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The Washington Post gave us some good frat boy budget reporting in a front page story on the farm bill this morning. Frat boy budget reporting is when you write a piece that provides no information to the vast majority of readers but lets you go down to the budget reporters’ frat house and give each other the budget reporters’ secret handshake. In this case, the piece told us that the farm bill will cost $956.4 billion over the next decade, it will reduce spending on SNAP by $8 billion and save $16 billion in total.
Yes, this is really helpful. At least 0.1 percent of Washington Post readers have any clue what these numbers mean for the budget over the next decade. It is possible and easy to express these numbers in ways that would be meaningful.
CEPR’s extraordinary Responsible Budget Reporting Calculator would allow any budget reporters to determine in seconds that the total bill is 2.05 percent of projected spending, which immediately would give the vast majority of Post readers a clear idea of the farm bill’s importance to the budget. They could also quickly recognize that the cuts to the SNAP bill are 0.017 percent of projected spending and the total savings on the bill are 0.034 percent of projected spending.
It’s really not hard to do budget reporting in a way that provides information to its audience. However the Post simply chooses not to.
The Washington Post gave us some good frat boy budget reporting in a front page story on the farm bill this morning. Frat boy budget reporting is when you write a piece that provides no information to the vast majority of readers but lets you go down to the budget reporters’ frat house and give each other the budget reporters’ secret handshake. In this case, the piece told us that the farm bill will cost $956.4 billion over the next decade, it will reduce spending on SNAP by $8 billion and save $16 billion in total.
Yes, this is really helpful. At least 0.1 percent of Washington Post readers have any clue what these numbers mean for the budget over the next decade. It is possible and easy to express these numbers in ways that would be meaningful.
CEPR’s extraordinary Responsible Budget Reporting Calculator would allow any budget reporters to determine in seconds that the total bill is 2.05 percent of projected spending, which immediately would give the vast majority of Post readers a clear idea of the farm bill’s importance to the budget. They could also quickly recognize that the cuts to the SNAP bill are 0.017 percent of projected spending and the total savings on the bill are 0.034 percent of projected spending.
It’s really not hard to do budget reporting in a way that provides information to its audience. However the Post simply chooses not to.
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Apparently a lot of media folks have made such a habit of repeating Republican talking points that they can’t see what is right in front of their eyes. The Republicans are touting the fact that the Congressional Budget Office (CBO) expects the Affordable Care Act (ACA) to reduce the number of people working.
Guess what? This was one of the motivations for the ACA. It is a feature, not a bug. There are a lot of people who would prefer not to work and would not work if they had some other way to get health care insurance. Imagine a 62 year-old with diabetes and other health conditions. No insurer will touch this person. If they can get insurance at all they are looking at bill that will certainly run well over $10k a year. If this person has a job that provides insurance they will keep it until they qualify for Medicare no matter how much of a struggle it is to go to work each day.
Now with the ACA this person will be able to buy insurance at the same price as anyone else in the age 55-64 age group. If they can get by on their Social Security and prior savings then they may well decide to retire early. They may also qualify for a subsidy in the exchanges. Is this an awful story? You be the judge.
The other likely scenario is the case of a mother with a newly born child. She may want to spend some time at home with her kid, but may have no other way to pay for her health insurance if she leaves her job. The ACA will give her an opportunity to get lower cost insurance (possibly with a subsidy). Again, is a mother taking some off to be with a new born kid a horror story?
Finally, we should be very clear about what CBO said on wages since there really is no ambiguity here. It said:
“According to CBO’s more detailed analysis, the 1 percent reduction in aggregate compensation that will occur as a result of the ACA corresponds to a reduction of about 1.5 percent to 2.0 percent in hours worked. (p 127)”
If hours fall by 1.5 to 2.0 percent, but compensation falls by 1.0 percent, then compensation per hour rises by 0.5-1.0 percent due to the ACA. If this is bad news for workers then someone must have been enjoying the new found freedoms in Colorado or Washington State too much.
Apparently a lot of media folks have made such a habit of repeating Republican talking points that they can’t see what is right in front of their eyes. The Republicans are touting the fact that the Congressional Budget Office (CBO) expects the Affordable Care Act (ACA) to reduce the number of people working.
