[dwar0123]

No matter what I say as regards to whether or not Edison did any innovative research, you will nitpick about irrelevant details that have no bearing on the topic.

It doesn't matter that Edison wasn't personally commercially successful, his research led to commercial success.

I have no idea how research was funded at English Universities back in the day, but when I think of government funded research, I think of the government funding someone for a specific result, not funding someone for whatever they happen to want to work on.

We seem to have a different idea on what the word innovation means.
http://en.wikipedia....wiki/Innovation

[mike777]

So many want to cut the budget but 200/B in 2013 is too much.
So many want to increase revenue but 500B in 2013 is too much.

deficit for 2013 is around 900-1000B

Just what is the right amount in 2013?
----------

----Krugman in the past has said we didn't have a short-term deficit crisis and we should focus on creating more near-term demand via larger stimulus packages. But he has said we have a long-term deficit problem that needs to be addressed. However, his column today is straight out of Modern Monetary Theory, which calls for as much deficit spending as necessary, for as long as necessary, to provide for strong economic growth. Followers of Modern Monetary Theory believe that since the U.S. federal government can print money and can never go bankrupt, that fiscal policy should be focused only on economic growth and inflation and not on the status of the debt. It remains unclear if Professor Krugman has now partially adopted their viewpoint or fully adopted their viewpoint. Either way, Krugman has called for a fundamental re-thinking of the direction of the fiscal cliff talks and fiscal policy.

http://seekingalpha....-deficit-crisis

----


What has changed? For one thing, the crisis they predicted keeps not happening. Far from fleeing U.S. debt, investors have continued to pile in, driving interest rates to historical lows. Beyond that, suddenly the clear and present danger to the American economy isn’t that we’ll fail to reduce the deficit enough; it is, instead, that we’ll reduce the deficit too much. For that’s what the “fiscal cliff” — better described as the austerity bomb — is all about: the tax hikes and spending cuts scheduled to kick in at the end of this year are precisely not what we want to see happen in a still-depressed economy

http://www.nytimes.c...toms.html?_r=1

[mike777]

Another viewpoint from Eugene Fama:

Litterman: What impact will the big expansion
in the Federal Reserve’s balance sheet have on the
markets?

Fama: It has basically rendered the Fed powerless
to control inflation. In 2008, when Lehman
Brothers collapsed, the Fed wanted to get the markets
moving and made massive purchases of securities.
The corollary to that activity, however, is
that reserves issued by the Fed and held by banks
exploded. An explosion in reserves causes an
explosion in the price level unless interest is paid
on the reserves. So, the Fed started to pay interest
on its reserves, which means that the central bank
issued bonds to buy bonds. I think it’s a largely
neutral activity.
Before 2008, controlling inflation was a matter
of controlling the monetary base (currency plus
reserves). But when the central bank pays interest
on its reserves, it is the currency supply that determines
inflation. But banks can exchange currency
for reserves on demand, which means the Fed cannot
control the currency supply and inflation, or
the price level, is out of its control. The Fed had the
power to control inflation, but I don’t think it does
under the current scenario.


Litterman: How does that relate to the debt
issues that the United States is facing?


Fama: The debt issues are entirely different.
The debt issues are about how much we want to
sacrifice the future for the present and whether we
get anything in the present for the future we’re sacrificing.
This has been the big debate between the
Keynesians and the non-Keynesians since 2008.


Litterman: But isn’t one way out of our debt
problem to inflate it away?


Fama: Yes, that’s one way to handle it, but it’s
far from a great solution. If the Fed were to stop
paying interest on its reserves, we’d probably
have a big inflation problem. The monetary base
was about $150 billion before the Fed stepped in
in 2008. Currency plus required reserves are still
in that neighborhood, but the Fed is holding $2.5
trillion—trillion!—worth of debt financed almost
entirely by excess reserves. The price level could
expand by the ratio of those two numbers, and that
translates into hyperinflation. Economies typically
do not function well in hyperinflation. The real
value of the government debt might disappear, but
the economy is likely to disappear with it.


