Beat the Press is Dean Baker's commentary on economic reporting. Dean Baker is co-director of the Center for Economic and Policy Research (CEPR).
There have been several pieces in the media complaining that the Fed is having a hard time raising interest rates from their current unusually low level. This is true, but the basic story here is quite simple: the economy remains very weak.
The growth rate has averaged just 2.0 percent for the last five years and may well fall below that pace in 2016. That is not an environment in which it makes sense for the Fed to be raising interest rates.
The recent news reports make it sound like the problem is that the Fed can't raise interest rates, as though this is a goal in itself. The real point is that we should want to see a strong economy in which it might be necessary for the Fed to raise interest rates to prevent overheating. The fact that the economy is not stronger means that people are unable to get jobs, or full-time jobs, or jobs that fully utlilize their skills.
It also means that we are foregoing an enormous amount of potential output. We could be devoting resources to the spread of clean energy, educating our kids, or providing better health care. But because there is not enough demand in the economy, resources just sit idle.
This is a real and huge problem. The fact that the Fed can't raise interest rates? Sorry, not in the same ballpark.Add a comment
It undoubtedly was very disappointing for Robert Samuelson, the Washington Post, and the rest of the Very Serious People (VSP) to see President Obama's call for increasing Social Security. For the time being, their plans to attack Social Security and Medicare seem completely dead in the water. After all, President Obama had earlier been a grand bargainer, willing to put both Social Security and Medicare on the table, now he actually wants to increase benefits. And even Donald Trump, the presumptive Republican presidential nominee, says he is opposed to cuts, at least for the moment.
But it is important to remember that in our nation’s capital, no bad idea stays dead for long. For that reason, no one should view Robert Samuelson’s latest column as an admission of defeat. It is a call for resurrection. So let’s get out that stake and see if we can nail this vampire once and for all.
The basic theme is the standard one: it is an effort to divert class warfare into generational warfare. Over the last four decades we have seen the greatest upward redistribution of income in the history of the world. Rather than have the losers blame the gainers, Robert Samuelson wants them to be angry at their parents.
Samuelson’s basic story is that the elderly are actually doing quite well; therefore, we should be looking to take money away from them rather than give them more. His main piece of evidence is a subjective question on well-being which shows the over age 65 age group consistently answers that they are most satisfied with their financial situation.
There are many points that can be made about this sort of subjective assessment. The most obvious is that the sense of satisfaction depends on expectations. People who are in retirement or the last years of their working career have little hope of substantial improvements in their living standard, so it may not be surprising that most would answer they are satisfied with what they have. Younger people can of course hope for, and in fact expect, better times ahead as they advance in their career.
In fact, there is useful information in this survey and it goes in the opposite direction of Samuelson’s complaints. If we look at recent and near retirees, the group between the ages of 50 to 64, we see a sharp decline in their sense of satisfaction over the period since the survey began in 1972. In 2014, the most recent year in the survey, just 25.2 percent of those in this age group expressed satisfaction with their financial situation. This is down from 38.4 percent in 1972 and a peak of 41.4 percent in 1978.Add a comment
That’s right, CEPR Co-Director Dean Baker has been Beating the Press for 10 years now (and that doesn’t include the commentary on economic reporting he did for 10 years before that).
This means 10 years of waking up every morning — even on weekends! — at 4:30AM, combing through The New York Times, The Wall Street Journal, The Washington Post (or as he has been known to say, Fox on 15th street) and other major new outlets. 10 years of dismantling bogus economic theory. 10 years of uncovering the ideological bias behind misrepresentation of data and revealing the spin that promotes narrow interests.
Beat The Press has called out deficit hawks, Social Security slashers, and bubble deniers. Every day for the past 10 years (or close to it anyway) Dean has candidly explained what policies mean for real people.
CEPR receives no dedicated funding for our blogs — all funding must come from general support, which is getting harder and harder to come by. With a 24-hour-news cycle and moneyed interests dominating the political world, it is as important as ever that people are informed about the matters that impact them the most.
