -- in which I acknowledge that there is a potential short-run argument for protectionism, while making it clear that I'm not in favor of acting on that argument. He doesn't actually take on my argument; he just insists that the only reason I might possibly have said anything like this is partisan bias, as opposed to an attempt to be intellectually honest.

Speaking of which, Clive and others have, in my view, a fundamentally flawed view of how to defend free trade. They believe that you should scream "Heresy! Sacrilege!" at anyone who even suggests that the world is more complicated than the simple Ricardian model of comparative advantage. But, you know, the world actually is more complicated than that simple model, and I believe that one's case for free trade should be robust enough to stand up to a bit of free thinking -- not sustained by excommunicating anyone who questions orthodoxy, even hypothetically.

Was that piece really hysterical? I believe it is the first time I have ever been called that. One of Paul's commenters accuses me of being Broderish, which is a criticism that makes more sense to me--but it cannot be possible, can it, to be both hysterical and Broderish? I do try to be reasonable, which I know can be infuriating, but as it happens I don't think that "being reasonable means declaring, in all circumstances, that Democrats and Republicans are equally in the wrong". Each side is usually somewhat wrong, I find, but the proportions do vary according to topic. I am very much in the Democratic camp on the stimulus, for instance. I think it is unreasonable, on the other hand, to regard everything Republicans say as definitionally wicked or stupid or both, which is the organising principle of everything Paul writes in the NYT.

As for defending free trade, I don't recall ever shouting "Heresy! Sacrilege!" at anyone who "even suggests that the world is more complicated than in Econ 101". Well, perhaps I have, but only as a joke, I promise. (Odd by the way that Paul thinks Econ 101 is all you need to talk about the stimulus intelligently, but far too simplistic when it comes to trade.) In fact I agree with Paul about free trade: in the real world, theoretical reservations aside, he is for it and so am I. The problem is that he can't just say that, because most of the progressive Democrats who adore his writings do not want to hear it. He is too good an economist, and too honest a person, to advocate protectionism, so he does the next best thing. He equivocates.

I think Paul is disingenuous (there I go again, more hysterics) when he says that the blog-post in question makes it clear he is not in favour of acting on the short-run argument for protection. You be the judge. In my view, he says it is all very complicated. He kind of supports free trade in an ideal world--that would be an Econ 101 world--but there are circumstances, which happen to be very like today's circumstances, in which protection could make sense. This "needs to be taken seriously", and the case gets stronger if optimal macro co-ordination is not forthcoming (which it won't be). Ask any Democratic congressman what Paul's advice on "Buy American" is. The answer will not be, "Don't do it." It will be, "The most brilliant economist I know of thinks there's a case."

My exchange with Robert Barro was via email. With his permission, here it is:

>>>>>>>>>>

Clive,

I hope that all is well. It seems from your writing that I at least had the beneficial effect of neutralizing Krugman. I am not sure what you mean by "consensus." You don't think it's pretty wild to have a multiplier of 1.5, so that government spending is not only free, it has negative costs? The only informative empirical work I know of (from Valerie Ramey and my own work) finds multipliers associated with defense spending that are positive but less than one. In Valerie's work, this shows up as a negative effect from added government military purchases on private consumer spending. Multipliers for other forms of government spending are imprecisely determined but are not significantly different from zero. Actually, I hope that my current long-term empirical project will shed more light, including macro effects from changes in marginal tax rates.

You want me to ignore good economic theory and empirical analysis and pretend that a voodoo multiplier above one should be respected as a "consensus?"

-- Robert

>>>>>>>>>>

Hi Robert.

Thank you for writing. It is good of you to take the trouble.

If we are to have Paul doing what he does in the NYT, it might be better to have you writing in a similarly gladiatorial way than not at all. But I do think it would be best of all if you, Paul, and other scholars of such distinction gave a little more thought to the harm that this unscholarly politicised jousting can do.

