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Floyd Norris (who unfortunately has accepted a buyout and will be leaving the paper) had an interesting piece on the disappearance of traditional defined benefit pensions. He notes that millions of workers in multi-employer plans are at risk of sharp reductions in benefits. Detroit city workers and retirees have already seen sharp declines in benefits.
After pointing out that few workers now have secure pensions, he then refers to a new book by Alicia Munnell, Charles D. Ellis and Andrew D. Eschtruth, which he cites as saying that the typical household near retirement has only $110,000 in a 401(k). Actually this figure refers to the roughly half of near retirees that have a 401(k). The median near retirement household has considerably less money in a retirement account.
According to our recent analysis of the Fed’s 2013 Survey of Consumer Finance, the average net worth outside of housing wealth for families in the middle quintile of households between the age of 55-64 was just $89,300. This figure includes all assets in 401(k)s, plus any money held in checking and saving accounts and any non-housing tangible assets, like a car or boat. it would subtract non-mortgage debt like credit cards, car loans, and student loans.
The average home equity stake for households in the middle quintile in this age cohort was $76,400, this accounted for 54.6 percent of the home’s value. In 1989, households in the middle quintile in this age group had more than 81 percent of their home paid off on average.
Floyd Norris (who unfortunately has accepted a buyout and will be leaving the paper) had an interesting piece on the disappearance of traditional defined benefit pensions. He notes that millions of workers in multi-employer plans are at risk of sharp reductions in benefits. Detroit city workers and retirees have already seen sharp declines in benefits.
After pointing out that few workers now have secure pensions, he then refers to a new book by Alicia Munnell, Charles D. Ellis and Andrew D. Eschtruth, which he cites as saying that the typical household near retirement has only $110,000 in a 401(k). Actually this figure refers to the roughly half of near retirees that have a 401(k). The median near retirement household has considerably less money in a retirement account.
According to our recent analysis of the Fed’s 2013 Survey of Consumer Finance, the average net worth outside of housing wealth for families in the middle quintile of households between the age of 55-64 was just $89,300. This figure includes all assets in 401(k)s, plus any money held in checking and saving accounts and any non-housing tangible assets, like a car or boat. it would subtract non-mortgage debt like credit cards, car loans, and student loans.
The average home equity stake for households in the middle quintile in this age cohort was $76,400, this accounted for 54.6 percent of the home’s value. In 1989, households in the middle quintile in this age group had more than 81 percent of their home paid off on average.
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I have complained at length about news stories that give us really big numbers with no context, which they should know are absolutely meaningless to almost all their listeners. Marketplace Radio did exactly this early in the week when it told listeners in a short segment:
“Here’s a big number: $18 trillion.
I have complained at length about news stories that give us really big numbers with no context, which they should know are absolutely meaningless to almost all their listeners. Marketplace Radio did exactly this early in the week when it told listeners in a short segment:
“Here’s a big number: $18 trillion.
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It looks like individual choice is not supposed to get in the way of corporate profits in the world of Michael Froman and U.S. trade policy. In a Washington Post article on the Trans-Atlantic Trade and Investment Pact (TTIP), U.S. Trade Representative Michael Froman is quoted as saying:
“We’re not trying to force anybody to eat anything … we do feel like the decision as to what is safe should be made by science.”
While it is not entirely clear what Froman means by this comment, most people would probably think that individuals have the right to determine for themselves what is safe, since “science” or scientists sometimes makes mistakes, just like economists. This would mean that food should be clearly labeled, so that people can know what chemicals it contains and how it was produced. Froman’s comment could be interpreted as objecting to this position.
It is also worth noting that the TTIP is not a “free trade” agreement as asserted in the article. The increased protections in the pact, in the form of stronger patent and copyright protections, are likely to do more to raise prices and block trade than any tariff reductions that are included. the pact is mostly about putting in place a set of regulations that are likely to be very friendly to the corporate interests involved in negotiating the deal, but which would face difficulty if put to a vote of democratically elected parliaments individually.
It looks like individual choice is not supposed to get in the way of corporate profits in the world of Michael Froman and U.S. trade policy. In a Washington Post article on the Trans-Atlantic Trade and Investment Pact (TTIP), U.S. Trade Representative Michael Froman is quoted as saying:
“We’re not trying to force anybody to eat anything … we do feel like the decision as to what is safe should be made by science.”
