That’s the question we ask this week in honor of the commemoration of the George W. Bush Library. According to Politico the answer appears to be “yes.”
Politico tells us that the Democrats in Congress who argue that there is no urgency to deal with the debt and that instead the focus of policy should be boosting the economy and getting the unemployment rate down are now increasingly occupying the center stage in the Democratic Party:
“These Democrats and their intellectual allies once occupied the political fringes, pushed aside by more moderate members who supported both immediate spending cuts and long-term entitlement reforms along with higher taxes.
But aided by a pile of recent data suggesting the deficit is already shrinking significantly and current spending cuts are slowing the economy, more Democrats such as Virginia Sen. Tim Kaine and Maryland Rep. Chris Van Hollen are coming around to the point of view that fiscal austerity, in all its forms, is more the problem than the solution.”
That’s the question we ask this week in honor of the commemoration of the George W. Bush Library. According to Politico the answer appears to be “yes.”
Politico tells us that the Democrats in Congress who argue that there is no urgency to deal with the debt and that instead the focus of policy should be boosting the economy and getting the unemployment rate down are now increasingly occupying the center stage in the Democratic Party:
“These Democrats and their intellectual allies once occupied the political fringes, pushed aside by more moderate members who supported both immediate spending cuts and long-term entitlement reforms along with higher taxes.
But aided by a pile of recent data suggesting the deficit is already shrinking significantly and current spending cuts are slowing the economy, more Democrats such as Virginia Sen. Tim Kaine and Maryland Rep. Chris Van Hollen are coming around to the point of view that fiscal austerity, in all its forms, is more the problem than the solution.”
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When the government grants drug companies patent monopolies that allow them to sell drugs at hundreds or even thousands of times the free market price it gives them an enormous incentive to do things like pay off doctors to prescribe drugs. Everyone who has ever taken an intro economics class understands that fact.
Unfortunately our leading economists do not seem aware of how protectionism in the prescription drug industry leads to corruption that can both raise costs and jeopardize the public’s health. That’s probably because they are too busy finding reasons why we can’t take steps to bring the economy back to full employment.
When the government grants drug companies patent monopolies that allow them to sell drugs at hundreds or even thousands of times the free market price it gives them an enormous incentive to do things like pay off doctors to prescribe drugs. Everyone who has ever taken an intro economics class understands that fact.
Unfortunately our leading economists do not seem aware of how protectionism in the prescription drug industry leads to corruption that can both raise costs and jeopardize the public’s health. That’s probably because they are too busy finding reasons why we can’t take steps to bring the economy back to full employment.
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David Ignatius used his Washington Post column yesterday to give a glowing tribute to Mervyn King, the outgoing governor of the Bank Of England. The whole piece is a paean to King’s wisdom that concludes by telling readers that King is:
“the only person I’ve ever seen who could intellectually intimidate former Treasury secretary Larry Summers. King couldn’t fix the British economy, but he did understand it.”
While silencing Larry Summers is certainly commendable, the claim that King understands the economy is highly questionable. It was not just his job to fix the British economy, it was his job to prevent it from breaking in the first place.
King was running the Bank of England as the housing bubble grew to ever more dangerous levels. It should have been clear to King that this asset bubble would burst at some point and that it would have severe consequences for the UK economy. However he took no measures to rein it in, apparently oblivious to the dangers. As a result, the UK is now experiencing a downturn that is more severe than the Great Depression. That fact probably deserves some mention in a balanced assessment of King’s record.
[Typos corrected from an earlier version.]
David Ignatius used his Washington Post column yesterday to give a glowing tribute to Mervyn King, the outgoing governor of the Bank Of England. The whole piece is a paean to King’s wisdom that concludes by telling readers that King is:
“the only person I’ve ever seen who could intellectually intimidate former Treasury secretary Larry Summers. King couldn’t fix the British economy, but he did understand it.”
