Casey Mulligan has a blognote in the NYT today dismissing concerns about a double-dip in the housing market telling readers that:
“the price and construction data so far do not seem to suggest that home values will be significantly different this year than they were in 2010.”
Those looking at Mr. Mulligan’s charts will note that he only shows the Case-Shiller data on home prices through September. This is striking because the Case-Shiller 20-city index was released the last Tuesday of 2010. This index showed a price decline of 1.3 percent from September to October. Over the three months since prices temporarily peaked in July, at the expiration of the first-time buyers tax credit, home prices have fallen at a 9.2 percent annual rate.
Home prices in the bottom third of the market, which was most affected by the credit, are plunging in almost every city. These declines are likely to affect the higher end of the market in the year ahead since the people selling bottom tier homes are the ones buying more expensive homes. These data form the basis for most concerns about further declines in house prices. Without the most recent data it is difficult to make useful projections about 2011 prices.
Casey Mulligan has a blognote in the NYT today dismissing concerns about a double-dip in the housing market telling readers that:
“the price and construction data so far do not seem to suggest that home values will be significantly different this year than they were in 2010.”
Those looking at Mr. Mulligan’s charts will note that he only shows the Case-Shiller data on home prices through September. This is striking because the Case-Shiller 20-city index was released the last Tuesday of 2010. This index showed a price decline of 1.3 percent from September to October. Over the three months since prices temporarily peaked in July, at the expiration of the first-time buyers tax credit, home prices have fallen at a 9.2 percent annual rate.
Home prices in the bottom third of the market, which was most affected by the credit, are plunging in almost every city. These declines are likely to affect the higher end of the market in the year ahead since the people selling bottom tier homes are the ones buying more expensive homes. These data form the basis for most concerns about further declines in house prices. Without the most recent data it is difficult to make useful projections about 2011 prices.
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Yep, Brooks said that proposals to raise $150 billion a year from Wall Street banks and speculators are now on the national political agenda. So are alternatives to patent monopolies for supporting prescription drug research and international Medicare vouchers that will allow beneficiaries to take advantage of the more efficient health care systems in Germany, Canada and elsewhere, with the government and the beneficiary splitting the savings.
Brooks told readers this morning that “…the exciting thing about this moment is that everything is on the table,” so all of these policies must be under consideration. Okay, Brooks probably didn’t really mean this, but we can still have fun.
He should also correct his characterization of big versus small government. He seems to use government spending as a share of GDP as a measure of whether government is “big.” In fact, a government that spends less as a share of GDP can easily have more control over the economy than a larger government. For example, a government can mandate private expenditures such as the purchase of health care rather than pay for health care through direct spending. Or, it can grant monopolies like patents and copyrights instead of paying subsidies. It can also give out tax expenditures, like the mortgage interest deduction, instead of paying out subsidies.
The government can also squeeze large segments of the workforce by having the Federal Reserve Board pursue policies that push up interest rates and therefore unemployment. Such policies would also have the effect of squeezing state and local governments, forcing them to cut back spending and/or raise taxes. In short, there is little direct relationship between the government’s share of GDP and its impact on the economy.
Yep, Brooks said that proposals to raise $150 billion a year from Wall Street banks and speculators are now on the national political agenda. So are alternatives to patent monopolies for supporting prescription drug research and international Medicare vouchers that will allow beneficiaries to take advantage of the more efficient health care systems in Germany, Canada and elsewhere, with the government and the beneficiary splitting the savings.
Brooks told readers this morning that “…the exciting thing about this moment is that everything is on the table,” so all of these policies must be under consideration. Okay, Brooks probably didn’t really mean this, but we can still have fun.
He should also correct his characterization of big versus small government. He seems to use government spending as a share of GDP as a measure of whether government is “big.” In fact, a government that spends less as a share of GDP can easily have more control over the economy than a larger government. For example, a government can mandate private expenditures such as the purchase of health care rather than pay for health care through direct spending. Or, it can grant monopolies like patents and copyrights instead of paying subsidies. It can also give out tax expenditures, like the mortgage interest deduction, instead of paying out subsidies.
