If the goal is to increase the inflation rate, then printing more money might seem like a reasonable way to go. But not in Germany. A Reuters piece on the NYT quotes German central bank head Jens Weidmann saying:
“There are no easy and quick ways out of this crisis. The money printer is definitely not the way to solve it.”
This appears in the context of a suggestion that the European Central Bank adopt quantitative easing to raise the inflation rate. So there you have it.
If the goal is to increase the inflation rate, then printing more money might seem like a reasonable way to go. But not in Germany. A Reuters piece on the NYT quotes German central bank head Jens Weidmann saying:
“There are no easy and quick ways out of this crisis. The money printer is definitely not the way to solve it.”
This appears in the context of a suggestion that the European Central Bank adopt quantitative easing to raise the inflation rate. So there you have it.
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A NYT article on the growth of the car industry in Mexico told readers:
“Around 40 percent of all auto-industry jobs in North America are in Mexico, up from 27 percent in 2000 (the Midwest has about 30 percent), and experts say the growth is accelerating, especially in Guanajuato, where state officials have been increasing incentives.”
According to the Bureau of Labor Statistics, in 2000 the United States had roughly 1,310,000 jobs in the auto industry. Currently employment in the sector is around 800,000, implying a drop of 38.9 percent. If employment in Canada followed the same pattern, then Mexico’s share of total industry employment in North America would have risen to more than 55 percent if it had stayed constant since 2000. Since Mexico’s share of total employment is now just 40 percent, it implies that it has gained share by seeing a less rapid decline, not by adding jobs. This doesn’t fit well with the main thesis of the article which is that a middle class is rising in Mexico.
A NYT article on the growth of the car industry in Mexico told readers:
“Around 40 percent of all auto-industry jobs in North America are in Mexico, up from 27 percent in 2000 (the Midwest has about 30 percent), and experts say the growth is accelerating, especially in Guanajuato, where state officials have been increasing incentives.”
According to the Bureau of Labor Statistics, in 2000 the United States had roughly 1,310,000 jobs in the auto industry. Currently employment in the sector is around 800,000, implying a drop of 38.9 percent. If employment in Canada followed the same pattern, then Mexico’s share of total industry employment in North America would have risen to more than 55 percent if it had stayed constant since 2000. Since Mexico’s share of total employment is now just 40 percent, it implies that it has gained share by seeing a less rapid decline, not by adding jobs. This doesn’t fit well with the main thesis of the article which is that a middle class is rising in Mexico.
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Andrew Ross Sorkin is angry that people are upset by seeing former Treasury Secretary Timothy Geithner cash in on his public service by taking a job at the private equity company Warburg Pincus. In his column he complained:
“Within 24 hours of Timothy F. Geithner’s announcement on Saturday that he would join Warburg Pincus, the private equity firm, a parade of naysayers emerged, almost like clockwork, to criticize the former Treasury secretary’s move as a prime example of the evil of the government’s revolving door.”
As a Geithner defender, Sorkin apparently had hoped that critics would refrain from commenting until Geithner’s new job was no longer news.
Sorkin seems to miss the issue here. There is little reason to believe that Geithner’s experience in government would give him the sort of expertise that would be expected from a top executive at a private equity company. His record also does not demonstrate an especially astute understanding of the economy, since he consistently underestimated the duration and severity of the downturn, after completely missing the original collapse. The latter could be seen as pretty big gaffe, since he was pretty much sitting at ground zero at the time as president of the New York Fed.
While Geithner may not have expertise in investment or economics to sell, he does have political connections. This is presumably the reason that a private equity company would be willing to pay him a 7-figure salary and give him a top position. Sorkin is also being either naive or disingenuous when he comments on Geithner’s past opposition to the carried interest tax subsidy that benefits private equity firms like Warburg Pincus:
“If he changes course now that he is in industry, he deserves a drubbing.”
If Geithner changes courses now, he will probably not send a note to Sorkin notifying him of his new views on the issue. This change will likely be exhibited in close door meetings with Geithner’s former associates.
Perhaps some of the comment on Geithner’s new job was motivated by this line from a New York Magazine article:
“Geithner says it’s ‘extremely unlikely’ he will take a job in the world of finance, but the idea that he is somehow, secretly, working hand in hand with that community persists, and every once in a while someone pulls out records of his phone calls and meetings with CEOs as evidence.”