While it is not entirely clear what Froman means by this comment, most people would probably think that individuals have the right to determine for themselves what is safe, since “science” or scientists sometimes makes mistakes, just like economists. This would mean that food should be clearly labeled, so that people can know what chemicals it contains and how it was produced. Froman’s comment could be interpreted as objecting to this position.
It is also worth noting that the TTIP is not a “free trade” agreement as asserted in the article. The increased protections in the pact, in the form of stronger patent and copyright protections, are likely to do more to raise prices and block trade than any tariff reductions that are included. the pact is mostly about putting in place a set of regulations that are likely to be very friendly to the corporate interests involved in negotiating the deal, but which would face difficulty if put to a vote of democratically elected parliaments individually.
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A Washington Post article on President Obama’s efforts to secure fast-track trade authority in order to pass the Trans-Pacific Partnership (TPP) included an incredible comment from Obama:
“‘It is somewhat challenging because of .?.?. Americans feeling as if their wages and incomes have stagnated’ because of increasing global competition, Obama said. ‘There’s a narrative there that makes for some tough politics.'”
Of course President Obama is correct that this “narrative,” which most economists would say corresponds to the reality, makes it difficult to pass more trade deals that will further disadvantage workers in the United States. It’s not clear why President Obama would be surprised that most of the public opposes trade deals that are likely to redistribute more income upward.
According to the article, the administration also inaccurately characterized the nature of the TPP.
“The administration has argued that the trade deals will boost U.S. exports and lower tariffs for American goods in the fast-growing Asia-Pacific region, where the United States has faced increasing economic competition from China.”
The deal will have little impact on tariffs in most of the countries that are parties to the TPP, since they are already low. Furthermore, the deal includes a large amount of protectionism in the form of stronger patent and copyright protection. Higher licensing fees and royalties will make the drug and entertainment industry richer, but are likely to crowd out other exports.
It is also worth noting that jobs depend on net exports (exports minus imports), not exports. (If we increase exports, but imports rise by a larger amount, then we on net lose jobs.) If the administration doesn’t understand that it is net exports that affect employment, and not just exports, then the media should be doing intense ridicule. This would be like Sarah Palin saying she could see Russia from her house, but much more serious.
A Washington Post article on President Obama’s efforts to secure fast-track trade authority in order to pass the Trans-Pacific Partnership (TPP) included an incredible comment from Obama:
“‘It is somewhat challenging because of .?.?. Americans feeling as if their wages and incomes have stagnated’ because of increasing global competition, Obama said. ‘There’s a narrative there that makes for some tough politics.'”
Of course President Obama is correct that this “narrative,” which most economists would say corresponds to the reality, makes it difficult to pass more trade deals that will further disadvantage workers in the United States. It’s not clear why President Obama would be surprised that most of the public opposes trade deals that are likely to redistribute more income upward.
According to the article, the administration also inaccurately characterized the nature of the TPP.
“The administration has argued that the trade deals will boost U.S. exports and lower tariffs for American goods in the fast-growing Asia-Pacific region, where the United States has faced increasing economic competition from China.”
The deal will have little impact on tariffs in most of the countries that are parties to the TPP, since they are already low. Furthermore, the deal includes a large amount of protectionism in the form of stronger patent and copyright protection. Higher licensing fees and royalties will make the drug and entertainment industry richer, but are likely to crowd out other exports.
It is also worth noting that jobs depend on net exports (exports minus imports), not exports. (If we increase exports, but imports rise by a larger amount, then we on net lose jobs.) If the administration doesn’t understand that it is net exports that affect employment, and not just exports, then the media should be doing intense ridicule. This would be like Sarah Palin saying she could see Russia from her house, but much more serious.
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Eduardo Porter ends an interesting piece on declining income inequality in Latin America with a warning that the decline may not continue, insofar as exports of commodities was a major cause. The argument is that China’s growth is slowing, and since China was a major market for exports, this means that growth in demand in the future might be much slower than growth in demand in the last decade.
The problem with this view, which is frequently repeated in the media, is that it ignores the fact that China is much larger now than it was a decade ago. China’s economy has more than doubled in size over the last decade. This means from the standpoint of the world economy, 7.0 percent growth in China today has far more impact than 10.0 percent did a decade ago. It may well be the case that demand for commodities exported from Latin America is weakening, but if we are comparing the impact of growth in China on this demand, it is undoubtedly a larger factor in 2014 than it was in 2004.
