That is the impression that readers may take away from an article discussing the potential for self-driving trucks. The article notes that 3 million people work as truckers and warns of the risk that these people face from displacement due to this technology.
In fact, technology has always displaced workers from jobs. This is the basis for higher wages, as the remaining workers got the benefit of productivity growth in the form of higher wages. Higher wages allowed them to buy more goods and services, thereby creating new jobs that could be filled by the displaced workers. Alternatively, if hours per worker are reduced, then the gains in productivity can result in the same number of people being employed, with workers enjoying the benefits of productivity growth in more leisure.
This will not happen if the government pursues policies that keep workers from sharing in the benefits of productivity growth, for example by raising interest rates to reduce employment or if it pursues anti-union policies to undermine workers bargaining power. However, in these cases the problem is the policies, not the technology.
At a time when productivity growth has fallen to almost zero, workers should welcome technology that has the promise of substantial gains in productivity. Of course, they should also demand policies that will allow them to share in the gains.
That is the impression that readers may take away from an article discussing the potential for self-driving trucks. The article notes that 3 million people work as truckers and warns of the risk that these people face from displacement due to this technology.
In fact, technology has always displaced workers from jobs. This is the basis for higher wages, as the remaining workers got the benefit of productivity growth in the form of higher wages. Higher wages allowed them to buy more goods and services, thereby creating new jobs that could be filled by the displaced workers. Alternatively, if hours per worker are reduced, then the gains in productivity can result in the same number of people being employed, with workers enjoying the benefits of productivity growth in more leisure.
This will not happen if the government pursues policies that keep workers from sharing in the benefits of productivity growth, for example by raising interest rates to reduce employment or if it pursues anti-union policies to undermine workers bargaining power. However, in these cases the problem is the policies, not the technology.
At a time when productivity growth has fallen to almost zero, workers should welcome technology that has the promise of substantial gains in productivity. Of course, they should also demand policies that will allow them to share in the gains.
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The first paragraph in a Reuters article on the April consumer price index (CPI) told readers:
“U.S. consumer prices recorded their biggest increase in more than three years in April as gasoline and rents rose, pointing to a steady inflation build-up that could give the Federal Reserve ammunition to raise interest rates later this year.”
Before the cheering for another Fed rate hike gets too loud it would be worth looking at the data more closely. The core CPI has risen modestly in recent months, however inflation is still below the Fed’s 2.0 percent target using its chosen measure, the personal consumption expenditure deflator. And, since 2.0 percent is supposed to be an average, not a ceiling, we have a long way to go up before the Fed needs to move, assuming it takes its own target seriously.
But it’s also worth noting that even the very modest evidence of acceleration in inflation may be largely illusory. The rise in the core CPI has been driven by rising housing costs. Here’s the change in a measure of the core CPI that excludes shelter costs.
CPI without Food, Shelter, and Energy
Source: Bureau of Labor Statistics.
See the acceleration? This measure has been trailing off the last two months and in any case never got as high as it was in late 2011. It has remained under 2.0 percent since the middle of 2012.
The story with housing is that shortages of supply are pushing up prices. If this is bothering the Fed, it is not going to fix the problem by raising interest rates. (Higher rates mean less housing construction — check your intro textbook.) In short, contrary to what the folks at Reuters might tell you, there is not much of a case here for higher interest rates.
The first paragraph in a Reuters article on the April consumer price index (CPI) told readers:
“U.S. consumer prices recorded their biggest increase in more than three years in April as gasoline and rents rose, pointing to a steady inflation build-up that could give the Federal Reserve ammunition to raise interest rates later this year.”
Before the cheering for another Fed rate hike gets too loud it would be worth looking at the data more closely. The core CPI has risen modestly in recent months, however inflation is still below the Fed’s 2.0 percent target using its chosen measure, the personal consumption expenditure deflator. And, since 2.0 percent is supposed to be an average, not a ceiling, we have a long way to go up before the Fed needs to move, assuming it takes its own target seriously.
