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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Glenn Kessler, the Washington Post’s Fact Checker, gave former Secretary of State Hillary Clinton three Pinocchios for saying that the Republicans wanted to turn Social Security money over to Wall Street. I am afraid that I see this one a bit differently.

First, as a small point, the piece comments:

We have explained before that “privatization” is one of those pejorative political labels used by opponents of the Bush plan…”

That’s not how I remember the story. In the 1990s many conservatives openly talked about their plans to “privatize” Social Security. At some point, they apparently ran focus groups and discovered that the term “privatization” did not poll well. At that point, they switched directions and starting talking about “personal accounts,” rather than privatizing Social Security. While the advocates of a policy certainly have the right to assign whatever name they like to the policy, it seems a bit extreme to criticize its opponents for using the term that advocates themselves had used in the recent past.

The piece then notes that President Clinton had openly advocated investing Social Security money in a stock index fund, therefore:

“One could certainly say that the first president who wanted to ‘give the Social Security trust fund to Wall Street’ was Bill Clinton.”

It is worth making an important distinction between the possible meanings of turning Social Security over to Wall Street. On the one hand, there is the possibility of directly investing some of the trust fund in the stock market. On the other hand, there are proposals to turn over the administration of individuals' Social Security to private financial firms. These routes have very different meanings and implications.

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Neil Irwin had an interesting piece on the Federal Reserve Board’s interest rate policy and its relationship to the stock market. The piece essentially argues that if the Fed were to make its interest rate decision based on economic data that it would hike rates at its next meeting. By contrast if it bases its decision on the stock market, it will leave rates where they are. It also argues that the Fed had acted to prop up the stock market in the 1997 following the East Asian financial crisis.

This is interesting analysis but there are some additional pieces that needed to be added to this puzzle. First, it is far from clear that the stock market was the main concern when Greenspan cut rates in 1997. There was a massive outflow of capital from developing countries following the East Asian financial crisis in the summer of that year.

At that time, many countries in the developing world had fixed their exchange rate to the dollar, as did Russia. This outflow of capital made it difficult for them to maintain the value of their currency. A reduction in interest rates by the Fed helped to alleviate some of the pressure on these currencies. (It didn’t work; most of them eventually devalued their currency against the dollar.)

Greenspan was also concerned about a stock bubble since the summer of 1996. (We know this from Fed minutes.) He decided not to act against the bubble, deciding it would be best to just let the bubble run its course. The recession that resulted from its eventual collapse in 2000–2002 gave us the longest period without net job growth since the Great Depression, at least until the 2008 recession.

Anyhow, while it is clear that Greenspan didn’t act against a stock bubble, it is a bit stronger claim to assert that he deliberately propped it up. It is also worth noting both that the price to trend earnings ratios were far higher in the 1990s (peaking at over 30 to 1) than what we are seeing at present. Furthermore, this was in a much higher interest rate environment, with interest rates on Treasury bonds in the 5.0–6.0 percent range, as opposed to 2.0 percent today. In other words, there was a clear case for a bubble in the late 1990s, which is not true today.

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The job killers (proponents of Fed rate hikes) seized on some modest upticks in the January inflation data to argue that the economy is near capacity and the Fed should be pushing up interest rates. After all, the core (excluding food and energy) consumer price index (CPI) rose by 2.2 percent over the last year, somewhat over the Fed’s 2.0 percent target. That’s pretty scary stuff.

I’ll make a few quick points here. First, the Fed officially targets the core personal consumption expenditure deflator. That index has risen by just 1.7 percent over the last twelve months, still below the Fed’s target.

Second, the Fed’s target is explicitly an average rate of inflation, not a ceiling. Many of us think that the 2.0 percent target is arbitrary and unreasonably low, but even if we accept this level, the inflation rate has a long way to go upward before the Fed will have even hit this target. We could have 4 years of 3.0 percent inflation and still be pretty much on target over the prior decade.

The third point is that the modest uptick in the inflation rate shown in the CPI is largely coming from rising rents. Here is the index the Bureau of Labor Statistics constructs for a core index that excludes shelter (mostly rent).

