The NYT had an interesting piece on how a new generation of robots is able to do far more sophisticated tasks in factories and warehouses than earlier generations of robots. The piece repeatedly warns that this new technology could cost large numbers of jobs.
While one outcome of the introduction of this new technology could be the loss of jobs in the economy, that would be due to inept economic policy. What the article is describing is productivity growth. This is exactly what we should want. It allows us to be richer if we work the same number of hours or to be as rich and work fewer hours. We had very rapid productivity growth in the three decades following World War II. It did not lead to unemployment, but rather to rapidly rising living standards for the bulk of the population.
In the last three decades the government has pursued policies that have the effect of redistributing income upward so that the gains from growth are not broadly shared. These policies include a high dollar policy that makes U.S. manufacturing goods less competitive domestically and internationally, a policy of selective protectionism that largely protects the most highly educated professionals (e.g. doctors and lawyers) from foreign competition, and a policy of shifting tens of billions of dollars each year to Wall Street banks through “too big to fail” insurance provided at zero cost by the government.
If this new generation of robots ends up making large segments of the population worse off, it will be the result of deliberate policies. It is not the fault of the robots.
The NYT had an interesting piece on how a new generation of robots is able to do far more sophisticated tasks in factories and warehouses than earlier generations of robots. The piece repeatedly warns that this new technology could cost large numbers of jobs.
While one outcome of the introduction of this new technology could be the loss of jobs in the economy, that would be due to inept economic policy. What the article is describing is productivity growth. This is exactly what we should want. It allows us to be richer if we work the same number of hours or to be as rich and work fewer hours. We had very rapid productivity growth in the three decades following World War II. It did not lead to unemployment, but rather to rapidly rising living standards for the bulk of the population.
In the last three decades the government has pursued policies that have the effect of redistributing income upward so that the gains from growth are not broadly shared. These policies include a high dollar policy that makes U.S. manufacturing goods less competitive domestically and internationally, a policy of selective protectionism that largely protects the most highly educated professionals (e.g. doctors and lawyers) from foreign competition, and a policy of shifting tens of billions of dollars each year to Wall Street banks through “too big to fail” insurance provided at zero cost by the government.
If this new generation of robots ends up making large segments of the population worse off, it will be the result of deliberate policies. It is not the fault of the robots.
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The Washington Post devoted a major front page article to the results of a poll that it sponsored along with the Kaiser Foundation on attitudes of the public to the role of government in the economy. The poll purported to find large divides between most Democrats and Republicans on the proper role of government in the economy and whether people preferred bigger or smaller government.
The piece (presumably following the poll) fundamentally misrepresents the role that the government plays in the economy. It implies that “big government” means a government that taxes and/or spends a great deal, ignoring all the ways in which government interventions determine flows of money that do not involve direct taxation or spending.
To take an obvious example, government granted patent monopolies raise the price of prescription drugs by close to $270 billion a year compared to the free market price. In terms of its impact on the economy and people’s lives this has roughly the same effect as if the government were to raise taxes by $270 billion a year (more than $3 trillion over a decade — keeping pace with the growth of the economy) and use the money to pay drug companies to develop drugs.
Similarly, the high dollar policy that the United States has pursued since the Clinton years has the effect of destroying jobs and lowering wages in sectors of the economy (most importantly manufacturing) that are exposed to international competition. The high dollar policy is a major factor redistributing income from the bulk of the workforce to those who have the political power to largely protect themselves from international competition (e.g. doctors and lawyers).
The government also transfers tens of billions of dollars a year to the financial sector through the “too big to fail” insurance that it provides at no cost to the major Wall Street banks. This governmental support provides the basis for many Wall Street fortunes.
The WAPO piece fundamentally misrepresents the importance of government in the economy by reducing it tax and spending policy. The impacts of these policies are trivial compared with the impact that government policies have in structuring markets. It is simply wrong to imply that a government is “small” by virtue of the fact that it does not tax or spend much compared to the size of the economy.
The Washington Post devoted a major front page article to the results of a poll that it sponsored along with the Kaiser Foundation on attitudes of the public to the role of government in the economy. The poll purported to find large divides between most Democrats and Republicans on the proper role of government in the economy and whether people preferred bigger or smaller government.
