I’m not kidding. Charles Lane’s column in the Washington Post is quite literally complaining about the fact that the Washington Post stands to lose business to the postal service. Lane is upset that the postal service has contracted with a major distributor of ads to use the mail service to bring the material to people’s houses. Previously this material was distributed largely by newspapers like the Washington Post, which means that the Post and other newspapers stand to lose from the deal.
Lane is openly upset about this. He wants the post office to go out of business because he has decided that it is technologically obsolete.
Of course any business will eventually become technologically obsolete if it doesn’t adapt. Congress has largely put the post office into an impossible squeeze where it has insisted that it be run at a profit, along business lines, while at the same time it has consistently given into whiners from rival businesses, like Lane, who get upset any time they face being out-competed by this 19th century relic.
Businesses tend to get their way since they use their political connections to rein in the post office. For example, about a decade ago the postal service ran a very successful set of ads that highlighted the fact that its express mail was about a quarter of the price of the overnight delivery services of Fed Ex or UPS. The two competitors went to court to stop the ads. When the court told them to get lost, Fed Ex and UPS went to Congress and stopped the ads.
The post office used to provide banking services to much of the population. However, the wizards in the financial sector didn’t like the competition, so they had it shut down.
Now we have Charles Lane and the Washington Post complaining that the technologically obsolete postal service is undercutting it in its ability to deliver junk ads to people’s homes. Market economies are so tough!
I’m not kidding. Charles Lane’s column in the Washington Post is quite literally complaining about the fact that the Washington Post stands to lose business to the postal service. Lane is upset that the postal service has contracted with a major distributor of ads to use the mail service to bring the material to people’s houses. Previously this material was distributed largely by newspapers like the Washington Post, which means that the Post and other newspapers stand to lose from the deal.
Lane is openly upset about this. He wants the post office to go out of business because he has decided that it is technologically obsolete.
Of course any business will eventually become technologically obsolete if it doesn’t adapt. Congress has largely put the post office into an impossible squeeze where it has insisted that it be run at a profit, along business lines, while at the same time it has consistently given into whiners from rival businesses, like Lane, who get upset any time they face being out-competed by this 19th century relic.
Businesses tend to get their way since they use their political connections to rein in the post office. For example, about a decade ago the postal service ran a very successful set of ads that highlighted the fact that its express mail was about a quarter of the price of the overnight delivery services of Fed Ex or UPS. The two competitors went to court to stop the ads. When the court told them to get lost, Fed Ex and UPS went to Congress and stopped the ads.
The post office used to provide banking services to much of the population. However, the wizards in the financial sector didn’t like the competition, so they had it shut down.
Now we have Charles Lane and the Washington Post complaining that the technologically obsolete postal service is undercutting it in its ability to deliver junk ads to people’s homes. Market economies are so tough!
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The Washington Post had an article highlighting the Fed’s commitment to continue to buy long-term bonds for the foreseeable future, even if the economy looks somewhat better. It then gives a list of what it presents as relatively positive recent economic reports and says that the Fed intends to still continue its bond buying policies.
One of the items on this list is a forecast that the economy will grow 2.0 percent in the third quarter. It is difficult to view this as positive. The Congressional Budget Office puts the economy’s potential growth rate at 2.4-2.5 percent. This means that with a 2.0 percent growth rate the economy is falling further below its potential. With a gap that is already close to 6.0 percent of GDP we should be seeing growth rates that far exceed the economy’s potential rate of growth in order to get us back to potential GDP and full employment.
The Washington Post had an article highlighting the Fed’s commitment to continue to buy long-term bonds for the foreseeable future, even if the economy looks somewhat better. It then gives a list of what it presents as relatively positive recent economic reports and says that the Fed intends to still continue its bond buying policies.
One of the items on this list is a forecast that the economy will grow 2.0 percent in the third quarter. It is difficult to view this as positive. The Congressional Budget Office puts the economy’s potential growth rate at 2.4-2.5 percent. This means that with a 2.0 percent growth rate the economy is falling further below its potential. With a gap that is already close to 6.0 percent of GDP we should be seeing growth rates that far exceed the economy’s potential rate of growth in order to get us back to potential GDP and full employment.
