Ireland is in the headlines these days as its government struggles with insolvency. Remarkably, none of the news stories remember to point out that Ireland was a model of fiscal responsibility in the years leading up to its current disaster. Not only did it balance its budget, Ireland ran large budget surpluses in the 5 years preceding its collapse in 2008. Its peak surplus in 2006 was 2.9 percent of GDP, the equivalent of a surplus of roughly $420 billion in the United States.
Like the deficit hawks in the United States, Ireland’s political leaders ignored the country’s massive housing bubble, the collapse of which sank its economy. It is interesting to note that, while Ireland’s background to the deficit crisis is generally ignored, news reports on Greece’s financial difficulties routinely referred to its large budget deficits in the years leading up to the crisis.
Ireland is in the headlines these days as its government struggles with insolvency. Remarkably, none of the news stories remember to point out that Ireland was a model of fiscal responsibility in the years leading up to its current disaster. Not only did it balance its budget, Ireland ran large budget surpluses in the 5 years preceding its collapse in 2008. Its peak surplus in 2006 was 2.9 percent of GDP, the equivalent of a surplus of roughly $420 billion in the United States.
Like the deficit hawks in the United States, Ireland’s political leaders ignored the country’s massive housing bubble, the collapse of which sank its economy. It is interesting to note that, while Ireland’s background to the deficit crisis is generally ignored, news reports on Greece’s financial difficulties routinely referred to its large budget deficits in the years leading up to the crisis.
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The Post told readers that industrial production was unchanged in October. This is true, but that is the result of a 3.4 percent plunge in the output of utilities, which is primarily a function of the weather. Manufacturing output increased by 0.5 percent in October and a reported decline of 0.2 percent in September was revised to a gain of 0.1 percent.
The Post told readers that industrial production was unchanged in October. This is true, but that is the result of a 3.4 percent plunge in the output of utilities, which is primarily a function of the weather. Manufacturing output increased by 0.5 percent in October and a reported decline of 0.2 percent in September was revised to a gain of 0.1 percent.
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Yes, that would be the Rivlin-Domenici commission. In elite Washington circles ignorance is a credential.
Yes, that would be the Rivlin-Domenici commission. In elite Washington circles ignorance is a credential.
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Listeners might have thought that 9.6 percent unemployment, with 25 million people unemployed, underemployed, or who have given up looking for work altogether was the biggest problem facing the country today. But, NPR knows better.
It concluded a fawning interview with New Hampshire Senator Judd Gregg by referring the deficit as a “great problem.” It would have been interesting if they explained to listeners how they arrived at this conclusion.
People who know economics know that current deficits are due to the collapse of the housing bubble. NPR had virtually no time for analysts who warned of this entirely predictable disaster (unlike the endless hours that it devotes to deficits). If deficits were smaller today we would have fewer jobs and higher unemployment. It is not clear why anyone would advocate this outcome.
In the longer term, the large projected deficits are attributable to a projected explosion of health care costs in the United States. Per person costs are projected to rise from a bit more than twice the average of other wealthy countries to 3 or 4 times the average per person cost. If health care costs increase as projected, it will have a devastating impact on the economy. It will also lead to a large budget deficit. If U.S. health care costs were comparable to those in Canada, Germany or other wealthy countries, the United States would be looking at long-term surpluses, not deficits.
A competent interviewer would have asked Senator Gregg why he persists in misrepresenting a health care problem as a budget problem.
Listeners might have thought that 9.6 percent unemployment, with 25 million people unemployed, underemployed, or who have given up looking for work altogether was the biggest problem facing the country today. But, NPR knows better.
It concluded a fawning interview with New Hampshire Senator Judd Gregg by referring the deficit as a “great problem.” It would have been interesting if they explained to listeners how they arrived at this conclusion.
People who know economics know that current deficits are due to the collapse of the housing bubble. NPR had virtually no time for analysts who warned of this entirely predictable disaster (unlike the endless hours that it devotes to deficits). If deficits were smaller today we would have fewer jobs and higher unemployment. It is not clear why anyone would advocate this outcome.