The piece (presumably following the poll) fundamentally misrepresents the role that the government plays in the economy. It implies that “big government” means a government that taxes and/or spends a great deal, ignoring all the ways in which government interventions determine flows of money that do not involve direct taxation or spending.
To take an obvious example, government granted patent monopolies raise the price of prescription drugs by close to $270 billion a year compared to the free market price. In terms of its impact on the economy and people’s lives this has roughly the same effect as if the government were to raise taxes by $270 billion a year (more than $3 trillion over a decade — keeping pace with the growth of the economy) and use the money to pay drug companies to develop drugs.
Similarly, the high dollar policy that the United States has pursued since the Clinton years has the effect of destroying jobs and lowering wages in sectors of the economy (most importantly manufacturing) that are exposed to international competition. The high dollar policy is a major factor redistributing income from the bulk of the workforce to those who have the political power to largely protect themselves from international competition (e.g. doctors and lawyers).
The government also transfers tens of billions of dollars a year to the financial sector through the “too big to fail” insurance that it provides at no cost to the major Wall Street banks. This governmental support provides the basis for many Wall Street fortunes.
The WAPO piece fundamentally misrepresents the importance of government in the economy by reducing it tax and spending policy. The impacts of these policies are trivial compared with the impact that government policies have in structuring markets. It is simply wrong to imply that a government is “small” by virtue of the fact that it does not tax or spend much compared to the size of the economy.
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AP has been running a series of widely distributed columns that have been trying to convince readers that the Social Security system is in crisis and is in desperate need of fixing. These pieces have contributed to the misinformation on the topic that has been widely disseminated by wealthy people like Peter Peterson and the Washington Post.
These pieces routinely try to scare the public by expressing the size of the projected Social Security shortfall in large numbers that lack any context. This pattern continues in the last AP column. The article told readers:
“Once Social Security’s surplus is gone, the program is scheduled to pay out $134 trillion more in benefits than it will collect in taxes over the next 75 years, according to data from the agency. Adjusted for inflation, that’s $30.5 trillion in 2012 dollars.”
These are really big numbers and the piece would have provided just as much information to its readers if it substituted the words “really big number” for $134 trillion or $30.5 trillion. Virtually none of the people reading this article has any idea of how large the economy will be over the next 75 years so they have no basis for assessing the size of these numbers.
It is easy to express the projected shortfalls in ways that would be understandable to readers. The Social Security trustees projection of the size of the shortfall is equal to approximately 0.9 percent of GDP over the 75-year planning horizon. The Congressional Budget Office’s projection of the shortfall is equal to approximately 0.5 percent of GDP. Put another way, the shortfall projected by the Trustees could be fully met with a tax increase equal to roughly 5 percent of projected wage growth over the next three decades. It would have been much more informative to use such ratios to express the size of the shortfall, although perhaps somewhat less scary.
The piece is also misleading in its comment:
“But the sooner changes are made, the more subtle they can be because they can be phased in slowly. Each year lawmakers wait, Social Security’s financial problems loom larger and the need for bigger changes becomes greater, according to an analysis by The Associated Press.”
While this is true (if we cut benefits or raise taxes for more people, then the benefit cut or tax increase per person would be less), the article implies that the increase in the projected size of the shortfall from the 2011 Trustees report to the 2012 Trustees report had little to do with waiting. The main reason that there was a sharp increase in the projected shortfall is that the Trustees used more pessimistic assumptions about the program. If the program had been brought into balance based on the 2011 projections, the changes in projections in 2012 would again show the program to be unbalanced. Waiting had nothing to with it.
AP has been running a series of widely distributed columns that have been trying to convince readers that the Social Security system is in crisis and is in desperate need of fixing. These pieces have contributed to the misinformation on the topic that has been widely disseminated by wealthy people like Peter Peterson and the Washington Post.
These pieces routinely try to scare the public by expressing the size of the projected Social Security shortfall in large numbers that lack any context. This pattern continues in the last AP column. The article told readers:
“Once Social Security’s surplus is gone, the program is scheduled to pay out $134 trillion more in benefits than it will collect in taxes over the next 75 years, according to data from the agency. Adjusted for inflation, that’s $30.5 trillion in 2012 dollars.”