 

Non-Shelter Inflation, Last 12 Months
non shelter inflation

Source: Bureau of Labor Statistics.

There is a very small uptick in this index also, but only to 1.5 percent inflation over the last year. (There was a much larger uptick at the start of 2011.) We are still well below the Fed’s 2.0 percent inflation target if we pull out rent.

This matters, because if higher inflation is being driven by rising rents, it is not clear that higher interest rates are the right tool to bring prices down. Every Econ 101 textbook tells us about supply and demand. The main factor pushing up rents is more demand for the limited supply of housing. The best way to address this situation is to construct more housing.

But housing is perhaps the most interest sensitive component of demand. If we raise interest rates, then builders are likely to put up fewer new units. This will create more pressure on the housing stock and push rents up further.

Yes, the fuller picture is more complicated. Zoning restrictions often prevent housing from being built and there are many issues about what type of housing gets built. But as a general rule, more housing means lower rents, and if the Fed’s interest rate hikes lead to less construction, they will likely lead to a higher rate of rental inflation, the opposite of its stated intention.

The moral of the story is that the Fed should keep its fingers off the trigger. There is no reason for concern about inflation in the economy in general and in the one major sector where it is somewhat of a problem, higher interest rates will make the situation worse.

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Many people have contempt for economists. It is remarkable they don’t have more. Economists can’t even agree on answers to the most basic questions, like is an economy suffering from too little demand or too much demand. If that sounds confusing, this is like a weatherperson telling us that we don’t know whether to expect severe drought or record floods.

Today’s example is Japan. The NYT had a front page story about its declining population. Unlike many pieces on falling populations, this one at least pointed out the positives aspects, such as less crowded cities and less strain on infrastructure. But after making this point, the piece tells readers:

“The real problem, experts say, is less the size of the familiar ‘population pyramid’ but its shape — in Japan’s case, it has changed. Because the low birthrate means each generation is smaller than the last, it has flipped on its head, with a bulging cohort of older Japanese at the top supported by a narrow base of young people.

“One-quarter of Japanese are now over 65, and that percentage is expected to reach 40 percent by 2060. Pension and health care costs are growing even as the workers needed to pay for them become scarcer.”

Okay, this is a story of inadequate supply. The argument is that Japan’s large number of retirees will be making demands on its economy that its dwindling group of workers will be unable to meet.

That’s an interesting story, but anyone who has followed the debates on economic policy in Japan for the last three years knows that the government has been desperately struggling to increase demand. Prime Minister Abe has been pushing both monetary and fiscal stimulus with the hope of getting more spending to spur growth. In other words, Abe is concerned that Japan doesn’t have enough old people with pensions and health care demands to keep the economy fully employed.

Now this is pretty goddamn incredible. It is possible for an economy to face problem of too little demand. That was the story in the depression and I would argue facing most of the world today.

It is also possible for an economy to face a problem of excess demand, as is being described in this article. This is a situation where it lacks the resources needed to meet the demand it is generating. That typically manifests itself in high and rising inflation (clearly not the story in Japan today.) 

It is not possible for a country to have both too much aggregate demand and too little aggregate demand at the same time. Maybe the NYT editors should sit down with those covering Japan and figure out which story fits the country’s economy. Until they can decide, maybe they should refrain from reporting on a country’s economy that they obviously do not understand.

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Are rivers flowing upstream? Has anyone seen four horsemen? Anyhow, it seems that the Washington Post editorial board is now acknowledging that a financial transactions tax [FTT] could be a serious policy. It ran an editorial which included a few derisive comments directed towards Senator Bernie Sanders, who has advocated a financial transactions tax in his presidential campaign, but favorably cited the Tax Policy Center’s analysis and said:

“They [FTTs] represent a ‘tempting’ option that might help the United States raise revenue while curbing speculative excess.”

There are a few points worth adding to the Post’s comments. The Post told readers:

“However, a tax would undoubtedly dampen some productive trading and not necessarily raise that much revenue, the report found — about $50 billion a year, in contrast to the $75 billion figure Mr. Sanders floats.”

