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Article Artículo

Robert Samuelson Mostly Right on Over-Valued Dollar

Robert Samuelson makes an important point in his column today, the "strong" dollar is hurting the country's economy. This fact is central to understanding the imbalances that have shaken the U.S. and world economy over the last 15 years. Because of an over-valued dollar the trade deficit exploded in the late 1990s.

A trade deficit means that demand is going overseas rather than for goods and services in the United States. To offset this lost demand we must either have public sector deficits or we must have private savings lag investment, or some combination. In the late 1990s the consumption, and resulted low savings, generated by the stock bubble filled the demand gap. In the last decade, when the trade deficit hit a peak of 6.0 percent of GDP in 2006, the construction and consumption booms generated by the housing bubble filled the gap.

Until we get the dollar down to a level consistent with more balanced trade we will have a large demand gap that will have to be filled by either public or private sector deficits. That is a fact of accounting, not a debatable point. Those who disagree simply do not understand.

The part of the story that Samuelson misses is that the over-valued dollar is a relatively recent phenomenon, not something that dates from the U.S. becoming the world's leading reserve currency. The dollars soared in 1997 as a result of the U.S. government and IMF"s mismanagement of the East Asian bailout from the financial crisis.

The conditions they imposed on the countries of the region led developing countries around the world to begin to accumulate massive amounts of dollars as a cushion so that they would not ever be in the situation that the East Asian countries found themselves in 1997. This means that the imbalances of the last 15 years can be directly attributed to the failures of the Greenspan-Rubin-Summers team (a.k.a. "The Committee that Saved the World") that directed the bailout.

Dean Baker / May 27, 2013

Article Artículo

Affordable Care Act

Obamacare Is Creating Uncertainty! Better Ditch It

As the January 1, 2014 date, when the main body of President Obama's health care plan takes effect, comes closer Republicans are getting ever more frantic. After all, the risk to the country is enormous. The program will extend health care insurance to tens of millions of people and provide real security to tens of millions more (suppose you get sick now and lose the job that provides you insurance).

Now that is really scary. People may like the plan and actually look to extend it and improve it in various ways that could mean lower incomes for insurers, doctors, and other providers. This is why the Republicans are pulling out all the stops to sink the plan now before it's too late.

Robert Samuelson carries the torch today in his column "the fog of Obamacare," the point of which is that it is all so confusing. As evidence he cites polls showing that people don't know what the main provisions of the bill are or when they take effect or even if the bill was passed into law.

Yes, that is bad news. It probably didn't help matters in this area that we had many Republicans talking about death panels or that the government was going to take over the health care system.

Unfortunately the public is often less informed that many of us might like. They think that welfare and foreign aid are among the largest items in the federal budget. Many also thought that Saddam Hussein was behind the September 11th attacks. In other areas Samuelson has not been especially concerned about public ignorance.

But Samuelson tells us that employers are also confused about their responsibilities. He knows this because he talked to the heads of four employer consulting companies. He tells readers that many of these companies "are only now coming to grips with the ACA, because they’d assumed that the Supreme Court would invalidate it or that a Republican White House would repeal it."

So employers rely on consultants who had not paid attention to the ACA because they thought the Supreme Court would repeal it or that Romney would win the election? Now that is scary.

Dean Baker / May 24, 2013

Article Artículo

Globalization and Trade

IMF

Jamaica

Latin America and the Caribbean

World

IMF Approves Jamaica Loan – Pain, No Gain

After months of speculation, in early May the IMF formally approved a new lending agreement with Jamaica worth $932.3 million. With additional commitments from the World Bank and Inter-American Development Bank, the total loan package amounts to $2 billion. But, after another year of negative economic growth (the fourth in the last five years), will this time be any different?

Jamaica previously agreed to an IMF loan in early 2010, which was coupled with a debt exchange that sought to lower interest rates but did not provide any haircut (a lowering of the debt’s principal). The agreement mandated harsh austerity measures and despite the debt exchange, Jamaica’s interest burden remained the highest in the world, at 11 percent of GDP. The agreement eventually broke down after a Jamaican court ruled that the government had to distribute back pay to public sector workers, against the wishes of the IMF. Nevertheless, Jamaica has largely continued the austerity measures from the first agreement. After a return to growth –albeit slow- in fiscal year 2011/12, Jamaica slipped back into a recession this past year, after cutting non-interest expenditure by over 2 percentage points of GDP. Even some within the IMF warned that the fiscal consolidation efforts were going too far and could threaten “the fragile recovery and social cohesion.”

