I’ve always been told that newspapers are pressed for space and like to eliminate any unnecessary wording. Why then do they insist on calling trade pacts, like the proposed deal between the European Union and the United States “free-trade” pacts? I found the phrase “free-trade” three times in my reading of this NYT article on the European Parliament’s efforts to limit the scope of a deal.
As the discussion makes clear most of the issues raised in the discussion have little to do with tariffs or quotas, the items that usually hold center place in free trade. Rather, the pact has to do with a range of regulatory issues, in many cases seeking to impose rules that might not pass muster if they had to go through the conventional political process.
These regulatory rules have nothing to do with free trade. For example, the United States is likely to push for stronger patent and copyright protections, the opposite of free trade. Apparently the Obama administration is also intending to use the pact to derail an EU effort to impose a financial transactions tax on banks, according to the article. Again, this has zero to do with free trade, it is about protecting big banks from the same sort of taxation imposed on other industries.
So, the question is, why does the NYT feel the need to use the term “free-trade” in this piece? What information has it provided readers that they would be missing if it just referred to the deal as a “trade” pact?
I’ve always been told that newspapers are pressed for space and like to eliminate any unnecessary wording. Why then do they insist on calling trade pacts, like the proposed deal between the European Union and the United States “free-trade” pacts? I found the phrase “free-trade” three times in my reading of this NYT article on the European Parliament’s efforts to limit the scope of a deal.
As the discussion makes clear most of the issues raised in the discussion have little to do with tariffs or quotas, the items that usually hold center place in free trade. Rather, the pact has to do with a range of regulatory issues, in many cases seeking to impose rules that might not pass muster if they had to go through the conventional political process.
These regulatory rules have nothing to do with free trade. For example, the United States is likely to push for stronger patent and copyright protections, the opposite of free trade. Apparently the Obama administration is also intending to use the pact to derail an EU effort to impose a financial transactions tax on banks, according to the article. Again, this has zero to do with free trade, it is about protecting big banks from the same sort of taxation imposed on other industries.
So, the question is, why does the NYT feel the need to use the term “free-trade” in this piece? What information has it provided readers that they would be missing if it just referred to the deal as a “trade” pact?
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In the aftermath of the horrific factory fire in Bangladesh leading to over 1100 deaths, there have been renewed demands for serious safety standards at the clothing factories there. These demands have been met by the standard response from industry spokespeople that higher costs will simply cost jobs since firms will relocate to lower cost countries.
Adam Davidson has a piece in the NYT magazine this weekend that makes the simple point: there are no more Bangladeshes. The threat of relocation was a realistic concern when companies could move to the south of the United States, to Latin America, to China, or Vietnam, but this threat no longer exists. All of these regions/countries have seen sufficient rise in living standards and wages that they do not provide credible alternatives to companies seeking to escape higher labor costs in Bangladesh. There are no obvious locations where companies can now look to relocate to escape higher costs in Bangladesh.
This means that if companies have to pay a few pennies more per t-shirt to provide safe working conditions in Bangladesh they will just have to live with the higher cost. That means slightly lower profit for the manufacturer and an almost invisible price increase for t-shirt buyers in rich countries.
In the aftermath of the horrific factory fire in Bangladesh leading to over 1100 deaths, there have been renewed demands for serious safety standards at the clothing factories there. These demands have been met by the standard response from industry spokespeople that higher costs will simply cost jobs since firms will relocate to lower cost countries.
Adam Davidson has a piece in the NYT magazine this weekend that makes the simple point: there are no more Bangladeshes. The threat of relocation was a realistic concern when companies could move to the south of the United States, to Latin America, to China, or Vietnam, but this threat no longer exists. All of these regions/countries have seen sufficient rise in living standards and wages that they do not provide credible alternatives to companies seeking to escape higher labor costs in Bangladesh. There are no obvious locations where companies can now look to relocate to escape higher costs in Bangladesh.
This means that if companies have to pay a few pennies more per t-shirt to provide safe working conditions in Bangladesh they will just have to live with the higher cost. That means slightly lower profit for the manufacturer and an almost invisible price increase for t-shirt buyers in rich countries.