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Robert Samuelson goes after the Affordable Care Act (ACA) in his column today. Remarkably, he is almost half right. His target is the provision that larger employers must provide insurance for full-time employees, which he says could amount to $5,000 a year. He tells readers that this provision will both lead to less hiring and also encourage employers to keep workers’ hours below the 30 hour cutoff, both of which would be undesirable outcomes.
This is partly right, but only partly. The ACA does not actually require larger employers to buy insurance policies for their workers. It gives them the option of paying a penalty of $2000 per worker, with the first 30 workers being exempt. This means that an employer of 60 workers who did not want to offer insurance would face a penalty of $60,000 or $1,000 per worker. (One thousand dollars is only one-fifth of Samuelson’s $5,000 number, but if we give him the marginal cost of hiring another worker we get to 40 percent, which is almost half.)
For a full-time worker this $1,000 penalty would come to 50 cents an hour. That is much smaller than recent increases in the minimum wage which have not been associated with any job loss according to a number of academic studies. Therefore, we might conclude that Samuelson’s concerns about the ACA causing job loss have little foundation outside of Washington Postland.
However there is still the issue of gaming the system. Some employers will undoubtedly be happy to save themselves $2,000 by reducing their workers’ hours from just over 30 per week to just under 30 per week. This would be bad news for workers at low-paying jobs who likely need these hours.
While Samuelson wants to throw up his hands and say we therefore should get rid of Obamacare, more serious people would say that we could look to amend the bill to have the penalties based on hours worked rather than the number of full-time workers. This provision on full-time workers was put in place by an amendment to the Senate bill. The original House bill had a more reasonable provision and it would not be difficult to design an amendment that did not base penalties on the number of full-time workers, but rather total hours worked. For those familiar with arithmetic, such calculations are not difficult.
There is another important point on this topic that Samuelson apparently missed. Historically insurance was provided as a per worker benefit, making it a fixed overhead cost. (It is increasingly common for employers to pro-rate its payment for insurance based on hours worked, but this practice is still the exception.) This meant that employers would rather have workers put in longer workweeks, possibly even paying an overtime premium, rather than hiring additional workers and paying for health insurance.
This is a major distortion of the labor market from the current system. It is undoubtedly one reason that full-time workers in the United States put in 20 percent more hours a year on average than do workers in western Europe. The notion that we somehow have a perfect labor market now, into which the ACA will introduce distortions, is absurd on its face.
Robert Samuelson goes after the Affordable Care Act (ACA) in his column today. Remarkably, he is almost half right. His target is the provision that larger employers must provide insurance for full-time employees, which he says could amount to $5,000 a year. He tells readers that this provision will both lead to less hiring and also encourage employers to keep workers’ hours below the 30 hour cutoff, both of which would be undesirable outcomes.
This is partly right, but only partly. The ACA does not actually require larger employers to buy insurance policies for their workers. It gives them the option of paying a penalty of $2000 per worker, with the first 30 workers being exempt. This means that an employer of 60 workers who did not want to offer insurance would face a penalty of $60,000 or $1,000 per worker. (One thousand dollars is only one-fifth of Samuelson’s $5,000 number, but if we give him the marginal cost of hiring another worker we get to 40 percent, which is almost half.)
For a full-time worker this $1,000 penalty would come to 50 cents an hour. That is much smaller than recent increases in the minimum wage which have not been associated with any job loss according to a number of academic studies. Therefore, we might conclude that Samuelson’s concerns about the ACA causing job loss have little foundation outside of Washington Postland.
However there is still the issue of gaming the system. Some employers will undoubtedly be happy to save themselves $2,000 by reducing their workers’ hours from just over 30 per week to just under 30 per week. This would be bad news for workers at low-paying jobs who likely need these hours.
While Samuelson wants to throw up his hands and say we therefore should get rid of Obamacare, more serious people would say that we could look to amend the bill to have the penalties based on hours worked rather than the number of full-time workers. This provision on full-time workers was put in place by an amendment to the Senate bill. The original House bill had a more reasonable provision and it would not be difficult to design an amendment that did not base penalties on the number of full-time workers, but rather total hours worked. For those familiar with arithmetic, such calculations are not difficult.
There is another important point on this topic that Samuelson apparently missed. Historically insurance was provided as a per worker benefit, making it a fixed overhead cost. (It is increasingly common for employers to pro-rate its payment for insurance based on hours worked, but this practice is still the exception.) This meant that employers would rather have workers put in longer workweeks, possibly even paying an overtime premium, rather than hiring additional workers and paying for health insurance.
