The Washington think tank Third Way has managed to make a lot of news lately by misrepresenting its research. It put out a paper by David Autor and Melanie Wasserman with some tentative results concerning the impact on children of growing up without a father present in the household. The paper found weak evidence that boys were less likely to graduate college under such circumstances, while girls were less affected. While the piece itself notes the tentative nature of this finding (the impact of growing up in a rural household on college graduation rates was equally strong), Third Way touted this “startling discovery.” (Fans of this finding are no doubt troubled by same sex marriage, since it implies that boys raised by lesbian couples will be less likely to graduate college.)
Anyhow, Robert Samuelson naturally picks up on this finding to warn us about our future in a piece titled “family meltdown.” Complaining about single parent families is old news, as is the growth of single parent families. (The increase in single parent households was largely a story of the 60s and the 70s. The percentage of children being raised in a household with just one parent has been relatively stable over the last quarter century.) What is new is that this complaint is coming from “a liberal think tank” rather than conservatives like Charles Murray.
It is not clear what makes Third Way liberal. It has called for cutting Social Security, focusing on deficit reduction at the expense of economic growth, and taken a variety of other positions that are not ordinarily associated with being liberal. There is nothing wrong with an organization adopting eclectic positions on issues, but it is certainly misleading for it then to be described as “liberal.” Samuelson’s description of Third Way may lead readers to believe that there is a consensus on the societal risks posed by his family meltdowns which is not at all true.
The Washington think tank Third Way has managed to make a lot of news lately by misrepresenting its research. It put out a paper by David Autor and Melanie Wasserman with some tentative results concerning the impact on children of growing up without a father present in the household. The paper found weak evidence that boys were less likely to graduate college under such circumstances, while girls were less affected. While the piece itself notes the tentative nature of this finding (the impact of growing up in a rural household on college graduation rates was equally strong), Third Way touted this “startling discovery.” (Fans of this finding are no doubt troubled by same sex marriage, since it implies that boys raised by lesbian couples will be less likely to graduate college.)
Anyhow, Robert Samuelson naturally picks up on this finding to warn us about our future in a piece titled “family meltdown.” Complaining about single parent families is old news, as is the growth of single parent families. (The increase in single parent households was largely a story of the 60s and the 70s. The percentage of children being raised in a household with just one parent has been relatively stable over the last quarter century.) What is new is that this complaint is coming from “a liberal think tank” rather than conservatives like Charles Murray.
It is not clear what makes Third Way liberal. It has called for cutting Social Security, focusing on deficit reduction at the expense of economic growth, and taken a variety of other positions that are not ordinarily associated with being liberal. There is nothing wrong with an organization adopting eclectic positions on issues, but it is certainly misleading for it then to be described as “liberal.” Samuelson’s description of Third Way may lead readers to believe that there is a consensus on the societal risks posed by his family meltdowns which is not at all true.
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Nelson Schwartz struggled to make sense of the economy in a NYT column today. After all, we see signs of economic weakness everywhere, yet the stock market is soaring. (This may be less of a mystery to folks who know that stock prices are ostensibly a measure of corporate profits, not the health of the economy.)
After going through the bad news, Schwartz gives us the case for optimism about the economy:
“‘The current slowdown will be the last for a while,’ said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. He estimates that after growing by annual rates of only 1.3 percent in the second quarter and 1.5 percent in the third quarter, the economy will expand by 2.5 percent in the final months of the year and maintain that pace in 2014.
‘We’re getting closer to the end of chronically disappointing growth,’ Mr. Harris added. ‘It’s not like we’re going to have a huge boom but something that feels sustainable.'”
The economy has a trend growth rate of between 2.2 percent and 2.4 percent. If we sustain a 2.5 percent growth rate then we will be exceeding the trend growth rate by between 0.1-0.3 percentage points. According to the Congressional Budget Office the economy is still 6.0 percentage points below its potential level of output. This means that in the optimistic scenario described here we will return to potential GDP in somewhere between 20 and 60 years.
Nelson Schwartz struggled to make sense of the economy in a NYT column today. After all, we see signs of economic weakness everywhere, yet the stock market is soaring. (This may be less of a mystery to folks who know that stock prices are ostensibly a measure of corporate profits, not the health of the economy.)
After going through the bad news, Schwartz gives us the case for optimism about the economy:
“‘The current slowdown will be the last for a while,’ said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. He estimates that after growing by annual rates of only 1.3 percent in the second quarter and 1.5 percent in the third quarter, the economy will expand by 2.5 percent in the final months of the year and maintain that pace in 2014.