Presumably Geithner was reflecting some of the same sentiments as the critics derided by Sorkin when he indicated that he would probably not seek a job in finance.
Sorkin actually provides a valuable service with this piece since it displays the contempt with which elites view the rest of the country. At one point he favorably notes a comment from Ben White at Politico:
“Ben White of Politico on Monday joked sarcastically in his email newsletter about the criticism of Mr. Geithner’s new role: ‘Maybe he should have joined the priesthood.'”
Among the other positions open to Geithner were the presidency of his alma mater, Dartmouth, or possibly the head of a major charity (Sorkin suggests Red Cross). These are jobs that would pay high 6-figure or low 7-figure salaries. Such pay would put Geithner at the edge of the top 0.1 percent of the workforce and give him annual earnings 30 or more times as much as the typical worker. However for elite types, this would be the same as taking a vow of poverty and joining the priesthood.
Andrew Ross Sorkin is angry that people are upset by seeing former Treasury Secretary Timothy Geithner cash in on his public service by taking a job at the private equity company Warburg Pincus. In his column he complained:
“Within 24 hours of Timothy F. Geithner’s announcement on Saturday that he would join Warburg Pincus, the private equity firm, a parade of naysayers emerged, almost like clockwork, to criticize the former Treasury secretary’s move as a prime example of the evil of the government’s revolving door.”
As a Geithner defender, Sorkin apparently had hoped that critics would refrain from commenting until Geithner’s new job was no longer news.
Sorkin seems to miss the issue here. There is little reason to believe that Geithner’s experience in government would give him the sort of expertise that would be expected from a top executive at a private equity company. His record also does not demonstrate an especially astute understanding of the economy, since he consistently underestimated the duration and severity of the downturn, after completely missing the original collapse. The latter could be seen as pretty big gaffe, since he was pretty much sitting at ground zero at the time as president of the New York Fed.
While Geithner may not have expertise in investment or economics to sell, he does have political connections. This is presumably the reason that a private equity company would be willing to pay him a 7-figure salary and give him a top position. Sorkin is also being either naive or disingenuous when he comments on Geithner’s past opposition to the carried interest tax subsidy that benefits private equity firms like Warburg Pincus:
“If he changes course now that he is in industry, he deserves a drubbing.”
If Geithner changes courses now, he will probably not send a note to Sorkin notifying him of his new views on the issue. This change will likely be exhibited in close door meetings with Geithner’s former associates.
Perhaps some of the comment on Geithner’s new job was motivated by this line from a New York Magazine article:
“Geithner says it’s ‘extremely unlikely’ he will take a job in the world of finance, but the idea that he is somehow, secretly, working hand in hand with that community persists, and every once in a while someone pulls out records of his phone calls and meetings with CEOs as evidence.”
Presumably Geithner was reflecting some of the same sentiments as the critics derided by Sorkin when he indicated that he would probably not seek a job in finance.
Sorkin actually provides a valuable service with this piece since it displays the contempt with which elites view the rest of the country. At one point he favorably notes a comment from Ben White at Politico:
“Ben White of Politico on Monday joked sarcastically in his email newsletter about the criticism of Mr. Geithner’s new role: ‘Maybe he should have joined the priesthood.'”
Among the other positions open to Geithner were the presidency of his alma mater, Dartmouth, or possibly the head of a major charity (Sorkin suggests Red Cross). These are jobs that would pay high 6-figure or low 7-figure salaries. Such pay would put Geithner at the edge of the top 0.1 percent of the workforce and give him annual earnings 30 or more times as much as the typical worker. However for elite types, this would be the same as taking a vow of poverty and joining the priesthood.
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Jeffrey Sachs again takes on Paul Krugman (and indirectly Larry Summers) in his call for a new macroeconomics. (My comments on past attacks, with links to the originals, can be found here and here.) I’m not sure that there is much new here, so I would again take Krugman’s side.
Sachs’ complaint is that we should be doing long-term planning to lay infrastructure for transportation, energy, and other areas of the economy. This is fine and I would expect no objections from Krugman. Certainly there are none on my part.
