At the New Yorker John Cassidy writes on the potentially permanent damage done to the U. S. economy by the Great Recession:

Trying to sort the signals from the noise in the jobs report is a tough task in the best of times: the margin of error for the payroll figures is plus or minus ninety thousand jobs. So instead I’ll say a few things about a new research paper by three economists at the Federal Reserve, which is getting a lot of attention because it suggests that the recession and its aftermath have not only done terrible things to the U.S. economy in the immediate sense—high rates of joblessness, tepid gross-domestic-product growth, falling incomes—but also seriously undermined the economy’s capacity for future growth. Gavyn Davies, of the Financial Times, drew attention to the study earlier this week; Reuters published a story about it; and, in today’s New York Times, Paul Krugman devoted an entire Op-Ed to it, which was perfectly justified. It deserves to be discussed widely.

The authors of the paper are David Wilcox, the head of economic research at the Fed, and two of his colleagues, William Wascher and Dave Reifschneider. Although the study uses some sophisticated statistical methods, its basic point is straightforward: in the long term, economic output (G.D.P.) is constrained by the quantity and the quality of economic inputs (labor, capital, and technology). If the growth rate and quality of these inputs decline, the potential growth rate of G.D.P. will fall, too—it’s just a matter of arithmetic.

Since the financial crisis of 2007, the authors argue, that’s precisely what has happened. With hiring rates down, many workers have given up searching for jobs and have dropped out of the labor force. (According to today’s employment report, the labor-force participation rate hit yet another low in October: 62.8 per cent.) With budgets tight, corporations and government departments have cut back on investments in new plants and machinery, computer hardware and software, and research and development. And, with investments in innovation depressed, the rate of over-all productivity growth has slowed down.

If you put all of these things together, they seem to suggest that the economy’s capacity for growth is lower than it was before the financial crisis. How much lower? The authors come up with a variety of numbers, including one that has received a lot of attention: potential G.D.P.—broadly speaking, the level of G.D.P. consistent with stable inflation—“is currently about 7 percent below the trajectory it appeared to be on prior to 2007.” According to the latest figures from the Commerce Department, the G.D.P. is now close to seventeen trillion dollars, and seven per cent of that figure is $1.2 trillion. This is a lot of money to have gone missing, especially if it will never be recovered.

He reproduces the familiar “potential GDP” graph, showing a shortfall of $2 trillion in GDP from where we might be if the growth trend of 2007-2008 had continued. I’m going to propose an alternative scenario.

Above I’ve reproduced his graph but I’ve introduced a solid green line that illustrates where we would be if the growth trend after the end of the dot-com boom had continued. It’s hauntingly familiar.

I agree with Mr. Cassidy that serious damage has been done to the U. S. economy. I disagree about when. Here’s my alternative story.

The dot-com boom was not caused by the policies of the 1990s. It was the consequence of more than a decade worth of capital investment in information and telecommunications technology that finally paid off. Our economy is now a mature economy like France or the United Kingdom rather than a developing one like China. We’ve adopted policies including fiscal, trade, immigration, education, healthcare, etc. that taken together have resulted in the growth we’ve seen for much of our history to slow. The dot-com boom offset the effects of those policies until it ended. When it did the Powers-That-Be were desperate to keep the party going and so adopted policies which resulted in the housing bubble of the Aughts.

The gains produced by that bubble were illusory. There’s no use wondering where all that potential growth went. There was nothing there. It never really existed.

But what about all of those unemployed people and unutilized assets? (I hear someone ask.) My explanation is somewhat along the lines of Tyler Cowen’s “zero marginal product” one. Businesses continue to invest but they’re investing overseas and what domestic investment they’re doing depresses employment. Despite that we continue to import large numbers of unskilled and semi-skilled workers and skilled workers in areas where employment isn’t growing. Businesses are convinced, with a confidence based in experience, that they’ll be able to import the workers they need and continue pushing wages down even as the number of unemployed or discouraged burgeons.

The negotations with Iran over its nuclear development policy are teetering:

World powers failed to reach an interim deal with Iran over its disputed nuclear program after lengthy talks in Geneva despite days of encouraging signs from the White House that a deal was imminent.

Catherine Ashton, the European Union’s top diplomat, said talks will resume on Nov. 20 in Geneva.

Ashton said there had been, “concrete progress but some differences remain,” BBC reports.

The news came as Secretary of State John Kerry was joined by foreign ministers from the United Kingdom, France, Russia, China and Germany to hold a series of meetings with each other and with Iran’s delegation, headed by Zarif.

