In an article that reported on the Commerce Department’s release of consumption data from September, the Washington Post told readers that: “consumer spending was stuck in the doldrums.” Actually, the report showed a very high rate of spending relative to income. The saving rate fell from 5.6 percent in August to 5.3 percent in September. Historically the saving rate has averaged more than 8.0 percent, so consumers are currently spending at a high level relative to their income.
In an article that reported on the Commerce Department’s release of consumption data from September, the Washington Post told readers that: “consumer spending was stuck in the doldrums.” Actually, the report showed a very high rate of spending relative to income. The saving rate fell from 5.6 percent in August to 5.3 percent in September. Historically the saving rate has averaged more than 8.0 percent, so consumers are currently spending at a high level relative to their income.
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A Washington Post article discussing the risks associated with another round of quantitative easing raised the possibility that the Fed could lose its credibility if the program does not lead to the intended growth. It implies that the loss of credibility would be a major harm.
It is worth noting that the whole economic collapse came about because of the Fed’s failure to notice and/or do anything about an $8 trillion housing bubble. Given this enormous failure, it is not clear how much credibility it currently enjoys among people who follow the economy.
The article also raises the risk that a precipitous fall in the dollar, “could be disastrous.” It is difficult to see a scenario in which even the steepest falls in the dollar would be disastrous for the United States. U.S. exporters would suddenly become hyper-competitive (we still export $1 trillion a year in goods and services), while domestically produced goods would drive imports from the shelves. This scenario would likely be disastrous for our trading partners, which is why they would almost certainly intervene in currency markets to prevent the dollar from having a steep and sudden tumble.
A Washington Post article discussing the risks associated with another round of quantitative easing raised the possibility that the Fed could lose its credibility if the program does not lead to the intended growth. It implies that the loss of credibility would be a major harm.
It is worth noting that the whole economic collapse came about because of the Fed’s failure to notice and/or do anything about an $8 trillion housing bubble. Given this enormous failure, it is not clear how much credibility it currently enjoys among people who follow the economy.
The article also raises the risk that a precipitous fall in the dollar, “could be disastrous.” It is difficult to see a scenario in which even the steepest falls in the dollar would be disastrous for the United States. U.S. exporters would suddenly become hyper-competitive (we still export $1 trillion a year in goods and services), while domestically produced goods would drive imports from the shelves. This scenario would likely be disastrous for our trading partners, which is why they would almost certainly intervene in currency markets to prevent the dollar from having a steep and sudden tumble.
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The answer is that they would get significant cuts in revenue. The Washington Post, which is known for its problems with logic and economics, never made this point as it discussed the possibility of a mass exodus of physicians from the Medicare program. The Post uncritically presented complaints about Medicare’s compensation schedule from Cecil B. Wilson, the president of the American Medical Association that Medicare does not pay them enough money. (The article was headlined: “Physicians Face Painful Decision on Medicare.”)
While it is possible that any individual physician can make more money by taking patients from private insurers rather than Medicare patients, physicians in aggregate could only make up for the revenue lost by not seeing Medicare patients if there was a large pool of individuals with money or high-paying insurers who do not currently have access to doctors. Of course, people with money in the United States are already seeing doctors, so if physicians en masse turned away from Medicare then they would simply have fewer patients. (This may be the painful decision referred to in the headline.)
The answer is that they would get significant cuts in revenue. The Washington Post, which is known for its problems with logic and economics, never made this point as it discussed the possibility of a mass exodus of physicians from the Medicare program. The Post uncritically presented complaints about Medicare’s compensation schedule from Cecil B. Wilson, the president of the American Medical Association that Medicare does not pay them enough money. (The article was headlined: “Physicians Face Painful Decision on Medicare.”)
While it is possible that any individual physician can make more money by taking patients from private insurers rather than Medicare patients, physicians in aggregate could only make up for the revenue lost by not seeing Medicare patients if there was a large pool of individuals with money or high-paying insurers who do not currently have access to doctors. Of course, people with money in the United States are already seeing doctors, so if physicians en masse turned away from Medicare then they would simply have fewer patients. (This may be the painful decision referred to in the headline.)
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On Friday, Morning Edition featured a debate on trade between former Bush administration economist Mathew Slaughter and Thea Lee, an economist with the AFL-CIO. [Disclosure: Ms. Lee is a personal friend.] The discussion allowed Mr. Slaughter to have the last word, in which he proclaimed:
“One is most of the research to date that Thea cites has concluded that it’s technology innovations of many kinds, that tend to favor demand for skilled workers that has put pressure on the wages of so many Americans.
