Paul Howard celebrates the lower than projected cost of the Medicare prescription drug program and attributes it to the role of private insurers. In fact, the main reason that Part D has cost less than projected is that the rate of increase in drug prices overall has been far less than projected. This in turn is attributable to a sharp fall in the number of breakthrough drugs.
If Howard wants to blame the collapse of innovation on the use of private insurers to deliver the Medicare drug benefit then he may have a case that the private insurers were central to controlling costs. Otherwise, he’s killing electrons for nothing.
Thanks to Robert Salzberg for calling this one to my attention.
Paul Howard celebrates the lower than projected cost of the Medicare prescription drug program and attributes it to the role of private insurers. In fact, the main reason that Part D has cost less than projected is that the rate of increase in drug prices overall has been far less than projected. This in turn is attributable to a sharp fall in the number of breakthrough drugs.
If Howard wants to blame the collapse of innovation on the use of private insurers to deliver the Medicare drug benefit then he may have a case that the private insurers were central to controlling costs. Otherwise, he’s killing electrons for nothing.
Thanks to Robert Salzberg for calling this one to my attention.
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The Washington Post had an article that touted Ireland’s success with its austerity program, which has allowed it to sell long-term bonds in financial markets at reasonable interest rates. The article questions whether Ireland can be an example for the rest of Europe with the first sentence posing the question:
“In Europe’s grand battle over growth vs. austerity, has Ireland proved that austerity works?”
While it is undoubtedly good news that the Irish government can re-enter credit markets, it is worth noting that the unemployment rate in Ireland is still 14.7 percent, down very slightly from its recession peak. This is still 10 full percentage points above the pre-recession level. This is supposed to prove that austerity works?
The Washington Post had an article that touted Ireland’s success with its austerity program, which has allowed it to sell long-term bonds in financial markets at reasonable interest rates. The article questions whether Ireland can be an example for the rest of Europe with the first sentence posing the question:
“In Europe’s grand battle over growth vs. austerity, has Ireland proved that austerity works?”
While it is undoubtedly good news that the Irish government can re-enter credit markets, it is worth noting that the unemployment rate in Ireland is still 14.7 percent, down very slightly from its recession peak. This is still 10 full percentage points above the pre-recession level. This is supposed to prove that austerity works?
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Yes, boys and girls and Arnold Schwarzenegger fans everywhere, a strong dollar does not mean a healthy economy, contrary to what Neil Irwin told us today in the Washington Post. In fact, fans of arithmetic and believers in accounting identities know that an over-valued dollar is at the root of our current economic problems. While believers in the Confidence Fairy think that investment will reach new highs as a share of GDP, and/or consumers will spend even when they have little wealth, those of us who follow data know that the only way to make up the demand shortfall created by trade deficit is with a large budget deficit. However, the Serious People say that we can’t have a large budget deficit, so that means we get high unemployment.
The only serious way to get the trade deficit down is get the dollar down. That will make our exports cheaper to people living in other countries and make imports more expensive for people in the United States. That means more exports and fewer imports, and therefore a smaller trade deficit. (For those folks who were looking to the trade agreements, the idea that these will reduce the trade deficit is just something that the Serious People tell to children.)
Anyhow, it is easy to show there is no direct relationship between the health of the economy and the strength of the dollar. In fact, the recovery in the first half of the Clinton administration was based to a substantial extent on the idea that a lower deficit would lead to a lower valued dollar and therefore more net exports. And, this largely worked as shown below.
Then Robert Rubin took over at Treasury and pushed his high dollar policy giving us record trade deficits along with a stock and housing bubble. You know the rest of the story.
Yes, boys and girls and Arnold Schwarzenegger fans everywhere, a strong dollar does not mean a healthy economy, contrary to what Neil Irwin told us today in the Washington Post. In fact, fans of arithmetic and believers in accounting identities know that an over-valued dollar is at the root of our current economic problems. While believers in the Confidence Fairy think that investment will reach new highs as a share of GDP, and/or consumers will spend even when they have little wealth, those of us who follow data know that the only way to make up the demand shortfall created by trade deficit is with a large budget deficit. However, the Serious People say that we can’t have a large budget deficit, so that means we get high unemployment.