But it’s also worth noting that even the very modest evidence of acceleration in inflation may be largely illusory. The rise in the core CPI has been driven by rising housing costs. Here’s the change in a measure of the core CPI that excludes shelter costs.
CPI without Food, Shelter, and Energy
Source: Bureau of Labor Statistics.
See the acceleration? This measure has been trailing off the last two months and in any case never got as high as it was in late 2011. It has remained under 2.0 percent since the middle of 2012.
The story with housing is that shortages of supply are pushing up prices. If this is bothering the Fed, it is not going to fix the problem by raising interest rates. (Higher rates mean less housing construction — check your intro textbook.) In short, contrary to what the folks at Reuters might tell you, there is not much of a case here for higher interest rates.
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Robert Samuelson used his column today to argue against included environmental, equity considerations, or other factors in the measure of the gross domestic product. He is completely right.
Over the decades there have been many efforts to change the measure of GDP to include other factors that we should value under the argument that the output of goods and services is not everything. Of course, the output of goods and services is not everything, but the problem is trying to use GDP as a comprehensive measure of well being. It isn’t, and anyone who imagines it is a comprehensive measure of well-being is badly confused.
GDP is a measure of economic output, which is useful to know, but hardly sufficient to tell us whether a country and its people are doing well. A country can have rapid GDP growth, but if it all goes to the richest one percent, it would be hard to see that as a good story. Or if rapid GDP growth went along with extreme environmental degradation, it also would not mean the population was doing well.
The measure of GDP is useful in assessing the health of an economy and society in the same way that weight is a useful measure in assessing a person’s health. If a person is five feet and ten inches and weighs 300 pounds, then it is likely they have a problem. On the other hand, they can weigh 160 pounds and still have an inoperable tumor. We would want to know the person’s weight to assess their condition, but it will not tell us everything we need to know to evaluate their health.
In the same vein, we identify countries with high per capita GDP, but enormous inequality. It is hard to view these as success stories, since most of the population would not be benefiting from the strength of the economy. However, if a country has a very low per capita GDP or has seen little or no growth over the last two decades, it is unlikely that its population is doing very well. Some countries may consciously choose to have lower GDP for very good reasons. Workers in West Europe put in about 20 percent fewer hours on average than workers in the United States. This allows them to have paid sick days, paid family leave, and 4–6 weeks a year of vacation. Having more family time and leisure are good reasons for sacrificing some amount of output.
In short, GDP is a useful but limited measure. The problem is not with GDP, but with people who might see it as a comprehensive measure of well-being. It isn’t.
Robert Samuelson used his column today to argue against included environmental, equity considerations, or other factors in the measure of the gross domestic product. He is completely right.
Over the decades there have been many efforts to change the measure of GDP to include other factors that we should value under the argument that the output of goods and services is not everything. Of course, the output of goods and services is not everything, but the problem is trying to use GDP as a comprehensive measure of well being. It isn’t, and anyone who imagines it is a comprehensive measure of well-being is badly confused.
GDP is a measure of economic output, which is useful to know, but hardly sufficient to tell us whether a country and its people are doing well. A country can have rapid GDP growth, but if it all goes to the richest one percent, it would be hard to see that as a good story. Or if rapid GDP growth went along with extreme environmental degradation, it also would not mean the population was doing well.
The measure of GDP is useful in assessing the health of an economy and society in the same way that weight is a useful measure in assessing a person’s health. If a person is five feet and ten inches and weighs 300 pounds, then it is likely they have a problem. On the other hand, they can weigh 160 pounds and still have an inoperable tumor. We would want to know the person’s weight to assess their condition, but it will not tell us everything we need to know to evaluate their health.
In the same vein, we identify countries with high per capita GDP, but enormous inequality. It is hard to view these as success stories, since most of the population would not be benefiting from the strength of the economy. However, if a country has a very low per capita GDP or has seen little or no growth over the last two decades, it is unlikely that its population is doing very well. Some countries may consciously choose to have lower GDP for very good reasons. Workers in West Europe put in about 20 percent fewer hours on average than workers in the United States. This allows them to have paid sick days, paid family leave, and 4–6 weeks a year of vacation. Having more family time and leisure are good reasons for sacrificing some amount of output.