These are really big numbers and the piece would have provided just as much information to its readers if it substituted the words “really big number” for $134 trillion or $30.5 trillion. Virtually none of the people reading this article has any idea of how large the economy will be over the next 75 years so they have no basis for assessing the size of these numbers.
It is easy to express the projected shortfalls in ways that would be understandable to readers. The Social Security trustees projection of the size of the shortfall is equal to approximately 0.9 percent of GDP over the 75-year planning horizon. The Congressional Budget Office’s projection of the shortfall is equal to approximately 0.5 percent of GDP. Put another way, the shortfall projected by the Trustees could be fully met with a tax increase equal to roughly 5 percent of projected wage growth over the next three decades. It would have been much more informative to use such ratios to express the size of the shortfall, although perhaps somewhat less scary.
The piece is also misleading in its comment:
“But the sooner changes are made, the more subtle they can be because they can be phased in slowly. Each year lawmakers wait, Social Security’s financial problems loom larger and the need for bigger changes becomes greater, according to an analysis by The Associated Press.”
While this is true (if we cut benefits or raise taxes for more people, then the benefit cut or tax increase per person would be less), the article implies that the increase in the projected size of the shortfall from the 2011 Trustees report to the 2012 Trustees report had little to do with waiting. The main reason that there was a sharp increase in the projected shortfall is that the Trustees used more pessimistic assumptions about the program. If the program had been brought into balance based on the 2011 projections, the changes in projections in 2012 would again show the program to be unbalanced. Waiting had nothing to with it.
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David Leonhardt poses the bizarre question in the headline of a blog post today: “Is Simple Demography Behind Weak Economy?”
There is a simple answer to this simple question, “no.”
The basic story, which is well-known to those who read the monthly employment numbers, or who are unemployed themselves, is a lack of jobs, not a lack of workers. Yes, population growth and therefore labor force growth has slowed. This would imply a lower growth rate of potential GDP. That means that once we have absorbed all the excess labor and the unemployment rate is back down to the 4-5 percent range, we would expect somewhat slower growth going forward.
However, there is no story that passes the laugh test that says that slower population growth explains our inability to employ the existing population. (Let’s see, smaller supply of workers, therefore smaller demand for workers. I must have missed that lecture in my econ classes.)
The annoying part of this story is that it is really hard to understand the mystery that Leonhardt is trying to explain. The housing bubble was generating around $1.2 trillion in demand that disappeared when it collapsed. Half of this was in residential construction and half was in consumption driven by bubble generated home equity. (You can throw in another $100-$200 billion in state and local spending supported by housing bubble generated tax revenue and also the bubble in non-residential real estate.)
This demand is gone now. It cannot be replaced by magic. The budget deficit has filled part of the gap, but there is no mechanism in the private sector that allows it to easily fill this gap in demand. (Can Leonhardt or anyone else identify the missing mechanism?)
In short, this is an effort to create a mystery where there is none. It is annoying because it distracts from serious solutions (spend money, stupid) and it also helps to absolve the dingbats who wrecked the economy of their guilt. The people who failed to see the housing bubble should all be thrown out on their rears and forced to look for work. They messed up as badly as they possibly could and do not deserve to continue to get 6-figure salaries at a time when so many people are suffering from their ungodly incompetence.
[Typos corrected 4:30 P.M. August 19.]
David Leonhardt poses the bizarre question in the headline of a blog post today: “Is Simple Demography Behind Weak Economy?”
There is a simple answer to this simple question, “no.”
The basic story, which is well-known to those who read the monthly employment numbers, or who are unemployed themselves, is a lack of jobs, not a lack of workers. Yes, population growth and therefore labor force growth has slowed. This would imply a lower growth rate of potential GDP. That means that once we have absorbed all the excess labor and the unemployment rate is back down to the 4-5 percent range, we would expect somewhat slower growth going forward.
However, there is no story that passes the laugh test that says that slower population growth explains our inability to employ the existing population. (Let’s see, smaller supply of workers, therefore smaller demand for workers. I must have missed that lecture in my econ classes.)
The annoying part of this story is that it is really hard to understand the mystery that Leonhardt is trying to explain. The housing bubble was generating around $1.2 trillion in demand that disappeared when it collapsed. Half of this was in residential construction and half was in consumption driven by bubble generated home equity. (You can throw in another $100-$200 billion in state and local spending supported by housing bubble generated tax revenue and also the bubble in non-residential real estate.)
