Read More Leer más Join the discussion Participa en la discusión
Would a doctor work for Uber? Probably not, but if it turned out there were no jobs for doctors and the only way she could support her family was to work for Uber, then a doctor may work for Uber. That is an important point left out of an interesting article on growing economic insecurity for workers.
A big part of this story is the decision by the Federal Reserve Board to raise interest rates to deliberately limit the number of jobs in the economy. This disproportionately hits less educated workers, who are the first ones to be fired when the economy slows. If jobs were plentiful then employers would be forced to offer higher wages and more job security in order to attract the workers they need. The Fed’s policy to keep the labor market weak in the last three and a half decades has been a major factor in the deterioration of job quality.
It is also bizarre that the article cited a study by Michael Greenstone and Adam Looney to support the case that, controlling for education, men have been seeing declines in wages for forty years. The Economic Policy Institute had been documenting this decline in the State of Working America for decades.
Would a doctor work for Uber? Probably not, but if it turned out there were no jobs for doctors and the only way she could support her family was to work for Uber, then a doctor may work for Uber. That is an important point left out of an interesting article on growing economic insecurity for workers.
A big part of this story is the decision by the Federal Reserve Board to raise interest rates to deliberately limit the number of jobs in the economy. This disproportionately hits less educated workers, who are the first ones to be fired when the economy slows. If jobs were plentiful then employers would be forced to offer higher wages and more job security in order to attract the workers they need. The Fed’s policy to keep the labor market weak in the last three and a half decades has been a major factor in the deterioration of job quality.
It is also bizarre that the article cited a study by Michael Greenstone and Adam Looney to support the case that, controlling for education, men have been seeing declines in wages for forty years. The Economic Policy Institute had been documenting this decline in the State of Working America for decades.
Read More Leer más Join the discussion Participa en la discusión
That’s not quite how the paper put it, but it is in fact what it reported. The story according to the headline is “bipartisan partnership produces a health bill that passes house.” According to the article the bill instructs the Food and Drug Administration (FDA) to use information from doctors’ practices and drug registries in determining whether to approve new drugs rather than just relying on clinical trials. The problem with this approach is that the industry often pays doctors to say good things about their drugs. It would difficult for the FDA to know for certain that the information it is relying upon was not paid for by the company seeking approval of a drug.
The piece also includes the interesting tidbit that the cost of additional funding for the FDA, another provision in the bill, would be covered by selling off some of the country’s petroleum reserve. This shows the remarkable cynicism of the deficit hawks in Congress.
Selling oil reserves is simply a shuffling of assets, it is not a way of either improving the government’s financial situation or reducing the drain on the economy from the budget deficit. It’s analogous to a household pawning its silverware to avoid having to borrow. There is no economic reason to prefer selling off this asset to adding debt, it is just a silly ritual that apparently is taken seriously in Washington policy circles these days.
That’s not quite how the paper put it, but it is in fact what it reported. The story according to the headline is “bipartisan partnership produces a health bill that passes house.” According to the article the bill instructs the Food and Drug Administration (FDA) to use information from doctors’ practices and drug registries in determining whether to approve new drugs rather than just relying on clinical trials. The problem with this approach is that the industry often pays doctors to say good things about their drugs. It would difficult for the FDA to know for certain that the information it is relying upon was not paid for by the company seeking approval of a drug.
The piece also includes the interesting tidbit that the cost of additional funding for the FDA, another provision in the bill, would be covered by selling off some of the country’s petroleum reserve. This shows the remarkable cynicism of the deficit hawks in Congress.
Selling oil reserves is simply a shuffling of assets, it is not a way of either improving the government’s financial situation or reducing the drain on the economy from the budget deficit. It’s analogous to a household pawning its silverware to avoid having to borrow. There is no economic reason to prefer selling off this asset to adding debt, it is just a silly ritual that apparently is taken seriously in Washington policy circles these days.
Read More Leer más Join the discussion Participa en la discusión
That’s what a NYT article seemed to be telling people. The center of the story is the fact that it appears that La Grange, Ill (population 15,550) was using grossly out of date mortality tables in calculating the pension obligations for its police and fire fighters. Without directly saying as much, the piece implies that this is a common problem with much larger pension funds and that such practices are the basis for the underfunding of many public sector pensions.