Won’t you show BTP some 10th Anniversary love by clicking here and donating today? Robert Samuelson will thank you! Well…maybe not, but all of us at CEPR will.
Thanks for your support,
Dean and your friends at CEPRAdd a comment
The NYT has another piece that talks about China's demographic problem due to an aging population. (In fairness, this is really a sidebar, the piece is mostly arguing that China has failed to get itself on a sustainable growth path.) I went through the arithmetic on this last week.
The basic point is simple: China has had extraordinarily rapid productivity growth over the last three and a half decades. The impact of this growth on raising wages and living standards swamps any conceivable negative effect from a declining ratio of workers to retirees. The math is about as simple as it gets, but I'm still curious how the bad story is supposed to manifest itself.
Keep in mind, the story is supposed to be a labor shortage. What does that mean?
That's a serious question, how does an economy know it's having a labor shortage? Presumably it means that the lowest paying jobs end up going unfilled because people have better options. So what? Many retail stores will go out of business, so will some restaurants, and other low wage employers. Why would we care? Remember, no one is going unemployed. These businesses are going under because they can't find workers willing to work at the wage they are offering. Instead, workers are going to better paying, higher productivity jobs. That's unfortunate for these businesses, but hey, that's capitalism.
There is an issue that much of the support for retirees may go through the government, which means that China would have to increase taxes. There may be a Chinese Grover Norquist who will make any tax increases very difficult politically, but that is a political issue, not an economic one. Workers who have seen their real wages double or triple in the last couple of decades can certainly afford to pay somewhat higher taxes to support their retired parents.
So again, what exactly is the problem?Add a comment
The May jobs report was worse than most analysts (including me) had expected. We are now seeing a lot of columns asking how bad was it? My answer is pretty bad.
First, to get an obvious source of overstated weakness out of the way, we lost 35,000 jobs in the communications sector due to the Verizon strike. Those jobs will come back in the June report. If we add that number in we get 73,000. That’s better, but hardly a great report.
Furthermore, this bad report wasn’t hugely out of the line with the reports from the prior two months, both of which were revised down with the May release. The average for these two months was 154,500. Taken together, the three reports provide solid evidence that the rate of job growth has slowed sharply from the 200,000 plus rate of the prior two years.
We get a similar story if we look at total hours. Since December, the index of average weekly hours has risen at less than a 0.7 percent annual rate. This compares to a 2.0 percent rate over the prior year. (The index has actually been slightly negative if we use January, 2016 as the start point.)
We can also look to other items in the report that are to some extent independent of the establishment jobs numbers. For example, we can look to the employment diffusion indexes, which show the percentage of industries in which employers expect to add workers over a given period. All of these have fallen sharply in recent months.
Neil Irwin has an interesting piece in the Upshot section of the NYT noting factors that people may not consider in deciding between renting and buying their home. One item I would add to the list is the tendency to overstate the value of the mortgage interest tax deduction.
It is common for realtors to push houses on prospective buyers by telling them that their mortgage interest is tax deductible. This is true, but the value of the deduction is only equal to the difference between the household's deductions including mortgage interest and the standard deduction.
Most people will have few deductions other than their mortgage interest deduction. Typically, they may have state income taxes, and that will be pretty much it.
Suppose these taxes come to $5k a year for a couple and their mortgage interest is $10,000 a year. If they are in the 25 percent bracket, they might be inclined to think that they are saving $2,500 a year from their taxes due to the mortgage interest deduction. In fact, since the standard deduction for this couple is $12,600, they are only benefiting to the extent that the mortgage interest deduction puts them above this number. In this case their combined deductions are now $15,000, which is $2,400 above the standard deduction. That will save them $600 a year on their taxes, not $2,500.
