I’m just asking. By the way, what measure is he using that shows that the United States has declining human capital? All the data with which I am familiar shows the workforce is getting more educated through time.
I’m just asking. By the way, what measure is he using that shows that the United States has declining human capital? All the data with which I am familiar shows the workforce is getting more educated through time.
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The NYT notes that recent documents suggest that Goldman Sachs was largely hedged against a potential AIG bankruptcy and that it had taken collateral from AIG and other counter-parties that would have almost fully compensated for any losses.
It is not clear that Goldman was as hedged as the documents suggest since, as the article mentions in passing, a bankruptcy court may not have clawed back some of the collateral posted. The other issue that would have been worth mentioning in this piece is that the government and Goldman resisted the release of documents at every point in this process. For 6 months after the initial bailout of AIG the government provided no information whatsoever about the counter-parties who had been paid with the money.
The NYT notes that recent documents suggest that Goldman Sachs was largely hedged against a potential AIG bankruptcy and that it had taken collateral from AIG and other counter-parties that would have almost fully compensated for any losses.
It is not clear that Goldman was as hedged as the documents suggest since, as the article mentions in passing, a bankruptcy court may not have clawed back some of the collateral posted. The other issue that would have been worth mentioning in this piece is that the government and Goldman resisted the release of documents at every point in this process. For 6 months after the initial bailout of AIG the government provided no information whatsoever about the counter-parties who had been paid with the money.
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The Washington Post reported that House Democrats who voted for the energy bill are worried that it will hurt them in the election because their opponents have labeled it as a job killer. It would have been worth noting that there is no reason to believe that the bill would have led to a substantial loss of jobs. If opponents of the bill are able to score political points by describing the bill as a job killer it is only because the media have done a poor job in describing its impact.
The Washington Post reported that House Democrats who voted for the energy bill are worried that it will hurt them in the election because their opponents have labeled it as a job killer. It would have been worth noting that there is no reason to believe that the bill would have led to a substantial loss of jobs. If opponents of the bill are able to score political points by describing the bill as a job killer it is only because the media have done a poor job in describing its impact.
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The Washington Post had an article discussing the debate over how central banks can prevent future economic collapses like the current one. As is its practice, the Post relied exclusively on economists who were not able to see the crisis coming. As a result, it fundamentally misrepresents the crisis as being primarily financial in nature.
In fact, the main problem was that the housing bubble was driving the economy, generating $1.2 trillion in annual demand through construction and housing equity driven consumption. There is no easy mechanism through the economy can replace this much lost demand. That would be the case whether or not the collapse of the bubble was associated with a financial crisis.
The article also fails to list one of the most simple and obvious ways that central banks can combat a bubble: talk. During the run-up of the housing bubble, Federal Reserve Board Chairman Alan Greenspan repeatedly said that everything was fine in the housing market, as did Ben Bernanke, who was a governor at the Fed for most of the period. This helped undermine the case of those who were warning of the bubble.
By contrast, if Greenspan had explicitly warned of the bubble and documented its existance and potential dangers with extensive research from the Fed staff, it may have been effective in containing its growth. The financial industry cannot simply ignore research from the Fed and there was no serious response to the evidence that the Fed could have presented.
There is no reason the Fed and other central banks cannot use the full capabilities of their research staff to attempt to counter dangerous financial bubbles. There is a virtually costless strategy with enormous potential payoffs.
The Washington Post had an article discussing the debate over how central banks can prevent future economic collapses like the current one. As is its practice, the Post relied exclusively on economists who were not able to see the crisis coming. As a result, it fundamentally misrepresents the crisis as being primarily financial in nature.
In fact, the main problem was that the housing bubble was driving the economy, generating $1.2 trillion in annual demand through construction and housing equity driven consumption. There is no easy mechanism through the economy can replace this much lost demand. That would be the case whether or not the collapse of the bubble was associated with a financial crisis.
