Republican House Speaker John Boehner committed an enormous gaffe yesterday according to a Washington Post article. Mr. Boehner claimed that:
“Our unemployment rate has been higher than 8 percent for more than 21 / 2 years, far above what the Obama administration promised with the ‘stimulus.’”
Actually, the stimulus did not promise to keep the unemployment rate below 8 percent as Mr. Boehner would know if he ever looked at the administration’s discussion of its stimulus proposal at the time. The report claimed that the stimulus as proposed would create between 3-4 million jobs by the end of 2010. However, the bill passed by Congress was substantially smaller than the stimulus requested by the president. The expected effect would therefore be in the range of 2-3 million jobs.
However, the economy was in much worse shape than the administration recognized at the time. It expected the unemployment rate to peak at 9.0 percent even without any stimulus. At the time, the economy was losing close to 700,000 jobs a month. The unemployment rate had already risen to 9.4 percent by May when the first stimulus related checks were just going out the door.
The best evidence available shows that the stimulus worked almost exactly as planned, creating 2-3 million jobs. However, the economy needed 10-12 million. The Obama administration’s error was in underestimating the severity of the downturn, not overpromising for the benefits of the stimulus.
This is apparent to people who can read and know arithmetic. The Washington Post should have highlighted the fact that Mr. Boehner apparently either has difficulty with arithmetic or was deliberately trying to mislead the public.
Republican House Speaker John Boehner committed an enormous gaffe yesterday according to a Washington Post article. Mr. Boehner claimed that:
“Our unemployment rate has been higher than 8 percent for more than 21 / 2 years, far above what the Obama administration promised with the ‘stimulus.’”
Actually, the stimulus did not promise to keep the unemployment rate below 8 percent as Mr. Boehner would know if he ever looked at the administration’s discussion of its stimulus proposal at the time. The report claimed that the stimulus as proposed would create between 3-4 million jobs by the end of 2010. However, the bill passed by Congress was substantially smaller than the stimulus requested by the president. The expected effect would therefore be in the range of 2-3 million jobs.
However, the economy was in much worse shape than the administration recognized at the time. It expected the unemployment rate to peak at 9.0 percent even without any stimulus. At the time, the economy was losing close to 700,000 jobs a month. The unemployment rate had already risen to 9.4 percent by May when the first stimulus related checks were just going out the door.
The best evidence available shows that the stimulus worked almost exactly as planned, creating 2-3 million jobs. However, the economy needed 10-12 million. The Obama administration’s error was in underestimating the severity of the downturn, not overpromising for the benefits of the stimulus.
This is apparent to people who can read and know arithmetic. The Washington Post should have highlighted the fact that Mr. Boehner apparently either has difficulty with arithmetic or was deliberately trying to mislead the public.
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In an otherwise thoughtful column comparing the current situation with Greece and its options for leaving the euro with the situation of Argentina in its 1998-2002 crisis, Floyd Norris gets a fundamental fact wrong. Norris told readers:
“In 2002, Argentina’s currency, the peso, was officially tied to the dollar at a one-to-one parity. There was a “currency board” that was supposed to assure the tie could never be broken, and it had worked for a decade. But Argentine inflation had outpaced that of the United States, and the peso was seriously overvalued.”
Actually, Argentina had no inflation at all in the years from 1997 to 2001. The reason that its economy became less competitive was that the dollar had soared in value against other currencies. When the dollar rose, the Argentine peso rose with it. This made Argentina’s economy uncompetitive.
The problem was not excessive domestic inflation, but simply that its currency was linked to the dollar at a time when its value was rising. While the United States could support the large trade deficit that resulted from an over-valued currency, Argentina could not.
In an otherwise thoughtful column comparing the current situation with Greece and its options for leaving the euro with the situation of Argentina in its 1998-2002 crisis, Floyd Norris gets a fundamental fact wrong. Norris told readers:
“In 2002, Argentina’s currency, the peso, was officially tied to the dollar at a one-to-one parity. There was a “currency board” that was supposed to assure the tie could never be broken, and it had worked for a decade. But Argentine inflation had outpaced that of the United States, and the peso was seriously overvalued.”
Actually, Argentina had no inflation at all in the years from 1997 to 2001. The reason that its economy became less competitive was that the dollar had soared in value against other currencies. When the dollar rose, the Argentine peso rose with it. This made Argentina’s economy uncompetitive.
The problem was not excessive domestic inflation, but simply that its currency was linked to the dollar at a time when its value was rising. While the United States could support the large trade deficit that resulted from an over-valued currency, Argentina could not.
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In a front page news analysis the NYT told readers that:
“but these days the problem for Europe may be that it has not had — and may not have — its own Lehman Brothers, at least in the sense that Lehman shocked Americans to take divisive and expensive steps to repair the damage.”
