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Article Artículo

Washington Post's Dan Balz Absolves Pollsters on UK Miss: "No One" Saw It!

I usually don't stray directly into political contests and polling here at BTP, but I think there is a very important economic phenomenon here. Dan Balz, the Washington Post's lead political analyst, had a piece on the election results in the UK. The last paragraph begins by telling readers:

"No one saw Thursday’s British results ahead of time. Even more than the Brexit vote and more than Trump’s victory, this was a shocker."

This is not true. The polling firm YouGov's model nailed the results almost exactly, predicting that the Conservatives would lose 20 seats. (They actually lost 19.) This matters not only because Balz is denying YouGov the credit it deserves for getting this one right, but because he is giving an amnesty to everyone else who missed it. According to Balz, the other polling firms can't be blamed because the outcome simply was unknowable.

This collective amnesty is annoying because these people are paid lots of money to get things right. When they completely blow it, they should suffer the consequences. After all, when the custodian doesn't do a good job cleaning the toilets, they get fired. The Washington Post doesn't write a piece on their behalf saying that it couldn't be done.

Of course, this brings back memories of the housing bubble and the massive "who could have known" amnesty granted all the economists and policy types who completely missed the largest economic collapse in more than seventy years. As a frustrated "no one" in this case, I can say that it absolutely was foreseeable and anyone with open eyes saw it. 

CEPR / June 11, 2017

Article Artículo

Government

Corporate Profits and Investment: Not Moving Together

Many economists have expressed surprise over the fact that investment has not been stronger in the recovery from the Great Recession, given the high level of corporate profits. The trends in investment and profits over the last half century suggest that they should not be surprised.

Profit and investment shares of GDP have not moved together over this period. In fact, there is weak negative correlation in shares over this period (-0.3). The figure below shows before- and after-tax shares of profit in net national product (NNP) since 1964.[1] (We use NNP to take account of the fact that the depreciation share of output has increased substantially over this period, which would bias the profit share downward.) It also shows the share of non-residential fixed investment in NNP.

There are several points worth noting about these trends. First, there is not much movement in the non-residential investment share. The table below shows the investment shares of NNP by decade:

Decade Investment Shares
1970s 13.9%
1980s 15.8%
1990s 14.6%
2000s  14.9%
2010-2017(1)  14.3%

Dean Baker and Brian Dew / June 09, 2017

Article Artículo

Economic Populism Doesn't Have to Involve More Government

Thomas Edsall's NYT piece is ostensibly bad news for Democrats since it argues that the working-class populism among non-college educated Trump voters is anti-government. He argues this means that they are suspicious of government programs Democrats favor that redistribute from the wealthy to poor and working class.

While Edsall presents this as insoluble problem for Democrats looking to rebuild majority support, that is not really the case. The upward redistribution of the last four decades has been driven by government policies. It can be reversed by different government policies, which does not necessarily mean more government.

The first and most obvious item on this list of policies is Federal Reserve Board monetary policy. Right now the Federal Reserve Board is in the process of raising interest rates. The point of this policy is to slow the economy and reduce the pace of job growth. This is ostensibly because the Fed is concerned about inflation getting too high, but the immediate effect of the policy is to keep people from getting jobs and reducing the bargaining power of those who do have jobs.

A Fed that doesn't raise interest rates doesn't imply any bigger government than a Fed that does raise interest rates. In the decades immediately following World War II, when most workers shared in the gains from economic growth, The Fed was more committed to full employment and less concerned about inflation. There is no reason that Democrats could not champion a more worker-friendly Fed.

There is a similar story with trade policy. While it will not be possible to get back or even most of the millions of jobs lost to trade in the last decade, the United States could pursue policies that get the trade deficit closer to balance. A trade deficit in the range of 1.0 percent of GDP ($190 billion), instead of the current trade deficit of around 3 percent of GDP (around $550 billion) would imply another 1–2 million manufacturing jobs. This would provide a substantial boost to the labor market for workers without college degrees.

CEPR / June 08, 2017

Article Artículo

Disability

The Washington Post's War on Disability Continues

At a time when an ever larger share of national income is going to the richest one percent, and large segments of the working class population are seeing rising mortality rates, the Washington Post naturally turns to the country's most pressing problem: the number of people receiving disability payments from the government.

Its second piece on the topic profiled a family with multiple generations receiving disability benefits. It seemed to go out of its way to include every possible negative aspect of their lives in order to give an unfavorable view of the family and leave readers with the impression that the country has a serious problem of families who do nothing but collect disability checks generation after generation.

The piece begins with a horrible story of young children playing with a puppy and then accidentally dropping it to the floor. They originally think the puppy was killed from the drop, but apparently it was only stunned and managed to survive. Then we get the story of the mother telling the kids to grab sodas to bring to a Sunday morning church service.

We then get the poetic description of the rural Missouri countryside where this family lives:

"She saw that gravel road turn into another and another. She saw trailers, dirt-battered and deteriorating. She saw land as flat as it was empty, land that migrant workers traveled hundreds of miles to cultivate, reaping both that year’s watermelon harvest and jobs that few in the community were willing to do."

CEPR / June 05, 2017