Furthermore, as time goes on, interest will be a smaller share of this couple's mortgage payment as the mortgage is gradually paid off. This will reduce the amount that can be deducted against their taxes. This means that the mortgage interest deduction will be of less use to this couple over time.
Many homebuyers are unaware of these facts, these realtors can be misleading. They are worth keeping in mind by potential homebuyers.Add a comment
Roger Cohen tells us it does. In a column drafted in Vietnam, he tells us that the Trans-Pacific Partnership (TPP) is all about shoring up East Asian countries in their resistance to China.
That's an interesting thought. After all, the hardest battles at the end were about getting longer and stronger patent-related protections for the pharmaceutical industry. It's not obvious how that helps us gain solidarity among the people of the region against China.
There is much else in the deal that doesn't obviously help us vis-a-vis China. For example, the Investor State Dispute Settlement mechanism, which institutionalizes the far-right wing legal doctrine of regulatory takings (we have to compensate foreign investors for any law or regulation that reduces their expected profits), doesn't seem like the sort of thing that advances an anti-China coalition.
Nor is it obvious why we would not have had stronger rules of origin requirements. As the TPP is written, China will be able to hugely increase the amount of goods it can export to the United States tariffs free by having them assembled into products in one of the TPP countries. This is not to argue that we should be looking to construct a trade deal to marginalize China, but if that were the point, the TPP would probably not be that deal.Add a comment
That is a headline I would love to see. Of course, Donald Trump would threaten to have them investigated.Add a comment
No, I'm not about to become a charter member of the Robert Samuelson fan club, but he does get the basic story right in his column this morning. The robots are not taking our jobs, or at least not at an especially rapid pace. As Samuelson correctly points out, robots are just a form of productivity growth and productivity growth has been very slow in recent years. This is 180 degrees at odds with the robots taking our jobs story.
In fact, we should want more robots taking our jobs. That would allow more rapid wage growth and/or longer vacations and more leisure, assuming of course that the Federal Reserve Board did not deliberately slow the economy to create more unemployment.
There are a couple of other points worth mentioning on this piece. Samuelson is dismissive of the potential impact of self-driving cars. He tells readers:
"Consider. An opinion survey by Brandon Schoettle and Michael Sivak at the University of Michigan found that only 16 percent of respondents wanted self-driving vehicles; 39 percent preferred “partially self-driving” and 46 percent wanted no “self-driving” features. Safety is one anxiety. Cost may be another. Presumably, car prices would be higher, reflecting the costs of software, sensors and electronics. Will drivers pay the premium, especially when today’s cars last longer than ever? (The average age of today’s vehicles is 11 years, up from five years in 1969, reports the Transportation Department)."
This one completely misses the potential of self-driving cars. If cars are remotely driven, there is no need to own your own car. You can summon a car to meet your specific needs at the time you need it. In other words, if it's just a short trip by yourself, you would presumably summon a small car that uses very little gas (or electricity). If you're going on a longer trip with friends or family, you would summon a bigger car that would allow everyone to be comfortable. Not owning a car could lead to enormous savings, in addition to not needing parking spaces or garage space to house your car.
It's not surprising that people grabbed for a quick survey would not have a clear idea of the potential of this technology. It's unlikely any of us can fully grasp the potential of major innovations. I remember Paul Krugman dismissing the value of the iPad when it first came out. I say this not to trash Krugman, but to point out that even a very insightful economist, who had time to reflect on the topic, had no clue as to use of this new product. Anyhow, put me down as a big optimist on self-driving vehicles.Add a comment
In an article on the decision by Japan's Prime Minister, Shinzo Abe, to delay a long scheduled increase in its sales tax, the NYT told readers:
"Its [Japan's] debt may be large, but it is almost entirely funded by domestic savers, making a crisis like the one in Greece much less likely."
While it is true that most Japanese debt is held domestically, an even more important difference is that Japan's debt is almost entirely in yen. This means that Japan can never be in the situation Greece faced where it was unable to meet payments on its debt. Japan could always print the money to pay the bonds. Greece could not, since it is not allowed to print euros.