Litterman: What would your suggestion be for
monetary or fiscal policy at this point?


Fama: Simple. Balance the budget. I heard a
very prominent person say in private that we could
balance the budget by going back to the level of
government expenditures in 2007. The economy
is currently about the size it was then. If you just
rolled expenditures back to that point, I think it
would come close to balancing the budget.

http://www.cfapubs.o...69/faj.v68.n6.1

[ArtK78]

As long as I have been able to understand the meaning of the U.S. Public Debt, the number has been astronomical. In the 1960s the amount of the Public Debt dwarfed any other number which had any meaning. And yet, looking back on those numbers, they seem insignificant to the current amount of the Public Debt.

So, what has been the consequence of the massive amount of the U.S. Public Debt over the last 50 years? Virtually nothing.

I completely ignore the amount of the debt. If anyone were to ask me about the massive amount of debt that we are putting on the shoulders of our children and grandchildren, my response would be that I am sure they will muddle through somehow.

[mike777]

Interesting that given the current economic climate the discussion comes down to:

1) greater deficit spending will lead to riots in the streets and a collapse of inv and savings or hyper inflation.
2) greater deficit spending will lead to a thriving economy.
3) neutral, virtually nothing.

[blackshoe]

Nobody really knows what will happen, including economists. Economics is all smoke and mirrors.

[mike777]

The fiscal cliff means a cut in spending of roughly 3-4% in 2013. A drop in the 2013 deficit from 1000B to 300B.
The result per the CBO and many others are catastrophic economic consquences.

How in the world did our economy become so fragile?

Hormesis is when a small dose of a harmful substance is actually beneficial, acting as medicine. It triggers some overreaction. "harm is dose dependent"

-----

Corporate profits are highest-ever share of GDP, while wages are lowest-ever


see this graph please:
http://www.dailykos....are-lowest-ever

[hrothgar]

mike777, on 2012-December-05, 12:17, said:

The fiscal cliff means a cut in spending of roughly 3-4% in 2013. A drop in the 2013 deficit from 1000B to 300B.
The result per the CBO and many others are catastrophic economic consquences.

How in the world did our economy become so fragile?

The fiscal cliff was deliberate designed to be harmful.
What you are flagging is a feature, not a bug.

As a practical example, the sequestration is mandated as flat, across the board spending cuts.
The government doesn't have the discretionary authority to kill project X while keeping project Y untouched.
Instead, it needs to cut all projects evenly, leading to a radically suboptimal allocation of resources.

With this said and done, I also think that the fiscal cliff is being portrayed as worse than it is.
I'm not quite a "cliff diver", but I don't think that going over the cliff is the worse possible outcome.

[phil_20686]

mike777, on 2012-December-05, 12:17, said:

The fiscal cliff means a cut in spending of roughly 3-4% in 2013. A drop in the 2013 deficit from 1000B to 300B.
The result per the CBO and many others are catastrophic economic consquences.



Corporate profits are highest-ever share of GDP, while wages are lowest-ever

When the economy has slack multipliers are large, so deficits are good. Obviously, monetary policy would be better, but still.


These measures of corporate profits are basically useless. For example, if a company expands abroad successfully, its profits rise, but american GDP does not (much) so instantly corporate profits become a larger share of GDP without any effect on the american economy whatsoever. Secondly, when you look at corporate profits vs GDP, then when GDP in the host countries tanks, but most of the earnings of companies come from abroad, obviously it makes the share greater, even while corporate profits decline in an absolute sense.

What would actually be an interesting graph would be corporate profits from US operations only. Of course, such a thing is difficult to achieve, due to the myriad complications of tax systems, but still, it would be better.

[mike777]

phil_20686, on 2012-December-05, 13:38, said:

When the economy has slack multipliers are large, so deficits are good. Obviously, monetary policy would be better, but still.


