It’s often said that in Washington an intellectual is someone who discovers what everyone else has known for two decades. Hence we get Phillip Longman’s extremely confused piece in the Washington Monthly.
Ostensibly the piece is explaining how we got to a situation where tens of millions of baby boomers and Gen-Xers face retirement with almost nothing other than their Social Security and Medicare. However it detours to stop almost everywhere along the way, starting with the end of the baby boom. Somehow slower population growth is bad news, although it is difficult to see why. Do you feel the need for more traffic congestion, greenhouse gas emissions, more crowded parks and beaches? Do we have labor shortages? Yes, Social Security taxes might be 1-2 percentage points higher than if baby boom birthrates had continued in perpetuity, but if this is the biggest problem the country faces then we are in way better shape than it seems.
Then we get a visit to the 401(k) world which Longman does not quite get right. The 401(k) was sold as a supplement to traditional pensions. The idea was that many workers did not have defined benefit pensions, so the 401(k) was presented as a way that they too could save for retirement. It was not presented to Congress or the public as the replacement that it eventually became.
Of course people were ripped off in the fees for these plans, a point that some of us have been making for two decades. They also got caught up in the stock bubble. Yes, this was also a point that many of us made at the time. When people thought the stock market would just keep rising (an assumption that was explicit in all the privatization proposals put forward in the 90s, including Clinton’s plan to put Social Security money in the stock market), they did not save enough. They got killed when the market crashed.
They also foolishly listened to experts like Alan Greenspan who told them in the last decade that house prices would just keep rising. This meant that they did not save because their house was doing it for them.
Now they are hitting retirement with nothing. Longman says he doesn’t know what to do. Well there is no shortage of proposals for publicly managed pension plans that could even have a defined benefit. Getting the dollar down to a more competitive level could create millions of new manufacturing jobs, hugely improving the state of the labor market. It should not be that hard to fix our health care system, every other country has done it. If our leaders are not up to the task, we can always go the trade route.
Okay, Phillip Longman tells us he doesn’t know any answers. That is perhaps not surprising since he apparently never saw any of these problems coming, but that really should not bother the rest of us.
Addendum:
This piece is actually part of a Washington Monthly symposium that contains many ideas that are well worth considering.
It’s often said that in Washington an intellectual is someone who discovers what everyone else has known for two decades. Hence we get Phillip Longman’s extremely confused piece in the Washington Monthly.
Ostensibly the piece is explaining how we got to a situation where tens of millions of baby boomers and Gen-Xers face retirement with almost nothing other than their Social Security and Medicare. However it detours to stop almost everywhere along the way, starting with the end of the baby boom. Somehow slower population growth is bad news, although it is difficult to see why. Do you feel the need for more traffic congestion, greenhouse gas emissions, more crowded parks and beaches? Do we have labor shortages? Yes, Social Security taxes might be 1-2 percentage points higher than if baby boom birthrates had continued in perpetuity, but if this is the biggest problem the country faces then we are in way better shape than it seems.
Then we get a visit to the 401(k) world which Longman does not quite get right. The 401(k) was sold as a supplement to traditional pensions. The idea was that many workers did not have defined benefit pensions, so the 401(k) was presented as a way that they too could save for retirement. It was not presented to Congress or the public as the replacement that it eventually became.
Of course people were ripped off in the fees for these plans, a point that some of us have been making for two decades. They also got caught up in the stock bubble. Yes, this was also a point that many of us made at the time. When people thought the stock market would just keep rising (an assumption that was explicit in all the privatization proposals put forward in the 90s, including Clinton’s plan to put Social Security money in the stock market), they did not save enough. They got killed when the market crashed.
They also foolishly listened to experts like Alan Greenspan who told them in the last decade that house prices would just keep rising. This meant that they did not save because their house was doing it for them.
