October 30, 2019

October 30, 2019 (GDP Byte)

If the reporters want to yell about how Warren's plan will mean higher taxes, then they have the option to do so, but Senator Warren is talking about matters to real people.

When I first saw Senator Warren refuse to acknowledge that Medicare for All will mean higher taxes, I admired her political skills, but as an economist, I was annoyed at her evasion of an obvious truth. However, on further thought, I realize that she is exactly right and is doing a public service with her simple insistence that costs for most people will go down.

It is true that many people hate taxes and find the idea that they would ever have to pay more for taxes for anything repugnant. But that group is far from a majority of the electorate. Most people approach their tax bill as any rational person would. They want to know what they are getting for their money.

This is why Warren is giving the right answer even though it is angering reporters and political pundits. She is talking about what actually matters to most voters; what will they get for their money?

The reporters are determined to make this a “she will raise your taxes story.” This is an absurd narrowing of the issue. There is no reason that Warren should cooperate with their silly game. She is determined to talk about the substance of the issue, whether or not the reporters want to hear it.

For a larger context, consider how the budget is reported. Reporters routinely highlight the budget deficit and the accumulated debt, as though this is the most important feature of the budget. It is at least implicit in nearly all reporting that the country would be better off with a lower budget deficit.

This is also indicated in their choice of sources. An incredibly high percentage of budget stories in leading news outlets (i.e. the New York Times, Washington Post, and National Public Radio) feature comments from Committee for a Responsible Federal Budget, an organization committed to lower deficits and debt.   

News stories on the budget almost never present the countervailing view, which is endorsed by a growing number of economists, that the budget deficit has generally been too small in the years following the Great Recession. The result has been that growth has been slower than it otherwise would have been, causing workers to be needlessly unemployed.

Let’s unpack the E&Y study. Employment  E&Y touts that the private equity industry supports 8.8 million jobs. You could mistakenly think this means that PE created 8.8 million jobs or that PE increased employment at the companies it took over. That may be

The thing to fear isn’t productivity growth. It’s false narratives and bad economic policy.

Next week we will be celebrating the 20^th anniversary of the founding of the Center for Economic and Policy Research (October 29^th to be precise). I’m going to take this opportunity to point out how much economic debate has shifted over the last two decades, and also do a bit of boasting.

When Mark Weisbrot and I started CEPR at the end of 1999, it was the heyday of neoliberalism. Bill Clinton had won reelection in 1996, assuring us that the era of big government was over. Two big agenda items from his first term were the passage of NAFTA and welfare reform, which, as he put it, “ended welfare as we know it.” In international economics, the Washington Consensus reigned supreme, with privatization and austerity being pushed pretty much everywhere in the developing world.

Mark and I felt that the debate on economic policies had become overly narrow, and we thought that a small dynamic think tank, without major institutional constraints, could make a difference.

One of the first issues that we weighed in on was Social Security. At the time, the conventional wisdom, even among Democrats, was that Social Security was in crisis and that benefits had to be cut. Our book, Social Security: The Phony Crisis, came out just as CEPR was launching. Two decades later, not only have benefits not been cut, but the centrist position in the Democratic Party has shifted to benefits should be raised.

We also had pushed for full employment policies. In two books, Jared Bernstein and I argued that the benefits from low levels of unemployment to workers at the middle and bottom of the pay ladder were enormous. We also argued that economists had underestimated the economy’s ability to maintain low levels of unemployment without spiraling inflation. Today, as the unemployment rate sits at 3.5 percent, Jerome Powell, the chair of the Federal Reserve Board, has largely adopted our position.

(This post originally appeared on my Patreon page.)

Back in the late 1960s, when it was clear that the United States was losing in Vietnam, Vermont Senator George Aiken came up with the plan to declare victory and leave. It seems that Donald Trump has stolen the senator’s playbook. 

While we don’t know much of the details of Trump’s partial deal with China, it seems almost certain that he has not won most of his demands. According to press accounts, China will commit to buy a large amount of U.S. agricultural products. This is a highly visible, but largely pointless victory for Trump.

All the major agricultural commodities, such as wheat, corn, soybeans, and beef, sell on massive world markets. If China commits to buying some amount from U.S. producers, for the most part, it will come at the expense of producers from other countries. It will not be an increase in world demand. This means that the displaced producers will be dumping their now surplus commodities on world markets, leaving the market price received by U.S. farmers little changed. 

Anyhow, it was hardly a surprise to some of us that Trump would go the declare victory and leave route. My colleague at the Center for Economic and Policy Research, Mark Weisbrot, made exactly this prediction a couple of weeks ago, as did I, a few days earlier. 

This outcome was easy to see. Trump could not care less about U.S.-China trade policy. He does care about not looking weak and he very much wants to be re-elected. The obvious answer is to say that he won. It doesn’t matter that he may have gotten almost nothing of what he demanded. His followers will believe him and when the media raise questions after seeing the deal, we all know the Trump response: FAKE NEWS.

Este informe analiza las políticas macroeconómicas del Gobierno, los cambios institucionales y de políticas, así como indicadores económicos y sociales generales de los últimos 13 años, desde que Evo Morales asumió el poder.

October 2019, Andrés Arauz, Mark Weisbrot, Andrew Bunker and Jake Johnston

The government of Ecuador reached an agreement on Monday with leaders of the protests that have rocked the country for the last two weeks.

The report from the front is that Donald Trump is losing his trade war badly, and that is a good thing for people in the United States and the world.

The economic crisis in Argentina continues to intensify, with high inflation, rising poverty, and decreasing investor confidence. The implementation of a record $57 billion IMF bailout program, rather than alleviating Argentina’s economic woes, has seen poverty and unemployment rise, and a surge in debt levels. 

Argentine political sentiment was tested in August when voters went to the primary polls and delivered a decisive defeat to President Mauricio Macri and his ruling coalition. With a nearly 16-point lead, Alberto Fernández and his running mate, former president Cristina Fernández de Kirchner, are in a strong position to win the general presidential election on October 27. Their broad-based, progressive coalition is also poised to capture the legislature and key governorships, significantly reshaping Argentina’s political terrain.

In light of these developments, and Argentina’s uncertain future, on Tuesday, September 24, three economists, who have been closely following political and economic developments in Argentina, presented their analysis to congressional staffers and civil society representatives at the Longworth House Office Building in Washington, DC.