Another example of the importance of starting dates

Back in October, Yglesias reported on how the Trump stock market rally wasn't all that impressive. Other countries' stock market indices had risen by more than ours had. To illustrate this, he included this graph comparing the US S&P 500 with Japan's Nikkei, Germany's DAX, and France's CAC indices:

It clearly shows that, while the S&P500 has risen considerably since Aug 2016, the rise is not as large as the gains experienced by other countries. He concluded:

That said, the fact that stock market enthusiasm over the past year has been worldwide with the United States lagging other key countries seems like a strong indication that Trump hasn’t done anything that’s particularly successful or exciting. ... For whatever reason, markets are up just about everywhere, not only in the United States. And markets generally seem to be up by more in countries with boring, competent-seeming leadership than they are in the United States.

I liked the graph and it is a good idea to think in terms of such counterfactuals, but I also had my doubts. Why normalize all the indices at the end of July, half a year before he became president and months before he won the election? In the middle of the semester I felt it was interesting enough to mention to my honors students while bringing up a concern or two, but I eventually forgot my desire to investigate further.

Well, time to investigate! Compare if you will the following graphs with three different normalizations: Yglesias' end-of-July 2016, the election in 2016, and the inauguration in 2017. I'm extending the data out to today, using weekly closing numbers.

The S&P's relative performance has improved since Yglesias wrote, so that even using his normalization the US is now modestly outperforming Europe and has been for the most part since the Tax Cut and Jobs Act. The Nikkei is still outperforming the S&P by a wide margin, but his conclusion would now have to be that the President's antics haven't harmed the US.

If we normalize just before the election, however, we see that the US is right on par with Japan and outperforming Europe by a wide margin.

And normalizing from the inauguration shows the US ahead of every other country with the most boring and competent seeming Germany performing worst.

So what's the takeaway? We need more crazy antics? I doubt it. My three lessons for today are about how little we know:

1) If you're going to do this kind of analysis, be forthright about why you are choosing your starting dates. Starting dates are everything. That's part of why statistics gets its reputation for lies: you can make the same numbers tell almost any story you want. If you want US stock returns to look as bad as possible, start at July 3, 2016 (really close to Yglesias' starting point) so that Japan is 20 points ahead of the US. If you want the US stock returns to look as strong as possible, go back nearly 3 years ago to June 28, 2015 and give Trump credit for growth that happened during Obama's term, putting the US 20 points ahead of Japan. Or maybe just pick a credible day from which we can justly and reasonably judge the President's performance.

2) Let's please remember on all sides that the stock market is not a great indicator of how the economy as a whole is doing. The correlation may even be negative in the very long run (http://www.businessinsider.com/equity-returns-and-gdp-per-capita-2014-2)

3) Let's not draw too many life lessons about how to run an economy and a presidency until all the data points are in. 

Why do they matter? Fish and McD's

Pinstrup-Anderson, co-author on my textbook, recently asked what fish have to do with food and nutrition security. He answers that it matters a great deal and recommends a new report by a high-level panel of experts on the subject.

The current debate and the many papers written recently about how agriculture can be made more nutrition sensitive also miss the point.  We should talk about how the food system, including fisheries and aquaculture and the total supply chain, can be made more nutrition sensitive.  If we limit the discussion and policy recommendations to agriculture, we are foregoing some very big opportunities for improving food security and nutrition. ... 

The report, which is available at www.fao.org/cfs/cfs-hlpe or in hardcopy from cfs-hlpe@fao.org, is a goldmine of policy-related knowledge about the fisheries and aquaculture sectors, their importance, sustainability issues, governance and recommended policies for consideration by governments, the private sector, civil society and international organizations. It provides a comprehensive assessment of the interaction between the fisheries and aquaculture sector and food and nutrition security. The report is a must-read for those of us interested in food policy.

