The Washington Post has a practice of granting oped space to almost anyone who is prepared to advance its agenda of deficit reduction. Today it opens its pages to Senator Tom Coburn who begins his piece by telling readers that:
“Any honest view of our debt, deficits, size of government and demographic challenges shows we must make major changes if we are going to pass on the American way of life to our children. Each week seems to bring new warning signs: slower-than-expected growth (already as much as 25 to 33 percent every year, some estimate), higher-than-expected unemployment numbers.”
Actually the current period of high unemployment and slow growth has nothing to do with the budget deficit. It is the result of the collapse of the $8 trillion housing bubble. Unfortunately, Federal Reserve Board chairs Alan Greenspan, Ben Bernanke and other policymakers overlooked this enormous bubble as it was growing. Apparently, Mr. Coburn has not noticed the bubble even now that its collapse has wrecked the economy.
At one point, Coburn cites Morgan Stanley Director Erskine Bowles calling the deficit situation, “… the most predictable economic crisis in history.” Actually, the housing bubble was probably the most predictable economic crisis in history. Unfortunately, almost no one in a policy position was able to predict it.
Contrary to Mr. Coburn’s assertion at the beginning of his, any honest view of the debt, deficits, size of government and demographic challenges shows that we have to fix our health care system. If per person health care expenditures were comparable to what they are in Germany, Canada, or any other wealthy country with a longer life expectancy than the United States we would be looking at budget surpluses, not deficits.
The Washington Post has a practice of granting oped space to almost anyone who is prepared to advance its agenda of deficit reduction. Today it opens its pages to Senator Tom Coburn who begins his piece by telling readers that:
“Any honest view of our debt, deficits, size of government and demographic challenges shows we must make major changes if we are going to pass on the American way of life to our children. Each week seems to bring new warning signs: slower-than-expected growth (already as much as 25 to 33 percent every year, some estimate), higher-than-expected unemployment numbers.”
Actually the current period of high unemployment and slow growth has nothing to do with the budget deficit. It is the result of the collapse of the $8 trillion housing bubble. Unfortunately, Federal Reserve Board chairs Alan Greenspan, Ben Bernanke and other policymakers overlooked this enormous bubble as it was growing. Apparently, Mr. Coburn has not noticed the bubble even now that its collapse has wrecked the economy.
At one point, Coburn cites Morgan Stanley Director Erskine Bowles calling the deficit situation, “… the most predictable economic crisis in history.” Actually, the housing bubble was probably the most predictable economic crisis in history. Unfortunately, almost no one in a policy position was able to predict it.
Contrary to Mr. Coburn’s assertion at the beginning of his, any honest view of the debt, deficits, size of government and demographic challenges shows that we have to fix our health care system. If per person health care expenditures were comparable to what they are in Germany, Canada, or any other wealthy country with a longer life expectancy than the United States we would be looking at budget surpluses, not deficits.
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Home sales fell through the floor last May as the first time home buyers tax credit ended in April. The expiration of the credit pulled a lot of sales forward, so that few people were buying in May.
This is why it should have people very concerned that purchase mortgage applications for last week were actually slightly below the level for the same week last year. The same was true for the prior week also. These are weekly data, which means that the numbers will be erratic, but this is not a good sign.
Home sales fell through the floor last May as the first time home buyers tax credit ended in April. The expiration of the credit pulled a lot of sales forward, so that few people were buying in May.
This is why it should have people very concerned that purchase mortgage applications for last week were actually slightly below the level for the same week last year. The same was true for the prior week also. These are weekly data, which means that the numbers will be erratic, but this is not a good sign.
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In an article on the poor employment prospects for recent college grads, the NYT told readers:
“Now evidence is emerging that the damage wrought by the sour economy is more widespread than just a few careers led astray or postponed.”
This is actually a good article that includes some new evidence on the extent to which recent college grads are either working at jobs that do not require a college degree or out of work altogether. (The graph accompanying the article shows that 22.4 percent are out of work altogether and 22.0 percent are working at jobs that don’t require a degree.)
It’s just striking that a sentence like this appeared near the top of the article. We’re just now discovering that there is serious damage from this downturn? Some editor was asleep at the wheel on this one.
