As family and work patterns have shifted over recent decades, the demand for time off from work to address family needs has grown rapidly. “Work-family balance” has become an urgent but elusive priority for millions of Americans, driven by high labor forc

Dean Baker
Al Jazeera English, October 15, 2012

The New York Times reported Saturday on U.S. drug efforts in Honduras. Following a series of bungled raids and downed airplanes, the Times reports that “All joint operations in Honduras are now suspended,” while U.S. officials develop a new plan which will encompass other areas of reform. On the deadly raid in Ahuas, which CEPR policy analyst Alexander Main and Annie Bird of Rights Action documented in detail here, Senator Patrick Leahy (D-VT) told the Times, “This operation was bungled in its conception, in its implementation and in its aftermath.”

Many former recipients of IMF loans spoke out at the annual meetings this week against the conditionalities imposed by the IMF, Reuters reports. The IMF released new research last week showing that the austerity policies they imposed as lending conditions caused up to three times more economic damage than they had previously estimated. Argentina, which defaulted on their debt after an economic crisis triggered in part by IMF austerity policies in the early 2000s, noted the IMF’s admission was a “first step”, but Finance Minister Hernán Lorenzino added, “Once again... the IMF is endorsing policy conditionalities and reform strategies that are bound to fail, worsening recession and unemployment levels in programme countries and leading to unsustainable debt paths and social failure.” A CEPR report in 2009 looked at all the IMF’s borrowing agreements, finding that 31 of 41 contained pro-cyclical policies that could lower economic growth.

At the annual IMF meetings in Tokyo, Colombia announced it would leave the voting bloc aligned with Brazil in favor of Mexico, reports Bloomberg. Brazil, a member of the BRICS countries, has been one of the most vocal advocates of IMF reform. An agreement to shift more voting rights to developing countries has been held up for years as the traditionally dominant European countries have resisted moving their voting shares more in line with their share of world economic output. Colombia’s Central Bank chief Dario Uribe commented on the move to Mexico’s voting  constituency, “It’s a group where there’s a receptivity toward a country like Colombia, where there are great historical and commercial ties.”

Last week a “vulture fund” belonging to American Task Force Argentina, a lobbying group seeking to recoup the “full” value of Argentina’s defaulted bonds which were bought for cents on the dollar, detained an Argentine naval ship in Ghana to try and force repayment. The lobbying group lists some 40 members of their organization on their website, including many farmers associations, yet this weekend the Wall Street Journal reported that many of them had no idea how they became affiliated with the group. "We don't have anything to do with Argentina's debt,” Larry Matlack president of the American Agriculture Movement told the Journal.

Dean Baker
Truthout, October 15, 2012

In his NYT blog, Thomas Edsall took off from a recent paper by Northwestern University economist Robert Gordon and warned that we may see a future of very slow economic growth. While Gordon is a good economist, with many useful insights (including in this paper), it is worth throwing in a few words of caution.

First, economists’ ability to predict trends in productivity is virtually zero. There were two major shifts in productivity trends in the post-World War II period: the slowdown that began in 1973 and the speedup that began in 1995. Almost no one saw either shift coming even as the shifts were occurring, much less 3 or 5 years ahead of time. Forty years later there is still no agreement within the economics profession on the causes of the slowdown in 1973. Given this history, it is reasonable to view any projections of productivity growth for the next hundred years and beyond with more than a little skepticism.

With this caution, let me suggest some reasons that Gordon may be overly pessimistic. There are good reasons for believing that we could have large gains in living standards, even if these may not always be picked up in our GDP or productivity measures.

To start with an easy one, we spend more than 17 percent of GDP on health care, more than twice as much per person as the average for other wealthy countries. Yet, we have nothing obvious to show for it in the way of outcomes.

This suggests two obvious paths for gains. First, we can look to get our costs more in line with those of other wealthy countries. This would free up an enormous amount of resources for other uses. If the political system is too corrupt to allow for increased efficiency in the health care sector, we can look to take advantage of the more efficient systems elsewhere through increased trade.

We could also look to have the sort of improvements in lifestyle and diet that would bring our life expectancies up to those of other wealthy country. We are currently more than 5 years behind Japan, the leader among major countries. If we could get even with Japan, somewhere over the course of the century, this extra 5 years, beyond the current path of increase, would be worth more than $250,000 per person by standard measures.

A relatively simple way in which we could have an increase in living standards that would not be picked up GDP or productivity measures is by reducing the standard workweek to four days from five. If we assume that people spend an average of 1 hour on their round-trip commute, this would be an increase in pay per-hour spent working/commuting of more than 2 percent. If we also could stagger workdays and reduce congestion, the gains would be correspondingly larger.

After having provoked a debate that subsequently involved Nick Rowe, Brad DeLong and Paul Krugman, I will assert blog owners’ privilege and throw out some summary thoughts.

First, we all seem to agree that in a situation where the economy is clearly operating well below its potential, governments can run deficits to boost employment and output. I believe we all agree that in principle the government can also use these deficits to increase future output through productive investment in either physical or human capital. This would make future generations better off on net as a result of deficits today, since the economy will be larger than it would be without the deficits.

I would also add, without necessarily implicating anyone else, that simply by increasing output and employment the government is likely to make society better off in the future for two reasons. First, by keeping people employed we will keep them attached to the labor force and reduce the number of hard core unemployed who would be difficult to re-employ in subsequent years, possibly leaving us with a higher rate of unemployment (and lower output) long into the future.