In the longer term, the large projected deficits are attributable to a projected explosion of health care costs in the United States. Per person costs are projected to rise from a bit more than twice the average of other wealthy countries to 3 or 4 times the average per person cost. If health care costs increase as projected, it will have a devastating impact on the economy. It will also lead to a large budget deficit. If U.S. health care costs were comparable to those in Canada, Germany or other wealthy countries, the United States would be looking at long-term surpluses, not deficits.
A competent interviewer would have asked Senator Gregg why he persists in misrepresenting a health care problem as a budget problem.
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David Brooks complains that liberals used rigorous economic models.
“The economic approach embraced by the most prominent liberals over the past few years is mostly mechanical. The economy is treated like a big machine; the people in it like rational, utility maximizing cogs. The performance of the economic machine can be predicted with quantitative macroeconomic models.
These models can be used to make highly specific projections. If the government borrows $1 and then spends it, it will produce $1.50 worth of economic activity. If the government spends $800 billion on a stimulus package, that will produce 3.5 million in new jobs.
Everything is rigorous. Everything is science.”
Brooks contrasts this approach with the moralizing and whining of conservatives:
“Conservatives, who are usually stereotyped as narrow-eyed business-school types, have gone all Oprah-esque in trying to argue against these liberals. If the government borrows trillions of dollars, this will increase public anxiety and uncertainty, the conservatives worry.”
He then concludes that because the economy is still weak, we should listen to the conservatives and cut spending and taxes.
Actually, the liberal models have performed quite well if Brooks actually bothered to look. The stimulus was projected to create 3.7 million jobs in its original form. The bill actually approved by Congress contained roughly one-third less stimulus, so we should have expected it to create roughly 2.5 million jobs. No one who looked at the models that Brooks is condemning would have thought that this would have been sufficient to restore the economy to normal levels of output and employment in an economy that had lost over 6 million jobs by the time the stimulus kicked in.
Brooks also misrepresents the attitude of liberal economists to the moralistic conservatives who just want to give all our money to rich people. All of their whining has specific implications. For example, when Brooks or some other conservative complains that businesses aren’t hiring because of all the uncertainty about taxes and regulation, then the implication is that businesses are finding ways to meet their demand for labor in ways that don’t involve permanent hires.
The obvious mechanisms would be to increase average hours per worker or increase the hiring of temps. Liberal and progressive economists insist on examining the evidence to see whether it supports the whining of the conservatives. In this case (and all others) it doesn’t. The increase in hours per worker since the trough last fall has been very modest and average hours are still well below their pre-recession level. Temp employment has rebounded very weakly and is also far below its pre-recession level.
In short, Brooks is not just complaining about the economic models of liberals. He is also complaining that liberals try to examine the logical implications of their whining and look for evidence of these whinings being accurate. Brooks’ view is apparently that we just give in to conservatives since this is the only way to get them to stop whining.
David Brooks complains that liberals used rigorous economic models.
“The economic approach embraced by the most prominent liberals over the past few years is mostly mechanical. The economy is treated like a big machine; the people in it like rational, utility maximizing cogs. The performance of the economic machine can be predicted with quantitative macroeconomic models.
These models can be used to make highly specific projections. If the government borrows $1 and then spends it, it will produce $1.50 worth of economic activity. If the government spends $800 billion on a stimulus package, that will produce 3.5 million in new jobs.
Everything is rigorous. Everything is science.”
Brooks contrasts this approach with the moralizing and whining of conservatives:
“Conservatives, who are usually stereotyped as narrow-eyed business-school types, have gone all Oprah-esque in trying to argue against these liberals. If the government borrows trillions of dollars, this will increase public anxiety and uncertainty, the conservatives worry.”
He then concludes that because the economy is still weak, we should listen to the conservatives and cut spending and taxes.
