Senator Rand Paul re-introduces 'Audit the Fed' bil

Reuters  article "Senator Rand Paul re-introduces 'Audit the Fed' bill" (January 28th, 2015) discusses a new bill introduced by Rand Paul, Ted Cruz, and 28 other Senators to "audit the Fed." This would expand the yearly audits taken by 1) Government Accountability Office, 2) the Office of the Inspector General, and 3) Private firms, to include monetary policy discussions, minutes of which are currently released with a three week lag.  Detailed accounts of their holdings are released each week.

The real intent of the bill seems to be to monitor Federal Reserve policy discussion in real time.  This will have two effects: first, to generate more comments for politicians like Rand to jawbone Fed officials about.  Second, it will chill discussion in times of crisis.

In the end, chipping away at the Fed's independence is a good way to get higher inflation.  From Alesina and Summers (1993), the relationship between Federal Reserve bank independence and inflation (click to enlarge).

 

Another aspect of the conservative echo chamber that has lead to insanity.  Sadly, Corrections sees little way to end it.

Edit:  Even a broken clock is right twice a day.  Senator Warren:

[...] but I oppose the current version of this bill because it promotes congressional meddling in the Fed's monetary policy decisions, which risks politicizing those decisions and may have dangerous implications for financial stability and the health of the global economy.

The worst thing for a party about giving up its sanity for poorly-thought-out crusades,is it cedes sanity to the opposition.

Obama announces 15 recess appointments, scolds GOP

Reuter's News article "Obama announces 15 recess appointments, scolds GOP" (March 27th, 2010) offers a quotes that deserves further scrutiny. The article quotes Harry Reid on appointments and nominations:

The Senate's top Democrat, Harry Reid, welcomed Obama's move. "Regrettably, Senate Republicans have dedicated themselves to a failed strategy to cripple President Obama's economic initiatives by stalling key administration nominees at every turn," said Reid, the majority leader from Nevada.

Corrections has a harder time seeing this from the data. On average a confirmed appointee spent 75.78 days waiting until their confirmation vote. On average, the 15 appointed nominees spent 214 days waiting until their confirmation vote. Of the 13 not-appointed nominees who spent 214 or more days waiting until their nomination vote but were confirmed, the average appointee spent 238.5 days waiting. Twenty-two individuals who waited 214 or more days remain unconfirmed.

Examining these twenty-two, none seem to be "key", as Senator Reid claims. As this can be seen as a subjective claim, Corrections offers a list of positions for the purposes of information dissemination and self-evaluation.

• Four are members of the Commodity Credit Corporation Board of Directors. 
• One is the Director of Civilian Radioactive Waste Management. 
• There are three Assistant Attorney Generals (of various counsels). 
• One is the Deputy Director for State, Local, and Tribal Affairs. 
• Another is a Commissioner of the Federal Election Commission.
• Assistant Secretary for Planning and Evaluation
• Five Judges-two local D.C., two Court of Appeals, and a district court judge
• Two board members of the Legal Services Center
• A board member for the national labor relations board
• Chief Counsel of Advocacy
• Under Secretary of International Affairs

It is not immediately apparent whether or not Senator Reid's comment is deserving of correction.  For better understanding of the distribution of waiting times, Corrections offers a Kaplan-Meier plot for political appointees and their confirmation (click to enlarge).  We mark individuals not yet confirmed and individuals appointed.

Finally, and perhaps most relevantly, we can see that all appointments come after a large expected increase in their expected waiting days for confirmation, examining the conditional expectations (though a Heckman selection model with dubious exclusion restrictions gives an expected average waiting time of between 40 and 88 days, depending on specification).  This would perhaps be a more economic explanation of these recess appointments.

Some 600,000 jobs tied to Obama stimulus plan in 4Q

Reuter's article titled "Some 600,000 jobs tied to Obama stimulus plan in 4Q" (January 31st, 2010) reports improvements in the job-generation counting mechanism of the stimulus plan, but neglects to mention those jobs that this government has taken away from future generations:

That would mean a total of a little more than 1.2 million jobs were created or saved in 2009, versus the Council's forecast of 1.5 million to 2 million jobs, though comparisons are difficult.

Comparisons are made even more difficult by the deadweight loss associated with any subsidy. In the picture below, the deadweight loss in the job market is given by the red shaded area (click here to enlarge).

