The NYT ran a piece telling readers “even pessimists feel optimistic about the American economy.” What is striking is the nature of the optimism reported in the article. At one point the article gives as one example of this optimism:
“Mr. Behravesh (the chief economist at IHS Global Insight) now expects the annual growth rate to rise to 2.9 percent in 2014 and 3.5 percent in 2015.”
The trend rate of GDP growth is between 2.2-2.5 percent according to the Congressional Budget Office (CBO) and other forecasters. CBO puts the economy now at roughly 6.0 percent below its trend level of output. If we take the average of Behravesh’s forecast for the next two years and assume that the economy sustains this rate going forward, then the economy will be growing at a rate of 3.2 percent.
At that pace it will be closing the output gap at a rate of between 0.7-1.0 percentage point a year. If we take the higher number (1.0 percentage point) then we will get back to potential output in 2019, making this downturn as long as the Great Depression. If we take the lower number then we won’t get back to potential GDP sometime in 2021, making this a 14-year downturn.
It would be interesting to know what the real pessimists say.
The NYT ran a piece telling readers “even pessimists feel optimistic about the American economy.” What is striking is the nature of the optimism reported in the article. At one point the article gives as one example of this optimism:
“Mr. Behravesh (the chief economist at IHS Global Insight) now expects the annual growth rate to rise to 2.9 percent in 2014 and 3.5 percent in 2015.”
The trend rate of GDP growth is between 2.2-2.5 percent according to the Congressional Budget Office (CBO) and other forecasters. CBO puts the economy now at roughly 6.0 percent below its trend level of output. If we take the average of Behravesh’s forecast for the next two years and assume that the economy sustains this rate going forward, then the economy will be growing at a rate of 3.2 percent.
At that pace it will be closing the output gap at a rate of between 0.7-1.0 percentage point a year. If we take the higher number (1.0 percentage point) then we will get back to potential output in 2019, making this downturn as long as the Great Depression. If we take the lower number then we won’t get back to potential GDP sometime in 2021, making this a 14-year downturn.
It would be interesting to know what the real pessimists say.
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The Washington Post shows as little regard for standards of journalistic objectivity in its coverage of trade deals as in its coverage of Social Security. Therefore it was not surprising to see this line in an article reporting on the European Union’s decision to restrict areas to be covered in a new trade pact with the United States:
“The Transatlantic Trade and Investment Partnership is a centerpiece of the Obama administration’s accelerating push on trade and international economic relations to boost U.S. growth and jobs.”
Really? The Post knows that boosting growth and jobs is the main purpose of the Obama administration’s trade agenda? That could be the case, but given the central role that corporate lobbyists are playing in designing the agenda it might be reasonable to believe that boosting corporate profits is a high priority. This does not necessarily mean boosting growth and creating jobs and in fact may mean the exact opposite.
For example, when trade agreements increase patent or other barriers on the sale of prescription drugs it will raise the price of these drugs in other countries, pulling money out of consumers pockets and leaving them with less money to spend on other items produced in the United States. This will boost corporate profits but will lower growth and hurt employment. The same is true of many other items on the agenda of U.S. trade negotiators.
The Post need not pass judgment on the motives of the Obama administration in these negotiations. It just should follow normal journalistic standards and report the administration’s claims about its agenda (along with the claims of critics) and let readers make up their own minds. It is irresponsible to simply assert that the motives claimed by the administration are its true motives, especially when so much evidence points in the opposite direction.
The Washington Post shows as little regard for standards of journalistic objectivity in its coverage of trade deals as in its coverage of Social Security. Therefore it was not surprising to see this line in an article reporting on the European Union’s decision to restrict areas to be covered in a new trade pact with the United States:
“The Transatlantic Trade and Investment Partnership is a centerpiece of the Obama administration’s accelerating push on trade and international economic relations to boost U.S. growth and jobs.”
Really? The Post knows that boosting growth and jobs is the main purpose of the Obama administration’s trade agenda? That could be the case, but given the central role that corporate lobbyists are playing in designing the agenda it might be reasonable to believe that boosting corporate profits is a high priority. This does not necessarily mean boosting growth and creating jobs and in fact may mean the exact opposite.
For example, when trade agreements increase patent or other barriers on the sale of prescription drugs it will raise the price of these drugs in other countries, pulling money out of consumers pockets and leaving them with less money to spend on other items produced in the United States. This will boost corporate profits but will lower growth and hurt employment. The same is true of many other items on the agenda of U.S. trade negotiators.