Actually, the liberal models have performed quite well if Brooks actually bothered to look. The stimulus was projected to create 3.7 million jobs in its original form. The bill actually approved by Congress contained roughly one-third less stimulus, so we should have expected it to create roughly 2.5 million jobs. No one who looked at the models that Brooks is condemning would have thought that this would have been sufficient to restore the economy to normal levels of output and employment in an economy that had lost over 6 million jobs by the time the stimulus kicked in.
Brooks also misrepresents the attitude of liberal economists to the moralistic conservatives who just want to give all our money to rich people. All of their whining has specific implications. For example, when Brooks or some other conservative complains that businesses aren’t hiring because of all the uncertainty about taxes and regulation, then the implication is that businesses are finding ways to meet their demand for labor in ways that don’t involve permanent hires.
The obvious mechanisms would be to increase average hours per worker or increase the hiring of temps. Liberal and progressive economists insist on examining the evidence to see whether it supports the whining of the conservatives. In this case (and all others) it doesn’t. The increase in hours per worker since the trough last fall has been very modest and average hours are still well below their pre-recession level. Temp employment has rebounded very weakly and is also far below its pre-recession level.
In short, Brooks is not just complaining about the economic models of liberals. He is also complaining that liberals try to examine the logical implications of their whining and look for evidence of these whinings being accurate. Brooks’ view is apparently that we just give in to conservatives since this is the only way to get them to stop whining.
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Ross Douthat denounced progressives who attacked the Bowles-Simpson proposals for cutting Social Security and Medicare to help finance lower taxes on the hard-pressed wealthy. He got a few things wrong in the process.
First, Douthat complains that businesses in the United States have to “labor under one of the higher corporate tax rates in the developed West.” While the marginal tax rate in the United States is somewhat higher than the average, because of the extensive loopholes in the corporate tax, the effective tax rate in the United States is lower than the average for the OECD. There certainly is no general opposition among liberals to reform that would reduce the tax rate while offsetting the lower rates with fewer deductions.
He complains that in the liberal/progressive’s world, “the Social Security retirement age never budges, no matter how high average life expectancy climbs.” Mr. Douthat apparently has not heard that the Social Security retirement age is rising already. The age at which workers collect full benefits has already risen from 65 to 66. It will rise to 67 for workers who reach age 62 after 2022. Also, although life expectancy has been rising, this is mostly due to increases for workers in the top half of the income distribution. The increase in the retirement age already in law will eat up most of the increase in life expectancy over the last 40 years for workers in the bottom half of the wage distribution.
He also appears to believe that Social Security is a subsidy for middle class workers. This is not the case. Because of its progressive benefit structure, most middle income workers will get a real return of less than 2.0 percent on the money they paid in payroll taxes.
Douthat also complains about the government warping the health care marketplace. While this is true, the main distortions are not being primarily protected by liberals. Patent protection for prescription drugs cause them to be sold at prices that are several hundred percent above their competitive market price, however conservatives tend to be the biggest proponents of stronger patent protection. Increased international competition would also go far toward bringing our health care costs more in line with the rest of the world.
Douthat also compares the views of liberals in the United States unfavorably with Europe, noting that many European countries are cutting back on the generosity of their welfare states. Apparently Mr. Douthat didn’t know that their welfare states are currently far more generous than the welfare states in the United States. This means that the cutbacks will still in most cases leave the welfare states in these countries considerably more generous than in the United States. For example, the recent hotly contested law in France raised its early retirement age to 62 and its age for full benefits to 67, the levels already in law in the United States. And, French workers have seen a much more rapid increase in life expectancy than workers in the United States over the last four decades.
Finally, Douthat apparently is a Neanderthal protectionist who fears international competition. He argues that the United States could have higher tax rates and a more generous welfare state in the early post-war period because its competitors had been destroyed by the war. Actually, in economic theory, the United States benefits from having wealthy countries from whom it can buy goods and services more cheaply than they can be produced domestically. It is not clear why Douthat thinks that this is a problem.