It is important to specify that the government has taken money from people to "create" jobs, redistributed it, and claimed victory, likely at the cost of future jobs. If the government had not decided to push forward with a stimulus, the money they no longer needed could be re-invested by consumers in more productive activities--hopefully, in spending that does not generate deadweight loss. Natural investments, which spur industrial growth, may create many more jobs in the future than the government has burdened tax-payers with now.

It is also important to note, as Kevin Murphy has, that the effect of government spending depends largely on how efficient the government is at employing the resources it has. If we believe that the government is largely inefficient (so for every tax dollar it raises, it entirely wastes fifty cents), this makes it more likely that the net value of the stimulus is negative. If we notice that the stimulus plan is not devoted to making use of "idle" resources, but rather to transferring funds from productive taxpayers to less productive citizens, this also makes it more likely that the net value of the stimulus is negative. Finally, if we believe that even "idle" resources, such as the unemployed, are able to become productive with relative ease, such as by taking a college course or moving, the case that the stimulus has net negative value becomes quite compelling.

U.S. food stamp chief wants California to boost use

Reuters article "U.S. food stamp chief wants California to boost use" (December 18th, 2009) falsely supposes that a welfare-based program will improve total utility. Discussing the need for California to recruit more of its eligible federal food-stamp programs, the article includes the following quote from a nutrition analyst:

'There are economic benefits for everyone, for the entire state, if we increase participation [in the federal food stamp program]'

Likely, however, the economic benefits do not outweigh the economic costs for both citizens of the state and for the state.  Notably, a federal program providing subsidized food gets its funding from all US citizens (including Californians), and so increased participation anywhere only costs most Californians.  In addition, the state can easily be made worse off.  By subsidizing people who do not work, food stamp programs magnify the benefit to California citizens of remaining unemployed.  If the labor force is very responsive to changes in wages (or changes in non-labor payment, like welfare), then it is possible that enough people will stay out of California's labor force (at least in the short-run) to depress state tax revenues, as graphically depicted below (click to enlarge).  Californians working and paying taxes have a positive externality to all other Californians, and labor is inefficiently undersupplied as it is.  Placing a negative implicit tax on not working moves Californians further from an optimal equilibrium.

A paradox of plenty - hunger in America

Brend Debusmann, writing for Reuters in his article "A paradox of plenty--hunger in America" (Nov. 24th, 2009), gives both a false analysis of equality in America, and offers a poor comparison of opportunity in America to opportunity in Europe.

After all, a bedrock belief in America held that this is the land of unlimited opportunities where every citizen has an equal chance to succeed and become rich.  That requires an assumption that the system is fair.  How many Americans still believe that?  Last summer, a pair of political scientists, Benjamin Page and Lawrence Jacobs, published a study whose findings included that just 28 percent thought the present distribution of wealth is fair.

The author's evidence has nothing to do with his claim.  Although more than two thirds of Americans may think that Bill Gates does not deserve his billions, that it is "unfair" that he is so wealthy, this in no way informs wether or not each of these displeased Americans had the opportunity to obtain, for example, the schooling necessary to become their own Bill Gates.  Drive, of course, is a pre-requisite to obtaining wealth.  Ex post inequality of outcome does not presuppose ex ante inequality of opportunities.

Also, the article falsely implies that the chance of joining the middle class for poor children in America is lower than in other European nations.

More evidence that the gap between myth and reality is shrinking comes from the American Human Development project, a research group which found that "social mobility is now less fluid in the United States than in other affluent nations...a poor child born in Germany, France, Canada or one of the Nordic countries has a better chance to join the middle class in adulthood than an American child born into similar curcumstances."

 To see why this is a misleading statistic, imagine that half of American children are poor, and half middle class.  Suppose also that assignment into adulthood social class is random, so that a poor child has the same chance as a middle class child of ending up either middle class or poor.  Then, the chance of ending up middle class is 50% for a poor child, just as it is for a child born in the middle class.  Suppose now that 80% of European children are middle class and only 20% are poor.  Then, suppose that class re-assignment is random, so that a poor child has a 80% chance of entering the middle class in adulthood.    We see that under such a random assignment, the chance that a poor child becomes middle class depends completely on the size of the middle class relative to the lower class.

In fact, middle classes may not be comparable.  For example, in Soviet Russia, the probability that a homeless child entered the "middle class" was likely quite large, but the child's living standard, quite low.  All of this implies that expected future income of poor children should be as relevant a measure of lower-class mobility as the probability that those children rise to the ranks of the middle class.  Given this information, we may find that a poor child would quite prefer to take a chance on more in America over less in Germany.