As we have previously noted, following the Venezuelan National Electoral Council’s (CNE’s) decision to conduct a full audit of voting receipts, as Henrique Capriles had originally demanded, Capriles reversed his position and announced he would boycott the audit. Concurrent with this shift, he began to focus on new demands: he wanted an audit of the voter registry and the fingerprint registry, claiming that such audits would be needed in order to ensure there had been not repeat voting. Capriles has not plausibly explained how such repeat voting would be possible in a system where there are two records: an electronic record and a paper record of voting receipts, and where each voter must first present identification and fingerprints before being allowed to vote.

Auditing all the remaining paper voting receipts is no simple task. The receipts must be brought in from all over the country to the Mariches storehouse where the audit is being conducted, and election monitors from the U.S. have noted that some of the boxes containing these receipts are even being carried by canoe from remote areas in the Amazon and elsewhere. While the CNE was consumed with this task over the past several weeks, Venezuelan opposition figures raised a cry, demanding to have the fingerprint registry examined.

Last week the CNE reaffirmed earlier reports that it would conduct this audit as well, the latest of about 20 audits demanded by the opposition to which the CNE has agreed. The CNE officials have said, however, that the fingerprint verification will take time, and they would be unlikely to release results until September. While Capriles’ call for the fingerprint audit have gained traction in the English language media, the CNE officials’ announcements that they plan to conduct such an audit have not. As we have noted, there has been very little reporting on the audits in the U.S. and U.K. press in general, from the just completed audit of all the remaining voting receipts, to the 18 audits demanded by the opposition (and carried out by the CNE), mostly carried out before the election. The most recent -- and very brief -- reference to the audits in Reuters, for example, inverts the opposition’s shifting demands to put the blame on the election’s winner: "Maduro originally accepted a proposal for a full audit of the close April election which he won, but then backtracked and has since hardened his stance."

Brad DeLong has a set of ruminations on the economic situation that we now face, the gist of which is that we better be cautious in using fiscal policy because "we" are worried that the bankers may sink themselves again if interest rates rise back to more normal levels. Let's look at the argument starting with figuring out who "we" is.

While Brad never tells exactly, when he says "we" he is obviously referring to the mainstream of the economics profession. And his "we" actually got considerably more wrong than he gives them credit for in his post. To start with, "we" hugely overestimated the effectiveness of monetary policy in sustaining full employment in the United States. In citing the Fed's successes Brad tells us:

"There was the 2001 collapse of the dot-com Bubble that took $5 trillion of equity wealth down with it. In all of these cases the Federal Reserve was able to react swiftly and smoothly to keep these large financial shocks from having much of an effect on the real economy of production and employment."

That's not what the data show. First of all, from peak to trough we lost $10 trillion in equity value. The crash went far beyond the dot-coms, the stock price of everything from GM to McDonalds plummeted in the stock market crash of 2000-2002.

It turns reality on its head to say there was not much effect on employment from this crash. Employment peaked in February of 2001. It didn't cross this peak again until February of 2005. The employment peak in the private sector was reached in January of 2001. It didn't cross this again until June of 2005. In both cases this was at the time by far the longest stretch without gains in employment since the great depression. 

Looking at employment to population ratios, the EPOP peaked at 64.7 percent in April of 2000. Five years later it was a full 2 percentage points lower. That corresponds to 4.4 million fewer people holding jobs.

It is also worth noting that the federal funds rate was lowered to 1.0 percent in the summer of 2002 and remained at this level for almost two full years. This was the same rate that the ECB had in place following the 2008 meltdown until it recently lowered its overnight rate somewhat further. The 1.0 percent ECB rate was already thought to be pretty much a zero lower bound in the sense that no one believes that further reductions have any substantial payoff in economic activity. For practical purposes the Fed had hit the zero lower bound following the 2001 downturn.

In other words, it was easy to see from looking at the data that recovery from the stock market crash induced recession in 2001 was not easy. It is scary to think that "we" did not recognize that fact at the time and apparently still do not recognize this fact today.

Having gotten a few e-mails I thought I would add a few more words on job growth in the recovery. There are some basic facts on the growth and jobs story that I thought were not entirely clear in this NYT piece.

First, the basic problem is that growth has been extremely weak in this recovery. Annual growth has averaged just over 2.0 percent in this recovery. That is pathetic, it is below the underlying trend rate of growth, which is in the neighborhood of 2.4 percent. This means that the economy has actually been falling further behind its potential level of output even during the recovery.

Growth during a recovery is usually proportionate to the severity of the downturn. When we had severe downturns in 1974-75 and 1981-82 we saw years of growth in excess of 6 percent. If this recovery were like other recoveries that is what we would be seeing. By comparison, the 2.0 percent growth we actually have seen is dismal. No one should think that growth has been anywhere close to acceptable in the recovery.

Just to be clear, this is not because the Obama administration has been especially inept in dealing with the economy. They have been inept, facts speak for themselves and millions of people are needlessly suffering as a result, but the nature of the problem they faced was qualitatively different than in other downturns.

Other recessions, except for the 2001 downturn, were caused by the Fed raising interest rates to combat inflation. Even though these recessions all caused great pain in the form of unemployment/underemployment, there was an obvious way to counteract these downturns: lower interest rates.