Rather than asking them to think, Paul gives comfort to the massed ranks of liberal economic illiterates--and you do the same for their conservative equivalents. In the middle, where there are open minds willing to be enlightened, the typical response is to switch off. I think that this is a shame. Needless to say, I am not arguing that you (or Paul) should be untrue to your own views when writing for a wider audience, only that you should not deny or dismiss the professional consensus, such as it is, out of hand, or advance your own views with deliberately exaggerated certainty.

Yes, I do think there is a broad consensus on fiscal policy--one that you, I don't need to say, have helped shape. It is that fiscal policy can deliver a stimulus under certain circumstances, albeit not as powerfully or reliably as was widely believed pre-Barro. The consensus has absorbed your contribution by advocating counter-cyclical fiscal stimulus more cautiously than before, and with much closer attention to the implications for public debt and financing. Of course you would go further--and everybody who cares about this subject will pay close attention to your ongoing research. You may very well push the consensus further yet. But, for the moment, you can press for greater caution in attempting fiscal stimulus, or even argue against it altogether, without saying that advocates of stimulus under present circumstances--including economists like Paul or Larry or Christina Romer, whom I know you respect--are dealing in voodoo economics.

By the way, is it helpful to say that a multiplier of 1 implies that government spending is free? The implication would be that even a multiplier of 0.5 (which you seem willing to contemplate) would buy you real resources at half-price. Obviously public spending eventually has to be paid for, in full, one way or another--which is true regardless of the multiplier. It is quite another thing to say that a multiplier of more than zero commits you to the view that we can have a free lunch. That is a debating point, something to please one's allies and annoy one's opponents--not an aid to understanding.

Perhaps all I am saying is that economists of the stature of you and Paul and Larry and so on should address each other in your pop writings with something like the same courtesy and intellectual seriousness you would use in an academic setting, rather than pushing custard pies into each other's faces. That just looks bad--and I find it hard to believe that you or Paul value the approbation of the idiots on either side who are delighted by it.

-- Clive

>>>>>>>>>>

Clive,

Sorry, but I do not believe you are getting the economic substance right. A multiplier of 1 means that, from a social perspective, the added government purchases really are free--they are provided by the utilization of idle resources. This point holds even if the spending is deficit financed so that the public debt rises, although there can be deadweight losses in the future from financing the larger debt. In the same sense, if the multiplier is greater than 1, say 1.5, the free public goods really do come with the bonus of free private consumption or investment. I think this view is the one actually held by Summers, C. Romer, etc., and I really do think it's voodoo macroeconomics. I think you do not regard it as voodoo because you find it familiar and comfortable.

If, as you say, the multiplier is positive but less than 1--say 0.5--the public goods cost only 50 cents on the dollar. This is correct, but I think, in practice, the only evidence for positive multipliers comes from responses to (temporary) military outlays during wars (such as in the U.S., where the wars have not involved a lot of physical destruction or loss of life). In these cases, the added outlay did require a lot of added work beyond reduced unemployment, notably by women, so this extra effort has to be included in the social cost. For non-defense outlays, the best empirical estimate I have at this point is a multiplier of 0 (though not precisely determined). This is the standard cost-benefit case where the benefit of an extra unit of public spending has to justify the added cost one-to-one. This multiplier of 0 should not be regarded as a pole, but rather as a central point. In the medium run, the multiplier is likely to be negative, reflecting the adverse effect of larger government on economic growth.

By the way, although WWII raised U.S. real GDP a lot, this response is not typical for the OECD. If fact, WWII is the biggest economic disaster of the 20th century, out-stripping the Great Depression. This is, of course, because many countries suffered greatly from physical destruction and loss of life (the U.K. not nearly as much as many countries on the European continent).

As to Krugman, my response would likely have been more moderate if he had not referred to my ideas as bone-headed. But I promise to behave better in the future.

-- Robert

>>>>>>>>>>

Thanks Robert.