There is no one cited in the article who says anything like this. In the wake of the Lehman collapse, the economy lost more than 700,000 jobs a month over the next nine months. While much of this job loss was probably an inevitably result of the bursting of the housing bubble, the financial freeze up associated with Lehman’s collapse almost certainly worsened the situation. It is difficult to see how Europe or the world economy as a whole would benefit from the same sort of financial freeze-up.
It is also worth noting that, contrary to assertions in the article, the Fed began its special lending facilities long before the Lehman collapse. It expanded these facilities in response to the collapse and Congress did authorize the TARP, but it difficult to see how the economy on net ended up better off as a result of the crisis that followed the Lehman collapse.
Of course there are scenarios that could be positive in Europe or could have been positive in the U.S. For example, if the government had used the bankruptcies that would have resulted from letting the market run its course to restructure the financial system, then the country might have a much more efficient industry. Goldman Sachs, Morgan Stanley, Citigroup and Bank of America all would have been bankrupt, giving the government an opportunity to reestablish these banks as a set of smaller financial institutions that were more focused on serving the productive economy.
This is a possible, but not likely outcome from a collapse in Europe. Just as is the case here, the financial industry holds enormous power. It is likely that they would be able to garner the government assistance to keep their current structures largely intact.
In a front page news analysis the NYT told readers that:
“but these days the problem for Europe may be that it has not had — and may not have — its own Lehman Brothers, at least in the sense that Lehman shocked Americans to take divisive and expensive steps to repair the damage.”
There is no one cited in the article who says anything like this. In the wake of the Lehman collapse, the economy lost more than 700,000 jobs a month over the next nine months. While much of this job loss was probably an inevitably result of the bursting of the housing bubble, the financial freeze up associated with Lehman’s collapse almost certainly worsened the situation. It is difficult to see how Europe or the world economy as a whole would benefit from the same sort of financial freeze-up.
It is also worth noting that, contrary to assertions in the article, the Fed began its special lending facilities long before the Lehman collapse. It expanded these facilities in response to the collapse and Congress did authorize the TARP, but it difficult to see how the economy on net ended up better off as a result of the crisis that followed the Lehman collapse.
Of course there are scenarios that could be positive in Europe or could have been positive in the U.S. For example, if the government had used the bankruptcies that would have resulted from letting the market run its course to restructure the financial system, then the country might have a much more efficient industry. Goldman Sachs, Morgan Stanley, Citigroup and Bank of America all would have been bankrupt, giving the government an opportunity to reestablish these banks as a set of smaller financial institutions that were more focused on serving the productive economy.
This is a possible, but not likely outcome from a collapse in Europe. Just as is the case here, the financial industry holds enormous power. It is likely that they would be able to garner the government assistance to keep their current structures largely intact.
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Dana Milbank had a solid column today. He ridiculed Republican claims that President Obama’s health care plan is responsible for high unemployment. Milbank showed that the claims put forward by leading Republican politicians lacked any evidence and for the most part defied commonsense.
For example, one business owner with 50 employees claimed that he could not hire another worker because this would make him subject to provisions in the bill that apply to firms with 51 or more employees. However, these provisions do not take effect until 2014 giving the employer more than 2 full years to adjust his workforce to the desired level.
It is easy to show that the claims that regulation is impeding hiring are nonsense. If firms had need for more labor but were reluctant to hire because of regulations then we should be expecting to see that the length of the average workweek is increasing. It isn’t. It is still below its pre-recession level.
In short, the Republicans are just making things up when they claim regulation is impeding job creation. The media have the time to research this issue and explain the situation to the public. Milbank’s column is the sort of ridicule that politicians deserve for this sort of behavior.
Dana Milbank had a solid column today. He ridiculed Republican claims that President Obama’s health care plan is responsible for high unemployment. Milbank showed that the claims put forward by leading Republican politicians lacked any evidence and for the most part defied commonsense.
For example, one business owner with 50 employees claimed that he could not hire another worker because this would make him subject to provisions in the bill that apply to firms with 51 or more employees. However, these provisions do not take effect until 2014 giving the employer more than 2 full years to adjust his workforce to the desired level.
It is easy to show that the claims that regulation is impeding hiring are nonsense. If firms had need for more labor but were reluctant to hire because of regulations then we should be expecting to see that the length of the average workweek is increasing. It isn’t. It is still below its pre-recession level.
In short, the Republicans are just making things up when they claim regulation is impeding job creation. The media have the time to research this issue and explain the situation to the public. Milbank’s column is the sort of ridicule that politicians deserve for this sort of behavior.