Now they are hitting retirement with nothing. Longman says he doesn’t know what to do. Well there is no shortage of proposals for publicly managed pension plans that could even have a defined benefit. Getting the dollar down to a more competitive level could create millions of new manufacturing jobs, hugely improving the state of the labor market. It should not be that hard to fix our health care system, every other country has done it. If our leaders are not up to the task, we can always go the trade route.
Okay, Phillip Longman tells us he doesn’t know any answers. That is perhaps not surprising since he apparently never saw any of these problems coming, but that really should not bother the rest of us.
Addendum:
This piece is actually part of a Washington Monthly symposium that contains many ideas that are well worth considering.
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A Washington Post article referred to “$85 million in government loans to GM and Chrysler in 2009.” Oh well, no one gets everything right.
Addendum:
Of course this is a typo, but one that an editor should have quickly caught. However it is worth pointing out that if the Post had the habit of expressing numbers in a way that made them meaningful to readers, it is unlikely they would have missed this one. Specifically, if they described the number as a share of the budget (@ 2.4 percent, if written correctly), it would likely have caught their attention if they had written it as 0.0024 percent of federal spending.
Obviously the Post is not alone in writing out big numbers that are meaningless to 99 percent of their readers. This is the standard practice in reporting. However it really amounts to a silly fraternity ritual. The job of reporters is to provide information to their audience and this does not do it and they know it. I have never found a reporter who could tell me with a straight face that when they write that we are spending $210 billion on transportation over the next six years that this number has any meaning to their readers.
A Washington Post article referred to “$85 million in government loans to GM and Chrysler in 2009.” Oh well, no one gets everything right.
Addendum:
Of course this is a typo, but one that an editor should have quickly caught. However it is worth pointing out that if the Post had the habit of expressing numbers in a way that made them meaningful to readers, it is unlikely they would have missed this one. Specifically, if they described the number as a share of the budget (@ 2.4 percent, if written correctly), it would likely have caught their attention if they had written it as 0.0024 percent of federal spending.
Obviously the Post is not alone in writing out big numbers that are meaningless to 99 percent of their readers. This is the standard practice in reporting. However it really amounts to a silly fraternity ritual. The job of reporters is to provide information to their audience and this does not do it and they know it. I have never found a reporter who could tell me with a straight face that when they write that we are spending $210 billion on transportation over the next six years that this number has any meaning to their readers.
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While the source is not clear, someone developed a simple way to identify incompetent news reporters. If you hear a reporter ask people in President Obama’s administration, ideally in a belligerent tone, “are the American people better off than they were four years ago?,”the reporter is trying to tell you that they are not qualified to do their job.
The reason we know that the questioners are incompetent reporters is that this is a pointless question. Suppose your house is on fire and the firefighters race to the scene. They set up their hoses and start spraying water on the blaze as quickly as possible. After the fire is put out, the courageous news reporter on the scene asks the chief firefighter, “is the house in better shape than when you got here?”
Yes, that would be a really ridiculous question. Hence George Stephanopoulos was being absurd when he posed this question to David Plouffe, a top political adviser to President Obama on ABC’s This Week. Bob Schieffer was being equally silly when he asked Martin O’Malley, the Chairman of the Democratic Governors Association, the same question on CBS’s Face the Nation.
A serious reporter asks the fire chief if he had brought a large enough crew, if they had enough hoses, if the water pressure was sufficient. That might require some minimal knowledge of how to put out fires.
Similarly, serious reporters would ask whether the stimulus was large enough, was it well-designed, and were there other measures that could have been taken like promoting shorter workweeks, as Germany has done. That would of course require some knowledge of economics, but it sure makes more sense than asking if a house is better off after it was nearly burnt to the ground.
[Typo corrected 9-4-12]
While the source is not clear, someone developed a simple way to identify incompetent news reporters. If you hear a reporter ask people in President Obama’s administration, ideally in a belligerent tone, “are the American people better off than they were four years ago?,”the reporter is trying to tell you that they are not qualified to do their job.
