Yes, we have a mismatch of jobs and skills. The problem is that it seems to be on the side of the managers who can’t seem to figure out how to get good help. An excellent review of Peter Cappelli’s new book by Trey Popp.
Yes, we have a mismatch of jobs and skills. The problem is that it seems to be on the side of the managers who can’t seem to figure out how to get good help. An excellent review of Peter Cappelli’s new book by Trey Popp.
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Deficits throughout the euro zone were relatively modest prior to the economic collapse in 2008 according to data from the IMF. In fact, some euro zone countries, like Spain and Ireland, were even running budget surpluses. This didn’t stop Reuters from telling readers in the first line of an article picked up by the NYT:
“Public debt levels in the euro zone neared their projected peak last year after more than a decade of huge borrowing.”
This is seriously misleading since it implies that large deficits were a longstanding problem as opposed to an outgrowth of the economic crisis.
Deficits throughout the euro zone were relatively modest prior to the economic collapse in 2008 according to data from the IMF. In fact, some euro zone countries, like Spain and Ireland, were even running budget surpluses. This didn’t stop Reuters from telling readers in the first line of an article picked up by the NYT:
“Public debt levels in the euro zone neared their projected peak last year after more than a decade of huge borrowing.”
This is seriously misleading since it implies that large deficits were a longstanding problem as opposed to an outgrowth of the economic crisis.
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There were numerous news stories and columns touting the liberal agenda that President Obama put forward in his second inaugural address yesterday (e.g. here and here). While the speech certainly hit on several issues that have historically been important to liberals, the failure to mention full employment was a major omission.
The fact that the economy is still more than 9 million jobs below its trend growth path implies enormous suffering. Not only are millions of people unnecessarily unemployed or underemployed, high levels of unemployment mean that most workers lack bargaining power. As a result they are unable to raise their wages and get their share of productivity growth. This means that income is likely to continue to be redistributed upward.
There are not easy political paths to full employment at this point. Government stimulus (i.e. larger deficits) is the most obvious path, but that seems out of the question in a context where deficit reduction is dominating the policy debate. If the dollar dropped, it would make U.S. goods more competitive, thereby increasing net exports, but Obama has made little commitment in this direction and the process would take time in any case.
The best prospect is probably increased use of worksharing. Germany has used worksharing to lower its unemployment rate by more than 2 percentage points below its pre-recession level, even though its growth has been no better than growth in the United States. Worksharing does enjoy bipartisan support in the United States and is an option in the unemployment insurance systems in 25 states, but the takeup rate has been extremely low. It’s possible that a major presidential push could substantially increase the use of worksharing.
Anyhow, it is striking that a speech that touched on many liberal themes did not make a commitment to full employment. This should have been noted in the coverage.
There were numerous news stories and columns touting the liberal agenda that President Obama put forward in his second inaugural address yesterday (e.g. here and here). While the speech certainly hit on several issues that have historically been important to liberals, the failure to mention full employment was a major omission.
The fact that the economy is still more than 9 million jobs below its trend growth path implies enormous suffering. Not only are millions of people unnecessarily unemployed or underemployed, high levels of unemployment mean that most workers lack bargaining power. As a result they are unable to raise their wages and get their share of productivity growth. This means that income is likely to continue to be redistributed upward.
There are not easy political paths to full employment at this point. Government stimulus (i.e. larger deficits) is the most obvious path, but that seems out of the question in a context where deficit reduction is dominating the policy debate. If the dollar dropped, it would make U.S. goods more competitive, thereby increasing net exports, but Obama has made little commitment in this direction and the process would take time in any case.
The best prospect is probably increased use of worksharing. Germany has used worksharing to lower its unemployment rate by more than 2 percentage points below its pre-recession level, even though its growth has been no better than growth in the United States. Worksharing does enjoy bipartisan support in the United States and is an option in the unemployment insurance systems in 25 states, but the takeup rate has been extremely low. It’s possible that a major presidential push could substantially increase the use of worksharing.
Anyhow, it is striking that a speech that touched on many liberal themes did not make a commitment to full employment. This should have been noted in the coverage.
