That is the implication of a NYT Dealbook post that reported JPMorgan’s claim that parts of the Dodd-Frank bill will favor European banks. If JPMorgan’s claim is correct, then it means that U.S. consumers need to worry less about any potential increase in the cost of financial services that could result from better prudential regulation. JPMorgan is claiming that European governments are willing to incur the cost of subsidizing risky practices of their banks (think Iceland).
Economists would argue that this is pure gain to U.S. consumers, just as they argue that being able to get low cost textiles and steel from China or India is a gain. If European subsidies make U.S. financial services uncompetitive, then the U.S. should simply focus on the areas in which it enjoys a comparative advantage.
That is the implication of a NYT Dealbook post that reported JPMorgan’s claim that parts of the Dodd-Frank bill will favor European banks. If JPMorgan’s claim is correct, then it means that U.S. consumers need to worry less about any potential increase in the cost of financial services that could result from better prudential regulation. JPMorgan is claiming that European governments are willing to incur the cost of subsidizing risky practices of their banks (think Iceland).
Economists would argue that this is pure gain to U.S. consumers, just as they argue that being able to get low cost textiles and steel from China or India is a gain. If European subsidies make U.S. financial services uncompetitive, then the U.S. should simply focus on the areas in which it enjoys a comparative advantage.
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Michelle Singletary, the Post’s generally adept personal finance reporter, missed one today. Regulations by the Fed limiting debit card swipe fees are definitely a positive step. Currently these fees are passed on to all consumers. The ones getting nailed worst are the cash customers who pay the higher price without even getting the convenience. This is like a sales tax.
The reduction in fees will not be passed on everywhere and always to consumers (firms do have market power), but to be an economist here, if firms thought they could mark up their prices by more, why aren’t they doing it already? In other words, it is reasonable to assume that most of the savings will be passed on to consumers.
Michelle Singletary, the Post’s generally adept personal finance reporter, missed one today. Regulations by the Fed limiting debit card swipe fees are definitely a positive step. Currently these fees are passed on to all consumers. The ones getting nailed worst are the cash customers who pay the higher price without even getting the convenience. This is like a sales tax.
The reduction in fees will not be passed on everywhere and always to consumers (firms do have market power), but to be an economist here, if firms thought they could mark up their prices by more, why aren’t they doing it already? In other words, it is reasonable to assume that most of the savings will be passed on to consumers.
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David Autor has inaccurately reported that he has found evidence of a hollowing out of the distribution of jobs for men, with increased employment at the top and the bottom ends of the wage distribution and a loss of jobs in the middle. NYT columnist David Leonhardt seems to have largely bought this story as well.
Actually, as John Schmitt, my colleague at CEPR, and former colleague Heather Boushey pointed out, Autor’s work shows the opposite. In the most recent business cycle, 2000-2007, there was a relative decline in the demand for all male occupations, except those at the bottom of the wage distribution. There was less of a decline for jobs near the top than for those in the middle, but it would be more than a bit of an exaggeration to call this a hollowing out of the job distribution. Autor’s data is essentially showing an increased demand for less-skilled occupations pure and simple.
The story for the prior business cycle is also not quite what Autor describes. Between 1989 and 1999, there actually was a decline in relative employment for all occupations below the median except those near the very bottom (the bottom decile).
A large percentage of the workers in this bottom decile were immigrants. There has been considerable research (e.g. here and here) that suggests that immigrants don’t compete directly with native born workers and instead fill a sub-class of occupations in which jobs would have gone largely unfilled in the absence of immigrant workers. Insofar as this is the case, it suggests that the growth in the lowest wage occupations was not a demand-side phenomenon, but rather a supply side story. In this view, if there had been a large influx of immigrants occupying the middle wage occupations, then we would have seen strong growth in employment in these occupations as well (albeit at much lower wages).
In the period from 1979-1989, the first business cycle analyzed by Autor, there is a decline in the relative shares of employment for all occupations below the 60th percentile. This also does not support the hollowing out story.
