Dana Milbank, a Washington Post columnist who doubles as a fashion critic, devoted today’s column to ridiculing progressive members of Congress who complained about the deal on the debt ceiling. He presents a number of quotes from progressive members of Congress who complained about cuts that may mean that people cannot afford housing, heat, food or medical care.
While these were all very funny, it would be much easier to find ridiculous comments from deficit hawks. For example, Mr. Milbank could fill endless columns with lines from former Senator Alan Simpson, the co-chair of President Obama’s deficit commission. Mr. Simpson apparently thinks that we have just discovered the existence of the baby boom cohort as they are on the edge of retirement.
He also could have included comments from David Walker, the former comptroller general at the Government Accountability Office and also former head of Peter Peterson’s Foundation. Mr. Walker has repeatedly warned that if we don’t get the deficit down, then the dollar could fall against other currencies. This one is really hilarious, because a decline in the dollar against other currencies is actually supposed to be one of the main benefits of lower deficits.
In standard economics the argument is that deficit reduction will reduce the trade deficit by lowering U.S. interest rates, which will make dollar assets less attractive to foreign investors. If they buy fewer dollar assets, then the dollar will fall, improving our trade deficit. Now how funny is that? Our former comptroller general doesn’t even know which way is up when it comes to the deficit, his life’s obsession.
Milbank also could have made fun of the bond rating agencies threatening to downgrade U.S. government debt. What does this mean? U.S. government debt is denominated in dollars. The U.S. government issues dollars. Do Moody’s and Standard and Poors think that the government will lose the ability to issue dollars? In other words, what could they mean with this threat to downgrade U.S. debt?
The credit rating agencies are making a nonsense threat. Now that is really funny.
Milbank could fill many columns making fun of the deficit hawks who are trying to whip up hysteria with nonsense stories about the budget and the economy. Of course the Post, his employer, is at the forefront of this effort. So, Mr. Milbank sticks to making fun of politicians who profess concern for the poor and middle class, and to fashion criticism.
Dana Milbank, a Washington Post columnist who doubles as a fashion critic, devoted today’s column to ridiculing progressive members of Congress who complained about the deal on the debt ceiling. He presents a number of quotes from progressive members of Congress who complained about cuts that may mean that people cannot afford housing, heat, food or medical care.
While these were all very funny, it would be much easier to find ridiculous comments from deficit hawks. For example, Mr. Milbank could fill endless columns with lines from former Senator Alan Simpson, the co-chair of President Obama’s deficit commission. Mr. Simpson apparently thinks that we have just discovered the existence of the baby boom cohort as they are on the edge of retirement.
He also could have included comments from David Walker, the former comptroller general at the Government Accountability Office and also former head of Peter Peterson’s Foundation. Mr. Walker has repeatedly warned that if we don’t get the deficit down, then the dollar could fall against other currencies. This one is really hilarious, because a decline in the dollar against other currencies is actually supposed to be one of the main benefits of lower deficits.
In standard economics the argument is that deficit reduction will reduce the trade deficit by lowering U.S. interest rates, which will make dollar assets less attractive to foreign investors. If they buy fewer dollar assets, then the dollar will fall, improving our trade deficit. Now how funny is that? Our former comptroller general doesn’t even know which way is up when it comes to the deficit, his life’s obsession.
Milbank also could have made fun of the bond rating agencies threatening to downgrade U.S. government debt. What does this mean? U.S. government debt is denominated in dollars. The U.S. government issues dollars. Do Moody’s and Standard and Poors think that the government will lose the ability to issue dollars? In other words, what could they mean with this threat to downgrade U.S. debt?
The credit rating agencies are making a nonsense threat. Now that is really funny.
Milbank could fill many columns making fun of the deficit hawks who are trying to whip up hysteria with nonsense stories about the budget and the economy. Of course the Post, his employer, is at the forefront of this effort. So, Mr. Milbank sticks to making fun of politicians who profess concern for the poor and middle class, and to fashion criticism.
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The sky is up, grass is green, and Clinton got budget surpluses because the economy grew much more rapidly than expected. We know this because the Congressional Budget Office (which passes for God in Washington budget debates) told us in 1996 that the deficit in the year 2000 would be $244 billion or 2.7 percent of GDP ($405 billion in 2011). CBO calculated that the net impact of legislated changes between 1996 and 2000 was to raise the 2000 deficit by $10 billion.