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Morning Edition’s top of the hour news segment (sorry, no link) told listeners that the Nikkei dropped in response to the Bank of Japan’s commitment to support stimulus. The Wall Street Journal said the opposite, pointing out that the bank’s asset purchase plans were quite modest. According to the WSJ, the decline in Japan’s stock market and rise in the yen was due to the concern that the bank was insufficiently committed to stimulus.
Morning Edition’s top of the hour news segment (sorry, no link) told listeners that the Nikkei dropped in response to the Bank of Japan’s commitment to support stimulus. The Wall Street Journal said the opposite, pointing out that the bank’s asset purchase plans were quite modest. According to the WSJ, the decline in Japan’s stock market and rise in the yen was due to the concern that the bank was insufficiently committed to stimulus.
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A Reuters article in the NYT told readers that:
“Japan’s public debt burden is already the worst among major economies at more than twice the size of its $5 trillion economy.”
While Japan does have the highest ratio of debt to GDP among wealthy countries, it also has one of the lowest ratios of interest to GDP. Its net interest payments are less than 1.0 percent of GDP. This number would be even lower if payments made to the central bank were subtracted out. (These are refunded to Japan’s treasury.) By comparison, the interest burden in the United States is currently around 1.5 percent of GDP (approximately 1.0 percent after subtracting out money refunded by the Fed). It had been over 3.0 percent of GDP in the early 1990s.
The piece also warned that continued large deficits could raise interest rates and slow the economy. Actually this depends on what happens to the inflation rate. Japan has had near zero inflation or modest deflation for much of the last two decades. If interest rates rise, but the inflation rate rises by more, as is the explicit policy of the government, then real interest rates would decline. This would boost growth in Japan.
A Reuters article in the NYT told readers that:
“Japan’s public debt burden is already the worst among major economies at more than twice the size of its $5 trillion economy.”
While Japan does have the highest ratio of debt to GDP among wealthy countries, it also has one of the lowest ratios of interest to GDP. Its net interest payments are less than 1.0 percent of GDP. This number would be even lower if payments made to the central bank were subtracted out. (These are refunded to Japan’s treasury.) By comparison, the interest burden in the United States is currently around 1.5 percent of GDP (approximately 1.0 percent after subtracting out money refunded by the Fed). It had been over 3.0 percent of GDP in the early 1990s.
The piece also warned that continued large deficits could raise interest rates and slow the economy. Actually this depends on what happens to the inflation rate. Japan has had near zero inflation or modest deflation for much of the last two decades. If interest rates rise, but the inflation rate rises by more, as is the explicit policy of the government, then real interest rates would decline. This would boost growth in Japan.
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It told readers:
“The country faces a fast-growing national debt as a result of waves of retiring workers who expect health care and pension benefits.”
This is not true. The reason the debt has been rising rapidly in recent years is that the economy plunged due to the collapse of the housing bubble. In 2007, before the collapse, the deficit was just 1.2 percent of GDP and the debt to GDP ratio was falling. The Congressional Budget Office projected that the deficit would remain in this neighborhood well into the current decade, even if the Bush tax cuts were not allowed to expire.
Source: Congressional Budget Office.
It told readers:
“The country faces a fast-growing national debt as a result of waves of retiring workers who expect health care and pension benefits.”
This is not true. The reason the debt has been rising rapidly in recent years is that the economy plunged due to the collapse of the housing bubble. In 2007, before the collapse, the deficit was just 1.2 percent of GDP and the debt to GDP ratio was falling. The Congressional Budget Office projected that the deficit would remain in this neighborhood well into the current decade, even if the Bush tax cuts were not allowed to expire.
Source: Congressional Budget Office.
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David Brooks would benefit hugely from a remedial course in grade school arithmetic. It might keep him from saying silly things in his NYT columns like:
“We are now a mature nation with an aging population. Far from being underinstitutionalized, we are bogged down with a bloated political system, a tangled tax code, a byzantine legal code and a crushing debt.”
If he were more acquainted with arithmetic he would be able to go to government publications and discover that far from being “crushing,” the interest burden of our debt is near a post-war low. In fact, if we subtracted the $90 billion in interest that is refunded from the Fed to the Treasury the interest burden would be at a post war low.