France in particular objected to the proposed deal, questioning whether it would go far enough to limit Tehran’s nuclear ambitions, AFP reported. French Foreign Minister Laurent Fabius said Iran’s continued operations at its Arak nuclear reactor and its enriched uranium stockpiles should be addressed to remove Iran from the path of developing the capability to build a nuclear weapon without detection

I think it’s refreshing that we’re not the bad guy in this. The French have taken up that role. I think that John Kerry is an idiot and anything with his fingerprints on it is automatically suspect. I also think that our policies with respect to foreign policy, nuclear proliferation, and Iran’s nuclear development program in particular have been wrong-headed—simultaneously too bellicose and unconvincing.

I’m struggling to form an opinion on the emerging deal with Iran. What do you think?

The editors of the Pittsburgh Post-Gazette to remonstrate with those who complain that the president lied about the PPACA. So what? It’s still a good policy:

Plans are being canceled because they don’t meet the coverage set out in the Affordable Care Act and leave many people poorly insured. Those Americans who have been canceled can obtain other policies that may be more or less costly but should offer them better coverage than before.

In short, the furor of the supposed great lie is an embarrassment to Mr. Obama, but it obscures the larger and more important truth that the Affordable Care Act remains good policy.

Is it? I’d like to see somebody make the case. What I’ve seen is people defending the idea of the PPACA or its possible future evolution. If you’re defending the PPACA, here’s what you need to defend. The estimate of people without healthcare insurance is between 30 million and 50 million people. According to the CBO, no more than a third of those would be insured under the terms of the PPACA. Consequently, you need to defend the PPACA not on the basis that it insures everybody or that someday everybody might be insured but that leaving between 20 million and 40 million people uninsured is just fine.

You need to defend the PPACA’s expansion of the Medicaid paid by the states beyond their ability to pay. You need to defend the cancellation of hundreds of thousands or millions of people’s insurance not on the basis of their potentially getting better insurance someday but on the basis that they shouldn’t have had even the insurance they had.

I wish them the best of luck. The key point is not merely that the PPACA is bad but that it is inadequate and doesn’t provide the path to future improvement its advocates think it will.

The other day in comments over at OTB a frequent commenter made what I think is the best and most succinct summary of the PPACA I’ve ever read: it was the least disruptive meaningful change the Democrats in Congress thought they could enact. IMO with respect to our healthcare system disruption is directly proportional to meaning.

Here’s my less than fifty word synopsis of our healthcare system. It provides pretty fair healthcare for those who can afford it. It’s mostly subsidized and the subsidies are determined based on political expediency rather than need or merit. Most of the benefits of the subsidies go to providers, stockholders, and the wealthy.

I think that’s a system that needs more disruption rather than less.

Showing enviable prudence, most of the uninsured are ignoring Healthcare.gov:

PRINCETON, NJ — In the midst of widespread news coverage of problems with the federal health exchange website, relatively few uninsured Americans (18%) — the primary target population for the exchanges — have so far attempted to visit an exchange website. The percentage is slightly higher, 22%, among uninsured Americans who say they plan to get insurance through the exchanges.

the Gallup organization has found. They also find that nearly half don’t plan to purchase insurance, period. As my wife sometimes say, you can lead a horse to water but that won’t make him into a duck.

But back to the meat of Avik Roy’s “fact-checking” the president’s apology. Things have come to a pretty pass when you must fact-check apologies. The president made an awful lot about the relatively small 5% of people who will be affected. For me, that was a serious problem with the PPACA as written. An awful lot of pain was going to be imposed on an awful lot of people with an awful lot of attendant political sniping on behalf of so small an outcome. In my early posts on the subject I referred to it as a sort of “Wales syndrome”, hearkening back to a line from Robert Bolt’s A Man for All Seasons.

Writing at the Tribune that wasn’t lost on Lynn Sweet, either:

The 5 percent reference is about folks who bought individual policies after the law became effective in 2010. Under the new law kicking in now, if those policies don’t pass federal muster, insurance companies must stopping selling them.

What the administration never appreciated was that people get new plans all the time — but they hardly noticed because it seemed more like an automatic renewal, albeit often with higher costs. A cancellation letter gets your attention.

The Obama team has been relying on legalistic technicalities in keeping the misleading language in his remarks.

Obama kept using that 5 percent figure in his interview with Todd in an attempt to put the situation in perspective. But if you are one of the 5 percent and are angry and feel duped — I don’t blame you. You are entitled to your story.

Now the president and his surrogates are rushing around, lying about lying, making excuses for the, in their own words, inexcuseable over a trade-off. They have decided to help 2% of the people (that’s the number the CBO estimated would enroll for insurance through the exchanges) at most certainly the expense of 5% of the people and probably of 98% of the people.

The gamble is that in November 2014 everyone will have forgotten all about it. Frankly, I doubt it. They’ll be reminded every time they get a premium increase and, fair or not, Democrats will own those since they’ll be blamed on the PPACA whether the PPACA had anything to do with them or not.

