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).

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Hey, who can blame them? It's an obscure government program with 60 million beneficiaries, with benefits that are so small that they don't matter to anyone who is anyone.

I'm actually not joking here. The WSJ ran an article telling readers that the average baby boomer between the ages of 55-64 faces a gap of $36,371 between the $45,000 a year they expect to need as income in retirement and the $9,129 they can expect to get based on the savings they have accumulated. The incredible part of the story is that the piece never once mentions Social Security, nor does the Blackrock study on which the article is based.

While Social Security benefits will not fill this gap, they will be by far the largest part of the retirement income of most middle income retirees. The average worker's retirement benefit is roughly $16,000 a year. If this is a couple, then the spouse can count a benefit of at least $8,000 unless his work history entitled him to a larger benefit. Together with the savings accumulations estimated by Blackrock, this is still likely to leave most middle income couples well below the $45,000 comfort level that the study found, but they are far closer than the discussion in the WSJ article implied.

 

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The NYT had a largely negative assessment of Abenomics, implying that it had done little to improve the state of Japan's economy in the last two and a half years. The piece never mentions the surge in employment in Japan over this period. The overall employment rate for workers age 16-64 rose by 2.4 percentage points since the fourth quarter of 2012. This compares to a rise of 1.2 percentage points in the United States in a period in which the pace of job growth has been widely touted. If the United States had the same growth in employment rates as Japan under Abenomics, it would translate into another 2.4 million jobs.

Employment growth among women has been especially impressive, rising by 3.6 percentage points over this period. The employment rate for women is now a full percentage point higher than in the United States.

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I realize that this may come as a shock to the reporters and editors at the NYT, but companies are sometimes not truthful. That is why when G.E. announced that it was closing a factory in Wisconsin because it no longer had access to subsidized loans through the Export-Import Bank, the article should have said something to the effect of "G.E. claims to be closing factory because of lack of access to Export-Import Bank loans." A serious newspaper would not take the assertion at face value and headline the article, "Ex-Im Bank Dispute Threatens G.E. Factory that Obama Praised."

The New York Times has many outstanding reporters, but they don't have any easy way of knowing if, for example, G.E. had plans to close this factory regardless of the fate of the Export-Import Bank. In that case, blaming the bank for the closure would be a convenient way to try to pressure Congress to renew funding.

If we try to guess the size of the subsidy that G.E. gets from the bank, if we assume that it might be $3 billion in loans or guarantees this year, with an average subsidy of 1.0 percentage point compared to the market interest rate, this comes to $30 million. By comparison, G.E. CEO Jeffrey Immelt received $37.2 million in compensation last year.

This would suggest that the subsidies that G.E. receives from the Ex-Im Bank are relatively small compared to the compensation of Mr. Immelt and other top executives. Cuts to their pay would be another possible route for keeping the Wisconsin plant operating.

 

Addendum:

It is worth noting that G.E.'s allegation is that the loss of a government subsidy is causing it to close a factory. It is not common for the NYT to highlight when a factory is closed due to the loss of a protective tariff. If the paper has a different attitude towards subsidies and tariffs it would be interesting to hear the basis for this position. Certainly it would not be justified in conventional economics.

 

Note: Typo corrected, thanks ltr and Robert Salzberg.

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A Washington Post editorial arguing for the adoption of a budget proposal put forward by Representative Scott Rigell applauded the plan's call for using the chained CPI for indexing all taxes and benefits, including Social Security. It described the chained CPI as "more accurate."

The chained CPI will typically show a lower rate of inflation than the CPI currently used since it accounts for substitutions in consumption, as people change their consumption patterns in response to changes in prices. (It changes the weights in the index assigned to different price increases, it doesn't count savings from switching from more expensive to less expensive items.)

While there is an argument for picking up the impact of substitution, it is important to note that this may not be valid for the senior population that relies on Social Security. It is possible that seniors are less likely to change their consumption patterns by switching items or outlets in response to price increases. We could determine whether or not this is the case by constructing a full price index for the elderly, which would track the prices of the specific goods and services they consume and look at the outlets where they buy them.

This is what Congress would do if it was interested in an accurate measure of the rate of price increase experienced by seniors. Switching to the chained CPI will mean lower benefits (@ 3 percent for the average senior over the course of their retirement), the Post has no clue as to whether it would be more accurate.