These measures of corporate profits are basically useless. For example, if a company expands abroad successfully, its profits rise, but american GDP does not (much) so instantly corporate profits become a larger share of GDP without any effect on the american economy whatsoever. Secondly, when you look at corporate profits vs GDP, then when GDP in the host countries tanks, but most of the earnings of companies come from abroad, obviously it makes the share greater, even while corporate profits decline in an absolute sense.

What would actually be an interesting graph would be corporate profits from US operations only. Of course, such a thing is difficult to achieve, due to the myriad complications of tax systems, but still, it would be better.

that is why I posted the graph, long term graph where this % runs around 4-6.5% long term. 11% or so is really an outlier.
also why I posted Hormesis and why so many comments pointed out how fragile, very fragile the economy seems to be, which really was my main point in the whole post.

[Bbradley62]

Kent Conrad, Jeff Sessions, Paul Ryan and Chris Van Hollen (chairs and ranking members of the Senate and House Budget Committees) should be locked in a room, with no media access to them, until they can come up with a proposal on which at least 3 of the 4 of them agree. (There are committees for a reason; get "the leadership" out of the process, since it's their role to be partisan, not cooperative.) Both chambers should then be required to vote on that proposal, without amendments. Then, see where we stand...

[mike777]

Bbradley62, on 2012-December-05, 17:27, said:

Kent Conrad, Jeff Sessions, Paul Ryan and Chris Van Hollen (chairs and ranking members of the Senate and House Budget Committees) should be locked in a room, with no media access to them, until they can come up with a proposal on which at least 3 of the 4 of them agree. (There are committees for a reason; get "the leadership" out of the process, since it's their role to be partisan, not cooperative.) Both chambers should then be required to vote on that proposal, without amendments. Then, see where we stand...

Disagree I prefer this method:

We only have a few weeks left so rather than give it to people with too much time on their hands, find the busiest guy/gal and hand the problem off to them.

[kenberg]

Bbradley62, on 2012-December-05, 17:27, said:

Kent Conrad, Jeff Sessions, Paul Ryan and Chris Van Hollen (chairs and ranking members of the Senate and House Budget Committees) should be locked in a room, with no media access to them, until they can come up with a proposal on which at least 3 of the 4 of them agree. (There are committees for a reason; get "the leadership" out of the process, since it's their role to be partisan, not cooperative.) Both chambers should then be required to vote on that proposal, without amendments. Then, see where we stand...

This has appeal to me. I'm not completely sure we should let them out afterward.

[mike777]

kenberg, on 2012-December-05, 21:06, said:

This has appeal to me. I'm not completely sure we should let them out afterward.

Ken I was not a math major but I just wonder if Jensen's inequality somehow applies in a helpful way to this whole issue.

I know it is very important in Information Theory.

[kenberg]

mike777, on 2012-December-05, 22:20, said:

Ken I was not a math major but I just wonder if Jensen's inequality somehow applies in a helpful way to this whole issue.

I know it is very important in Information Theory.

I am not sure I should try to answer this before breakfast but, well, Becky does the cooking so here goes:

It's tacky, I suppose, to re-formulate your question but try this: Does convexity play a role? Almost surely the answer is yes, in any economic analysis of much of anything, I would expect that you would only have to go a few pages before convexity gets into the act. And then Jensen's inequality cannot be far off stage. Of course it may not be explicit.

An example? No, I don't have one. But I bet an economist would not have to search for long.

For the curious: Suppose you have a string of numbers, say 1,2,4,7. You might average these numbers to get 7/2 and then square to get 49/4. Or you might square the original numbers and get 1,4,16,49. If you average these squares you get 70/4. Notice that 49/4 is less than 70/4. Jensen's inequality guarantees in advance that the first procedure will give a smaller value than the second procedure, based on the fact that squaring numbers is an example of a convex function. There are lots of important convex functions, and estimating comparative sizes is often important. So yeah, Jensen gets his due.

[PassedOut]

Obama is negotiating from strength now on the fiscal cliff, and he won't make any concessions to get the debt limit raised either. All good.