In an article on the poor employment prospects for recent college grads, the NYT told readers:
“Now evidence is emerging that the damage wrought by the sour economy is more widespread than just a few careers led astray or postponed.”
This is actually a good article that includes some new evidence on the extent to which recent college grads are either working at jobs that do not require a college degree or out of work altogether. (The graph accompanying the article shows that 22.4 percent are out of work altogether and 22.0 percent are working at jobs that don’t require a degree.)
It’s just striking that a sentence like this appeared near the top of the article. We’re just now discovering that there is serious damage from this downturn? Some editor was asleep at the wheel on this one.
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USA Today is now telling us that used car prices may not stay at their record highs. As I explained last week, we expect most items to be hitting record-high prices most of the time, since the economy is seeing moderate rates of inflation, not deflation. However, it turns out that we are not actually seeing record high car prices rights now, at least not according to the Bureau of Labor Statistics. The difference between the indexes referred to in the article and the index shown in the graph is that the Bureau of Labor Statistics adjusts for changes in quality.
USA Today is now telling us that used car prices may not stay at their record highs. As I explained last week, we expect most items to be hitting record-high prices most of the time, since the economy is seeing moderate rates of inflation, not deflation. However, it turns out that we are not actually seeing record high car prices rights now, at least not according to the Bureau of Labor Statistics. The difference between the indexes referred to in the article and the index shown in the graph is that the Bureau of Labor Statistics adjusts for changes in quality.
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Timothy Egan understated the extent to which the Ryan plan would raise costs for Medicare beneficiaries. He reports that it would double the amount that the typical beneficiary would have to pay for their care. Actually, the Congressional Budget Office projects that it would triple the cost for retirees by 2030, with the ratio rising even higher in later years. (This doesn’t take account of the increase in the eligibility age to 67.)
It’s worth noting that the vast majority of this additional cost is due to increased payments to the insurance industry and health care industry. The CBO projections imply that only about one-fifth of the increased cost to beneficiaries will be savings to the government.
Timothy Egan understated the extent to which the Ryan plan would raise costs for Medicare beneficiaries. He reports that it would double the amount that the typical beneficiary would have to pay for their care. Actually, the Congressional Budget Office projects that it would triple the cost for retirees by 2030, with the ratio rising even higher in later years. (This doesn’t take account of the increase in the eligibility age to 67.)
It’s worth noting that the vast majority of this additional cost is due to increased payments to the insurance industry and health care industry. The CBO projections imply that only about one-fifth of the increased cost to beneficiaries will be savings to the government.
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Of course the Post does not have a clue as to how Republican politicians actually “regard” the health insurance exchanges established under President Obama’s health care plan. All the Post can know is what these politicians say. It has no idea what, if anything, they actually believe about this system. This should cause readers to question why it asserted:
“Republicans, however, regard it [the insurance exchange system] as a likely first step down the road to a government-controlled insurance system.”
The people in question are politicians, not political philosophers. They do not get their jobs for their refined views on social and economic issues. They get their jobs for appealing to important interest groups. The Post should understand this fact.
Of course the Post does not have a clue as to how Republican politicians actually “regard” the health insurance exchanges established under President Obama’s health care plan. All the Post can know is what these politicians say. It has no idea what, if anything, they actually believe about this system. This should cause readers to question why it asserted:
“Republicans, however, regard it [the insurance exchange system] as a likely first step down the road to a government-controlled insurance system.”
The people in question are politicians, not political philosophers. They do not get their jobs for their refined views on social and economic issues. They get their jobs for appealing to important interest groups. The Post should understand this fact.
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That is the only thing that readers can conclude from a classic he said/she said piece about the Ryan budget plan approved by House Republicans last month. The piece simply repeated assertions about his budget from Representative Ryan and responses from House Minority Leader Nancy Pelosi and other Democrats.
It did not, for example, point out that the Congressional Budget Office projects that the Ryan plan would increase the cost of buying Medicare equivalent policies by $34 trillion (5 times the projected Social Security shortfall) over the program’s 75-year planning period. Nor did it point out that the Republican proposal envisions that by 2050, most areas of government spending, including the military budget, will shrink to a size that is less than two-third the current size of the military budget.
The Post readers generally will not have time to look such things up for themselves. Post reporters should.