The Post need not pass judgment on the motives of the Obama administration in these negotiations. It just should follow normal journalistic standards and report the administration’s claims about its agenda (along with the claims of critics) and let readers make up their own minds. It is irresponsible to simply assert that the motives claimed by the administration are its true motives, especially when so much evidence points in the opposite direction.
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Neil Irwin has an interesting discussion of a new practice by which some private data gathering outfits sell early access to the releases of their data at a premium. The idea is that a small number of people will have access to the new information ahead of the market.
Irwin raises several issues about this practice, but misses an important one: economic efficiency. From an economic standpoint we would like as few resources as possible to be devoted to the process of collecting and disseminating information.
This means for example, that if we can have 2000 people involved in the process of collecting data on employment, wages, prices and output and disseminating this information to the rest of us, we are much richer collectively than if we have 2 million people involved in this process (including the running of financial markets). In the former case, the other 1,998,000 people would be able to spend their time providing the rest of us with health care, housing, education, or other goods and services of value.
However if we deliberately create a situation where there are large amounts of money to be made by getting early access to data then we will almost certainly be pulling more people into this process of collecting and disseminating information. To be concrete, if people think that they can make millions or billions of dollars by beating the crowd to information then many people will devote great effort to beating the crowd to information.
This is pure rent-seeking in that their behavior offers no benefit to the economy. It will not make the economy more efficient if the price of a specific stock or other financial assets adjust 1 second more quickly to new information, however it can make particular individuals very rich.
In principle we want to set rules for the market so that people have incentive to engage in behavior that increases the wealth of society for example by inventing more efficient cars or developing better drugs. We don’t want the incentives to drive them toward rent-seeking behavior that offers no social benefit. Opportunities to get market moving data ahead of others will undoubtedly encourage more rent-seeking behavior. This is a loss to the economy and society.
Neil Irwin has an interesting discussion of a new practice by which some private data gathering outfits sell early access to the releases of their data at a premium. The idea is that a small number of people will have access to the new information ahead of the market.
Irwin raises several issues about this practice, but misses an important one: economic efficiency. From an economic standpoint we would like as few resources as possible to be devoted to the process of collecting and disseminating information.
This means for example, that if we can have 2000 people involved in the process of collecting data on employment, wages, prices and output and disseminating this information to the rest of us, we are much richer collectively than if we have 2 million people involved in this process (including the running of financial markets). In the former case, the other 1,998,000 people would be able to spend their time providing the rest of us with health care, housing, education, or other goods and services of value.
However if we deliberately create a situation where there are large amounts of money to be made by getting early access to data then we will almost certainly be pulling more people into this process of collecting and disseminating information. To be concrete, if people think that they can make millions or billions of dollars by beating the crowd to information then many people will devote great effort to beating the crowd to information.
This is pure rent-seeking in that their behavior offers no benefit to the economy. It will not make the economy more efficient if the price of a specific stock or other financial assets adjust 1 second more quickly to new information, however it can make particular individuals very rich.
In principle we want to set rules for the market so that people have incentive to engage in behavior that increases the wealth of society for example by inventing more efficient cars or developing better drugs. We don’t want the incentives to drive them toward rent-seeking behavior that offers no social benefit. Opportunities to get market moving data ahead of others will undoubtedly encourage more rent-seeking behavior. This is a loss to the economy and society.
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The Post ran an article highlighting new data from the Census Bureau showing that the number of white people who died last year exceeded the number who were born. It concludes the piece by citing William Frey, a demographer at Brookings:
“the natural decrease in whites suggests that aging whites will increasingly come to rely on the younger, mainly minority population to underwrite social programs that will sustain them.”
While this is true of social programs like Social Security and Medicare, this statement would also be true of stockholders who are even more disproportionately white than the elderly population, especially when ownership is measured in dollar terms. If the implication of Frey’s statement is that changing demographics could be the basis for future social conflict the more obvious locus would be the portion of national income siphoned off by stockholders than the benefits going to retirees.
While minorities can anticipate benefiting in their old age from Social Security and Medicare, and from the insurance they provide against disability and early death throughout their working lifetimes, most will not ever benefit to any significant extent from stock ownership. This would suggest that if there is an increasing basis for conflict between whites and minorities the more obvious area of contention would be the rules that have increased corporate profits at the expense of wages (e.g. fiscal and monetary policies that foster high unemployment, too big to fail banks, increased patent and copyright protection) rather than government social programs.