So from a policy perspective, a question is, well, what do we want to do about that? Do you want to get rid of the computers that we’ve created over the past 30 or 40 years?”
Actually the economic research does not provide a compelling case that technology, rather than trade, has been the major factor driving inequality. The biggest rise in inequality between college and non-college educated workers occurred in the 80s, before the explosion of computerization and the uptick in productivity growth. In the 00s, there was no increase in the college-non-college pay gap. The only real gainers in that decade were workers with advance degree. This pattern in inequality is difficult to reconcile with a technology story.
On Friday, Morning Edition featured a debate on trade between former Bush administration economist Mathew Slaughter and Thea Lee, an economist with the AFL-CIO. [Disclosure: Ms. Lee is a personal friend.] The discussion allowed Mr. Slaughter to have the last word, in which he proclaimed:
“One is most of the research to date that Thea cites has concluded that it’s technology innovations of many kinds, that tend to favor demand for skilled workers that has put pressure on the wages of so many Americans.
So from a policy perspective, a question is, well, what do we want to do about that? Do you want to get rid of the computers that we’ve created over the past 30 or 40 years?”
Actually the economic research does not provide a compelling case that technology, rather than trade, has been the major factor driving inequality. The biggest rise in inequality between college and non-college educated workers occurred in the 80s, before the explosion of computerization and the uptick in productivity growth. In the 00s, there was no increase in the college-non-college pay gap. The only real gainers in that decade were workers with advance degree. This pattern in inequality is difficult to reconcile with a technology story.
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The Washington Post (a.k.a. “Fox on 15th Street) clearly is on the opposite side of the Rally to Restore Sanity. In addition to David Broder’s call for a war to stimulate the economy, Fred Hiatt, the paper’s editorial page editor, demanded that President Obama lie to the American people.
In an article calling on President Obama to show leadership, Hiatt lists at the top of things that Obama would do if he were acting as a leader:
“He would tell Democrats that Social Security will go broke without reform.” Of course this is not true. According to the Congressional Budget Office the program is fully solvent for the next 29 years with no changes whatsoever and with changes no larger than were put in place by the Greenspan commission in 1983 it can be kept solvent in the 22nd century.
Hiatt also complained that Obama has demonized business. This apparently stems from the difficulty of getting information in distant downturn Washington. Hiatt is apparently unaware of the fact that even as unemployment remains at near double-digit levels, corporate profits have returned to their pre-recession peak. In other words, business is doing just great under President Obama’s leadership, even he has occasionally said some nasty things about them.
The column also included the bizarre assertion that: “unchecked, deficits will depress Americans’ standard of living deficits threaten the country’s standard of living.” Of course by far the biggest threat to Americans’ standard of living is the near double-digit unemployment that the country is now experiencing. The deficits being run today impose zero burden on the country since they harness resources that would otherwise be idle.
Over the long-term, the deficit problem is simply the problem of a broken U.S. health care system as every policy analyst knows. For some reason the Washington Post is determined to hide this simple fact.
The Washington Post (a.k.a. “Fox on 15th Street) clearly is on the opposite side of the Rally to Restore Sanity. In addition to David Broder’s call for a war to stimulate the economy, Fred Hiatt, the paper’s editorial page editor, demanded that President Obama lie to the American people.
In an article calling on President Obama to show leadership, Hiatt lists at the top of things that Obama would do if he were acting as a leader:
“He would tell Democrats that Social Security will go broke without reform.” Of course this is not true. According to the Congressional Budget Office the program is fully solvent for the next 29 years with no changes whatsoever and with changes no larger than were put in place by the Greenspan commission in 1983 it can be kept solvent in the 22nd century.
Hiatt also complained that Obama has demonized business. This apparently stems from the difficulty of getting information in distant downturn Washington. Hiatt is apparently unaware of the fact that even as unemployment remains at near double-digit levels, corporate profits have returned to their pre-recession peak. In other words, business is doing just great under President Obama’s leadership, even he has occasionally said some nasty things about them.
The column also included the bizarre assertion that: “unchecked, deficits will depress Americans’ standard of living deficits threaten the country’s standard of living.” Of course by far the biggest threat to Americans’ standard of living is the near double-digit unemployment that the country is now experiencing. The deficits being run today impose zero burden on the country since they harness resources that would otherwise be idle.
Over the long-term, the deficit problem is simply the problem of a broken U.S. health care system as every policy analyst knows. For some reason the Washington Post is determined to hide this simple fact.