That is the only thing that readers can conclude from a classic he said/she said piece about the Ryan budget plan approved by House Republicans last month. The piece simply repeated assertions about his budget from Representative Ryan and responses from House Minority Leader Nancy Pelosi and other Democrats.
It did not, for example, point out that the Congressional Budget Office projects that the Ryan plan would increase the cost of buying Medicare equivalent policies by $34 trillion (5 times the projected Social Security shortfall) over the program’s 75-year planning period. Nor did it point out that the Republican proposal envisions that by 2050, most areas of government spending, including the military budget, will shrink to a size that is less than two-third the current size of the military budget.
The Post readers generally will not have time to look such things up for themselves. Post reporters should.
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Ezra Klein makes the case that the United States needs a weaker dollar in order to increase net exports and move towards more balanced trade. (Former Senator Ernest Hollings referred to the weaker dollar as a “competitive” dollar.) However it wrongly thinks the need is temporary and that China’ currency policy is the sole problem.
In fact, the problem of the over-valued dollar is longstanding and dates back to Robert Rubin’s days as Treasury Secretary. When Rubin took over as Treasury Secretary he reversed his predecessor’s position that the dollar should be allowed to drift downward.
In fact, the decline in the value of the dollar was supposed to be one of the fruits of President Clinton’s deficit reduction policy. A lower valued dollar was suppose to boost U.S. net exports and turn our trade deficit into a trade surplus. In standard economic theory rich countries are supposed to run trade surpluses, lending capital to poorer developing countries.
Rubin instead insisted that the United States wanted a high dollar. He put muscle behind this view in 1997 East Asian financial crisis. He used the Treasury Department’s control over the IMF to force the crisis countries to repay their debts in full, instead of allowing for defaults and write–downs. The repayment was financed by a massive boost in exports from the region. This was made possible by sharply lower values of their currencies against the dollar. In other words, the value of the dollar rose.
The harsh conditions imposed by the IMF in the East Asian crisis led countries throughout the developing world to begin to accumulate reserves on a massive basis in order to avoid ever being forced to deal with the IMF. This meant deliberately depressing the value of their currency against the dollar.
The huge U.S. trade deficit in the late 90s and the last decade was a major source of the imbalances of these years. A trade deficit logically implies (i.e. there is no damn way around it) either a large budget deficit or negative private savings, or some combination.
In the late 90s, the country had a budget surplus, but negative private savings. This was the result of the stock bubble. The wealth created by that bubble led to a consumption boom which pushed savings rates to levels that were at the time record lows.
After the stock bubble collapsed, the budget deficit returned. While the deficit fell back to more normal levels in 2006 and 2007, this was associated with private savings again becoming highly negative as the household saving rate fell to near zero in the years 2004-2007. The culprit in this case was the wealth created by the housing bubble.
Klein misses this story. The over-valued dollar is not a side-bar, nor is China a lonely culprit in this story. The over-valued dollar is central to any understanding of the U.S. economy over the last 15 years.
Ezra Klein makes the case that the United States needs a weaker dollar in order to increase net exports and move towards more balanced trade. (Former Senator Ernest Hollings referred to the weaker dollar as a “competitive” dollar.) However it wrongly thinks the need is temporary and that China’ currency policy is the sole problem.
In fact, the problem of the over-valued dollar is longstanding and dates back to Robert Rubin’s days as Treasury Secretary. When Rubin took over as Treasury Secretary he reversed his predecessor’s position that the dollar should be allowed to drift downward.
In fact, the decline in the value of the dollar was supposed to be one of the fruits of President Clinton’s deficit reduction policy. A lower valued dollar was suppose to boost U.S. net exports and turn our trade deficit into a trade surplus. In standard economic theory rich countries are supposed to run trade surpluses, lending capital to poorer developing countries.
Rubin instead insisted that the United States wanted a high dollar. He put muscle behind this view in 1997 East Asian financial crisis. He used the Treasury Department’s control over the IMF to force the crisis countries to repay their debts in full, instead of allowing for defaults and write–downs. The repayment was financed by a massive boost in exports from the region. This was made possible by sharply lower values of their currencies against the dollar. In other words, the value of the dollar rose.