However in a world where folks in Washington have little interest in long-term plans the question is whether we are better with a do nothing approach or a stimulate the economy anyway you can approach. I am firmly in the latter camp, as is Krugman to my understanding.(I would also go with work sharing schemes as an alternative low-budget route to sustain high levels of employment.)
After all, the people who go years without jobs are not going to get that time back. They and their families will have suffered through hardship because of bungled macroeconomic policy in Washington. Some of the long-term unemployed will never work again. What are we supposed to tell these millions of people who are unemployed through no fault of their own, wait until we can get out grand investment plans through Congress?
It’s very hard to see the downside of stimulus that is less than optimally spent. We have a higher debt to GDP ratio? Fixations on such things might be the rage in Washington, but it’s hard to see why economists should share this obsession.
I would also temper somewhat Sachs enthusiasm for long-range planning and government investment. We certainly need more, but a little humility would be appropriate. I have a lot of respect for Sachs (he was my candidate for World Bank president), but I don’t trust him or anyone else to make all the right calls on what investments we should be making to structure the economy over the next 2-4 decades.
Some plans will inevitably go wrong. Perhaps high-speed rail really won’t prove to be a terribly efficient way to move people around in 15-20 years or maybe solar is not a form of clean energy that should be at the top of our list. I’m a big fan of both, but if we jump in full force with both feet, we may find that we have made some serious mistakes. This possibility would suggest a more gradual ramping up of commitments even if progressives somehow got control of the keys to the government.
Jeffrey Sachs again takes on Paul Krugman (and indirectly Larry Summers) in his call for a new macroeconomics. (My comments on past attacks, with links to the originals, can be found here and here.) I’m not sure that there is much new here, so I would again take Krugman’s side.
Sachs’ complaint is that we should be doing long-term planning to lay infrastructure for transportation, energy, and other areas of the economy. This is fine and I would expect no objections from Krugman. Certainly there are none on my part.
However in a world where folks in Washington have little interest in long-term plans the question is whether we are better with a do nothing approach or a stimulate the economy anyway you can approach. I am firmly in the latter camp, as is Krugman to my understanding.(I would also go with work sharing schemes as an alternative low-budget route to sustain high levels of employment.)
After all, the people who go years without jobs are not going to get that time back. They and their families will have suffered through hardship because of bungled macroeconomic policy in Washington. Some of the long-term unemployed will never work again. What are we supposed to tell these millions of people who are unemployed through no fault of their own, wait until we can get out grand investment plans through Congress?
It’s very hard to see the downside of stimulus that is less than optimally spent. We have a higher debt to GDP ratio? Fixations on such things might be the rage in Washington, but it’s hard to see why economists should share this obsession.
I would also temper somewhat Sachs enthusiasm for long-range planning and government investment. We certainly need more, but a little humility would be appropriate. I have a lot of respect for Sachs (he was my candidate for World Bank president), but I don’t trust him or anyone else to make all the right calls on what investments we should be making to structure the economy over the next 2-4 decades.
Some plans will inevitably go wrong. Perhaps high-speed rail really won’t prove to be a terribly efficient way to move people around in 15-20 years or maybe solar is not a form of clean energy that should be at the top of our list. I’m a big fan of both, but if we jump in full force with both feet, we may find that we have made some serious mistakes. This possibility would suggest a more gradual ramping up of commitments even if progressives somehow got control of the keys to the government.
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The Washington Post thinks it’s always a good time to beat up seniors. It continually complains that overly generous Social Security and Medicare benefits are the country’s biggest problem. It never lets facts stand in the way.
Its latest attack tells readers that money going to seniors somehow comes at the expense of money for our kids. This is a loony tune invention of the Fox on 15th Street gang. In the real world, countries that spend a larger share of their GDP on seniors also spend a larger share on their kids.
Then the piece tells us:
“the poverty rate among the elderly is 9.1 percent, lower than the national rate of 15 percent — and much lower than the 21.8 percent rate among children.”
That’s nice, but the Census Bureau’s supplemental poverty measure, which is a more comprehensive assessment of poverty, shows a far smaller gap with a poverty rate for seniors of 14.8 percent compared with a poverty rate of 18.0 percent for children.