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That’s what readers of Jim Roumell’s column on wealth-testing Social Security must be asking. The column, “the rich can save Social Security by giving up their checks,” gets almost all its facts wrong, and suffers from huge problems of logic.
The basic idea is that we have some very rich people who don’t need Social Security, therefore there shouldn’t get it. Of course these people did pay for their Social Security. While Roumell is certainly right that the very rich don’t need the money, they generally wouldn’t need the interest on the government bonds they own. We could also deny them the interest on these bonds, that would make as much sense as Roumell’s proposal on Social Security, but let’s not get bogged down in such moral considerations.
Roumell sees large savings if we deny Social Security to the rich:
“According to the Wall Street Journal, the top 1 percent of the United States’ 115?million households have a net worth of $6.8?million or greater. The top 5?percent have a net worth of $1.9 million or greater. If just the top 1 percent of wealthiest households gave up their Social Security income, assuming two-thirds of these households are of retirement age and will receive benefits averaging $30,000 a year, more than $200?billion would be saved in the first 10 years. That would contribute greatly to resolving the projected funding gap. If Social Security is gradually phased out for the wealthiest 5 percent of households, beginning with just a 10 percent benefit reduction, the savings climbs to nearly $500 billion over 10 years.”
Let’s see, two-thirds of the top 1.0 percent are over age 65? Where exactly did Roumell get this one? Has the Washington Post heard of fact checking?
If we eliminate Social Security for the wealthiest 5 percent, then we would be eliminating benefits for household with incomes of around $80,000 in their retirement. That’s a new definition of “rich.” It was $400,000 a year when we talked about small increases in tax rates.
But the best part of the story is trying to envision what Roumell’s wealth test even would look like. People tend to accumulate wealth during their working lifetime and spend it down as they approach retirement. How do we monitor people’s wealth? Do we do annual assessments of the value of their stock portfolios, their home and vacation properties, personal items like expensive paintings and jewelry? Then if they cross the magic $1.9 million threshold at any point in their lives we put a permanent hold on their Social Security benefits?
The long and short is that Roumell’s proposal is completely unworkable as anyone who has given it a moment’s thought would recognize. But hey, he wants to go after Social Security and he has a lot of money, why not give him a column in the Washington Post?
That’s what readers of Jim Roumell’s column on wealth-testing Social Security must be asking. The column, “the rich can save Social Security by giving up their checks,” gets almost all its facts wrong, and suffers from huge problems of logic.
The basic idea is that we have some very rich people who don’t need Social Security, therefore there shouldn’t get it. Of course these people did pay for their Social Security. While Roumell is certainly right that the very rich don’t need the money, they generally wouldn’t need the interest on the government bonds they own. We could also deny them the interest on these bonds, that would make as much sense as Roumell’s proposal on Social Security, but let’s not get bogged down in such moral considerations.
Roumell sees large savings if we deny Social Security to the rich:
“According to the Wall Street Journal, the top 1 percent of the United States’ 115?million households have a net worth of $6.8?million or greater. The top 5?percent have a net worth of $1.9 million or greater. If just the top 1 percent of wealthiest households gave up their Social Security income, assuming two-thirds of these households are of retirement age and will receive benefits averaging $30,000 a year, more than $200?billion would be saved in the first 10 years. That would contribute greatly to resolving the projected funding gap. If Social Security is gradually phased out for the wealthiest 5 percent of households, beginning with just a 10 percent benefit reduction, the savings climbs to nearly $500 billion over 10 years.”
Let’s see, two-thirds of the top 1.0 percent are over age 65? Where exactly did Roumell get this one? Has the Washington Post heard of fact checking?
If we eliminate Social Security for the wealthiest 5 percent, then we would be eliminating benefits for household with incomes of around $80,000 in their retirement. That’s a new definition of “rich.” It was $400,000 a year when we talked about small increases in tax rates.