The reason we know that the questioners are incompetent reporters is that this is a pointless question. Suppose your house is on fire and the firefighters race to the scene. They set up their hoses and start spraying water on the blaze as quickly as possible. After the fire is put out, the courageous news reporter on the scene asks the chief firefighter, “is the house in better shape than when you got here?”
Yes, that would be a really ridiculous question. Hence George Stephanopoulos was being absurd when he posed this question to David Plouffe, a top political adviser to President Obama on ABC’s This Week. Bob Schieffer was being equally silly when he asked Martin O’Malley, the Chairman of the Democratic Governors Association, the same question on CBS’s Face the Nation.
A serious reporter asks the fire chief if he had brought a large enough crew, if they had enough hoses, if the water pressure was sufficient. That might require some minimal knowledge of how to put out fires.
Similarly, serious reporters would ask whether the stimulus was large enough, was it well-designed, and were there other measures that could have been taken like promoting shorter workweeks, as Germany has done. That would of course require some knowledge of economics, but it sure makes more sense than asking if a house is better off after it was nearly burnt to the ground.
[Typo corrected 9-4-12]
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Okay, some cheap WAPO bashing this morning, an article on Bernanke’s speech at Jackson Hole, described a rate of job growth of 150,000 a month or more as “robust.” Sorry, that isn’t close to right.
The economy is down by more than 9.5 million jobs from its trend path. We need roughly 100,000 jobs per month to keep pace with the growth of the labor force. This means that at 150,000 jobs per month, we are making up the jobs shortfall at the rate of 50,000 a month. At this pace it will take us close to 16 years to get back to the economy’s trend job growth path. A rate of job creation that gets us to full employment in 2028 is not robust.
For the young’uns out there, or those with bad memories we created 250,000 jobs per month over the last four years of the Clinton administration, and that was starting with an unemployment rate below 6.0 percent. We should not subject our economic policymakers to the soft bigotry of low expectations.
Okay, some cheap WAPO bashing this morning, an article on Bernanke’s speech at Jackson Hole, described a rate of job growth of 150,000 a month or more as “robust.” Sorry, that isn’t close to right.
The economy is down by more than 9.5 million jobs from its trend path. We need roughly 100,000 jobs per month to keep pace with the growth of the labor force. This means that at 150,000 jobs per month, we are making up the jobs shortfall at the rate of 50,000 a month. At this pace it will take us close to 16 years to get back to the economy’s trend job growth path. A rate of job creation that gets us to full employment in 2028 is not robust.
For the young’uns out there, or those with bad memories we created 250,000 jobs per month over the last four years of the Clinton administration, and that was starting with an unemployment rate below 6.0 percent. We should not subject our economic policymakers to the soft bigotry of low expectations.
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That is the only conclusion that readers of David Brooks’ column could reach. After all, he tells us:
“Today’s Republican Party unabashedly celebrates this ambition and definition of success. Speaker after speaker at the convention in Tampa, Fla., celebrated the striver, who started small, struggled hard, looked within and became wealthy. …
Republicans promised to get government out of the way. Reduce the burden of debt. Offer Americans an open field and a fair chance to let their ambition run.”
He then adds:
“On the one hand, you see the Republicans taking the initiative, offering rejuvenating reform. On the other hand, you see an exhausted Democratic Party, which says: We don’t have an agenda, but we really don’t like theirs. Given these options, the choice is pretty clear.”
If Brooks was as old as he looks he would remember that back in 1980 Ronald Reagan promised to cut taxes and get government out of the way. However he must not be old enough to have been following politics way back then.
Of course if Brooks was as old as he looked, he certainly would be able to remember back to 2000, when George W. Bush promised to cut taxes and get government out of the way. However Brooks must not be old enough to have been following politics back in 2000 either.