Yes, I take your point, of course. From a social welfare point of view--ignoring distributional issues as they affect taxpayers v bondholders, this generation v later generations, residents v foreigners--then the cost of a fiscal stimulus that puts idle resources to work is confined to the deadweight losses of financing the debt. It feels strange for me to be reminding Robert Barro that those losses and distributional issues might be a big deal, and that one should be cautious on those grounds (among others) about advocating immoderate fiscal activism--but I just did, so there you are.

I would never presume to quarrel with you (or Paul) on the economics. That would be absurd. I am quarrelling with you about your journalism. Your view that counter-cyclical fiscal policy cannot--even in present circumstances--put idle resources to work may for all I know be true. I resolve to keep an open mind about it. But I am sure that for the moment the larger part of the economics profession disagrees with you. And I am sure that in challenging that consensus by calling it voodoo economics you are doing the discipline no favours.

Did Paul call you bone-headed? That was a bone-headed thing for him to say. But you see my point. What are non-economists to make of this exchange of insults and exaggerated certainties? Can you blame them for hearing only the political message they want to hear, and tuning out the rest?

-- Clive

>>>>>>>>>>

Clive,

Oh yes, the bone-headed remark is what started things.

One thing I think you need to be clear on is the distinction between Ricardian equivalence and Keynesian multipliers. The first bears, for example, on how a deficit-finance tax cut affects aggregate demand. The Ricardian view is no effect, and the "standard" view is that the effect is positive but less than one. The multiplier has to do with how a change in aggregate demand affects output. It is possible to have a large multiplier even with Ricardian equivalence, and it is possible to have a small multiplier even without Ricardian equivalence.

-- Robert

Thanks, Robert, especially for that last clarification. I have to admit that I haven't been giving much thought to the scenario in which a deficit-financed stimulus has no effect (under Ricardian equivalence) on aggregate demand and yet still has a big multiplier. I will have to think about that one..."

Me:

"The first bears, for example, on how a deficit-finance tax cut affects aggregate demand. The Ricardian view is no effect, and the "standard" view is that the effect is positive but less than one. "

Has anyone ever studied the question of whether or not Ricardian Equivalence is a tautology, and not an empirical observation? It sounds like a fancy name for "robbing Peter to pay Paul", just as "creative destruction" is a fancy name for the fact that some businesses won't make it.

"The multiplier has to do with how a change in aggregate demand affects output."

I actually doubt that a causal connection about this can be determined. Can someone explain how you rule out all the diverse incentives and disincentives and panic reactions in a crisis? Take spending during wartime. What can look like conspicuous consumption during peace can look like treason during a world war. Surely social pressures help determine spending patterns, or am I being silly?

Posted by: Don the libertarian Democrat | February 11, 2009 11:00 AM

and what this new plan, once it has been worked out, is really going to cost.

From the FT:

Son of TARP

February 10, 2009 6:54pm

The Obama administration knows that the politics of its new Financial Stability Plan is even more difficult than the economics—which is saying something. The country detests the Troubled Asset Relief Programme, now recast and renamed, regarding it as a vastly expensive rescue of the people who caused the crisis. Tim Geithner acknowledged this on Tuesday. The administration had to improve and expand the programme, while persuading voters that costs will be controlled and that the villains will be punished. The goals are complicated, and the result is a bit of a mess.

The caps on pay of banking executives announced earlier, though far milder than taxpayers have been led to think, are part of the strategy. The new plan, which will use Treasury money to seed new commitments from the private sector and the Federal Reserve, also has politics much in mind. Some $350bn remains unspent in the TARP. The idea is to use it to mobilise new Fed lending and private participation in the resolution of toxic assets. This way the $350bn might be stretched to $2,000bn and up with no need for new Congressional approval.

The plan is anything but finished. Mr Geithner announced principles that will guide it, nothing resembling a worked-out scheme.