This demand is gone now. It cannot be replaced by magic. The budget deficit has filled part of the gap, but there is no mechanism in the private sector that allows it to easily fill this gap in demand. (Can Leonhardt or anyone else identify the missing mechanism?)
In short, this is an effort to create a mystery where there is none. It is annoying because it distracts from serious solutions (spend money, stupid) and it also helps to absolve the dingbats who wrecked the economy of their guilt. The people who failed to see the housing bubble should all be thrown out on their rears and forced to look for work. They messed up as badly as they possibly could and do not deserve to continue to get 6-figure salaries at a time when so many people are suffering from their ungodly incompetence.
[Typos corrected 4:30 P.M. August 19.]
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The normally astute Martin Wolf failed to do his homework for a column yesterday in which he described the deficit reduction plan put forward by Morgan Stanley director Erskine Bowles and former Senator Alan Simpson as “the only politically realistic long-term fiscal solution.”
Actually there is a much politically viable solution: do nothing. Yes, this will make the deficit hawks at the Washington Post and other such places yell and scream, but it is both politically viable and economically solid. Unlike Bowles-Simpson, the do-nothing plan would not further slow the economy. (Remember, Bowles-Simpson as originally designed would have begun deficit reduction on October 1, 2011.) The do-nothing plan is obviously politically viable since it is currently what we are doing, more or less. (We’ll have to see how the end of 2012 issues get resolved.)
The economic reality is that we face no urgency to do anything on the deficit. We will undoubtedly need some additional revenues over the longer term, in addition to reversing the Bush tax cuts for the richest 2 percent, but it is possible that other better solutions will become politically viable, for example a Wall Street speculation tax that would hit big banks like the one where Mr. Bowles serves as a director. (It’s funny how they never considered taxing Wall Street.)
It’s also possible that we will fix the health care system so it doesn’t take an absurdly large share of GDP. That would require that folks like the insurers, drug companies and doctors take a hit, but it is principle possible that we could see enough political pressure in the future that this tiny elite is forced to take the hit rather than tens of millions of seniors living on $20,000 a year.
The normally astute Martin Wolf failed to do his homework for a column yesterday in which he described the deficit reduction plan put forward by Morgan Stanley director Erskine Bowles and former Senator Alan Simpson as “the only politically realistic long-term fiscal solution.”
Actually there is a much politically viable solution: do nothing. Yes, this will make the deficit hawks at the Washington Post and other such places yell and scream, but it is both politically viable and economically solid. Unlike Bowles-Simpson, the do-nothing plan would not further slow the economy. (Remember, Bowles-Simpson as originally designed would have begun deficit reduction on October 1, 2011.) The do-nothing plan is obviously politically viable since it is currently what we are doing, more or less. (We’ll have to see how the end of 2012 issues get resolved.)
The economic reality is that we face no urgency to do anything on the deficit. We will undoubtedly need some additional revenues over the longer term, in addition to reversing the Bush tax cuts for the richest 2 percent, but it is possible that other better solutions will become politically viable, for example a Wall Street speculation tax that would hit big banks like the one where Mr. Bowles serves as a director. (It’s funny how they never considered taxing Wall Street.)
It’s also possible that we will fix the health care system so it doesn’t take an absurdly large share of GDP. That would require that folks like the insurers, drug companies and doctors take a hit, but it is principle possible that we could see enough political pressure in the future that this tiny elite is forced to take the hit rather than tens of millions of seniors living on $20,000 a year.
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The NYT ran a promotion for Representative Paul Ryan as a news story. The piece did not include a single critical comment from any of the people interviewed.
This is truly remarkable since many of Ryan proposals would add enormous costs to the economy and/or don’t seem to add up. For example, according to the Congressional Budget Office’s projections, his 2011 Medicare proposal would have increased the cost to the country of providing Medicare equivalent insurance policies by $34 trillion over Medicare’s 75-year planning period. His proposal for Social Security privatization would have added tens of billions of dollars annually to the administrative costs of Social Security.
In addition, his latest Medicare plan claims to save the same $750 billion over the next decade in Medicare as President Obama, but it does not include any of the cost control provisions. (Ryan says that he will repeal the Affordable Care Act.) He also has a budget that projects that government spending outside of Social Security and health care will be reduced to 3.75 percent of GDP by 2050. This is less than current spending on the military, which Representative Ryan claims he wants to maintain at or above current levels. This implies that he wants to eliminate the rest of the federal government, if it is taken seriously.