In short, GDP is a useful but limited measure. The problem is not with GDP, but with people who might see it as a comprehensive measure of well-being. It isn’t.
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Back in the old days reporters and editors tried to eliminate excess words from news articles to make them as short as possible. That’s why it is interesting to see the Washington Post go the other way. In an article assessing the presidential race it told readers:
“Clinton performed poorly against Sen. Bernie Sanders of Vermont in Democratic primaries in this part of the country — partly because of her past support for free-trade agreements and partly because Sanders’s promises to focus on economic issues and income inequality resonated with voters.’
Of course, these were not actually “free-trade” deals. They didn’t free trade in many areas, like physicians and dentists’ services. And, they increased protectionism in some areas, making patents and copyrights stronger and longer. Therefore, it is inaccurate to describe deals like NAFTA, CAFTA, or the Trans-Pacific Partnership as “free-trade” agreements. And, it adds an unnecessary word.
Back in the old days reporters and editors tried to eliminate excess words from news articles to make them as short as possible. That’s why it is interesting to see the Washington Post go the other way. In an article assessing the presidential race it told readers:
“Clinton performed poorly against Sen. Bernie Sanders of Vermont in Democratic primaries in this part of the country — partly because of her past support for free-trade agreements and partly because Sanders’s promises to focus on economic issues and income inequality resonated with voters.’
Of course, these were not actually “free-trade” deals. They didn’t free trade in many areas, like physicians and dentists’ services. And, they increased protectionism in some areas, making patents and copyrights stronger and longer. Therefore, it is inaccurate to describe deals like NAFTA, CAFTA, or the Trans-Pacific Partnership as “free-trade” agreements. And, it adds an unnecessary word.
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The Washington Post ran a piece on the dispute in France over weakening labor protections for workers. The piece told readers the law removing protections (such as weakening rules on the 35-hour workweek) is:
“…an attempt to combat unemployment — an issue all over Europe that is especially acute in France, where the rate has stubbornly lingered over 10 percent for some time now, just below its high in the mid-1990s.”
It is far from obvious that weakening protections will be an effective way to reduce unemployment. The most obvious reason that France has high unemployment today is weak demand as a result of the austerity policies demanded by Germany and the European Union. If the issue is structural problems in the labor market it’s hard to explain how France was able to have much lower unemployment rates in 2005–2007 when it had all the same structural problems in the labor market.
The piece also exaggerates the extent to which France’s labor market has failed to adjust following the crisis. According to the OECD, the employment to population ratio (EPOP) in France for people between the ages 16 and 65 is 63.9 percent, 1.0 percentage point below its pre-crisis peak of 64.9 percent. By comparison, the EPOP in the United States is 69.3 percent, 2.7 percentage points below its pre-crisis level. The difference is explained by the fact that more U.S. workers have dropped out of the labor market in the last eight years.
There is a similar story among young people (ages 16–24) where the EPOP in the United States is down by 5.3 percentage points. By comparison, in France it is only down by 2.6 percentage points, albeit from a much lower start point. (French college students don’t pay tuition and receive a stipend from the government, as a result, they generally don’t work while in school.)
The most obvious way to reduce unemployment in France would be to increase government spending and/or improve the trade balance by reducing the value of the country’s currency. Both of these options now appear to be precluded by the decisions of the country’s leaders, however; this is the cause of high unemployment in France, not the 35-hour workweek.
The Washington Post ran a piece on the dispute in France over weakening labor protections for workers. The piece told readers the law removing protections (such as weakening rules on the 35-hour workweek) is:
“…an attempt to combat unemployment — an issue all over Europe that is especially acute in France, where the rate has stubbornly lingered over 10 percent for some time now, just below its high in the mid-1990s.”