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In his review of former Fed Chair Ben Bernanke's new book, Michael Kinsley tells us:

"Bernanke makes a compelling case that in 2007 and 2008, the world economy came very close to collapse, and only novel efforts by the Fed (cooperating with other United States and foreign government agencies) saved us from an economic catastrophe greater than the Great Depression."

The Great Depression lasted for more than a decade because the government did not spend enough money to get the economy back to a normal level of output. It eventually did get the economy back to full employment due to the spending associated with World War II. If the government had undertaken similar spending in 1931, for example to build up the infrastructure and to expand the provision of education and health care, the depression would have ended a decade sooner.

Unless there is some reason the United States government could not have spent money in 2009 if the banks had collapsed in 2008, then we did not have to worry about a Second Great Depression. No one has yet indicated what that reason could be. Even Republicans have consistently supported stimulus during downturns. (George W. Bush signed the first stimulus package in February of 2008 when the unemployment rate was 4.7 percent.) So the story of being saved from the Second Great Depression is entirely a myth that can be used to justify the bailout of the Wall Street banks.

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In a NYT review of Roger Lowenstein's book on the Federal Reserve Board, Robert Rubin touts the virtues of the Fed's independence from political control. He decries efforts to make the Fed more accountable to Congress.

While the Fed may not feel as though it must directly respond to Congress, that does not mean it is not responsive to political pressures. In the last thirty five years, it has maintained policies that have on average kept the unemployment rate almost a full percentage point above the Congressional Budget Office's estimate of the non-accelerating inflation rate of unemployment (0.5 percentage points excluding the Great Recession). By contrast, in the prior three decades the unemployment rate had averaged half a percentage point less than CBO's estimate of the NAIRU.

 

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Source: Baker and Bernstein, 2013.

The higher unemployment acts as an insurance policy against inflation. The higher unemployment kept millions of people from working and deprived tens of millions of workers of the bargaining power needed to secure real wage increases. While modestly higher inflation would be a matter of little concern to most workers (especially since it is being driven in part by higher wages), it would be very upsetting to the financial sector since the value of the debt they own would be reduced.

The financial industry has a grossly disproportionate influence on the Fed due to its design. They largely control the 12 district banks. In addition, the governors appointed by the president tend to be more responsive to the concerns of the financial industry than other sectors of the economy. It is certainly possible that if the Fed were not so tied to the financial industry, it would have paid more attention to the housing bubble as it was growing. The industry made huge amounts of money from the mortgages that fueled the bubble. (In this context, it is probably worth noting that Mr. Rubin made more than $100 million from his position as a top executive at Citigroup during the bubble years.)

For these reasons, the public may not be as happy about the Fed's lack of accountability to democratically elected bodies as Mr. Rubin. Many might prefer a central bank that is concerned more about workers than bankers.

 

Addendum:

On this topic, it is probably worth noting that in 2014 Robert Rubin, together with Martin Feldstein, argued that the Fed should be prepared to use higher interest rates as a tool to combat bubbles.

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Yes folks, back in the good old days we just had the Soviet Union and the U.S.:

"I was born into the Cold War era. It was a dangerous time with two nuclear-armed superpowers each holding a gun to the other’s head, and the doctrine of “mutually assured destruction” kept both in check. But we now know that the dictators that both America and Russia propped up in the Middle East and Africa suppressed volcanic sectarian conflicts."

But now we have ISIS and Al Qaeda and so many other small radical groups. It is all so complicated. And when we get to the economy:

"Robots are milking cows and IBM’s Watson computer can beat you at 'Jeopardy!' and your doctor at radiology, so every decent job requires more technical and social skills — and continuous learning. In the West, a smaller number of young people, with billions in college tuition debts, will have to pay the Medicare and Social Security for the baby boomers now retiring, who will be living longer. 'Suddenly,' argues Dobbs, [Richard Dobbs, a director of the McKinsey Global Institute] 'the number of people who don’t believe they will be better off than their parents goes from zero to 25 percent or more.'

"'When you are advancing, you buy the system; you don’t care who’s a billionaire, because your life is improving. But when you stop advancing, added Dobbs, you can 'lose faith in the system — whether that be globalization, free trade, offshoring, immigration, traditional Republicans or traditional Democrats. Because in one way or another they can be perceived as not working for you.'"

Okay, we get it, Thomas Friedman is very confused. But that's not new. Let's try to look at the substance.