The Fed side is reasonably straightforward. It involves expanding an existing programme, the Term Asset-backed Securities Loan Facility, which lends to investors in securitised car, student and credit-card loans. The scope of the TALF will be widened. The Treasury will put some more money in, shielding the Fed from the first layer of risk. Whether this will be enough to protect the Fed’s balance sheet remains to be seen.

The other main innovation is the plan to create a public-private fund to acquire bad assets. This raises many more questions than the expanded TALF. What terms and conditions will the Treasury offer its private partners in the venture? There are plenty of bad assets out there already for investors willing to buy them. The new inducement seems to be guarantees. The Treasury can stretch the TARP money a long way by guaranteeing the bad assets: this could certainly draw in lots of new private capital. It would also leave taxpayers on the hook for potentially very large sums if things do not work out as intended.

Mr Geithner did not go into that, or explain how taxpayers would participate in the upside if things go well. Despite the insistence on transparency, one wonders if investors will be offered a better deal than taxpayers will be led to think. More forthright approaches—including nationalisation—might end up costing taxpayers less, but the administration has apparently decided that they would be much harder to sell. And Mr Geithner’s assurance that his scheme will “help provide a market mechanism for valuing assets” is puzzling. The terms of the guarantees or subsidies attached to the toxic assets will decide what they are worth—and what this new plan, once it has been worked out, is really going to cost."

Me:

1. "More forthright approaches—including nationalisation—might end up costing taxpayers less, but the administration has apparently decided that they would be much harder to sell. And Mr Geithner’s assurance that his scheme will “help provide a market mechanism for valuing assets” is puzzling. The terms of the guarantees or subsidies attached to the toxic assets will decide what they are worth—and what this new plan, once it has been worked out, is really going to cost."

You've summed it up. We will spend whatever it takes to avoid nationalization. This is a simple fact. When TARP was diverted from Toxic Assets, the price went down, and savvy investors like John Paulson started buying them. When the government gets in, even by guaranteeing private investment, the price and availability of TAs will magically rise. There is only one way to read this: The plan is to shift much of the losses from the banks to the taxpayers. That's because, in Geithner's view, the banks and their investors are more important to our system than taxpayers. Wiping them out is not an option. They might get mad and stop investing, and they will certainly stop lobbying. No amount of hide the losses can cover up what's being done. Geithner will eventually pay the price and be chucked out if this doesn't work ( Since I don't like seeing all the pain in the economy, I hope it works and helps ), but by then he will be a hero to the bankers and shareholders. They might even name a bank after him. I got an email from these banks last night as they were popping the corks on the bubbly: it said "Better luck next time, ass". They do so enjoy laughing at our expense.

Posted by: Don the libertarian Democrat

I used to have no time for the idea that economists never agree, so economics must be a bogus science and a waste of time

From Clive Crook:

"Politics is damaging the credibility of economics

By Clive Crook

Published: February 8 2009 17:06 | Last updated: February 8 2009 17:06

I used to have no time for the idea that economists never agree, so economics must be a bogus science and a waste of time. Of course economists disagree, I would say. Economics is difficult, and by its nature cannot be as clear-cut as the physical sciences. But it strives to meet the most rigorous standards of evidence-gathering and scientific method. As long as it remains aware of its own limits, one should not mock the discipline for aiming high.

Economists are right to disagree. This does not stop them improving public policy or raising the standard of discussion inside and outside the profession. Judge them by those standards, I used to say.

As a lapsed member of the guild – I had a spell as an economist in the British civil service – I have a lingering sentimental attachment. But my earlier confidence that economists are not wasting their own and everybody else’s time is diminishing. Are the leaders of the profession measuring up to the standards I just mentioned? Are they helping to improve policy, or raise the standard of public understanding? You could easily argue the opposite.