However, the greatest absurdity of the Post’s crusade is that its obsession with austerity and budget deficits is denying income to both the young and old, depriving the country of close to $1 trillion a year (@$3,000 per person) in lost output, according to the Congressional Budget Office.
Note: Typos corrected, thanks Robert.
The Washington Post thinks it’s always a good time to beat up seniors. It continually complains that overly generous Social Security and Medicare benefits are the country’s biggest problem. It never lets facts stand in the way.
Its latest attack tells readers that money going to seniors somehow comes at the expense of money for our kids. This is a loony tune invention of the Fox on 15th Street gang. In the real world, countries that spend a larger share of their GDP on seniors also spend a larger share on their kids.
Then the piece tells us:
“the poverty rate among the elderly is 9.1 percent, lower than the national rate of 15 percent — and much lower than the 21.8 percent rate among children.”
That’s nice, but the Census Bureau’s supplemental poverty measure, which is a more comprehensive assessment of poverty, shows a far smaller gap with a poverty rate for seniors of 14.8 percent compared with a poverty rate of 18.0 percent for children.
However, the greatest absurdity of the Post’s crusade is that its obsession with austerity and budget deficits is denying income to both the young and old, depriving the country of close to $1 trillion a year (@$3,000 per person) in lost output, according to the Congressional Budget Office.
Note: Typos corrected, thanks Robert.
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It would have been useful if the NYT had made this point in an article that discussed the impact of global warming on the developing world. After noting the destruction caused by events related to climate change, like the typhoon that hit the Philippines and the droughts afflicted wide areas across Africa and the Middle East, the piece tells readers:
“The United States and other rich countries have made their opposition to large-scale compensation clear. Todd D. Stern, the State Department’s envoy on climate issues, bluntly told a gathering at Chatham House in London last month that large-scale resources from the world’s richest nations would not be forthcoming.
“‘The fiscal reality of the United States and other developed countries is not going to allow it,’ he said. ‘This is not just a matter of the recent financial crisis. It is structural, based on the huge obligations we face from aging populations and other pressing needs for infrastructure, education, health care and the like. We must and will strive to keep increasing our climate finance, but it is important that all of us see the world as it is.’
“Appeals to rectify the injustice of climate change, he added, will backfire. ‘Lectures about compensation, reparations and the like will produce nothing but antipathy among developed country policy makers and their publics.'”
The position that the United States finds it inconvenient to compensate poor countries for the damage it has caused them runs directly counter to the United States usual position in international forums where it typically is the strongest proponent of property rights. In this case the United States is effectively arguing that it will not compensate poor countries for the damage it has done to their property (and lives) because they can’t force it do so. It would have been helpful if the article had explicitly noted this departure from the normal U.S. position.
It would have also be useful to note that Stern is 100 percent wrong on the economics. For the foreseeable future the United States, along with most wealthy countries, face no realistic budget constraints. With economies operating well below full employment additional government spending would help to boost demand, employment, and growth. The only obstacle to more spending is a bizarre cult of budget balancers that dominates politics in the United States and Europe in defiance of all available economic evidence and theory.
It would have been useful if the NYT had made this point in an article that discussed the impact of global warming on the developing world. After noting the destruction caused by events related to climate change, like the typhoon that hit the Philippines and the droughts afflicted wide areas across Africa and the Middle East, the piece tells readers:
“The United States and other rich countries have made their opposition to large-scale compensation clear. Todd D. Stern, the State Department’s envoy on climate issues, bluntly told a gathering at Chatham House in London last month that large-scale resources from the world’s richest nations would not be forthcoming.
“‘The fiscal reality of the United States and other developed countries is not going to allow it,’ he said. ‘This is not just a matter of the recent financial crisis. It is structural, based on the huge obligations we face from aging populations and other pressing needs for infrastructure, education, health care and the like. We must and will strive to keep increasing our climate finance, but it is important that all of us see the world as it is.’
“Appeals to rectify the injustice of climate change, he added, will backfire. ‘Lectures about compensation, reparations and the like will produce nothing but antipathy among developed country policy makers and their publics.'”