While silencing Larry Summers is certainly commendable, the claim that King understands the economy is highly questionable. It was not just his job to fix the British economy, it was his job to prevent it from breaking in the first place.
King was running the Bank of England as the housing bubble grew to ever more dangerous levels. It should have been clear to King that this asset bubble would burst at some point and that it would have severe consequences for the UK economy. However he took no measures to rein it in, apparently oblivious to the dangers. As a result, the UK is now experiencing a downturn that is more severe than the Great Depression. That fact probably deserves some mention in a balanced assessment of King’s record.
[Typos corrected from an earlier version.]
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I have had plenty of occasions to criticize the editorial views of both the NYT and the Washington Post, but there are major differences between these two pillars of the national media. It would be hard to find a better statement of these differences than the Times and Post‘s view of the impact of the sequester on air travel.
One could also add that the sequester is throwing around 600,000 people out of work according to the Congressional Budget Office. These are people who have the necessary skills to fill jobs in the economy but who will not be working because people in Washington lack the skills to design policies to keep the economy near full employment.
I have had plenty of occasions to criticize the editorial views of both the NYT and the Washington Post, but there are major differences between these two pillars of the national media. It would be hard to find a better statement of these differences than the Times and Post‘s view of the impact of the sequester on air travel.
One could also add that the sequester is throwing around 600,000 people out of work according to the Congressional Budget Office. These are people who have the necessary skills to fill jobs in the economy but who will not be working because people in Washington lack the skills to design policies to keep the economy near full employment.
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One of the big issues left to be resolved in the debate over housing finance is the size of the down payment that homebuyers must put down in order for a mortgage to be considered a “qualified” mortgage. If a mortgage fits this definition, securitizers would not be required to hold capital against the mortgage.
NYT’s Dealbook had a post discussing the topic which highlighted research by Roberto G. Quercia, director of the Center for Community Capital at the University of North Carolina at Chapel Hill, which purports to show that there is not much additional risk of default with lower down payments. In fact, the numbers presented in the piece imply that Quercia’s research implies that low down payment loans have far higher risks of default. This means that lenders would either have to charge considerably higher interest rates or be subsidized for making these loans.
The NYT piece reports that Quercia found that the default rate during the years of the housing crash on a set of loans that met certain quality standards was 5.8 percent. However the default rate on loans with down payments of 20 percent or more was just 3.9 percent.
The piece reports that this higher down payment group comprised less than half of the loans in the study. If we assume that the 20 percent down payment group comprised 40 percent of the loans then this means that the default rate for home buyers putting less than 20 percent down was over 7.0 percent, more than 80 percent higher than for the 20 percent down payment group.
Furthermore, the losses for the less than 20 percent down payment group would be considerably higher on each default since there is less of a down payment cushion. If the loss for a default on a 20 percent down payment averages 25 percent, and we assume that the average down payment for the less than 20 percent group is 10 percent, then the losses for this group would average 39 percent of the amount loaned. (A 20 percent down payment is 25 percent of mortgage loan. A 10 percent down payment is just 11 percent of the amount loaned.)
Multiplying the increased probability of default (1.8) by the higher loss per default (1.6), the cost of default for the less than 20 percent down payment mortgages would be over 180 percent higher for the more than 20 percent down payment group, according to Quercia’s research. That would not seem to be a good argument to apply the same lending standards for this low down payment group.
It is also worth noting that Quercia’s assessment, as presented in the NYT post, that the 20 percent down payment would have excluded more than half of the borrowers does not follow from the evidence presented. If homebuyers knew that they had to put down 20 percent to get a lower cost mortgage, then they would be more likely to have a 20 percent down payment than in a context where this was not a requirement, as was true for the period examined by Quercia.
One of the big issues left to be resolved in the debate over housing finance is the size of the down payment that homebuyers must put down in order for a mortgage to be considered a “qualified” mortgage. If a mortgage fits this definition, securitizers would not be required to hold capital against the mortgage.