Economists are failing to express anything resembling consensus on the most basic questions of economic policy. Is fiscal stimulus desirable, or even possible? Some say yes, some say no. In a recession, is it best to cut taxes or raise spending, or both, or neither? They disagree about that. How should governments mend their broken financial systems? They disagree about that too.

I had thought they would at least agree that raising trade barriers at a time like this must be a bad idea. Then I read Paul Krugman, Nobel laureate, Princeton professor, and New York Times columnist, explain that raising tariffs – though perhaps unwise for other reasons – “can make the world better off”. “There is a short-run case for protectionism,” he went on, “and that case will increase in force if we don’t have an effective economic recovery programme.” What are his readers to make of this? Are all the economists who say otherwise just wrong?

This impression of disarray – that economics has nothing clear to say on these questions – is not the fault of economics as such. It is a mostly false impression created by some of its leading public intellectuals, Mr Krugman among them.

Economics outside the academy has become the continuation of politics by other means. If you wish to know what Mr Krugman thinks on any policy question, do not read his scholarly writings; see which policies are advocated by the progressive wing of the Democratic party. Mr Krugman agrees with liberal Democrats about most things, and for the rest gives as much cover as the discipline of economics can provide – which, given its scientific limitations, is plenty. He does this even on matters where, if his scholarly work is any guide, the economics is firmly against his allies. Liberal Democrats are protectionists. Mr Krugman is not, but politics comes first.

The syndrome affects economists on the right as much as on the left. Just as there is a consensus among economists that protectionism should be opposed, most economists believe that a powerful fiscal stimulus is both possible and desirable in present circumstances, and that the best stimulus would include big increases in public spending. Yet recently, Robert Barro, a scholar with conservative sympathies, wrote in the Wall Street Journal that this view was an appeal to “magic”.

The problem is not that Mr Krugman questions the consensus on trade (if indeed he does), or that Mr Barro questions the consensus on fiscal policy (as he certainly does). It is that both set the consensus aside so carelessly. In doing so, these stars of the profession destroy the credibility of their own discipline. Mr Krugman gives liberals the economics they want. Mr Barro gives conservatives the same service. They narrow or deny the common ground. Why does this matter? Because the views of readers inclined to one side or the other are further polarised; and in the middle, those of no decided allegiance conclude that economics is bunk.

Politics and economics are always difficult to keep apart. But the problem is getting worse, perhaps because political splits are deepening, or perhaps because the lack of disinterested economic advice is more keenly felt with so much at stake.

The web, for all its blessings, is an aggravating factor. Many of the most successful economics blogs promote communication within political groupings, not across them. On the web you best build an audience by organising a claque and stroking its prejudices. Extend elaborate courtesy to people you agree with and boorish contempt to those who do not get it. Celebrate exasperation and incivility as marks of intellectual authenticity – an attitude easier to tolerate in teenagers under hormonal stress than in professors at world-class universities.

Consensus economics does exist. The Obama administration and the Federal Reserve are trying to apply it. The economics professoriate has an obligation to criticise and improve those policies. But if politics is allowed to split the discipline, and communication across that divide continues to break down, the science of economics will forfeit what little respect it still commands.

Send your comments to clive.crook@gmail.com

Post and read comments at Clive Crook’s Washington Blog"

Me:

16. I think that there is a difference between Political Economy and Economics. Consequently, I can honestly say that I like Barro and Krugman and can use them both. My criticism of both is that they are rather too enamored of their own points, applying them almost mechanically, and not willing to understand the valid points that the other is making. Of course, my plan is a compromise plan:

1) Social Safety Net spending is not part of a stimulus. This can include aid to states for such services. It will cost what is necessary to truly help people suffering through this crisis. I have no set figure in mind.
2) $100 Billion for Infrastructure.
4) $300 Billion in Tax Cuts.
A. Sales Tax decrease or Payroll Tax decrease.
B. Tax Cuts for Investment.