It is far from obvious that weakening protections will be an effective way to reduce unemployment. The most obvious reason that France has high unemployment today is weak demand as a result of the austerity policies demanded by Germany and the European Union. If the issue is structural problems in the labor market it’s hard to explain how France was able to have much lower unemployment rates in 2005–2007 when it had all the same structural problems in the labor market.
The piece also exaggerates the extent to which France’s labor market has failed to adjust following the crisis. According to the OECD, the employment to population ratio (EPOP) in France for people between the ages 16 and 65 is 63.9 percent, 1.0 percentage point below its pre-crisis peak of 64.9 percent. By comparison, the EPOP in the United States is 69.3 percent, 2.7 percentage points below its pre-crisis level. The difference is explained by the fact that more U.S. workers have dropped out of the labor market in the last eight years.
There is a similar story among young people (ages 16–24) where the EPOP in the United States is down by 5.3 percentage points. By comparison, in France it is only down by 2.6 percentage points, albeit from a much lower start point. (French college students don’t pay tuition and receive a stipend from the government, as a result, they generally don’t work while in school.)
The most obvious way to reduce unemployment in France would be to increase government spending and/or improve the trade balance by reducing the value of the country’s currency. Both of these options now appear to be precluded by the decisions of the country’s leaders, however; this is the cause of high unemployment in France, not the 35-hour workweek.
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The Washington Post really, really doesn’t like Bernie Sanders and they miss no opportunity to display this dislike. For this reason, it is not surprising that they had a field day highlighting a report from the Tax Policy Center showing that his program would increase the debt by $18 trillion over the course of a decade. As the folks at Fairness and Accuracy in Reporting (FAIR) noted, this study was good for four different pieces over a seven hour period.
The main story in the Tax Policy Center analysis was that Sanders universal Medicare program would cost far more than he assumes. While they have some basis for their pessimism, it would have been reasonable to note that Sanders has some basis for his numbers. Specifically, other countries that have single-payer type systems have costs that are comparable to what Sanders assumes in his projections.
Of course getting from here to there is hardly an easy task and the Post and anyone else would be right to be skeptical about whether it could be done smoothly. But an honest discussion would make this point clearly. In other words, if we could make our health care system work as well as the systems in the United Kingdom, Denmark, or Canada, then Sanders would be right about the cost.
The Tax Policy Center is saying that it can’t be done. Again, they could be right, but it is not obvious that our government is that much more incompetent and/or corrupt than the governments in these other countries. In any case, the job of a newspaper should be to provide information to readers, which the Post has clearly done in its single-minded crusade to trash Bernie Sanders and his agenda.
The Washington Post really, really doesn’t like Bernie Sanders and they miss no opportunity to display this dislike. For this reason, it is not surprising that they had a field day highlighting a report from the Tax Policy Center showing that his program would increase the debt by $18 trillion over the course of a decade. As the folks at Fairness and Accuracy in Reporting (FAIR) noted, this study was good for four different pieces over a seven hour period.
The main story in the Tax Policy Center analysis was that Sanders universal Medicare program would cost far more than he assumes. While they have some basis for their pessimism, it would have been reasonable to note that Sanders has some basis for his numbers. Specifically, other countries that have single-payer type systems have costs that are comparable to what Sanders assumes in his projections.
Of course getting from here to there is hardly an easy task and the Post and anyone else would be right to be skeptical about whether it could be done smoothly. But an honest discussion would make this point clearly. In other words, if we could make our health care system work as well as the systems in the United Kingdom, Denmark, or Canada, then Sanders would be right about the cost.
The Tax Policy Center is saying that it can’t be done. Again, they could be right, but it is not obvious that our government is that much more incompetent and/or corrupt than the governments in these other countries. In any case, the job of a newspaper should be to provide information to readers, which the Post has clearly done in its single-minded crusade to trash Bernie Sanders and his agenda.
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The New York Times had a piece on Puerto Rico’s financial problems which argued that they are a harbinger for the problems facing many state and local governments. In the process it managed to mix many different stories in a way that does not make much sense.