In fact, the main reason that some public sector funds face severe shortfalls is that politicians like Richard M. Daley and Chris Christie chose not to make required contributions. This is a serious problem since the country’s elites apparently praise such behavior. Since ending his last term as mayor of Chicago, Mr. Daley has been appointed a senior distinguished fellow at the University of Chicago, given a seat on the board of Coca Cola, and made a principal of the investment firm Tur Partners LLC. Chris Christie is running for the Republican presidential nomination. Reporters covering his campaign rarely mention his failure to make required pension contributions, including going back an explicit commitment to state employee unions, as a liability. If the people most directly responsible for the underfunding of pensions get rewarded, then it should not be surprising that we do have some cases of major underfunding.
Bizarrely, at one point the piece suggests that the public might look to actuaries as the main target for the underfunding of public sector pensions:
“Retirees are counting on the money promised to them. Taxpayers are in no mood to bail out troubled pension funds. Some are looking for scapegoats.
“‘Actuaries make a juicy target,’ said Mary Pat Campbell, an actuary who responded to the board’s call for comments.”
This is bizarre since Wall Street is the far more obvious target. The recession following the collapse of the housing bubble is likely to cost the country more than $10 trillion in lost output. This both directly contributed to pension shortfalls, by making it more difficult for governments to make required contributions to pensions during the recession years, and indirectly by reducing the revenue base of many governments on an ongoing basis. It is rather strange that taxpayers should look to target actuaries, most of whom make relatively modest salaries, rather than big Wall Street players who often make tens of millions or even hundreds of millions of dollars a year.
That’s what a NYT article seemed to be telling people. The center of the story is the fact that it appears that La Grange, Ill (population 15,550) was using grossly out of date mortality tables in calculating the pension obligations for its police and fire fighters. Without directly saying as much, the piece implies that this is a common problem with much larger pension funds and that such practices are the basis for the underfunding of many public sector pensions.
In fact, the main reason that some public sector funds face severe shortfalls is that politicians like Richard M. Daley and Chris Christie chose not to make required contributions. This is a serious problem since the country’s elites apparently praise such behavior. Since ending his last term as mayor of Chicago, Mr. Daley has been appointed a senior distinguished fellow at the University of Chicago, given a seat on the board of Coca Cola, and made a principal of the investment firm Tur Partners LLC. Chris Christie is running for the Republican presidential nomination. Reporters covering his campaign rarely mention his failure to make required pension contributions, including going back an explicit commitment to state employee unions, as a liability. If the people most directly responsible for the underfunding of pensions get rewarded, then it should not be surprising that we do have some cases of major underfunding.
Bizarrely, at one point the piece suggests that the public might look to actuaries as the main target for the underfunding of public sector pensions:
“Retirees are counting on the money promised to them. Taxpayers are in no mood to bail out troubled pension funds. Some are looking for scapegoats.
“‘Actuaries make a juicy target,’ said Mary Pat Campbell, an actuary who responded to the board’s call for comments.”
This is bizarre since Wall Street is the far more obvious target. The recession following the collapse of the housing bubble is likely to cost the country more than $10 trillion in lost output. This both directly contributed to pension shortfalls, by making it more difficult for governments to make required contributions to pensions during the recession years, and indirectly by reducing the revenue base of many governments on an ongoing basis. It is rather strange that taxpayers should look to target actuaries, most of whom make relatively modest salaries, rather than big Wall Street players who often make tens of millions or even hundreds of millions of dollars a year.
Read More Leer más Join the discussion Participa en la discusión
Thomas Edsall had a very good piece on divisions in the Democratic Party over trade policy in the NYT this morning. The piece cites a large body of academic research pointing out that U.S. trade policy has played a large role in destroying manufacturing jobs and redistributing income upwards. It notes that this is the basis of the opposition of unions to trade policy, which has caused the overwhelming majority of Democrats in Congress to oppose the Trans-Pacific Partnership (TPP).
However the piece errors in referring to the TPP and U.S. trade policy in general as “free trade.” It is absolutely not free trade.