Handjiski points out that all of Sub-Saharan Africa only has two countries with McDonald's franchises. Even though countries like Seychelles, E. Guinea, Gabon, Botswana, and good old Nigeria have a higher income than Indonesia, Egypt, Pakiston, or Moldova did when they got their first. He suggests that, since having a McDonald's requires a certain level of infrastructure, entrepreneurship, and access to a large number of ingredients, it can be a development indicator:

In almost 60 percent of cases, developing countries grew [significantly] faster in the five years, compared to the previous five, following the opening of the first McDonald’s. ... What this means is that McDonald’s may be viewed as one of the tipping points for when a country has amassed sufficient urban middle-class, investment security and supply chains for economic take off.

 Speaking of which, there was also a recent article about how Americans' general stupidity with fractions stopped A&W from beating McDonald's Quarter Pounder with a "Third Pounder". People said 3 is less than 4 and therefore 1/3 is less than 1/4. Ouch. In related interesting news, New York states has decided that a burrito is a sandwich for tax purposes.

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Inequality and income support

Villarreal, Francisco (2014). "Monetary Policy and Inequality in Mexico," MPRA Paper 57074.

What happens to household income inequality when there is an unexpected increase in interest rates? "Monetary policy shocks are identified using a structural model, and inequality is measured from household survey data. Then the effect of shocks on inequality is evaluated using a time–series model." Earlier work on the US finds that an unexpected increase in interest rates increases inequality. In Mexico he finds that inequality decreases because median hourly wages drop and workers don't increase labor enough to make up for it, but this effect only lasts for about two years.

Sumner argues in a lot of places that we should focus much more on consumption inequality than on income or wealth inequality; even though the three should be correlated, it's actual standards of living we should be worried about. Oddly enough, then

The correct response to economic inequality (from utilitarian perspective) is to abolish all taxes on capital income, and institute a progressive consumption tax.

Unfortunately, most of the Piketty supporters seem to think it's better to have lower tax rates on a wealthy person who devotes his wealth to riotous living, as compared to a wealthy person who is thrifty, putting the money into capital formation, charity, and/or his children's welfare. I have yet to see a persuasive justification for this bizarre policy preference.

If what we're really concerned about, then, is increasing incomes for the bottom, how do you do it? Economists are best at telling us how not to do it. One example I am likely to mention in my intro macro class next semester from Carden tries to remind people of what is not seen when we choose to pay more to buy American. The broken window fallacy as seen in socks. Meanwhile, here are some comments on a universal basic income, none of which are very satisfying to me but at least it's being discussed.

CBO on the Tobin Tax: "slightly" disastrous

The Tobin tax would put a very teensy tiny tax on certain kinds of financial transactions. Miniscule really. Hardly worth mentioning. Right, Congressional Budget Office?

As foreign holders of U.S. securities moved their transactions abroad, more of the market could go with them, which could diminish the importance of the United States as a major global financial market ... In the short term, a decrease in investment would lower demand for goods and services and thus reduce output and employment ... The tax might discourage short-term speculation, which can destabilize markets and lead to disruptive events (such as the October 1987 stock market crash and the more recent “flash crash,” when the stock market temporarily plunged on May 6, 2010) The transaction tax would also affect the funding of state and local pension plans ($3 trillion as of June 2011). Besides initially reducing the value of their existing assets slightly, the tax would raise transaction costs for pension plans. Both of those effects would increase required contributions to the plans.

To sum up: recession, send jobs overseas, make Really Big stock market crashes more likely, make it harder for people to save for retirement and taxing the retirement savings of the elderly more than the young, AND mess up the US bond market. Ooh, where can I sign up? /snark (HT: Newmark)

General Equilibrium: Fuel Subsidies and Cocoa

What other effects does the removal of a fuel subsidy have? Well, it increases the price of cocoa, for one. Removing the fuel subsidy led to strikes, and strikes led to this:

The ongoing labour strike in Nigeria has contributed to drive the price of Cocoa to highs not seen in 11 years. Government processing offices that usually grade Cocoa before export are closed as a result of the strike. Also virtually all export terminals have been closed as a result of the strike. Cocoa beans are first certified/graded before being bagged and shipped for exports.
The price of Cocoa had fallen over 30% in 2011, however the strike has seen prices rebound and gain 15% in just two days.