The story of these prior downturns was that high interest rates led people to stop buying cars and houses. This created a huge amount of pent-up demand for cars and houses. When the Fed lowered interest rates demand in these sectors exploded providing the kindling that set the recovery on its course.

Ha-Joon Chang
The Guardian Unlimited, 7 de mayo, 2013
El Mono Político, 19 de mayo, 2013
En Inglés

Todd Ganos at Forbes Magazine is upset that people earning $150,000 a year get Social Security. Hey, I'm upset that people earning $1 million a year get interest on government bonds. In both cases they don't need it, but you know what? They paid for it.

But let's skip the morality play and have some fun with numbers. We want to figure out how much money we could in principle save by taking away Social Security benefits from these rich retirees. Ganos tells readers:

"According to the Congressional Budget Office, there are approximately 25.6 million senior households in the United States.  The average annual pre-tax income of the top 10% of senior households is approximately $197,000.  Does such a household need Social Security retirement income payments?"

Okay, so the average income for this top 10 percent of seniors is $197,000 a year. Let's suppose that the average income for the top 1 percent of seniors is $1 million a year, which is probably pretty much in the ballpark. That leaves the average income for the remaining 9 percent of these wealthy seniors at just under $110,000. And that is still an average. Many will have considerably lower incomes. Yet, Ganos thinks we can painlessly take away Social Security benefits for this group that average (for them) close to $20,000 a year. He must not have heard all the howls of pain last fall about the job creators being devastated by an increase in their tax rate of 4 percentage points on income over $450,000 a year. 

If we want to be serious about this exercise, we would look at the actual distribution of benefits rather than playing games with averages that include the Warren Buffets of the world. We did this a few years back. If you wanted to cover 10 percent of the benefits paid out (not 10 percent of seniors), you had to get to individuals with incomes of less than $50,000, not counting their Social Security benefits. (We took person income to keep things simpler, many seniors do live alone.)

June 7, 2013 (Jobs Byte)

June 7, 2013

Sorry, I misread the piece. It was the Social Security and Medicare trust funds that he wants to abolish. It would be the same thing -- destroying large amounts of wealth, just different people involved.

In the case of Peter Peterson and Bill Gates, we would be destroying the wealth of two very rich people. In the case of the Social Security and Medicare trust funds we would be destroying $3 trillion in wealth that belongs to the country's workers. Of course I should have realized off the bat that Samuelson could not be talking about destroying Peterson and Gates' bank accounts. The Post never would allow a column in the paper suggesting that we confiscate the wealth of the rich.

Okay, what is Samuelson's argument? It's a bit hard to tell.

He tells us:

"In the public mind, the trust funds suggest that Social Security and Medicare are quarantined from the rest of government. As long as the funds remain solvent, promised benefits can be paid. So policy focuses on strengthening the trust funds. Against that background, it was inevitable that the trustees’ latest reports would be cast as good news. Slower-than-expected increases in health-care costs have extended the life of the Medicare trust fund until 2026, two years later than last year’s estimate. The Social Security trust fund is projected to pay promised benefits through 2033, the same as last year. This seems comfortably distant."

Yes, this is exactly right. The trust funds are legally quarantined from the rest of the government, which is all that matters for these programs. The mind that Samuelson attributes to the public is 100 percent on the mark. So where is the problem?

Ahead of today’s closing of the Organization of American States (OAS) General Assembly in Guatemala, numerous drug policy, human rights and other organizations called on the governments of the Americas [PDF] to consider alternatives to the decades-long U.S.-led “war on drugs.” The open letter appeals from these groups echo those made ahead of the Central American Integration System summit at the beginning of May: “Prohibitionist policies and the war on drugs have intensified violent conflict in the region,” and human rights have suffered. Human Rights Watch Americas Director José Miguel Vivanco made a similar declaration: “The ‘drug war’ has taken a huge toll in the Americas, from the carnage of brutal drug-trafficking organizations to the egregious abuses by security forces fighting them,” and “Governments should find new policies to address the harm drug use causes while curbing the violence and abuse that have plagued the current approach.” Human Rights Watch recommends decriminalization of personal drug use.

The drug question was the focus of the meeting, which followed the release of an OAS report that considers alternative policies including legalization and treatment, as opposed to criminalization and incarceration. Timed to coincide with the OAS General Assembly, an op-ed in the Guardian of London on Tuesday by Colombian president Juan Manuel Santos summarizes four drug policy scenarios described in the OAS report.

The OAS report is just the latest in a tide of policy papers, studies, opinion pieces, rallies and marches all with a similar refrain: it’s time for a change on drug policy. While the U.S. continues to express resistance (Kerry is reported to have remarked at the assembly that “I say to all those who speak about legalization and reform:  the challenges go far beyond a single ingredient. Drugs destroy lives, destroy families.”), countries in Latin America are moving ahead. Most notably, Uruguay is poised to become the first country in the region to legalize and regulate marijuana, with the lower house expected to soon approve such reforms that are backed by President José Mujica and his Frente Amplio party.

Dean Baker
Truthout, 7 de mayo, 2013
El Mono Político, 9 de mayo, 2013
En Inglés