To summarize, in the first cycle, Autor finds increased relative demand for highly skilled occupations and decreased demand for less skilled occupations. In the second cycle he finds increased demand for highly skilled occupations and decreased demand for all but the lowest skilled occupations, which may be the result of an influx of low-paid immigrant workers. In the third period, there is a decline in the relative demand for everyone but less-skilled workers. In other words, he really doesn’t show any evidence of a hollowing out of the job distribution.
David Autor has inaccurately reported that he has found evidence of a hollowing out of the distribution of jobs for men, with increased employment at the top and the bottom ends of the wage distribution and a loss of jobs in the middle. NYT columnist David Leonhardt seems to have largely bought this story as well.
Actually, as John Schmitt, my colleague at CEPR, and former colleague Heather Boushey pointed out, Autor’s work shows the opposite. In the most recent business cycle, 2000-2007, there was a relative decline in the demand for all male occupations, except those at the bottom of the wage distribution. There was less of a decline for jobs near the top than for those in the middle, but it would be more than a bit of an exaggeration to call this a hollowing out of the job distribution. Autor’s data is essentially showing an increased demand for less-skilled occupations pure and simple.
The story for the prior business cycle is also not quite what Autor describes. Between 1989 and 1999, there actually was a decline in relative employment for all occupations below the median except those near the very bottom (the bottom decile).
A large percentage of the workers in this bottom decile were immigrants. There has been considerable research (e.g. here and here) that suggests that immigrants don’t compete directly with native born workers and instead fill a sub-class of occupations in which jobs would have gone largely unfilled in the absence of immigrant workers. Insofar as this is the case, it suggests that the growth in the lowest wage occupations was not a demand-side phenomenon, but rather a supply side story. In this view, if there had been a large influx of immigrants occupying the middle wage occupations, then we would have seen strong growth in employment in these occupations as well (albeit at much lower wages).
In the period from 1979-1989, the first business cycle analyzed by Autor, there is a decline in the relative shares of employment for all occupations below the 60th percentile. This also does not support the hollowing out story.
To summarize, in the first cycle, Autor finds increased relative demand for highly skilled occupations and decreased demand for less skilled occupations. In the second cycle he finds increased demand for highly skilled occupations and decreased demand for all but the lowest skilled occupations, which may be the result of an influx of low-paid immigrant workers. In the third period, there is a decline in the relative demand for everyone but less-skilled workers. In other words, he really doesn’t show any evidence of a hollowing out of the job distribution.
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The NYT has an article telling readers that Latvian officials working for the European Union bureaucracy earn much higher pay than their counterparts who remain in Latvia. This is of course true. It would be very surprising if it were not the case.
The European Union is dominated by relatively wealthy countries like France, Germany, and the U.K. It would be expected that the pay of its officials would reflect pay scales in these countries. This means that when poorer countries, like Latvia, enter the EU, their nationals can anticipate big pay increases if they move from employment by the Latvian government to employment by the EU, just as a plumber would get a big increase in pay if they moved from Latvia to Germany.
The NYT has an article telling readers that Latvian officials working for the European Union bureaucracy earn much higher pay than their counterparts who remain in Latvia. This is of course true. It would be very surprising if it were not the case.
The European Union is dominated by relatively wealthy countries like France, Germany, and the U.K. It would be expected that the pay of its officials would reflect pay scales in these countries. This means that when poorer countries, like Latvia, enter the EU, their nationals can anticipate big pay increases if they move from employment by the Latvian government to employment by the EU, just as a plumber would get a big increase in pay if they moved from Latvia to Germany.
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That was not the way that the Post framed the issue, but this is the implication of an article on public sector pensions in California that began with a discussion of the $520,000 a year pension received by the former administrator of a small city. The article cites the claim by the California Foundation for Fiscal Responsibility that more than 15,000 retired state employees receive pensions of more than $100,000 a year. It then cites a spokesperson for the American Federation of State County and Municipal Employees saying that the average pension is just $19,000.