In other words, I tend to agree with Krugman's amount, but use Barro's approach more. Politically, I would compromise in order to show unity in a crisis, which I believe to be very important. Since I have a Political Economy like Shiller's, I agree that a massive stimulus might work. However, like Buiter, I don't believe that we can risk it. I do think that government spending is important to show that we have enough confidence to invest in the future. Since I view the crisis through a more behavioral interpretation of Fisher's Debt-Deflation model, I would be much looser in my monetary policy.

In other words, I have an eclectic approach. What's wrong with that? Either politically, or economically?

Posted by: Don the libertarian Democrat

John Martyn - One For The Road - Jools Holland 2004

From Clive Crook on the FT:

"Now you see what words have done

January 29, 2009

In view of his poor health in recent years, I wasn’t surprised to hear from an old friend this morning that John Martyn had died, but I was taken aback by my reaction: it moved me very much. Martyn was an extraordinarily talented singer, guitarist and composer. I have been devoted to his music since my teens. For much of that time, I listened to at least a song or two of his almost every day. Even now, 35 years on, I dare say not a week goes by without my putting on one of his records. And more often than not, when I listen to one song of his, I end up listening to many.

Once in the early 1970s I turned up at one of his concerts to find fewer than 20 other people in the audience. He marched us to the pub round the corner and played for us there. He even bought a round, but came out well ahead over the course of the evening. Michael reminds me of a fabulous concert at the Oxford Polytechnic way back when. (Somebody from the audience shouted, “Play something difficult.” So he did.) By the time I went with my daughter to see him at Warwick University in 2005 he was in his wheelchair and almost unrecognisable. The music was still superb. Most of his devotees regard records such as “Solid Air” or “One World” as his best–and they are fabulous. But I like his later albums even better. If I was allowed to keep only one, it would be “Cooltide”. More recently than that, “Glasgow Walker” was another gem.

It find it a sad scandal that he never became very well-known or made much money, while posers such as Sting, who I suppose occupies a similar place in the spectrum of popular music, are as rich as Croesus. Not that Martyn ever seemed to care. His life, by all accounts, was a shambles, but he seemed to find his setbacks–almost all of his own making–ridiculous and amusing. The main thing is that he made more wonderful music than all of the stars now saying they were influenced by him put together".

My feeling:

My favorite song is “Piece By Piece”. I have it on a loop that I listen to all the time. But he had a lot of great songs. Posted by: Don the libertarian Democrat | January 30th, 2009 at 7:29 pm | Report this comment

More Martyn:

"This is the biggest financial crisis since the depression"

Well, here's Setser echoing Roubini and Krugman and Crook:

"What to do? Goldman (Hatzius, McKelvey, Philips, Tilton, Smyth, Michels and Sum) recommend:

a) A substantial fiscal stimulus (they suggest that a $300-500 billion/ 2-3% of GDP stimulus might not be enough) ( I've agreed with this, even though Buiter hates it- Don )
b) Aggressive GSE lending. Goldman observes that the GSEs have cut back on their lending (really lending that they support through their purchases of mortgages) since the September “Agency” crisis — something that feeds into further falls in home prices. Agency spreads remain wide. ( Agree. We need rational lending to keep up-Don )
c) The Fed could pre-commit to keep policy rates low for a long time ( I don't think people will believe them- Don )
d) The Fed could start to buy long-term assets — starting with Treasuries, and then moving toward more risky assets — to bring long-term rates down, and generally start to deploy their less conventional policy options. ( Yes: That's what I'm talking about in earlier posts. Brad, Paulson has destroyed using "deployed" as a serious word- Don )

Goldman believes that the first three steps should be adopted now — and the last step should be held in reserve.( I say get going- Don) That makes sense to me. I would add policy efforts to try to limit the fall in demand for US and European goods from emerging economies to Goldman’s list of near term policies.( Like What?-Don ) I worry a bit that the US will do too much of the heavy lifting to support global demand and emerging economies with large surpluses will do too little, helping to sustain a larger external deficit than I would like. But right now even I would argue that concerns about the path of external adjustment need to be subordinated to guarding against the risk of an enormous fall in US demand. Goldman’s analysis offers a good starting point for debating how best to try to contain the economic fallout from the current financial turmoil.

