The NYT had another piece suggesting that pessimism about the economy is preventing consumers from spending more. Actually, the current 5.5 percent saving rate is well below the post-war average, which is close to 8.0 percent. With tens of millions of baby boomers approaching retirement with almost no wealth, and many of the politicians in Washington planning to cut back Social Security and Medicare, it would be reasonable to expect the saving rate to rise rather than fall, meaning that consumption will weaken in the future.
The NYT had another piece suggesting that pessimism about the economy is preventing consumers from spending more. Actually, the current 5.5 percent saving rate is well below the post-war average, which is close to 8.0 percent. With tens of millions of baby boomers approaching retirement with almost no wealth, and many of the politicians in Washington planning to cut back Social Security and Medicare, it would be reasonable to expect the saving rate to rise rather than fall, meaning that consumption will weaken in the future.
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Yes, David Brooks devotes a column to the health care bill in which he refers to the “trauma of the past two years.” Wow, things must have been bad at the NYT’s oped pages. Did Mr. Brooks have nightmares about death panels?
Mr. Brooks’ trauma may explain why the column is so out of touch with reality. Brooks warns that:
“The number of people in those exchanges could thus skyrocket, especially as startup companies undermine their competitors with uninsured employees and lower costs.”
What does Brooks think he is saying here? As it stands, start-ups already do not have any obligation to pay for their workers’ health care. Furthermore, the absolute orthodoxy in economics (i.e. you are an idiot if you don’t accept it) is that health care payments come out of wages, so the savings to employers from not providing health care should simply end up as higher wages, so how will the start-ups benefit in this picture?
More importantly, if President Obama’s health care plan allows start-ups to be much more competitive domestically, won’t they also be much more competitive internationally? And, this is a big problem?
Maybe the NYT should let Mr. Brooks go on leave until he recovers from his trauma.
Yes, David Brooks devotes a column to the health care bill in which he refers to the “trauma of the past two years.” Wow, things must have been bad at the NYT’s oped pages. Did Mr. Brooks have nightmares about death panels?
Mr. Brooks’ trauma may explain why the column is so out of touch with reality. Brooks warns that:
“The number of people in those exchanges could thus skyrocket, especially as startup companies undermine their competitors with uninsured employees and lower costs.”
What does Brooks think he is saying here? As it stands, start-ups already do not have any obligation to pay for their workers’ health care. Furthermore, the absolute orthodoxy in economics (i.e. you are an idiot if you don’t accept it) is that health care payments come out of wages, so the savings to employers from not providing health care should simply end up as higher wages, so how will the start-ups benefit in this picture?
More importantly, if President Obama’s health care plan allows start-ups to be much more competitive domestically, won’t they also be much more competitive internationally? And, this is a big problem?
Maybe the NYT should let Mr. Brooks go on leave until he recovers from his trauma.
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The Planet Money segment of Morning Edition wrongly told listeners on Friday that Spain might be too big to save, implying that the country is too large for the European Central Bank (ECB) to cover its debts. This is not true.
The ECB, with the approval of the European Union, could easily cover the debts of Spain and any other country for the simple reason, to take Ben Bernanke’s line, that it has a printing press. It is possible that the ECB will opt not to save Spain, either because of concerns about inflation or simply out of a desire to teach Spain a lesson (i.e. it was stupid to join the euro) but this would be a choice. Spain could be saved if the euro zone countries want to save it.
It is also worth noting that Spain may well be better off if it is not saved. Its unemployment rate is currently over 20 percent. The austerity being demanded by the euro zone countries will prevent the unemployment rate from declining any time soon. By contrast, if Spain were to default on its debt and leave the euro it would be immediately be free to take steps to boost growth and employment. This could lead to a sharp turnaround and a rapid move back toward full employment.
This is exactly what happened in Argentina. It had a sharp 6-month plunge after its December 2001 default, but then had 7 years of solid growth until the world economic crisis in 2008 brought Argentina’s economy to a near standstill.