The government can also squeeze large segments of the workforce by having the Federal Reserve Board pursue policies that push up interest rates and therefore unemployment. Such policies would also have the effect of squeezing state and local governments, forcing them to cut back spending and/or raise taxes. In short, there is little direct relationship between the government’s share of GDP and its impact on the economy.
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The Post used this term in a piece reporting that the J.P. Morgan executive may become President Obama’s next chief of staff. In fact, NAFTA, which Daley helped push through Congress, and other trade deals that he has supported included many protectionist provisions, most importantly increasing intellectual property protections. These deals also did little or nothing to free up trade in highly paid professional services like those provided by doctors and lawyers.
The trade deals supported by Daley were primarily about subjecting manufacturing workers to increased competition with low-paid workers in the developing world, thereby driving down their wages. They had little to do with free trade.
The Post used this term in a piece reporting that the J.P. Morgan executive may become President Obama’s next chief of staff. In fact, NAFTA, which Daley helped push through Congress, and other trade deals that he has supported included many protectionist provisions, most importantly increasing intellectual property protections. These deals also did little or nothing to free up trade in highly paid professional services like those provided by doctors and lawyers.
The trade deals supported by Daley were primarily about subjecting manufacturing workers to increased competition with low-paid workers in the developing world, thereby driving down their wages. They had little to do with free trade.
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In reporting on a WikiLeaks cables showing U.S. State Department officials acting as sales agents for Boeing, the New York Times decided to tell readers that the real motivation was high-paying jobs for American workers. This leak might be seen as rather embarrassing since most small businesses cannot count on top State Department officials spending their time pushing their product. These businesses have to pay for their own marketing.
However, the NYT threw in the comment:
“It is not surprising that the United States helps American companies doing business abroad, given that each sale is worth thousands of jobs.”
Of course most immediately each sale means tens of millions of additional profit for Boeing. The NYT presents no basis whatsoever for its assertion that the concern for American jobs was a larger motivational factor for the State Department sales pitches than the concern for Boeing’s profits.
It is also worth noting that in the standard trade models that economists use to argue the merits of lower trade barriers, each sale is not worth “thousands of jobs.” The standard trade models assume a fully employed economy. In these models, at best an additional sale could mean that a small number of workers are employed at modestly more productive jobs, leading to small gains in wages and efficiency. If administration officials actually believed that each sale of a Boeing jet abroad means thousands of jobs then they do not accept the standard economic arguments that are used to push for trade agreements.
In reporting on a WikiLeaks cables showing U.S. State Department officials acting as sales agents for Boeing, the New York Times decided to tell readers that the real motivation was high-paying jobs for American workers. This leak might be seen as rather embarrassing since most small businesses cannot count on top State Department officials spending their time pushing their product. These businesses have to pay for their own marketing.
However, the NYT threw in the comment:
“It is not surprising that the United States helps American companies doing business abroad, given that each sale is worth thousands of jobs.”
Of course most immediately each sale means tens of millions of additional profit for Boeing. The NYT presents no basis whatsoever for its assertion that the concern for American jobs was a larger motivational factor for the State Department sales pitches than the concern for Boeing’s profits.
It is also worth noting that in the standard trade models that economists use to argue the merits of lower trade barriers, each sale is not worth “thousands of jobs.” The standard trade models assume a fully employed economy. In these models, at best an additional sale could mean that a small number of workers are employed at modestly more productive jobs, leading to small gains in wages and efficiency. If administration officials actually believed that each sale of a Boeing jet abroad means thousands of jobs then they do not accept the standard economic arguments that are used to push for trade agreements.
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The Post ran a major article telling readers that the value of the benefits they receive under Medicare will vastly exceed the taxes they paid into the program based on a new analysis from the Urban Institute. It then tells readers that many workers think that they paid for their Medicare benefits and:
“…that mistaken impression complicates the job for policymakers trying to build political support in the coming months for dealing with deficits that could drag the economy back down.”