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This is not a joke (at least not on my part). David Broder, the longtime columnist and reporter at a formerly respectable newspaper, quite explicitly suggested that fighting a war with Iran could be an effective way to boost the economy. Ignoring the idea that anyone should undertake war as an economic policy, Broder’s economics is also a visit to loon tune land.
Broder tells readers:
“Can Obama harness the forces that might spur new growth? This is the key question for the next two years.
What are those forces? Essentially, there are two. One is the power of the business cycle, the tidal force that throughout history has dictated when the economy expands and when it contracts.
Economists struggle to analyze this, but they almost inevitably conclude that it cannot be rushed and almost resists political command. As the saying goes, the market will go where it is going to go.
In this regard, Obama has no advantage over any other pol. Even in analyzing the tidal force correctly, he cannot control it.
What else might affect the economy? The answer is obvious, but its implications are frightening. War and peace influence the economy.”
Sorry Mr. Broder, outside of Fox on 15th the world does not work this way. War affects the economy the same way that other government spending affects the economy. It does not have some mystical impact as Broder seems to think.
If spending on war can provide jobs and lift the economy then so can spending on roads, weatherizing homes, or educating our kids. Yes, that’s right, all the forms of stimulus spending that Broder derided so much because they add to the deficit will increase GDP and generate jobs just like the war that Broder is advocating (which will also add to the deficit).
So, we have two routes to prosperity. We can either build up our physical infrastructure and improve the skills and education of our workers or we can go kill Iranians. Broder has made it clear where he stands.
This is not a joke (at least not on my part). David Broder, the longtime columnist and reporter at a formerly respectable newspaper, quite explicitly suggested that fighting a war with Iran could be an effective way to boost the economy. Ignoring the idea that anyone should undertake war as an economic policy, Broder’s economics is also a visit to loon tune land.
Broder tells readers:
“Can Obama harness the forces that might spur new growth? This is the key question for the next two years.
What are those forces? Essentially, there are two. One is the power of the business cycle, the tidal force that throughout history has dictated when the economy expands and when it contracts.
Economists struggle to analyze this, but they almost inevitably conclude that it cannot be rushed and almost resists political command. As the saying goes, the market will go where it is going to go.
In this regard, Obama has no advantage over any other pol. Even in analyzing the tidal force correctly, he cannot control it.
What else might affect the economy? The answer is obvious, but its implications are frightening. War and peace influence the economy.”
Sorry Mr. Broder, outside of Fox on 15th the world does not work this way. War affects the economy the same way that other government spending affects the economy. It does not have some mystical impact as Broder seems to think.
If spending on war can provide jobs and lift the economy then so can spending on roads, weatherizing homes, or educating our kids. Yes, that’s right, all the forms of stimulus spending that Broder derided so much because they add to the deficit will increase GDP and generate jobs just like the war that Broder is advocating (which will also add to the deficit).
So, we have two routes to prosperity. We can either build up our physical infrastructure and improve the skills and education of our workers or we can go kill Iranians. Broder has made it clear where he stands.
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Hell no, I’m not kidding. Here it is:
“the public’s real anxiety is about values, not economics: the gnawing sense that Americans have become debt-addicted and self-indulgent.”
This is really priceless. There are more than 25 million people unemployed, underemployed or who have given up looking for work altogether, but they are not concerned about economics. They are worried about values.
Okay, I will stop with the ridiculing of David Brooks, I know it’s cheap fun. But, I do have to point out one other real winner in this column:
” Obama came to be defined by his emergency responses to the fiscal crisis.”
Yes, the column says “fiscal.” Is this the mother of all Freudian slips or what? Brooks somehow wrote “fiscal,” when he obviously meant “financial.” Neither he nor his editor caught it on a second reading. You couldn’t ask for a better example of the elite’s fixation with making this into a fiscal crisis. The Wall Street boys wrecked the economy with their greed and ineptitude and now they intend to make ordinary workers pay for it with cuts to Social Security and Medicare. Talk about a crisis of values.
Hell no, I’m not kidding. Here it is:
“the public’s real anxiety is about values, not economics: the gnawing sense that Americans have become debt-addicted and self-indulgent.”
This is really priceless. There are more than 25 million people unemployed, underemployed or who have given up looking for work altogether, but they are not concerned about economics. They are worried about values.
Okay, I will stop with the ridiculing of David Brooks, I know it’s cheap fun. But, I do have to point out one other real winner in this column:
” Obama came to be defined by his emergency responses to the fiscal crisis.”