As a precondition for the new IMF agreement, the Jamaican government undertook a second debt exchange in February of this year, seeking to lower interest costs and “bring down the debt burden over time.” However, similar to the previous exchange, the principal of the debt was not touched and interest costs remain extremely high and damaging. Of the 131 countries for which IMF World Economic Outlook data is available, Jamaica will still have the highest average interest burden in the world over the next six years. The debt exchange succeeded in extending the maturity profile of domestic debt (the amount coming due within five years decreased from 53.2 percent to 23.4 percent), but Jamaica is still expected to spend some 8 percent of GDP on interest payments for the next three years, crowding out needed spending elsewhere. Overall debt servicing is projected to take up 45 percent of total government expenditures over the next three years, only a slight reduction from the 46 percent average over the previous three.

Jake Johnston / May 23, 2013

Article Artículo

Workers

Young College Graduates: Economic Implications of Unpaid Internships

In addition to the legal and ethical concerns with unpaid internships, which I raised in a recent post, unpaid internships also pose a number of economic issues. First and foremost, unpaid internships require a substantial financial commitment from interns. Young adults participating in unpaid internships typically sacrifice time they could spend earning money at paying jobs. Even so, many interns work second jobs at night shifts to make ends meet. As many of the most desirable internships are located in cities, interns often have to endure long, costly commutes or somehow afford housing closer to the city. Some interns even paymore than $12,000 for a semester-long internship placement (includes housing costs) in cities like Washington, D.C.

Some students and recent graduates are fortunate enough to have families that can afford to subsidize these costs. For many students from modest backgrounds, however, their families cannot bankroll their living expenses as they perform unpaid work. It is not possible for these students to work unpaid internships when they need to take paying jobs in order to put themselves through school or cover their living expenses. Without internship experiences, lower-income students will be at a competitive disadvantage when applying for future jobs. In this regard, unpaid internships can reinforce socioeconomic inequalities.

Unpaid internships don't always provide the returns many interns expect. The 2011 National Association of Colleges and Employers (NACE) graduate survey (includes every organization type: for-profit, non-profit, government) found that graduates who had unpaid internships not only performed worse in job offers and starting salaries compared with those with paid internships but they also had worse prospects than those who had no internship experience at all (Eisenbrey, 2012).

CEPR and Will Kimball / May 22, 2013

Article Artículo

Latin America and the Caribbean

Not Writing History

Ten days ago Guatemalan courts convicted former dictator General Efraín Ríos Montt, to 80 years in prison for charges of genocide and crimes against humanity. Though the ruling has just been overturned on technical grounds, it was the first time that a country has been able to use its own criminal courts to try a former head of state for genocide, arguably making it one of the most important court decisions in decades. Despite the significance of the ruling, not just for what it represents for the more than 200,000 victims of the genocide and their families, but also for human rights worldwide, the mass media in the U.S.  has mostly ignored the U.S. role in contributing to and supporting the genocide.

The New York Times provided a couple of exceptions in the last week. Its “Room for Debate,” feature, which is regularly published online but not in the print edition, and allows perspectives from a broader political spectrum than is normally permitted in news articles or even the op-ed page,  published a range of opinions on the extent of U.S. support and complicity for the Ríos Montt regime. And last week the New York Times published an exceptional print article about the role of the U.S. government in Guatemala, Reagan’s financial and fervent military support for Ríos Montt’s bloody dictatorship, and how this aspect of the genocide had been conspicuously absent during the trial against Ríos Montt.  

Amazingly, the Washington Post chose not to report at all on the historic ruling in their print edition following the day of the ruling. Although stories on corruption scandals in India, a detained youth activist in Egypt, and voting in Pakistan did make the international section of the print edition of that day’s Washington Post,  the Post found no space to print this story. Two days after the conviction was announced (and after it made headlines around the world), and buried deep in the digest section of Sunday’s print international section were a total of 73 words dedicated to what it said human rights activists called “a historic moment” in Guatemala.

This dearth of words from the Washington Post shouldn’t be too surprising. After all, not reporting or investigating news about massacres and genocide in Guatemala when it had the opportunity to do so is consistent with the Post’s reporting on the country throughout the 1980s when the U.S. government supported death squads in the countryside killing anyone and everyone that they could. Yes, the Post reported on Guatemala, and on guerrillas, and occasionally it even paid some lip-service to the idea that some people claimed that the government and army, not the guerrillas, were behind the vast majority of deaths in the country. But, despite reliable indications and reports that government-led massacres and even a genocide was in fact underway in Guatemala, for example from this October, 1982 episode of PBS’s MacNeil/Lehrer Report  and this one from November of 1983, the Post neglected the opportunity to dig up the truth during this period. The New York Times, it should be pointed out, also mostly ignored the genocide when it was taking place. This was the pre-internet era, so if these newspapers did not report on massacres, for the United States public and policy-makers, they weren’t part of the news.  (However, investigative reporter Allan Nairn did get opinion pieces into the NYT and Washington Post some time after the worst massacres had occurred.)

CEPR and Sara Kozameh / May 21, 2013