There is a risk that printing large amounts of yen would lead to inflation, but that is a very difference situation that the one Greece faces. Also, the idea that Japan will face a risk of excessive inflation at any point in the near future does not seem very plausible.
Add a comment
The Trans-Pacific Partnership (TPP) must be in deep trouble. The NYT has apparently abandoned any pretext of objectivity in covering the trade deal. The second paragraph of a news article on the political obstacles confronting the TPP equated the deal with "the cause of free and open trade." While that may be effective rhetoric for a pro-TPP politician, it has nothing to do with the reality of the deal.
The TPP actually does very little to advance free and open trade, primarily because the trade barriers between the countries in the pact are already low. This is why the International Trade Commission (ITC) found that removal of these barriers would add just over 0.01 percentage point to annual growth over the next 16 years.
In fact, because it increases barriers in the form of longer and stronger patent and copyright protection, the TPP may on net actually increase protectionism among the countries in the pact. (The ITC did not factor in the impact of higher prices for prescription drugs and other protected products in its analysis.)
In addition to these protectionist measures, the TPP may also restrict labor mobility through its clause on industrial secrets. This could require states to enforce non-compete agreements that prevent workers from moving from one company to another or starting their own business.
The TPP also effectively brings in through the backdoor, the far right-wing legal doctrine of regulatory takings. Under the rules in the TPP, foreign investors would have to be compensated for any regulatory action that reduced their profits. This is a major issue for many opponents of the deal.
However, the NYT article ignores the long set of issues around the TPP. It completely equates the TPP with the cause of free trade, using the term "pro-trade" at five different points in the article to describe supporters of the TPP.
The piece also refers to the alleged loss of $300 million in export markets due to a trade deal between Japan and Australia. (It implies this market would be regained with the TPP.) According to the National Cattlemen's Beef Association, this is equal to a bit less than 0.4 percent of current production in the United States.Add a comment
All NYT readers know that protectionism is stupid and self-defeating. It hurts everyone involved. So where were all the economic experts to give the usual lines on protectionism in response to efforts to change the Digital Millennium Copyright Act?
The NYT reported on these efforts without ever once mentioning the economic costs that would be implied by making listeners pay more money for music and the cost that intermediaries like YouTube would have to incur to comply with stronger copyright protection. The failure to mention these costs is remarkable given how space the NYT and other media outlets have devoted to denouncing proposals from Donald Trump to impose higher tariffs and plans by Bernie Sanders to chart a different course for trade policy.
Economics works the same regardless of whether the item in question is a car, a ton of steel, or a song. Imposing barriers that raise the price imposes costs on consumers and the economy. The biggest difference is that in proportionate terms the barriers involved with copyright protection are likely to be far larger than any trade barriers that Trump or anyone else might impose on imported manufactured goods. While the latter are unlikely to exceed 50 percent of the sale price, and would almost certainly be far less, copyright protection can make music that would otherwise be available for free very costly.
To get an idea of how costly such protections can be, New Zealand's government estimated that increasing the length of copyright protection from 50 to 75 years, as required by the Trans-Pacific Partnership, would cost it 0.24 percent of annual GDP, the equivalent of $4.3 billion in the U.S. economy in 2016. It would have been helpful to include some estimates of the costs associated with the stronger protections being discussed in this piece.
It is also worth noting that only a very small portion of the costs associated with this protection is likely to end up in the pockets of the performers. Much of it is simply deadweight loss — the lost benefit that consumers would have had from being able to listen to music at its marginal cost which they will forego now that it is selling at its higher protected price. A large portion will go to costs associated with enforcement, including new locks that would be put in place. And, much would go to intermediaries in the process, including the lawyers and lobbyists working on changing the law.