This is a major distortion of the labor market from the current system. It is undoubtedly one reason that full-time workers in the United States put in 20 percent more hours a year on average than do workers in western Europe. The notion that we somehow have a perfect labor market now, into which the ACA will introduce distortions, is absurd on its face.
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Almost five years after the start of the recession we still have close to 25 million people who are unemployed, underemployed, or who have given up work altogether. Given that this is ruining the lives of millions of workers and their children we might think that this is the country’s most important problem. Fortunately, we have National Public Radio (NPR) to set us straight.
NPR presented a segment this morning that is largely based on the views of Nariman Behravesh, the chief economist of the forecasting firm IHS Global Insight and author of Spin-Free Economics: A No-Nonsense, Nonpartisan Guide to Today’s Global Economic Debates. The last part of the segment told listeners:
“But going forward, America’s role in the world will be largely shaped by how well Congress handles the budget deficit problems in coming months, he [Behravesh] said. As other countries, especially in Europe, grapple with the problem of too much government debt, people around the world are looking to the United States for moral leadership, he said.
“If the United States shows that it’s possible for democracies to discipline themselves and control their debts, then its economic and soft power may surge …”
Wow, isn’t that impressive. So Europe, China and the rest of the world will be really impressed if the United States throws even more people out of work as long as it reduces its budget deficit! That’s interesting, had it not been for NPR I never would have known people in the rest of the world thought this way.
It is an especially bizarre way to think since the large budget deficits of the last few years are almost entirely due to the downturn that followed in the wake of the collapse of the housing bubble. The chart below shows the actual deficit for 2007 and the projections for 2008-2012 that the Congressional Budget Office made in January of 2008, before it recognized the impact of the collapse of the housing bubble on the economy. It also shows the actual deficits for these years.
Source: Congressional Budget Office.
As can be seen the deficit was actually quite modest prior to the collapse of the housing bubble and was projected to remain small in the year ahead. In fact, it was projected to turn to a surplus in fiscal year 2012 after the expiration of the Bush tax cuts, although even if the tax cuts had remained in place, the deficits would still have been consistent with a declining debt to GDP ratio.
There were no big new programs that exploded the deficit in 2008 and 2009, rather the collapse of the economy caused tax collections to plunge and spending on transfer payments like unemployment insurance and food stamps to increase. In addition, the one-time spending and tax cuts in the stimulus also added to the deficit. However, there were no substantial permanent changes to underlying tax and spending policies that would have led to permanently larger deficits.
In short, NPR wants its listeners to believe that a deficit that is attributable to a collapsed economy is a bigger problem than the collapsed economy itself. That takes great insight!
[Thanks to Joe Seydl for calling this one to my attention.]
Almost five years after the start of the recession we still have close to 25 million people who are unemployed, underemployed, or who have given up work altogether. Given that this is ruining the lives of millions of workers and their children we might think that this is the country’s most important problem. Fortunately, we have National Public Radio (NPR) to set us straight.
NPR presented a segment this morning that is largely based on the views of Nariman Behravesh, the chief economist of the forecasting firm IHS Global Insight and author of Spin-Free Economics: A No-Nonsense, Nonpartisan Guide to Today’s Global Economic Debates. The last part of the segment told listeners:
“But going forward, America’s role in the world will be largely shaped by how well Congress handles the budget deficit problems in coming months, he [Behravesh] said. As other countries, especially in Europe, grapple with the problem of too much government debt, people around the world are looking to the United States for moral leadership, he said.
“If the United States shows that it’s possible for democracies to discipline themselves and control their debts, then its economic and soft power may surge …”
Wow, isn’t that impressive. So Europe, China and the rest of the world will be really impressed if the United States throws even more people out of work as long as it reduces its budget deficit! That’s interesting, had it not been for NPR I never would have known people in the rest of the world thought this way.
It is an especially bizarre way to think since the large budget deficits of the last few years are almost entirely due to the downturn that followed in the wake of the collapse of the housing bubble. The chart below shows the actual deficit for 2007 and the projections for 2008-2012 that the Congressional Budget Office made in January of 2008, before it recognized the impact of the collapse of the housing bubble on the economy. It also shows the actual deficits for these years.
