Welcome to Wonkbook, Wonkblog’s morning policy news primer by Puneet Kollipara. To subscribe by e-mail, click here. Send comments, criticism or ideas to Wonkbook at Washpost dot com. To read more by the Wonkblog team, click here.
Wonkbook’s Number of the Day: One. That's the number of states that has still a same-sex marriage ban for which a legal challenge has not yet been filed in court.
Wonkbook’s Chart of the Day: These charts explain why the housing recovery isn't for real yet.
Wonkbook's Top 5 Stories: (1) Piketty's data problem; (2) same-sex marriage tipping point; (3) why the EPA climate rules matter; (4) VA on Memorial Day; and (5) our still-lousy housing recovery.
1. Top story: The FT claims a lauded new book on worsening wealth inequality has serious data errors
Why the FT is wrong and Piketty is right. "This doesn't seem to be a Reinhart and Rogoff situation. Their Excel errors really did change their conclusions. Piketty's don't. Unless, like Giles, you average inequality by population instead of by country — which is debatable, at best, since Piketty is only concerned about inequality within countries. Still, it's another reminder that economics is the least exact science. That's why it's critical for researchers to make their data public, so everyone else can double and triple check it. To his credit, Piketty has done just that. Now he should tell us a little more about his methods." Matt O'Brien in The Washington Post.
U.S. wealth inequality is rising, and other things the FT analysis gets wrong. "Giles states that 'it is not possible to say anything much about the top 10 per cent share between 1870 and 1960, as the data for the US simply does not exist.' However, as Matt Bruenig points out, since Piketty's book came out there's been significant new work by Emmanuel Saez and Gabriel Zucman telling us exactly that. Check out the slides, they are awesome. Well respected work that fills in the makeshift gaps Piketty had to use to make the wealth inequality data for the United States in this period. This is a sign of a good work — subsequent work is bearing out its results." Mike Konczal in the Roosevelt Institute.
Piketty used faulty data in inequality book, Financial Times alleges. "Thomas Piketty, author of a best-selling book on the widening gap between rich and poor, relied on faulty data that skewed his conclusions, the Financial Times reported on its web site. The mistakes undercut Piketty’s argument that wealth inequalities are heading back up to levels last seen before World War I, wrote Chris Giles, the FT’s economics editor....After correcting for these apparent errors, two of the book’s 'central findings — that wealth inequality has begun to rise over the past 30 years and that the U.S. obviously has a more unequal distribution of wealth than Europe — no longer seem to hold,' according to Giles." Rich Miller in Bloomberg.
The full Financial Times investigation. Chris Giles in The Financial Times (paywalled).
The full text of Piketty's response. The Financial Times (paywalled).
Explainer: The types of alleged errors, and what they mean. Neil Irwin in The New York Times.
A Reinhart-Rogoff-like moment for Piketty? "Thomas Piketty’s book, 'Capital in the Twenty-First Century', has been the publishing sensation of the year. Its thesis of rising inequality tapped into the zeitgeist and electrified the post-financial crisis public policy debate. But according to a Financial Times investigation, the rock-star French economist appears to have got his sums wrong. The data underpinning Professor Piketty’s 577-page tome, which has dominated best-seller lists in recent weeks, contain a series of errors that skew his findings. The FT found mistakes and unexplained entries in his spreadsheets, similar to those that last year undermined the work on public debt and growth of Carmen Reinhart and Kenneth Rogoff." Chris Giles in The Financial Times.
Maybe not. The FT's analysis doesn't debunk Piketty's claims, economists say. "Scott Winship, a fellow at the New York-based Manhattan Institute for Policy Research, said the newspaper’s allegations aren’t 'significant for the fundamental question of whether Piketty’s thesis is right or not.' James Hamilton, an economics professor at the University of California, San Diego, said there’s 'abundant evidence' of widening inequality 'from a good many sources besides Piketty.'" Matthew Boesler and Aki Ito in Bloomberg.
@swinshi: I’ve spent time with Piketty U.S. wealth ineq spreadsheet and LOTS of time with his income data. He’s not up to funny business.
This kerfuffle also says nothing about income inequality. "Mr. Piketty is famous for having produced estimates of not just the share of wealth held by the top 1 percent (or top 10 percent), but also for his estimates showing a greater concentration of income among high earners. The F.T. re-analysis is entirely about wealth inequality, and no serious questions have been raised about the veracity of the data on the rising income shares of the top 1 percent." Justin Wolfers in The New York Times.