If it was not possible to find any conservatives who care about needless economic waste or blatant errors in arithmetic, the NYT should have found people with a different ideological perspective who could have made these points. Newspapers are not supposed to be used for fluff pieces for candidates, these are supposed to be written by their campaigns.
Addendum: Paul Ryan could not even figure out that it did not make sense to blame President Obama for the closure of a large GM plant in his district that took place while President Bush was still in the White House. Is this what passes as an “intellectual” in conservative circles?
The NYT ran a promotion for Representative Paul Ryan as a news story. The piece did not include a single critical comment from any of the people interviewed.
This is truly remarkable since many of Ryan proposals would add enormous costs to the economy and/or don’t seem to add up. For example, according to the Congressional Budget Office’s projections, his 2011 Medicare proposal would have increased the cost to the country of providing Medicare equivalent insurance policies by $34 trillion over Medicare’s 75-year planning period. His proposal for Social Security privatization would have added tens of billions of dollars annually to the administrative costs of Social Security.
In addition, his latest Medicare plan claims to save the same $750 billion over the next decade in Medicare as President Obama, but it does not include any of the cost control provisions. (Ryan says that he will repeal the Affordable Care Act.) He also has a budget that projects that government spending outside of Social Security and health care will be reduced to 3.75 percent of GDP by 2050. This is less than current spending on the military, which Representative Ryan claims he wants to maintain at or above current levels. This implies that he wants to eliminate the rest of the federal government, if it is taken seriously.
If it was not possible to find any conservatives who care about needless economic waste or blatant errors in arithmetic, the NYT should have found people with a different ideological perspective who could have made these points. Newspapers are not supposed to be used for fluff pieces for candidates, these are supposed to be written by their campaigns.
Addendum: Paul Ryan could not even figure out that it did not make sense to blame President Obama for the closure of a large GM plant in his district that took place while President Bush was still in the White House. Is this what passes as an “intellectual” in conservative circles?
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A New York Times article on “Europe’s lost decade” could have easily had a headline like this. The piece talks about the high unemployment and weak growth across the euro zone, but never notes the obvious cause, major cutbacks in government spending and tax increases. The predicted result of such austerity measures is a contraction in demand.
This is even more likely to be the outcome of austerity in the euro zone than in the United States, since the private sector is a smaller share of the economy. (If the private sector is two-thirds of the economy, then it must expand by 1.5 percent to make up a 1 percentage point drop in GDP. If it’s 50 percent of the economy, then it has to grow by 2.0 percent to make up for a 1 percent drop in GDP.)
At one point the article implies that austerity would somehow help to promote growth, telling readers:
“Leaders in Brussels and European capitals have pledged to improve budgetary discipline, remove government obstacles to growth and strengthen the banking system by establishing a common regulator at the E.C.B.”
This one seems to be telling us that further budget cuts (i.e. “budgetary discipline”) would somehow boost demand.
Only at the very end of the article does the piece acknowledge that deficit reduction could be hurting growth:
“Some of the decline in euro zone economic output reflects lower government spending, as political leaders struggle to cut national deficits.”
Really?
A New York Times article on “Europe’s lost decade” could have easily had a headline like this. The piece talks about the high unemployment and weak growth across the euro zone, but never notes the obvious cause, major cutbacks in government spending and tax increases. The predicted result of such austerity measures is a contraction in demand.
This is even more likely to be the outcome of austerity in the euro zone than in the United States, since the private sector is a smaller share of the economy. (If the private sector is two-thirds of the economy, then it must expand by 1.5 percent to make up a 1 percentage point drop in GDP. If it’s 50 percent of the economy, then it has to grow by 2.0 percent to make up for a 1 percent drop in GDP.)
At one point the article implies that austerity would somehow help to promote growth, telling readers:
“Leaders in Brussels and European capitals have pledged to improve budgetary discipline, remove government obstacles to growth and strengthen the banking system by establishing a common regulator at the E.C.B.”
This one seems to be telling us that further budget cuts (i.e. “budgetary discipline”) would somehow boost demand.