Food demand and price volatility

In Mankiw's Principles of Microeconomics textbook, he poses students the following paraphrased question: Your friend notes that food has a very high demand elasticity and comments that it would be a good source of tax revenue. In what sense is your friend right about it being a "good" tax and in what sense is the tax "not good"?

Most students successfully answered that it was "good" in the sense that it would generate a lot of tax revenue, (missed the part of it being "good" in the sense that there would be very little deadweight loss), and that it is "not good" in the sense that it will hurt the poor who may not have enough to eat more than the wealthy.

FAO in its new High Level Panel of Experts report on food price volatility takes that excellent point one step further in rigor. As societies and individuals become wealthier, their demand for food becomes less sensitive to price (less elastic). This means when any price change occurs, it is the poorer consumers who will change their consumption pattern most. When all food prices increase and it isn't because of an increase in demand*, the poor have less to eat while the non-poor are still able to have enough food.

Food price volatility increases the inequality of food consumption. They also show that biofuel policies increase the inequality of food consumption even further, shaping a food system designed to hurt the poor more when food prices rise.

"I started the war against subsidies."

Head of the Central Bank, Sanusi, explaining in more detail why he is against the fuel subsidies in Nigeria. There is a pretty thorough description of how the subsidy really supports corruption and some of the evidence of it. Interesting throughout.

So for two years I have been convinced that this thing is a scam and that it cannot be stopped because the entire controls have been compromised. ... So yes, I am willing to take all the criticism and labels and be unpopular but this has to stop and govt can find other ways of alleviating pain.

Removing it has costs in terms of nigerians paying more for PMS-which by the way is not the fuel for genrators, power plants, production facilities, heavy duty goods transportation trucks and even luxury buses. It is fuel used by the middle class and car owners to drove around town and from city to city not to employ workers and produce goods and services. Diesel which is critical to manufacturing and employment creation is not subsidized

1. I am a strong advocate for subsidies if they are for production and not consumption, and if they benefit the poor and not middle men and rent seekers. The US government subsidizes cotton and wheat farmers and nigeria spends its reserves importing wheat from america and keeping american farmers employed....

Finally: removing subsidy is not a silver bullet that solves our economic problems. And there is a huge trust deficit that government has to address. Government needs to investigate subsidy payments and punish any violations of extant guidelines. It needs to cut on unnecessary and waste ful expenditure. It needs to fight corruption and show seriousness in that. It needs to deliver on capital projects, power and infrastructure including irrigation, farm-level storage and agri-processing. These are all valid issues that are to be taken IN ADDITION to and not in place of subsidy removal.

Best tweets of the protests

This is another post I will be updating occasionally: some entertaining tweets about the fuel subsidies (in some cases, spelled out further for the Twitter-impaired)

On economics:
This is the point where I wish I concentrated during those classes on Economics
There are 3 groups of Nigerians at the moment: 1, those fighting for the fuelsubsidy; 2, those fighting against the fuel subsidy, 3. Those who don't even know what subsidy is. I'm no. 3.
The market for high heels have died with the market for cabs.

On cars:
If he puts on the AC in his car for you, marry him!
Abuja Bigboy spotted Oppressing as he left his engine on while waiting for girlfriend

Tried on a new shirt. Kinda tight. I'm not there yet but I'm on my way. My Fuel subsidy "strolls" should do the rest!
Lol! We be blaming everything on the fuel subsidy. Employer: "why are you 2 hours late to work" Employee's reply: fuel subsidy.

The government's side on the fuel subsidy

The BBC had a brief interview with Ahmed Ali Gulak, Special Adviser to the President on political matters. Among the more interesting talking points, the government claims that prices and protests will have calmed down within 3-4 weeks. Here's hoping it's calmed down by the time classes start!