For example, it reported on the problems of deteriorating infrastructure in many cities and states, specifically citing the case of the troubled Metro transit system in Washington, DC. Infrastructure has historically been an area in which the federal government took substantial responsibility. Unfortunately, it has chosen not to step up its efforts in the last decade, even as the economy has been well below its full employment level of output. The decision by the federal government not to spend money cost the country hundreds of billions of dollars in lost output and needlessly kept millions of people from working. It also means that cities and states will face expensive repair bills and lost economic output in the future due to problems with infrastructure.
The piece also quoted former lieutenant governor Richard Ravitch saying, “New York City has $85 billion of retiree health obligations all by itself.” To put this in context, the city’s annual output is over $600 billion. Since this obligation will have to be met over the next three or four decades, Ravitch is referring to a commitment that is equal to roughly 0.5 percent of future income. This is hardly trivial, but not obviously an impossible burden.
The piece then refers to public pension funds in states like New Jersey and Illinois that are badly underfunded. In this context, it notes a warning from the Illinois Supreme Court from 1917 that the pension funds might run into trouble. The origins of these states’ current funding problem date to the stock bubble of the 1990s. They opted to put little or nothing into their pension funds as the stock market soared to record highs. Effectively, the rise in the market was making the contributions for them.
When the market crashed in 2000–2002, the pensions were suddenly much more poorly funded. However, the economy was also in a recession and state and local governments were squeezed for cash. Some, like Illinois and New Jersey, chose to forego part of their required contribution, perhaps in the hope that the stock bubble would return. It didn’t.
In any case, given the recent origins of the severe pension shortfalls in Illinois, New Jersey, and a few other states, it is probably fair to say that the 1917 warnings were wrong, unless the Court somehow foresaw the stock bubble and crash and its impact on pension funds.
The New York Times had a piece on Puerto Rico’s financial problems which argued that they are a harbinger for the problems facing many state and local governments. In the process it managed to mix many different stories in a way that does not make much sense.
For example, it reported on the problems of deteriorating infrastructure in many cities and states, specifically citing the case of the troubled Metro transit system in Washington, DC. Infrastructure has historically been an area in which the federal government took substantial responsibility. Unfortunately, it has chosen not to step up its efforts in the last decade, even as the economy has been well below its full employment level of output. The decision by the federal government not to spend money cost the country hundreds of billions of dollars in lost output and needlessly kept millions of people from working. It also means that cities and states will face expensive repair bills and lost economic output in the future due to problems with infrastructure.
The piece also quoted former lieutenant governor Richard Ravitch saying, “New York City has $85 billion of retiree health obligations all by itself.” To put this in context, the city’s annual output is over $600 billion. Since this obligation will have to be met over the next three or four decades, Ravitch is referring to a commitment that is equal to roughly 0.5 percent of future income. This is hardly trivial, but not obviously an impossible burden.
The piece then refers to public pension funds in states like New Jersey and Illinois that are badly underfunded. In this context, it notes a warning from the Illinois Supreme Court from 1917 that the pension funds might run into trouble. The origins of these states’ current funding problem date to the stock bubble of the 1990s. They opted to put little or nothing into their pension funds as the stock market soared to record highs. Effectively, the rise in the market was making the contributions for them.
When the market crashed in 2000–2002, the pensions were suddenly much more poorly funded. However, the economy was also in a recession and state and local governments were squeezed for cash. Some, like Illinois and New Jersey, chose to forego part of their required contribution, perhaps in the hope that the stock bubble would return. It didn’t.
In any case, given the recent origins of the severe pension shortfalls in Illinois, New Jersey, and a few other states, it is probably fair to say that the 1917 warnings were wrong, unless the Court somehow foresaw the stock bubble and crash and its impact on pension funds.
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Ruth Marcus used her column today to present the speech that House Speaker Paul Ryan should give to the Republican convention in order to disassociate himself from Donald Trump. She has Paul Ryan being somewhat less than honest.