Guess what? This was one of the motivations for the ACA. It is a feature, not a bug. There are a lot of people who would prefer not to work and would not work if they had some other way to get health care insurance. Imagine a 62 year-old with diabetes and other health conditions. No insurer will touch this person. If they can get insurance at all they are looking at bill that will certainly run well over $10k a year. If this person has a job that provides insurance they will keep it until they qualify for Medicare no matter how much of a struggle it is to go to work each day.
Now with the ACA this person will be able to buy insurance at the same price as anyone else in the age 55-64 age group. If they can get by on their Social Security and prior savings then they may well decide to retire early. They may also qualify for a subsidy in the exchanges. Is this an awful story? You be the judge.
The other likely scenario is the case of a mother with a newly born child. She may want to spend some time at home with her kid, but may have no other way to pay for her health insurance if she leaves her job. The ACA will give her an opportunity to get lower cost insurance (possibly with a subsidy). Again, is a mother taking some off to be with a new born kid a horror story?
Finally, we should be very clear about what CBO said on wages since there really is no ambiguity here. It said:
“According to CBO’s more detailed analysis, the 1 percent reduction in aggregate compensation that will occur as a result of the ACA corresponds to a reduction of about 1.5 percent to 2.0 percent in hours worked. (p 127)”
If hours fall by 1.5 to 2.0 percent, but compensation falls by 1.0 percent, then compensation per hour rises by 0.5-1.0 percent due to the ACA. If this is bad news for workers then someone must have been enjoying the new found freedoms in Colorado or Washington State too much.
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Yes, not much of a surprise here. (I had to check the date to be sure I wasn’t reading an old column.) Anyhow, let’s start with the punch line:
“Economic inequality is usually a consequence of our problems and not a cause. For starters, the poor are not poor because the rich are rich.
“The two conditions are generally unrelated. Mostly, the rich got rich by running profitable small businesses (car dealerships, builders), creating big enterprises (Google, Microsoft), being at the top of lucrative occupations (bankers, lawyers, doctors, actors, athletes), managing major companies or inheriting fortunes. By contrast, the very poor often face circumstances that make their lives desperate.”
Really? So the fact that doctors and lawyers secure themselves protection from competition and thereby drive up the cost of medical care and other products (yes, we do pay for corporate lawyers in the price of goods and services) doesn’t affect the income of the poor? Not where I learned arithmetic.
How about the fact that the rich use their control over politicians to get them to run high unemployment policies by reducing the deficit and demand in the economy. This costs low and middle income workers both jobs and wages (see Jared Bernstein and my book on the topic.)
Oh yeah, and what about the fact that the Wall Street boys can get themselves too big to fail subsidies from the government ($83 billion a year according to Bloomberg, a bit more than the SNAP budget)? And of course they also get exemptions from the sales taxes that other industries have to pay. Where does this money come from if not the rest of us?
But hey, Robert Samuelson tells us their wealth has nothing to do with other people suffering. Who are you going to listen to, common sense, logic, and arithmetic or Robert Samuelson?
Then we get Samuelson telling us:
“Finally, widening economic inequality is sometimes mistakenly blamed for causing the Great Recession and the weak recovery. The argument, as outlined by two economists at Washington University in St. Louis, goes like this: In the 1980s, income growth for the bottom 95 percent of Americans slowed. People compensated by borrowing more. All the extra debt led to a consumption boom that was unsustainable. The housing bubble and crash followed. Now, weak income growth of the bottom 95 percent ‘helps explain the slow recovery.’
Actually, the logic goes like this, as told by those of us who knew enough about the economy to see this crash coming. The economy suffers from weak demand because of so much money being redistributed upward to rich people who spend a smaller share of their income than middle and low income households. This problem was aggravated enormously by the explosion of the trade deficit that followed the run-up in the dollar due to botched East Asian financial crisis in 1997.
In the presence of weak demand the Fed allows interest rates to fall more than would otherwise be the case. In the absence of investment demand, these low interest rates create an environment that is very conducive to bubbles, hence we got the stock bubble in the 1990s and the housing bubble in the last decade. In the absence of another bubble to boost the economy we are continuing to see slow growth and high unemployment.
That one is probably too simple for Robert Samuelson to understand, but for most other people it provides a pretty direct link between inequality and the economic and social disaster of the Great Recession.
So the story is pretty simple. The system has been rigged to redistribute income upward. The rich have used their control of the political process to ensure that it stays that way and their control of news outlets like the Washington Post to try to distort reality.
