Baum on Money: Marginal thinking from Fed, false fiscal choices

Posted1/19/2014 7:06 AM

Morning, all. Here are some of the stories I've flagged you should know.

A nuanced discussion of marginal costs and benefits.


The marginal costs weren't deemed sufficient for the Fed to begin tapering its asset purchases at the December meeting, but the declining marginal efficacy of those purchases was. Clear? At the margin, I guess. The minutes from the Dec. 17-18 meeting reveal a lot of talk about talk (forward guidance), words about words. It's enough to make your head spin. Fed policy makers are so focused on how to tell us they're never gonna tighten again that it will be interesting to see how they react when the market starts to challenge its guidance.

Economic growth vs. fiscal discipline is a false choice.

Former Treasury Secretary Robert Rubin (he would probably prefer to forget his affiliation with Citigroup) says U.S. fiscal imbalances create uncertainty, undermine business confidence and stand in the way of economic growth. Paul Krugman is certain to sic the confidence fairy on him. Rubin has some random thoughts on monetary policy as well. Unconventional policy is "sometimes justified" absent alternatives, but the Fed must weigh the costs versus the benefits. Pretty much what the Fed has been saying. Maybe, when it comes to policy, Rubin should stick to his "strong dollar" mantra.

War on poverty rages on.

It's been 50 years since President Lyndon Johnson first waged a war on poverty, with programs focused on education, health care and welfare. The U.S. is still fighting that war, but the federal government is "doing so increasingly through the tax code," according to the Tax Foundation. For example, the employer-provided health care exclusion cost the government $203 billion in 2013. About $445 billion of the $1.1 trillion of total tax expenditures each year goes toward social welfare programs. Surely there has to be a better way to help the needy than using, and abusing, the tax code.

The not-so-insignificant cost of regulation.

The cost of the federal government's 2013 regulations totaled a net $112 billion, according to government data. The new rules added 157.9 million paperwork burden hours. The American Action Forum breaks down the costs and the burden so you don't have to. The biggest contributor to costs was something called Tier 3 Emissions Standards. The biggest paperwork burden came from Affirmative Action Obligations. The AAF looked at financial statements from 30 large companies and found that, in some cases, the cost of compliance was more than 10 percent of market cap.

Please pass the kale.

Both the U.S. and U.K. are in the midst of a kale mania. Yes, that dark green leafy vegetable that's good for you. Full disclosure: I had never purchased kale until last year. I didn't even know what it looked like. A friend kept talking about crispy kale, so I tried it. If "crispy," "salty" and "healthy" seem like strange bedfellows, don't mock it 'til you've tried it. I'm hooked on crispy kale. Recipe provided on request.

• Caroline Baum is a Bloomberg View columnist.

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