Only at the very end of the article does the piece acknowledge that deficit reduction could be hurting growth:
“Some of the decline in euro zone economic output reflects lower government spending, as political leaders struggle to cut national deficits.”
Really?
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The WAPO has a nicely graphed blog post telling us that there was no recession for college grads. It shows that employment for college grads has risen at a strong pace since the start of the recovery and is well above its pre- recession level. The problem is that we need a denominator in this story. (This seems to be a recurring problem at the WAPO, like when they tell us about the multi-trillion dollar shortfall projected for Social Security without pointing out that it is equal to around 0.6 percent of future GDP.) Anyhow fans of fractions can see that there was in fact a serious recession for college grads which still lingers today. As the graph shows, the unemployment rate for college grads rose from less than 2.0 percent before the downturn to a peak of more than 5.0 percent in 2009. Currently it is hovering near 4.0 percent, more than twice its pre-recession level.
Unemployment Rate for People With at Least a College Degree
Source: Bureau of Labor Statistics.
So how do we get a doubling of unemployment at a time when college grads are scooping up millions of new jobs? Yes folks, this is where our old friend the denominator comes in. It seems that there has been an even more rapid rise in the number of college grads in the labor force over the last five years as shown below.
People with a College Degree or Higher in the Labor Force
Source: Bureau of Labor Statistics.
So even though college grads were getting more jobs, they were not getting them at a fast enough pace to keep up with the growth in the number of college grads in the labor force. Just to be clear, college grads were still doing well in the scheme of things. Here’s the picture for those at the other end of the educational spectrum, people without high school degrees.
Unemployment Rate for People with Less than a High School Degree
Source: Bureau of Labor Statistics.
As can be seen unemployment also doubled for people with less than a high school degree, but the starting point was much higher at close to 7.0 percent. In fact, this rise in unemployment understates the true impact of the downturn, since many people without high school degrees simply left the labor force as a result of their bleak job prospects. (This undoubtedly happened with some college grads too, but the effect was likely much smaller.)
The moral of this story is that the recession has hit everyone. This is important because some folks could be led to believe from this employment story that the problem is that we just need more people to get college degrees and then they will be able to find good paying jobs. However, when we bring in our old friend the denominator we can see that this is not true. The problem is simply a lack of demand in the economy. Education helps in a downturn as it does during normal times, but even the most highly educated workers are getting whacked by this recession.
The WAPO has a nicely graphed blog post telling us that there was no recession for college grads. It shows that employment for college grads has risen at a strong pace since the start of the recovery and is well above its pre- recession level. The problem is that we need a denominator in this story. (This seems to be a recurring problem at the WAPO, like when they tell us about the multi-trillion dollar shortfall projected for Social Security without pointing out that it is equal to around 0.6 percent of future GDP.) Anyhow fans of fractions can see that there was in fact a serious recession for college grads which still lingers today. As the graph shows, the unemployment rate for college grads rose from less than 2.0 percent before the downturn to a peak of more than 5.0 percent in 2009. Currently it is hovering near 4.0 percent, more than twice its pre-recession level.
Unemployment Rate for People With at Least a College Degree
Source: Bureau of Labor Statistics.
So how do we get a doubling of unemployment at a time when college grads are scooping up millions of new jobs? Yes folks, this is where our old friend the denominator comes in. It seems that there has been an even more rapid rise in the number of college grads in the labor force over the last five years as shown below.
People with a College Degree or Higher in the Labor Force
Source: Bureau of Labor Statistics.
So even though college grads were getting more jobs, they were not getting them at a fast enough pace to keep up with the growth in the number of college grads in the labor force. Just to be clear, college grads were still doing well in the scheme of things. Here’s the picture for those at the other end of the educational spectrum, people without high school degrees.
Unemployment Rate for People with Less than a High School Degree
Source: Bureau of Labor Statistics.
As can be seen unemployment also doubled for people with less than a high school degree, but the starting point was much higher at close to 7.0 percent. In fact, this rise in unemployment understates the true impact of the downturn, since many people without high school degrees simply left the labor force as a result of their bleak job prospects. (This undoubtedly happened with some college grads too, but the effect was likely much smaller.)