‘We’re getting closer to the end of chronically disappointing growth,’ Mr. Harris added. ‘It’s not like we’re going to have a huge boom but something that feels sustainable.'”
The economy has a trend growth rate of between 2.2 percent and 2.4 percent. If we sustain a 2.5 percent growth rate then we will be exceeding the trend growth rate by between 0.1-0.3 percentage points. According to the Congressional Budget Office the economy is still 6.0 percentage points below its potential level of output. This means that in the optimistic scenario described here we will return to potential GDP in somewhere between 20 and 60 years.
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It is understandable that politicians would use euphemisms when they talk about cutting Social Security. After all, it is an incredibly popular program among all demographic groups and across the political spectrum. Therefore it is not surprising they would refer to “changes” to Social Security when they mean cuts to Social Security. But what is the Post’s excuse?
It is understandable that politicians would use euphemisms when they talk about cutting Social Security. After all, it is an incredibly popular program among all demographic groups and across the political spectrum. Therefore it is not surprising they would refer to “changes” to Social Security when they mean cuts to Social Security. But what is the Post’s excuse?
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Corporate governance structures in the United States make the old Soviet Union look like a model of democracy. As it is, the voting structure is so rigged to favor insiders that it is almost impossible for shareholders to remove even the most incompetent directors and install better management.
This is mostly done through the structure of elections to give incumbents an almost unbeatable advantage. However the NYT tells us that even in the rare cases where the incumbents are voted out they don’t always leave. Columnist James Stewart identified 41 cases where directors lost elections but still continued to hold their seats on the board.
This is why we need Director Watch (TM). The basic story in corporate America is that the CEO and other top management pay off the directors to look the other way as they pilfer the company at the shareholders’ expense. And then the CEOs run around claiming that they earned their big paychecks. Leonid Brezhnev would have been jealous.
Corporate governance structures in the United States make the old Soviet Union look like a model of democracy. As it is, the voting structure is so rigged to favor insiders that it is almost impossible for shareholders to remove even the most incompetent directors and install better management.
This is mostly done through the structure of elections to give incumbents an almost unbeatable advantage. However the NYT tells us that even in the rare cases where the incumbents are voted out they don’t always leave. Columnist James Stewart identified 41 cases where directors lost elections but still continued to hold their seats on the board.
This is why we need Director Watch (TM). The basic story in corporate America is that the CEO and other top management pay off the directors to look the other way as they pilfer the company at the shareholders’ expense. And then the CEOs run around claiming that they earned their big paychecks. Leonid Brezhnev would have been jealous.
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Charles Krauthammer is not impressed with President Obama’s proposal to cut the cost of living adjustment for Social Security. He complains:
“First, the proposal — “chained CPI,” a change in the way inflation is measured — is very small. It reduces Social Security by a quarter of a penny on the dollar — a $2,000 check reduced by a five-dollar bill.”
This is a correct statement (or almost correct statement, the Social Security Administration estimates the impact 0.3 percent annually) on the first year impact of the cut. However the impact accumulates over time. After ten years it would be between 2.5-3.0 cents on a dollar or $50-$60 on a $2,000 check. This is a considerably larger hit to the typical beneficiary than the typical high income taxpayer would see as a result of the increase in tax rates last year.
It is also worth noting that a $2,000 monthly check would put this person near the top of the distribution of beneficiaries. The average check is a bit over $1,200.
Charles Krauthammer is not impressed with President Obama’s proposal to cut the cost of living adjustment for Social Security. He complains:
“First, the proposal — “chained CPI,” a change in the way inflation is measured — is very small. It reduces Social Security by a quarter of a penny on the dollar — a $2,000 check reduced by a five-dollar bill.”
This is a correct statement (or almost correct statement, the Social Security Administration estimates the impact 0.3 percent annually) on the first year impact of the cut. However the impact accumulates over time. After ten years it would be between 2.5-3.0 cents on a dollar or $50-$60 on a $2,000 check. This is a considerably larger hit to the typical beneficiary than the typical high income taxpayer would see as a result of the increase in tax rates last year.
It is also worth noting that a $2,000 monthly check would put this person near the top of the distribution of beneficiaries. The average check is a bit over $1,200.
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Retail sales fell in March and economists were surprised.
Retail sales fell in March and economists were surprised.
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Fareed Zakaria failed to recognize the true fruits of Thatcherism in his column today. After telling readers that Thatcherism was the right remedy for the problems of the 1970s such as oil shocks, slow productivity growth and rising wages, he says that it is not the answer for economy now:
“Today, American and European workers struggle to keep up their wages as technology and globalization push them down. Western economies face global competition, with other countries building impressive infrastructure and expanding education and worker training. They face a two-track economy where capital does well but labor does not, where college graduates thrive but those without strong skills fall behind and where inequality is rising not just in outcomes but also in opportunities.”