Most notably, she wants Ryan to say:
“I have spent my life believing in, and fighting for, the ideals of the Republican Party: limited government, fiscal responsibility, free trade and free markets, the United States’ role as the world’s most important force for peace and liberty. It is not clear to me which, if any, of those convictions Mr. Trump shares.”
Ryan actually doesn’t want limited government, he actually wants pretty much no government. He has repeatedly introduced budgets that call for eliminating all of the federal government except Social Security, Medicare, Medicaid, and the military by 2050. His budgets provide zero funding for the Justice Department, the State Department, the Food and Drug Administration, the National Institutes of Health, the Education Department, the National Park Service and everything else we think of as the federal government.
As a big supporter of stronger and longer patent and copyright protection, it is hard to see how Ryan can claim to be a supporter of free trade and free markets. As far as fiscal responsibility, Ryan has proposed huge tax cuts that would go disproportionately to the wealthy, which he claims will be offset by ending deductions which he has never named.
She also has a reference to Social Security and Medicare, with Ryan then saying that he wants to “get entitlement spending under control.” If Ryan were being honest he would of course tell the convention that he wants to privatize both programs.
It’s not clear why Ms. Marcus thinks it’s appropriate for Ryan to misrepresent his fundamental political positions in this address to the Republican convention.
Ruth Marcus used her column today to present the speech that House Speaker Paul Ryan should give to the Republican convention in order to disassociate himself from Donald Trump. She has Paul Ryan being somewhat less than honest.
Most notably, she wants Ryan to say:
“I have spent my life believing in, and fighting for, the ideals of the Republican Party: limited government, fiscal responsibility, free trade and free markets, the United States’ role as the world’s most important force for peace and liberty. It is not clear to me which, if any, of those convictions Mr. Trump shares.”
Ryan actually doesn’t want limited government, he actually wants pretty much no government. He has repeatedly introduced budgets that call for eliminating all of the federal government except Social Security, Medicare, Medicaid, and the military by 2050. His budgets provide zero funding for the Justice Department, the State Department, the Food and Drug Administration, the National Institutes of Health, the Education Department, the National Park Service and everything else we think of as the federal government.
As a big supporter of stronger and longer patent and copyright protection, it is hard to see how Ryan can claim to be a supporter of free trade and free markets. As far as fiscal responsibility, Ryan has proposed huge tax cuts that would go disproportionately to the wealthy, which he claims will be offset by ending deductions which he has never named.
She also has a reference to Social Security and Medicare, with Ryan then saying that he wants to “get entitlement spending under control.” If Ryan were being honest he would of course tell the convention that he wants to privatize both programs.
It’s not clear why Ms. Marcus thinks it’s appropriate for Ryan to misrepresent his fundamental political positions in this address to the Republican convention.
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That would seem to be the implication of an article warning about the economic consequences of lower birth rates. The piece notes the falloff in birth rates following the recession and points out that it has not recovered. It presents the prospect of fewer young people as a serious economic problem.
It, of course, is a serious problem if people feel that they are too financially insecure to have children; however, it is difficult to see any obvious economic problems resulting from that decision. A declining population means less pollution, less strain on the infrastructure, and lower priced housing. (Germany is held up as a horror story with its low birth rate. It is worth noting that housing costs have risen much less rapidly in Germany over the last two decades than in the United States.) If our children end up spending a smaller share of their income on housing costs than we do, this is not a problem.
That would seem to be the implication of an article warning about the economic consequences of lower birth rates. The piece notes the falloff in birth rates following the recession and points out that it has not recovered. It presents the prospect of fewer young people as a serious economic problem.
It, of course, is a serious problem if people feel that they are too financially insecure to have children; however, it is difficult to see any obvious economic problems resulting from that decision. A declining population means less pollution, less strain on the infrastructure, and lower priced housing. (Germany is held up as a horror story with its low birth rate. It is worth noting that housing costs have risen much less rapidly in Germany over the last two decades than in the United States.) If our children end up spending a smaller share of their income on housing costs than we do, this is not a problem.
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