Source: Congressional Budget Office.
Brooks’ confusion then causes him to assert:
“Reinvigorating a mature nation means using government to give people the tools to compete, but then opening up a wide field so they do so raucously and creatively. It means spending more here but deregulating more there. It means facing the fact that we do have to choose between the current benefits to seniors and investments in our future, and that to pretend we don’t face that choice, as Obama did, is effectively to sacrifice the future to the past.”
In fact there is no reason to make such a choice between meeting obligations to seniors and investing in the future. If we fixed our health care system so that our per person health care costs were in line with those in other wealthy countries we would be looking at long-term budget surpluses, not deficit.
Thanks to Robert Salzberg for calling this one to my attention.
David Brooks would benefit hugely from a remedial course in grade school arithmetic. It might keep him from saying silly things in his NYT columns like:
“We are now a mature nation with an aging population. Far from being underinstitutionalized, we are bogged down with a bloated political system, a tangled tax code, a byzantine legal code and a crushing debt.”
If he were more acquainted with arithmetic he would be able to go to government publications and discover that far from being “crushing,” the interest burden of our debt is near a post-war low. In fact, if we subtracted the $90 billion in interest that is refunded from the Fed to the Treasury the interest burden would be at a post war low.
Source: Congressional Budget Office.
Brooks’ confusion then causes him to assert:
“Reinvigorating a mature nation means using government to give people the tools to compete, but then opening up a wide field so they do so raucously and creatively. It means spending more here but deregulating more there. It means facing the fact that we do have to choose between the current benefits to seniors and investments in our future, and that to pretend we don’t face that choice, as Obama did, is effectively to sacrifice the future to the past.”
In fact there is no reason to make such a choice between meeting obligations to seniors and investing in the future. If we fixed our health care system so that our per person health care costs were in line with those in other wealthy countries we would be looking at long-term budget surpluses, not deficit.
Thanks to Robert Salzberg for calling this one to my attention.
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Adam Davidson has an interesting piece in the NYT Magazine on the debate over whether technology is responsible for the growth in inequality over the last three decades or whether the increase has been primarily the result of policies that have redistributed income upward. (As the author of The End of Loser Liberalism: Making Markets Progressive, I am firmly in the latter camp.) The immediate basis for the piece is a new paper by Larry Mishel, John Schmitt, and Heidi Shierholz that questions the widely accepted work of M.I.T. professor David Autor, which attributes rising inequality to the loss of jobs in middle class occupations. (The paper is not yet available, but several of the main points are presented in blog posts here, here, here, and here.)
Davidson does a good job laying out the central issues at one point turning to Frank Levy, another M.I.T. economist, to help define the terrain. Levy points out that while inequality has increased almost everywhere, there are huge differences in the extent of the increase. This suggests that there is a very big role for policy in the rise in inequality in the United States. (We’re #1.)
However Davidson’s conclusion may mislead readers.
“What do we value more: growth or fairness? That’s a value judgment. And for better or worse, it’s up to us.”
The idea that there is tradeoff between growth and inequality does not follow from Levy’s comments. It could be the case that policy decisions were aggravating trends in equality rather than alleviating them. For example, increasing the length and scope of patent and copyright protection is a policy that would have the effect of redistributing income upward as would protecting doctors and lawyers from international competition in a context where trade policy is designed to make most workers increasingly exposed to such competition. In these and other cases, it is possible to identify policies that would likely both increase growth and reduce inequality.
Adam Davidson has an interesting piece in the NYT Magazine on the debate over whether technology is responsible for the growth in inequality over the last three decades or whether the increase has been primarily the result of policies that have redistributed income upward. (As the author of The End of Loser Liberalism: Making Markets Progressive, I am firmly in the latter camp.) The immediate basis for the piece is a new paper by Larry Mishel, John Schmitt, and Heidi Shierholz that questions the widely accepted work of M.I.T. professor David Autor, which attributes rising inequality to the loss of jobs in middle class occupations. (The paper is not yet available, but several of the main points are presented in blog posts here, here, here, and here.)