UPDATE: BBC's interview with the central banker, Senusi, who argues that subsidies should be for production, not consumption; that they should be paid for with savings not debt (our children are paying for our consumption); and that much of Nigeria's subsidies are re-exported to other West African countries. He admits the cost of living to go up and that other prices will rise. It was not unexpected. The crash in Europe and other countries requires greater fiscal responsibility. Improvements may not be seen for 6 months-3 years.

Price transmission in Nigeria

With the fuel subsidy's disappearance, the price of gasoline increased from N65 ($0.40) to N140-N150 (just under $1). What other prices go up and how quickly? I'll be updating this post from time to time with new prices as I learned them:


Small plastic bag with water: N5 up to N10; larger bag in Lagos from N60 to N150 Jan 4   (reported through Twitter from numerous sources)


Jan 5 from our shopping - taxi service price up from N1000/hour to N2000/hr; water jug refills unavailable; most food sold at the same price; lower selection of bread than usual; 


Jan 5 NigeriaNewsDesk Twitter report: Many filling stations outside Calabar, the Cross River State capital, are selling premium motor spirit, popularly known as petrol, for N250

Fourth-hand Twitter report: Packet of St Louis Sugar was N100. Post subsidy N250


A student reports: A bowl of raw foreign rice has gone from N250 to N270 in Kaduna while a similar bowl of black eyed peas has gone from N120 to N180.


Jan 9 - water jug refill up from N350 to N375. Tailoring services and fabric same price as before.

Mixed Bag: good and bad in African agriculture

In the most distressing news I've heard recently put in a positive light, 20 Tanzanian farmers were invited to Uganda to learn more about using human feces as fertilizer. They would like to convince us that this is a good thing because fertilizer use is so low, but it's also a great way for spreading diseases. Their numbers are 20 years old, but show that a lot more fertilizer is supposedly distributed than was ever spread on crops. That doesn't suggest the problem was lack of fertilizer availability.

Flooding in northwestern Nigeria (Sokoto state, pictured) destroyed 1 billion Naira worth of crops ($6.7 million).

In much happier news, ICRISAT has been providing some Mali farmers with groundnut (peanut) seeds that take only 3 months to harvest instead of 4. As rain patterns have shifted, assumedly due to climate change, the rainy season has been getting shorter and shorter. If I understand the report correctly, it claims that groundnut production has also increased 10-fold.

They also established a cooperative (starting at 20 members, now 65) to coordinate storage. Each member of the cooperative contributes 20 kg of groundnuts for storage. 10 of them they get back later in the year (as a form of forced storage for behavioral economics reasons) and the other 10 are sold (for about $320) to give the cooperative a source of loanable capital.

Ugandan rice production is up significantly - 66% during the last decade. Instead of importing rice, they now export to South Sudan, Kenya, and DRC. The article credits Nerica (New Rice for Africa) with much of the growth. I take the article to be saying that a new survey by the Ministry of Agriculture claims that rice exports are now valued more than any other traditional food export.

Zimbabwe is going to start handing out agricultural input vouchers to vulnerable farmers this week, entitling them to "10 kilograms of maize seed, one 50-kilogram bag of compound D and one 50 kilogram bag of ammonium nitrate fertilizer."

The price of seeds (and everything else) in Africa

Good news: the prices of cereals, edible oils, sugar, and dairy products were down sharply in October, bringing FAO's food price index down to its lowest point for the year. Not that it's all that low, but it's something. However, peanut butter prices are up 40% in the US, but not abroad (so American expat families everywhere can breathe a sigh of relief). Since the US government shields peanut growers from the world market, the weather in Georgia and Alabama matters for the US price, but not the international price.

Swaziland's government has retracted its usual agricultural input subsidies: no more discount or free seeds, no more discount tractors (government was charging $17.30/hr rental; private cost is $26.60). The article also discusses how the feudal land tenure system makes things more difficult. One farmer laments:

“I live on the banks of a river [the Nkomati]. My maize crops could easily thrive if I had a simple pump and piping. What I harvest would pay for the loan, but I have no collateral because there is nothing to offer the bank" [because he does not own the land and so can't put that up as collateral.]