The only serious way to get the trade deficit down is get the dollar down. That will make our exports cheaper to people living in other countries and make imports more expensive for people in the United States. That means more exports and fewer imports, and therefore a smaller trade deficit. (For those folks who were looking to the trade agreements, the idea that these will reduce the trade deficit is just something that the Serious People tell to children.)
Anyhow, it is easy to show there is no direct relationship between the health of the economy and the strength of the dollar. In fact, the recovery in the first half of the Clinton administration was based to a substantial extent on the idea that a lower deficit would lead to a lower valued dollar and therefore more net exports. And, this largely worked as shown below.
Then Robert Rubin took over at Treasury and pushed his high dollar policy giving us record trade deficits along with a stock and housing bubble. You know the rest of the story.
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This is what reporters/columnists are supposed to do. His column is not an endorsement, it just lays out the benefits and downsides of a serious budget. What a novel idea.
Addendum:
I noted the comments below on Zandi’s concern that stimulus is not needed because the economy is kicking into a higher gear. FWIW, Zandi has seen the economy kicking into a higher gear numerous times over the last four years.
For example, in December of 2010 he told David Leonhardt:
“In my previous baseline I expected real G.D.P. growth of 2.8 percent in 2011 and 4.2 percent in 2012, … I’m now expecting real G.D.P. growth of 3.9 percent in 2011 and 3.4 percent in 2012.”
Actual growth in 2011 was 2.0 percent and in 2012 1.6 percent.
An NYT article in April of 2012 told readers:
“‘I’m relatively optimistic,’ said Mark Zandi, the chief economist at Moody’s Analytics, who released a note this week showing unemployment dropping faster than he previously forecast. As for the more dire claims about an economy on the brink, ‘I don’t really take those seriously.'”
The average growth rate over the next three quarters was 1.5 percent.
It is worth taking this track record into account in assessing Zandi’s view of the benefits of stimulus at present. He has been seriously overly optimistic in his past forecasts.
This is what reporters/columnists are supposed to do. His column is not an endorsement, it just lays out the benefits and downsides of a serious budget. What a novel idea.
Addendum:
I noted the comments below on Zandi’s concern that stimulus is not needed because the economy is kicking into a higher gear. FWIW, Zandi has seen the economy kicking into a higher gear numerous times over the last four years.
For example, in December of 2010 he told David Leonhardt:
“In my previous baseline I expected real G.D.P. growth of 2.8 percent in 2011 and 4.2 percent in 2012, … I’m now expecting real G.D.P. growth of 3.9 percent in 2011 and 3.4 percent in 2012.”
Actual growth in 2011 was 2.0 percent and in 2012 1.6 percent.
An NYT article in April of 2012 told readers:
“‘I’m relatively optimistic,’ said Mark Zandi, the chief economist at Moody’s Analytics, who released a note this week showing unemployment dropping faster than he previously forecast. As for the more dire claims about an economy on the brink, ‘I don’t really take those seriously.'”
The average growth rate over the next three quarters was 1.5 percent.
It is worth taking this track record into account in assessing Zandi’s view of the benefits of stimulus at present. He has been seriously overly optimistic in his past forecasts.
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New York Governor Andrew Cuomo has been bragging about job growth on his watch. The NYT has a piece challenging Cuomo’s claims. It tells readers:
“The number of private-sector jobs increased by 4 percent in New York State from January 2011 to January 2013, according to the State Labor Department. Nationwide, over the same period, private sector jobs grew by 4.4 percent.
“Those figures come despite the fact that New York State lost fewer jobs, as a percentage, than the nation did in the Great Recession.”
Actually the fact that New York lost fewer jobs in the downturn would be an argument as to why it would create fewer jobs in the upturn.
Every state will have some amount of normal job growth consistent with the growth of the labor force. It will also have additional job growth associated with a backlog of unemployed workers who are looking to find work. In the extreme case where a state lost no jobs in the downturn this backlog would be zero. In that case, the only source of job growth will be the normal growth of the labor force.