"Americans, to be sure, are always reluctant to undertake ambitious government initiatives. "

John Judis with a post that I sort of disagree with, via Clive Crook:

"If Obama and the Democrats in Congress act boldly, they can not only arrest the downturn, but also lay the basis for an enduring majority. As was the case with Franklin Roosevelt, many of the measures necessary to combat the recession--such as spending money on physical and electronic infrastructure, adopting national health insurance--will also help ensure a Democratic majority. The rural South remained Democrat for generations because of Roosevelt's rural electrification program; a similar program for bringing broadband to the hinterland could lead these voters back to the Democratic Party. And national health insurance could play the same role in Democrats' future prospects that Social Security played in the perpetuation of the New Deal majority.

Americans, to be sure, are always reluctant to undertake ambitious government initiatives. This is, as historian Louis Hartz once demonstrated, a country founded on Lockean liberalism. But as Roosevelt discovered when he was elected, a national crisis creates a popular willingness to entertain dramatic initiatives. Obama and the Democrats will also not face the same formidable adversaries that Jimmy Carter or Bill Clinton had to face. The Republican Party will be divided and demoralized after this defeat. Just as the Great Depression took Prohibition and the other great social issues of the 1920s off the popular agenda, this downturn has set aside the culture war of the last decades. It wasn't a factor in the presidential election. And the business lobbies that blocked national health insurance in 1994 will incur the public's wrath if they once again try to buy Congress.

If, on the other hand, Obama and the Democrats take the advice of official Washington and go slow--adopting incremental reforms, appeasing adversaries that have lost their clout--they could end up prolonging the downturn and discrediting themselves. What could have been a hard realignment could become not merely a soft realignment, but perhaps even an abortive one. That's not the kind of change that America needs or wants--and, hopefully, Obama and the Democrats understand that."

Here's my problem, where he's specific, I happen to agree with him:

1) Infrastructure spending in the stimulus

2) National health

Why I support 2 is a long story which I've already talked about, but not here. 1 I've talked about a number of times lately.

However, the rest of the post I disagree with. Liberal programs would not work, and, hence, would not end up being popular in terms of economics. Of course, if they were enacted and worked, I wouldn't worry about it, because their working would decide the issue.

I'm not too worried, because it wasn't Judis who was elected.

"In light of the most recent data another fiscal boost is needed, and it had better be big."

Clive Crook also supports a stimulus:

"How big a boost? One leading policy economist -- also a noted scholar of the Depression and a level-headed man not given to exaggeration -- is Barry Eichengreen of the University of California (Berkeley). He has called for a further stimulus of 5 percent of national income: in other words, another $700 billion. "This means that the [budget] deficit may be closer to $2 trillion than $1 trillion next year," he points out. A $700 billion stimulus is at the high end of the numbers currently being suggested. Among economists, packages of $300 billion to $500 billion are more the norm, and proposals circulating on Capitol Hill are at the lower end of that range. A year ago, even these smaller sums would have been regarded as staggering.

I agree with Eichengreen. The economy is no longer on the edge of the precipice but tipping over into free fall. A second stimulus package of $500 billion or more -- to include spending on infrastructure and unemployment assistance as well as tax cuts -- is necessary. If you are going to do this, there is no point in half-measures. The government has to fill the space that terrified consumers are now vacating, and it is a very big space."

I agree. Here's my comment:

"If European governments and other countries introduce big fiscal plans of their own (as they should, in their own interests), the chances of a flight from the dollar would come down. Second, the package should ideally include commitments -- including postdated tax increases and reform of the budget process -- that would reassure investors that Washington will bring the deficit back under control once the crisis is over."