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The NYT reported that British Prime Minister David Cameron was prepared to give a speech in which he would call on households and businesses to pay down their debt rather than spend. This amounts to a gaffe of enormous proportions. It implies that the Prime Minister overseeing one of the world’s largest economies has no clue about economics. If households and businesses responded to the prime minister’s request, it would further reduce demand leading to a second recession and a further rise in unemployment.
While the NYT piece did note that Cameron changed his comments in response to complaints from businesses, it did not go on to quiz his staff in the same way that the media have followed up on other alleged gaffes by political figures. For example, in the weeks following the disclosure of then Senator Obama’s comments about working class Pennsylvanians turning to guns and religion out of frustration and bitterness, news stories were filled with accounts from Obama’s press people and others about his remarks.
Certainly the magnitude of Cameron’s gaffe dwarfs the guns and religion statement from Obama. The media should be pressing his aides to determine whether Mr. Cameron is really as confused about the economy as the text of his original speech implied. People in both the UK and the rest of the world would undoubtedly like to know.
The NYT reported that British Prime Minister David Cameron was prepared to give a speech in which he would call on households and businesses to pay down their debt rather than spend. This amounts to a gaffe of enormous proportions. It implies that the Prime Minister overseeing one of the world’s largest economies has no clue about economics. If households and businesses responded to the prime minister’s request, it would further reduce demand leading to a second recession and a further rise in unemployment.
While the NYT piece did note that Cameron changed his comments in response to complaints from businesses, it did not go on to quiz his staff in the same way that the media have followed up on other alleged gaffes by political figures. For example, in the weeks following the disclosure of then Senator Obama’s comments about working class Pennsylvanians turning to guns and religion out of frustration and bitterness, news stories were filled with accounts from Obama’s press people and others about his remarks.
Certainly the magnitude of Cameron’s gaffe dwarfs the guns and religion statement from Obama. The media should be pressing his aides to determine whether Mr. Cameron is really as confused about the economy as the text of his original speech implied. People in both the UK and the rest of the world would undoubtedly like to know.
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The paper doesn’t tell its readers how it made the determination that the country faces a budget crisis, but this did not prevent it from telling readers in both a headline and an article‘s first sentence that there is a budget crisis. The NYT’s assessment certainly differs sharply from the assessment of financial markets in this respect. They are willing to lend the U.S. government trillions of dollars at interest rates of less than 2.0 percent on 10-year bonds. If the financial markets shared the assessment of the NYT editors they would be demanding far higher interest on government debt.
The paper doesn’t tell its readers how it made the determination that the country faces a budget crisis, but this did not prevent it from telling readers in both a headline and an article‘s first sentence that there is a budget crisis. The NYT’s assessment certainly differs sharply from the assessment of financial markets in this respect. They are willing to lend the U.S. government trillions of dollars at interest rates of less than 2.0 percent on 10-year bonds. If the financial markets shared the assessment of the NYT editors they would be demanding far higher interest on government debt.
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The NYT piece on the failure of Greece to meet its deficit targets and the response by the IMF, the European Central Bank, and the European Commission should have included a comment from someone pointing out that these institutions are jeopardizing the growth prospects for the world economy in order to try to squeeze some additional money out of Greece for its creditors.
The risk of a Greek default is leading to soaring interest rates on the debt of several euro zone countries and creates a real risk of another Lehman-type financial freeze-up. This would virtually guarantee a double-dip recession in both the euro-zone and the United States.
This fact should have been included in the article. Given that the current economic crisis is in large part the result of the incompetence of these institutions, the public might not appreciate the fact that they are risking further damage to the world economy in order to squeeze a country that is already suffering enormous economic pain.
The NYT piece on the failure of Greece to meet its deficit targets and the response by the IMF, the European Central Bank, and the European Commission should have included a comment from someone pointing out that these institutions are jeopardizing the growth prospects for the world economy in order to try to squeeze some additional money out of Greece for its creditors.
The risk of a Greek default is leading to soaring interest rates on the debt of several euro zone countries and creates a real risk of another Lehman-type financial freeze-up. This would virtually guarantee a double-dip recession in both the euro-zone and the United States.
This fact should have been included in the article. Given that the current economic crisis is in large part the result of the incompetence of these institutions, the public might not appreciate the fact that they are risking further damage to the world economy in order to squeeze a country that is already suffering enormous economic pain.
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Why can’t the NYT just call the trade agreements being sent to the senate “trade” agreements? Why does it feel the need to mislead readers in the headline and several times in the article itself by calling them “free trade” agreements?
These deals do not free all trade. There will still be plenty of protectionist barriers left in place that will make it difficult for doctors, lawyers and other professionals from these countries from working in the United States. Furthermore the deals actually increase protectionism in the areas of patents and copyrights, which is one of their main purposes.