Yes, not much of a surprise here. (I had to check the date to be sure I wasn’t reading an old column.) Anyhow, let’s start with the punch line:
“Economic inequality is usually a consequence of our problems and not a cause. For starters, the poor are not poor because the rich are rich.
“The two conditions are generally unrelated. Mostly, the rich got rich by running profitable small businesses (car dealerships, builders), creating big enterprises (Google, Microsoft), being at the top of lucrative occupations (bankers, lawyers, doctors, actors, athletes), managing major companies or inheriting fortunes. By contrast, the very poor often face circumstances that make their lives desperate.”
Really? So the fact that doctors and lawyers secure themselves protection from competition and thereby drive up the cost of medical care and other products (yes, we do pay for corporate lawyers in the price of goods and services) doesn’t affect the income of the poor? Not where I learned arithmetic.
How about the fact that the rich use their control over politicians to get them to run high unemployment policies by reducing the deficit and demand in the economy. This costs low and middle income workers both jobs and wages (see Jared Bernstein and my book on the topic.)
Oh yeah, and what about the fact that the Wall Street boys can get themselves too big to fail subsidies from the government ($83 billion a year according to Bloomberg, a bit more than the SNAP budget)? And of course they also get exemptions from the sales taxes that other industries have to pay. Where does this money come from if not the rest of us?
But hey, Robert Samuelson tells us their wealth has nothing to do with other people suffering. Who are you going to listen to, common sense, logic, and arithmetic or Robert Samuelson?
Then we get Samuelson telling us:
“Finally, widening economic inequality is sometimes mistakenly blamed for causing the Great Recession and the weak recovery. The argument, as outlined by two economists at Washington University in St. Louis, goes like this: In the 1980s, income growth for the bottom 95 percent of Americans slowed. People compensated by borrowing more. All the extra debt led to a consumption boom that was unsustainable. The housing bubble and crash followed. Now, weak income growth of the bottom 95 percent ‘helps explain the slow recovery.’
Actually, the logic goes like this, as told by those of us who knew enough about the economy to see this crash coming. The economy suffers from weak demand because of so much money being redistributed upward to rich people who spend a smaller share of their income than middle and low income households. This problem was aggravated enormously by the explosion of the trade deficit that followed the run-up in the dollar due to botched East Asian financial crisis in 1997.
In the presence of weak demand the Fed allows interest rates to fall more than would otherwise be the case. In the absence of investment demand, these low interest rates create an environment that is very conducive to bubbles, hence we got the stock bubble in the 1990s and the housing bubble in the last decade. In the absence of another bubble to boost the economy we are continuing to see slow growth and high unemployment.
That one is probably too simple for Robert Samuelson to understand, but for most other people it provides a pretty direct link between inequality and the economic and social disaster of the Great Recession.
So the story is pretty simple. The system has been rigged to redistribute income upward. The rich have used their control of the political process to ensure that it stays that way and their control of news outlets like the Washington Post to try to distort reality.
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The NYT had a piece noting how states across the country are seeing better budget pictures than they had projected. While this is attributed to growth, economic growth in 2013 was pretty much in line with expectations (worse in first half, better in second). The more plausible explanation is that the run-up in the stock market to both more capital gains taxes (a point that is noted) and also for capital gains income in many cases to be reported and taxed as normal income.
For tax purposes, short-term capital gains (assets held less than a year) are treated the same as normal income. Therefore it is likely that many households just report capital gains earnings as normal income. This would explain why the statistical discrepancy turns negative following large run-ups in asset prices such as the stock bubble in the 1990s and the housing bubble in the last decade.
The implication of this scenario is that much of the increase in the tax revenue that states are now seeing is ephemeral. Unless stock and/or house prices continue to rise at an extraordinary pace, the statistical discrepancy will fall back toward zero and the extra tax revenue states are now seeing will disappear.
The NYT had a piece noting how states across the country are seeing better budget pictures than they had projected. While this is attributed to growth, economic growth in 2013 was pretty much in line with expectations (worse in first half, better in second). The more plausible explanation is that the run-up in the stock market to both more capital gains taxes (a point that is noted) and also for capital gains income in many cases to be reported and taxed as normal income.