If he were old enough to remember Reagan, or at least Bush, he would realize that Governor Romney and Representative Ryan are simply rehashing tired old rhetoric about individuals striving to succeed and how this benefits everyone. He would remember that we tried their route. The 1980s we had what was at the time the slowest decade of growth since the Great Depression, and the growth we had overwhelmingly went to those at the top. Workers in the middle and bottom of the distribution saw their wages stagnate.
We then went the same route in the last decade. This led to a completely lost decade for the economy, with the worst downturn since the Great Depression (which happened before President Obama took office).
While it is certainly fair to blame the Democrats for not being full of creative ideas, the reason that we are facing the economic disaster we now have is due to the fact that we followed the path that Romney and Ryan are now pushing. If Brooks were as old as he looks he could be blamed for having so little knowledge of the country’s recent political history, but this young man will just have to do a bit more homework so that he can recognize rehashed rhetoric and old tired ideas.
That is the only conclusion that readers of David Brooks’ column could reach. After all, he tells us:
“Today’s Republican Party unabashedly celebrates this ambition and definition of success. Speaker after speaker at the convention in Tampa, Fla., celebrated the striver, who started small, struggled hard, looked within and became wealthy. …
Republicans promised to get government out of the way. Reduce the burden of debt. Offer Americans an open field and a fair chance to let their ambition run.”
He then adds:
“On the one hand, you see the Republicans taking the initiative, offering rejuvenating reform. On the other hand, you see an exhausted Democratic Party, which says: We don’t have an agenda, but we really don’t like theirs. Given these options, the choice is pretty clear.”
If Brooks was as old as he looks he would remember that back in 1980 Ronald Reagan promised to cut taxes and get government out of the way. However he must not be old enough to have been following politics way back then.
Of course if Brooks was as old as he looked, he certainly would be able to remember back to 2000, when George W. Bush promised to cut taxes and get government out of the way. However Brooks must not be old enough to have been following politics back in 2000 either.
If he were old enough to remember Reagan, or at least Bush, he would realize that Governor Romney and Representative Ryan are simply rehashing tired old rhetoric about individuals striving to succeed and how this benefits everyone. He would remember that we tried their route. The 1980s we had what was at the time the slowest decade of growth since the Great Depression, and the growth we had overwhelmingly went to those at the top. Workers in the middle and bottom of the distribution saw their wages stagnate.
We then went the same route in the last decade. This led to a completely lost decade for the economy, with the worst downturn since the Great Depression (which happened before President Obama took office).
While it is certainly fair to blame the Democrats for not being full of creative ideas, the reason that we are facing the economic disaster we now have is due to the fact that we followed the path that Romney and Ryan are now pushing. If Brooks were as old as he looks he could be blamed for having so little knowledge of the country’s recent political history, but this young man will just have to do a bit more homework so that he can recognize rehashed rhetoric and old tired ideas.
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The NYT notes that the new jobs being created in the upturn tend to be low-paying jobs. This is not surprising. The jobs that are created in large part reflect the state of the labor market. No one will work the midnight shift at the local 7-11 for the minimum wage if they have the opportunity to get relatively good paying jobs in manufacturing, construction, or health care.
High unemployment leads to lower wages for most workers both by lowering the wages in their jobs and leading to a mix that has more lower paying jobs than would be the case if the economy was near full employment. (This was the point of my book with Jared Bernstein, The Benefits of Full Employment.)
High unemployment tends to have less effect on the most highly educated workers since few doctors and lawyers are laid off when the economy goes into recession. (Although this downturn may have had some downward effect even on the wages of lawyers.) This is why macroeconomic policy has to be very much understood as a class biased policy. When the ineptitude of the Fed allowed the housing bubble to grow to incredibly dangerous proportions, it was the livelihoods of tens of millions low and middle-income workers that were being put at risk, along with their savings, which were overwhelmingly in their homes.