It is likely that performers will get less than ten cents for every dollar of lost benefits to consumers and their take may well end up being less than one cent per dollar. Unfortunately, the NYT never mentioned these losses at all, ignoring the well-known benefits of free trade.
Yes, musicians and singers need to be paid for their work, but there are more modern and efficient mechanisms for this task.Add a comment
The pressure for a Fed rate hike is building as consumer spending in April came in somewhat higher than expected. Other data remain mixed, with investment notably weak.
The Washington Post ran an article that seemed to support the rate hike agenda. It told readers that the Fed's key measure of inflation, the core personal consumption expenditure deflator, had ticked up in recent months. This is not true.
If we take the measure as being the year over year change, this was just 1.6 percent from April of 2015 to April of 2016. It was 1.7 percent for both January and February.
Add a comment
Before the West Virginia primary, former Secretary of States Hillary Clinton made a comment about how environmental regulations would lead to a loss of jobs in coal mining. The comment was in the context of a commitment to retraining miners and providing aid to hard-hit communities, but her critics have seized on it to say that she wants to get rid of coal mining jobs.
Emma Roller picked up on this theme in a NYT column on how the presidential election will affect candidates lower down on the ticket. Roller quotes Andrea Bozek, the communications director for the National Republican Senatorial Committee:
"'Her [Clinton's] comments on coal are going to really hurt Katie McGinty in Pennsylvania and Ted Strickland in Ohio,' she said. 'That’s a huge issue for voters in those states, and I think you’re going to see a lot of TV ads this summer and fall tying Hillary Clinton’s comments — not only on coal, but on her national security record, economic record — to these candidates as well.'"
According to the Bureau of Labor Statistics, Ohio has a labor force of just under 5.6 million. It has 11,600 jobs in the category logging and mining. This means that just over 0.2 percent of Ohio's workforce would be employed in coal mining if all of the jobs in this category were coal mining. Since the state probably has some jobs in logging and in other types of mining, coal mining would have to be a smaller share of the total workforce.
Pennsylvania has 6,000 people employed in coal mining with a total workforce of 5.9 million. This means that the coal industry accounts for just over 0.1 percent of total employment in Pennsylvania.
It seems questionable that comments relating to an industry that employees between 0.1–0.2 percent of a state's workforce are likely to have much impact on the outcome of an election.Add a comment
Robert Samuelson says it does, using his column, "Good News for the Middle Class," to highlight the findings of the Fed's Report on the Economic Well-Being of U.S. Households in 2015. For Samuelson, the big news is that 69 percent of households said they were “living comfortably” or “doing okay,” up from 62 percent in 2013.
Okay, that one is clearly going in the right direction, although this is not terribly surprising given that we are two years further along in a recovery, which now has a respectable rate of job growth. But this aside, it is hard to view much of the other information in the report as being very positive.
For example, the report finds that:
"Twenty-two percent of employed adults indicate that they are either working multiple jobs, doing informal work for pay in addition to their main job, or both."
"Thirty-one percent of non-retired respondents report that they have no retirement savings or pension at all, including 27 percent of non-retired respondents age 60 or older."
"Forty-six percent of adults say they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money."
None of these findings look like good news to me. Samuelson does note the last one on the ability to cover emergency expenses, but strangely tells readers:
"...almost 30 percent of respondents said they’d have trouble covering an unanticipated expense of $400."
The 46 percent figure is in the executive summary.
Some other items that folks may find interesting:
"Just 16 percent of young adults (ages 25 to 34) whose parents both have only a high-school degree or less completed a bachelor’s degree, whereas 65 percent of young adults with a parent who completed a bachelor’s degree have completed one themselves."
This is certainly not a very good story on mobility.
And finally one about the future:
"Twenty-three percent of respondents expect their income to be higher in the year after the survey, down from 29 percent who expected income growth in the year after the 2014 survey."