The Post ran an article highlighting new data from the Census Bureau showing that the number of white people who died last year exceeded the number who were born. It concludes the piece by citing William Frey, a demographer at Brookings:
“the natural decrease in whites suggests that aging whites will increasingly come to rely on the younger, mainly minority population to underwrite social programs that will sustain them.”
While this is true of social programs like Social Security and Medicare, this statement would also be true of stockholders who are even more disproportionately white than the elderly population, especially when ownership is measured in dollar terms. If the implication of Frey’s statement is that changing demographics could be the basis for future social conflict the more obvious locus would be the portion of national income siphoned off by stockholders than the benefits going to retirees.
While minorities can anticipate benefiting in their old age from Social Security and Medicare, and from the insurance they provide against disability and early death throughout their working lifetimes, most will not ever benefit to any significant extent from stock ownership. This would suggest that if there is an increasing basis for conflict between whites and minorities the more obvious area of contention would be the rules that have increased corporate profits at the expense of wages (e.g. fiscal and monetary policies that foster high unemployment, too big to fail banks, increased patent and copyright protection) rather than government social programs.
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A NYT piece on the growth in the percentage of young people getting college degrees included the assertion from Jamie P. Merisotis, the chief executive of the Lumina Foundation:
“There are worrisome signs that the demand for high-skilled talent is increasing more rapidly than we’re actually educating people … We can’t expect our citizens to meet the demands of the 21st-century economy and society without a 21st-century education.”
It is not clear what this evidence would be. The unemployment rate for college graduates, although down from its peak in 2010, is still close to twice its pre-recession level. In addition, wages for college graduates without advance degrees were stagnant even before the recession. These facts suggest that the economy is not suffering from a shortage of highly educated worker, although there may be some narrow occupations and locations in which shortages appear.
A NYT piece on the growth in the percentage of young people getting college degrees included the assertion from Jamie P. Merisotis, the chief executive of the Lumina Foundation:
“There are worrisome signs that the demand for high-skilled talent is increasing more rapidly than we’re actually educating people … We can’t expect our citizens to meet the demands of the 21st-century economy and society without a 21st-century education.”
It is not clear what this evidence would be. The unemployment rate for college graduates, although down from its peak in 2010, is still close to twice its pre-recession level. In addition, wages for college graduates without advance degrees were stagnant even before the recession. These facts suggest that the economy is not suffering from a shortage of highly educated worker, although there may be some narrow occupations and locations in which shortages appear.
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The government gives direct student loans. This saves money by eliminating the financial intermediaries. Is there some reason that it can’t do the same with mortgages, that is a reason other than banks need to rip off the public with the government’s assistance?
Jesse Eisinger has a good piece pointing out that the most politically likely paths for reforming Fannie Mae and Freddie Mac are likely to mean big profits for banks and incorporate few of the lessons from the housing bubble.
The government gives direct student loans. This saves money by eliminating the financial intermediaries. Is there some reason that it can’t do the same with mortgages, that is a reason other than banks need to rip off the public with the government’s assistance?
Jesse Eisinger has a good piece pointing out that the most politically likely paths for reforming Fannie Mae and Freddie Mac are likely to mean big profits for banks and incorporate few of the lessons from the housing bubble.
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The NYT implied that politicians in the United States and Europe are pushing a trade deal because they want to boost growth in a prolonged period of stagnation. This is not plausible.
Even optimistic projections of the impact of a trade deal show that it would only increase GDP by around 1.0 percent. This increase would only be felt after the changes in the agreement are fully phased in which will almost certainly be more than a decade. The implication is that the impact on annual growth will almost certainly be less than 0.1 percentage point, and even this would be an optimistic scenario.
The more obvious explanation is that powerful corporate interests could benefit from a trade agreement that would over-ride national or local health, safety, and environmental regulations. The most obvious news in this piece is that political leaders are misrepresenting their motives, trying to claim that a trade deal is about economic growth, which could provide benefits to most of the population, as opposed to special interest rules that are intended to benefit a narrow group of corporations.
The NYT implied that politicians in the United States and Europe are pushing a trade deal because they want to boost growth in a prolonged period of stagnation. This is not plausible.
Even optimistic projections of the impact of a trade deal show that it would only increase GDP by around 1.0 percent. This increase would only be felt after the changes in the agreement are fully phased in which will almost certainly be more than a decade. The implication is that the impact on annual growth will almost certainly be less than 0.1 percentage point, and even this would be an optimistic scenario.