Ross Douthat denounced progressives who attacked the Bowles-Simpson proposals for cutting Social Security and Medicare to help finance lower taxes on the hard-pressed wealthy. He got a few things wrong in the process.
First, Douthat complains that businesses in the United States have to “labor under one of the higher corporate tax rates in the developed West.” While the marginal tax rate in the United States is somewhat higher than the average, because of the extensive loopholes in the corporate tax, the effective tax rate in the United States is lower than the average for the OECD. There certainly is no general opposition among liberals to reform that would reduce the tax rate while offsetting the lower rates with fewer deductions.
He complains that in the liberal/progressive’s world, “the Social Security retirement age never budges, no matter how high average life expectancy climbs.” Mr. Douthat apparently has not heard that the Social Security retirement age is rising already. The age at which workers collect full benefits has already risen from 65 to 66. It will rise to 67 for workers who reach age 62 after 2022. Also, although life expectancy has been rising, this is mostly due to increases for workers in the top half of the income distribution. The increase in the retirement age already in law will eat up most of the increase in life expectancy over the last 40 years for workers in the bottom half of the wage distribution.
He also appears to believe that Social Security is a subsidy for middle class workers. This is not the case. Because of its progressive benefit structure, most middle income workers will get a real return of less than 2.0 percent on the money they paid in payroll taxes.
Douthat also complains about the government warping the health care marketplace. While this is true, the main distortions are not being primarily protected by liberals. Patent protection for prescription drugs cause them to be sold at prices that are several hundred percent above their competitive market price, however conservatives tend to be the biggest proponents of stronger patent protection. Increased international competition would also go far toward bringing our health care costs more in line with the rest of the world.
Douthat also compares the views of liberals in the United States unfavorably with Europe, noting that many European countries are cutting back on the generosity of their welfare states. Apparently Mr. Douthat didn’t know that their welfare states are currently far more generous than the welfare states in the United States. This means that the cutbacks will still in most cases leave the welfare states in these countries considerably more generous than in the United States. For example, the recent hotly contested law in France raised its early retirement age to 62 and its age for full benefits to 67, the levels already in law in the United States. And, French workers have seen a much more rapid increase in life expectancy than workers in the United States over the last four decades.
Finally, Douthat apparently is a Neanderthal protectionist who fears international competition. He argues that the United States could have higher tax rates and a more generous welfare state in the early post-war period because its competitors had been destroyed by the war. Actually, in economic theory, the United States benefits from having wealthy countries from whom it can buy goods and services more cheaply than they can be produced domestically. It is not clear why Douthat thinks that this is a problem.
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Robert Samuelson is beating up on Japan in his column today. While its economy has certainly had troubles in the last two decades, the picture is not quite as bleak as he seems to believe. Its rate of productivity growth (the most important measure of economic dynamism) since 1995 has been almost identical to the average for the OECD and within 0.2 percentage points of the rate in the United States. Furthermore, since depreciation is a large and growing share of U.S. output (primarily because computers become obsolete quickly) it is likely that a net measure of output would show Japan and the United States having virtually the same productivity growth over this period. Net productivity is the measure that is relevant for living standards, since you can’t eat depreciation.
It is also worth noting that Japan’s unemployment rate is just 5.0 percent. It never rose above 6.0 percent over the last two decades.
However Samuelson’s biggest error is that he fails to understand the problem that deflation, or more correctly low inflation, poses for Japan’s economy. While he rightly ridicules the idea that consumers would delay purchases to buy items of like cars to buy them at a price that is 0.5 percent lower the following year, this is not the main way that low inflation harms the economy.
In an economy operating below capacity, it would be desirably to have very low real interest rates to boost investment. This means that the cost of borrowing is low relative to the return on investment. Because interest rates can’t go negative, it is impossible for real interest rates to fall as much as would be desired given the weakness of Japan’s economy. It would be ideal if it could keep its nominal rates at their current near zero level, while inflation rose to 3.0 or 4.0 percent.