The Planet Money segment of Morning Edition wrongly told listeners on Friday that Spain might be too big to save, implying that the country is too large for the European Central Bank (ECB) to cover its debts. This is not true.
The ECB, with the approval of the European Union, could easily cover the debts of Spain and any other country for the simple reason, to take Ben Bernanke’s line, that it has a printing press. It is possible that the ECB will opt not to save Spain, either because of concerns about inflation or simply out of a desire to teach Spain a lesson (i.e. it was stupid to join the euro) but this would be a choice. Spain could be saved if the euro zone countries want to save it.
It is also worth noting that Spain may well be better off if it is not saved. Its unemployment rate is currently over 20 percent. The austerity being demanded by the euro zone countries will prevent the unemployment rate from declining any time soon. By contrast, if Spain were to default on its debt and leave the euro it would be immediately be free to take steps to boost growth and employment. This could lead to a sharp turnaround and a rapid move back toward full employment.
This is exactly what happened in Argentina. It had a sharp 6-month plunge after its December 2001 default, but then had 7 years of solid growth until the world economic crisis in 2008 brought Argentina’s economy to a near standstill.
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That is effectively what a USA Today article implied when it told readers that:
“U.S. [population] growth is the envy of most developed nations.”
The article implied that countries with stagnant or declining populations will experience economic hardship as a result. In fact, the impact of productivity growth in raising living standards is an order of magnitude greater than whatever drag demographics, in the form of rising dependency ratios, might be in slowing the growth of living standards. Furthermore, lower populations may directly improve living standards by reducing congestion and pollution and increasing the ratio of capital to labor. This is especially likely to be the case in the densely populated countries of Europe and Japan.
That is effectively what a USA Today article implied when it told readers that:
“U.S. [population] growth is the envy of most developed nations.”
The article implied that countries with stagnant or declining populations will experience economic hardship as a result. In fact, the impact of productivity growth in raising living standards is an order of magnitude greater than whatever drag demographics, in the form of rising dependency ratios, might be in slowing the growth of living standards. Furthermore, lower populations may directly improve living standards by reducing congestion and pollution and increasing the ratio of capital to labor. This is especially likely to be the case in the densely populated countries of Europe and Japan.
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The NYT ran a blognote providing background on Gene Sperling, who is likely to be selected as President Obama’s new National Economic Advisor. At one point the post refers to Sperling’s work in the Clinton administration and told readers that he is:
“particularly proud of the work he and colleagues did to create the Earned Income Tax Credit.”
Actually the Earned Income Tax Credit was a Nixon administration policy that first took effect in January of 1975.
[Addendum: the NYT has now corrected the post. Also, the EITC law was actually signed by Ford after Nixon resigned.]
The NYT ran a blognote providing background on Gene Sperling, who is likely to be selected as President Obama’s new National Economic Advisor. At one point the post refers to Sperling’s work in the Clinton administration and told readers that he is:
“particularly proud of the work he and colleagues did to create the Earned Income Tax Credit.”
Actually the Earned Income Tax Credit was a Nixon administration policy that first took effect in January of 1975.
[Addendum: the NYT has now corrected the post. Also, the EITC law was actually signed by Ford after Nixon resigned.]
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The Washington Post had an article on Estonia’s entry into the euro zone. It contrasted Estonia, along with Germany, as “growing” economies, with debt laden ones, like Greece and Ireland. It would have been worth noting that Estonia now has an unemployment rate of 16.2 percent. It’s economy shrank by more than 15 percent in the downturn and it is not projected to get back to its 2007 level of GDP until after 2015. For these reasons, it is strange to paint Estonia as a success story.
The Washington Post had an article on Estonia’s entry into the euro zone. It contrasted Estonia, along with Germany, as “growing” economies, with debt laden ones, like Greece and Ireland. It would have been worth noting that Estonia now has an unemployment rate of 16.2 percent. It’s economy shrank by more than 15 percent in the downturn and it is not projected to get back to its 2007 level of GDP until after 2015. For these reasons, it is strange to paint Estonia as a success story.