The position that the United States finds it inconvenient to compensate poor countries for the damage it has caused them runs directly counter to the United States usual position in international forums where it typically is the strongest proponent of property rights. In this case the United States is effectively arguing that it will not compensate poor countries for the damage it has done to their property (and lives) because they can’t force it do so. It would have been helpful if the article had explicitly noted this departure from the normal U.S. position.
It would have also be useful to note that Stern is 100 percent wrong on the economics. For the foreseeable future the United States, along with most wealthy countries, face no realistic budget constraints. With economies operating well below full employment additional government spending would help to boost demand, employment, and growth. The only obstacle to more spending is a bizarre cult of budget balancers that dominates politics in the United States and Europe in defiance of all available economic evidence and theory.
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That is the only plausible way to interpret its assertion in an article on China’s decision to relax its one-child policy that referred to a “looming shortage of labor.” China has hundreds of millions of people unemployed, under-employed, or working in low productivity and therefore low wage jobs. If the labor market begins to tighten these people will be absorbed in higher productivity, higher paying sectors of the economy. That is the way economies develop.
The United States used to have more than half of its workforce employed in agriculture. This share shrank rapidly as better paying jobs opened up in manufacturing. The Washington Post undoubtedly would have said the United States suffered from a labor shortage during this period.
The piece also notes China’s aging population as a reason for relaxing the one-child policy. With productivity growing at rates of 6-7 percent annually, if only a small portion of these potential wage gains are taxed away, it could easily cover the cost of caring for an aging population.
That is the only plausible way to interpret its assertion in an article on China’s decision to relax its one-child policy that referred to a “looming shortage of labor.” China has hundreds of millions of people unemployed, under-employed, or working in low productivity and therefore low wage jobs. If the labor market begins to tighten these people will be absorbed in higher productivity, higher paying sectors of the economy. That is the way economies develop.
The United States used to have more than half of its workforce employed in agriculture. This share shrank rapidly as better paying jobs opened up in manufacturing. The Washington Post undoubtedly would have said the United States suffered from a labor shortage during this period.
The piece also notes China’s aging population as a reason for relaxing the one-child policy. With productivity growing at rates of 6-7 percent annually, if only a small portion of these potential wage gains are taxed away, it could easily cover the cost of caring for an aging population.
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Paul Krugman tells us that Larry Summers joined the camp concerned about secular stagnation in his I.M.F. talk last week, something that I had not picked up from prior coverage of the session. This is good news, but I would qualify a few of the points that Krugman makes in his elaboration of Summers’ remarks.
First, while the economy may presently need asset bubbles to maintain full employment (a point I made in Plunder and Blunder: The Rise and Fall of the Bubble Economy), it doesn’t follow that we should not be concerned about asset bubbles. The problem with bubbles is that their inflation and inevitable deflation lead to massive redistribution of wealth.
In the case of the housing bubble in particular we saw millions of people lose much or all of their wealth from buying homes at bubble-inflated prices. The loss of housing wealth is especially devastating because housing is a highly leveraged asset even in normal times and it is an asset often held by middle and moderate income households. It was great that the bubble was able to spur growth and get the economy close to full employment, however the subsequent crash was pretty awful. It would be incredibly irresponsible to go through another round like this.
The second qualification is that it is reasonable to believe that aggregate consumption levels will depend at least in part on the distribution of income. The upward redistribution in the last three decades, from middle and lower end wage earners to the high end wage earners in the 80s and 90s, and to corporate profits in the last decade, likely had an effect in depressing consumption. The question here is whether the marginal propensity to consume out of income is higher for a retail clerk or factory worker than a doctor or CEO. I would be willing to argue that it is, which means that the upward redistribution of income over this period had a depressing effect on consumption. (As a practical matter, this depressing effect was offset by the asset bubbles in the 1990s and 2000s.)
The third qualification is that Summers and Krugman seem to be leaving net exports out of the picture. In the old textbooks, rich countries like the United States were supposed to be net exporters of capital to developing countries. This implies that instead of running trade deficits we should be running surpluses This would both mean a higher return on capital in rich countries and more rapid growth in developing countries, which would be able to use imported goods and services to build up their capital stock even as they sustained a decent level of consumption for their populations.