But the best part of the story is trying to envision what Roumell’s wealth test even would look like. People tend to accumulate wealth during their working lifetime and spend it down as they approach retirement. How do we monitor people’s wealth? Do we do annual assessments of the value of their stock portfolios, their home and vacation properties, personal items like expensive paintings and jewelry? Then if they cross the magic $1.9 million threshold at any point in their lives we put a permanent hold on their Social Security benefits?
The long and short is that Roumell’s proposal is completely unworkable as anyone who has given it a moment’s thought would recognize. But hey, he wants to go after Social Security and he has a lot of money, why not give him a column in the Washington Post?
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I’m off on vacation until Friday, May 24. Remember, don’t believe anything you read in the paper until I’m back.
I’m off on vacation until Friday, May 24. Remember, don’t believe anything you read in the paper until I’m back.
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The Washington Post long ago abandoned the separation between news and editorials, routinely running pieces advocating cuts in Social Security and Medicare in its news section. It now appears as though the New York Times is following the Post’s lead.
A news story on the budget made repeated assertions that Social Security and Medicare must be cut. At one point it referred to the:
“the inevitable pain that comes from curbing those huge and popular programs [Social Security and Medicare].”
Of course there is nothing inevitable about curbing spending on Social Security and Medicare and there is certainly not inevitable pain. The most obvious route for curbing costs in these programs from an economic standpoint would be cutting Medicare payments to drug companies, medical equipment companies, doctors and other providers. This would not be especially painful for anyone who does not derive income from the program.
Clearly the paper was expressing its desire to see these programs cut.
It later added:
“The longer the delay, the sharper and more immediate the changes Washington must eventually make to ease the long-term fiscal squeeze.”
Again, this is an invention of the NYT. There is no evidence that the country is up against any “long-term fiscal squeeze” or that anything would be gained by making cuts now.
The NYT, unlike the Post, generally keeps these sorts of political views on the opinion page. It is unfortunate that it appears to have departed from its standard practice with this article.
Addendum
This piece is now (8:30 AM, 5-15) clearly labeled as “political memo,” indicating that it is not a straight news story. That was not the case when it was posted last night. Here‘s the original for those of you who thought I made an Excel spreadsheet error.
The Washington Post long ago abandoned the separation between news and editorials, routinely running pieces advocating cuts in Social Security and Medicare in its news section. It now appears as though the New York Times is following the Post’s lead.
A news story on the budget made repeated assertions that Social Security and Medicare must be cut. At one point it referred to the:
“the inevitable pain that comes from curbing those huge and popular programs [Social Security and Medicare].”
Of course there is nothing inevitable about curbing spending on Social Security and Medicare and there is certainly not inevitable pain. The most obvious route for curbing costs in these programs from an economic standpoint would be cutting Medicare payments to drug companies, medical equipment companies, doctors and other providers. This would not be especially painful for anyone who does not derive income from the program.
Clearly the paper was expressing its desire to see these programs cut.
It later added:
“The longer the delay, the sharper and more immediate the changes Washington must eventually make to ease the long-term fiscal squeeze.”
Again, this is an invention of the NYT. There is no evidence that the country is up against any “long-term fiscal squeeze” or that anything would be gained by making cuts now.
The NYT, unlike the Post, generally keeps these sorts of political views on the opinion page. It is unfortunate that it appears to have departed from its standard practice with this article.
Addendum
This piece is now (8:30 AM, 5-15) clearly labeled as “political memo,” indicating that it is not a straight news story. That was not the case when it was posted last night. Here‘s the original for those of you who thought I made an Excel spreadsheet error.
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Undoubtedly everyone has seen stories in the media about how we need to expand high-skilled immigration because we have a shortage of workers with degrees in science, technology, engineering, and math (STEM). Claims of a shortage of STEM workers have been disconcerting to those of us who believe in economics since shortages are supposed to result in rising prices, or in this case, higher wages. We don’t seem to be seeing rapidly rising wages in most areas, which makes the claims of shortages dubious.
