I have a question. Has the effect of the waivers granted on the CBO’s projections about the fiscal implications of the PPACA been studied?

Daniel Gross takes note of what, according to Brad DeLong is President Obama’s greatest “unforced error”, the failure to nominate new candidates for the Board of Governors of the Federal Reserve:

Democratic partisans are disappointed that Obama doesn’t get agitated and make obstructionists pay a price. But the president bears plenty of responsibility. While you can blame the other party for not cooperating, the ultimate failure to fill key posts in important agencies is its own goal, an unforced error, a self-inflicted wound. You can’t have nomination fights if you don’t nominate people in the first place. The Senate has confirmed a lower percentage of nominees for judgeships than it has for prior presidents. But Obama has also attempted to fill a smaller percentage of openings than his predecessors. It doesn’t always require an act of obstruction to keep a government post open.

I think there’s also a more subtle issue: too many academics who are tenured professors at prestige universities. I’m thinking of Larry Summers and Austan Goolsbee, to name two. Given the choice between giving up their tenured posts at Harvard and the University of Chicago (something that departmental and/or university rules required after the elapse of a certain period of time) or remain as part of the administration’s economic team they elected to return to their tenured posts.

I think that’s far more likely to be true if you nominate people tenured at the most prestigious institutions. There are only so many tenured posts in those institutions and they’re understandably reluctant to abandon them forever for what is inevitably a temporary gig.

It takes time to make a team from a collection of individuals, especially when you’re dealing with people who aren’t exactly team players to start out with. It’s darned hard for that team to take shape when the roster keeps changing.

The Oriental Institute of the University of Chicago has completed its dictionary of the Assyrian language:

Some might wonder if it is a bit late in the game, but scholars at the University of Chicago’s Oriental Institute have finally completed the Assyrian Dictionary, listing 28,000 words of a language that hasn’t been used for more than 2,000 years.

Published in 21 volumes, the dictionary project was started in 1921. In all, 88 scholars worked 90 years to compile it.

Thank God they were working on deadline! 😉

If you’ve got $1,400 sitting around gathering dust you can buy your very own copy.

The total number of cuneiform tablets that have been found isn’t unimaginably vast—they number in the hundreds of thousands—and only a fraction of the cuneiform tablets found have been in the Assyrian language, an extinct Semitic language apparently descended from Akkadian. I would guess their total number to be in the tens of thousands. I know that about 30,000 tablets in the Assyrian language were found in Nineveh. The total number of distinct works (many works have been found in multiples) included transactions, laws, marriages, divorces, legal disputes, literature, religious texts and personal correspondence among which was a note from a bratty rich kid. Here’s a quotation:

“From year to year, the clothes of the (young) gentlemen here become better, but you let my clothes get worse.

“The son of Adad-iddinam, whose father is only an assistant to my father, (has) two new sets of clothes . . . while you fuss even about a single set of clothes for me. In spite of the fact that you bore me and his mother only adopted him, his mother loves him, while you, you do not love me!”

Definitely a daunting task.

New finds in West Asia have cast some doubt on the long-standing theory that our species originated in East Africa and spread from there to the rest of the world:

Early members of the genus Homo, possibly direct ancestors of people today, may have evolved in Asia and then gone to Africa, not vice versa as many scientists have assumed.

Most paleoanthropologists have favored an African origin for the potential human ancestor Homo erectus. But new evidence shows the species occupied a West Asian site called Dmanisi from 1.85 million to 1.77 million years ago, at the same time or slightly before the earliest evidence of this humanlike species in Africa, say geologist Reid Ferring of the University of North Texas in Denton and his colleagues.

The new Dmanisi discoveries point to an Asian homeland for H. erectus, the scientists propose online June 6 in the Proceedings of the National Academy of Sciences.

“Dmanisi was occupied repeatedly for roughly 80,000 years and supported a population that was well established and probably quite mobile,” Ferring says.

Evidence remains meager for the geographic origins of the Homo genus, says anthropologist Bernard Wood of George Washington University in Washington, D.C. Several scenarios of Homo evolution are possible, and it’s possible that humankind’s genus got its start in Asia with H. erectus.

The idea that H. erectus evolved from H. habilis has been looking decreasingly likely for many years. Indeed, I would be surprised if habilis wasn’t reclassified as Australopithecus.