In the same vein, the Fed’s new commitment to target 2.0 percent inflation, implicitly at the cost of higher unemployment, is a promise to throw low and middle class people out of work in order to put downward pressure on their wages to keep inflation from rising above its target level. The impact of this policy is likely to dwarf the impact of federal tax policy in its impact on most non-rich Americans.
The NYT notes that the new jobs being created in the upturn tend to be low-paying jobs. This is not surprising. The jobs that are created in large part reflect the state of the labor market. No one will work the midnight shift at the local 7-11 for the minimum wage if they have the opportunity to get relatively good paying jobs in manufacturing, construction, or health care.
High unemployment leads to lower wages for most workers both by lowering the wages in their jobs and leading to a mix that has more lower paying jobs than would be the case if the economy was near full employment. (This was the point of my book with Jared Bernstein, The Benefits of Full Employment.)
High unemployment tends to have less effect on the most highly educated workers since few doctors and lawyers are laid off when the economy goes into recession. (Although this downturn may have had some downward effect even on the wages of lawyers.) This is why macroeconomic policy has to be very much understood as a class biased policy. When the ineptitude of the Fed allowed the housing bubble to grow to incredibly dangerous proportions, it was the livelihoods of tens of millions low and middle-income workers that were being put at risk, along with their savings, which were overwhelmingly in their homes.
In the same vein, the Fed’s new commitment to target 2.0 percent inflation, implicitly at the cost of higher unemployment, is a promise to throw low and middle class people out of work in order to put downward pressure on their wages to keep inflation from rising above its target level. The impact of this policy is likely to dwarf the impact of federal tax policy in its impact on most non-rich Americans.
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The United States doesn’t understand much about free markets. If it did, people here would realize that patents and copyrights are big government, not the free market. China is trying to teach this lesson to Apple. As the Post reports, a Chinese firm is filing a patent infringement lawsuit against Apple.
This is undoubtedly the first of many such suits. Strong patent laws are likely to create many high-paying jobs for lawyers, however they are almost certainly an impediment to innovation in the 21st century. Unfortunately, because protectionists so completely dominate public debate, fundamental reform of patent policy is not even being considered by leading political figures in either political party.
The United States doesn’t understand much about free markets. If it did, people here would realize that patents and copyrights are big government, not the free market. China is trying to teach this lesson to Apple. As the Post reports, a Chinese firm is filing a patent infringement lawsuit against Apple.
This is undoubtedly the first of many such suits. Strong patent laws are likely to create many high-paying jobs for lawyers, however they are almost certainly an impediment to innovation in the 21st century. Unfortunately, because protectionists so completely dominate public debate, fundamental reform of patent policy is not even being considered by leading political figures in either political party.
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A lengthy NYT Magazine piece reports on the increasing number of couples where the women earns more than the man. It notes that one reason is that women are graduating college in higher numbers. At one point it presents the views of Michael Greenstone, an economist at M.I.T. and director of the Hamilton Project:
“An important long-term issue is that men are not doing as well as women in keeping up with the demands of the global economy. … It’s a first-order mystery for social scientists, why women have more clearly heard the message that the economy has changed and men have such a hard time hearing it or responding.”
Actually it is not as much of a mystery to people who know the data. There is considerable wage dispersion for both men with college degrees and men with just high school degrees. As a result, even though on average college grads earn much more than men with just a high school degree, there are many men with college degrees who earn less than people with just high school degrees. My colleague John Schmitt and Heather Boushey found that in 2009, 20 percent of recent college grads earned less than the average high school graduate.
Stepping back a bit, it is likely that the marginal high school grad, who is debating going to college, would be near the top of the wage distribution for people with just high school degrees. On the other hand, if they were to go to college, they would likely be towards the bottom of the distribution of people with college degrees. Given the expense and opportunity cost of going to college, it might be a very reasonable decision for this person not to opt to go to college.
If the NYT had found someone more familiar with the data, they could have explained this point to readers.