Therefore when Bloomberg tells us that the economy grew at a 4 percent annual rate from 1994 to 2000 as the federal government’s budget moved from deficit to surplus, this is like telling us that the sun rose as the rooster crowed. Yes, the sun did indeed rise, but the rooster’s crowing had nothing to do with it.
The sky is up, grass is green, and Clinton got budget surpluses because the economy grew much more rapidly than expected. We know this because the Congressional Budget Office (which passes for God in Washington budget debates) told us in 1996 that the deficit in the year 2000 would be $244 billion or 2.7 percent of GDP ($405 billion in 2011). CBO calculated that the net impact of legislated changes between 1996 and 2000 was to raise the 2000 deficit by $10 billion.
Therefore when Bloomberg tells us that the economy grew at a 4 percent annual rate from 1994 to 2000 as the federal government’s budget moved from deficit to surplus, this is like telling us that the sun rose as the rooster crowed. Yes, the sun did indeed rise, but the rooster’s crowing had nothing to do with it.
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Following the collapse of the housing bubble and the resulting financial meltdown, there was widespread agreement that securitzers should be forced to keep “skin in the game,” meaning a stake in the mortgages they issued. Dodd-Frank included a requirement to this effect.
While many were arguing for a 10 or even 20 percent stake, the rules that came out from regulators is that they have to keep just 5 percent. Furthermore, the regulators exempted traditional 20-percent-down mortgages that have low risk of the fault. Banks need keep no skin in the game on those.
Naturally the banks are acting like this 5 percent stake will be the end of the world. They are yelling that this will exclude large numbers of people from the market. If bankers could do arithmetic (the evidence suggests otherwise), then they would know that this claim is absurd on its face.
The bank will still be getting a return on the 5 percent stake. They will just get a slightly lower return than if they could sell it. Let’s assume that the return on this 5 percent stake is 40 basis points less than if they could sell it. That comes to 2 basis points or 0.02 percentage points for the mortgage as a whole. Is this going to result in large numbers of people being frozen out of the housing market?
Give me a break, this is garbage and Gretchen Morgensen was right to call them on it.
Following the collapse of the housing bubble and the resulting financial meltdown, there was widespread agreement that securitzers should be forced to keep “skin in the game,” meaning a stake in the mortgages they issued. Dodd-Frank included a requirement to this effect.
While many were arguing for a 10 or even 20 percent stake, the rules that came out from regulators is that they have to keep just 5 percent. Furthermore, the regulators exempted traditional 20-percent-down mortgages that have low risk of the fault. Banks need keep no skin in the game on those.
Naturally the banks are acting like this 5 percent stake will be the end of the world. They are yelling that this will exclude large numbers of people from the market. If bankers could do arithmetic (the evidence suggests otherwise), then they would know that this claim is absurd on its face.
The bank will still be getting a return on the 5 percent stake. They will just get a slightly lower return than if they could sell it. Let’s assume that the return on this 5 percent stake is 40 basis points less than if they could sell it. That comes to 2 basis points or 0.02 percentage points for the mortgage as a whole. Is this going to result in large numbers of people being frozen out of the housing market?
Give me a break, this is garbage and Gretchen Morgensen was right to call them on it.
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The budget deal has them really excited at Fox on 15th. It told readers:
“At several points, Obama and Boehner held out hope they could agree on a far-reaching bipartisan plan to tame the soaring national debt once and for all by raising taxes and cutting health and retirement spending. But House Republicans repeatedly walked away from the bargaining table, refusing to raise taxes. In the end, policymakers were left with a far more modest achievement that does little more than resolve the immediate crisis.”
Wow, maybe the Washington Post could share with us the mechanism for taming “the soaring nation debt once and for all.” The reason the debt is soaring (serious newspapers reserve such terms for the opinion pages) is that incompetent economists allowed an $8 trillion housing bubble to grow out of control so that when it crashed it wrecked the economy. Does the Post know a mechanism that will require that the Fed and Treasury are staffed by competent people? Its readers would love to hear about it.