If both numbers are accurate, then this means that roughly 3 percent of retirees account for almost 20 percent of total benefits (assuming an average pension for the over $100k group of $110k), which means that the average pension for the bottom 97 percent is a bit over $16,000 a year.
The article includes a statement from an economist blaming the public sector employees for not better policing their pension system. While this is a reasonable point, it is also reasonable to ask why the people supervising the pension systems, who are paid six figure salaries for this work, have not called attention to abuses like the one highlighted at the beginning of this article.
That was not the way that the Post framed the issue, but this is the implication of an article on public sector pensions in California that began with a discussion of the $520,000 a year pension received by the former administrator of a small city. The article cites the claim by the California Foundation for Fiscal Responsibility that more than 15,000 retired state employees receive pensions of more than $100,000 a year. It then cites a spokesperson for the American Federation of State County and Municipal Employees saying that the average pension is just $19,000.
If both numbers are accurate, then this means that roughly 3 percent of retirees account for almost 20 percent of total benefits (assuming an average pension for the over $100k group of $110k), which means that the average pension for the bottom 97 percent is a bit over $16,000 a year.
The article includes a statement from an economist blaming the public sector employees for not better policing their pension system. While this is a reasonable point, it is also reasonable to ask why the people supervising the pension systems, who are paid six figure salaries for this work, have not called attention to abuses like the one highlighted at the beginning of this article.
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Okay, I didn’t expect this headline, but it would be worth reminding readers that this would be the effect of the Republican proposal for sharp budget cuts for the remainder of the 2011 fiscal year. Analyses by both Goldman Sachs and Moody’s have shown that the spending cuts, if extended into 2012, would eliminate more than 500,000 jobs. It would have been appropriate to mention this point in the article.
Okay, I didn’t expect this headline, but it would be worth reminding readers that this would be the effect of the Republican proposal for sharp budget cuts for the remainder of the 2011 fiscal year. Analyses by both Goldman Sachs and Moody’s have shown that the spending cuts, if extended into 2012, would eliminate more than 500,000 jobs. It would have been appropriate to mention this point in the article.
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The NYT reported on the dispute between retailers and banks over debit card fees. The banks, by their own claim, take advantage of their monopoly power to charge fees that are far above their cost. (We know this because they have threatened to raise the cost of services like maintaining checking accounts if they have to lower their fees on debit cards. They could only do this sort of cross-subsidy if they had some degree of monopoly power in debit cards.)
The article never discussed the situation of customers who pay in cash. These are likely to be the biggest gainers from lower debit card fees. Retailers are generally required to charge all customers the same price regardless of how they pay. This means that cash customers pay a price that covers the cost of debit card and credit card transactions, even though they do not receive the benefit of these services.
In effect, the banks impose a sales tax of 1-2 percent on all customers to cover their fees. Debit and credit card users get a benefit in the form of greater convenience for this tax. Cash customers just pay the tax. Of course cash customers also tend to be poorer, since these are largely people who could not get credit cards and may not even have bank accounts. So, these fees are a transfer from the less wealthy to more wealthy.
The NYT reported on the dispute between retailers and banks over debit card fees. The banks, by their own claim, take advantage of their monopoly power to charge fees that are far above their cost. (We know this because they have threatened to raise the cost of services like maintaining checking accounts if they have to lower their fees on debit cards. They could only do this sort of cross-subsidy if they had some degree of monopoly power in debit cards.)
The article never discussed the situation of customers who pay in cash. These are likely to be the biggest gainers from lower debit card fees. Retailers are generally required to charge all customers the same price regardless of how they pay. This means that cash customers pay a price that covers the cost of debit card and credit card transactions, even though they do not receive the benefit of these services.