One of the main goals of the TPP is to increase patent and copyright protection. That is protection as in protectionism. These government granted monopolies can increase the price of drugs and other protected items by several thousand percent. This has the same economic impact and leads to the same distortions as tariffs of several thousand percent. Markets do not care if the price of a product is raised due to a tariff or a government granted patent monopoly, it leads to the same distortions.
These trade deals have also done almost nothing to remove the protectionist barriers that make it difficult for foreigners to train to become doctors, dentists, or other professionals and work in the United States. The reasons that these highly paid professions have not seen their salaries hurt by trade is due to the fact that the government has protected them, not that there is some inherent impossibility in Indians training to U.S. standards and becoming doctors in the United States.
Also, a free trade policy would mean pushing for freely floating currencies. This has clearly not been a priority for the Obama administration as our trading partners, most importantly China, have accumulated trillions of dollars of foreign reserves in order to inflate the value of the dollar against their currencies, thereby supporting their large trade surpluses. The Obama administration chose to not even include currency as a topic in the TPP.
It is important to point out that our trade policy is not free trade first because it might lead some to believe that our trade policy involves pursuing some great economic principle. It doesn’t. It’s about redistributing money to the rich.
Second, it is important because at this point the biggest gains for “everyday people” will actually come from more free trade, not less. It’s not realistic to think that the United States will erect tariffs or other barriers that will block the import of manufactured goods from Mexico, China, and other developing countries. It is reasonably to think that we might push for more market based exchange rates, less costly patent and copyright protection, and the elimination of unnecessary professional restrictions that prevent us from having lower cost health care, legal services, and other professional services.
Thomas Edsall had a very good piece on divisions in the Democratic Party over trade policy in the NYT this morning. The piece cites a large body of academic research pointing out that U.S. trade policy has played a large role in destroying manufacturing jobs and redistributing income upwards. It notes that this is the basis of the opposition of unions to trade policy, which has caused the overwhelming majority of Democrats in Congress to oppose the Trans-Pacific Partnership (TPP).
However the piece errors in referring to the TPP and U.S. trade policy in general as “free trade.” It is absolutely not free trade.
One of the main goals of the TPP is to increase patent and copyright protection. That is protection as in protectionism. These government granted monopolies can increase the price of drugs and other protected items by several thousand percent. This has the same economic impact and leads to the same distortions as tariffs of several thousand percent. Markets do not care if the price of a product is raised due to a tariff or a government granted patent monopoly, it leads to the same distortions.
These trade deals have also done almost nothing to remove the protectionist barriers that make it difficult for foreigners to train to become doctors, dentists, or other professionals and work in the United States. The reasons that these highly paid professions have not seen their salaries hurt by trade is due to the fact that the government has protected them, not that there is some inherent impossibility in Indians training to U.S. standards and becoming doctors in the United States.
Also, a free trade policy would mean pushing for freely floating currencies. This has clearly not been a priority for the Obama administration as our trading partners, most importantly China, have accumulated trillions of dollars of foreign reserves in order to inflate the value of the dollar against their currencies, thereby supporting their large trade surpluses. The Obama administration chose to not even include currency as a topic in the TPP.
It is important to point out that our trade policy is not free trade first because it might lead some to believe that our trade policy involves pursuing some great economic principle. It doesn’t. It’s about redistributing money to the rich.
Second, it is important because at this point the biggest gains for “everyday people” will actually come from more free trade, not less. It’s not realistic to think that the United States will erect tariffs or other barriers that will block the import of manufactured goods from Mexico, China, and other developing countries. It is reasonably to think that we might push for more market based exchange rates, less costly patent and copyright protection, and the elimination of unnecessary professional restrictions that prevent us from having lower cost health care, legal services, and other professional services.
Read More Leer más Join the discussion Participa en la discusión
The media seem to think it’s a really huge deal that investors in China’s stock market have not made any money since February. The Washington Post told readers that it could even threaten the regime’s legitimacy in a front page story headlined, “stock slide sandbags China’s leaders.”
The article begins:
“For decades, the Chinese Communist Party has been able to keep control of democracy protests, dissidents, the legal system and the military, but it is now facing an even more intractable foe: a plummeting stock market.
“Invisible and fast-paced, mutinous market forces have defied the party-led government’s efforts to arrest the month-long slide in Chinese stock markets. If this continues, the slump in stock prices could slow the economy and undermine faith in the party’s leadership and power, experts on China and economics say.”