For tax purposes, short-term capital gains (assets held less than a year) are treated the same as normal income. Therefore it is likely that many households just report capital gains earnings as normal income. This would explain why the statistical discrepancy turns negative following large run-ups in asset prices such as the stock bubble in the 1990s and the housing bubble in the last decade.
The implication of this scenario is that much of the increase in the tax revenue that states are now seeing is ephemeral. Unless stock and/or house prices continue to rise at an extraordinary pace, the statistical discrepancy will fall back toward zero and the extra tax revenue states are now seeing will disappear.
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We’ve been reading stories in the NYT and elsewhere about how Chicago has pension obligations to its workers that it can’t possibly meet. Most of these accounts are exaggerated and seem intended to provoke excessive fears in order to facilitate default on the city’s pension obligations. Nonetheless, there is no doubt that the city has seriously underfunded pensions.
This is why it is striking that when the NYT ran a piece on former Mayor Richard M. Daley going to the hospital, it failed to mention Daley’s record on the city’s pensions, telling readers:
“Mr. Daley, Chicago’s longest-serving mayor with 22 years in office, is credited with giving the city a face lift with new green spaces, a revived theater district and the transformation of Navy Pier into a colorful playground.”
Daley is the person most responsible for the underfunding of Chicago’s pensions, making him one of the most irresponsible elected leaders in recent history. It would be understandable that the NYT may not want to highlight negative aspects of Mr. Daley’s tenure at a moment when he is apparently dealing with serious health issues, but there is no excuse for this sort of whitewashing of his record. Tens of thousands of people who worked for the city for decades may not see the pensions they earned as a result of Daley’s recklessness.
We’ve been reading stories in the NYT and elsewhere about how Chicago has pension obligations to its workers that it can’t possibly meet. Most of these accounts are exaggerated and seem intended to provoke excessive fears in order to facilitate default on the city’s pension obligations. Nonetheless, there is no doubt that the city has seriously underfunded pensions.
This is why it is striking that when the NYT ran a piece on former Mayor Richard M. Daley going to the hospital, it failed to mention Daley’s record on the city’s pensions, telling readers:
“Mr. Daley, Chicago’s longest-serving mayor with 22 years in office, is credited with giving the city a face lift with new green spaces, a revived theater district and the transformation of Navy Pier into a colorful playground.”
Daley is the person most responsible for the underfunding of Chicago’s pensions, making him one of the most irresponsible elected leaders in recent history. It would be understandable that the NYT may not want to highlight negative aspects of Mr. Daley’s tenure at a moment when he is apparently dealing with serious health issues, but there is no excuse for this sort of whitewashing of his record. Tens of thousands of people who worked for the city for decades may not see the pensions they earned as a result of Daley’s recklessness.
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The Washington Post has a very good piece about what having health insurance means to poor people in Eastern Kentucky with chronic health care conditions. As a famous vice-president once said, “it’s a big f***ing deal.”
That’s not an excuse to overlook the huge flaws in Obamacare. For many people care will still be unaffordable. And the insurance companies, drug companies, medical supply companies and doctors are still ripping us off. But as this piece shows, it is already having a huge impact on people’s lives.
The Washington Post has a very good piece about what having health insurance means to poor people in Eastern Kentucky with chronic health care conditions. As a famous vice-president once said, “it’s a big f***ing deal.”
That’s not an excuse to overlook the huge flaws in Obamacare. For many people care will still be unaffordable. And the insurance companies, drug companies, medical supply companies and doctors are still ripping us off. But as this piece shows, it is already having a huge impact on people’s lives.
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Firms added inventories at a record $127.2 billion (in 2009 dollars) annual rate in the fourth quarter of 2014. This increase did not draw much attention because it was only $11.5 billion above the third quarter pace, adding 0.44 percentage points to GDP growth in the quarter. The extraordinary pace of inventory growth in the last two quarters means it is likely that inventory growth will slow in future quarters, which will be somewhat of a drag on growth.
However, it is worth noting that we are likely looking at a slower rate of inventory growth in future quarters, not actually a decrease in inventories as has been suggested in several reports. If inventories were to actually decline (which they almost never do outside of recessions) then it would be a huge drag on growth almost certainly pushing GDP in negative territory. Just to take a simple case, if inventories stayed flat in the first quarter, then the rate of inventory accumulation would have fallen by $127.2 billion, in a single quarter. This would translate into roughly a $508.8 billion annual rate of change (the quarterly rate multiplied by four). With GDP at roughly $16 trillion (in 2009 dollars), this would knock roughly 3.2 percentage points off the rate of growth in the quarter.
