There is much that is wrong with former Clinton and Obama aide (and J.P. Morgan executive) Bill Daley’s NYT column arguing for the Trans-Pacific Partnership (TPP). First, there is the obvious that he is equating the TPP and past trade deals with “free trade.”
Of course they are not the same, these deals have been about putting manufacturing workers in competition with low-paid workers in the developing world, while protecting doctors and other highly paid professionals from the same sort of competition. They also impose a business friendly regulatory structure. And, they increase protectionism in the form of stronger and longer copyright and patent protection.
But this is not new. What stands out in Daley’s piece is the ungodly silly assertion that:
“today, of the 40 largest economies, the United States ranks 39th in the share of our gross domestic product that comes from exports. This is because our products face very high barriers to entry overseas in the form of tariffs, quotas and outright discrimination.”
Can you see the problem with this one? Think about how much the U.S. might export compared to a country like France. How much would it export compared to a country like Belgium or Luxembourg?
Yes, smaller countries are likely to have a larger share of their economy go to exports because they are smaller. To take advantage of economies of scale, countries like Luxembourg, Belgium, and even France have to integrate their economies with other countries. Because the much larger size of the United States, many economies of scale can be captured entirely by serving the domestic market. That is the main reason that we rank 39th out of Daley’s 40 countries in the export share of GDP, not barriers to our products.
You have to wonder if these folks don’t ever get tired of these sorts of cheap tricks. Do they really think the TPP is such a bad deal that they can’t sell it with honest arguments?
Note: Spelling of “aide” was corrected.
There is much that is wrong with former Clinton and Obama aide (and J.P. Morgan executive) Bill Daley’s NYT column arguing for the Trans-Pacific Partnership (TPP). First, there is the obvious that he is equating the TPP and past trade deals with “free trade.”
Of course they are not the same, these deals have been about putting manufacturing workers in competition with low-paid workers in the developing world, while protecting doctors and other highly paid professionals from the same sort of competition. They also impose a business friendly regulatory structure. And, they increase protectionism in the form of stronger and longer copyright and patent protection.
But this is not new. What stands out in Daley’s piece is the ungodly silly assertion that:
“today, of the 40 largest economies, the United States ranks 39th in the share of our gross domestic product that comes from exports. This is because our products face very high barriers to entry overseas in the form of tariffs, quotas and outright discrimination.”
Can you see the problem with this one? Think about how much the U.S. might export compared to a country like France. How much would it export compared to a country like Belgium or Luxembourg?
Yes, smaller countries are likely to have a larger share of their economy go to exports because they are smaller. To take advantage of economies of scale, countries like Luxembourg, Belgium, and even France have to integrate their economies with other countries. Because the much larger size of the United States, many economies of scale can be captured entirely by serving the domestic market. That is the main reason that we rank 39th out of Daley’s 40 countries in the export share of GDP, not barriers to our products.
You have to wonder if these folks don’t ever get tired of these sorts of cheap tricks. Do they really think the TPP is such a bad deal that they can’t sell it with honest arguments?
Note: Spelling of “aide” was corrected.
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Mr. Arithmetic was wondering after seeing an article in the Chicago Sun Times that analyzed the distribution of pensions among former employees of the City of Chicago and the State of Illinois. The article began by telling readers:
“One of every four retired workers from the state of Illinois, the city of Chicago and the Chicago Public Schools is getting a pension of more than $60,000 a year.
“That’s 80,365 people in all.”
It then went on to say that 13,240 of these workers had pensions of more than $100,000 a year and 20,004 had pensions between $80,000 and $100,000.
So this group of retirees seems to be doing reasonably well, but what prompted Mr. Arithmetic’s interest was the statement:
“In all, the state’s five pension funds, Chicago’s four pension funds and the Chicago teachers pension fund are paying a total of $12.7 billion a year to more than 310,000 people.”
Here’s the problem. We apparently have total payments of $12,700 million. If this was just divided evenly among all 310,000 beneficiaries it would come to a bit less than $41,000 a head, but we know that many retirees get much more than this figure, so the rest must get much less. We can try to figure out how much less by doing some arithmetic and making some assumptions.
We’ll assume conservatively that the average pension for people who get more than $100k a year is $105k, the average pension for people who get between $80k and $100k is $85k, and the average pension for people who get more than $60k and less than $80k is $65k. That gets us:
13,240 * $105k = $1,390 million
20,004 * $85k = $1,700 million
47,121 * $65k = $3,063 million
Taken together this gives us $6,153 million going to these retirees. If we subtract that from $12,700 million being paid out in total, that leaves $6,547 million going to the remaining 229,635 retirees. That comes to an average pension for this group of $28,500 a year. This doesn’t seem too high, especially since most of these workers are not covered by Social Security so this will be the bulk of their retirement income.