The more obvious explanation is that powerful corporate interests could benefit from a trade agreement that would over-ride national or local health, safety, and environmental regulations. The most obvious news in this piece is that political leaders are misrepresenting their motives, trying to claim that a trade deal is about economic growth, which could provide benefits to most of the population, as opposed to special interest rules that are intended to benefit a narrow group of corporations.
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The NYT ran a column that discussed the massive corruption in the pharmaceutical industry and using a water pistol to rein it in. The basic story is straightforward. As a result of government provided patent monopolies (i.e. not the free market), drug companies can sell drugs for hundreds or even thousands of dollars per prescription. In most cases these drugs would sell for a few dollars in a free market.
According to textbook economics, the enormous gap between the price and marginal cost of these drugs gives their manufacturers an enormous incentive to lie, cheat, and steal and find other ways to get more people to buy their drugs. This is the point of the column, the industry is spending a fortune trying to mislead doctors about the safety and effectiveness of their drugs so they will prescribe them more widely.
In a normal world we would be talking about alternative mechanisms for financing prescription drugs. If research was not supported by patent monopolies then drug companies would not spend tens of billions of dollars each year trying to mislead doctors about the quality of their drugs. But it is too great a leap to talk about changing the structure of incentives so instead we get the water pistol:
“The pharmaceutical industry figured that out decades ago, deploying tens of thousands of sales representatives, or “detailers,” to promote their products directly to doctors in their offices. For years, my colleagues and I have been using a similar approach through the nonprofit Independent Drug Information Service, now financed by the governments of Pennsylvania and the District of Columbia. Our “academic detailing” program assesses the medical literature in a non-product-driven way and then deploys a “docent service” of pharmacists and nurses to visit doctors in their own offices and guide them through the resulting therapy recommendations.”
Yeah, somehow I don’t think this crew will be up to the task.
The NYT ran a column that discussed the massive corruption in the pharmaceutical industry and using a water pistol to rein it in. The basic story is straightforward. As a result of government provided patent monopolies (i.e. not the free market), drug companies can sell drugs for hundreds or even thousands of dollars per prescription. In most cases these drugs would sell for a few dollars in a free market.
According to textbook economics, the enormous gap between the price and marginal cost of these drugs gives their manufacturers an enormous incentive to lie, cheat, and steal and find other ways to get more people to buy their drugs. This is the point of the column, the industry is spending a fortune trying to mislead doctors about the safety and effectiveness of their drugs so they will prescribe them more widely.
In a normal world we would be talking about alternative mechanisms for financing prescription drugs. If research was not supported by patent monopolies then drug companies would not spend tens of billions of dollars each year trying to mislead doctors about the quality of their drugs. But it is too great a leap to talk about changing the structure of incentives so instead we get the water pistol:
“The pharmaceutical industry figured that out decades ago, deploying tens of thousands of sales representatives, or “detailers,” to promote their products directly to doctors in their offices. For years, my colleagues and I have been using a similar approach through the nonprofit Independent Drug Information Service, now financed by the governments of Pennsylvania and the District of Columbia. Our “academic detailing” program assesses the medical literature in a non-product-driven way and then deploys a “docent service” of pharmacists and nurses to visit doctors in their own offices and guide them through the resulting therapy recommendations.”
Yeah, somehow I don’t think this crew will be up to the task.
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A NYT blog post on the impact of the rise in interest rates on the economy commented:
“Many real estate analysts say that homes are so affordable that even a considerable rise in interest rates would not do much to undermine the housing recovery, especially if the economy is growing at a healthy rate.”
Actually homes are not especially affordable. Inflation adjusted house prices nationwide are more than 15 percent higher than their long-term trend. They are still down considerably from their bubble peaks, but that hardly means that prices are low. Of course even with the recent rise in mortgage interest rates, mortgage rates are still at extraordinarily low levels.
A NYT blog post on the impact of the rise in interest rates on the economy commented:
“Many real estate analysts say that homes are so affordable that even a considerable rise in interest rates would not do much to undermine the housing recovery, especially if the economy is growing at a healthy rate.”
Actually homes are not especially affordable. Inflation adjusted house prices nationwide are more than 15 percent higher than their long-term trend. They are still down considerably from their bubble peaks, but that hardly means that prices are low. Of course even with the recent rise in mortgage interest rates, mortgage rates are still at extraordinarily low levels.
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