The other reason that short-term increases in employment can have long-term effects is that by keeping families intact, children are likely to have better upbringings and do better in school. This means that the next generation will on average will have happier more productive lives because we used deficits to keep their parents employed today.

Okay, but even if deficits today don’t reduce output tomorrow, Nick Rowe argues that by increasing the wealth of some members of the current generation (those who hold the bonds used to finance the deficit), we can still be reducing the wealth of members of future generations. The argument here is that if we get back to full employment at some point in the future (this is a full employment argument), the people who hold the bonds will be able to pull resources away from young people who are entering the labor force and were not involved in the decision to run deficits today.

There is some validity to this point, but it is extremely limited. First, it is important to remember that most of the holders of current debt will be people who have children and/or will bequest some of their wealth to their children or charitable organizations. While children may not benefit one to one from the consumption of their parents, surely they benefit in part. Insofar as people with or without children save some of the wealth from the bonds and subsequently will it to children or charitable organizations, today’s deficit will not crowd out any consumption of future generations.

Finally, much of the tax burden of paying the debt service on the debt issued today will be borne by members of the current generation. In that sense it is an issue of intra-generational distribution, not intergenerational distribution.

In short, we can talk about some burden on future generations as a result of debt issued today, if it goes to unproductive uses, but the size of this burden is clearly a fraction of the debt and likely to be a very small fraction in my book. Furthermore, debt is far from the only mechanism through which the government imposes inter-generational burdens of this type.

Nearly three years after the earthquake of January 2010, durable housing solutions remain nonexistent while tens of thousands remain at risk of forced evictions. According to the International Organization for Migration, there are currently 369,000 individuals residing in 541 official IDP camps throughout Haiti. Yet over 20 percent of the remaining individuals are in constant risk of eviction. Fortunately, camp residents are organizing to fight back. Public Radio International’s The World reports:

Enter Patrice Florvilus. After the earthquake, the attorney formed an organization that represents residents of tent camps who’ve been threatened with eviction.

“Our strategy is to stop evictions by making landlords follow the law, which can mean a lengthy legal process. And that’s what the landlord wants to avoid,” Florvilus said.

It doesn’t always work, but a legal defeat can sometimes turn into a de facto victory. In one case, the mayor of Delmas ordered families off government land. A court upheld the eviction order. But then the mayor backed off — locals say because of organized opposition.

But activists have faced many difficulties, including intimidation and jail time. Meena Jagannath reported last month on the case of David Oxygène, an activist who was imprisoned for over two months. He was arrested during one of his group’s weekly protests against the Martelly government calling for improved social policies, including adequate housing.

More recently, a protest organized by camp residents to protest the lack of adequate housing was cancelled following threatening phone calls and other forms of intimidation. GlobalPost reports:

She [Alexis Erkart of Other Worlds] says fear and fatigue run high in the camps, and residents are consistently faced with the prospect of forced evictions, but have nowhere else to go.

Erkert told GlobalPost yesterday via email that yesterday’s protest was being organized by a number of camps, but that “a number of camp residents reported receiving threatening phone calls and thugs coming to the camps telling people not to participate in the protest. There was enough fear that they decided to hold off.”

…

“More and more camps are evicted with no housing plan in place, without viable options for the future,” said Erkert. “They have no access to the government, and limited access to the media. It makes me deeply sad that today they were stripped of one of the only means available to them to make their voices heard.”

Every month, the Bureau of Labor Statistics conducts the Job Openings and Labor Turnover Survey (JOLTS). The survey asks businesses questions about hirings, firings and layoffs, workers quitting, and the number of job openings they have. This past Wednesday, the BLS released the JOLTS for August. Using data from the JOLTS and unemployment, a ratio of the number of unemployed workers to the number of job openings, called the job seekers ratio, can give an idea of how tight the labor market is. For August, the job seekers ratio is at 3.5, meaning that for every one job opening there are three and a half unemployed workers. While this is a lot better than the high of 6.7 reached in July of 2009, it’s a far cry from the 1.7 ratio averaged from 2005 through 2007.      

Another interesting part of the JOLTS is that it’s broken down by industry. This gives insight into which industries are hiring, and which aren’t. If you’ve paid attention to very serious people – or very, very serious people – you’ve no doubt heard the argument that our unemployment problems are a mismatch between workers’ skills and the jobs of the 21^st century. This argument is called “structural unemployment.” If the economy suffers from structural unemployment, government policies to boost spending won’t help. Instead, the unemployed need to get retrained for the jobs that are available. Then the unemployment crisis will disappear. Unfortunately, this story disagrees with the data/reality. 

Politicians have told us for decades that homeownership is the American Dream. They do this because they get lots of contributions from interest groups that have a stake in pushing homeownership: builders, real estate agents, mortgage bankers, and many others who stand to get a share of the spoils. But letting politicians determine our dreams is never good policy.

While homeownership may often provide a good path for secure housing and a route to accumulate wealth for moderate- and middle-income families, it's often not the best option. The reason is very simple: There are large transactions costs associated with homeownership. A person planning to buy a home can expect to pay fees on a mortgage, title insurance, fees for an inspection, an appraisal, a survey, and in many states a transfer tax. These fees can easily come to 3-4 percent of the purchase price of a home.

Homeowners face a similar story on the sell side. The most important cost of selling a home is usually the Realtors’ fee, which is typically 6 percent of the sale price. In total the average round-trip cost of buying and selling a house is likely to be in the neighborhood of 10 percent of the purchase price.

This is a lot of money to throw in the garbage. For a $250,000 house this would imply transactions costs of $25,000. That would be more than two years of rent for a place that rented at $1,000 a month.