More charts on the U.S. wealth inequality trend: Atif Mian and Amir Sufi in House of Debt.
One way the kerfuffle does echo Reinhart-Rogoff: The partisan bomb-throwing. "There was an outbreak of gloating across the wires the moment the Financial Times story went live. The book has plenty of critics...and many of which reached gleefully for word that Mr Piketty's work might not be perfect. One suspects that in a public back-and-forth that has often failed to hew particularly closely to the substance of the book, this will become an excuse for many to write the book off, and for others a piece of ammo to fire at ideological opponents. In that way, and in many others, this does look quite a lot like the Reinhart-Rogoff contretemps, to which Mr Giles draws a parallel." The Economist.
Why was Piketty using spreadsheets, anyway? "Mr. Piketty’s work is not complex and multivariate. It’s fairly simple. And for that, a spreadsheet is a reasonable choice. Moreover, because advanced training is not required to examine a spreadsheet, by working in one, and sharing it, Mr. Piketty made it possible for more people to check his work. That’s praiseworthy. If the allegations hold up, Mr. Piketty may have made some errors in his spreadsheet. But the choice of that tool is not to blame for them. Were his work more complex, he’d likely have been better off using a statistical programming language. But it isn’t, and a spreadsheet is just fine." Austin Frakt in The New York Times.
KRUGMAN: Is Piketty all wrong? "The notion of stable wealth concentration in the United States is at odds with many sources of evidence....It’s just not plausible that this increase in the concentration of income from capital doesn’t reflect a more or less comparable increase in the concentration of capital itself....If his attempted reworking of Piketty leads to the conclusion that nothing has happened to wealth inequality, what that really shows is that he’s doing something wrong. None of this absolves Piketty from the need to respond to each of the individual questions. But anyone imagining that the whole notion of rising wealth inequality has been refuted is almost surely going to be disappointed." Paul Krugman in The New York Times.
PILKINGTON: No, this isn't Piketty's Reinhart-Rogoff moment. "Perhaps Piketty has mucked up some of the figures. But his is not the only study dealing with this issue. In that sense, I don’t think that this is a Reinhart and Rogoff moment that discredits the underlying thesis of Piketty’s book. Rather I think that it is just another lesson in data analysis for us all. Lies, lies and damned statistics, as they say." Philip Pilkington in Naked Capitalism.
COWEN: Regarding data on wealth inequality. "The data section of Piketty’s book, which has gathered so much praise, then is not so useful, though by no fault of Piketty’s. We might think it likely that wealth inequality has gone up, but if we are going to do these selective overrides of the best available data, we cannot trust the data so much period or otherwise cite it with authority. We also could not map wealth inequality into particular measures of the r vs. g gap at various periods of time. If there is one big lesson of the FT/Piketty dust-up, it is that we don’t have reliable numbers on wealth inequality." Tyler Cowen in Marginal Revolution.
BRENNAN: Are there problems with Piketty's data? Of course. "One common objection to Giles’s skepticism [Friday] has been that increasing wealth inequality is simply an obvious fact of this world — why do we need the data to back it up? Well, Piketty needs the data to back up the arguments he made with it — he needs wealth inequality not just to appear high or to be rising, but to be returning to 19th-century levels as a matter of economic inevitability. The errors he made may not be devastating to the work he’s done to prove this so far, but even without taking them into account, he hasn’t yet justified his dramatic conclusions." Patrick Brennan in National Review.
CHAIT: The problem with conservative reformers. "The challenge facing the conservative reformers is the yawning gap between their ambition — crafting a Republican platform designed to address real-world problems rather than redeem ideological fantasies — and the stark political reality of the Republican coalition. They are attempting to soothe a suspicious beast. The difficulty of the task merely serves to underscore its urgency. The deeper tension in the project lies between the political demands of the reform project and the demands of intellectual honesty." Jonathan Chait in New York Magazine.
FRIEDMAN: Motivating people to do something about climate change. "The question is how do we motivate people to do something about it at the scale required, when many remain skeptical or preoccupied with the demands of daily life — and when climate scientists themselves caution that it is impossible to attribute any single weather event to climate change....Andrew Sullivan’s Dish blog last week linked to a very novel approach offered by Thomas Wells, a Dutch philosopher: Since climate change and environmental degradation pit the present against the future, our generation versus those unborn, we should start by giving the future a voice in our present politics." Thomas L. Friedman in The New York Times.