But this:

http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2008/10/the-benefit-of-inequality.html?cid=137119795#comments

"Stumbling and Mumbling on a stimulus plan:

"This raises an obvious question. If government borrowing today merely means lower state spending or higher taxes tomorrow, why should it boost aggregate economic activity at all? Won’t it just cause tax-payers to save in anticipation of higher future taxes, or public sector workers to save in anticipation of redundancy?
This is, of course, the challenge of the Ricardian equivalence hypothesis. This says that fiscal policy is impotent, because people should save in anticipation of higher future taxes, which is what borrowing is."

Will people save in preparation of tax increases? Or losing a job?

"the UK is one of the few countries in which Ricardian equivalence is wrong. So perhaps fiscal policy might work.
How can this be?
It‘s not necessarily because people are short-sighted. It‘s because they are liquidity-constrained - they can’t save or borrow enough.
Put yourself in the shoes of a poorly-paid person. You might anticipate higher taxes in five years’ time. But what can you do about it? You’re struggling to pay rent and leccy bills today. You just can’t save as a precaution against future problems - you’ve enough on your plate making ends meet now."

Well, if people are poor enough, No. They can't. They need to live.

"But what if we had a more progressive tax system, with taxes only levied upon those of us who can afford to save? We might well trim spending on fripperies to save more. We would then be in the world of Ricardian equivalence, in which public borrowing was offset by private saving."

So, people who can save will.

Conclusion:

"My point is simple. What allows Darling’s fiscal policy to work is the fact that taxes fall upon people who can‘t save. If the poor were better off - and so able to save - or if taxes were more progressive, fiscal policy would be less powerful.
Personally, I’d prefer a world of greater equality and less powerful fiscal policy. But not everyone shares my preference."

I agree, but I'm not sure I accept the reasoning. For one thing, oddly, if the rich will save in anticipation of future taxes, why not tax them now, and obviate that problem. Another possibility would be to raise taxes until they don't want to save. One could also tax their savings. I'm not advocating any of these things, but there do seem possibilities to counter this effect where it exists."

And this:

"You might be interested in this about the Japanese stimulus plan from the FT:

http://www.ft.com/cms/s/0/00df00ae-a63c-11dd-9d26-000077b07658.html

"Although the handouts would increase household disposable income, given that there could be a consumption tax rise in three years, the plan was structured in a way that would encourage people to save, Mr Morita said."

Now, are we more like Britain or Japan? Easy, where saving is concerned. But you've already mentioned the tax cuts earlier this year, and the fact that a lot of it was saved. Now this, from the WSJ:

http://blogs.wsj.com/economics/2008/10/31/good-news-for-stability-bad-news-for-growth/

"Part of the reason that consumer cut back on spending in September is that Americans were putting more of their money into savings. That may not be good news for GDP growth in the short-term, but it’s a positive sign for the long-term stability of the economy.

In September, personal saving — disposable personal income less spending — was $140.3 billion, compared with $82.5 billion in August. That raised the savings rate to 1.3% from 0.8% in the previous month. The savings rate spiked from May to July on the back of the government’s stimulus payments, but averaged below 1% for a number of years. It was just 0.2% in April before the stimulus payments went out, and has been nearly flat for years, not rising more than 1.5% in any month since 2004. The rate was in double digits in the 1970s and early 80s, but began a steady decline to the historic lows reached in recent years."

So, I'm with you on the stimulus, and we should eventually work on the deficit and debt, but, for God's sake, don't announce that now.

As the WSJ reports:

http://blogs.wsj.com/economics/2008/10/31/ecb-to-governments-spend-more/

"In a currency bloc governed by strict rules about how much debt national governments are supposed to hold, it doesn’t happen often that a central banker encourages governments to up spending. But radical times call for radical measures."

Let's be radical now, and conservative later.

Posted by Don the libertarian Democrat | October 31, 2008 3:48 PM