This is an interesting assessment. Those of us who are less expert on China than experts consulted for this article might wonder how the regime managed to survive a stock market crash between October of 2007 and October of 2008 in which the market lost over 60 percent of its value. This is more than twice as large a decline as the market has experienced in the current downturn. In spite of this plunge, China’s economy grew more than 9.0 percent in 2009, although it did require a substantial government stimulus program.
The piece also contains the strange paragraph:
“For decades, some enthusiasts have argued that China was the exception to the rule: that its farsighted leaders could make the transition to a more open economy while avoiding the debt trap that every other so-called miracle economy had fallen into since World War II. That idea could be the biggest casualty of the crash, both at home and abroad.”
It’s not clear what the article means in asserting that every other miracle economy has fallen into a debt trap. South Korea and Taiwan have experienced rapid and sustained growth for more than five decades, with only brief periods of recessions. As a result, South Korea now has a per capita income that is roughly 90 percent of the per capita income in the United Kingdom. Taiwan’s income is more than 15 percent higher. Are these countries not supposed to be “so-called miracle economies” or is this the record of economies mired in a “debt-trap?”
Addendum:
China’s stock market rose 5.8 percent today.
The media seem to think it’s a really huge deal that investors in China’s stock market have not made any money since February. The Washington Post told readers that it could even threaten the regime’s legitimacy in a front page story headlined, “stock slide sandbags China’s leaders.”
The article begins:
“For decades, the Chinese Communist Party has been able to keep control of democracy protests, dissidents, the legal system and the military, but it is now facing an even more intractable foe: a plummeting stock market.
“Invisible and fast-paced, mutinous market forces have defied the party-led government’s efforts to arrest the month-long slide in Chinese stock markets. If this continues, the slump in stock prices could slow the economy and undermine faith in the party’s leadership and power, experts on China and economics say.”
This is an interesting assessment. Those of us who are less expert on China than experts consulted for this article might wonder how the regime managed to survive a stock market crash between October of 2007 and October of 2008 in which the market lost over 60 percent of its value. This is more than twice as large a decline as the market has experienced in the current downturn. In spite of this plunge, China’s economy grew more than 9.0 percent in 2009, although it did require a substantial government stimulus program.
The piece also contains the strange paragraph:
“For decades, some enthusiasts have argued that China was the exception to the rule: that its farsighted leaders could make the transition to a more open economy while avoiding the debt trap that every other so-called miracle economy had fallen into since World War II. That idea could be the biggest casualty of the crash, both at home and abroad.”
It’s not clear what the article means in asserting that every other miracle economy has fallen into a debt trap. South Korea and Taiwan have experienced rapid and sustained growth for more than five decades, with only brief periods of recessions. As a result, South Korea now has a per capita income that is roughly 90 percent of the per capita income in the United Kingdom. Taiwan’s income is more than 15 percent higher. Are these countries not supposed to be “so-called miracle economies” or is this the record of economies mired in a “debt-trap?”
Addendum:
China’s stock market rose 5.8 percent today.
Read More Leer más Join the discussion Participa en la discusión
Yes, the bottom is really falling out in China, prepare for another Great Depression there. I won’t claim any great expertise on China’s economy, but the exasperated reporting on the recent fall in China’s stock market should also note that it followed an enormous boom. Undoubtedly many people who bought into this boom will be hurt, but it’s not clear that it is a disaster for China’s economy if it’s stock market returns to its level of five months ago.
It is also worth noting that its market had a far sharper drop in 2008. Its economy continued to grow strongly after the crash, although it did require a large government stimulus program.
Yes, the bottom is really falling out in China, prepare for another Great Depression there. I won’t claim any great expertise on China’s economy, but the exasperated reporting on the recent fall in China’s stock market should also note that it followed an enormous boom. Undoubtedly many people who bought into this boom will be hurt, but it’s not clear that it is a disaster for China’s economy if it’s stock market returns to its level of five months ago.
It is also worth noting that its market had a far sharper drop in 2008. Its economy continued to grow strongly after the crash, although it did require a large government stimulus program.
Read More Leer más Join the discussion Participa en la discusión
With the prospect of Grexit increasing, there have been numerous news stories pronouncing this as a disaster for Greece. There have also been many accounts telling us that Greece will not have the same positive prospects as Argentina.