HOWARD: What broke Washington. "How likely is it that Congress will deal with unsustainable deficits, climate change, decrepit infrastructure, unaffordable health care, muddled immigration policy, obsolete laws, unmanageable civil service, rigged electoral districts...?...Responsible reform seems hopeless. But hopelessness, it turns out, has its own political arc. Most change comes not incrementally, but in large gulps after long periods of inertia, according to political scientists Frank Baumgartner and Bryan Jones. It may look like nothing will ever change, but the pressures keep building until, all at once, like the 'stick-slip' phenomenon of earthquakes, the ground gives way and a new order evolves." Philip K. Howard in The Washington Post.
GALBRAITH: Policy, not capitalism, behind income divide. "Rising inequality is not necessarily a sign of bad times. The boom creates jobs, reduces poverty and expands wellbeing. But high inequality tends to prefigure a crisis. After a crisis inequality falls – like blood pressure after a heart attack. But that is a bit late. Inequality, like blood pressure, can be controlled. We do not find an unstoppable trend – not even in the past 40 years. Much depends on global forces, bearing against the strength and determination of national policies and institutions." James Galbraith in The Financial Times.
SHILLER: Buying insurance against climate change. "The third National Climate Assessment report...warns us about our hazardous future and offers many good ideas for dealing with it. But a most important point may be lost in the crowd....'Commercially available mechanisms such as insurance can also play a role in providing protection against losses due to climate change.' That sentence should have been in big, bold letters and underlined. That’s because of the substantial risk that efforts to stop global warming will fail. The implications are staggering, and we must encourage private innovation and government support to insure against the devastating financial losses that will result." Robert J. Shiller in The New York Times.
DOUTHAT: Is the tea party finished or not? "The Tea Party is finished: smashed, at last, by the power and dollars of the Republican establishment....No, the Tea Party has won: There simply isn’t that much difference between an establishment Republican and a Tea Party Republican anymore....These are the two narratives that swirled around the G.O.P. after last Tuesday’s primaries, and both contain a measure of truth. But there’s a third way to look at the State of the Tea Party, circa 2014, which is that the movement’s political legacy still has a big To Be Determined sticker on it." Ross Douthat in The New York Times.
Morgan Freeman interlude: Morgan Freeman's voice, altered by helium.
2. The same-sex marriage tipping point
Same-sex marriage supporters racking up courtroom wins. "One after another and in sometimes evocative language, judges appointed by Republican and Democratic presidents are declaring it's too late to turn back on the topic of same-sex marriage. The unbroken string of state and federal court rulings in support of gay and lesbian unions takes in every region of the country, including former states of the Confederacy, and brings to 26 states where same-sex couples can get married or a judge has ruled they ought to be allowed. It also may have pushed gay marriage to a legal tipping point, where the cause has won such wide-ranging approval that it will be hard for the Supreme Court to rule against it." Mark Sherman and Nicholas Riccardi in the Associated Press.
Interactive: The changing landscape on same-sex marriage. Masuma Ahuja, Robert Barnes, Emily Chow and Cristina Rivero in The Washington Post.
States by date of legalization and proportion of conservative residents. The Economist.
Same-sex marriage by the numbers. "Since the Supreme Court ruled last summer that the federal government must recognize same-sex marriages performed in states where they are legal, there has been a race to have state bans declared illegal. Nineteen states and the District allow same-sex marriages, and there are lawsuits in every state — except one, North Dakota — that bars the unions. Challengers have been successful in each case that has been decided, including in conservative states....But supporters of the marriage bans say it’s important to remember that these judges have the first word, not the last." Robert Barnes in The Washington Post.
Speaking of North Dakota... "The nation’s last unchallenged state same-sex marriage ban is about to lose that status. 'There will be a case filed challenging North Dakota’s same-sex marriage ban,' says Joshua Newville, a Minneapolis-based civil rights attorney who filed a suit Thursday against South Dakota’s ban on behalf of same-sex couples there. Newville is in talks with advocates and attorneys in North Dakota and confirmed that either he or another attorney will bring a lawsuit against that state’s ban within six to eight weeks." Niraj Chokshi in The Washington Post.
Explainer: What the judges have said. Niraj Chokshi in The Washington Post.
More evidence of the tipping point: public opinion. "The fight is made even harder for opponents by a new political environment, shaped by rapidly changing public opinion, where outspoken opposition to gay marriage is not seen as advantageous. A Gallup poll this month found that support for gay marriage is at an all-time high, at 55 percent, rising 15 percentage points in just five years....Two years ago, even the official position of President Obama, Hillary Clinton, and many other top Democrats was opposition to gay marriage. As the pressure spreads, Republicans are facing a wave of acceptance and new rights." Peter Sullivan in The Hill.
