In the Soviet Union, for a long time, official publications (which were the only publications) were prohibited from mentioning Leon Trotsky, one of the leaders of the revolution, who subsequently fell out with Stalin and was forced into exile. I’m wondering if The New York Times has the same policy towards mentioning the trade deficit as a cause of economic weakness.
It’s hard to reach any other conclusion after seeing David Leonhardt’s piece on the recurring tendency of forecasters to be overly optimistic about economic growth. Leonhardt points to the persistent shortfall of demand as the major problem slowing growth. Following Larry Summers, he suggests policies that could boost investment and consumption.
While these are both good ways of increasing demand, so is a lower trade deficit. This is very basic economics. If the trade deficit were 1.0 percent of GDP rather than a bit more than 3.0 percent of GDP, it would provide the same boost to demand as a $400 billion annual stimulus package.
It’s sort of amazing that Leonhardt can leave such a basic and obvious point out of this discussion. Did the NYT’s commissars airbrush the trade deficit out of the article?
In the Soviet Union, for a long time, official publications (which were the only publications) were prohibited from mentioning Leon Trotsky, one of the leaders of the revolution, who subsequently fell out with Stalin and was forced into exile. I’m wondering if The New York Times has the same policy towards mentioning the trade deficit as a cause of economic weakness.
It’s hard to reach any other conclusion after seeing David Leonhardt’s piece on the recurring tendency of forecasters to be overly optimistic about economic growth. Leonhardt points to the persistent shortfall of demand as the major problem slowing growth. Following Larry Summers, he suggests policies that could boost investment and consumption.
While these are both good ways of increasing demand, so is a lower trade deficit. This is very basic economics. If the trade deficit were 1.0 percent of GDP rather than a bit more than 3.0 percent of GDP, it would provide the same boost to demand as a $400 billion annual stimulus package.
It’s sort of amazing that Leonhardt can leave such a basic and obvious point out of this discussion. Did the NYT’s commissars airbrush the trade deficit out of the article?
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That seems pretty much definitional, but many readers of this Washington Post piece, on what is in effect insider trading by top management, may miss this point. As CEO pay has exploded over the last four decades, from 20 to 30 times the pay of a typical worker to 200 or 300 times, many have discussed this rise as though it is somehow in collusion with shareholders.
That makes zero sense. The money that CEOs and top management pocket is money that otherwise could have gone to shareholders. Shareholders have no more interest in CEOs getting big paychecks than they do in seeing assembly line workers or retail clerks getting big paychecks. Contrary to the view that shareholders have been making out like bandits, stock market returns over the last two decades have actually been low by historical standards.
When it comes to reining in CEO pay, shareholders should be viewed as allies. This matters not just because CEOs don’t deserve such outrageous paychecks, but because bloated CEO pay affects pay scales throughout the economy. If this is hard to understand, ask a high-level university administrator near you how much they get paid.
That seems pretty much definitional, but many readers of this Washington Post piece, on what is in effect insider trading by top management, may miss this point. As CEO pay has exploded over the last four decades, from 20 to 30 times the pay of a typical worker to 200 or 300 times, many have discussed this rise as though it is somehow in collusion with shareholders.
That makes zero sense. The money that CEOs and top management pocket is money that otherwise could have gone to shareholders. Shareholders have no more interest in CEOs getting big paychecks than they do in seeing assembly line workers or retail clerks getting big paychecks. Contrary to the view that shareholders have been making out like bandits, stock market returns over the last two decades have actually been low by historical standards.
When it comes to reining in CEO pay, shareholders should be viewed as allies. This matters not just because CEOs don’t deserve such outrageous paychecks, but because bloated CEO pay affects pay scales throughout the economy. If this is hard to understand, ask a high-level university administrator near you how much they get paid.
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It is always fun, even if tiresome, to mock Donald Trump for getting things wrong. This is why the jump in the merchandise trade deficit last year to $891.2 billion was especially newsworthy.
Trump had made the trade deficit one of the central issues in his campaign and promised to reduce it to bring back good-paying jobs in manufacturing. He was going to use his skills as a negotiator to get better deals from our trading partners. For this reason, the fact that the deficit is going up, not down, is somewhat amusing. In this case, unlike the last decade, the rise in the trade deficit is associated with a modest increase in manufacturing employment rather than a crash, so the implications of the rise are not nearly as serious.
Nonetheless, it is worth getting the story straight. It is somewhat misleading to refer to the 2018 trade deficit as “record-breaking” as in this Washington Post headline. While the $891.2 billion deficit is considerably larger in nominal terms than the previous record of $838.3 billion, set in 2006, it is considerably smaller measured relative to the size of the economy.
The 2018 deficit is equal to 4.3 percent of GDP. The 2006 deficit was equal to 6.1 percent of GDP. If we are making historical comparisons, this is the more relevant figure, not the dollar amount.
It is always fun, even if tiresome, to mock Donald Trump for getting things wrong. This is why the jump in the merchandise trade deficit last year to $891.2 billion was especially newsworthy.