As far as the concern for productive trading, the way the tax would reduce this is by raising the cost of trades. However, the cost of trading has fallen sharply over the last four decades. This means that the tax would, depending on the exact rate, only raise the cost of trading part of the way back to where it was four decades ago.

If the tax were set at a 0.1 percent rate on stock, with lower rates for other assets, then it would be raising the cost of trading to the levels of 10–20 years ago. So unless we see much more productive trading in the markets today than we did in the 1990s, we wouldn’t have much to worry about in this respect.

As far as the amount of money that would be raised, this depends hugely on the sensitivity of trading volume to the size of the tax. The Tax Policy Center assumed an elasticity of 1.5, meaning that the percentage drop in trading volume would be 1.5 times the percentage increase in trading costs associated with the tax. This elasticity assumption is certainly at the high end of the estimates in the literature. An elasticity assumption closer to 1.0, which is more in the center of the estimates in the research, implies the tax would raise roughly twice as much revenue.

It is also is worth noting that the 1.5 elasticity assumption used by the Tax Policy Center implies that trading volume decreases by a larger percentage than the increase in costs due to the tax. It would mean, for example, that if the tax raised trading costs by 40 percent, then trading volume would decline by close to 60 percent.

This means investors would reduce their trading by a larger amount than their costs per trade increased. As a result, investors would on average spend less money on trading, even including the tax, than they did before the tax was put in place. In that scenario, the entire burden of the tax is borne by the financial industry in the form of lost trading revenue.

Arguably the 1.5 elasticity assumption by the Tax Policy Center is too high, but if it is correct, it does mean the tax will raise less revenue, but it also means a much larger hit to the financial industry. Insofar as a purpose of the tax is to reduce the amount of resources being wasted by shuffling stock and derivatives back and forth all day, an FTT would have a huge effect in this case.

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Since I had been critical of elite economists for using their authority rather than evidence to trash Gerald Friedman’s analysis of Bernie Sanders’ program, I should acknowledge a serious effort to do exactly the sort of analysis I advocated. Christina Romer, one of the four former heads of the Council of Economic Advisers who signed the earlier letter criticizing Friedman’s analysis, along with David Romer (both of whom are now Berkeley economics professors), did a detailed critique of the Friedman analysis.

I could quibble with aspects of their critique, but I would say it is basically right. There clearly is still a large amount of slack in the economy which would allow for 2–4 years of exceptionally strong growth (e.g. 4–5 percent). However, it is very hard to envision a story where this sort of growth rate is maintained for a full eight years of a Sanders’ administration.

Furthermore, many aspects of Sanders’ agenda point to slower growth. For example, universal Medicare and expanded Social Security will make it easier for older people not to work, as will free college for young people. Also, mandated vacations will mean fewer hours per worker, on average. These may all be good things (I happen to think so), but they are likely to mean less GDP growth than would otherwise be the case.

Anyhow, I appreciate that Romer and Romer took the time to do the analysis. We should be having a discussion about how much better the economy can be doing than it is now. This analysis is a step in that direction.

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Matt O’Brien had a very good piece on the silliness of the robots taking our jobs story. The basic point is that it is silly to worry about a possible future in which robots are taking our jobs, when we currently face a situation in which people don’t have jobs just because Congress won’t spend the money. I couldn’t agree more.

We can all see the really cool things that can be done by robots and advanced computers, but the fact is they are not doing it now. As Matt notes, productivity growth has been very slow in the last decade, the story of robots taking our jobs is one in which productivity growth is very fast.

There are two points worth adding to Matt’s comments. First, he refers to an often cited analysis that finds 47 percent of all jobs are at risk of being automated over the next twenty years. Sounds pretty scary, right? Well let’s imagine that all of the 47 percent of those at risk jobs gets computerized over the next two decades. (The study just identifies these as “at risk” jobs, a high proportion of which will be computerized, not all of them.)