The real world never followed the textbook story very closely, but it followed especially badly in the years following the 1997 East Asian financial crisis. The harsh terms of the bailout (led in part by Larry Summers) led to a situation in which developing countries began to accumulate massive amounts of reserves to protect themselves from ever being dictated to by the IMF in the same way. Instead of being importers of capital from rich countries developing countries became huge exporters of capital. This meant that the United States in particular had a huge trade deficit that created a huge drag on demand.
Finally, as an alternative to trying to increase demand to deal with secular stagnation, countries could try to reduce supply. This should not sound too crazy. Western Europeans work on average 20 percent fewer hours a year than do people in the United States. These countries mandate paid vacation (at least four weeks a year), paid sick days, paid parental leave and other forms of paid time off. France has a 35-hour work week. Remember, the problem is too much supply not too little. Reduced work hours (i.e. more leisure) is an easy way to deal with this “problem.”
The long and short of the matter is that secular stagnation is really a story of too much wealth. It is absurd that this ends up impoverishing countries and leading to mass suffering. Keynes taught us how to deal with this problem almost 80 years ago. We know how to prevent the suffering; we just lack the political force to stop it.
Paul Krugman tells us that Larry Summers joined the camp concerned about secular stagnation in his I.M.F. talk last week, something that I had not picked up from prior coverage of the session. This is good news, but I would qualify a few of the points that Krugman makes in his elaboration of Summers’ remarks.
First, while the economy may presently need asset bubbles to maintain full employment (a point I made in Plunder and Blunder: The Rise and Fall of the Bubble Economy), it doesn’t follow that we should not be concerned about asset bubbles. The problem with bubbles is that their inflation and inevitable deflation lead to massive redistribution of wealth.
In the case of the housing bubble in particular we saw millions of people lose much or all of their wealth from buying homes at bubble-inflated prices. The loss of housing wealth is especially devastating because housing is a highly leveraged asset even in normal times and it is an asset often held by middle and moderate income households. It was great that the bubble was able to spur growth and get the economy close to full employment, however the subsequent crash was pretty awful. It would be incredibly irresponsible to go through another round like this.
The second qualification is that it is reasonable to believe that aggregate consumption levels will depend at least in part on the distribution of income. The upward redistribution in the last three decades, from middle and lower end wage earners to the high end wage earners in the 80s and 90s, and to corporate profits in the last decade, likely had an effect in depressing consumption. The question here is whether the marginal propensity to consume out of income is higher for a retail clerk or factory worker than a doctor or CEO. I would be willing to argue that it is, which means that the upward redistribution of income over this period had a depressing effect on consumption. (As a practical matter, this depressing effect was offset by the asset bubbles in the 1990s and 2000s.)
The third qualification is that Summers and Krugman seem to be leaving net exports out of the picture. In the old textbooks, rich countries like the United States were supposed to be net exporters of capital to developing countries. This implies that instead of running trade deficits we should be running surpluses This would both mean a higher return on capital in rich countries and more rapid growth in developing countries, which would be able to use imported goods and services to build up their capital stock even as they sustained a decent level of consumption for their populations.
The real world never followed the textbook story very closely, but it followed especially badly in the years following the 1997 East Asian financial crisis. The harsh terms of the bailout (led in part by Larry Summers) led to a situation in which developing countries began to accumulate massive amounts of reserves to protect themselves from ever being dictated to by the IMF in the same way. Instead of being importers of capital from rich countries developing countries became huge exporters of capital. This meant that the United States in particular had a huge trade deficit that created a huge drag on demand.
Finally, as an alternative to trying to increase demand to deal with secular stagnation, countries could try to reduce supply. This should not sound too crazy. Western Europeans work on average 20 percent fewer hours a year than do people in the United States. These countries mandate paid vacation (at least four weeks a year), paid sick days, paid parental leave and other forms of paid time off. France has a 35-hour work week. Remember, the problem is too much supply not too little. Reduced work hours (i.e. more leisure) is an easy way to deal with this “problem.”
The long and short of the matter is that secular stagnation is really a story of too much wealth. It is absurd that this ends up impoverishing countries and leading to mass suffering. Keynes taught us how to deal with this problem almost 80 years ago. We know how to prevent the suffering; we just lack the political force to stop it.