Davidson does a good job laying out the central issues at one point turning to Frank Levy, another M.I.T. economist, to help define the terrain. Levy points out that while inequality has increased almost everywhere, there are huge differences in the extent of the increase. This suggests that there is a very big role for policy in the rise in inequality in the United States. (We’re #1.)
However Davidson’s conclusion may mislead readers.
“What do we value more: growth or fairness? That’s a value judgment. And for better or worse, it’s up to us.”
The idea that there is tradeoff between growth and inequality does not follow from Levy’s comments. It could be the case that policy decisions were aggravating trends in equality rather than alleviating them. For example, increasing the length and scope of patent and copyright protection is a policy that would have the effect of redistributing income upward as would protecting doctors and lawyers from international competition in a context where trade policy is designed to make most workers increasingly exposed to such competition. In these and other cases, it is possible to identify policies that would likely both increase growth and reduce inequality.
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What is wrong with people who write opinion pieces for the NYT, they seem to think it is a good thing that people in China are poor. Today Steve Rattner has a column that compares India and China that comments about, “India’s better demographics.” What does this mean, that India maintains rapid population growth, while China has been able to reduce its population growth to a trickle? (A blogpost yesterday had the same complaint about China’s slower population growth.)
Partly as a result of China’s slower population growth there has been a marked tightening of labor markets throughout much of the country. This is allowing hundreds of millions of Chinese workers to have rapidly rising wages which mean rapidly rising living standards. Seeing hundreds of millions of people in a situation to substantially improve their quality of life is a great thing. These people will be protected against hunger and starvation, have decent housing, and be able to provide their kids with education. This is not happening in India to anywhere near the same extent and more rapid population growth is at least part of the story.
In addition to the impact on living standards there is also the impact on the environment. Other things equal, more people means more pollution and more greenhouse gas emissions. Who could want this?
There are plenty of grounds for criticizing China, including some of the mechanisms used to slow population growth, but the slowdown in China’s population growth was an enormous service to humanity.
What is wrong with people who write opinion pieces for the NYT, they seem to think it is a good thing that people in China are poor. Today Steve Rattner has a column that compares India and China that comments about, “India’s better demographics.” What does this mean, that India maintains rapid population growth, while China has been able to reduce its population growth to a trickle? (A blogpost yesterday had the same complaint about China’s slower population growth.)
Partly as a result of China’s slower population growth there has been a marked tightening of labor markets throughout much of the country. This is allowing hundreds of millions of Chinese workers to have rapidly rising wages which mean rapidly rising living standards. Seeing hundreds of millions of people in a situation to substantially improve their quality of life is a great thing. These people will be protected against hunger and starvation, have decent housing, and be able to provide their kids with education. This is not happening in India to anywhere near the same extent and more rapid population growth is at least part of the story.
In addition to the impact on living standards there is also the impact on the environment. Other things equal, more people means more pollution and more greenhouse gas emissions. Who could want this?
There are plenty of grounds for criticizing China, including some of the mechanisms used to slow population growth, but the slowdown in China’s population growth was an enormous service to humanity.
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The NYT has an article on how Amgen managed to get a provision into the budget deal signed at the start of this year which could get it $500 million in additional revenue from Medicare over the course of the decade. The piece reports that this was a victory for Amgen’s extensive lobbying network on Capitol Hill.
This sort of corruption is exactly what economic theory predicts when the government gives companies monopolies in certain markets, as it does with patent protected drugs. When a company can sell a drug at prices that are several thousand percent above the marginal cost of production it has enormous incentive to pressure politicians to allow it to sell the drug in contexts where it may not be the best treatment for a disease.
The NYT has an article on how Amgen managed to get a provision into the budget deal signed at the start of this year which could get it $500 million in additional revenue from Medicare over the course of the decade. The piece reports that this was a victory for Amgen’s extensive lobbying network on Capitol Hill.
This sort of corruption is exactly what economic theory predicts when the government gives companies monopolies in certain markets, as it does with patent protected drugs. When a company can sell a drug at prices that are several thousand percent above the marginal cost of production it has enormous incentive to pressure politicians to allow it to sell the drug in contexts where it may not be the best treatment for a disease.
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