As far as who pulls in these higher pensions, many of them are police and firefighters. The city reports that the average pension for 2,900 retired firefighters is $67,000. The average pension for 9,200 police officers is $59,000. Obviously there are others who fall into the Sun Times high pension group, but that’s a significant part of the story.
Note: My mother is one of these pension beneficiaries, although she is not among the Sun Times’ high income group.
Mr. Arithmetic was wondering after seeing an article in the Chicago Sun Times that analyzed the distribution of pensions among former employees of the City of Chicago and the State of Illinois. The article began by telling readers:
“One of every four retired workers from the state of Illinois, the city of Chicago and the Chicago Public Schools is getting a pension of more than $60,000 a year.
“That’s 80,365 people in all.”
It then went on to say that 13,240 of these workers had pensions of more than $100,000 a year and 20,004 had pensions between $80,000 and $100,000.
So this group of retirees seems to be doing reasonably well, but what prompted Mr. Arithmetic’s interest was the statement:
“In all, the state’s five pension funds, Chicago’s four pension funds and the Chicago teachers pension fund are paying a total of $12.7 billion a year to more than 310,000 people.”
Here’s the problem. We apparently have total payments of $12,700 million. If this was just divided evenly among all 310,000 beneficiaries it would come to a bit less than $41,000 a head, but we know that many retirees get much more than this figure, so the rest must get much less. We can try to figure out how much less by doing some arithmetic and making some assumptions.
We’ll assume conservatively that the average pension for people who get more than $100k a year is $105k, the average pension for people who get between $80k and $100k is $85k, and the average pension for people who get more than $60k and less than $80k is $65k. That gets us:
13,240 * $105k = $1,390 million
20,004 * $85k = $1,700 million
47,121 * $65k = $3,063 million
Taken together this gives us $6,153 million going to these retirees. If we subtract that from $12,700 million being paid out in total, that leaves $6,547 million going to the remaining 229,635 retirees. That comes to an average pension for this group of $28,500 a year. This doesn’t seem too high, especially since most of these workers are not covered by Social Security so this will be the bulk of their retirement income.
As far as who pulls in these higher pensions, many of them are police and firefighters. The city reports that the average pension for 2,900 retired firefighters is $67,000. The average pension for 9,200 police officers is $59,000. Obviously there are others who fall into the Sun Times high pension group, but that’s a significant part of the story.
Note: My mother is one of these pension beneficiaries, although she is not among the Sun Times’ high income group.
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For some reason major news outlets like the NYT and WaPo chose not to report on the Federal Reserve Board’s release of data on industrial output for April. This release showed that manufacturing output was flat in April leaving output roughly half a percentage point below the November level. Meanwhile capacity utilization, which is often a forerunner of investment in new plant and equipment, dropped to 77.2 percent, 0.9 percentage points below its November level.
The weakness is manufacturing is not surprising given the sharp rise in the trade deficit in the quarter and especially in March. The rise in the deficit is presumably the result of the run-up in the value of the dollar in the second half of 2014. The new data should have warranted at least a short article in these papers.
For some reason major news outlets like the NYT and WaPo chose not to report on the Federal Reserve Board’s release of data on industrial output for April. This release showed that manufacturing output was flat in April leaving output roughly half a percentage point below the November level. Meanwhile capacity utilization, which is often a forerunner of investment in new plant and equipment, dropped to 77.2 percent, 0.9 percentage points below its November level.
The weakness is manufacturing is not surprising given the sharp rise in the trade deficit in the quarter and especially in March. The rise in the deficit is presumably the result of the run-up in the value of the dollar in the second half of 2014. The new data should have warranted at least a short article in these papers.
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The Washington Post told readers that China’s government is no longer acting to keep the value of the dollar up against its currency:
“Economists say that over the past several years, China’s currency has risen to a fair value, no longer providing Chinese exporters with a leg up on U.S. businesses.”
After citing several economists who support the claim that the currency is at or near a market value, it then reports that it’s trade surplus is within a normal range.
“Nick Lardy, a Peterson economist specializing in China, says that in 2014 China’s trade surplus dropped to 2.2 percent of gross domestic product, a level considered an indicator of fair exchange rates. At their peak in 2007, China’s exports amounted to 10 percent of GDP, he said.”