That one doesn't look great. People's ability to see the economy's future tends not to be very good (probably because they mostly get information from reading what economists say), but this certainly does not suggest optimism about their economic prospects. On net, I don't know if the picture here is good news, but I suppose we can say that it could be worse.Add a comment
It is amazing how often we hear that China is experiencing some sort of crisis because of its aging population. This is supposed to lead to a situation in which it won't have enough workers to support an aging population.
If folks have been following events in China recently its big problem is too few jobs and unemployment. It has closed a number of coal mines in recent years, leading to the loss of tens or even hundreds of thousands of jobs in the coal mining industry. Currently, it is hugely subsidizing its steel exports to keep its steel factories running. Without these subsidies, hundreds of thousands of workers could lose their jobs. There are comparable stories in many other industries.
So China's big problem for the foreseeable future is going to be too many workers, that is 180 degrees at odds with the too few workers story that the demographic crisis people keep pitching, as in this Reuters article that appeared in the NYT today. This piece includes the ominous warning:
"For the first time in decades China's working age population fell in 2012 and the world's most populous nation could be the first country in the world to get old before it gets rich."
Actually, China is pretty close to getting rich. If the I.M.F.'s projections prove correct, then it will be as wealthy as countries like Portugal and Greece by the end of the next decade. (This assumes that the per capita growth rate over the rest of the decade is the same as is projected from 2019–2021.) In an international context, that would count as "rich," and in any case many countries with lower per capita incomes already have high ratios of retirees to workers. Given its extraordinarily rapid growth over the last three and half decades China is far better positioned to care for its population of retirees than almost any other country in the developing world.
Addendum: Numbers for Arithmetic Fans
In response to requests from Twitterland, I will show the simple arithmetic of why China need not be worried about its declining ratio of workers to retirees. This is highly stylized, but it should make the basic point.Add a comment
The NYT had an interesting column on how we can reduce the length of the security lines at airports. (Start with your shoes.) However, the piece left out one obvious factor lengthening security lines: carry on baggage.
Security lines would move much quicker if more people checked their luggage rather than carry it on board. Of course, there is a good reason that people want to carry their bags on board, most airlines charge them $25 per checked bag. (Southwest is a notable exception, allowing two free checked bags per passenger.) So we have airlines carrying through a policy that is making everyone's life miserable to squeeze a few extra dollars out of their passengers.
We can counter the airlines bad behavior. Suppose that TSA charged a $10 fee for each bag that goes through security. That would give people more incentive to check their bags, thereby reducing the length of the security lines. If that is too radical, we can change an absurdity in current law under which airline tickets are subject to a 7.5 percent tax used to fund airport operations, but fees like those for checking bags are not. If there is a planet where this makes sense, I haven't seen it.
Anyhow, trying to get more people to check their bags is a really simple way to reduce the length of the security lines. Southwest is a highly profitable airline, maybe they could provide some management training to their competitors.
Irrelevant sidebar — here's the reference for my title.Add a comment
Yes, what else is new? The basic story is that Robert Samuelson has discovered a wage series that shows, "many workers are actually receiving modest increases." Samuelson tells readers:
"...the study [the one showing modest wage growth] exerts pressure on the Fed to raise interest rates."
The series that has Samuelson so excited is a wage series that tracks the same workers over time. It looks at full-time workers and compares their wages this year with their wages last year. It will exclude anyone who was not employed full-time in both periods and it also will miss anyone who moves, since it is a household survey.
My friend Jared Bernstein has already given a good argument as to why the Fed should not jump on this new series as an excuse to raise interest rates. Let me add three additional points.
First, the gap between this series and the other wage series can be explained by an increased premium for longer tenured workers. More than 4 million workers leave their jobs every month. This series is picking up only the people who stay in their full-time job or leave their job and find a new full-time job, but do not move. That exlcudes a very large segment of the labor force. Suppose this group is getting an increased wage premium. Why is this a rationale for the Fed to raise to interest rates? In this respect, it is worth noting that the wage gains shown by this measure are still almost a full percentage point below the pre-recession pace.Add a comment
That's the question millions are asking, or at least the one they should be asking. The OECD recently did an analysis of the economic consequences for the U.K. if it decides to leave the European Union. It concluded that it would cost the country 5.1 percent of GDP in its central estimate. Other analyses have arrived at similar estimates. Such estimates have been cited by right-thinking people everywhere as a powerful argument against the U.K. leaving the European Union. (It is.)