Roving Bandit notices the South Sudan National Bureau of Statistics report: annual inflation in South Sudan is up to 60% from September 2010 to September 2011. For the year, the biggest contributor is food prices that went up 64%. The price of furniture and furnishings went up far more (108%) as did alcohol (95%), but food carries a much larger weight (71/100) in the basket of goods than anything else. Food price increases have been very small this month, thankfully.

Happy Labor-tarian Day

Have solidarity with the working class and get the government off their backs. Many of the poorest pay over 100% marginal tax rates as benefits phase out in strange and unpredictable ways. It sets up strong counter-incentives to work. Employer payroll taxes reduce demand for labor across the board.

From Cafe Hayek:

taxes on corporations are taxes on people:

I remember that in addressing the issue in the 1980s, the late Herb Stein said that it’s as if people think that if the government imposed a tax on cows, the tax would be paid by the cows.

Labor and environmental regulations are actually preventing the government from producing Obama's sought-after clean tech jobs (HT: Newman).

Catalan at Mises discusses the moral and pragmatic consequences of Libertarianism for the poor:

As a “quasi”-consequentialist I tend to judge libertarianism by the outcomes of certain policies (or, better said, lack of policies). I honestly believe that the free market could better provide for the “less fortunate” than an interventionist economy, and that an interventionist economy will lead to the further impoverishment of the “less fortunate” over the long run. [My father] disagreed and I gave the example of the food industry. In more capitalistic countries, where regulation on food production and distribution is relatively minor, food is plentiful — there is a surplus that can be exported. There are some who are “malnourished”, but malnourishment in the United States is not the same as malnourishment in Sudan, for the most part. Yet, in countries where food is rationed there is widespread malnourishment and famine.

While I tend to favor his overall sentiment when applied to the US, the malnourishment of Sudan is scarcely caused by too much government today. You can make the case that the problem is too much of really bad government in the past, but if even 15 years of no central government have not turned things around in a significant way, maybe there needs to be something more. A good part of the reason our markets function well includes significant amounts of public goods provided by our government. Could they also be supplied by the market? Perhaps. Experience around the world shows that where government does not provide them, markets have provided in insufficient quantities to get their market system where it could be.

On the bright side, at least one sector is hiring: the downward-pointing arrows manufacturers.

The Lighter Side: Washington, education, and the end of the world

Yesterday in my principles of microeconomics course, I actually ran the students through a few models of why we go to college (get skills, get a sheepskin, find out where we "fit" in the world). This is the lighter side of those models.

I cannot believe House Republicans are actually talking about not extending a tax cut. By their own score cards with the Bush tax cuts, that is equivalent to raising taxes. I am gratified to hear Romney at least listening to his economic advisor and saying, yeah, we wish the tax cut were on the employer half, but it helps create jobs and puts money in poor and middle-class people's pockets, let's keep this thing rolling.

In other news, Washington remains as it ever was.

And life is pretty normal everywhere else too. Should we be relieved?

The unintended consequences of hyphens

The political economy of the Dodd-Frank bill (against conflict minerals, but actually destroying livelihoods and preventing good local governance):

What's even more frustrating is that members of Congress like Jim McDermott and their staffs seem to have taken Enough's word at face value, going so far as to let the advocacy organization choose most of the witnesses at hearings on the Dodd-Frank measure, which meant that any dissenting voices - Congolese or American - went mostly unheard. 
That's a terrible way to develop legislation. I realize that members of Congressional staffs are extremely busy dealing with hundreds of issues every day and that it saves time to let an advocacy organization plan most of the details of a hearing on one obscure topic, but there need to be a wider variety of voices on questions involving Africa - or any topic, for that matter. At the very least, I think it's reasonable to expect that people testifying before Congress on DRC actually speak French and spend regular, extended periods of time there. 
It is beyond frustrating to have watched this completely avoidable catastrophe unfold when it was so evident that Enough has misread the situation in DRC and that the legislators who listened to them were going to unintentionally create the disaster Aronson describes. 

