In a fascinating recent post The Nation’s Greg Kaufman pulls together a range of responses from economic justice advocates and researchers (including me) on whether the fiscal cliff deal was a good one for low-income people. Reading it along side what's b

Mark WeisbrotThe Guardian Unlimited, January 9, 2013En Español | Em Português

Dean Baker
The Hankyoreh (South Korea), January 9, 2013

By the conventional “peak to trough” measure, the recession that began in December 2007 ended 18 months later, in June 2009. But you’d be hard-pressed to find much evidence of “recovery” in the labor market.  Job creation is barely keeping up with population growth.  The marginal decline in the unemployment rate (from about 10 percent at its worst to just under 8 percent at the end of 2012) has been driven mostly by people dropping out of the labor force.  And long-term unemployment remains stubbornly high.

All of this begs a bigger question: What would real recovery look like?

The first and simplest measure (see graphic below) is simply to chart our progress towards regaining the jobs lost during the downturn.  This yields a flat threshold at the December 2007 employment levels, and a jobs deficit that pushed past 8 million in late 2009 and now sits at about 3 million.  

This “struggling back to the surface” measure has some utility, especially in comparing the recovery trajectories of different recessions.  But it becomes less useful the longer the downturn lasts, as population growth creates a new baseline for the labor force.  Getting back to December 2007 employment has little meaning after five years of immigration, retirements, and high school and college graduations.

Dean Baker
Truthout, January 8, 2013

Economic commentator Evan Soltas really missed the boat in his most recent Bloomberg column on the minimum wage. He gets some of the economics right —the best empirical evidence on the minimum wage, he notes, for example, "find[s] small, if any, impacts o

William K. Black, former deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement and now Associate Professor of Economics and Law at the University of Missouri – Kansas City takes on Alvaro Vargas Llosa and other “neoliberal” pundits in a long post today at Huffington Post. Noting how Vargas Llosa, P.J. O’Rourke and others have condemned the left-leaning heads of Latin American states as “idiots” and “stupid,” Black examines the track record of the neoliberal economic model versus the alternatives being pursued by countries such as Ecuador:

We have run what economists refer to as a "natural experiment." At the same time that Latin Americans were overwhelmingly rejecting key neo-liberal aspects of the Washington Consensus the Eurozone and the United States moved rapidly in the opposite direction by adopting ever more extreme neo-liberal dogmas. These dogmas created what criminologists refer to as a criminogenic environment -- an environment where the incentives are so perverse that they can produce epidemics of "control fraud." These fraud epidemics directly drove the financial crises in the United States, the United Kingdom, Ireland, and Iceland and indirectly triggered crises by causing global systemic shocks. AVL does not wish to discuss the predation by the world's most elite bankers.

The loss of the young (through emigration), employment, output, income, and wealth and the growth of poverty and inequality that resulted from the most extreme neo-liberal policies are staggering. In the U.S., over 10 million Americans lost their jobs or could not obtain jobs that would have been produced by a healthy economy. Spanish unemployment is nearly 5 million. The crisis is so great that it is now common for Irish and Italian citizens to emigrate as soon as they earn their university degrees. The Financial Crisis Inquiry Commission reported that the loss of U.S. wealth in the household sector alone was estimated at over $12 trillion -- a trillion is a thousand billion.

And concluding:

The American Red Cross has issued a new progress report on its work in Haiti since the earthquake, describing how it has used the $486 million USD that it has raised. The report, while brief, and still vague in some places, seems to be intended in part as

Dean Baker
Al Jazeera English, January 7, 2013

Mark WeisbrotThe Guardian Unlimited, January 5, 2013

January 7, 2013

January 7, 2013 (Housing Market Monitor)

Over the next month, Haiti Relief and Reconstruction Watch blogger and CEPR International Research Associate, Jake Johnston will be in Haiti following up, on the ground, many of the issues this blog has covered since the earthquake nearly three years ago.

Port-au-Prince – In the last thirteen months, the “official” total of displaced persons in Haiti has decreased by 35 percent and over 300 camps have been closed. One could be forgiven for thinking the decrease was even larger. The sprawling tent camp near the airport, for everyone entering Haiti to see, as well as the Champ de Mars camp, are no longer. With their closure, some of the most visible signs of the stalled reconstruction effort have been erased.  As the three-year commemoration of the earthquake approaches, the reduction in the IDP population will undoubtedly be touted as one of the great successes of the relief and reconstruction effort. And yet an estimated 360,000 Haitians remain in official tent camps.

Those who remain may not be as visible; many are tucked behind high walls and off main streets but their situation remains just as dire and continues to deteriorate. The most recent OCHA Humanitarian Bulletin notes that those who remain in the camps “face worsening living conditions, as humanitarian partners pull out as a result of lack of funding.” It is estimated that at least 230,000 will still be in the camps at this time next year.