This rate of computerization would translate into 3.1 percent annual productivity growth. That’s a hair higher than the 2.9 percent annual rate of productivity growth that we saw in the Golden Age from 1947–1973. That was a period of low unemployment and rapid real wage and income growth. If there is a reason that we should be scared in this story it is not because of the productivity growth, but rather an institutional structure that prevents most workers from benefitting from this growth.

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Fareed Zakaria used his column in the Washington Post this week to approvingly quote former British foreign minister David Miliband saying:

“The right has no good answer to the problem that globalization erodes people’s identities. The left has no good answer to the problem that it exacerbates inequality...”

Actually, the left has plenty of good answers on inequality, they just get ignored or misrepresented in outlets like the Washington Post.

For example, many progressives (including Senator Bernie Sanders) have long supported a financial transactions tax. This would raise tens of billions of dollars annually that would come almost exclusively out of the hides of the high-flyers in the financial sector. Progressives also want to end the government’s “too big to fail” insurance for the country’s largest banks, a subsidy that gives tens of billions of dollars a year to the country’s biggest banks. When these ideas appear at all in the Post they are completely misrepresented, with the paper bizarrely insisting that financial reform is about preventing the 2008 crisis instead of restructuring the financial sector to better serve the productive economy.

Beyond finance, many progressives are strongly opposed to the center’s protectionist agenda on trade, which would involves continually making patent and copyright protection stronger and longer. These forms of protection are equivalent to imposing tariffs of several thousand percent on the protected items. However since the beneficiaries in the pharmaceutical, software, and entertainment industry tend to be rich and powerful, papers like the Washington Post pretend they are the “free market.”

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The Washington Post headlined a Reuters' piece on the Commerce Department's release of January data on durable goods orders "new orders for durable goods increased in January." The first sentence told readers:"New orders for long-lasting U.S. manufactured goods in January rose by the most in 10 months as demand picked up broadly, offering a ray of hope for the downtrodden manufacturing sector."This is more than a bit misleading. The 4.9 percent jump in January looks much less impressive when considered with a 4.6 percent decline in December and a 0.5 percent decline in November. The monthly data in this series are highly erratic.

The large drop reported for December was almost certainly a measurment error and did not reflect an actual decline in orders. This means that the January jump was primarily attributable to the series again more accurately reflecting the true level of orders in the economy. Looking over a longer period, nominal orders are up by less than 1.0 percent over the last year. While this is not a horrible story of collapsing manufacturing, it is wrong to imply there is any evidence of a bounce back in this sector.

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The confusion on inflation continues. The NYT ran a Reuters piece on the latest inflation data from Japan. The piece began by telling readers:

“Japan's core consumer prices were unchanged in January from a year earlier, suggesting that persistent falls in energy costs will keep inflation well below the central bank's 2 percent target.

“While falling fuel costs may be a boon for corporate profits, low energy prices suppress inflation which in turn may discourage companies from raising wages or the prices of their goods.”

Okay, let’s step back a second. The reason that folks care about having higher inflation is to give firms more incentive to invest. If the goods and services they are selling rise in price by 2.0 percent a year, as opposed to staying flat, then they have more incentive to invest at the same nominal interest rate. We’ll call this 2.0 percent inflation case “Scenario I.”

Now let’s imagine Scenario II. Suppose that the prices of the goods and services firms in Japan produce rise by 2.0 percent a year, as in Scenario I, but the prices of oil and other items that Japan imports fall rapidly. The result is that the overall inflation rate is zero.

Your brainteaser for tonight is: do Japanese firms have any less incentive to invest in the Scenario II than Scenario I?

Addendum

I should mention that cheap oil is horrible for the environment since it encourages people to use more of the stuff and makes it more difficult to promote clean energy. This may be obvious, but is worth repeating.

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Jacob Weisberg wasn’t quite straight with readers when he said that Ronald Reagan supported “Keynesian stimulus” in a NYT column on how the Republican Party has changed since the days of Reagan. The Keynesian stimulus took the form of a large permanent tax cut that was highly skewed toward the wealthy. He also had large increases in military spending.