Modigliani-Miller as done in the Ukraine:

people who import cars to Ukraine sometimes cut the car in two separate pieces and carry it through the customs this way. By doing this, they save a fortune on import tax. A car carried in two pieces is seen as spare parts and therefore is taxed at a much lower rate than a normal car.

Equivalent Taxation

Tino plots the average national US government revenue, spending, and deficit by share of GDP since WWII.  The question is: Does the US have a spending problem or a revenue problem or both? What do we see?

First, this exercise shows us that Weigel is mistaken. Tax revenue during both Reagan terms was virtually identical with the Carter years, even though Reagan cut tax rates dramatically.

Second, revenues during the second Clinton term, the highest of the post-war periods, was 19.9%, only a little higher than the 19.0% level Paul Ryan has suggested (which liberals claim is far too little).

Lastly, President Obama has increased spending to levels never witnessed in American post-war history. … The overwhelming majority of Presidents Obama's budgeted deficit would remain even if he collected Clinton-era record revenue. …
The only reasonable conclusion that the United States primarily has a spending problem, not a revenue problem. It is the expansion of the government - some already carried out by Obama, some projected to occur - that is causing the long term structural deficit to grow beyond control, not a reduction of revenue caused by lowering the taxes on the rich.

If liberals want to argue that government spending is too low, and that we should increase it for reasons of social policy and raise taxes to pay for it, they should feel free to do so. But please do not claim that the long term deficit is primarily caused by taxes being too low relative to historical levels, because that is simply not true.

Taxes and timing (HT: Mankiw):

Malcolm has $30 billion, a passion for steaks, and a plan to buy 3 billion steaks for $10 each on his next birthday.
But an election is coming, pitting Lefty, from a blue state, against Righty, from a red state. Lefty hates the rich and wants to levy a 15 percent wealth tax. Righty loves the rich and wants to levy a 17.5 percent sales tax.
Everyone knows a wealth tax is progressive and a sales tax is regressive, but Malcolm is scratching his head.
“If Lefty wins, I’ll pay a $4.5 billion tax, which means 450 million fewer steaks. If Righty wins, the price of steaks will rise by 17.5 percent to $11.75, and my $30 billion will buy 450 million fewer steaks. Either way, I’m out 450 million steaks.”
Then Malcolm says, “What if I wait 10 years to have my Here’s-the-Beef Bash? I can double my money and postpone the sales tax. Righty is surely my candidate.”
But Malcolm reconsiders the math and shakes his head.
“If Lefty’s elected, I lose $4.5 billion immediately. I can turn my remaining $25.5 billion into $51 billion over 10 years and buy 5.1 billion steaks. If Righty wins, I can turn my $30 billion into $60 billion over the decade, but, given the sales tax, the $60 billion buys 5.1 billion steaks. It’s the identical story. And if the $10 base price of steak rises, I’ll be in even worse shape, but the same worse shape in both cases.
Moreover, if I forget my birthday and leave everything to my kids, they’ll also fare the same regardless. If Lefty wins, I’ll leave them less money, and if Righty wins, I’ll leave them more money, but with less purchasing power.

Five Second: Sumner Defending Mankiw on taxes

The original post is a month old, but is highly relevant today. Sumner defends the Laffer curve and Mankiw:

I’d argue that this data is strongly supportive of the view that both the US and Europe are near to tops of the Laffer Curve for total taxation.  I did not say then, nor do I claim now, that we are precisely at the top.  But I also don’t see any reason to believe that if we raised taxes from 28% to 40% of GDP, that revenue would rise anywhere near proportionately, with no change in GDP per capita. …

For instance, in Mankiw’s data the Germans raise $13,893/person with taxes of 40.6% of GDP.  The US raises $13,097/person, with taxes of just 28.2% of GDP.  The progressive denial of the Laffer Curve is an implied claim that if we raised our tax rate to German levels, our GDP would not decline, instead we’d raise an astounding $18,856/person in tax revenue, despite the fact that no other major country with Euro-style tax rates comes close to raising that kind of revenue.  Quite a leap of faith.