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I will depart from my policy of not commenting on articles where I am mentioned to clarify the issues (to me) surrounding Gene Sperling’s selection as a President Obama’s national economic advisor. The primary issue is not that Sperling got $900,000 from Goldman Sachs for part-time work, although that does look bad. The primary issue is that Sperling thought, and may still think, that the policies that laid the basis for the economic collapse were just fine.
Sperling saw nothing wrong with the stock market bubble that laid the basis for the 2001 recession. The economy did not begin to create jobs again until two and a half years after the beginning of this recession and even then it was only due to the growth of the housing bubble. Gene Sperling also saw nothing wrong with the growth of that bubble. Gene Sperling also saw nothing wrong with the financial deregulation of the Clinton years which, by the way, helped make Goldman Sachs lots of money. And, he saw nothing wrong with the over-valued dollar which gave the United States an enormous trade deficit. This trade deficit undermined the bargaining power of manufacturing workers and helped to redistribute income upward.
In short, Sperling has a horrible track record of supporting policies that were bad for the country and good for Wall Street. This track record is far more important than his $900,000 consulting fee in providing my basis for objecting to Sperling’s appointment. It is remarkable that it was not mentioned in this article.
I will depart from my policy of not commenting on articles where I am mentioned to clarify the issues (to me) surrounding Gene Sperling’s selection as a President Obama’s national economic advisor. The primary issue is not that Sperling got $900,000 from Goldman Sachs for part-time work, although that does look bad. The primary issue is that Sperling thought, and may still think, that the policies that laid the basis for the economic collapse were just fine.
Sperling saw nothing wrong with the stock market bubble that laid the basis for the 2001 recession. The economy did not begin to create jobs again until two and a half years after the beginning of this recession and even then it was only due to the growth of the housing bubble. Gene Sperling also saw nothing wrong with the growth of that bubble. Gene Sperling also saw nothing wrong with the financial deregulation of the Clinton years which, by the way, helped make Goldman Sachs lots of money. And, he saw nothing wrong with the over-valued dollar which gave the United States an enormous trade deficit. This trade deficit undermined the bargaining power of manufacturing workers and helped to redistribute income upward.
In short, Sperling has a horrible track record of supporting policies that were bad for the country and good for Wall Street. This track record is far more important than his $900,000 consulting fee in providing my basis for objecting to Sperling’s appointment. It is remarkable that it was not mentioned in this article.
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Both the New York Times and the Washington Post decided to make major news stories out of a new Census report on state finances for fiscal 2009. Both papers highlighted a reported 30 percent decline in revenue for the year.
While this might sound like a terrifying plunge, the bulk of this reported decline in revenue was attributable to the loss in value of investments held by the states, most importantly stock held by their pension funds. The fact that the stock market fell in the 2009 fiscal year (June 30, 2008 to June 30, 2009 in almost all states) is not exactly news. The S&P 500 fell by 27.9 percent from the end of June, 2008 to the end of June, 2009.
Furthermore, it would have been worth pointing out that this plunge has been largely reversed. The S&P rose 12 percent during the states’ 2010 fiscal year and its most recent close has brought the market almost back to its June 2008 level. In other words, the plunge in revenue that is the highlight of these articles has already been almost completely reversed by the subsequent rise in the stock market.
This does not mean that the states do not still face serious funding shortfalls. Revenue has been hard hit by the recession and stocks still have not provided the return that was anticipated, meaning that pensions do face shortfalls. However, it would have been helpful to readers to point out that the plunge in investment values has been been reversed rather than to highlight this plunge as a major cause for concern.
Hat tip to Gary Burtless.
Both the New York Times and the Washington Post decided to make major news stories out of a new Census report on state finances for fiscal 2009. Both papers highlighted a reported 30 percent decline in revenue for the year.
While this might sound like a terrifying plunge, the bulk of this reported decline in revenue was attributable to the loss in value of investments held by the states, most importantly stock held by their pension funds. The fact that the stock market fell in the 2009 fiscal year (June 30, 2008 to June 30, 2009 in almost all states) is not exactly news. The S&P 500 fell by 27.9 percent from the end of June, 2008 to the end of June, 2009.