The current crew of Republican presidential candidates seems to be very much in this same mode, also urging large tax cuts that would primarily benefit the wealthy and spending more on the military. Reagan did agree to roll back some of his tax cut when it appeared that deficits were getting too large in 1982 and 1983. We can’t know whether the Republican candidates would be prepared to raise taxes again if deficits were leading to high interest rates and/or inflation, but in their platforms they are very much following Reagan, contrary to what Weisberg claims.

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It must be tough for flat earth believers; people insist on rejecting their views on the shape of the earth based on evidence. Robert Samuelson seems to be in the same situation. He used his column to complain about economists not caring about balanced budgets, just because there is no evidence that they should.

The immediate provocation for this diatribe is Doug Elmendorf, the former head of the Congressional Budget Office. Elmendorf used to be a big advocate of smaller deficits, but he now is arguing that Congress take advantage of near record low interest rates to undertake a major infrastructure initiative.

Samuelson concluded his piece:

“Destroyed is the pre-1960s consensus: a crude allegiance to a balanced budget. Since 1961, the government has run annual deficits in all but five years. Allowing for desirable deficits when the economy is well below capacity or when there’s a national emergency, we need to go back to the future. Before making vast new commitments — a la Elmendorf — we should balance the ones we already have.”

Ah yes, the country is being destroyed by deficits. That is why the government has to pay almost 2.0 percent to borrow long-term. And the interest on our horrible debt costs us almost 0.8 percent of GDP in annual interest payments. Sound pretty awful? Interest cost us more than 3.0 percent of GDP back in the early 1990s.

It is amazing that people like Samuelson, and more importantly our politicians in Washington, continue to try to run the government based on nostrums they learned from their parents rather than the real world. Elmendorf changed his view on economic priorities based on evidence.

There is a clear story of how excessive deficits can hurt the economy. They drive up interest rates if the Fed does not accommodate them and they lead to inflation if the Fed does. The rationale is simple: excess deficits cause us to push the economy too hard. They lead to too much demand given the economy’s ability to produce goods and services.

We clearly are not seeing this constraint. There are still millions of unemployed or underemployed workers who would like full-time jobs. This means that the concern about balanced budgets is needlessly keeping these people unemployed. And the weakness of the labor market is keeping tens of millions of workers from having the bargaining power necessary to get their share of the benefits from economic growth in higher wages.

Perhaps even worse, the obsession with deficits prevents us from doing things we really need to do. The neglected items form a long list, from early childhood education and affordable college to keeping the kids in Flint from being poisoned.

But hey, why look at the real world when we have the words of wisdom on balanced budgets that Robert Samuelson learned from his parents.

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The NYT had an article this morning on how European tech start-ups were seeing new capital dry up in the same way as Silicon Valley firms. The piece portrayed this as largely a negative event. Undoubtedly, it is bad news for the founders and top employees of these firms, but it’s not clear it is bad news for the economy.

The huge capitalizations of many start-ups has allowed a small number of people to get very rich, however it is not clear that their valuations bore any resemblance to their value to the economy. For example, both Groupon and Dropbox at one point had market capitalizations of more than $10 billion.

While selling coupons over the web and an efficient offsite Internet storage system are both items that will provide benefits to many individuals, so is combining peanut butter and jelly in a single jar. It is not clear that we should expect to see someone becoming a billionaire for coming up with the idea of combining peanut butter and jelly in one jar, nor is obvious that the contributions of many of these start-ups should cause people to become billionaires.

If capital markets are hugely overpricing start-ups relative to their actual value to the economy, as subsequently determined by the market, then they are effectively redistributing wealth from others to the leading actors in these start-ups. Insofar as the money is coming from other wealthy people, this is simply a matter of money going from the old rich to newly created rich. In this case, it need not be matter of concern for the rest of us. However if pension fund assets or money held in mutual funds through individual retirement accounts are going into over-valued start-ups, then this is a redistribution from the rest of us to the new rich.

Insofar as that is the story of the Silicon Valley boom and the parallel boom in Europe, we should applaud the collapse of the price of these companies’ stock. An over-valued stock price has the same impact on the economy as counterfeit money that passes for real. It gives some individuals purchasing power who should not have a claim to it. Catching the counterfeiter and bringing the stock price back in line with the fundamentals is good news. (Of course in an economy that is operating below its capacity like ours, we actually would benefit from the demand that would be generated by a successful counterfeiter, but that is another story.)