The article also fails to list one of the most simple and obvious ways that central banks can combat a bubble: talk. During the run-up of the housing bubble, Federal Reserve Board Chairman Alan Greenspan repeatedly said that everything was fine in the housing market, as did Ben Bernanke, who was a governor at the Fed for most of the period. This helped undermine the case of those who were warning of the bubble.
By contrast, if Greenspan had explicitly warned of the bubble and documented its existance and potential dangers with extensive research from the Fed staff, it may have been effective in containing its growth. The financial industry cannot simply ignore research from the Fed and there was no serious response to the evidence that the Fed could have presented.
There is no reason the Fed and other central banks cannot use the full capabilities of their research staff to attempt to counter dangerous financial bubbles. There is a virtually costless strategy with enormous potential payoffs.
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In an article that discussed the two-tier pay system that Chrysler and GM adopted as part of their rescue plan, the Post told readers that the debate over autoworkers’ wages during the bailout pitted “the advocates of the free market against those for a ‘fair wage.'” Actually, there was no one in this debate advocating a free market. Those who wanted to see the wages of union auto workers cut were still very supportive of the licensing and professional restrictions that protect doctors and other highly paid professionals from foreign competition. These people also support other major forms of interference with market outcomes such as copyrights and patent protection.
The only clearly recognizable view held by those who insisted that autoworkers wages lowered to $14 an hour was that they wanted to see autoworkers get paid less money. The Post should simply report what people say and not attribute an ideology to them which almost certainly does not fit reality.
In an article that discussed the two-tier pay system that Chrysler and GM adopted as part of their rescue plan, the Post told readers that the debate over autoworkers’ wages during the bailout pitted “the advocates of the free market against those for a ‘fair wage.'” Actually, there was no one in this debate advocating a free market. Those who wanted to see the wages of union auto workers cut were still very supportive of the licensing and professional restrictions that protect doctors and other highly paid professionals from foreign competition. These people also support other major forms of interference with market outcomes such as copyrights and patent protection.
The only clearly recognizable view held by those who insisted that autoworkers wages lowered to $14 an hour was that they wanted to see autoworkers get paid less money. The Post should simply report what people say and not attribute an ideology to them which almost certainly does not fit reality.
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The lead article in the Sunday Post reported on the battle over extending President Bush’s tax cuts. At one point it told readers that: “because they [the tax cuts] were expected to eventually cause huge deficits, Republicans wrote them to expire in 2010.”
Actually the story is somewhat more pernicious. President Bush had set a budget target for his tax cuts. Had they run through 2011 the cost would have exceeded his target. Therefore they wrote the law so that the cuts ended in 2010, keeping the 10-year cost within his target.
The article also includes the bizarre statement: “And with unemployment at 9.5 percent, even some Democrats are queasy about raising taxes on high earners — a category that includes many small-business owners — when policymakers are trying to encourage them to create jobs.”
Actually, there is little evidence that raising taxes on high income households will have any notable impact on job creation. (Job growth was quite rapid under the Clinton era tax rates.) Furthermore, many of the Democrats who oppose raising taxes on the wealthy have opposed many or all of President Obama’s stimulus measures, indicating that they have little concern about job creation.
It is certainly more plausible that these politicians are worried about campaign contributions from high income households, an issue that remarkably was never mentioned once in this article.
The lead article in the Sunday Post reported on the battle over extending President Bush’s tax cuts. At one point it told readers that: “because they [the tax cuts] were expected to eventually cause huge deficits, Republicans wrote them to expire in 2010.”
Actually the story is somewhat more pernicious. President Bush had set a budget target for his tax cuts. Had they run through 2011 the cost would have exceeded his target. Therefore they wrote the law so that the cuts ended in 2010, keeping the 10-year cost within his target.
The article also includes the bizarre statement: “And with unemployment at 9.5 percent, even some Democrats are queasy about raising taxes on high earners — a category that includes many small-business owners — when policymakers are trying to encourage them to create jobs.”