Furthermore, it would have been worth pointing out that this plunge has been largely reversed. The S&P rose 12 percent during the states’ 2010 fiscal year and its most recent close has brought the market almost back to its June 2008 level. In other words, the plunge in revenue that is the highlight of these articles has already been almost completely reversed by the subsequent rise in the stock market.
This does not mean that the states do not still face serious funding shortfalls. Revenue has been hard hit by the recession and stocks still have not provided the return that was anticipated, meaning that pensions do face shortfalls. However, it would have been helpful to readers to point out that the plunge in investment values has been been reversed rather than to highlight this plunge as a major cause for concern.
Hat tip to Gary Burtless.
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Given that the unemployment rate is 9.8 percent, that more than 1 million people a year are losing their homes to foreclosure, and that corporate profits are back at pre-recession levels, one would think that there are plenty of legitimate grounds to criticize President Obama and the Democrats in Congress. But, the NYT decided not to restrict itself it to reality.
In a piece warning the Republicans not to misread their mandate the NYT explained that this is exactly what the Democrats had done:
“It’s also how Democrats elected in 2006 and 2008 came to enact a series of expensive new programs without ever really bothering to explain to the public why such investments were necessary or how they would be paid for. They wanted to believe the voters had risen up to demand a resurgence of liberal government, when in fact all the evidence suggested that all anxious voters really wanted was a government that seemed to work.”
It would have been great if the NYT could have given 2 or 3 examples of “expensive new programs” that the Democrats had enacted without paying for. The only expensive program that sticks out at the moment is the health care reform bill. This bill is paid for, at least according to the Congressional Budget Office, even if not according to the NYT.
Given the fact that this piece is completely out of touch with reality perhaps the NYT has decided to introduce a comics section.
Given that the unemployment rate is 9.8 percent, that more than 1 million people a year are losing their homes to foreclosure, and that corporate profits are back at pre-recession levels, one would think that there are plenty of legitimate grounds to criticize President Obama and the Democrats in Congress. But, the NYT decided not to restrict itself it to reality.
In a piece warning the Republicans not to misread their mandate the NYT explained that this is exactly what the Democrats had done:
“It’s also how Democrats elected in 2006 and 2008 came to enact a series of expensive new programs without ever really bothering to explain to the public why such investments were necessary or how they would be paid for. They wanted to believe the voters had risen up to demand a resurgence of liberal government, when in fact all the evidence suggested that all anxious voters really wanted was a government that seemed to work.”
It would have been great if the NYT could have given 2 or 3 examples of “expensive new programs” that the Democrats had enacted without paying for. The only expensive program that sticks out at the moment is the health care reform bill. This bill is paid for, at least according to the Congressional Budget Office, even if not according to the NYT.
Given the fact that this piece is completely out of touch with reality perhaps the NYT has decided to introduce a comics section.
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The NYT profiled Indiana’s governor Mitch Daniels as a responsible deficit hawk. At one point it describes his agenda for saving money on Social Security and Medicare:
“Benefits should be cut for high-income and healthy people.”
It is worth noting that most of the proposals for changes in the Social Security benefit formula of the type described in the article would reduce benefits for people who have had average earnings as low as $40,000 a year. This is not an income level that would usually be described as “high income.” For tax purposes, President Obama and the Democrats in Congress have used $200,000 as a cutoff.
The NYT profiled Indiana’s governor Mitch Daniels as a responsible deficit hawk. At one point it describes his agenda for saving money on Social Security and Medicare:
“Benefits should be cut for high-income and healthy people.”
It is worth noting that most of the proposals for changes in the Social Security benefit formula of the type described in the article would reduce benefits for people who have had average earnings as low as $40,000 a year. This is not an income level that would usually be described as “high income.” For tax purposes, President Obama and the Democrats in Congress have used $200,000 as a cutoff.
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