The budget deal has them really excited at Fox on 15th. It told readers:
“At several points, Obama and Boehner held out hope they could agree on a far-reaching bipartisan plan to tame the soaring national debt once and for all by raising taxes and cutting health and retirement spending. But House Republicans repeatedly walked away from the bargaining table, refusing to raise taxes. In the end, policymakers were left with a far more modest achievement that does little more than resolve the immediate crisis.”
Wow, maybe the Washington Post could share with us the mechanism for taming “the soaring nation debt once and for all.” The reason the debt is soaring (serious newspapers reserve such terms for the opinion pages) is that incompetent economists allowed an $8 trillion housing bubble to grow out of control so that when it crashed it wrecked the economy. Does the Post know a mechanism that will require that the Fed and Treasury are staffed by competent people? Its readers would love to hear about it.
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Many readers of the NYT and Post may not have a good sense of how much $2.4 trillion in cuts over the next decade is. Unfortunately, the major news outlets do not consider it their responsibility to tell us.
The government is projected to spend $46 trillion over the next 10 years. This means that the proposed cuts are a bit more than 5 percent of projected spending. However, large categories of the budget are protected. More than $27 trillion of projected spending goes to Social Security, Medicare, Medicaid and interest. If these areas escape largely untouched, the projected cuts would be around 13 percent of the remaining portion of the budget.
In fact, since some other areas of the budget, like unemployment insurance, are also likely to be largely protected, the cuts to the remaining portion of the budget will be even larger.
The government is projected to spend $7.8 trillion on the military over the next decade. If this area is largely protected, then most of the cuts would likely come from the $6.7 trillion of spending on the domestic discretionary portion of the budget. This is the portion that includes spending on infrastructure, education, research, and other areas that are considered investment.
Many readers of the NYT and Post may not have a good sense of how much $2.4 trillion in cuts over the next decade is. Unfortunately, the major news outlets do not consider it their responsibility to tell us.
The government is projected to spend $46 trillion over the next 10 years. This means that the proposed cuts are a bit more than 5 percent of projected spending. However, large categories of the budget are protected. More than $27 trillion of projected spending goes to Social Security, Medicare, Medicaid and interest. If these areas escape largely untouched, the projected cuts would be around 13 percent of the remaining portion of the budget.
In fact, since some other areas of the budget, like unemployment insurance, are also likely to be largely protected, the cuts to the remaining portion of the budget will be even larger.
The government is projected to spend $7.8 trillion on the military over the next decade. If this area is largely protected, then most of the cuts would likely come from the $6.7 trillion of spending on the domestic discretionary portion of the budget. This is the portion that includes spending on infrastructure, education, research, and other areas that are considered investment.
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He didn’t seem to in his comments on CNN this morning. Gene Sperling, the head of President Obama’s National Economic Council, explained the failure of President Obama to get a deal on the debt ceiling last December as being a problem of divided government.
Actually, Democrats fully controlled both houses of Congress by large majorities at that time. It is possible that Republicans may have filibustered a debt ceiling deal in the Senate, but it is just wrong to say that we had divided government.
Reporters may want to ask Mr. Sperling if he was aware of the congressional line-up last December. It is probably more important to the country than getting to the bottom of Representative Weiner’s twitter underwear pictures.
He didn’t seem to in his comments on CNN this morning. Gene Sperling, the head of President Obama’s National Economic Council, explained the failure of President Obama to get a deal on the debt ceiling last December as being a problem of divided government.
Actually, Democrats fully controlled both houses of Congress by large majorities at that time. It is possible that Republicans may have filibustered a debt ceiling deal in the Senate, but it is just wrong to say that we had divided government.
Reporters may want to ask Mr. Sperling if he was aware of the congressional line-up last December. It is probably more important to the country than getting to the bottom of Representative Weiner’s twitter underwear pictures.
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That would seem to be the implication of the advice in an article that we should follow Canada’s model for dealing with our deficit. According to the NYT, Canada did things right when it decided to get its deficit down in 1994, doing a comprehensive review of its spending.
Since that was almost 20 years ago, we have some basis for assessing how things turned out. According to the OECD’s data on productivity growth (the main determinant of living standards), it doesn’t seem that Canada has done very well. Its productivity growth has averaged just 1.0 percent annually from 1994 to 2010. This compares to 1.8 percent in the United States. Canada’s rate of productivity growth is behind the 1.5 percent rate for Greece and Portugal and even behind the 1.1 percent rate for Japan, although it is better than the 0.7 percent rate for Spain.