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Claire Cain Miller had an interesting Upshot piece about differences in the way men and women divide child care and other unpaid household labor across countries. Some countries, notably the Nordic countries and the United States have made substantial progress in lessening the gap between women and men’s hours, although women still do substantially more unpaid work even in these countries (over 50 percent more in the United States). Other countries on the list, mostly those in Asia and southern Europe have done much worse by this measure, still having ratios of more than two to one.

While this is a very important issue which I would not want to trivialize, I couldn’t help but notice the substantial differences in total hours per day of unpaid labor reported across countries. The figure below sum the hours reported in each country for men and women.

Book8 660 image001

Source: New York Times.

At low end is South Korea, where the total reported hours of unpaid work are just 4.5 per day. Next in line is China at 5.4 hours, and then Japan at 6.0 hours. The big outlier at the other extreme is Australia at 8.1 hours per day, a full hour below Denmark, where total hours are 7.1 per day. The United States comes in close to the average at 6.8 hours per day.

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Okay, that’s not exactly true, but the new Economic Report of the President (ERP) has an interesting section that provides insight into the question of how fast the economy can grow, and more importantly how low the unemployment rate can go. The ERP re-examined the evidence on the relationship between inflation and unemployment.

Economists have long held the view that lower rates of unemployment would be associated with rising rates of inflation and vice versa. When the Federal Reserve Board decides to raise interest rates to slow the economy it is based on the belief that unemployment is falling to a level that would be associated with a rising rate of inflation.

Most economists now put the unemployment rate at which inflation starts to rise somewhere near the current 4.9 percent rate. (This is called the non-accelerating inflation rate of unemployment or NAIRU.) So does the ERP. But its analysis suggests a somewhat different story.

Figure 2-xiv shows the estimate of the NAIRU based on a simple regression measuring the change in the inflation rate against the level of unemployment using data from the last twenty years. The graph shows that the estimate has been falling consistently over the last two decades and is now near 4.0 percent. Furthermore, because the relationship is so weak, there is a huge range of uncertainty around this estimate. In fact, the figure shows that a zero percent unemployment rate is within the 95 percent confidence interval. (Don’t try that at home folks.)

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Robert Samuelson used his column today to back up Fed Chair Janet Yellen’s claim that expansions do not die of old age. In a column titled “Janet Yellen is wrong. Expansions do die of old age,” Samuelson briefly recounted the history of recoveries and recessions over the last half century.

According to Samuelson’s account, they differed a great deal in length, with the economy experiencing four recessions over the twelve years from 1970 to 1982, as the Fed struggled to slow inflation by raising interest rates and pushing up the unemployment rate. The recessions in 2001 and 2007–2009 came about as a result of collapsed asset bubbles. The former came after an almost decade long expansion.

The obvious take-away from the evidence presented by Samuelson is that expansions don’t just die, they have to be killed. The most common way they get killed is by the Fed’s efforts to curb inflation with higher interest rates. The other leading cause of death is a collapsing asset bubble.

So the question is, does anyone think current rates of inflation warrant sharp interest rate hikes from the Fed? If not, then we need to find an asset bubble whose collapse will sink the economy. If neither of these stories seems plausible, we have good reason to expect this recovery to go on for some time longer, even if the speed may be considerably slower than many of us would like.

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That is the theme of an article in the NYT yesterday with the headline, “China’s foreign exchange reserves dwindling rapidly.” The gist of the piece is that there has been a large outflow of capital from China in the last year, which has caused them to lose as much as $800 billion from their foreign reserves. According to the piece, China is down to its last $3.2 trillion.

If the idea of a country with $3.2 trillion in foreign reserves worrying about empty coffers sounds silly, it should. China has many economic problems (who doesn’t), but a shortage of foreign reserves is not among them.