In effect, the banks impose a sales tax of 1-2 percent on all customers to cover their fees. Debit and credit card users get a benefit in the form of greater convenience for this tax. Cash customers just pay the tax. Of course cash customers also tend to be poorer, since these are largely people who could not get credit cards and may not even have bank accounts. So, these fees are a transfer from the less wealthy to more wealthy.
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Yes, Robert Samuelson is at it again, spreading inaccurate and misleading claims about Social Security to justify taking money from retirees.
It seems that for some reason he has a hard time understanding the idea of a pension. This shouldn’t be that hard, many people have them.
The basic principle is that you pay money in during your working years and then you get money back after you retire. Social Security is a pension that is run through the government. Therefore Samuelson wants to call it “welfare.”
It is not clear exactly what his logic is. The federal government runs a flood insurance program. Are the payments made to flood victims under this program “welfare?” How about the people who buy government bonds. Are they getting “welfare” when they get the interest on their bonds? If there is any logic to Mr. Samuelson’s singling out Social Security as a source of welfare, he didn’t waste any space sharing it with readers.
There are a few other points that deserve comment. He claims that the trillions of dollars of surplus built up by the trust fund over the last three decades were an “accident.” Actually, this surplus was predicted by the projections available at the time. If anyone did not expect a large surplus to arise from the tax increases and benefit cuts put in place in 1983 then their judgement and arithmetic skills have to be seriously questioned.
In terms of the program and the deficit, under the law it can only spend money that came from its designated tax or the interest on the bonds held by the trust fund. It has no legal authority to spend one dime beyond this sum. In that sense it cannot contribute to the deficit. Mr. Samuelson apparently wants to use Social Security taxes to pay for defense and other spending.
If we allow for the possibility that we could impose a “Social Security” tax on workers and then use this money for other purposes, the decision to not use it for other purposes can be said to make the deficit larger. But this is sort of like saying that our decision not to steal money from disabled people makes the deficit larger. After all, if we had a policy of stealing from the disabled, then the deficit would be lower. How can anyone argue with that.
Finally Samuelson decided to get a little creative with numbers to press his case. He told readers that:
“In 2008, a quarter of households headed by people 65 and over had incomes exceeding $75,000.”
That’s not what the Census data show. They put the share of the over 65 population with incomes of more than $75,000 at 15.8 percent. And, almost half of these people had incomes of less than $100,000. In this context it worth remembering that President Obama put his lower cutoff for those subject to tax increases at $200,000.
So, we are reminded yet again that Robert Samuelson really doesn’t like Social Security and that he is willing to make up numbers to push his case.
Yes, Robert Samuelson is at it again, spreading inaccurate and misleading claims about Social Security to justify taking money from retirees.
It seems that for some reason he has a hard time understanding the idea of a pension. This shouldn’t be that hard, many people have them.
The basic principle is that you pay money in during your working years and then you get money back after you retire. Social Security is a pension that is run through the government. Therefore Samuelson wants to call it “welfare.”
It is not clear exactly what his logic is. The federal government runs a flood insurance program. Are the payments made to flood victims under this program “welfare?” How about the people who buy government bonds. Are they getting “welfare” when they get the interest on their bonds? If there is any logic to Mr. Samuelson’s singling out Social Security as a source of welfare, he didn’t waste any space sharing it with readers.
There are a few other points that deserve comment. He claims that the trillions of dollars of surplus built up by the trust fund over the last three decades were an “accident.” Actually, this surplus was predicted by the projections available at the time. If anyone did not expect a large surplus to arise from the tax increases and benefit cuts put in place in 1983 then their judgement and arithmetic skills have to be seriously questioned.
In terms of the program and the deficit, under the law it can only spend money that came from its designated tax or the interest on the bonds held by the trust fund. It has no legal authority to spend one dime beyond this sum. In that sense it cannot contribute to the deficit. Mr. Samuelson apparently wants to use Social Security taxes to pay for defense and other spending.