Since the underlying rate of growth is almost certainly less than 3.0 percent at the moment, the flatlining of inventories would push growth into negative territory. Even a modest fall in inventories would virtually guarantee a substantial drop in GDP in the first quarter.
Firms added inventories at a record $127.2 billion (in 2009 dollars) annual rate in the fourth quarter of 2014. This increase did not draw much attention because it was only $11.5 billion above the third quarter pace, adding 0.44 percentage points to GDP growth in the quarter. The extraordinary pace of inventory growth in the last two quarters means it is likely that inventory growth will slow in future quarters, which will be somewhat of a drag on growth.
However, it is worth noting that we are likely looking at a slower rate of inventory growth in future quarters, not actually a decrease in inventories as has been suggested in several reports. If inventories were to actually decline (which they almost never do outside of recessions) then it would be a huge drag on growth almost certainly pushing GDP in negative territory. Just to take a simple case, if inventories stayed flat in the first quarter, then the rate of inventory accumulation would have fallen by $127.2 billion, in a single quarter. This would translate into roughly a $508.8 billion annual rate of change (the quarterly rate multiplied by four). With GDP at roughly $16 trillion (in 2009 dollars), this would knock roughly 3.2 percentage points off the rate of growth in the quarter.
Since the underlying rate of growth is almost certainly less than 3.0 percent at the moment, the flatlining of inventories would push growth into negative territory. Even a modest fall in inventories would virtually guarantee a substantial drop in GDP in the first quarter.
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Steve Rattner gives us a glowing appraisal of Ben Bernanke on his departure from the Fed. I have written on Bernanke elsewhere, but the basic story is that he bears a large amount of responsibility for the housing bubble and its subsequent bursting, since he was a Fed governor and chief economic advisorin the Bush administration as policymakers allowed it to grow to ever more dangerous levels. The result has been a loss of more than $7.6 trillion in output to date ($25,000 per person) and an economy that is still down more than 8 million jobs six years after the beginning of the downturn. There were few people better positioned than Bernanke to try to stem the growth of the bubble, but he consistently insisted that it did not pose any problem to the economy.
Bernanke also made the decision to leave the financial industry intact at a time when the market would have sent Goldman Sachs, Citigroup and most of the other Wall Street giants into bankruptcy. He misled Congress to rush it into passage of the TARP and he gave hundreds of billions of dollars worth of loan subsidies and guarantees to keep Wall Street alive. As a result, the financial industry is more concentrated than ever.
Bernanke does deserve credit for his aggressive monetary policy in the face of harsh opposition from Republicans and some Democrats. It has boosted the economy, although other banks, notably the Bank of Japan, have been more aggressive. Anyhow, his monetary policy over the last four years certainly is a plus, but it doesn’t qualify Bernanke as a “godsend” by the usual meaning of the word.
Steve Rattner gives us a glowing appraisal of Ben Bernanke on his departure from the Fed. I have written on Bernanke elsewhere, but the basic story is that he bears a large amount of responsibility for the housing bubble and its subsequent bursting, since he was a Fed governor and chief economic advisorin the Bush administration as policymakers allowed it to grow to ever more dangerous levels. The result has been a loss of more than $7.6 trillion in output to date ($25,000 per person) and an economy that is still down more than 8 million jobs six years after the beginning of the downturn. There were few people better positioned than Bernanke to try to stem the growth of the bubble, but he consistently insisted that it did not pose any problem to the economy.
Bernanke also made the decision to leave the financial industry intact at a time when the market would have sent Goldman Sachs, Citigroup and most of the other Wall Street giants into bankruptcy. He misled Congress to rush it into passage of the TARP and he gave hundreds of billions of dollars worth of loan subsidies and guarantees to keep Wall Street alive. As a result, the financial industry is more concentrated than ever.
Bernanke does deserve credit for his aggressive monetary policy in the face of harsh opposition from Republicans and some Democrats. It has boosted the economy, although other banks, notably the Bank of Japan, have been more aggressive. Anyhow, his monetary policy over the last four years certainly is a plus, but it doesn’t qualify Bernanke as a “godsend” by the usual meaning of the word.
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