Tuesday, January 6, 2015

Influencing the fair-value debate

Two well-written pieces on fair-value accounting (FVA) appeared this week, and both were directly influenced by the work that Jason Delisle and I have been doing on the issue.

First, Matt Yglesias of Vox writes about "the obscure rule that could make student loans more expensive." He cites the National Affairs article written by Jason D. and myself, and he also links to our Politico piece to point out Elizabeth Warren's hypocrisy on FVA.

Yglesias describes the FVA debate accurately, but his setup is better than his conclusion. Echoing our major challenge to FVA opponents, Yglesias wonders why, if government loans are so profitable, we don't simply buy up most private-sector loans to book even higher profits. Unfortunately, he never really answers the question. He falls back on the government-is-special argument, which the CBO has refuted numerous times.

Second, Michael Grunwald has an excellent feature article in Politico about federal loans. Most interesting was this passage:
Still, it’s worth noting that the head of Obama’s Council of Economic Advisers, Jason Furman, once wrote an influential paper for the liberal Center on Budget and Policy Priorities [CBPP] that used fair-value accounting to attack Social Security privatization; the center has disavowed the politically inconvenient section of the paper, and Furman now says his budget analysis was wrong.
It's not mentioned by Grunwald, but this whole recantation was compelled by Jason D. and myself after we noted the CBPP's inconsistency in our National Affairs article.

Both the Yglesias and Grunwald articles are thoughtful contributions, and it's good to see that my work on FVA is having some impact on the discussion.