But Brexit is not the only policy that can cost the U.K. large amounts of output. Since the Cameron government came to power in 2010 it has placed a priority on reducing the budget deficit rather than restoring the economy to full employment. As a result, the U.K. economy is still well below its potential level of output. (The potential has undoubtedly fallen as a result due to weak public and private investment since the downturn and workers experiencing prolonged stretches of unemployment and thereby losing skills.)
To get a simple estimate of the output lost due to Cameron's austerity policies, we can compare the I.M.F.'s projected growth path for the U.K. from 2008, before the severity of the recession was recognized and its current level of output. In 2008, the I.M.F. projected that the U.K. economy would be 26.2 percent larger in 2016 than it was in 2007. (Since the projection only runs to 2013 I have assumed that the growth rate for 2012 to 2013 [2.7 percent] continues for the next three years.) The most recent projection shows that 2016 GDP will be just 9.4 percent higher than the 2007 level.
If we can credit the I.M.F. research staff for knowing what they were doing in their 2008 projections, then the U.K.'s austerity policies have cost it an amount of output equal to 16.8 percentage points of 2007 GDP or more than three times the estimated cost of Brexit. This means that if Brexit is an economic disaster then Cameron's austerity has been three times as costly as an economic disaster.
For the curious ones out there, the I.M.F's projections showed the U.S. economy being 26.4 percent larger in 2016 than in 2007. The most recent projection shows the economy being 12.6 larger. The implied loss of 13.8 percentage points of 2007 is a bit less than the three times Brexit measure.Add a comment
The Washington Post has an article telling readers that a former McDonald's CEO is warning that a $15 minimum wage will lead to widespread use of robots at fast food restaurants. The piece goes on to warn about the danger that robots pose to jobs more generally:
"Robotics and artificial intelligence are hot areas in the technology sector, and the World Economic Forum estimated earlier this year that their rise would cause a net loss of 5.1 million jobs over the next five years.
"Some experts are so concerned about looming unemployment that they are calling for a basic income, a regular stipend to be paid to citizens who are likely to lose their jobs and cannot be retrained."
When robots replace workers it is known as "productivity growth." Productivity growth has actually been incredibly slow in the last decade and has even been negative the last two years.
It is not clear who the "some experts" are (names please), but actual experts know that the economy's problem is too little productivity growth, not too much. Productivity growth allows for higher living standards. With more rapid productivity growth we can either have more goods or services or work fewer hours to have the same amount of goods and services.
Of course this depends on their being enough demand in the economy. Lack of demand can lead to unemployment. It is not hard to create demand. For example, we could have the government spend money. That is not hard in principle, but deficit cultists, like the Washington Post editorial board and much of the leadership in Congress (in both parties) start yelling and screaming about budget deficits.
We could try to get the trade deficit down, for example by lowering the value of the dollar against other currencies, which makes our goods and services more competitive. People in policy positions generally don't like to discuss this policy, which would hurt manufacturers like GE which have relocated much of their production overseas and major retailers like Walmart, which has profited by establishing low-cost supply chains.
We can also take steps to reduce average work time, for example by promoting work-sharing as an alternative to layoffs. We can also push for paid family leave, sick days, and vacations, like they have in other wealthy countries.
And, we could discourage the Fed from raising interest rates to choke off demand. Higher interest rates are a policy explicitly designed to keep people from getting jobs.
In short, there are many ways to ensure that the economy has enough demand to employ workers, but the Washington Post would rather yell about robots.Add a comment