It turns out that at least one major tech firm has figured out how markets work. Netflix apparently doesn’t have any problem hiring STEM workers. It offers higher wages. According to Businessweek:
“Netflix can now hire just about any engineer it wants. That’s a function of the computer science the company does and its reputation as the highest payer in Silicon Valley. Managers routinely survey salary trends in Silicon Valley and pay their employees 10 percent to 20 percent more than the going rate for a given skill.”
If Netflix can figure this out perhaps it would be possible for companies like Facebook, Microsoft, and other tech giants to get this down as well. It is always good for a company to get lower cost labor, just like they want to pay less for all of their inputs. But if these companies really need workers, the trick is to offer higher pay. Maybe remedial courses for top management would do the trick.
Undoubtedly everyone has seen stories in the media about how we need to expand high-skilled immigration because we have a shortage of workers with degrees in science, technology, engineering, and math (STEM). Claims of a shortage of STEM workers have been disconcerting to those of us who believe in economics since shortages are supposed to result in rising prices, or in this case, higher wages. We don’t seem to be seeing rapidly rising wages in most areas, which makes the claims of shortages dubious.
It turns out that at least one major tech firm has figured out how markets work. Netflix apparently doesn’t have any problem hiring STEM workers. It offers higher wages. According to Businessweek:
“Netflix can now hire just about any engineer it wants. That’s a function of the computer science the company does and its reputation as the highest payer in Silicon Valley. Managers routinely survey salary trends in Silicon Valley and pay their employees 10 percent to 20 percent more than the going rate for a given skill.”
If Netflix can figure this out perhaps it would be possible for companies like Facebook, Microsoft, and other tech giants to get this down as well. It is always good for a company to get lower cost labor, just like they want to pay less for all of their inputs. But if these companies really need workers, the trick is to offer higher pay. Maybe remedial courses for top management would do the trick.
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The NYT had a piece on changes to French labor market regulation that will make it easier for employers to cut wages. The piece implies that France has a seriously dysfunctional labor market:
“There is wide agreement that the country has to bring down its relatively high labor costs if it is to compete with lower-wage destinations overseas and even with Germany, which underwent its own painful labor-market restructuring over the last decade and currently has a jobless rate of just 5.4 percent.
“It is the kind of structural overhaul that European Union leaders are urging to increase employment and growth in France, which is being given two more years to get its budget deficit down to the European Union-mandated 3 percent of the gross domestic product. But even the government acknowledges that more must be done, including further changes to pensions.
“France is in the midst of an unemployment crisis, with nearly 11 percent of the work force unemployed in a period of near recession. Among people under 24, the problem is even worse, with more than 26 percent jobless.”
France’s economy is clearly depressed, but the more obvious culprit would seem to be the fallout from the collapse of housing bubbles across Europe and the austerity policies being imposed by the European Central Bank and the European Union. While France’s unemployment picture does look bad, its employment to population ratio tells a different story. According to the OECD, the employment to population ratio (EPOP) in France, for people ages 16-64, was 63.9 percent in 2012, down only slightly from its 64.2 percent rate in 2007.
By comparison, the EPOP in the United States has fallen 4.8 percentage points over this period, from 71.9 percent in 2007 to 67.1 percentage points in 2012. The reason that the United States has not seen a comparable rise in its unemployment rate is that a large portion of those without jobs have given up looking for work. Most economists would probably not consider this evidence of a well-functioning labor market.
The NYT had a piece on changes to French labor market regulation that will make it easier for employers to cut wages. The piece implies that France has a seriously dysfunctional labor market:
“There is wide agreement that the country has to bring down its relatively high labor costs if it is to compete with lower-wage destinations overseas and even with Germany, which underwent its own painful labor-market restructuring over the last decade and currently has a jobless rate of just 5.4 percent.
“It is the kind of structural overhaul that European Union leaders are urging to increase employment and growth in France, which is being given two more years to get its budget deficit down to the European Union-mandated 3 percent of the gross domestic product. But even the government acknowledges that more must be done, including further changes to pensions.
“France is in the midst of an unemployment crisis, with nearly 11 percent of the work force unemployed in a period of near recession. Among people under 24, the problem is even worse, with more than 26 percent jobless.”