Source: Congressional Budget Office.
As can be seen the deficit was actually quite modest prior to the collapse of the housing bubble and was projected to remain small in the year ahead. In fact, it was projected to turn to a surplus in fiscal year 2012 after the expiration of the Bush tax cuts, although even if the tax cuts had remained in place, the deficits would still have been consistent with a declining debt to GDP ratio.
There were no big new programs that exploded the deficit in 2008 and 2009, rather the collapse of the economy caused tax collections to plunge and spending on transfer payments like unemployment insurance and food stamps to increase. In addition, the one-time spending and tax cuts in the stimulus also added to the deficit. However, there were no substantial permanent changes to underlying tax and spending policies that would have led to permanently larger deficits.
In short, NPR wants its listeners to believe that a deficit that is attributable to a collapsed economy is a bigger problem than the collapsed economy itself. That takes great insight!
[Thanks to Joe Seydl for calling this one to my attention.]
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That is what readers of his column will conclude when they see him saying:
“Europe is a different story. The bubble years allowed much of Europe to avoid making the kind of structural changes necessary to put its social welfare system on a sustainable fiscal path and reform its labor and product markets. The euro crisis — which is both a banking crisis and a sovereign debt crisis — has forced Europeans to begin addressing those issues. But the noisy process will take years to complete, if for no other reason than it requires Europeans to accept, at least in the short run, a lower standard of living.”
Of course this is completely wrong. The countries with the well developed welfare states, Germany, Denmark, Sweden, the Netherlands are doing fine. The countries that are in crisis, Spain, Greece, Portugal, Ireland, have the least developed welfare states among the older EU countries. Also, there is nothing about the crisis that requires Europe on the whole to have a lower standard of living. In fact, the best resolution of the crisis involves Germans seeing higher wages and a higher standard of living. While this may imply a modest relative decline in the standard of living of the crisis countries (imports from Germany would cost more), it would lead a greatly improved standard of living from current levels.
That is what readers of his column will conclude when they see him saying:
“Europe is a different story. The bubble years allowed much of Europe to avoid making the kind of structural changes necessary to put its social welfare system on a sustainable fiscal path and reform its labor and product markets. The euro crisis — which is both a banking crisis and a sovereign debt crisis — has forced Europeans to begin addressing those issues. But the noisy process will take years to complete, if for no other reason than it requires Europeans to accept, at least in the short run, a lower standard of living.”
Of course this is completely wrong. The countries with the well developed welfare states, Germany, Denmark, Sweden, the Netherlands are doing fine. The countries that are in crisis, Spain, Greece, Portugal, Ireland, have the least developed welfare states among the older EU countries. Also, there is nothing about the crisis that requires Europe on the whole to have a lower standard of living. In fact, the best resolution of the crisis involves Germans seeing higher wages and a higher standard of living. While this may imply a modest relative decline in the standard of living of the crisis countries (imports from Germany would cost more), it would lead a greatly improved standard of living from current levels.
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This little factoid would have been worth including in a front page Washington Post news article reporting business executives’ expressed concerns about the end of the year budget situation. The article tells readers that the executives warned of dire consequences, including another debt downgrade and higher interest rates on government bonds, if the budget situation is not resolved quickly. An early resolution is more likely to leave the Bush tax cuts for the wealthy in place, since it would be easier politically to extend them before the end of the year than to reinstate them after they expire on January 1.
Since these executives have a large personal stake in how the tax battles are resolved it would have been appropriate to remind readers of that fact. It is possible that this could influence what they say on the topic. The Post would usually make a point of noting much smaller and more indirect conflicts of interest.
This little factoid would have been worth including in a front page Washington Post news article reporting business executives’ expressed concerns about the end of the year budget situation. The article tells readers that the executives warned of dire consequences, including another debt downgrade and higher interest rates on government bonds, if the budget situation is not resolved quickly. An early resolution is more likely to leave the Bush tax cuts for the wealthy in place, since it would be easier politically to extend them before the end of the year than to reinstate them after they expire on January 1.
Since these executives have a large personal stake in how the tax battles are resolved it would have been appropriate to remind readers of that fact. It is possible that this could influence what they say on the topic. The Post would usually make a point of noting much smaller and more indirect conflicts of interest.
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