Obviously New York did lose jobs in the downturn, but the fact that it lost a smaller number relative to the size of its labor force would be argument as to why we would expect slower job growth now, not an argument as to why growth would be faster.
I’ll let Cuomo’s crew argue their own case on their record, but on this particular point the NYT got it wrong.
New York Governor Andrew Cuomo has been bragging about job growth on his watch. The NYT has a piece challenging Cuomo’s claims. It tells readers:
“The number of private-sector jobs increased by 4 percent in New York State from January 2011 to January 2013, according to the State Labor Department. Nationwide, over the same period, private sector jobs grew by 4.4 percent.
“Those figures come despite the fact that New York State lost fewer jobs, as a percentage, than the nation did in the Great Recession.”
Actually the fact that New York lost fewer jobs in the downturn would be an argument as to why it would create fewer jobs in the upturn.
Every state will have some amount of normal job growth consistent with the growth of the labor force. It will also have additional job growth associated with a backlog of unemployed workers who are looking to find work. In the extreme case where a state lost no jobs in the downturn this backlog would be zero. In that case, the only source of job growth will be the normal growth of the labor force.
Obviously New York did lose jobs in the downturn, but the fact that it lost a smaller number relative to the size of its labor force would be argument as to why we would expect slower job growth now, not an argument as to why growth would be faster.
I’ll let Cuomo’s crew argue their own case on their record, but on this particular point the NYT got it wrong.
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That’s what the Washington Post told readers. There is a small problem here since China only has 1.35 billion people. Buy hey, what 250 million people more or less when you’re the Washington Post.
(Typo corrected — thanks Kat.)
That’s what the Washington Post told readers. There is a small problem here since China only has 1.35 billion people. Buy hey, what 250 million people more or less when you’re the Washington Post.
(Typo corrected — thanks Kat.)
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Good complaint, maybe she can talk to the Washington Post’s editorial board who are such huge supporters of NAFTA that they decided that Mexico’s GDP had quadrupled from 1987 to 2007. The data show a rise of just 83 percent. It would be great if the country had newspapers that didn’t insist on inventing their own reality to advance their agenda.
Good complaint, maybe she can talk to the Washington Post’s editorial board who are such huge supporters of NAFTA that they decided that Mexico’s GDP had quadrupled from 1987 to 2007. The data show a rise of just 83 percent. It would be great if the country had newspapers that didn’t insist on inventing their own reality to advance their agenda.
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Andrew Ross Sorkin’s piece arguing against the prosecution of large banks and other large companies might have led readers to believe that 28,000 people were out of work as a result of Arthur Anderson’s bankruptcy, following its prosecution. Of course this is not true.
There is no reason to believe that the demand for accounting services fell as a result of Arthur Anderson’s prosecution. While the people who had been working at Arthur Anderson lost their jobs when the company folded, the companies and individuals who were doing business with Arthur Anderson still needed accountants after the firm went out of business. This means that they would have turned to other firms with their business.
The firms who got the business lost by Arthur Anderson presumably hired more accountants and support staff to meet the additional demand. On net, there was probably little net change in employment in the accounting industry.
This point is important since banks and other large companies may try to make the same sort of argument as Sorkin to lead people to believe that there is a public interest in not holding them accountable for their crimes because it would lead to job loss. This is not true.
Andrew Ross Sorkin’s piece arguing against the prosecution of large banks and other large companies might have led readers to believe that 28,000 people were out of work as a result of Arthur Anderson’s bankruptcy, following its prosecution. Of course this is not true.
There is no reason to believe that the demand for accounting services fell as a result of Arthur Anderson’s prosecution. While the people who had been working at Arthur Anderson lost their jobs when the company folded, the companies and individuals who were doing business with Arthur Anderson still needed accountants after the firm went out of business. This means that they would have turned to other firms with their business.
The firms who got the business lost by Arthur Anderson presumably hired more accountants and support staff to meet the additional demand. On net, there was probably little net change in employment in the accounting industry.
This point is important since banks and other large companies may try to make the same sort of argument as Sorkin to lead people to believe that there is a public interest in not holding them accountable for their crimes because it would lead to job loss. This is not true.
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