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Everyone has seen the news stories about how Representative Paul Ryan, the leading candidate to be the next Speaker of the House, is a budget wonk. That should make everyone feel good, since we would all like to think a person in this position understands the ins and outs of the federal budget. But instead of telling us about how much Ryan knows about the budget (an issue on which reporters actually don't have insight), how about telling us what Ryan says about the budget?

It is possible to say things about what Ryan says, since he has said a lot on this topic and some of it is very clear. In addition to wanting to privatize both Social Security and Medicare, Ryan has indicated that he essentially wants to shut down the federal government in the sense of taking away all of the money for the non-military portion of the budget.

This fact is one that is easy to find if a reporter is willing to do five minutes of research. Ryan directed the Congressional Budget Office to score his budget plans back in 2012. The score of his plan showed the non-Social Security, non-Medicare portion of the federal budget shrinking to 3.5 percent of GDP by 2050 (page 16).

This number is roughly equal to current spending on the military. Ryan has indicated that he does not want to see the military budget cut to any substantial degree. That leaves no money for the Food and Drug Administration, the National Institutes of Health, The Justice Department, infrastructure spending or anything else. Following Ryan's plan, in 35 years we would have nothing left over after paying for the military.

Just to be clear, this was not some offhanded gaffe where Ryan might have misspoke. He supervised the CBO analysis. CBO doesn't write-down numbers in a dark corner and then throw them up on their website to embarrass powerful members of Congress. As the document makes clear, they consulted with Ryan in writing the analysis to make sure that they were accurately capturing his program.

So what percent of people in this country know that the next Speaker of the House would like to permanently shut down most of the government? What percent even of elite educated policy types even know this fact? My guess is almost no one, we just know he is a policy wonk.

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The early signals from the Obama administration are that the nonsense will be flowing fast and thick in its effort to push the Trans-Pacific Partnership (TPP). We got an indication of the level of the nonsense factor in a CNN article reporting on the administration's efforts to promote the still secret agreement.

CNN cites a column that President Obama had in a New Hampshire newspaper that told readers:

"...trade is a substantial driver of New Hampshire's economy. Over 20,000 American jobs are currently supported by goods exports from New Hampshire, with 32 percent of Made in New Hampshire goods exports shipped to TPP partners."

What exactly does it mean for over 20,000 New Hampshire jobs to be supported by exports? Suppose the exports are car parts that are sent to Mexico to be assembled into a car that is shipped back to the United States. Are the workers in New Hampshire suppose to celebrate because their parts are being exported to Mexico (a TPP partner) rather than being shipped to be assembled in Ohio?

This is obviously a ridiculous thing to say and certainly President Obama knows it. He repeats the line because it has been focus group tested and he can apparently count on reporters not pointing out its absurdity.

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That seems to be the case these days. Last week the Federal Reserve Board reported that manufacturing output fell by 0.1 percent, the second consecutive monthly decline. The sector has been virtually flat since April, presumably reflecting the rise in the trade deficit.

manufacturing fredgraph


This report seemed to go virtually unnoticed in places like the NYT and the Washington Post. Since the sector is still an important part of the economy, it might have been worth at least a small story.

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Yep, it seems that China now has a gross debt equal to 43.2 percent of its GDP, according to the I.M.F. By comparison, the gross debt of the United States is over 104 percent. But, the NYT apparently thinks China has a big problem here.

This does matter, because insofar as the main problem with China's economy is a lack of demand, it can be easily countered with additional government spending. Of course if the government were up against some sort of borrowing constraint due to an excessive debt burden, and inflationary concerns precluded the printing of money, then the route of deficit spending would not be available. However such constraints only appear to exist in the pages of the NYT, not in the real world.

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I know this is getting old, but let's go over the latest version. Robert Samuelson is unhappy about the presidential candidates' "flight from reality," which to him means they don't want to cut Social Security and Medicare, restrict immigration of less-educated workers (he means Democrats here), and promote more rapid economic growth. I will focus on the Social Security and Medicare story.

Samuelson tells us:

"Inevitably, the costs of Social Security, Medicare (federal health insurance for the elderly) and nursing home care under Medicaid (a federal-state insurance program for the poor) will grow dramatically. From 1965 to 2014, spending on Social Security and the major federal health care programs averaged 6.5 percent of the economy (gross domestic product). By 2040, the CBO projects this spending to exceed 14 percent of GDP.

"If we do not trim Social Security and Medicare spending — by slowly raising eligibility ages, cutting benefits and increasing premiums for wealthier recipients — we face savage cuts in other government programs, much higher taxes, bigger deficits or all three."