Actually, there is little evidence that raising taxes on high income households will have any notable impact on job creation. (Job growth was quite rapid under the Clinton era tax rates.) Furthermore, many of the Democrats who oppose raising taxes on the wealthy have opposed many or all of President Obama’s stimulus measures, indicating that they have little concern about job creation.
It is certainly more plausible that these politicians are worried about campaign contributions from high income households, an issue that remarkably was never mentioned once in this article.
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CNN had a segment on inequality in Brazil in which it told viewers:
“The country’s Gross Domestic Product — the value of goods and services it produces — was $2 trillion in 2009, the 10th largest in the world, according to the CIA World Factbook. But per capita income for the same year was estimated at $10,200, the 105th highest in the world. Simply stated, most of the wealth being produced is not finding its way down to most Brazilians.”
Actually, per capita income reveals nothing about inequality. It is simply GDP divided by the population. Brazil has a relatively low per capita income because it has a large population. The number for per capita income would be the same if everyone had the same income or one person had it all.
The piece could have referred to Brazil’s Gini index, which is a measure on inequality. At 56.7, it is one of the highest in the world, although it has been dropping in recent years.
(HT to Robert Naiman.)
CNN had a segment on inequality in Brazil in which it told viewers:
“The country’s Gross Domestic Product — the value of goods and services it produces — was $2 trillion in 2009, the 10th largest in the world, according to the CIA World Factbook. But per capita income for the same year was estimated at $10,200, the 105th highest in the world. Simply stated, most of the wealth being produced is not finding its way down to most Brazilians.”
Actually, per capita income reveals nothing about inequality. It is simply GDP divided by the population. Brazil has a relatively low per capita income because it has a large population. The number for per capita income would be the same if everyone had the same income or one person had it all.
The piece could have referred to Brazil’s Gini index, which is a measure on inequality. At 56.7, it is one of the highest in the world, although it has been dropping in recent years.
(HT to Robert Naiman.)
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The folks who thought the housing bubble was cool are now working overtime to make the victims of its collapse suffer as much as possible. This presumably explains the reason that Washington Post columnist Michael Gerson claimed that a Goldman Sachs study of 44 countries found that a study of 44 countries found that: “reducing government expenditures by one percentage point, in contrast, increases average annual growth by 0.6 percentage points.”
What the study actually found was that a one percentage point decline in government consumption expenditures was associated with a 0.63 percent increase in growth. However, it found that a one percentage point increase in government investment expenditures (spending on education, research, infrastructure etc. ) was associated with a 1.25 percentage point increase in growth. This would mean, for example, that a one percentage point decline in spending that was split evenly between cuts to government consumption and cuts to investment would lead to 0.31 percentage point decline in GDP growth.
There are reasons that this study is inapplicable to current circumstances. Most notably, the bulk of the benefit from spending cuts appears to come through the channel of lower interest rates inducing more investment. This is unlikely to be a important channel given that interest rates are already extremely low, however, even ignoring this issue, Gerson has seriously misrepresented the findings of the study that he cited.
The folks who thought the housing bubble was cool are now working overtime to make the victims of its collapse suffer as much as possible. This presumably explains the reason that Washington Post columnist Michael Gerson claimed that a Goldman Sachs study of 44 countries found that a study of 44 countries found that: “reducing government expenditures by one percentage point, in contrast, increases average annual growth by 0.6 percentage points.”
What the study actually found was that a one percentage point decline in government consumption expenditures was associated with a 0.63 percent increase in growth. However, it found that a one percentage point increase in government investment expenditures (spending on education, research, infrastructure etc. ) was associated with a 1.25 percentage point increase in growth. This would mean, for example, that a one percentage point decline in spending that was split evenly between cuts to government consumption and cuts to investment would lead to 0.31 percentage point decline in GDP growth.