A lengthy NYT Magazine piece reports on the increasing number of couples where the women earns more than the man. It notes that one reason is that women are graduating college in higher numbers. At one point it presents the views of Michael Greenstone, an economist at M.I.T. and director of the Hamilton Project:
“An important long-term issue is that men are not doing as well as women in keeping up with the demands of the global economy. … It’s a first-order mystery for social scientists, why women have more clearly heard the message that the economy has changed and men have such a hard time hearing it or responding.”
Actually it is not as much of a mystery to people who know the data. There is considerable wage dispersion for both men with college degrees and men with just high school degrees. As a result, even though on average college grads earn much more than men with just a high school degree, there are many men with college degrees who earn less than people with just high school degrees. My colleague John Schmitt and Heather Boushey found that in 2009, 20 percent of recent college grads earned less than the average high school graduate.
Stepping back a bit, it is likely that the marginal high school grad, who is debating going to college, would be near the top of the wage distribution for people with just high school degrees. On the other hand, if they were to go to college, they would likely be towards the bottom of the distribution of people with college degrees. Given the expense and opportunity cost of going to college, it might be a very reasonable decision for this person not to opt to go to college.
If the NYT had found someone more familiar with the data, they could have explained this point to readers.
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Most of the media have been doing fluff pieces on Representative Ryan ever since he was announced as Governor Romney’s pick for his VP candidate. (My favorite is this Post piece which waxes eloquently on his use of the word “baseline.”) Just in case any reporters decide to do any real reporting, I’d suggest they try taking issue with his account of the crushing debt burden that we are passing on to our children.
Representative Ryan seems impressed by big numbers (i.e. trillions), but seems to have difficulty with simple concepts. If we look at the ratio of our interest burden as share of GDP, it is close to 1.5 percent. This is near its low point for the post-war era.
Source: Congressional Budget Office.
In other words, instead of having a burden that is at a record high, the interest burden that we are now facing is near a post-war low. How can a budget wonk be so far from reality?
In fact, if we factor in the $80 billion in interest earnings that the Fed is refunding to the Treasury each year, the net interest burden is only about 1.0 percent of GDP, its lowest level since World War II.
There is one other item that should have caught the attention of reporters. Ryan hyped the fact that one of the major rating agencies downgraded the debt of the U.S. government. (The other two did not.) However the financial markets have been willing to lend the United States trillions of dollars at the lowest interest rate since World War II.
What sort of Ayn Rand follower takes the judgement of the bureaucrats and accountants in a credit-rating agency over the views of millions of investors putting trillions of dollars of their own money on the line? Let’s face it, Ryan is a wuss.
Most of the media have been doing fluff pieces on Representative Ryan ever since he was announced as Governor Romney’s pick for his VP candidate. (My favorite is this Post piece which waxes eloquently on his use of the word “baseline.”) Just in case any reporters decide to do any real reporting, I’d suggest they try taking issue with his account of the crushing debt burden that we are passing on to our children.
Representative Ryan seems impressed by big numbers (i.e. trillions), but seems to have difficulty with simple concepts. If we look at the ratio of our interest burden as share of GDP, it is close to 1.5 percent. This is near its low point for the post-war era.
Source: Congressional Budget Office.
In other words, instead of having a burden that is at a record high, the interest burden that we are now facing is near a post-war low. How can a budget wonk be so far from reality?
In fact, if we factor in the $80 billion in interest earnings that the Fed is refunding to the Treasury each year, the net interest burden is only about 1.0 percent of GDP, its lowest level since World War II.
There is one other item that should have caught the attention of reporters. Ryan hyped the fact that one of the major rating agencies downgraded the debt of the U.S. government. (The other two did not.) However the financial markets have been willing to lend the United States trillions of dollars at the lowest interest rate since World War II.
What sort of Ayn Rand follower takes the judgement of the bureaucrats and accountants in a credit-rating agency over the views of millions of investors putting trillions of dollars of their own money on the line? Let’s face it, Ryan is a wuss.
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