There are several points worth mentioning here. First, giving us the average spending from 1965–2014 on these programs as a baseline is the columnist's version of three-card monte. Spending in 1970 is not relevant to the increase going forward. What matters is what we are spending in 2015. The answer to that question is 10.1 percent of GDP. This means that the 14.2 percent of GDP projected for 2040 is an increase of 4.1 percentage points of GDP, a bit more than half of the increase implied by Samuelson.

It is also worth mentioning that the increase in spending on these programs in the years since 1965 was much larger than what we expect to see going forward. So what's the problem?

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George Will really takes it to Bernie Sanders in his column this morning.

"The fundamental producer of income inequality is freedom. Individuals have different aptitudes and attitudes. Not even universal free public education, even were it well done, could equalize the ability of individuals to add value to the economy."

Got that? Bill Gates is incredible rich because of his aptitude and attitude; the government's willingness to arrest anyone who infringes on the patent and copyright monopolies it gave him has nothing to do with his wealth. We're supposed to also ignore all the other millionaires and billionaires whose wealth depends on these government granted monopolies. 

And we should ignore the Wall Street boys who depend on their banks' too big to fail insurance or on the fact that the financial sector largely escapes the sort of taxation applied to the rest of the economy. And we shouldn't be bothered by the fact that Jeff Bezos got very rich in large part from avoiding the requirement to collect sales taxes which was imposed on his brick and mortar competitors. And, we need not pay attention to the tax scams that allow for much of the wealth of the private equity crew. 

Nor should we pay attention to Federal Reserve Board policies that deliberately slow the economy and reduce the rate of job creation any time workers are about to get substantial bargaining power. Nor should we pay attention to trade policies that put our manufacturing workers in direct competition with low-paid workers in Mexico and China, but protect our doctors, lawyers, and other professionals.

It's all about freedom. George Will has spoken.

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No one reads the Post's opinion pages for serious economic analysis, and Bethany McLean's Outlook piece on Fannie Mae and Freddie Mac reminds us why. While the basic point is fine (we should keep Fannie and Freddie), the argument is more than a bit confused.

The problem starts near the beginning when McLean tells us that GSE stands for "government-supported entities." In fact the acronym is for "government sponsored enterprises." The government created Fannie and Freddie and then turned them into largely private companies. (I apologize if the "government-supported entities" was meant to be ironic, but it went over my head if that's the case.)

Getting to more substantive matters, McLean tells us:

"Since 2008, while Fannie and Freddie have sat in limbo, homeownership has plunged. This summer, the Census Bureau reported that the homeownership rate had fallen to 63.4 percent, the lowest level in 48 years. (It had peaked at 69 percent, in 2004.) 'Renter nation,' one blog called the United States. The decline is particularly pronounced in minority communities. At the Congressional Black Caucus Foundation’s annual legislative conference this year, housing advocates pointed out that the homeownership rate for the black population has decreased from nearly 50 percent in 2004 to about 43 percent, its lowest level in 20 years. It’s projected to continue to drop."

The story on homeownership rates is of course true, but it is not clear what it has to do with Fannie and Freddie being in "limbo." The GSEs continue to buy up the vast majority of newly issue mortgages in spite of their "limbo" status. Mortgage interest rates are at the lowest levels the country has seen in more than half a century. It's hard to see how the situation would be better for potential homebuyers if Fannie and Freddie were not in limbo.

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Mike Konczal has picked up on my post responding to his piece on too big to fail. Just to give folks a quick orientation, the point of entry here was a Paul Krugman post saying that Dodd-Frank had largely ended too big to fail (TBTF), which linked to Mike's piece.

Before getting to any of the nitty-gritty, I am not sure that we are actually arguing over anything. Mike's intro says:

"My point isn’t to say that the subsidy is completely over. Nor, as I’ll explain in a bit, is it to say that TBTF is over. Instead, understanding this decline lets us know we should push forward with what we are doing. It debunks conservative narratives about Dodd-Frank being fundamentally a protective permanent bailout for the largest firms that we should scrap, and provides evidence against repealing it. And ideally it gets us to understand this subsidy as just one part of the more general TBTF problem that needs to be solved."

I'm actually pretty comfortable with that statement. I certainly don't want to repeal Dodd-Frank, nor do I in any way buy the right-wing line that Dodd-Frank institutionalized bailouts. So I'm not sure we're really in a very different position on this one. Perhaps I have more of a difference with Krugman than Mike here. I don't believe that Dodd-Frank ended TBTF as Krugman seems to imply in his post.