France’s economy is clearly depressed, but the more obvious culprit would seem to be the fallout from the collapse of housing bubbles across Europe and the austerity policies being imposed by the European Central Bank and the European Union. While France’s unemployment picture does look bad, its employment to population ratio tells a different story. According to the OECD, the employment to population ratio (EPOP) in France, for people ages 16-64, was 63.9 percent in 2012, down only slightly from its 64.2 percent rate in 2007.
By comparison, the EPOP in the United States has fallen 4.8 percentage points over this period, from 71.9 percent in 2007 to 67.1 percentage points in 2012. The reason that the United States has not seen a comparable rise in its unemployment rate is that a large portion of those without jobs have given up looking for work. Most economists would probably not consider this evidence of a well-functioning labor market.
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Steven Pearlstein is upset that the austerity pushers, like the Post’s editors, are looking rather foolish these days. After all, it seems they not only have problems with basic economic logic, they also have trouble with Excel spreadsheets. He notes the serious structural problems in Greece and some of the other crisis countries, then tells readers:
“Unfortunately, this is not how the anti-austerity crusaders talk about Greece or Italy or Portugal. They offer no reasonable alternative other than the rest of the world should line up to pour more money into a uncompetitive economies and profligate governments, under the theory that they can grow their way out of the hole they’ve dug. They can’t.”
Hmmm, I wish I knew some of the “anti-austerity crusaders” that Pearlstein is talking about. Folks I know have been talking about the need for adjustments in relative wages that can best be brought about by having wages in Germany and other surplus countries rise more rapidly so that the southern countries can regain competitiveness.
There are of course other problems in the crisis countries, in Greece most importantly the problem that people don’t like to pay taxes. This anti-austerity crusader has recommended a tax amnesty which would be coupled with serious penalties for people who don’t comply. (How do you spell “life in prison.”) My guess is that if millionaire and billionaire tax evaders got the impression that they would never get to see their families or money, they might be a bit more conscientious about adhering to the tax codes.
I have also suggested a vacant property tax to lower both residential and commercial rents, thereby raising real wages and providing a boost to business. I’d be happy to see many other reforms that would eliminate corruption that has developed over the years in these countries, as I suspect is the case with most anti-austerity crusaders. My argument, and I suspect that of my fellow crusaders, is that we have to keep our eyes on the ball.
These countries are suffering today from the fallout from collapsed asset bubbles, not their internal structural problems. The fault for these bubbles sits squarely with all the wise people at the ECB and EU who are now pushing austerity. Somehow they thought everything was fine in the years of the “Great Moderation” even though all the danger signs were flashing bright red.
Making the people in these countries suffer does not in any obvious way fix their structural problems. It just ruins lives. Yeah, me and my fellow crusaders don’t think that’s cute. Better to ruin the lives of the elites who caused this crisis.
Steven Pearlstein is upset that the austerity pushers, like the Post’s editors, are looking rather foolish these days. After all, it seems they not only have problems with basic economic logic, they also have trouble with Excel spreadsheets. He notes the serious structural problems in Greece and some of the other crisis countries, then tells readers:
“Unfortunately, this is not how the anti-austerity crusaders talk about Greece or Italy or Portugal. They offer no reasonable alternative other than the rest of the world should line up to pour more money into a uncompetitive economies and profligate governments, under the theory that they can grow their way out of the hole they’ve dug. They can’t.”
Hmmm, I wish I knew some of the “anti-austerity crusaders” that Pearlstein is talking about. Folks I know have been talking about the need for adjustments in relative wages that can best be brought about by having wages in Germany and other surplus countries rise more rapidly so that the southern countries can regain competitiveness.
There are of course other problems in the crisis countries, in Greece most importantly the problem that people don’t like to pay taxes. This anti-austerity crusader has recommended a tax amnesty which would be coupled with serious penalties for people who don’t comply. (How do you spell “life in prison.”) My guess is that if millionaire and billionaire tax evaders got the impression that they would never get to see their families or money, they might be a bit more conscientious about adhering to the tax codes.