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Things seem to be spinning off the rails very fast here in Washington. The NYT has an article today explicitly comparing the rollout of the health insurance exchanges to President Bush’s response to Hurricane Katrina.
There is no doubt that the rollout of the exchanges has gone very badly, with people having great difficulty getting on the Obamacare website and buying insurance. And the opponents of Obamacare have been very effective in hyping stories, real or unreal, of people losing their insurance due to the Affordable Care Act. But the comparison to the response to Hurricane Katrina has to qualify as more than a bit over the top.
People died because of the failed response to Katrina. For whatever reason, President Bush was unable to organize a response to a hurricane hitting a major American city even though its course and ferocity had been accurately predicted a week in advance. People in New Orleans died because they could not get access to food, water, and medical care. It seems more than a bit over the top to compare the difficulties that people are facing arranging for insurance to this sort of catastrophe.
Things seem to be spinning off the rails very fast here in Washington. The NYT has an article today explicitly comparing the rollout of the health insurance exchanges to President Bush’s response to Hurricane Katrina.
There is no doubt that the rollout of the exchanges has gone very badly, with people having great difficulty getting on the Obamacare website and buying insurance. And the opponents of Obamacare have been very effective in hyping stories, real or unreal, of people losing their insurance due to the Affordable Care Act. But the comparison to the response to Hurricane Katrina has to qualify as more than a bit over the top.
People died because of the failed response to Katrina. For whatever reason, President Bush was unable to organize a response to a hurricane hitting a major American city even though its course and ferocity had been accurately predicted a week in advance. People in New Orleans died because they could not get access to food, water, and medical care. It seems more than a bit over the top to compare the difficulties that people are facing arranging for insurance to this sort of catastrophe.
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Those of us who are old enough recall the origins of the euro crisis remember that countries like Spain and Ireland had enormous housing bubbles, which were fueled by lending by incompetent bankers in countries like Germany and the Netherlands. When these bubbles burst, trillions of dollars in loans lost much of their value. In addition, the driving force for economies across Europe disappeared throwing them into severe recessions.
And, as budget fans everywhere know, government budgets shift towards deficits when an economy goes into recession. The reason is that governments spend more money on things like unemployment benefits. They also lose tax revenue when people lose jobs and income. In short, in the real world, the euro crisis is about a collapsed housing bubble leading to a severe recession. The budget deficits were an outcome of this collapse.
But the NYT has decided to reinvent the history of the crisis. It told readers that the problem in the euro zone was overspending. In an article on a set of budget reviews issued by the European Commission, the NYT told readers:
“The announcement, by Olli Rehn, the European Union’s commissioner for economics and monetary policy, is aimed at keeping tighter reins on national finances to stave off the kind of overspending that fed a crisis that nearly destroyed the euro.”
In fact, of the current group of euro crisis countries, only Greece, and arguably Portugal, had a major deficit problem prior to the collapse. Italy’s deficits were not especially large and Cyprus, Ireland, and Spain all had budget surpluses on the eve of the collapse.
Those of us who are old enough recall the origins of the euro crisis remember that countries like Spain and Ireland had enormous housing bubbles, which were fueled by lending by incompetent bankers in countries like Germany and the Netherlands. When these bubbles burst, trillions of dollars in loans lost much of their value. In addition, the driving force for economies across Europe disappeared throwing them into severe recessions.
And, as budget fans everywhere know, government budgets shift towards deficits when an economy goes into recession. The reason is that governments spend more money on things like unemployment benefits. They also lose tax revenue when people lose jobs and income. In short, in the real world, the euro crisis is about a collapsed housing bubble leading to a severe recession. The budget deficits were an outcome of this collapse.
But the NYT has decided to reinvent the history of the crisis. It told readers that the problem in the euro zone was overspending. In an article on a set of budget reviews issued by the European Commission, the NYT told readers:
“The announcement, by Olli Rehn, the European Union’s commissioner for economics and monetary policy, is aimed at keeping tighter reins on national finances to stave off the kind of overspending that fed a crisis that nearly destroyed the euro.”
In fact, of the current group of euro crisis countries, only Greece, and arguably Portugal, had a major deficit problem prior to the collapse. Italy’s deficits were not especially large and Cyprus, Ireland, and Spain all had budget surpluses on the eve of the collapse.
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