There are several points worth noting. First, while it appears that China has largely stopped its large-scale purchases of foreign exchange (mostly dollars), its central bank now holds close to $4 trillion in foreign exchange. This is at least twice what would be expected for a country with an economy of China’s size.
It is widely believed by economists that the Fed’s holding of $3 trillion of assets is holding interest rates down in the United States. The idea is that by holding this stock of government bonds and mortgage backed securities, it is keeping their prices higher than they would be if investors had to hold this stock of assets. (Higher bond prices mean lower interest rates.) If we accept the view that holding a large stock of bonds affects their price, then it must follow that the decision of China’s bank to hold a large stock of foreign reserves raises their price relative to a situation where investors held them. This would mean that China’s central bank is continuing to prop up the value of the dollar against its currency, even if it is not actively buying dollars.
The point about a trade surplus of 2.2 percent of GDP being normal is also misleading. This would be a reasonable figure for a slow growing rich country like the United States. Economists usually expect fast growing developing countries like China to be running trade deficits. The idea is that capital earns a better return in a fast growing country. This pushes up the value of its currency.
Remember the billions of stories in the media last fall about how the dollar was rising because the U.S. economy was so strong? (It was growing at a bit more than a 2.0 percent annual rate.) That should be happening with China, given the huge difference between its growth rate and the growth rates in the U.S., Europe, and Japan. The rise in the value of China’s currency would make its goods and services less competitive internationally, shifting its trade surplus to a deficit. The fact that this is not happening is explained by the actions of China’s central bank to keep its currency from rising.
The Washington Post told readers that China’s government is no longer acting to keep the value of the dollar up against its currency:
“Economists say that over the past several years, China’s currency has risen to a fair value, no longer providing Chinese exporters with a leg up on U.S. businesses.”
After citing several economists who support the claim that the currency is at or near a market value, it then reports that it’s trade surplus is within a normal range.
“Nick Lardy, a Peterson economist specializing in China, says that in 2014 China’s trade surplus dropped to 2.2 percent of gross domestic product, a level considered an indicator of fair exchange rates. At their peak in 2007, China’s exports amounted to 10 percent of GDP, he said.”
There are several points worth noting. First, while it appears that China has largely stopped its large-scale purchases of foreign exchange (mostly dollars), its central bank now holds close to $4 trillion in foreign exchange. This is at least twice what would be expected for a country with an economy of China’s size.
It is widely believed by economists that the Fed’s holding of $3 trillion of assets is holding interest rates down in the United States. The idea is that by holding this stock of government bonds and mortgage backed securities, it is keeping their prices higher than they would be if investors had to hold this stock of assets. (Higher bond prices mean lower interest rates.) If we accept the view that holding a large stock of bonds affects their price, then it must follow that the decision of China’s bank to hold a large stock of foreign reserves raises their price relative to a situation where investors held them. This would mean that China’s central bank is continuing to prop up the value of the dollar against its currency, even if it is not actively buying dollars.
The point about a trade surplus of 2.2 percent of GDP being normal is also misleading. This would be a reasonable figure for a slow growing rich country like the United States. Economists usually expect fast growing developing countries like China to be running trade deficits. The idea is that capital earns a better return in a fast growing country. This pushes up the value of its currency.
Remember the billions of stories in the media last fall about how the dollar was rising because the U.S. economy was so strong? (It was growing at a bit more than a 2.0 percent annual rate.) That should be happening with China, given the huge difference between its growth rate and the growth rates in the U.S., Europe, and Japan. The rise in the value of China’s currency would make its goods and services less competitive internationally, shifting its trade surplus to a deficit. The fact that this is not happening is explained by the actions of China’s central bank to keep its currency from rising.
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Alan Sloan and Cezary Podkul have a piece in ProPublica that tries to explain the origins of the serious pension shortfalls in Chicago, Illinois, and several other state and local governments. The basic story is that governments went many years without making required contributions, which eventually leads to a serious shortfall.
However, there is another part of this story which is worth adding. In the late 1990s, most pensions were viewed as very well funded. This was due to the extraordinary run-up in stock prices. Many state and local governments drastically cut back their contributions to their pensions since they saw little need. The stock market was doing it for them.
The problem was that the bubble burst (which bubbles do). When the bubble burst over the period 2000–2002, it made pensions appear much less well funded. However, the bursting also led to a recession which worsened the budget situation of governments across the country. State and local governments suddenly had to make much larger pension contributions at a time when they faced large deficits. Not surprisingly, many chose to instead stick their heads in the sand and pray that the bubble would reinflate.