The moral of this story is that the recession has hit everyone. This is important because some folks could be led to believe from this employment story that the problem is that we just need more people to get college degrees and then they will be able to find good paying jobs. However, when we bring in our old friend the denominator we can see that this is not true. The problem is simply a lack of demand in the economy. Education helps in a downturn as it does during normal times, but even the most highly educated workers are getting whacked by this recession.
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The Washington Post once again confounded its critics who insisted that it couldn’t get any worse. Yesterday the paper ran an editorial that criticized Vice President Joe Biden for his lack of courage when he committed the administration to a policy of not cutting Social Security. Biden repeatedly told an audience in Southern Virginia that he guaranteed there would be no cuts to Social Security in a second Obama administration.
The paper then laid out its case for cuts to the program and outlined its plan:
“Tweak the inflation calculator and moderately raise the income limit for applying the payroll tax, and you can shore up Social Security with no harm to the safety net.”
Did you catch the cuts in that sentence? If not, that is what “tweak the inflation adjustment” means. It means reducing the size of the benefit by 0.3 percent annually. This cut accumulates over time to roughly 3 percent after 10 years, 6 percent after 20 years, and for those who collect benefits long enough, 9 percent after 30 years. Certainly many people might think that a 9 percent cut in benefits for 10 percent of retirees who rely solely on Social Security for their income, or the 30 percent of retirees who rely on it for more than 90 percent of their income, does some harm to the safety net.
The great part of this story is that in an editorial condemning Biden’s lack of courage on Social Security, the Post used a euphemism for cuts that probably eluded most readers. After all, cutting benefits for retirees by 0.3 percent a year doesn’t sound very nice, tweaking the inflation adjustment is much friendlier.
Only in the Washington Post.
The Washington Post once again confounded its critics who insisted that it couldn’t get any worse. Yesterday the paper ran an editorial that criticized Vice President Joe Biden for his lack of courage when he committed the administration to a policy of not cutting Social Security. Biden repeatedly told an audience in Southern Virginia that he guaranteed there would be no cuts to Social Security in a second Obama administration.
The paper then laid out its case for cuts to the program and outlined its plan:
“Tweak the inflation calculator and moderately raise the income limit for applying the payroll tax, and you can shore up Social Security with no harm to the safety net.”
Did you catch the cuts in that sentence? If not, that is what “tweak the inflation adjustment” means. It means reducing the size of the benefit by 0.3 percent annually. This cut accumulates over time to roughly 3 percent after 10 years, 6 percent after 20 years, and for those who collect benefits long enough, 9 percent after 30 years. Certainly many people might think that a 9 percent cut in benefits for 10 percent of retirees who rely solely on Social Security for their income, or the 30 percent of retirees who rely on it for more than 90 percent of their income, does some harm to the safety net.
The great part of this story is that in an editorial condemning Biden’s lack of courage on Social Security, the Post used a euphemism for cuts that probably eluded most readers. After all, cutting benefits for retirees by 0.3 percent a year doesn’t sound very nice, tweaking the inflation adjustment is much friendlier.
Only in the Washington Post.
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It is standard in the United States to report GDP growth at annual rates. This is not true everywhere in the world, where growth rates are often expressed at quarterly rates.
This is where reporters and editors come in. Using the magic of modern mathematics, quarterly growth rates can be converted into annual rates. Usually multiplying by 4 will do the trick, but to be strictly kosher one should take the growth rate to the fourth power.
This means that when the NYT reported data from the Bank of England showing the UK economy shrinking by 0.7 percent in the second quarter it should have pointed out to readers that this implied a 2.8 percent annual rate of decline. By failing to convert the quarterly growth rate into an annual rate, the NYT led most of its readers to believe that the UK’s recession is only one fourth as severe as is actually the case.
It is standard in the United States to report GDP growth at annual rates. This is not true everywhere in the world, where growth rates are often expressed at quarterly rates.
This is where reporters and editors come in. Using the magic of modern mathematics, quarterly growth rates can be converted into annual rates. Usually multiplying by 4 will do the trick, but to be strictly kosher one should take the growth rate to the fourth power.
This means that when the NYT reported data from the Bank of England showing the UK economy shrinking by 0.7 percent in the second quarter it should have pointed out to readers that this implied a 2.8 percent annual rate of decline. By failing to convert the quarterly growth rate into an annual rate, the NYT led most of its readers to believe that the UK’s recession is only one fourth as severe as is actually the case.
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