If we allow for the possibility that we could impose a “Social Security” tax on workers and then use this money for other purposes, the decision to not use it for other purposes can be said to make the deficit larger. But this is sort of like saying that our decision not to steal money from disabled people makes the deficit larger. After all, if we had a policy of stealing from the disabled, then the deficit would be lower. How can anyone argue with that.
Finally Samuelson decided to get a little creative with numbers to press his case. He told readers that:
“In 2008, a quarter of households headed by people 65 and over had incomes exceeding $75,000.”
That’s not what the Census data show. They put the share of the over 65 population with incomes of more than $75,000 at 15.8 percent. And, almost half of these people had incomes of less than $100,000. In this context it worth remembering that President Obama put his lower cutoff for those subject to tax increases at $200,000.
So, we are reminded yet again that Robert Samuelson really doesn’t like Social Security and that he is willing to make up numbers to push his case.
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It seems not. A front page NYT article reported on the drop in profits that the drug industry expects over the next year as many of its blockbuster drugs lose patent protection. The article reports that some of the major pharmaceutical companies may cut back their research spending as a result.
The article never discussed the possibility of alternative funding mechanisms. For example, Joseph Stiglitz, the Nobel prize winning economist, has advocated a prize fund whereby the government would buy up patents and allow all drugs to be sold at their competitive market price. It is also possible for the government to simply pay for the research up front (it already finances almost half of biomedical research through the National Institutes of Health). This also would allow the vast majority of new drugs to be sold for a few dollars per prescription.
This sort of overview of the pharmaceutical industry would have been an appropriate place to discuss the merits of the current patent system for financing prescription drug research.
It seems not. A front page NYT article reported on the drop in profits that the drug industry expects over the next year as many of its blockbuster drugs lose patent protection. The article reports that some of the major pharmaceutical companies may cut back their research spending as a result.
The article never discussed the possibility of alternative funding mechanisms. For example, Joseph Stiglitz, the Nobel prize winning economist, has advocated a prize fund whereby the government would buy up patents and allow all drugs to be sold at their competitive market price. It is also possible for the government to simply pay for the research up front (it already finances almost half of biomedical research through the National Institutes of Health). This also would allow the vast majority of new drugs to be sold for a few dollars per prescription.
This sort of overview of the pharmaceutical industry would have been an appropriate place to discuss the merits of the current patent system for financing prescription drug research.
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Actually Zakaria is not upset that the government will give far more money to the average rich person this year than the average child. He is upset that it spends more money on the elderly.
The main reason that the government spends more on the elderly than the young is that we run a public pension program, Social Security, through the government. We also run a seniors’ health insurance program, Medicare, through the government. In both cases people pay a dedicated tax for these benefits. (The Medicare tax does not pay for the whole cost of the program.)
Zakaria is upset that seniors are allowed to receive the benefits that they have paid for. By the same logic, he should be upset that billionaires like Peter Peterson can get millions or even tens of millions of dollars in interest each year on the government bonds they own. After all, this money would be far better spent educating our children than being put in the pockets of these incredibly wealthy people. The Zakaria methodology would have us go after these interest payments on the debt, if it were applied consistently.
Actually Zakaria is not upset that the government will give far more money to the average rich person this year than the average child. He is upset that it spends more money on the elderly.
The main reason that the government spends more on the elderly than the young is that we run a public pension program, Social Security, through the government. We also run a seniors’ health insurance program, Medicare, through the government. In both cases people pay a dedicated tax for these benefits. (The Medicare tax does not pay for the whole cost of the program.)
Zakaria is upset that seniors are allowed to receive the benefits that they have paid for. By the same logic, he should be upset that billionaires like Peter Peterson can get millions or even tens of millions of dollars in interest each year on the government bonds they own. After all, this money would be far better spent educating our children than being put in the pockets of these incredibly wealthy people. The Zakaria methodology would have us go after these interest payments on the debt, if it were applied consistently.
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