Actually, the problems that Zakaria identifies are largely the result of Thatcherism. A main reason that workers have to struggle to keep their wages up is that central banks have deliberately raised unemployment in order to keep inflation low. This weakens the bargaining power of workers, especially those in the bottom half of the wage distribution.
The high unemployment of recent years can be attributed to a policy of financial regulation that allowed for banks to grow large with the implicit subsidy of a government granted too big to fail guarantee. It also required central banks to conduct monetary and regulatory policy without regard to asset bubbles.
Thatcher and her kindred spirits in the United States and elsewhere worked to weaken labor unions. This has also reduced the ability of workers to secure their share of gains from productivity growth.
The split between winners and losers in the current economy does not fit Zakaria’s description. The median wage for college graduates has been virtually flat since the 1990s. This group includes many people who have very high skills.
The comment about globalization is bizarre. The fact that other countries have become wealthier should help the rich countries, not hurt them. It only poses a problem in a context of bad macroeconomic policy, like having an over-valued currency. It also can be a problem with selective protectionism of the sort used in the United States. Trade policy has deliberately put less-educated workers in direct competition with low-paid workers in the developing world. By contrast, highly educated professionals like doctors and lawyers, are largely protected from such competition.
It is remarkable that Zakaria somehow fails to recognize the extent to which the factors that he identifies as problems were the direct result of Thatcherism. In many cases, such as the weakening of workers bargaining power, this was an explicitly stated goal of many of her supporters.
Fareed Zakaria failed to recognize the true fruits of Thatcherism in his column today. After telling readers that Thatcherism was the right remedy for the problems of the 1970s such as oil shocks, slow productivity growth and rising wages, he says that it is not the answer for economy now:
“Today, American and European workers struggle to keep up their wages as technology and globalization push them down. Western economies face global competition, with other countries building impressive infrastructure and expanding education and worker training. They face a two-track economy where capital does well but labor does not, where college graduates thrive but those without strong skills fall behind and where inequality is rising not just in outcomes but also in opportunities.”
Actually, the problems that Zakaria identifies are largely the result of Thatcherism. A main reason that workers have to struggle to keep their wages up is that central banks have deliberately raised unemployment in order to keep inflation low. This weakens the bargaining power of workers, especially those in the bottom half of the wage distribution.
The high unemployment of recent years can be attributed to a policy of financial regulation that allowed for banks to grow large with the implicit subsidy of a government granted too big to fail guarantee. It also required central banks to conduct monetary and regulatory policy without regard to asset bubbles.
Thatcher and her kindred spirits in the United States and elsewhere worked to weaken labor unions. This has also reduced the ability of workers to secure their share of gains from productivity growth.
The split between winners and losers in the current economy does not fit Zakaria’s description. The median wage for college graduates has been virtually flat since the 1990s. This group includes many people who have very high skills.
The comment about globalization is bizarre. The fact that other countries have become wealthier should help the rich countries, not hurt them. It only poses a problem in a context of bad macroeconomic policy, like having an over-valued currency. It also can be a problem with selective protectionism of the sort used in the United States. Trade policy has deliberately put less-educated workers in direct competition with low-paid workers in the developing world. By contrast, highly educated professionals like doctors and lawyers, are largely protected from such competition.
It is remarkable that Zakaria somehow fails to recognize the extent to which the factors that he identifies as problems were the direct result of Thatcherism. In many cases, such as the weakening of workers bargaining power, this was an explicitly stated goal of many of her supporters.
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The Washington Post showed yet again why it is known as “Fox on 15th Street,” running a lead front page story headlined, “Obama eyes end to debt deadlock.” (The on-line version is slightly different.) The piece begins by telling readers in the first sentence:
“In the first budget of his second term, President Obama set aside the grand ambitions that marked his early days in office and sent Congress a blueprint aimed at achieving a simple goal: ending the long partisan standoff over the national debt.”
The “long partisan standoff over the national debt” is of course the Post’s invention. There are major debates over budget issues, with Republicans demanding cuts in many programs that Democrats support. (Interestingly, Social Security and Medicare are not on that list except in Washington. Both programs enjoy overwhelming support across the political spectrum elsewhere in the country.) There are also major issues on economic policy, with Democrats generally more willing to use stimulus to try to support the economy and get out of the downturn more quickly.
However there is no long partisan standoff on the national debt. Most people have little comprehension of the debt and do not view it as a major concern. Neither do financial markets, which is why the interest on 10-year Treasury bonds remains near a 60 year low. The interest burden the government faces is also near a post-World War II low. (It is at a post World-War II low if we subtract off the interest payments from the Fed to the Treasury.)