NYT’s Dealbook had a post discussing the topic which highlighted research by Roberto G. Quercia, director of the Center for Community Capital at the University of North Carolina at Chapel Hill, which purports to show that there is not much additional risk of default with lower down payments. In fact, the numbers presented in the piece imply that Quercia’s research implies that low down payment loans have far higher risks of default. This means that lenders would either have to charge considerably higher interest rates or be subsidized for making these loans.
The NYT piece reports that Quercia found that the default rate during the years of the housing crash on a set of loans that met certain quality standards was 5.8 percent. However the default rate on loans with down payments of 20 percent or more was just 3.9 percent.
The piece reports that this higher down payment group comprised less than half of the loans in the study. If we assume that the 20 percent down payment group comprised 40 percent of the loans then this means that the default rate for home buyers putting less than 20 percent down was over 7.0 percent, more than 80 percent higher than for the 20 percent down payment group.
Furthermore, the losses for the less than 20 percent down payment group would be considerably higher on each default since there is less of a down payment cushion. If the loss for a default on a 20 percent down payment averages 25 percent, and we assume that the average down payment for the less than 20 percent group is 10 percent, then the losses for this group would average 39 percent of the amount loaned. (A 20 percent down payment is 25 percent of mortgage loan. A 10 percent down payment is just 11 percent of the amount loaned.)
Multiplying the increased probability of default (1.8) by the higher loss per default (1.6), the cost of default for the less than 20 percent down payment mortgages would be over 180 percent higher for the more than 20 percent down payment group, according to Quercia’s research. That would not seem to be a good argument to apply the same lending standards for this low down payment group.
It is also worth noting that Quercia’s assessment, as presented in the NYT post, that the 20 percent down payment would have excluded more than half of the borrowers does not follow from the evidence presented. If homebuyers knew that they had to put down 20 percent to get a lower cost mortgage, then they would be more likely to have a 20 percent down payment than in a context where this was not a requirement, as was true for the period examined by Quercia.
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The United States emits more than twice as much greenhouse gas per person as the average for West Europe. If countries like Germany, France, and Spain emitted as much per person as the United States, there would be no point worrying about greenhouse gas emissions because the planet would be fried. The world’s emissions levels over the last three decades would be so much larger that there would be no hope of reducing emissions enough to prevent catastrophic levels of global warming.
This fact (i.e. undeniably true statement) makes the Washington Post’s lecture to Europeans about the United States being “the world leader in fighting climate change” laughable. Apparently the Washington Post thinks the United States should get big points for improvement and somehow that Europe should emulate us even if we still are emitting far more greenhouse gas per person than Europe.
No one ever accused the Washington Post of having much grasp of logic and arithmetic. After all, they are doubling down in their support of austerity even after the Reinhart & Rogoff errors had been exposed. But this one seems to be below even the Post’s incredibly low standard. Come on, we know that the Post hates Europe because they don’t give all of their money to the rich, and ordinary workers can expect to get health care and a decent retirement, but this one is really off the deep end.
The United States emits more than twice as much greenhouse gas per person as the average for West Europe. If countries like Germany, France, and Spain emitted as much per person as the United States, there would be no point worrying about greenhouse gas emissions because the planet would be fried. The world’s emissions levels over the last three decades would be so much larger that there would be no hope of reducing emissions enough to prevent catastrophic levels of global warming.
This fact (i.e. undeniably true statement) makes the Washington Post’s lecture to Europeans about the United States being “the world leader in fighting climate change” laughable. Apparently the Washington Post thinks the United States should get big points for improvement and somehow that Europe should emulate us even if we still are emitting far more greenhouse gas per person than Europe.
No one ever accused the Washington Post of having much grasp of logic and arithmetic. After all, they are doubling down in their support of austerity even after the Reinhart & Rogoff errors had been exposed. But this one seems to be below even the Post’s incredibly low standard. Come on, we know that the Post hates Europe because they don’t give all of their money to the rich, and ordinary workers can expect to get health care and a decent retirement, but this one is really off the deep end.
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