Trump had made the trade deficit one of the central issues in his campaign and promised to reduce it to bring back good-paying jobs in manufacturing. He was going to use his skills as a negotiator to get better deals from our trading partners. For this reason, the fact that the deficit is going up, not down, is somewhat amusing. In this case, unlike the last decade, the rise in the trade deficit is associated with a modest increase in manufacturing employment rather than a crash, so the implications of the rise are not nearly as serious.
Nonetheless, it is worth getting the story straight. It is somewhat misleading to refer to the 2018 trade deficit as “record-breaking” as in this Washington Post headline. While the $891.2 billion deficit is considerably larger in nominal terms than the previous record of $838.3 billion, set in 2006, it is considerably smaller measured relative to the size of the economy.
The 2018 deficit is equal to 4.3 percent of GDP. The 2006 deficit was equal to 6.1 percent of GDP. If we are making historical comparisons, this is the more relevant figure, not the dollar amount.
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David Brooks likes to present himself as a voice of reason in the midst of crazy ideologues of the left and the right. He gave us an example of his voice of reason routine today in a piece telling us that Medicare for All is an impossibility.
While the piece raises some reasonable points (the transition will be difficult) the highlight is a condemnation of the Canadian health care system, which is often held up as a model by supporters of Medicare for All.
“Finally, patient expectations would have to transition. Today, getting a doctor’s appointment is annoying but not onerous. In Canada, the median wait time between seeing a general practitioner and a specialist is 8.7 weeks; between a G.P. referral and an orthopedic surgeon, it’s nine months. That would take some adjusting.”
While it is true that Canada has longer wait times than the United States for seeing a specialist, this is one area in which its health care system does especially poorly. In other areas, it does better than the United States. Also, other systems, which all cost far less per person than in the United States, do better in this and other categories, as shown in a recent analysis by the Commonwealth Fund.
If Brooks wants to make the point that transitioning to a universal Medicare-type system will be difficult, he’s on solid ground. But to imply that we can’t do better requires ignoring a vast amount on evidence from other wealthy countries, all of whom do better in providing universal coverage at a lower per capita price than we pay for our far from universal coverage.
This is very far from a voice of reason in the health care debate.
David Brooks likes to present himself as a voice of reason in the midst of crazy ideologues of the left and the right. He gave us an example of his voice of reason routine today in a piece telling us that Medicare for All is an impossibility.
While the piece raises some reasonable points (the transition will be difficult) the highlight is a condemnation of the Canadian health care system, which is often held up as a model by supporters of Medicare for All.
“Finally, patient expectations would have to transition. Today, getting a doctor’s appointment is annoying but not onerous. In Canada, the median wait time between seeing a general practitioner and a specialist is 8.7 weeks; between a G.P. referral and an orthopedic surgeon, it’s nine months. That would take some adjusting.”
While it is true that Canada has longer wait times than the United States for seeing a specialist, this is one area in which its health care system does especially poorly. In other areas, it does better than the United States. Also, other systems, which all cost far less per person than in the United States, do better in this and other categories, as shown in a recent analysis by the Commonwealth Fund.
If Brooks wants to make the point that transitioning to a universal Medicare-type system will be difficult, he’s on solid ground. But to imply that we can’t do better requires ignoring a vast amount on evidence from other wealthy countries, all of whom do better in providing universal coverage at a lower per capita price than we pay for our far from universal coverage.
This is very far from a voice of reason in the health care debate.
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I had a longer piece on this Vox article, but our site ate it, so I will be very brief. This Vox piece on the financial transactions tax introduced by Hawaii Senator Brian Schatz gets the story badly wrong.
The CBO revenue estimate does assume a substantial reduction in trading volume. It does not assume that trading volume remains unchanged, as the piece seems to imply.
Of course, the reduction in volume could be larger than CBO assumes, but this would not be a bad thing. In principle, we want the financial markets to operate using as few resources as possible, this means that they are more efficient. If we can operate the markets with half as many trades (like we did in the 1990s) and the markets just as effectively allocate capital, then the markets are more efficient, just as the trucking sector would be more efficient if we could deliver the same amounts of goods with half as many trucks and truckers.
From the standpoint of the individual investor the tax will mean a higher cost per trade, but they will do fewer trades, leaving their trading costs pretty much the same even with the tax. For example, if the tax raises cost by 30 percent, then they (or their fund manager) will reduce trading volume by roughly 30 percent.
In this way, the financial sector eats pretty much the whole cost of the tax. This is why it is so popular among economists.
I had a longer piece on this Vox article, but our site ate it, so I will be very brief. This Vox piece on the financial transactions tax introduced by Hawaii Senator Brian Schatz gets the story badly wrong.
The CBO revenue estimate does assume a substantial reduction in trading volume. It does not assume that trading volume remains unchanged, as the piece seems to imply.
Of course, the reduction in volume could be larger than CBO assumes, but this would not be a bad thing. In principle, we want the financial markets to operate using as few resources as possible, this means that they are more efficient. If we can operate the markets with half as many trades (like we did in the 1990s) and the markets just as effectively allocate capital, then the markets are more efficient, just as the trucking sector would be more efficient if we could deliver the same amounts of goods with half as many trucks and truckers.