The other reason why inflation would be desirable is that it would allow homeowners to get out from under their debt burdens. If wages rose 3.0-4.0 percent annually in step with inflation, the burden of a fixed mortgage debt would be eroded through time. Also, if house prices rose in step with inflation, consumers would gain equity in their homes.
However, the problem in both of these cases is that the rate of inflation is too low. The fact that it crosses zero and is negative is of no special importance. The problem is low inflation, not deflation.
Robert Samuelson is beating up on Japan in his column today. While its economy has certainly had troubles in the last two decades, the picture is not quite as bleak as he seems to believe. Its rate of productivity growth (the most important measure of economic dynamism) since 1995 has been almost identical to the average for the OECD and within 0.2 percentage points of the rate in the United States. Furthermore, since depreciation is a large and growing share of U.S. output (primarily because computers become obsolete quickly) it is likely that a net measure of output would show Japan and the United States having virtually the same productivity growth over this period. Net productivity is the measure that is relevant for living standards, since you can’t eat depreciation.
It is also worth noting that Japan’s unemployment rate is just 5.0 percent. It never rose above 6.0 percent over the last two decades.
However Samuelson’s biggest error is that he fails to understand the problem that deflation, or more correctly low inflation, poses for Japan’s economy. While he rightly ridicules the idea that consumers would delay purchases to buy items of like cars to buy them at a price that is 0.5 percent lower the following year, this is not the main way that low inflation harms the economy.
In an economy operating below capacity, it would be desirably to have very low real interest rates to boost investment. This means that the cost of borrowing is low relative to the return on investment. Because interest rates can’t go negative, it is impossible for real interest rates to fall as much as would be desired given the weakness of Japan’s economy. It would be ideal if it could keep its nominal rates at their current near zero level, while inflation rose to 3.0 or 4.0 percent.
The other reason why inflation would be desirable is that it would allow homeowners to get out from under their debt burdens. If wages rose 3.0-4.0 percent annually in step with inflation, the burden of a fixed mortgage debt would be eroded through time. Also, if house prices rose in step with inflation, consumers would gain equity in their homes.
However, the problem in both of these cases is that the rate of inflation is too low. The fact that it crosses zero and is negative is of no special importance. The problem is low inflation, not deflation.
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I have a general policy at BTP of not mentioning articles that directly refer to me or CEPR. I am making an exception here because I think there is a very important point that deserves attention.
In an NYT blogpost (“A Deficit of Respect“) Tobin Harshaw discusses the response of liberals and progressives who attacked Erskine Bowles and Alan Simpson, the co-chairs of President Obama’s deficit commission. He concludes by criticizing those who:
“have begun the battle with ad hominem attacks on the commission’s chairmen as unserious, ill-intentioned, mentally unbalanced, avatars of the “money party.”
I would certainly fit as one of those who described at least one of the co-chairs (Erskine Bowles) as an avatar of the money party, even if I did not use exactly these words. The fact is that Mr. Bowles is a director of Morgan Stanley, one of the bailed out Wall Street banks. He gets $335,000 a year for his work with Morgan Stanley. This may be one of the reasons that the co-chairs report did not mention a financial speculation tax as a possible source of revenue, even though financial sector taxes have been widely advocated by policy analysts around the world, including even the I.M.F.
The exclusion of any new taxes on the financial sector is especially striking since Senator Simpson boasted at their joint press conference about having “harpooned every whale.” The financial industry is a pretty big whale to overlook.
When I first came to Washington I worked at the Economic Policy Institute, a think tank that gets 20-25 percent of its funding from labor unions. Media outlets, including the New York Times, routinely felt the need to notify readers of this source of funding with the idea that it could have bearing on my work and that of my colleagues. Given this practice, it certainly would seem reasonable to note that Mr. Bowles is currently getting huge amounts of money directly from a major Wall Street bank. Readers can decide for themselves whether this money affects his views on the best way to deal with the budget deficit.