I have also suggested a vacant property tax to lower both residential and commercial rents, thereby raising real wages and providing a boost to business. I’d be happy to see many other reforms that would eliminate corruption that has developed over the years in these countries, as I suspect is the case with most anti-austerity crusaders. My argument, and I suspect that of my fellow crusaders, is that we have to keep our eyes on the ball.
These countries are suffering today from the fallout from collapsed asset bubbles, not their internal structural problems. The fault for these bubbles sits squarely with all the wise people at the ECB and EU who are now pushing austerity. Somehow they thought everything was fine in the years of the “Great Moderation” even though all the danger signs were flashing bright red.
Making the people in these countries suffer does not in any obvious way fix their structural problems. It just ruins lives. Yeah, me and my fellow crusaders don’t think that’s cute. Better to ruin the lives of the elites who caused this crisis.
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We know this because they are spouting utterly absurd lines which Paul Sullivan unfortunately felt he had to repeat in his NYT column. Sullivan discusses the number of people who could be hit by President Obama’s proposal to cap tax sheltered savings at $3.4 million.
The discussion is ridiculous throughout. It makes a point of saying that under optimistic assumptions we could get 10-20 million people rubbing up against the proposed limits. (Yes, 10 percent of the population will have millions of dollars in financial assets.) However even more ridiculous is that there is no reason any serious person should give a damn.
If a person has $3.4 million in a tax sheltered account is there some national tragedy that the additional $50,000 they want to save will be subject to normal tax rules. If this ever rises to the point of meriting serious policy consideration then the world is way better off that I thought.
But here’s the best part:
“Any discussion of retirement savings that suggests ‘taking away tax-advantaged investing and capping investment amounts is detrimental to the system and society as a whole,’ said Robert L. Reynolds, president and chief executive of Putnam Investments and one of the people considered responsible for popularizing the 401(k) plan.
“‘Right now elderly poverty is at an all-time high,’ Mr. Reynolds said. ‘If that tells government anything, it’s we should do more to encourage saving for retirement.'”
Actually elderly poverty is nowhere close to being at an all-time high, but more importantly, what does Mr. Reynolds think he is talking about? The elderly who are in poverty are not worried about brushing up against the $3.4 million tax-exempt limit being proposed by President Obama. He is spouting non-sequiturs.
Apparently that is the state of the debate on this issue. And, the NYT’s retirement columnist presented this nonsense as a serious argument.
We know this because they are spouting utterly absurd lines which Paul Sullivan unfortunately felt he had to repeat in his NYT column. Sullivan discusses the number of people who could be hit by President Obama’s proposal to cap tax sheltered savings at $3.4 million.
The discussion is ridiculous throughout. It makes a point of saying that under optimistic assumptions we could get 10-20 million people rubbing up against the proposed limits. (Yes, 10 percent of the population will have millions of dollars in financial assets.) However even more ridiculous is that there is no reason any serious person should give a damn.
If a person has $3.4 million in a tax sheltered account is there some national tragedy that the additional $50,000 they want to save will be subject to normal tax rules. If this ever rises to the point of meriting serious policy consideration then the world is way better off that I thought.
But here’s the best part:
“Any discussion of retirement savings that suggests ‘taking away tax-advantaged investing and capping investment amounts is detrimental to the system and society as a whole,’ said Robert L. Reynolds, president and chief executive of Putnam Investments and one of the people considered responsible for popularizing the 401(k) plan.
“‘Right now elderly poverty is at an all-time high,’ Mr. Reynolds said. ‘If that tells government anything, it’s we should do more to encourage saving for retirement.'”
Actually elderly poverty is nowhere close to being at an all-time high, but more importantly, what does Mr. Reynolds think he is talking about? The elderly who are in poverty are not worried about brushing up against the $3.4 million tax-exempt limit being proposed by President Obama. He is spouting non-sequiturs.
Apparently that is the state of the debate on this issue. And, the NYT’s retirement columnist presented this nonsense as a serious argument.
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