[In the comments he adds:]

When comparing two large continental size economies, it makes sense to either compare totals [to] totals, or most succesful [sic] parts to most successful parts. I’m fine with either. I think Massachusetts or NYC or the SF Bay area of California could raise $18,000 per capita. I don’t think Mississippi or the border region of Texas could raise even $13,000.

Sumner defends the notion that the US tax system is more progressive than most European systems (and Mankiw):

Lindert showed that Europeans were able to raise more tax revenue only by having more regressive tax systems than the US, i.e. tax systems that relied more heavily on consumption taxes.  This is now pretty much common knowledge in the public finance area.  But many American progressives keep insisting that we can get closer to the (egalitarian) European model by making the US tax system more progressive, by having the rich pay more. 

Sumner argues that the solution these two facts suggest is to not assume the problem is that we don’t collect enough money, but that we don’t use it very well and focus on improving outcomes. He favors decentralization, changing spending priorities (less military), and do more cash grants on a county basis for what is needed in that county.

[In the comments he adds:]

For instance, I believe that our government spends about as much as the Canadian government on health care (per capita). The difference is that with that money they cover everyone, and we cover much less than 50% of the population with government health programs.

One of his commenters argues that the left does not believe everything Sumner claims they do, that they accept tax rises create increasing deadweight loss and slower-than-proportional revenue growth, but that the things they could spend the tax money on are worth those costs.

Unusual Political Economic Explanations

A good question from Cowen: “What is the political economy of a world where so few people work?” That deals with labor force participation rates rather than unemployment rates per se, but I would hazard that it makes the US look much more like Europe. Cowen believes that it will be more likely to lead to a change in ethical principles (moving from “protecting all the old people against major health care catastrophes” to guaranteeing everyone a particular annual income) which will involve a change in policy instruments from Medicare to welfare checks.

The political economy of energy: If we had no nuclear power, the world would produce an additional 2 billion tons of CO₂, roughly the total emissions of Germany and Japan combined, much of it from gas plants. Of course, that number doesn’t count for the demand-depressing effects of higher energy prices. Japan, however, seems less concerned with nuclear power itself than with the political economy of how it is run, with senior bureaucrats who regulated the nuclear power industry being invited to “cushy jobs” in it. “An energy portfolio, like any other, is a basket of risks: of security of supply, cost and environmental damage. Fear and uncertainty, which nuclear fission produces as unavoidably as it does iodine-131, distort people’s perceptions of those risks.”

Yglesias was debating the political economy of why our tax code is convoluted and an unnecessary headache for millions of filers. I filled in one answer just before he gave it, but his other answer I think is quite doubtful:

Under the circumstances, the sensible thing would be for the IRS to send everyone a sheet of paper that says “based on the income that’s been reported to us and your family status from last year, your taxes owed (or refund owed to you) is $X with standard deductions. If something’s changed, or if that income number is wrong, or if you want to itemize deductions, you should fill out forms blah blah blah. Otherwise, just send a check.” A lot of us would still need to wrestle with the forms and nobody likes to give up money, but this would be much more convenient for millions of people. We don’t do it because H&R Block and TurboTax don’t want to lose customers and, crucially, because the conservative movement wants taxes for ordinary people to be as annoying as possible. Rich people don’t care about this kind of simplification because they itemize their deductions and hire accountants. But they benefit from middle class people resenting the tax process because it helps them build the case for low tax rates.

I would be interested to know just how much H&R Block and Turbo Tax are giving in campaign contributions to specific members of the relevant committees to fight against tax simplification. I am doubtful that it is anywhere near as significant as, say, the contributions for the Farm Bill or any hint of regulation of meat processors.

The Lighter Side: Budget Deals - addicted to fish

How the Left sees budget cuts:

By way of comparison, see this graph comparing where we are now to a few years ago. Or compare it to the size of actual budget cuts:

So ... who won the debate? According to the political cartoons, it looks like a draw:

The Lighter Side: the new 1040 form