Since we are on the topic, given his behavior, it hardly seems out of line to describe the other co-chair, Alan Simpson, as “as unserious, ill-intentioned, mentally unbalanced.” Mr. Simpson has sent several late night e-mails to his critics (I was one recipient), which displayed extraordinary ignorance of the finances of the Social Security program, contempt for its beneficiaries, as well as a serious misunderstanding of bovine anatomy. One e-mail was also openly sexist, implying that the head of a major national women’s organization was too dumb to read a simple graph.
People can make their own judgment as to whether or not these e-mails and Mr. Simpson’s other erratic actions (he once cursed out a reporter for asking him his views on Social Security) are evidence of being unserious, ill-intentioned or mentally unbalanced. However, it hardly seems inappropriate to raise the question.
Mr. Harshaw obviously approves of the thrust of the recommendations of the co-directors. That is fine and it would be good to have an open debate on the need for and merits of these recommendations. Wall Street investment banker Peter Peterson and other wealthy supporters of the co-directors agenda are doing their best to stack the deck, spending hundreds of millions of dollars to push their agenda, to ensure that nothing resembling a fair debate occurs.
However, the questions raised by the critics of the co-directors, including issues about conflict of interest and erratic conduct, are typical of the sort of questions that the NYT and other media outlets routinely raise in their news reporting. Insofar as Harshaw objects to such questions being raised about Bowles and Simpson he is asking that they be granted special protection. That is a request that does not deserve to be treated seriously.
I have a general policy at BTP of not mentioning articles that directly refer to me or CEPR. I am making an exception here because I think there is a very important point that deserves attention.
In an NYT blogpost (“A Deficit of Respect“) Tobin Harshaw discusses the response of liberals and progressives who attacked Erskine Bowles and Alan Simpson, the co-chairs of President Obama’s deficit commission. He concludes by criticizing those who:
“have begun the battle with ad hominem attacks on the commission’s chairmen as unserious, ill-intentioned, mentally unbalanced, avatars of the “money party.”
I would certainly fit as one of those who described at least one of the co-chairs (Erskine Bowles) as an avatar of the money party, even if I did not use exactly these words. The fact is that Mr. Bowles is a director of Morgan Stanley, one of the bailed out Wall Street banks. He gets $335,000 a year for his work with Morgan Stanley. This may be one of the reasons that the co-chairs report did not mention a financial speculation tax as a possible source of revenue, even though financial sector taxes have been widely advocated by policy analysts around the world, including even the I.M.F.
The exclusion of any new taxes on the financial sector is especially striking since Senator Simpson boasted at their joint press conference about having “harpooned every whale.” The financial industry is a pretty big whale to overlook.
When I first came to Washington I worked at the Economic Policy Institute, a think tank that gets 20-25 percent of its funding from labor unions. Media outlets, including the New York Times, routinely felt the need to notify readers of this source of funding with the idea that it could have bearing on my work and that of my colleagues. Given this practice, it certainly would seem reasonable to note that Mr. Bowles is currently getting huge amounts of money directly from a major Wall Street bank. Readers can decide for themselves whether this money affects his views on the best way to deal with the budget deficit.
Since we are on the topic, given his behavior, it hardly seems out of line to describe the other co-chair, Alan Simpson, as “as unserious, ill-intentioned, mentally unbalanced.” Mr. Simpson has sent several late night e-mails to his critics (I was one recipient), which displayed extraordinary ignorance of the finances of the Social Security program, contempt for its beneficiaries, as well as a serious misunderstanding of bovine anatomy. One e-mail was also openly sexist, implying that the head of a major national women’s organization was too dumb to read a simple graph.
People can make their own judgment as to whether or not these e-mails and Mr. Simpson’s other erratic actions (he once cursed out a reporter for asking him his views on Social Security) are evidence of being unserious, ill-intentioned or mentally unbalanced. However, it hardly seems inappropriate to raise the question.