In terms of the studies, I was pointing out that the GAO study found limited evidence of only a very small TBTF subsidy in 2006. I believe that the markets saw the big banks as very much TBTF in 2006. I'm not sure if Mike is arguing that TBTF only came about during the crisis. That certainly is not my view.

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That's the question that has been raging across the Internet following a piece in the NYT by Paul Theroux. Theroux decried the poverty in the South in the United States and bemoaned the fact that it was partly attributable to the outsourcing of jobs to the developing world. This prompted commentary by Annie Lowrey and Branko Milanovic and others, asking whether the gains for the poor in the developing world were worth whatever losses might have been incurred by the working class and poor in the United States.

That might be an interesting philosophical question, but it has nothing to do with the reality at hand. It assumes, without any obvious justification, that job loss and wage stagnation was a necessary price for the improvement of living standards in the developing world. Clearly, there has been an association between the two, as the manufacturing jobs lost in rich countries meant hundreds of millions of relatively good paying jobs for people in poor countries, but that doesn't mean this was the only path to growth for the developing countries. There are fundamental questions of both the size and composition of trade flows that this assumption ignores.

On the size front, there is no obvious reason that developing country growth had to be associated with the massive trade surpluses they ran in the last decade. In the 1990s, many developing countries had extremely rapid growth accompanied by large trade deficits. For example, from 1990 to 1997 GDP annual growth averaged 7.1 percent in Indonesia, its trade deficit averaged 2.1 percent of GDP. In Malaysia growth averaged 9.2 percent, while its trade deficit averaged 5.6 percent of GDP. In Thailand growth averaged 7.4 percent, while the trade deficit averaged 6.4 percent of GDP.

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Paul Krugman used his column today to tell us that any Democrat in the White House will take a tough line on regulating Wall Street. I hope that he is right, but am a bit more skeptical given past associations. But beyond the speculation, there is one factual matter where I would differ his assessment.

At one point he argues that the implicit "too big to fail" (TBTF) subsidy for large banks has mostly disappeared due to the Dodd-Frank reforms. He cites a blog post by Mike Konczal, which in turn relies on a study by the Government Accountability Office (GAO). The GAO study does seem to suggest that the TBTF subsidy has largely disappeared.

It uses 42 different models to estimate the size of the subsidy year by year. While its models get highly significant results showing a large subsidy at the peak of the crisis, most find no subsidy in 2013. This can be seen as a victory. But if we look at the results more closely, we find that the study also finds little evidence of a TBTF subsidy in 2006. While 28 of the 42 studies did get significant results indicating a subsidy, compared to just 8 in 2013, the average size of the subsidy looks to be very small. From the chart it appears to be less than 10 basis points (a tenth of a percentage point).

Obviously, the big banks did enjoy too big to fail protection in 2006, since only Lehman was allowed to fail in the crisis, yet the GAO analysis implies that this held very little value. The problem here is that interest rates spreads, between more and less risky assets, tend to collapse in normal times. The basic story is that fire insurance is not worth much if no one thinks there can be a fire.

In the GAO analysis it is difficult to distinguish between a situation in which big banks don't pay much less interest than anyone else because people no longer believe the government will bail them out in a crisis and a situation in which the big banks don't pay much less interest than anyone else because no one thinks that anyone is about to go out of business. In the latter case, TBTF insurance may still exist, it would just be difficult to measure by these techniques.

It is worth noting that Mike's blogpost also referred to a study by the I.M.F. which found a TBTF subsidy of 25 basis points. That may not sound like a very big deal, but 25 basis points on $10 trillion in big bank assets comes to $25 billion a year. That's about 0.6 percent of the federal budget, more than we are spending on TANF.

I wouldn't say the I.M.F. methodology is necessarily better, but I would say that I am not convinced the TBTF insurance is history. If Goldman sinks itself, I would not bet that the Treasury and the Fed would be prepared to let the market work its magic.

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Like the rest of the Washington media, the New York Times respects Representative Paul Ryan, the current chair of the House Ways and Means Committee and possibly next speaker of the House. An article headlined "devotion to fiscal policy may keep Ryan from taking House speaker's job" begins by telling readers about Ryan's "sweeping budget proposals." It then goes on:

"Republicans, on the other hand, passionately embraced them [Ryan's budget proposals], and Mr. Ryan came to be seen as one of his party’s most influential thinkers on fiscal issues. His budget proposals showcase the thinking and philosophy of a lawmaker who many Republicans believe is now their best choice for speaker of the House, perhaps the only man who can dress and heal the deep gash in the House Republican Conference."