First, just to get oriented, let’s keep in mind why China has been losing its reserves. As the piece notes, it has been trying to keep its currency from falling. Note that for years, the United States and other countries have wanted China to raise the value of its currency. The argument was that it had accumulated vast amounts of reserves to keep the value of its currency low in order to maintain large trade surpluses.

Now the story is that if China decided not act — it did not use its reserves to buy up the currency being sold by people trying to get some of their money out of the country — the Chinese currency would fall against the dollar and other currencies. Would this be a problem for China?

A lower valued yuan would mean higher prices for the goods China imports and lower priced Chinese goods everywhere else in the world. While China recently saw a modest uptick in prices in January, the conventional wisdom is that the country is far more concerned about deflation than inflation. From this perspective, it’s hard to see how a rise in import prices is a problem.

The other side of the equation is that China’s goods and services would suddenly be much cheaper for people in other countries. This would lead to more exports. Since the rise in import prices will reduce imports, the net effect of a decline in the yuan would be a rise in China’s trade surplus. That would be bad news for the United States and other countries, but it is certainly not a problem for China.

In other words, there is no obvious economic reason that China could not just let its currency fall in value. It would make other countries unhappy, but China’s government presumably cares more about its own economy than the economies of its trading partners.

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Catherine Rampell joined the chorus of critics of the Gerald Friedman analysis of the economic impact of Bernie Sanders’ platform. For folks who missed it, Friedman is an economics professor at the University of Massachusetts who produced a 53 page paper that projects the budgetary and economic impact of Sanders’ proposals. (Friedman’s relation to the Sanders campaign is not clear.)

Many economists do not find the projections credible. Among other things, Friedman projects average annual productivity growth of 3.6 percent. This compares to a Golden Age average of 3.0 percent and a post-crash average of just over 1.0 percent. It also projects that the share of the population that is employed will reach new highs. This is in spite of the fact that the population will be considerably older at the end of Friedman’s projection period than at its previous peak and that Sanders also has a number of proposals that will make it easier for people not to work.

Rampell and other Friedman critics have rightly noted these elements of his program. Sanders proposes to increase Social Security benefits and have universal Medicare. This will make it easier for many people to retire earlier than might currently be the case. Sanders also proposes to make college free. This would likely reduce the percentage of college students who work, as well as increase the number of people who go to college.

These policies are both likely to lead to sharp reductions in labor force participation at both the older and younger ends of the age distribution. This highlights a point that many of us have made in comparisons of employment rates in European welfare states and the United States. The United States does better than countries like France (although worse than Germany and Denmark) when we look at employment rates for the population as a whole, but it looks pretty much the same if we focus on prime age workers (ages 25-54).

The difference is that France and other European countries have more generous pensions and universal health care coverage, which make it easier for older workers to retire. And college is either free or low cost (often with subsidies for students) so that it is not necessary for college students to work. As Rampell and others have acknowledged, these are not necessarily bad policies, but they do mean less work and less growth.

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In a Wall Street Journal column earlier this week, John Carney warned readers that the financial transactions tax (FTT) proposed by Senator Bernie Sanders “promises a smaller, slower market offering lower returns to investors.” He also warned that middle class investors will see higher costs in their mutual funds as a result of the tax.

While Carney treats the tax as a bit of a leap into the unknown, we actually have been there very recently. A FTT increases the cost of buying and selling shares of stock or other financial assets. We have had higher costs for buying and selling financial assets in the very recent past. The cost has fallen due to the rapid improvement in computer technology that has allowed for the price of trading to plummet in recent decades.

An FTT would raise the cost back to where it had been in prior decades. If a tax was structured along the lines being considered by European Union countries (0.1 percent on stock trades, 0.01 percent on derivative trades), then it would be raising costs roughly to where they were in the 1990s. These higher costs should then cause returns to investors to be comparable to what investors saw in the 1990s. (Past returns are no guarantee of future performance.) Markets don’t care if costs are higher due to a tax or less efficient technology, the impact is the same.

The amount of costs borne by middle class investors will depend on the extent to which their trading responds to higher costs. Most research indicates that trading will decline roughly in proportion to any increase in costs, meaning that most middle class investors would pay the same amount in trading costs after the tax as they did before the tax. (The recent study by the Tax Policy Center assumed that trading volume actually declined more than any increase in costs associated with the tax.)