Mr. Harshaw obviously approves of the thrust of the recommendations of the co-directors. That is fine and it would be good to have an open debate on the need for and merits of these recommendations. Wall Street investment banker Peter Peterson and other wealthy supporters of the co-directors agenda are doing their best to stack the deck, spending hundreds of millions of dollars to push their agenda, to ensure that nothing resembling a fair debate occurs.
However, the questions raised by the critics of the co-directors, including issues about conflict of interest and erratic conduct, are typical of the sort of questions that the NYT and other media outlets routinely raise in their news reporting. Insofar as Harshaw objects to such questions being raised about Bowles and Simpson he is asking that they be granted special protection. That is a request that does not deserve to be treated seriously.
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The Post told us about the prospect that the Bush tax cuts would expire in January:
“The stakes are enormous. Millions of taxpayers could see hundreds of dollars sliced from their paychecks in January unless Congress acts. Economists say expiration of the tax cuts would deal a devastating blow to the fragile U.S. economy, and has the potential to push it back into recession.”
There can be little doubt that the impact of pulling money out of the economy at this point will be negative, and given that the economy is scraping against zero growth already, it would not take much to throw it into another recession. But it might be a bit much to describe this as a “devastating blow.” The expiration of the Make Work Pay tax credit and other parts of the stimulus will also pull money out of people’s pockets and slow growth. The Post has never issued similar warnings about this prospect.
It would have been appropriate to refer to actual statements of specific economists rather than present overblown adjectives as being the considered judgment of the economics profession. In the same vein the article later describes the $4 trillion cost of continuing all the credits for a decade as a “budget buster.” This assessment should come from a participant in the debate, not the newspaper.
The Post told us about the prospect that the Bush tax cuts would expire in January:
“The stakes are enormous. Millions of taxpayers could see hundreds of dollars sliced from their paychecks in January unless Congress acts. Economists say expiration of the tax cuts would deal a devastating blow to the fragile U.S. economy, and has the potential to push it back into recession.”
There can be little doubt that the impact of pulling money out of the economy at this point will be negative, and given that the economy is scraping against zero growth already, it would not take much to throw it into another recession. But it might be a bit much to describe this as a “devastating blow.” The expiration of the Make Work Pay tax credit and other parts of the stimulus will also pull money out of people’s pockets and slow growth. The Post has never issued similar warnings about this prospect.
It would have been appropriate to refer to actual statements of specific economists rather than present overblown adjectives as being the considered judgment of the economics profession. In the same vein the article later describes the $4 trillion cost of continuing all the credits for a decade as a “budget buster.” This assessment should come from a participant in the debate, not the newspaper.
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In the United States economic growth numbers are almost always presented as annual rates. In Europe and much of the rest of the world they are typically presented as quarterly rates. This means that if a reporter simply presents the official rate from a government agency, as the Post did in an article on the debt crises in Ireland and Portugal, they will be giving readers a quarterly growth rate. This will likely leave a large portion of the paper’s readers confused as to actual growth rate.
It is a very simple matter to convert a quarterly growth rate into an annual rate. The proper way is to take the 1 plus the growth rate to the fourth power, an operation that could be done in far less than a second by almost any calculator produced in the last 15 years. However, for small numbers, like the 0.4 percent growth figure reported for the euro zone last quarter, it is just fine to multiply the quarterly rate by 4 to get a 1.6 percent annual rate.
In the United States economic growth numbers are almost always presented as annual rates. In Europe and much of the rest of the world they are typically presented as quarterly rates. This means that if a reporter simply presents the official rate from a government agency, as the Post did in an article on the debt crises in Ireland and Portugal, they will be giving readers a quarterly growth rate. This will likely leave a large portion of the paper’s readers confused as to actual growth rate.
It is a very simple matter to convert a quarterly growth rate into an annual rate. The proper way is to take the 1 plus the growth rate to the fourth power, an operation that could be done in far less than a second by almost any calculator produced in the last 15 years. However, for small numbers, like the 0.4 percent growth figure reported for the euro zone last quarter, it is just fine to multiply the quarterly rate by 4 to get a 1.6 percent annual rate.
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