The idea that workers have paid for their benefits actually would be close to accurate if the U.S. health care system was anywhere near as efficient as the health care systems in other wealthy countries. The per person cost of care in these countries, all of which enjoy longer life expectancies than the United States, are less than half as much as in the United States.
It is great to see that the Post is worried that “mistaken impressions” by the public might complicate the work of policymakers. There are a whole set of mistaken impressions that it could try to combat rather than foster, starting with the idea that the budget deficit is somehow at the center of the country’s economic problems.
The Post ran a major article telling readers that the value of the benefits they receive under Medicare will vastly exceed the taxes they paid into the program based on a new analysis from the Urban Institute. It then tells readers that many workers think that they paid for their Medicare benefits and:
“…that mistaken impression complicates the job for policymakers trying to build political support in the coming months for dealing with deficits that could drag the economy back down.”
The idea that workers have paid for their benefits actually would be close to accurate if the U.S. health care system was anywhere near as efficient as the health care systems in other wealthy countries. The per person cost of care in these countries, all of which enjoy longer life expectancies than the United States, are less than half as much as in the United States.
It is great to see that the Post is worried that “mistaken impressions” by the public might complicate the work of policymakers. There are a whole set of mistaken impressions that it could try to combat rather than foster, starting with the idea that the budget deficit is somehow at the center of the country’s economic problems.
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The NYT apparently has not learned about the financial crisis that followed in the wake of the collapse of the housing bubble. That is the only possible conclusion that readers can take away from an article about anger at public sector workers that failed to note that the plunge in the stock market in 2008-2009 was the major cause of the shortfalls in public sector pensions.
Certainly if the reporters and/or editors at the NYT had known about the financial crisis and the stock market plunge it would have been featured prominently in this piece.
The NYT apparently has not learned about the financial crisis that followed in the wake of the collapse of the housing bubble. That is the only possible conclusion that readers can take away from an article about anger at public sector workers that failed to note that the plunge in the stock market in 2008-2009 was the major cause of the shortfalls in public sector pensions.
Certainly if the reporters and/or editors at the NYT had known about the financial crisis and the stock market plunge it would have been featured prominently in this piece.
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The NYT can’t quite decide whether the southern European countries (Spain, Portugal, Italy and Greece) suffer from too many or too few workers, but it is anxious to tell readers that the situation is disastrous. The article begins by telling the story of a young Italian lawyer who can’t find a job commenting that:
“the most highly educated generation in the history of the Mediterranean hits one of its worst job markets.”
This is the story of too many workers and too few jobs. It sounds and is really bad.
But then the NYT flipped 180 degrees and decided that the real problem is the opposite, too few workers:
“experts warn of a looming demographic disaster in Southern Europe, which has among the lowest birth rates in the Western world. With pensioners living longer and young people entering the work force later — and paying less in taxes because their salaries are so low — it is only a matter of time before state coffers run dry.”
Okay, is the problem too many workers with too few jobs or too few workers, with too much demand? Either one of these stories is possible, but both are not, or at least not at the same time.
To help clarify matters, the NYT gives us this quote from Boston University Economist Lawrence Kotlikoff:
“If these [low] fertility rates continue through time, you won’t have Italians, Spanish, Greeks, Portuguese or Russians, … I imagine the Chinese will just move into Southern Europe.”
According to Professor Kotlikoff, there should be a huge shortage of young workers, which would drive up wages, and plunging demand for homes, which will make housing cheap. This sounds like a great story for young people in southern Europe, as long as they are not prejudiced against the Chinese.
But then we get back to the labor surplus story:
“‘This is the best-educated generation in Spanish history, and they are entering a job market in which they are underutilized,’ said Ignacio Fernández Toxo, the leader of the Comisiones Obreras, one of Spain’s two largest labor unions. ‘It is a tragedy for the country.’”