From the standpoint of the individual investor the tax will mean a higher cost per trade, but they will do fewer trades, leaving their trading costs pretty much the same even with the tax. For example, if the tax raises cost by 30 percent, then they (or their fund manager) will reduce trading volume by roughly 30 percent.
In this way, the financial sector eats pretty much the whole cost of the tax. This is why it is so popular among economists.
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That would have been worth mentioning in a New York Times piece on how the limits are hitting upper middle class and rich taxpayers in liberal states like New York and California. The tax law pushed through by Trump and the Republican Congress in 2017 was quite explicitly designed to make it more difficult for liberal states to raise revenue for purposes like providing health care and quality education.
It did this by limiting the amount of state and local tax that people could deduct from their federal taxes. While previously these taxes were fully deductible from federal taxes, which meant that the federal government was effectively picking up the tab on between 25 percent and 40 percent of state and local taxes, after the change the taxpayer has to pick up 100 percent, once the limit is reached.
However, New York’s governor, Andrew Cuomo, put in place a partial workaround on this limit. He pushed a bill through the state’s legislature that partially replaces the state’s income tax with a voluntary payroll tax on employers of 5.0 percent. A payroll tax paid by employers is not subject to income taxes. (Economists usually assume that payroll taxes come out of wages.)
The law reduces a worker’s state income tax dollar for dollar for money paid in the payroll tax on their behalf. This move effectively preserves the deductibility of the state income tax, at least for people who get most of their income in wages.
Contrary to what is implied in the NYT piece, Cuomo’s workaround has not been ruled illegal. It is being phased in, so only 1.0 percent of income tax could be shielded in this way in 2018, but that rises to 3.0 percent this year, and 5.0 percent in 2020.
That would have been worth mentioning in a New York Times piece on how the limits are hitting upper middle class and rich taxpayers in liberal states like New York and California. The tax law pushed through by Trump and the Republican Congress in 2017 was quite explicitly designed to make it more difficult for liberal states to raise revenue for purposes like providing health care and quality education.
It did this by limiting the amount of state and local tax that people could deduct from their federal taxes. While previously these taxes were fully deductible from federal taxes, which meant that the federal government was effectively picking up the tab on between 25 percent and 40 percent of state and local taxes, after the change the taxpayer has to pick up 100 percent, once the limit is reached.
However, New York’s governor, Andrew Cuomo, put in place a partial workaround on this limit. He pushed a bill through the state’s legislature that partially replaces the state’s income tax with a voluntary payroll tax on employers of 5.0 percent. A payroll tax paid by employers is not subject to income taxes. (Economists usually assume that payroll taxes come out of wages.)
The law reduces a worker’s state income tax dollar for dollar for money paid in the payroll tax on their behalf. This move effectively preserves the deductibility of the state income tax, at least for people who get most of their income in wages.
Contrary to what is implied in the NYT piece, Cuomo’s workaround has not been ruled illegal. It is being phased in, so only 1.0 percent of income tax could be shielded in this way in 2018, but that rises to 3.0 percent this year, and 5.0 percent in 2020.
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The New York Times had a piece explaining what austerity (i.e. cuts in social services) has meant for the United Kingdom. While it is a useful account, at one point the piece tells readers:
“The austerity measures were imposed to eliminate budget deficits that ballooned to unsustainable levels in the aftermath of the financial crisis.”
This seems to imply that the cuts were somehow economically necessary. This is not true. At the time, the UK had high rates of unemployment and large amounts of underutilized resources. There was no reason that it could not have continued to run deficits that were high because the economy was weak.
If the government had continued to run large deficits as the economy strengthened and approached full employment levels of output, it would have created inflationary pressures. This presumably would have resulted in the Bank of England pushing up interest rates to slow the economy, with negative hits to investment, housing, and the trade deficit.
However, at the time the budget cuts were put in place, there was no reason for the government to reduce its deficit. To say that it could not run deficits of that size forever is true in the same way that someone driving west in New Jersey can’t keep going that way because they will eventually fall into the Pacific ocean. But that is not the reason most people in New Jersey stop driving west.
The New York Times had a piece explaining what austerity (i.e. cuts in social services) has meant for the United Kingdom. While it is a useful account, at one point the piece tells readers:
“The austerity measures were imposed to eliminate budget deficits that ballooned to unsustainable levels in the aftermath of the financial crisis.”
This seems to imply that the cuts were somehow economically necessary. This is not true. At the time, the UK had high rates of unemployment and large amounts of underutilized resources. There was no reason that it could not have continued to run deficits that were high because the economy was weak.
If the government had continued to run large deficits as the economy strengthened and approached full employment levels of output, it would have created inflationary pressures. This presumably would have resulted in the Bank of England pushing up interest rates to slow the economy, with negative hits to investment, housing, and the trade deficit.
However, at the time the budget cuts were put in place, there was no reason for the government to reduce its deficit. To say that it could not run deficits of that size forever is true in the same way that someone driving west in New Jersey can’t keep going that way because they will eventually fall into the Pacific ocean. But that is not the reason most people in New Jersey stop driving west.
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