If the United States had experienced the same productivity growth as Canada over the last 17 years, we would be on average 12.6 percent poorer today. Insofar as the weaker growth can be attributed to Canada’s fiscal consolidation we can say that the path advocated by the NYT is equivalent to imposing a 12.6 percentage point income tax increase on the United States.
The article also refers to the surpluses at the end of the Clinton years and the expectation that the United States would pay off its debt. Economists who know national income accounting (an essential part of economics that unfortunately seems little known by economists) did not believe that the United States would pay off its debt.
The large budget surpluses projected by the Congressional Budget Office in the context of continuing trade deficits implied large dissaving by the private sector. (This is an accounting identity — it must be true.) It was very unlikely that either households would have large negative savings rates, especially as the baby boom cohorts were approaching retirement. And, it was also very unlikely that there would be an enormous investment boom even as the country was sending much of its manufacturing sector overseas.
Therefore, it was easy to predict that we would not see the surpluses that were projected at the end of the Clinton years. Unfortunately, economists never suffer any career consequences for being completely wrong. Therefore most still have not learned the basic national income accounting that is taught in every introductory class.
That would seem to be the implication of the advice in an article that we should follow Canada’s model for dealing with our deficit. According to the NYT, Canada did things right when it decided to get its deficit down in 1994, doing a comprehensive review of its spending.
Since that was almost 20 years ago, we have some basis for assessing how things turned out. According to the OECD’s data on productivity growth (the main determinant of living standards), it doesn’t seem that Canada has done very well. Its productivity growth has averaged just 1.0 percent annually from 1994 to 2010. This compares to 1.8 percent in the United States. Canada’s rate of productivity growth is behind the 1.5 percent rate for Greece and Portugal and even behind the 1.1 percent rate for Japan, although it is better than the 0.7 percent rate for Spain.
If the United States had experienced the same productivity growth as Canada over the last 17 years, we would be on average 12.6 percent poorer today. Insofar as the weaker growth can be attributed to Canada’s fiscal consolidation we can say that the path advocated by the NYT is equivalent to imposing a 12.6 percentage point income tax increase on the United States.
The article also refers to the surpluses at the end of the Clinton years and the expectation that the United States would pay off its debt. Economists who know national income accounting (an essential part of economics that unfortunately seems little known by economists) did not believe that the United States would pay off its debt.
The large budget surpluses projected by the Congressional Budget Office in the context of continuing trade deficits implied large dissaving by the private sector. (This is an accounting identity — it must be true.) It was very unlikely that either households would have large negative savings rates, especially as the baby boom cohorts were approaching retirement. And, it was also very unlikely that there would be an enormous investment boom even as the country was sending much of its manufacturing sector overseas.
Therefore, it was easy to predict that we would not see the surpluses that were projected at the end of the Clinton years. Unfortunately, economists never suffer any career consequences for being completely wrong. Therefore most still have not learned the basic national income accounting that is taught in every introductory class.
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The Wall Street Journal claimed that a main reason that the economy is growing slowly and not creating jobs is that people are not willing to move because they are often underwater in their homes. The evidence that it presents to support this assertion is dubious.
First, it notes that only 2.9 million people moved for a job in 2009 compared to 4.5 million in 1999. There are two major differences between these years. First, the work force was considerably older in 2009 with most of the baby boomers in their 50s and 60s. These workers are much less likely to move than younger workers.
More importantly, the economy lost 5 million jobs in 2009. It created 3 million jobs in 1999. This means that there were many fewer jobs to move for in 2009 than in 1999.
The best evidence that the sort of housing lock discussed in this article is creating a problem would be to show large sections of the country with rapidly rising wages. Offhand, it would be difficult to identify any significant region where this is the case and the article certainly does not identify one. (It does note an employer in South Dakota who complains about being unable to find workers, but it doesn’t report the wages he is offering.)
A recent analysis of the Bureau of Labor Statistics Displaced Workers Survey found no evidence that homeowners in states that had seen sharp declines in house prices were any less likely to move to get a new job than other homeowners. It would be useful if articles like this one based its judgments on data instead of anecdotes.