Then we shift back to a simultaneous surplus and shortage of labor with another quote from Professor Kotlikoff:
“For Dr. Kotlikoff, the solution is simple: ‘We have to change the labor laws. Not gradually, but quickly.’” But the piece then complains that changes are coming slowly:
“New austerity measures in Spain, where the unemployment rate is 20 percent, the highest in the European Union, are further narrowing the employment window. Spain has pledged to raise its retirement age to 67 from 65, but incrementally over the next 20 years.
“‘Now people are being sent into early retirement at age 55,’ said Sara Sanfulgencio, 28, who has a master’s degree in marketing but is unemployed and living in Madrid with her mother, who owns a children’s shoe store.”
Okay, so if the retirement age were instantly raised to 67, as this article is advocating, how is this supposed to create more jobs for young people like Ms. Sanfulgencio? In a context of an economy operating well below full employment it would seem her job prospects are improved by reducing the competition from older workers, which means keeping the retirement age low.
In short, the NYT clearly does not like the economic policies in southern Europe and it is anxious to tell readers that they are disastrous, it is just not sure why.
One important item missing from this picture is the European Central Bank (ECB). It could be buying up large amounts of public debt from Spain and other European countries both to boost demand and to alleviate their debt burden. (The interest on debt held by the ECB could be refunded back to European governments, thereby imposing no burden on their taxpayers.) This could help to increase employment. Also, if it leads to a modest increase in the inflation rate from its current new zero level, it would alleviate debt burdens and help to facilitate the necessary process of real wage adjustments between countries.
It is also worth noting that the current downturn is the result of the incompetence of the ECB which opted to ignore the growth of dangerous housing bubbles in Spain, Ireland and elsewhere. Remarkably, no one at the ECB lost their job or probably even missed a promotion as a result of this disastrous policy failure.
The NYT can’t quite decide whether the southern European countries (Spain, Portugal, Italy and Greece) suffer from too many or too few workers, but it is anxious to tell readers that the situation is disastrous. The article begins by telling the story of a young Italian lawyer who can’t find a job commenting that:
“the most highly educated generation in the history of the Mediterranean hits one of its worst job markets.”
This is the story of too many workers and too few jobs. It sounds and is really bad.
But then the NYT flipped 180 degrees and decided that the real problem is the opposite, too few workers:
“experts warn of a looming demographic disaster in Southern Europe, which has among the lowest birth rates in the Western world. With pensioners living longer and young people entering the work force later — and paying less in taxes because their salaries are so low — it is only a matter of time before state coffers run dry.”
Okay, is the problem too many workers with too few jobs or too few workers, with too much demand? Either one of these stories is possible, but both are not, or at least not at the same time.
To help clarify matters, the NYT gives us this quote from Boston University Economist Lawrence Kotlikoff:
“If these [low] fertility rates continue through time, you won’t have Italians, Spanish, Greeks, Portuguese or Russians, … I imagine the Chinese will just move into Southern Europe.”
According to Professor Kotlikoff, there should be a huge shortage of young workers, which would drive up wages, and plunging demand for homes, which will make housing cheap. This sounds like a great story for young people in southern Europe, as long as they are not prejudiced against the Chinese.
But then we get back to the labor surplus story:
“‘This is the best-educated generation in Spanish history, and they are entering a job market in which they are underutilized,’ said Ignacio Fernández Toxo, the leader of the Comisiones Obreras, one of Spain’s two largest labor unions. ‘It is a tragedy for the country.’”
Then we shift back to a simultaneous surplus and shortage of labor with another quote from Professor Kotlikoff:
“For Dr. Kotlikoff, the solution is simple: ‘We have to change the labor laws. Not gradually, but quickly.’” But the piece then complains that changes are coming slowly:
“New austerity measures in Spain, where the unemployment rate is 20 percent, the highest in the European Union, are further narrowing the employment window. Spain has pledged to raise its retirement age to 67 from 65, but incrementally over the next 20 years.
“‘Now people are being sent into early retirement at age 55,’ said Sara Sanfulgencio, 28, who has a master’s degree in marketing but is unemployed and living in Madrid with her mother, who owns a children’s shoe store.”