The harsh conditions imposed by the IMF in the East Asian crisis led countries throughout the developing world to begin to accumulate reserves on a massive basis in order to avoid ever being forced to deal with the IMF. This meant deliberately depressing the value of their currency against the dollar.
The huge U.S. trade deficit in the late 90s and the last decade was a major source of the imbalances of these years. A trade deficit logically implies (i.e. there is no damn way around it) either a large budget deficit or negative private savings, or some combination.
In the late 90s, the country had a budget surplus, but negative private savings. This was the result of the stock bubble. The wealth created by that bubble led to a consumption boom which pushed savings rates to levels that were at the time record lows.
After the stock bubble collapsed, the budget deficit returned. While the deficit fell back to more normal levels in 2006 and 2007, this was associated with private savings again becoming highly negative as the household saving rate fell to near zero in the years 2004-2007. The culprit in this case was the wealth created by the housing bubble.
Klein misses this story. The over-valued dollar is not a side-bar, nor is China a lonely culprit in this story. The over-valued dollar is central to any understanding of the U.S. economy over the last 15 years.
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This basic fact should have been included in a Washington Post piece that talked about plans to require federal employees to contribute more from their paychecks to their retirement plan. Economists of all political persuasions view workers’ pay as a total compensation package. When comparing pay in different jobs or industries economists include employer payments for health insurance, pensions, and other benefits, along with straight wages.
This means that when political figures call for federal employers to pay more money out of their paycheck into their pensions, they are calling for these workers to get a pay cut. This is not a debatable point in a he said/she said as this article implies. It is true.
This basic fact should have been included in a Washington Post piece that talked about plans to require federal employees to contribute more from their paychecks to their retirement plan. Economists of all political persuasions view workers’ pay as a total compensation package. When comparing pay in different jobs or industries economists include employer payments for health insurance, pensions, and other benefits, along with straight wages.
This means that when political figures call for federal employers to pay more money out of their paycheck into their pensions, they are calling for these workers to get a pay cut. This is not a debatable point in a he said/she said as this article implies. It is true.
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The NYT has an article discussing the possibility of an automatic spending cut rule as a mechanism to hit deficit targets. It quotes President Obama’s budget director, Jacob Lew, on the past success of such rules.
Mr. Lew credits such budget rules for reaching a balanced budget in the 90s. Actually, these rules were of limited value relative to much better than expected economic growth. In 1996, the Congressional Budget Office (CBO) projected a deficit in the year 2000 of 2.7 percent of GDP. The government actually ran a surplus of 2.4 percent of GDP, a shift of 5.1 percentage points of GDP, the equivalent of $750 billion in today’s economy.
According to CBO, none of this shift from deficit to surplus was the result of spending constraint or tax increases, its scoring shows that legislated changes over this 4-year period actually raised the deficit by $10 billion. By far the biggest reason that the budget shifted from a large deficit to a large surplus was much better than expected economic growth.
This growth pushed the unemployment rate down to 4.0 percent in 2000. CBO projected that it would be 6.0 percent. Mr. Lew should know that it was economic growth, not spending constraints that led to the Clinton surpluses. The NYT should have pointed this fact out to readers.
The NYT has an article discussing the possibility of an automatic spending cut rule as a mechanism to hit deficit targets. It quotes President Obama’s budget director, Jacob Lew, on the past success of such rules.
Mr. Lew credits such budget rules for reaching a balanced budget in the 90s. Actually, these rules were of limited value relative to much better than expected economic growth. In 1996, the Congressional Budget Office (CBO) projected a deficit in the year 2000 of 2.7 percent of GDP. The government actually ran a surplus of 2.4 percent of GDP, a shift of 5.1 percentage points of GDP, the equivalent of $750 billion in today’s economy.
According to CBO, none of this shift from deficit to surplus was the result of spending constraint or tax increases, its scoring shows that legislated changes over this 4-year period actually raised the deficit by $10 billion. By far the biggest reason that the budget shifted from a large deficit to a large surplus was much better than expected economic growth.
This growth pushed the unemployment rate down to 4.0 percent in 2000. CBO projected that it would be 6.0 percent. Mr. Lew should know that it was economic growth, not spending constraints that led to the Clinton surpluses. The NYT should have pointed this fact out to readers.
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