The Wall Street Journal claimed that a main reason that the economy is growing slowly and not creating jobs is that people are not willing to move because they are often underwater in their homes. The evidence that it presents to support this assertion is dubious.
First, it notes that only 2.9 million people moved for a job in 2009 compared to 4.5 million in 1999. There are two major differences between these years. First, the work force was considerably older in 2009 with most of the baby boomers in their 50s and 60s. These workers are much less likely to move than younger workers.
More importantly, the economy lost 5 million jobs in 2009. It created 3 million jobs in 1999. This means that there were many fewer jobs to move for in 2009 than in 1999.
The best evidence that the sort of housing lock discussed in this article is creating a problem would be to show large sections of the country with rapidly rising wages. Offhand, it would be difficult to identify any significant region where this is the case and the article certainly does not identify one. (It does note an employer in South Dakota who complains about being unable to find workers, but it doesn’t report the wages he is offering.)
A recent analysis of the Bureau of Labor Statistics Displaced Workers Survey found no evidence that homeowners in states that had seen sharp declines in house prices were any less likely to move to get a new job than other homeowners. It would be useful if articles like this one based its judgments on data instead of anecdotes.
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The NYT wrote that President Obama risked alienating liberal Democrats with his willingness to cut Social Security and Medicare. While this is true, he also risks alienating voters across the political spectrum.
Polls consistently show that the vast majority of people in every demographic group, including Tea Party Republicans, are opposed to cuts to these programs. The only people who tend to support cuts to Social Security and Medicare are the Wall Street financial types and the elites who do policy work and report it. This NYT piece wrongly implies that cuts to these programs enjoy support beyond this small group.
The NYT wrote that President Obama risked alienating liberal Democrats with his willingness to cut Social Security and Medicare. While this is true, he also risks alienating voters across the political spectrum.
Polls consistently show that the vast majority of people in every demographic group, including Tea Party Republicans, are opposed to cuts to these programs. The only people who tend to support cuts to Social Security and Medicare are the Wall Street financial types and the elites who do policy work and report it. This NYT piece wrongly implies that cuts to these programs enjoy support beyond this small group.
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The NYT is starting to do the same sort of editorializing in news stories for which Fox and the Washington Post are famous. It told readers that President Obama had proposed a change in the Social Security cost of living adjustment formula that would reduce scheduled benefits and then adds that this cut was “long sought by economists.”
Umm, which economists? All economists? Not this one, or many others with whom I associate. Is there a poll of economists that provides the basis for this assertion? If so, a cite would be in order.
Actually many people, including economists, have suggested that if the point is to have a cost of living adjustment that accurately reflects the cost of living of Social Security beneficiaries then the Bureau of Labor Statistics (BLS) can construct a full cost of living index for people over the age of 65 (or 62). It already has an experimental elderly index, which shows a higher rate of inflation than the index that is currently used for cost of living adjustments.
Economists, and others, who want to see an accurate cost of living adjustment would advocate having the BLS construct a full cost of living index for the elderly. Economists, and others, who want to see Social Security benefits reduced advocate adopting an index that shows a lower rate of inflation, whether or not this accurately represents the cost of living of Social Security beneficiaries.
The NYT is starting to do the same sort of editorializing in news stories for which Fox and the Washington Post are famous. It told readers that President Obama had proposed a change in the Social Security cost of living adjustment formula that would reduce scheduled benefits and then adds that this cut was “long sought by economists.”
Umm, which economists? All economists? Not this one, or many others with whom I associate. Is there a poll of economists that provides the basis for this assertion? If so, a cite would be in order.
Actually many people, including economists, have suggested that if the point is to have a cost of living adjustment that accurately reflects the cost of living of Social Security beneficiaries then the Bureau of Labor Statistics (BLS) can construct a full cost of living index for people over the age of 65 (or 62). It already has an experimental elderly index, which shows a higher rate of inflation than the index that is currently used for cost of living adjustments.
Economists, and others, who want to see an accurate cost of living adjustment would advocate having the BLS construct a full cost of living index for the elderly. Economists, and others, who want to see Social Security benefits reduced advocate adopting an index that shows a lower rate of inflation, whether or not this accurately represents the cost of living of Social Security beneficiaries.
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