It would be helpful if the paper could devote more time to the content rather than praise. Ryan essentially proposed eliminating virtually all of the federal government by 2050 according to the Congressional Budget Office (CBO) analysis of his plan that was done under his direction. According to CBO's analysis (page 16), under his plan in 2050 government spending on the military, infrastructure, law enforcement, research, and all non-health forms of income support, would be 3.5 percent of GDP. This is roughly equal to current levels of military spending, a level that Ryan and other Republicans have indicated they want to maintain. The implication is that Ryan would shut down just about all other parts of the federal government.

It would be more informative to readers if the NYT told them what Ryan's "thinking and philosophy" is rather than devoting an article to praising him for having one.

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We all have heard the stories about how the robots are going to take our jobs. The line is that innovations in computer technology will make robots ever more sophisticated, allowing them displace a rapidly growing number of workers. This could leave large numbers of workers with nothing to do, implying a massive amount of long-term unemployment.

There are two basic problems with this story. The first is a logical problem. The story of worker displacement by technology is not new, it goes back hundreds of years and it is ordinarily considered to be a good thing. This is what we call productivity growth. It means that workers can produce more goods and services in the same amount of time. This is the basis of rising wages and living standards.

If we see rapid productivity growth, as robots allow for the same output with fewer workers, this should allow the remaining workers to be paid more for each hour of work. This will allow them to spend more money, creating more demand in other sectors, which will allow displaced workers to be re-employed elsewhere.

Of course we have not seen workers getting the benefits of productivity growth in higher pay in recent years. This is due to policies and institutional changes that undermine workers' bargaining power. For example, trade policy has deliberately put manufacturing workers in competition with low paid workers in the developing world. The Federal Reserve Board routinely raises interest rates to slow job growth when it fears that workers are getting too much bargaining power and could possibly get inflationary wage increases. And, lower unionization rates mean that workers are less effective in demanding higher pay from employers.

For these reasons, most workers have not gotten their share of the gains from productivity growth, but there is another problem with the robots displacing workers story. Rather than robots leading to a massive surge in productivity, in recent years productivity growth has been unusually slow. According to the Bureau of Labor Statistics, annual productivity growth has averaged less than 0.6 percent since 2010. This compares to an average rate of 3.0 percent in the Internet boom years from 1995–2005 or 2.8 percent in the long post-World War II boom from 1947–1973. Even in the years of the productivity slowdown, from 1973–1995, had a 1.4 percent annual rate of growth, more than twice the recent pace. In short, there have not been many gains to share.

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Yep, it's hard to find out about the path of health care costs. You would probably have to go to one of the government websites, or read a newspaper, or maybe even listen to National Public Radio. In a piece discussing Republican presidential candidate Jeb Bush's health care plan, which repeals the Affordable Care Act (ACA), NPR told listeners that health care costs have been growing rapidly.

This is in fact not true. Since 2008, health care costs have barely outpaced the overall growth of the economy. While the exact causes of this slowdown are not clear, including how much credit the ACA should get, the slowdown itself is not in dispute.

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The NYT was unfair in its fact check of the Democratic presidential candidates' claim that spending on the environment can be an engine for economic growth. The piece quotes Keith Hall, the former commissioner of the Bureau of Labor Statistics:

"The goal should be to secure the largest possible environmental benefit at the lowest economic cost. Counting green jobs equates to counting part of the economic cost of achieving this environmental impact. We want this to be small, not large.”

This is true in the context of an economy at full employment, just as we should want as few people as possible to be employed in Silicon Valley designing our software or Wall Street managing finance. If the economy is at full employment then jobs in any sector are coming at the expense of meeting other needs. If we can get our energy with fewer workers, this would be mean we would have more people who could meet our health care or education needs. There would be a similar story if the Fed thought we were at full employment, even if it were wrong, and it was raising interest rates to slow the economy and prevent more job creation.

However, during the recession and for any period where the economy is below full employment, spending on the environment is a job creator. This means that additional support for environmental spending over the last eight years would have created jobs. And, this would quite possibly be the case for years into the future, depending on the strength of the economy.

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