The column also cited a study by the European Commission that purportedly showed a tax reducing GDP by 1.76 to 2.05 percent. Those numbers are from a preliminary study. A revised study found that the impact on growth would be less than 0.2 percent of GDP and that if the revenue was invested in the economy, it would be a positive 0.2 percent of GDP. That probably would not sound too scary to WSJ readers.

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A NYT piece headlined “left-leaning economists question cost of Bernie Sanders’ plans” may have misled readers about the extent of skepticism among economists who consider themselves left-leaning. I can say this as a card-carrying left-leaning economist who often talks to other card-carrying left-leaning economists.

While there are undoubtedly many left of center economists who have serious objections to the proposals Sanders has put forward, there are also many who have publicly indicated support for them. Remarkably, none of those economists were referenced in this article. In fact, to make its case on left of center economists’ views, the NYT even presented the comments of Ezra Klein, who is neither an economist nor a liberal, by his own identification.

It also misrepresented the comments of Jared Bernstein (a personal friend), implying that they were criticisms of Sanders’ program. In fact his comments were addressed to the analysis of Sanders’ proposals by Gerald Friedman, an economist at the University of Massachusetts who is not affiliated with the Sanders campaign.

It also presented the comments of Brookings economist Henry Aaron about the views expressed by “other economists in a ‘lefty chat group’ he joins online.” This would seem to violate the NYT’s usual policy on anonymous sources.

Sanders has a very ambitious agenda covering everything from universal Medicare, reforming the financial sector, paid sick days and vacation, free college, and universal childcare. If an economist, left-leaning or otherwise, can’t find some grounds for skepticism on any of these proposals they should probably be in a different line of work.

These are all big ideas, each of which will face enormous political opposition even if Bernie Sanders were in the White House. Sanders has not given a fully worked out proposal in any of these areas, nor is it reasonable to expect a fully worked out proposal from a candidate for the presidency. His campaign platform outlines general approaches. In the event Sanders got to the White House, it would be necessary to draft fully worked out legislative language which would almost certainly amount to hundreds of pages, and quite possibly thousands of pages, in each area. In addition, whatever he initially put on the table would have to be haggled over with Congress, even assuming that he had a much more sympathetic group than the current crew.

While it is nice that the NYT is subjecting Sanders’ views to serious scrutiny, it would be good if it also subjected the views of other candidates to the same scrutiny. For example, Secretary Clinton has indicated a desire to give more opportunity to African Americans and Hispanics, yet she has not commented on the decision by the Federal Reserve Board to raise interest rates at the end of last year. This rate hike was intended to be the first of a sequence of rate hikes.

The purpose of raising interest rates is to slow the economy and the rate of job creation, ostensibly to prevent inflation. The people who will be disproportionately hurt by slower job growth and high unemployment are African American and Hispanic. NYT readers would likely be interested in knowing how Secretary Clinton can reconcile her commitment to helping African Americans and Hispanics with her apparent lack of concern over the Fed’s decision to raise interest rates and deny them jobs.

Whatever standard of scrutiny the NYT chooses to apply to presidential candidates it should apply them equally. It is not good reporting to apply one standard to Senator Sanders, and even inventing credentials to press its points, and then apply lesser standards to the other candidates.

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Robert Samuelson really, really wants to cut Social Security and Medicare and he is not going to let the data get in the way. His column today complains about the lack of straight talk on the budget. He calls for candor when discussing the budget. Unfortunately he resists this standard himself.

The argument is the usual, rising Social Security and Medicare spending are going to crowd out other areas of the budget. As he tells us:

“The basic conflict posed by the budget is not between rich and poor but between workers and retirees. Present policy favors retirees over workers — the past over the present and future — because, politically, tampering with benefits is off-limits. The rest of government absorbs the fiscal consequences of an aging population.”

Okay, let’s inject a little straight talk and candor into Samuelson’s discussion. First, he tells us that he wants to free up money for other programs by:

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