As Paul Krugman reminds us Argentina recovered fairly quickly after it broke the link between its currency and the dollar. As he points out, the real disaster was in the period leading up to the break.
While many people have emphasized ways in which Argentina has advantages in this break relative to Greece, that was not a general perception at the time. The general story back at the end of 2001 and 2002 was that Argentina faced disaster.
For example, on January 1, 2002 we got this NYT piece headlined, “Argentina drifts leaderless as economic collapse looms.”
Here are the first three paragraphs:
“Without a president, a cabinet or a functioning government, Argentina drifted rudderless today, as people waited for the Peronist party to resolve its bitter internal differences over who should run the country and for how long.
“The surprise resignation of the interim president, Adolfo Rodríguez Saá, late Sunday means that by Tuesday Argentina is likely to have its fifth leader in less than two weeks, counting temporary caretakers.
“But with bank accounts partly frozen, a moratorium on payment of the foreign debt and political leaders clearly at a loss for what to do, the possibility of an economic collapse loomed as an even larger concern. All day long, nervous depositors lined up outside banks in hopes of withdrawing some of their money.”
There was another dire piece on Janauary 4th after a new government had been installed. Among other things, this piece told readers:
“Though most Argentines earn their salaries in pesos, an estimated 80 percent of all debts here were contracted in dollars. That raises the specter of widespread bankruptcies if ordinary Argentines are suddenly forced to pay 30 or 40 percent more pesos to meet their obligations.”
Yes, Argentina did have its own currency before the devaluation, but it faced the same sort of debt problem that Greece will face with many debts denominated in a currency that will suddenly be worth much more relative to people’s pay checks.
Anyhow, this is not to claim that a break with the euro will be easy or that Greece will necessarily do as well as Argentina in the aftermath. But it is important to remember that many people were predicting absolute disaster for Argentina at the time of its default and they were proven wrong. Perhaps these folks’ judgements about economics have improved in the last thirteen years, but I wouldn’t bet on it.
With the prospect of Grexit increasing, there have been numerous news stories pronouncing this as a disaster for Greece. There have also been many accounts telling us that Greece will not have the same positive prospects as Argentina.
As Paul Krugman reminds us Argentina recovered fairly quickly after it broke the link between its currency and the dollar. As he points out, the real disaster was in the period leading up to the break.
While many people have emphasized ways in which Argentina has advantages in this break relative to Greece, that was not a general perception at the time. The general story back at the end of 2001 and 2002 was that Argentina faced disaster.
For example, on January 1, 2002 we got this NYT piece headlined, “Argentina drifts leaderless as economic collapse looms.”
Here are the first three paragraphs:
“Without a president, a cabinet or a functioning government, Argentina drifted rudderless today, as people waited for the Peronist party to resolve its bitter internal differences over who should run the country and for how long.
“The surprise resignation of the interim president, Adolfo Rodríguez Saá, late Sunday means that by Tuesday Argentina is likely to have its fifth leader in less than two weeks, counting temporary caretakers.
“But with bank accounts partly frozen, a moratorium on payment of the foreign debt and political leaders clearly at a loss for what to do, the possibility of an economic collapse loomed as an even larger concern. All day long, nervous depositors lined up outside banks in hopes of withdrawing some of their money.”
There was another dire piece on Janauary 4th after a new government had been installed. Among other things, this piece told readers:
“Though most Argentines earn their salaries in pesos, an estimated 80 percent of all debts here were contracted in dollars. That raises the specter of widespread bankruptcies if ordinary Argentines are suddenly forced to pay 30 or 40 percent more pesos to meet their obligations.”
Yes, Argentina did have its own currency before the devaluation, but it faced the same sort of debt problem that Greece will face with many debts denominated in a currency that will suddenly be worth much more relative to people’s pay checks.
Anyhow, this is not to claim that a break with the euro will be easy or that Greece will necessarily do as well as Argentina in the aftermath. But it is important to remember that many people were predicting absolute disaster for Argentina at the time of its default and they were proven wrong. Perhaps these folks’ judgements about economics have improved in the last thirteen years, but I wouldn’t bet on it.