But I'm interested in the eventual outcome, and I found it interesting to review some of the main aspects of the centrist Simpson-Bowles plan:

Quote

Simpson-Bowles ends the the Bush tax cuts for income over $250,000. And note that they do that before they reform the tax code. The expiration of the tax cuts is built into their baseline. That way, their reform of the tax code starts from a revenue level that includes the revenue from those upper-income Bush tax cuts.

There are a lot of tax increases in Simpson-Bowles. $2.6 trillion over 10 years, to be exact. That’s more than President Obama ever proposed. It’s way more than the Republicans have ever proposed.

...

The key difference between Simpson-Bowles-style tax reform and the tax reform plans we heard about through the election is that S-B eliminates the preferential rate on capital gains and dividend income. That amounts to a huge tax increase on the rich, and it’s how S-B manages to lower rates while raising revenue and retaining progressivity.

...

Congress has already passed 70 percent of the discretionary cuts. Under the Budget Control Act, discretionary spending will be $1.5 trillion lower from 2013 to 2022 than was projected in the Congressional Budget Office’s 2010 baseliner. That means that 70 percent of S-B’s cuts to discretionary spending are done.

Simpson-Bowles cuts security spending by $1.4 trillion, not including drawing down the wars. That’s far deeper than what’s in the law now, far deeper than anything the White House or the Republicans have proposed, and deeper, I believe, than the sequester cuts that so many think would devastate the military.

I'd like to see the plan implemented pretty much in full, although I understand there is resistance from both sides. The discretionary cuts are already mostly done, but it will be hard to get the votes to slash the bloated military budget. We'll see.

It looks like the baseline tax rates will match the Simpson-Bowles starting point (unless the house republicans fall on their swords), and perhaps the political climate next year will be right for some of the other tax reforms in the plan also. Knock on wood...

[hrothgar]

kenberg, on 2012-December-06, 06:02, said:

An example? No, I don't have one. But I bet an economist would not have to search for long.

Convex combinations show up in portfolio theory starting on day one...

[blackshoe]

The military budget may be "bloated", but it's because we're sending our young men out to die in the mud and sand for no particular benefit to the country. If we stop doing that — and we should — the military budget, along with the size of the military (the Army in particular) can be reduced fairly easily — at least if we can ignore the lobbyists of the military-industrial complex.

[PassedOut]

blackshoe, on 2012-December-07, 13:44, said:

The military budget may be "bloated", but it's because we're sending our young men out to die in the mud and sand for no particular benefit to the country. If we stop doing that — and we should — the military budget, along with the size of the military (the Army in particular) can be reduced fairly easily — at least if we can ignore the lobbyists of the military-industrial complex.

Yes, the tough parts will be ignoring the lobbyists and dealing with the representatives of districts that will be affected.

[y66]

Posted by Ezra Klein on December 7, 2012 at 4:25 pm

Quote

Talk to smart folks in Washington, and here’s what they think will happen: The final tax deal will raise rates a bit, giving Democrats a win, but not all the way back to 39.6 percent, giving Republicans a win. That won’t raise enough revenue on its own, so it will be combined with some policy to cap tax deductions, perhaps at $25,000 or $50,000, with a substantial phase-in and an exemption for charitable contributions.

The harder question is what Republicans will get on the spending side of the deal. But even that’s not such a mystery. There will be a variety of nips and tucks to Medicare, including more cost-sharing and decreases in provider payments, and the headline Democratic concession is likely to be that the Medicare eligibility age rises from 65 to 67.

That’s not a policy I like much, but New York magazine’s Jonathan Chait accurately conveys the White House thinking here: They see it as having “weirdly disproportionate symbolic power,” as it’s not a huge (or smart) cut to Medicare benefits, and most of the pain will be blunted by the Affordable Care Act. But Republicans and self-styled deficit hawks see it as a big win. And Democratic House Minority Leader Nancy Pelosi, who staunchly opposes raising the retirement age, has stopped well short of ruling it out.