In short, the Post’s headline and the structure of the article should be understood as part of its effort to hype the debt as the country’s major problem. It is in fact not recognized as such by people across the country, nor is there any evidence suggested that it should be.
The Washington Post showed yet again why it is known as “Fox on 15th Street,” running a lead front page story headlined, “Obama eyes end to debt deadlock.” (The on-line version is slightly different.) The piece begins by telling readers in the first sentence:
“In the first budget of his second term, President Obama set aside the grand ambitions that marked his early days in office and sent Congress a blueprint aimed at achieving a simple goal: ending the long partisan standoff over the national debt.”
The “long partisan standoff over the national debt” is of course the Post’s invention. There are major debates over budget issues, with Republicans demanding cuts in many programs that Democrats support. (Interestingly, Social Security and Medicare are not on that list except in Washington. Both programs enjoy overwhelming support across the political spectrum elsewhere in the country.) There are also major issues on economic policy, with Democrats generally more willing to use stimulus to try to support the economy and get out of the downturn more quickly.
However there is no long partisan standoff on the national debt. Most people have little comprehension of the debt and do not view it as a major concern. Neither do financial markets, which is why the interest on 10-year Treasury bonds remains near a 60 year low. The interest burden the government faces is also near a post-World War II low. (It is at a post World-War II low if we subtract off the interest payments from the Fed to the Treasury.)
In short, the Post’s headline and the structure of the article should be understood as part of its effort to hype the debt as the country’s major problem. It is in fact not recognized as such by people across the country, nor is there any evidence suggested that it should be.
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The NYT had a major article on the budget today which told readers:
“While many economists say the new formula is more accurate, opponents say it does not adequately reflect the out-of-pocket health care expenses that burden older Americans.”
This comment is misleading since the issue with Social Security benefits is whether the chained CPI better reflects the cost of living of the population drawing Social Security checks. That is actually distinct from the rate of growth of out of pocket health care expenses, which would show that the cost of living for seniors as they age rises much more rapidly than the CPI.
There is good reason to believe that it does not. The Bureau of Labor Statistics (BLS) has an experimental elderly index that has consistently shown that the elderly experience a rate of inflation that is somewhat higher than the CPI that currently provides the basis for the annual cost of living adjustment. The main reason is that seniors spend a larger share of their income on health care and housing than the population as whole. Since these items tend to rise more rapidly in price, their cost of living rises somewhat more rapidly than what is shown by the current CPI.
It is also not clear that seniors substitute to the same extent as is assumed by the chained CPI. This would mean that a switch to a chained CPI would overstate the extent to which seniors benefit by substituting to goods that are rising less rapidly in price.
For this reason, many economists have advocated having the BLS construct a full elderly index which would track the rate of inflation in the specific items purchased by seniors at the stores at which they shop. This would provide a more accurate measure of the rate inflation seen by seniors.
It would have been useful if the NYT had made this point in its budget article. The comment about the views of economists on the accuracy of the chained CPI for the general population is at best misleading. It is not an issue that is relevant for the current debate.
The NYT had a major article on the budget today which told readers:
“While many economists say the new formula is more accurate, opponents say it does not adequately reflect the out-of-pocket health care expenses that burden older Americans.”
This comment is misleading since the issue with Social Security benefits is whether the chained CPI better reflects the cost of living of the population drawing Social Security checks. That is actually distinct from the rate of growth of out of pocket health care expenses, which would show that the cost of living for seniors as they age rises much more rapidly than the CPI.
There is good reason to believe that it does not. The Bureau of Labor Statistics (BLS) has an experimental elderly index that has consistently shown that the elderly experience a rate of inflation that is somewhat higher than the CPI that currently provides the basis for the annual cost of living adjustment. The main reason is that seniors spend a larger share of their income on health care and housing than the population as whole. Since these items tend to rise more rapidly in price, their cost of living rises somewhat more rapidly than what is shown by the current CPI.
It is also not clear that seniors substitute to the same extent as is assumed by the chained CPI. This would mean that a switch to a chained CPI would overstate the extent to which seniors benefit by substituting to goods that are rising less rapidly in price.
For this reason, many economists have advocated having the BLS construct a full elderly index which would track the rate of inflation in the specific items purchased by seniors at the stores at which they shop. This would provide a more accurate measure of the rate inflation seen by seniors.
It would have been useful if the NYT had made this point in its budget article. The comment about the views of economists on the accuracy of the chained CPI for the general population is at best misleading. It is not an issue that is relevant for the current debate.
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