We could have a definitive legal answer on same-sex marriage within two years. "At this point, it's looking more and more likely that the battle for marriage equality will once again reach the Supreme Court. By Paul Smith's estimate, it's going to take at most two years for the nation's top court to retry the same-sex marriage issue — and this time, they're expected to settle the issue once and for all. Smith is arguably the leading LGBT rights litigator in the country." German Lopez in Vox.
Same-sex families are now Census-legal. "The Census Bureau, which struggles to keep up with the rapid changes in American life, is about to start categorizing same-sex married couples as families. The 2013 American Community Survey results, which will be reported in September, will mark the first time the census integrates an estimated 180,000 same-sex married couples with statistics concerning the nation’s 56 million families. Until now, they had been categorized as unmarried partners, even when couples reported themselves as spouses." Carol Morello in The Washington Post.
Thunderstorm interlude: Lightning strikes One World Trade Center.
3. Why the climate rules will be a big deal, both here and abroad
EPA prepares to unveil carbon rules for power plants. "The Obama administration will next week unveil a cornerstone of its climate-change initiative with a proposed rule...for reducing carbon emissions by existing power plants....The proposal is designed to give states, which will administer the regulations, flexibility...as opposed to placing emissions limits on individual plants....Central to the strategy of flexibility: the option to include a cap-and-trade component where a limit is set on emissions and companies can trade allowances or credits for emissions....Power-plant operators could trade emissions credits or use other offsets in the power sector, such as renewable energy or energy-efficiency programs, to meet the target." Amy Harder in The Wall Street Journal.
One reason the rules matter: They could boost international action. "While today China pollutes more than the United States, Chinese officials insist that, as a developing economy, China should not be forced to take carbon-cutting actions. China has demanded that the United States, as the world’s historically largest polluter, go first. Chinese policy experts say that Mr. Obama’s regulation could end that standoff....As Mr. Obama moves ahead using his existing authority under the Clean Air Act, governments around the world have taken notice — and tried to learn everything they can about the law." Coral Davenport in The New York Times.
Explainer: The rules will be a big deal. So will the ensuing political and legal fights. "Along with other steps the administration has taken, like setting higher fuel standards for cars and trucks, the new regulations could make climate change action one of Obama’s signature achievements....Of course, a lot hinges on what the EPA actually proposes next week — in particular, whether the new regulations are strong enough to make a difference. It also depends on whether the new regulations can withstand the furious political and legal assault that conservatives, parts of the energy industry, and climate change deniers have launched." Jonathan Cohn in The New Republic.
How to sell a complex, controversial climate rule. "Washington's top environment advocate went to the Cleveland Clinic to talk about how...efforts to crack down on power-plant carbon emissions would ease a range of respiratory illnesses....Environmental Protection Agency Administrator Gina McCarthy also framed proposed new rules in terms of social justice, as poor black communities are disproportionately affected by air pollution....Both the message and the method reflect a conscious effort to avoid the problems that two years ago nearly sank Obama's health care reform." Valerie Volcovici in Reuters.
Explainer: What other options are available besides the EPA rule? A carbon tax, for one. Adele C. Morris in The Wall Street Journal.
Other energy/environmental reads:
House directs Pentagon to ignore climate change. Kate Sheppard in The Huffington Post.
In Louisiana, embattled Senate Democrat Landrieu tests power of energy-post clout. Philip Rucker in The Washington Post.
Political rhetoric bogs down the future of the Keystone XL pipeline. Jim Zarroli in NPR.
Hillary Clinton's Keystone XL headache. Andrew Restuccia and Maggie Haberman in Politico.
Baseball interlude: Beer guy catches foul ball in his tub.
4. Veterans' care loomed large on Memorial Day
The newest proposal to improve veterans' care: Access to private care. "More veterans are being allowed to obtain health care at private hospitals and clinics in an effort to improve their treatment following allegations of falsified records and delays in treatment.....Veterans Affairs Secretary Eric Shinseki also said VA facilities are enhancing capacity of their clinics so veterans can get care sooner. In cases where officials cannot expand capacity at VA centers, the Department of Veterans Affairs is 'increasing the care we acquire in the community through non-VA care,' Shinseki said. Lawmakers from both parties have pressed for this policy change." Matthew Daly in the Associated Press.
Long read: Why the crisis in VA hospitals shames our country on Memorial Day. Jake Adelstein in The Daily Beast.