There are reasons that this study is inapplicable to current circumstances. Most notably, the bulk of the benefit from spending cuts appears to come through the channel of lower interest rates inducing more investment. This is unlikely to be a important channel given that interest rates are already extremely low, however, even ignoring this issue, Gerson has seriously misrepresented the findings of the study that he cited.
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Sometimes the Post just leaves readers speechless. It has a front page article with the headline: “GOP finds grist for campaigns in projections of record deficits [this headline only appears in the print edition].”
The article goes on to explain how Republicans are yelling about the new record deficits.
There are two striking features to this article. First, Republicans have criticized President Obama for everything under the sun, including a speech encouraging children to work hard in school. That the Republicans are critical of the latest budget projections is not news and certainly not front page news. Although it might merit a front page story if they did not criticize the projections.
The other striking feature of this story is that the front page only presented the Republican criticisms. Only those who read to the jump page saw that Democrats response that the deficits were the result of the economic collapse in 2008. Even this point is largely left as a matter of “he said, she said,” rather than being reported as the fact that it is.
Sometimes the Post just leaves readers speechless. It has a front page article with the headline: “GOP finds grist for campaigns in projections of record deficits [this headline only appears in the print edition].”
The article goes on to explain how Republicans are yelling about the new record deficits.
There are two striking features to this article. First, Republicans have criticized President Obama for everything under the sun, including a speech encouraging children to work hard in school. That the Republicans are critical of the latest budget projections is not news and certainly not front page news. Although it might merit a front page story if they did not criticize the projections.
The other striking feature of this story is that the front page only presented the Republican criticisms. Only those who read to the jump page saw that Democrats response that the deficits were the result of the economic collapse in 2008. Even this point is largely left as a matter of “he said, she said,” rather than being reported as the fact that it is.
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The NYT had a peculiar front page article in which it portrayed Defense Secretary Robert Gates as a budget cutter even though he wants to increase the defense budget by 1.0 percent a year in excess of inflation. It notes that he doesn’t want the government to buy some of the weapons system being pushed by Congress. It then comments:
“In one of the paradoxes of Washington budget battles, Mr. Gates, even as he tries to forestall deeper cuts, is trying to kill weapons programs he says the military does not need over the objections of members of Congress who want to protect jobs.”
It is not clear what the article views as paradoxical. Increasing the defense budget by 1.0 percent a year in excess of inflation does not imply an austere budget. Nonetheless it also doesn’t imply an infinite budget. There is nothing paradoxical about the defense secretary having to set priorities in this context.
The article also includes the peculiar comment that defense spending:
“has averaged an inflation-adjusted growth rate of 7 percent a year over the last decade (nearly 12 percent a year without adjusting for inflation), including the costs of the wars.”
Inflation has not averaged anywhere near 5 percent over the last decade, so the 12 percent nominal growth rate is inconsistent with the 7 percent real growth rate.
The NYT had a peculiar front page article in which it portrayed Defense Secretary Robert Gates as a budget cutter even though he wants to increase the defense budget by 1.0 percent a year in excess of inflation. It notes that he doesn’t want the government to buy some of the weapons system being pushed by Congress. It then comments:
“In one of the paradoxes of Washington budget battles, Mr. Gates, even as he tries to forestall deeper cuts, is trying to kill weapons programs he says the military does not need over the objections of members of Congress who want to protect jobs.”
It is not clear what the article views as paradoxical. Increasing the defense budget by 1.0 percent a year in excess of inflation does not imply an austere budget. Nonetheless it also doesn’t imply an infinite budget. There is nothing paradoxical about the defense secretary having to set priorities in this context.
The article also includes the peculiar comment that defense spending:
“has averaged an inflation-adjusted growth rate of 7 percent a year over the last decade (nearly 12 percent a year without adjusting for inflation), including the costs of the wars.”
Inflation has not averaged anywhere near 5 percent over the last decade, so the 12 percent nominal growth rate is inconsistent with the 7 percent real growth rate.
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