Dmanisi is located roughly in the east-west center of Georgia, near the Turkish border. I’ve long thought that Georgian archaeology and paleontology would become a very interesting field after the collapse of the Soviet Union and here’s a bit more evidence. A question that this find raises is the route by which our very distant ancestors arrived there. My speculation would be for a route along the Mediterranean or, as has been suggested by some other finds in the Arabian Peninsula, a seacoast route along the shores of the Gulf.

Economics21 has updated the graph produced in 2009 by Christina Romer and Jared Bernstein to justify the Obama Administration’s stimulus package. Economics21 characterizes itself as nonpartisan but judging by its roster is pretty darned conservative. However, not “batshit crazy conservative” which James Joyner assures me is a technical political science term.

The red line dots are the update and constitute the real-life results. I think the most charitable comment you can make is that their model was wrong.

Read the whole thing. They also link to a report that suggests that the stimulus resulted in a net loss in jobs.

Right now my position on stimulus packages (defined as debt-financed spending other than via the tax code) is that, while I still believe that a well-timed and well-constructed stimulus package could produce actual economic stimulus just as Lord Keynes advised us eighty years ago, our political system is incapable of producing a well-timed and well-constructed stimulus package.

After a lengthy bill of indictment of the Obama Administration’s economic policies Martin Feldstein summarizes the state of the economy:

The economy will continue to suffer until there is a coherent and favorable economic policy. That means bringing long-term deficits under control without raising marginal tax rates—by cutting government outlays and by limiting the tax expenditures that substitute for direct government spending. It means lower tax rates on businesses and individuals to spur entrepreneurship and investment. And it means reforming Social Security and Medicare to protect the living standards of future retirees while limiting the cost to future taxpayers.

As the old Magic 8 Ball used to put it “Outlook not so good”.

Whenever I feel afraid
I hold my head erect
And whistle a happy tune
So no one will suspect
I’m afraid.
Song, from The King and I, Lyrics by Oscar Hammerstein II

Ben Bernanke is afraid. Or, at least, that’s the message I took away from a speech he made before a conference in Atlanta:

As I have discussed today, the economic recovery in the United States appears to be proceeding at a moderate pace and–notwithstanding unevenness in the rate of progress and some recent signs of reduced momentum–the labor market has been gradually improving. At the same time, the jobs situation remains far from normal, with unemployment remaining elevated. Inflation has risen lately but should moderate, assuming that commodity prices stabilize and that, as I expect, longer-term inflation expectations remain stable.

Against this backdrop, the Federal Open Market Committee (FOMC) has maintained a highly accommodative monetary policy, keeping its target for the federal funds rate close to zero and further easing monetary conditions through large-scale asset purchases. The FOMC has indicated that it will complete its purchases of $600 billion of Treasury securities by the end of this month while maintaining its existing policy of reinvesting principal payments from its securities holdings. The Committee also continues to anticipate that economic conditions are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

The full text of the speech is here.

He’s blown his wad (it’s a naval expression). He’s maintained interest rates near zero for far too long. He’s pumped money into the economy via quantitative easing. The policy has been effective: the stock market has risen sharply and inflation has risen (at least in the way that most people reckon it, by the prices of things they buy going up).

Much of the talk was devoted to prices as you can see from this word cloud of the speech, largely devoted to a defense of his policies. Increases in prices were attributed to anything other than his policies, “improving diets in the emerging economies” (quibble: do economies have diets?), production shortfalls, etc.

There is apparently a difference of opinion within the Fed. The New York Fed published a report that found:

…we see that 84 percent of all expenditures in the CPI basket were on items that experienced above-average increases in inflation in the last seven months.

which would seem to be in contradiction to the claim that most items hadn’t seen price increases.

Mish Shedlock:

Bernanke did everything possible to mitigate his role and the Fed’s role in this crisis. His unmitigated gall comes through loud and clear with this bald-faced lie:

“The Federal Reserve’s actions in recent years have doubtless helped stabilize the financial system, ease credit and financial conditions, guard against deflation, and promote economic recovery. All of this has been accomplished, I should note, at no net cost to the federal budget or to the U.S. taxpayer.”