Senate prepares its own VA accountability legislation. "Sen. Bernard Sanders (I-Vt.) said Friday that he is working with the White House on a new Veterans Affairs accountability bill and that he plans to introduce it after Congress returns from its Memorial Day recess on June 2. The proposal...would serve as the companion bill to a House measure that passed this week with strong bipartisan support. Both bills would give the VA secretary greater authority to fire senior executives, but Sanders said his legislation would include additional language ensuring due process protections for officials who face removal or demotions." Josh Hicks in The Washington Post.
One less-explored part of the VA scandal: mental health care. "The problems veterans experience getting Veterans Affairs medical care also exist with VA mental health care, where veterans with post-traumatic stress disorder and even those at high risk of suicide face long waits, according to VA staffers and internal investigations. At some VA medical centers, qualified mental health professionals, nursing staff and bed space are in such short supply that some mental health patients are discharged early." David Wood in The Huffington Post.
Other health care reads:
Analysis: VA scandal response has echoes of Obamacare's rollout. Cathleen Decker in the Los Angeles Times.
Veterans groups, senator trade barbs over VA scandal. Ryan Tracy in The Wall Street Journal.
VA's budget, and rolls, have increased. Damian Paletta in The Wall Street Journal.
Technology interlude: Kids react to old computers.
5. Why the housing recovery still stinks
The new-buyer missing link. "Economists, real-estate agents and many home builders expected first-time and entry-level buyers to begin returning to the market this year....Less buying at the market's lower end by first-time buyers has contributed to limiting sales of existing homes so far this year....It's also a factor in stunting sales of newly built homes....Some economists now predict that tight lending standards, high prices and the sluggish economic recovery will keep first-timers from returning in full force for several years. That likely means a slower pace for the housing recovery, already a drag on the broader economy in the past year." Kris Hudson in The Wall Street Journal.
How last year's mortgage-rate rise has cooled housing growth. "In a research report, Deutsche Bank economists Peter Hooper, Matthew Luzzetti and Torsten Slok quantify how last year’s mortgage rate increase curbed housing growth — and how that compared to past periods in which rates rose. The rise in rates was sharp by historical measures, write the Deutsche Bank economists....Their conclusion: Sharp spikes in mortgage rates tend to produce 'extended periods of weakness in housing' that last several quarters historically....But they also find that most housing indicators have actually fared better in the recent episode relative to the historical experience." Nick Timiraos in The Wall Street Journal.
Charts: 3 charts that explain why the housing recovery still isn't for real. Danielle Kurtzleben in Vox.
New home sales still aren't where they need to be. "Sales of new U.S. single-family homes rose in April and the stock of houses on the market hit a 3-1/2 year high....The rise ended two straight months of declines and beat Wall Street expectations, but sales remained in line with their sluggish first-quarter average....But there are glimmers of hope. Sales of previously owned homes rose in April, with the inventory of houses for sale reaching the highest level in nearly two years....And...rates on fixed 30-year mortgages fell to an average of 4.14 percent this week, a near seven-month low, which should help to improve affordability." Lucia Mutikani in Reuters.
Explainer: Yellen remains worried about housing. What does it mean? Jim Cahn in Forbes.
Other economic/financial reads:
More homebuyers are bringing all-cash offers to the table. Dina ElBoghdady in The Washington Post.
In grist for Fed's debate, researchers say unemployment rate isn't undercounting slack. Ben Leubsdorf in The Wall Street Journal.
Drumming interlude: Will Ferrell and Chad Smith drum-off.
Is Piketty’s "Capital" full of mistakes? Matt O'Brien.
How are Obamacare enrollees using their new coverage? Jason Millman.
The beverage curve: How to get the most buzz for your buck. Christopher Ingraham.
It’s been a really bad week for hummus. Max Ehrenfreund.
We almost fixed the credit card industry. Here’s what’s left to do. Danielle Douglas.
What it’s like for your dad to serve as Treasury Secretary during a crisis. Zachary Goldfarb.
How Obamacare could change three Senate races — for both Democrats and Republicans. Jason Millman.
The dramatic inequality of public-school spending in America. Emily Badger.
Most people have no idea how much debt they’ll need to afford college. Jonnelle Marte.
Tech: D.C.'s biggest loser. Tony Romm in Politico.
Republican Party sues to end fundraising limits on political parties. Brody Mullins in The Wall Street Journal.
Homeland Security may reduce deportations of nonviolent immigrants. Christi Parsons and Brian Bennett in the Los Angeles Times.
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