Presumably the NYT approves of these deals which is why it blesses them as “free trade” agreements, but this sort of editorializing should be left to the opinion pages.
Why can’t the NYT just call the trade agreements being sent to the senate “trade” agreements? Why does it feel the need to mislead readers in the headline and several times in the article itself by calling them “free trade” agreements?
These deals do not free all trade. There will still be plenty of protectionist barriers left in place that will make it difficult for doctors, lawyers and other professionals from these countries from working in the United States. Furthermore the deals actually increase protectionism in the areas of patents and copyrights, which is one of their main purposes.
Presumably the NYT approves of these deals which is why it blesses them as “free trade” agreements, but this sort of editorializing should be left to the opinion pages.
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Those who know economics recognize the trade deficit is the basic imbalance facing the economy today. If the U.S had balanced trade it would create in the neighborhood of 4 million manufacturing jobs.
Also, by getting trade closer to balance, the country would no longer be a net borrower. By definition, countries that are net borrowers must either have budget deficits or negative private savings, as the U.S. did at the peak of the housing bubble.
This is why it is so peculiar that the Washington Post is so strongly opposed to measures to reduce the value of the dollar against the yuan. The Post constantly rants about the budget deficit being too large. However, unless the trade deficit is reduced, then the Post’s dream of lower budget deficits could only translate into reduce private sector savings.
This means that people would be borrowing and accumulating nothing to support themselves in retirement. That is the implication of the Post’s position, there is no way around this.
The Post’s argument that the value of the yuan won’t affect trade much does not hold water. Even if many of the jobs that are already lost may not come back, a higher yuan would sharply reduce the rate at which we are losing new jobs.
Furthermore, other countries would likely raise the value of their currencies against the dollar, following the yuan. This is what happened when China raised the value of the yuan in 2005. This will lead to an improved trade balance with other countries as well. Relative prices are by far the most important factor in determining trade flows. These are in turn a direct function of the exchange rate.
The Post also mentions pending trade agreements as an alternative mechanism for balancing trade. (It inaccurately described these deals as “free-trade” agreements. These agreements increase many forms of protectionism, like patents and copyrights. The Post is misleading its readers to back its position by calling these pacts “free-trade” agreements.) In fact, the sorts of trade agreements now being considered have generally been associated with larger trade deficits, not smaller trade deficits.
Those who know economics recognize the trade deficit is the basic imbalance facing the economy today. If the U.S had balanced trade it would create in the neighborhood of 4 million manufacturing jobs.
Also, by getting trade closer to balance, the country would no longer be a net borrower. By definition, countries that are net borrowers must either have budget deficits or negative private savings, as the U.S. did at the peak of the housing bubble.
This is why it is so peculiar that the Washington Post is so strongly opposed to measures to reduce the value of the dollar against the yuan. The Post constantly rants about the budget deficit being too large. However, unless the trade deficit is reduced, then the Post’s dream of lower budget deficits could only translate into reduce private sector savings.
This means that people would be borrowing and accumulating nothing to support themselves in retirement. That is the implication of the Post’s position, there is no way around this.
The Post’s argument that the value of the yuan won’t affect trade much does not hold water. Even if many of the jobs that are already lost may not come back, a higher yuan would sharply reduce the rate at which we are losing new jobs.
Furthermore, other countries would likely raise the value of their currencies against the dollar, following the yuan. This is what happened when China raised the value of the yuan in 2005. This will lead to an improved trade balance with other countries as well. Relative prices are by far the most important factor in determining trade flows. These are in turn a direct function of the exchange rate.
The Post also mentions pending trade agreements as an alternative mechanism for balancing trade. (It inaccurately described these deals as “free-trade” agreements. These agreements increase many forms of protectionism, like patents and copyrights. The Post is misleading its readers to back its position by calling these pacts “free-trade” agreements.) In fact, the sorts of trade agreements now being considered have generally been associated with larger trade deficits, not smaller trade deficits.
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That is what listeners to a Morning Edition segment would conclude [sorry, no link yet]. The piece told listeners that China’s efforts to slow its economy would be bad news for the rest of the world since it would reduce the growth of China as an export market for other countries.
However China can actually slow its economy by replacing domestically produced goods with imports. This can be done by raising the value of the yuan against other currencies. This measure would also have the advantage of combating inflation by making lower cost imported good available.
That is what listeners to a Morning Edition segment would conclude [sorry, no link yet]. The piece told listeners that China’s efforts to slow its economy would be bad news for the rest of the world since it would reduce the growth of China as an export market for other countries.
However China can actually slow its economy by replacing domestically produced goods with imports. This can be done by raising the value of the yuan against other currencies. This measure would also have the advantage of combating inflation by making lower cost imported good available.
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