Eduardo Porter ends an interesting piece on declining income inequality in Latin America with a warning that the decline may not continue, insofar as exports of commodities was a major cause. The argument is that China’s growth is slowing, and since China was a major market for exports, this means that growth in demand in the future might be much slower than growth in demand in the last decade.
The problem with this view, which is frequently repeated in the media, is that it ignores the fact that China is much larger now than it was a decade ago. China’s economy has more than doubled in size over the last decade. This means from the standpoint of the world economy, 7.0 percent growth in China today has far more impact than 10.0 percent did a decade ago. It may well be the case that demand for commodities exported from Latin America is weakening, but if we are comparing the impact of growth in China on this demand, it is undoubtedly a larger factor in 2014 than it was in 2004.
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Andrew Ross Sorkin used his column today to complain about the AFL-CIO and others making an issue over Wall Street banks paying unearned deferred compensation to employees who take positions in government. He argues that the people leaving Wall Street for top level government positions are victims of a “populist shakedown.”
Sorkins’s complaint seems more than a bit bizarre given recent economic history. In the housing bubble years the Wall Street folks made themselves incredibly wealthy packaging and selling bad mortgage backed securities. When this practice threatened to put them all into bankruptcy, the Treasury and Fed stepped in with a bottomless pile of below market interest rate loans and loan guarantees to keep them afloat.
This was explicit policy as former Treasury Secretary Timothy Geithner makes very clear in his autobiography. He commented repeatedly that there would be “no more Lehmans,” and he ridiculed the “old testament” types who thought that somehow the banks should be made to pay for their incompetence and left to the mercy of the market.
The result is that the Wall Street banks are bigger and more powerful than ever. By contrast, more than 10 million homeowners are still underwater, the cohort of middle income baby boomers are hitting retirement with virtually nothing but their Social Security and Medicare to support them, and most of the workforce is likely to go a decade without seeing wage growth. And Geithner is now making a fortune at a private equity company and gives every indication in his book of thinking that he had done a great job.
This state of affairs would probably not exist if the Treasury had been full of people without Wall Street connections. If we had more academics, union officials, and people with business backgrounds other than finance, it is likely that all the solutions to the economic crisis created by Wall Street would not have involved saving Wall Street as a first priority. (And, we would not have that silly second Great Depression myth as the guiding story for public policy. Getting out of the Great Depression only required spending money — even Wall Street folks could figure that one out.)
Anyhow, the AFL-CIO is right to raise questions about policies that further Wall Street’s dominance of economic and financial policy. It’s striking that Sorkin can’t even see a problem.
Andrew Ross Sorkin used his column today to complain about the AFL-CIO and others making an issue over Wall Street banks paying unearned deferred compensation to employees who take positions in government. He argues that the people leaving Wall Street for top level government positions are victims of a “populist shakedown.”
Sorkins’s complaint seems more than a bit bizarre given recent economic history. In the housing bubble years the Wall Street folks made themselves incredibly wealthy packaging and selling bad mortgage backed securities. When this practice threatened to put them all into bankruptcy, the Treasury and Fed stepped in with a bottomless pile of below market interest rate loans and loan guarantees to keep them afloat.
This was explicit policy as former Treasury Secretary Timothy Geithner makes very clear in his autobiography. He commented repeatedly that there would be “no more Lehmans,” and he ridiculed the “old testament” types who thought that somehow the banks should be made to pay for their incompetence and left to the mercy of the market.
The result is that the Wall Street banks are bigger and more powerful than ever. By contrast, more than 10 million homeowners are still underwater, the cohort of middle income baby boomers are hitting retirement with virtually nothing but their Social Security and Medicare to support them, and most of the workforce is likely to go a decade without seeing wage growth. And Geithner is now making a fortune at a private equity company and gives every indication in his book of thinking that he had done a great job.
This state of affairs would probably not exist if the Treasury had been full of people without Wall Street connections. If we had more academics, union officials, and people with business backgrounds other than finance, it is likely that all the solutions to the economic crisis created by Wall Street would not have involved saving Wall Street as a first priority. (And, we would not have that silly second Great Depression myth as the guiding story for public policy. Getting out of the Great Depression only required spending money — even Wall Street folks could figure that one out.)
Anyhow, the AFL-CIO is right to raise questions about policies that further Wall Street’s dominance of economic and financial policy. It’s striking that Sorkin can’t even see a problem.
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