Read More Leer más Join the discussion Participa en la discusión
Read More Leer más Join the discussion Participa en la discusión
Yep, some things never change. Robert Samuelson tells us the tragic story of Greece: it needs to reduce its debt, but to do so it has to raise taxes and/or cut spending. That slows growth, which raises unemployment and also lowers its GDP, quite possibly raising its debt-to-GDP ratio. After telling us that there is no easy exit from this problem for Greece, Samuelson goes on:
“But it’s important to note that Greece’s predicament, though extreme, is shared by many major countries, including the United States, Japan, France and other European nations. …
“When only a few countries are over-indebted (meaning they cannot borrow from private markets at reasonable interest rates), this isn’t necessarily true. Countries can dampen domestic consumption and rely on export-led growth to take up the slack and limit unemployment. Nor is debt automatically bad. It has obvious productive uses: to fight severe recessions; to pay for wars and other emergencies; to finance public “investments” (roads, schools, research).
“Unfortunately, this standard view of government debt — we’re not talking about household and business debt — does not fully apply now. The reason is that numerous countries face similar problems.”
So Samuelson thinks that many countries cannot borrow at reasonable interest rates? That’s not what I read in the newspapers.
Let’s see, according to the Economist, the United States can borrow long-term at less than 2.3 percent interest. That’s less than half of the rate during those wonderful Clinton years when we were paying down the debt. Canada can do even better, paying just 1.7 percent. Those no-good-lazy-croissant-eating French types can borrow at a less than a 1.3 percent rate. The frugal Germans have to pay just 0.8 percent, a bit more than the hugely indebted Japanese who can get away with paying less than 0.5 percent.
In short, almost everyone other than Greece can borrow at extremely low interest rates. (Those high rates are their euro zone dividend.) Rather than being some difficult conundrum as Samuelson tries to tell his readers, this story is about as simple as it gets. The world is suffering from a huge shortfall in demand. We need people, businesses, and/or governments to spend money.
Unfortunately, the deficit gestapos are preventing more spending for reasons that defy logic but undoubtedly make sense to them. Anyhow, this is a really simple story, even if there is a lot of money to be made in trying to make it appear complicated.
Yep, some things never change. Robert Samuelson tells us the tragic story of Greece: it needs to reduce its debt, but to do so it has to raise taxes and/or cut spending. That slows growth, which raises unemployment and also lowers its GDP, quite possibly raising its debt-to-GDP ratio. After telling us that there is no easy exit from this problem for Greece, Samuelson goes on:
“But it’s important to note that Greece’s predicament, though extreme, is shared by many major countries, including the United States, Japan, France and other European nations. …
“When only a few countries are over-indebted (meaning they cannot borrow from private markets at reasonable interest rates), this isn’t necessarily true. Countries can dampen domestic consumption and rely on export-led growth to take up the slack and limit unemployment. Nor is debt automatically bad. It has obvious productive uses: to fight severe recessions; to pay for wars and other emergencies; to finance public “investments” (roads, schools, research).
“Unfortunately, this standard view of government debt — we’re not talking about household and business debt — does not fully apply now. The reason is that numerous countries face similar problems.”
So Samuelson thinks that many countries cannot borrow at reasonable interest rates? That’s not what I read in the newspapers.
Let’s see, according to the Economist, the United States can borrow long-term at less than 2.3 percent interest. That’s less than half of the rate during those wonderful Clinton years when we were paying down the debt. Canada can do even better, paying just 1.7 percent. Those no-good-lazy-croissant-eating French types can borrow at a less than a 1.3 percent rate. The frugal Germans have to pay just 0.8 percent, a bit more than the hugely indebted Japanese who can get away with paying less than 0.5 percent.
In short, almost everyone other than Greece can borrow at extremely low interest rates. (Those high rates are their euro zone dividend.) Rather than being some difficult conundrum as Samuelson tries to tell his readers, this story is about as simple as it gets. The world is suffering from a huge shortfall in demand. We need people, businesses, and/or governments to spend money.
Unfortunately, the deficit gestapos are preventing more spending for reasons that defy logic but undoubtedly make sense to them. Anyhow, this is a really simple story, even if there is a lot of money to be made in trying to make it appear complicated.
Read More Leer más Join the discussion Participa en la discusión