I’m disappointed with Avik Roy’s sloppy diction in his article at Forbes fisking the president’s apology for lying (and however the president dresses it, he lied) about people in the individual healthcare insurance market keeping their insurance. Mr. Roy writes:

It’s for these reasons that Delta Air Lines has said that it will spend $100 million more on health insurance on 2014 than it did in 2013, and why labor unions have complained that Obamacare “will drive the costs of collectively bargained, union administered plans, and other plans that cover unionized workers to unsupportable levels.”

Mr. Roy knows very well that Delta Airlines has been “self-insuring” its employees’ healthcare since 1997. He reported on it here:

It turns out, however, that even America’s largest companies face higher costs due to the health law. A recently-leaked letter from Delta Air Lines to the Obama administration states that the “cost of providing health care to our employees will increase by nearly $100,000,000 next year,” much of it due to Obamacare.

Note the distinction: Delta is claiming they’ll pay more for healthcare not for insurance. Delta doesn’t carry insurance and they don’t pay premiums. They pay claims. It’s possible that Delta also pays an insurance company to process the claims; I don’t honestly know. Since most processing charges are based on claims paid, Delta’s processing charges are likely to rise but those aren’t insurance costs. They’re processing costs.

More than half of all companies that subsidize the healthcare of their employees as part of the employment package self-insure and I presume it’s 100% among large companies. I strongly suspect we’ll hear increasingly loud squeals of complaint from them as they pay the higher costs that meeting the standards required by the PPACA will demand of them.

At long last the leaves on the trees hereabouts have begun to change their colors in earnest. Some have gone from green to fallen with only the briefest transition.

After we put the addition on our house a few years back, we redesigned our front bed. We removed the 70 year old pfitzers and hemlock, so typical of the landscaping of the 1940s and 50s, created a bed outlined by dry-laid limestone, and planted it with two Japanese maples, azaleas, and rhododendrons. In the spring and summer we plant annuals.

The picture above is one of the two Japanese maples. Rather than the more commonly seen Acer palmatum varieties it’s Acer shirasawanum ‘Aureum’. As you can see rather than the purplish-red typical of the leaves of the palmatum, its leaves turn a beautiful orange and gold. During the year it’s a light green.

Our other Japanese maple, also not a variety frequently encountered, is most dramatic in the spring but I may take its picture in a day or so if it develops nice color.

If you look closely through the window, you can see Nola wondering what the heck I’m up to out here and why she isn’t with me.

They had better hope that this is not typical:

WILMINGTON, Del. — More than a month after the launch of Delaware’s health insurance exchange, officials report only four Delawareans enrolled for insurance coverage under the Affordable Care Act.

As of Wednesday, Delaware’s marketplace guide organizations reported four enrollments, 31 enrollment applications completed and 218 accounts created for possible enrollment.

This would probably be a good time for me to repeat the back-of-the-envelope calculation I made a month ago. To enroll 7 million people in the exchanges, the number projected by the CBO, over a period of 200 days requires that 35,000 people be successfully enrolled per day. If you move the deadline up to, say, the end of February 2014, a more practical date, it’s more than 45,000 people successfully enrolled per day. If you move the deadline up to the end of 2013, the date required for technical compliance, more than 75,000 people must be successfully enrolled per day.

If the total number of enrollments is measured in the dozens or even the hundreds or thousands, reaching the 7 million number by the end of the year will require an enormous flood of enrollments between now and the end of the year. Keep that in mind when you hear administration officials quoting statistics about Healthcare.gov’s capacity.

It will be interesting to see what numbers they give us next week.

One of the managers working at the CMS who was responsible for overseeing the implementation of Healthcare.gov has left:

HealthCare.gov may have claimed its first casualty from the Obama administration: a veteran official who helped oversee development of the federal government’s glitch-ridden online insurance exchange.

The Centers for Medicare and Medicaid (CMS) said on Wednesday that Tony Trenkle, the agency’s top technology executive, will step down on Nov. 15 “to take a position in the private sector.” CMS Chief Operating Officer Michelle Snyder delivered the news in an e-mail to employees.

Trenkle was in charge of determining whether private information entered into the exchange system would be safe from hackers and identity thieves. An inspector general’s report released in August said CMS had delayed the deadline for making that decision until the eve of the site’s launch.

“If there are additional delays in completing the security authorization package, [Trenkle] may not have a full assessment of system risks and security controls needed for the security authorization” in time for the rollout, the report said.

I would very much like to know whether he is now looking for a job or has one lined up and if so whether he’s received a raise as a result of the move.

The original title I’d planned to use for this post was “Rat Deserts Sinking Etc.” but I decided that was too uncharitable.