Yes, the column says “fiscal.” Is this the mother of all Freudian slips or what? Brooks somehow wrote “fiscal,” when he obviously meant “financial.” Neither he nor his editor caught it on a second reading. You couldn’t ask for a better example of the elite’s fixation with making this into a fiscal crisis. The Wall Street boys wrecked the economy with their greed and ineptitude and now they intend to make ordinary workers pay for it with cuts to Social Security and Medicare. Talk about a crisis of values.
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Come on folks, we had the second largest inventory build-up in history. Pull that out and final demand grew at just a 0.6 percent annual rate.
Does anyone thing that inventories will continue to grow at this rate? This means that instead of adding to growth inventories will subtract from an economy that has almost no forward momentum. This is all GDP accounting 101. This should be the headline on the 3rd quarter numbers.
Come on folks, we had the second largest inventory build-up in history. Pull that out and final demand grew at just a 0.6 percent annual rate.
Does anyone thing that inventories will continue to grow at this rate? This means that instead of adding to growth inventories will subtract from an economy that has almost no forward momentum. This is all GDP accounting 101. This should be the headline on the 3rd quarter numbers.
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Low cost factory labor allows consumers to benefit from cheaper shoes, clothes, and toys. (These days it also means cheaper computers, aircraft parts, and windmill turbines.) Low paid immigrants from Latin America reduce the price of restaurant meals, hotel rooms, and child care.
The media routinely tout these benefits from globalization. The U.S. workers who may face cuts or unemployment as a consequence are told to get more training and learn to work harder.
This raises the question as why we don’t see a similar celebration at the prospect of an increased supply of lawyers driving down the wages of lawyers and the price of legal services. In fact, a lengthy Slate piece on the increasing supply of lawyers never once mentioned the potential economic gains associated with lower prices to consumers. The prospect of too many lawyers driving down wages in the profession was presented as a problem that should trouble right-thinking right thinking people.
Well, the logic is the same. Those who celebrate the low cost imports from China and the benefits of cheap immigrant labor should also be celebrating the fact that legal services should be costing us less in the future, unless of course they are partial to the relatively affluent types who tend to up as lawyers.
Low cost factory labor allows consumers to benefit from cheaper shoes, clothes, and toys. (These days it also means cheaper computers, aircraft parts, and windmill turbines.) Low paid immigrants from Latin America reduce the price of restaurant meals, hotel rooms, and child care.
The media routinely tout these benefits from globalization. The U.S. workers who may face cuts or unemployment as a consequence are told to get more training and learn to work harder.
This raises the question as why we don’t see a similar celebration at the prospect of an increased supply of lawyers driving down the wages of lawyers and the price of legal services. In fact, a lengthy Slate piece on the increasing supply of lawyers never once mentioned the potential economic gains associated with lower prices to consumers. The prospect of too many lawyers driving down wages in the profession was presented as a problem that should trouble right-thinking right thinking people.
Well, the logic is the same. Those who celebrate the low cost imports from China and the benefits of cheap immigrant labor should also be celebrating the fact that legal services should be costing us less in the future, unless of course they are partial to the relatively affluent types who tend to up as lawyers.
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It sure wouldn’t be obvious that the cost of Social Security is one of the biggest problems facing the country. The program’s projected shortfall over the next 75 years is equal to 0.5 percent of GDP, according to the Congressional Budget Office. This is less than one fourth of the increase in defense spending over the last decade. The share of health care spending in GDP is projected to rise by more than this every 3 years.
Dealing with global warming, a rapidly growing population of current and former prisoners, educating our children and maintaining our infrastructure all seem to pose much larger challenges than meeting the projected funding shortfall in Social Security. It is not clear why the NYT is telling readers that the growing costs of paying Social Security benefits are “one of the government’s biggest long-term challenges.” The data do not appear to support this assertion.
It sure wouldn’t be obvious that the cost of Social Security is one of the biggest problems facing the country. The program’s projected shortfall over the next 75 years is equal to 0.5 percent of GDP, according to the Congressional Budget Office. This is less than one fourth of the increase in defense spending over the last decade. The share of health care spending in GDP is projected to rise by more than this every 3 years.
Dealing with global warming, a rapidly growing population of current and former prisoners, educating our children and maintaining our infrastructure all seem to pose much larger challenges than meeting the projected funding shortfall in Social Security. It is not clear why the NYT is telling readers that the growing costs of paying Social Security benefits are “one of the government’s biggest long-term challenges.” The data do not appear to support this assertion.
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