Okay, so if the retirement age were instantly raised to 67, as this article is advocating, how is this supposed to create more jobs for young people like Ms. Sanfulgencio? In a context of an economy operating well below full employment it would seem her job prospects are improved by reducing the competition from older workers, which means keeping the retirement age low.
In short, the NYT clearly does not like the economic policies in southern Europe and it is anxious to tell readers that they are disastrous, it is just not sure why.
One important item missing from this picture is the European Central Bank (ECB). It could be buying up large amounts of public debt from Spain and other European countries both to boost demand and to alleviate their debt burden. (The interest on debt held by the ECB could be refunded back to European governments, thereby imposing no burden on their taxpayers.) This could help to increase employment. Also, if it leads to a modest increase in the inflation rate from its current new zero level, it would alleviate debt burdens and help to facilitate the necessary process of real wage adjustments between countries.
It is also worth noting that the current downturn is the result of the incompetence of the ECB which opted to ignore the growth of dangerous housing bubbles in Spain, Ireland and elsewhere. Remarkably, no one at the ECB lost their job or probably even missed a promotion as a result of this disastrous policy failure.
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It seems not from this article on how drug companies are now giving out coupons to cover part of the patients’ co-payment for expensive brand drugs. The logic is simple: the patent monopoly allows the company to sell the drug for a price that could be several hundred times its cost of production. This gives it an enormous incentive to try to get patients to use their drug and for doctors to prescribe it. This means that it can be very profitable to give out coupons that get around the co-payment which insurers charge as a disincentive to use expensive drugs.
This is the sort of gaming that economic theory predicts would result from government intervention in the market, like a patent monopoly. If this sort of behavior occurred in response to a government intervention intended to help low and moderate income people, like for example rent controls, the coverage would likely include comments from economists ridiculing such ill-advised interventions in the market. However, this piece includes no discussion whatsoever of the fact that the resources wasted in this gaming, and the possible negative health outcomes from people using less than optimal drugs, are entirely the result of patent monopolies. None of this would be occurring if drug research was financed through other mechanisms and drugs sold at their free market price, which would typically be less than $10 per prescription.
It seems not from this article on how drug companies are now giving out coupons to cover part of the patients’ co-payment for expensive brand drugs. The logic is simple: the patent monopoly allows the company to sell the drug for a price that could be several hundred times its cost of production. This gives it an enormous incentive to try to get patients to use their drug and for doctors to prescribe it. This means that it can be very profitable to give out coupons that get around the co-payment which insurers charge as a disincentive to use expensive drugs.
This is the sort of gaming that economic theory predicts would result from government intervention in the market, like a patent monopoly. If this sort of behavior occurred in response to a government intervention intended to help low and moderate income people, like for example rent controls, the coverage would likely include comments from economists ridiculing such ill-advised interventions in the market. However, this piece includes no discussion whatsoever of the fact that the resources wasted in this gaming, and the possible negative health outcomes from people using less than optimal drugs, are entirely the result of patent monopolies. None of this would be occurring if drug research was financed through other mechanisms and drugs sold at their free market price, which would typically be less than $10 per prescription.
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A chart accompanying an NYT piece on the difficulty of saving shows the sharp decline in the national savings rate in the 90s and the 00s. The piece suggests that this is due to the increased difficulty that people have in saving. The more obvious explanation is that the wealth created by the stock bubble in the 90s and the housing bubble in the last decade led people to consume more and save less. The effect of wealth in increasing consumption is one of the most widely accepted behavioral effects in economics.
A chart accompanying an NYT piece on the difficulty of saving shows the sharp decline in the national savings rate in the 90s and the 00s. The piece suggests that this is due to the increased difficulty that people have in saving. The more obvious explanation is that the wealth created by the stock bubble in the 90s and the housing bubble in the last decade led people to consume more and save less. The effect of wealth in increasing consumption is one of the most widely accepted behavioral effects in economics.
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