For those that have left the camps, little is known about their current status. According to OCHA, over 250,000 have left the camps due to resettlement programs, yet there has been no systematic tracking of what has happened to them. The government’s flagship relocation program, “16/6”, began over a year ago, meaning the one-year rental subsidies offered to camp residents have already run out, or will in the next few months. One former resident of the Champ de Mars camp said that his subsidy will run out next month, and with no steady employment, he expects to be back on the street soon. If so, he, and others in similar situations, would likely fall outside of the “official” camp population.

One of the major occupations for economists these days is blaming efforts to help poor people for the housing bubble and bust. The main villains in this story are Fannie Mae, Freddie Mac, the Federal Housing Authority (FHA) and the Community Reinvestment Act (CRA). A reader recently sent me another work in this proud tradition.

I just did a quick reading of the paper, but it seems that the smoking gun in this one is that banks subject to the CRA appeared to do more lending in CRA tracts in the periods where their lending behavior was being scrutinized by regulators. Just to remind folks, the CRA requires banks to make loans in the areas from which they were taking deposits, in particular focusing on areas that are disproportionately African American or Hispanic. The authors take this timing result, which is especially pronounced in the peak bubble years of 2004-2006, as evidence that the CRA played a major role in the pushing of bad loans on moderate income people. As they note, the loans issued in these tracts in these periods had a much higher default rate than other loans.

It's not clear that this gun is smoking quite as much the paper implies. First, it is important to remember that the biggest peddlers of subprime loans were mortgage lenders like Ameriquest and Countrywide. These lenders were for the most part not subject to the CRA since they were not banks (they raised money through the capital markets, not by taking deposits). Therefore the CRA was not a gun to the head of these lenders forcing them to make bad loans.

However even for the banks to whom the CRA did apply the evidence in this paper is less compelling than it may seem. Let's assume that banks do care about their CRA ratings for the reasons mentioned in the paper. (The CRA rating would likely be a factor that would come up when a bank was interested in a buyout or merger.) Let's also imagine that banks time their loans to CRA tracts so that they can show more loans in the periods where their compliance is being reviewed. Let's also hypothesize that in total the CRA doesn't get banks to make any more loans to CRA tracts than they would otherwise.

In this case, we would get exactly the sort of pattern of lending found in this study. Banks that are subject to the CRA would refrain from focusing on CRA tracts when they know no one is looking. Then when the light is on, they would make a stronger effort to make loans in the neighborhoods covered by the CRA. If banks engaged in this sort of timing of loans to CRA tracts, we would find that loans during CRA review periods were higher than in other times, even if there was no net increase in loans as a result of the CRA.

As we have previously noted, many pundits and much of the international media predicted a close presidential election in Venezuela in October, if not an actual victory by opposition candidate Henrique Capriles Radonski. But in the end, the vote was not close, as we had predicted it would not be in a paper we released on October 4. Chávez won by 11 percentage points – just a little over the 10.7 point victory that poll averages had suggested. As we have also noted, the conventional wisdom on Venezuela in the U.S. media and the economics profession (including the IMF) has repeatedly predicted sharply more negative outcomes for the Venezuelan economy than have materialized.

Now, as speculation runs rampant over the state of Hugo Chávez’s health, many of the same voices that predicted a close election in October are again predicting doom and gloom for Venezuela.

For example, in an op-ed just before the October election, the Inter-American Dialogue’s Michael Shifter wrote that “the election appears to be very tight.” In the New York Times’ Room for Debate today, Shifter details a list of problems that he says Chávez’s successor will need to tackle, “gradually” and tactfully in order to avoid some kind of catastrophe:

By now, it is easy to recite the litany of problems facing Venezuela.

At the top of the list are a huge fiscal deficit (around 20 percent) and high inflation (just under 18 percent), decaying infrastructure, mismanaged petroleum sector, shortages of basic goods, periodic blackouts and widespread crime and insecurity. All of these derive in some measure from severe institutional weaknesses, a product of Hugo Chávez’s one-man, 14-year rule. Whether his successor comes from his camp or from the opposition, reform and improved governance will be essential.

In a quickly-dated October 5 op-ed titled “How Hugo Chávez Became Irrelevant,” blogger Francisco Toro wrote, “Mr. Chávez is facing a tight re-election race against Henrique Capriles Radonski, a 40-year-old progressive state governor who extols the virtues of the Brazilian model,” and a little over a week before that wrote “Two weeks out, though, two of Venezuela's three best-regarded pollsters show him in a statistical dead-heat with the president. By crafting a message to appeal to a truly nationwide audience, he's given himself a real fighting chance to pull off a stunning upset on Oct. 7th.”

Mark WeisbrotRoom for Debate (The New York Times), January 4, 2013