It is worth including this history because it points to the sort of problems created by asset bubbles like the stock and housing bubbles. The conventional wisdom at the time, espoused by folks like Alan Greenspan and the Clinton administration, was that bubbles were no big deal. Greenspan argued the best thing to do was just let bubbles run their course and then pick up the pieces. The pension problems now being faced by state and local governments across the country are among the pieces.
Alan Sloan and Cezary Podkul have a piece in ProPublica that tries to explain the origins of the serious pension shortfalls in Chicago, Illinois, and several other state and local governments. The basic story is that governments went many years without making required contributions, which eventually leads to a serious shortfall.
However, there is another part of this story which is worth adding. In the late 1990s, most pensions were viewed as very well funded. This was due to the extraordinary run-up in stock prices. Many state and local governments drastically cut back their contributions to their pensions since they saw little need. The stock market was doing it for them.
The problem was that the bubble burst (which bubbles do). When the bubble burst over the period 2000–2002, it made pensions appear much less well funded. However, the bursting also led to a recession which worsened the budget situation of governments across the country. State and local governments suddenly had to make much larger pension contributions at a time when they faced large deficits. Not surprisingly, many chose to instead stick their heads in the sand and pray that the bubble would reinflate.
It is worth including this history because it points to the sort of problems created by asset bubbles like the stock and housing bubbles. The conventional wisdom at the time, espoused by folks like Alan Greenspan and the Clinton administration, was that bubbles were no big deal. Greenspan argued the best thing to do was just let bubbles run their course and then pick up the pieces. The pension problems now being faced by state and local governments across the country are among the pieces.
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Do newspapers like the NYT test applicants for reporting jobs on their ability to read minds? It seems they must, since so many of them seem to have this skill. Today’s article on the Senate’s approval of a motion to debate fast-track authority at several points told readers what various actors think or believe.
My favorite assessment of inner thoughts was in reference to demands that the Trans-Pacific Partnership (TPP) include currency rules:
“But the White House fears that making the accelerated authority contingent on currency policy alterations could scare important partners from the negotiating table, including Japan, the second-largest Trans-Pacific partner.”
If we assume that NYT reporters do not actually read minds, this statement means that someone at the White House (is there a reason for anonymity?) said that they feared currency rules would scare countries away from the negotiating table. As a practical matter, the United States would undoubtedly have to make concessions on other issues in order to get Japan and other countries to agree to currency rules.
Such concessions might mean that the TPP would end up being less beneficial to companies like Nike, Boeing, and Pfizer, which would reduce their interest in the pact. However in any serious assessment the issue is whether the TPP ends up being less corporate friendly as a result of currency rules, not whether the possibility of such a deal would disappear. Of course it is possible that the Obama administration would not have an interest in pursuing a trade deal that was less friendly to large corporations who are major campaign contributors.
It is also worth noting that many large U.S. corporations would actually be opposed to a reduction in the value of the dollar against other currencies. Companies like Walmart and GE, that depend on low cost imports, would lose much of their competitive advantage if the price of the Chinese yuan and other currencies rose against the dollar.
Do newspapers like the NYT test applicants for reporting jobs on their ability to read minds? It seems they must, since so many of them seem to have this skill. Today’s article on the Senate’s approval of a motion to debate fast-track authority at several points told readers what various actors think or believe.
My favorite assessment of inner thoughts was in reference to demands that the Trans-Pacific Partnership (TPP) include currency rules:
“But the White House fears that making the accelerated authority contingent on currency policy alterations could scare important partners from the negotiating table, including Japan, the second-largest Trans-Pacific partner.”
If we assume that NYT reporters do not actually read minds, this statement means that someone at the White House (is there a reason for anonymity?) said that they feared currency rules would scare countries away from the negotiating table. As a practical matter, the United States would undoubtedly have to make concessions on other issues in order to get Japan and other countries to agree to currency rules.
Such concessions might mean that the TPP would end up being less beneficial to companies like Nike, Boeing, and Pfizer, which would reduce their interest in the pact. However in any serious assessment the issue is whether the TPP ends up being less corporate friendly as a result of currency rules, not whether the possibility of such a deal would disappear. Of course it is possible that the Obama administration would not have an interest in pursuing a trade deal that was less friendly to large corporations who are major campaign contributors.
It is also worth noting that many large U.S. corporations would actually be opposed to a reduction in the value of the dollar against other currencies. Companies like Walmart and GE, that depend on low cost imports, would lose much of their competitive advantage if the price of the Chinese yuan and other currencies rose against the dollar.
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