For starters, were it not for the complete ineptitude of the Greenspan and Bernanke Fed the US would not be in this mess in the first place. Second, there most assuredly is a cost to the Fed’s policies.

Prices are higher, wages are not. Banks were bailed out at taxpayer expense. The Fed pays interest on reserves. That interest comes from taxpayers. The Fed’s balance sheet is loaded to the gills with garbage from Fannie Mae and Freddie Mac. The Fed is not at risk on that garbage because Congress approved unlimited backing for GSE debt. That unlimited backing is over $300 billion and counting. Those losses are not all on the Fed’s balance sheet of course. However let’s not ignore the Fed’s role in getting Congress to pass that blatantly stupid bill.

Bruce Krasting:

IMHO Ben should have stepped up to the plate and said to the world that in fact his policies have contributed to inflation. He should have confirmed, what we already know, the objective of current monetary policy is to stimulate inflation. After all, the idea that zero interest rates do not contribute to inflation is, well, a dumb idea that has no basis in fact.

There was another thing that jumped out at me from the speech:

Although it is moving in the right direction, the economy is still producing at levels well below its potential…

How is the potential of the economy measured? Is it measured relative, for example, to its state in 2006? Why is that the right comparison?

Is it not possible that the economy is producing at its potential but its potential is too low?

What should be done? First, the Fed should gradually start increasing interest rates to 1%, the level at which they should have been under the Taylor Rule. And they should clearly state and stick to a determination to operate under an open rules-based regime.

Second, no more quantitative easing. Dr. Bernanke strongly suggested that in his speech and they should stick to it.

Third, he should stop carrying water for the politicians in the Congress and in the Obama Administration. Monetary policy has exhausted its arsenal.

Either the Obama Administration believes in Keynesian stimulus or it does not. If it does, it should push for more stimulus in a form that the Congressional Republicans dare not refuse. To my eye a reduction or elimination of FICA would fit the bill.

If it does not, it would seem that austerity is the preferred strategy. The deficit for 2011 is expected to be more than $1.5 trillion. If this is austerity, it’s taking a form I do not recognize.

These chilling words, said of the Social Security Trust Fund, are from Paul Blahous, public trustee for the Social Security Trust Fund (hat tip: Bruce Krasting), in testimony before the House Ways and Means Committee. Here’s the complete quote:

The 2011 Trustees’ report is the first in which Public Trustees have ever participated to have concluded that an era of permanent annual deficits has been reached (assuming no future change in law).

From Krasting:

Bottom line; either a significant portion of seniors are going to be eating cat food, or the next few generations are going to be paying (unfairly) through the nose.

The shortfall is all but certain to be in the hundreds of billions or even trillions. In the near term there are really only two practical courses of action: either a substantial increase in FICA max or an increase in the income tax.

Just as a quick recap I believe that Social Security should be retained with the following changes:

• It should be means tested.
• The formula for cost of living adjustments should be changed to reduce the rate at which benefits increase.
• The Social Security retirement age should be increased to 70.
• A new category of disability for people over 62 who have worked for an appreciable portion of their careers in physical labor earning an hourly wage should be created.

You can argue over whether FICA max should be abolished altogether or if FICA itself (the “payroll tax”) should be abolished and all funding for Social Security be derived from general revenues. I think there would be benefits from the latter since it would eliminate some of the differential between on the books and off the books employees.

Social Security is not a right. It is not an annuity. It is not an investment. It should not be the primary long term financial planning strategy for most Americans. However, I hope that recent years have disabused people of the notion that there is any asset or combination of assets that appreciates in value monotonically.

We’re going to need some sort of old age assistance for the foreseeable future. We need to find an acceptable and sustainable formula for funding it. Social Security is no longer the cash cow it has been for most of its history. What we’ve got now is collapsing. Times a-wastin’.

Yesterday I published a foreign policy-related post at Outside the Beltway:

Horrifying Graphic of the Day

The drop in total biomass in the North Atlantic over the last century is shocking. There are any number of reasons for it including environmental degradation (various forms) and poor management. According to the UN Food and Agriculture Organization the most significant reason for the decline: government subsidy for fishing fleets.

Honestly, I don’t see any practical, effective, and politically acceptable way of slowing this problem let alone of reversing it.