Of course, The Washington Post would never make such an assertion, even if there is good reason to think that it is true. Instead, an article on Friday’s jobs report told readers:
“President Trump and Republicans on Capitol Hill have said they hope to pass sweeping changes to the tax code by the end of December, a move they believe will create more good-paying jobs and supercharge economic growth.”
This is again an inexplicable excursion into mind reading. The Post really has no idea what Republican politicians believe. Why is it so hard to just report what they say and leave the speculation on their true beliefs to readers?
This piece also included an inaccurate statement from Jason Furman, who served as President Obama’s chief economist. He quotes Furman as saying:
“‘They’re [workers] more confidently quitting their jobs to find another. Everything with the way people are behaving is consistent with the strength in the labor market. But wages just aren’t picking up the way we thought they would.'”
In fact, the share of unemployment due to people voluntarily quitting their jobs is much lower than it has been in the past when the unemployment rate got this low. The most recent numbers put the share of unemployment due to voluntary quits at just over 11.0 percent. By contrast in 1999 and 2000, the share was over 13 percent and peaked at more than 15.0 percent. This suggests that workers are much less confident in their job prospects than they were the last time the unemployment rate was near 4.0 percent.
Percent of Unemployment Due to Job Leavers
Source: Bureau of Labor Statistics.
Of course, The Washington Post would never make such an assertion, even if there is good reason to think that it is true. Instead, an article on Friday’s jobs report told readers:
“President Trump and Republicans on Capitol Hill have said they hope to pass sweeping changes to the tax code by the end of December, a move they believe will create more good-paying jobs and supercharge economic growth.”
This is again an inexplicable excursion into mind reading. The Post really has no idea what Republican politicians believe. Why is it so hard to just report what they say and leave the speculation on their true beliefs to readers?
This piece also included an inaccurate statement from Jason Furman, who served as President Obama’s chief economist. He quotes Furman as saying:
“‘They’re [workers] more confidently quitting their jobs to find another. Everything with the way people are behaving is consistent with the strength in the labor market. But wages just aren’t picking up the way we thought they would.'”
In fact, the share of unemployment due to people voluntarily quitting their jobs is much lower than it has been in the past when the unemployment rate got this low. The most recent numbers put the share of unemployment due to voluntary quits at just over 11.0 percent. By contrast in 1999 and 2000, the share was over 13 percent and peaked at more than 15.0 percent. This suggests that workers are much less confident in their job prospects than they were the last time the unemployment rate was near 4.0 percent.
Percent of Unemployment Due to Job Leavers
Source: Bureau of Labor Statistics.
Read More Leer más Join the discussion Participa en la discusión
This would have been useful information to include in an article on various proposals to alter the program. While the article does helpfully point out the limited size of benefits to the typical recipient, it reports the total cost as $73 billion a year.
Since most people are not very familiar with the size of the federal budget, they may think the food stamp program accounts for a substantial share of their tax dollars. For this reason, it would have been helpful to express this figure as a share of the total budget.
This would have been useful information to include in an article on various proposals to alter the program. While the article does helpfully point out the limited size of benefits to the typical recipient, it reports the total cost as $73 billion a year.
Since most people are not very familiar with the size of the federal budget, they may think the food stamp program accounts for a substantial share of their tax dollars. For this reason, it would have been helpful to express this figure as a share of the total budget.
Read More Leer más Join the discussion Participa en la discusión
A Morning Edition segment on the Republican tax cut plan made comparisons to the Reagan tax cuts and referred to the “boom” that occurred following the tax cuts. While the economy did grow rapidly in the years from 1983 to 1986, the main reason was the severity of the 1981–82 recession. Economies tend to bounce back quickly following a severe recession.
We saw the same story in the 1970s. The economy grew at a 5.7 percent annual rate in the thirteen quarters from the fourth quarter of 1982 to first quarter of 1986. This is not hugely different than the 5.3 percent annual growth rate from the first quarter of 1975 to the third quarter of 1977. The key to the more rapid growth in the Reagan recovery was the somewhat greater severity of the 1981–82 recession, which pushed unemployment almost to 11.0 percent.
It is also worth mentioning the poor performance of investment following the reduction in the corporate income tax in 1986. The tax reform act passed in that year lowered the corporate rate from 46 percent to 35 percent, roughly the same size reduction as is included in the current bill. Rather than leading to a boom, investment actually fell as a share of GDP over the next three years.
A Morning Edition segment on the Republican tax cut plan made comparisons to the Reagan tax cuts and referred to the “boom” that occurred following the tax cuts. While the economy did grow rapidly in the years from 1983 to 1986, the main reason was the severity of the 1981–82 recession. Economies tend to bounce back quickly following a severe recession.
We saw the same story in the 1970s. The economy grew at a 5.7 percent annual rate in the thirteen quarters from the fourth quarter of 1982 to first quarter of 1986. This is not hugely different than the 5.3 percent annual growth rate from the first quarter of 1975 to the third quarter of 1977. The key to the more rapid growth in the Reagan recovery was the somewhat greater severity of the 1981–82 recession, which pushed unemployment almost to 11.0 percent.
It is also worth mentioning the poor performance of investment following the reduction in the corporate income tax in 1986. The tax reform act passed in that year lowered the corporate rate from 46 percent to 35 percent, roughly the same size reduction as is included in the current bill. Rather than leading to a boom, investment actually fell as a share of GDP over the next three years.
Read More Leer más Join the discussion Participa en la discusión
The NYT article on the November jobs report notes the fact that the rate of wage growth does not appear to be appear accelerating. To explain why it presents the views of Michael Big, a general contractor in the Chicago area.
The piece tells readers that Mr. Big has had to turn away jobs in recent months because he can’t find the needed workers:
“‘Unfortunately we don’t have the labor to take all the projects that are coming in,’ Mr. Big said. His competitors are having the same problem, he added. ‘We’re all grumbling and complaining about the same thing, when we’re not poaching guys from each other.'”
The piece continues:
“Mr. Big’s experience raises a question: If workers are so hard to find, why aren’t companies raising pay? In his case, Mr. Big says that in order to pay more, he would have to charge his customers more, and if he does that, he’ll be outbid by his competitors.”
“‘The labor is there, but they’re not skilled enough for the wages they’re asking,’ Mr. Big said. He said construction workers without special skills were asking $15 an hour, well above the roughly $12 an hour he can afford.”
This presentation of the problem indicates the jobs really are not there. If people like Mr. Big are not prepared to pay enough to attract workers, then they really don’t have jobs to offer.
This is like if I want to see a doctor, but am only willing to pay $25 an hour. I probably would not find any doctors willing to work for that pay. In this case, I don’t really have a job for a doctor, or at least not in an economically meaningful sense. It is no surprise that jobs that offer pay below the market rate are not driving up wages.
The NYT article on the November jobs report notes the fact that the rate of wage growth does not appear to be appear accelerating. To explain why it presents the views of Michael Big, a general contractor in the Chicago area.
The piece tells readers that Mr. Big has had to turn away jobs in recent months because he can’t find the needed workers:
“‘Unfortunately we don’t have the labor to take all the projects that are coming in,’ Mr. Big said. His competitors are having the same problem, he added. ‘We’re all grumbling and complaining about the same thing, when we’re not poaching guys from each other.'”
The piece continues:
“Mr. Big’s experience raises a question: If workers are so hard to find, why aren’t companies raising pay? In his case, Mr. Big says that in order to pay more, he would have to charge his customers more, and if he does that, he’ll be outbid by his competitors.”
“‘The labor is there, but they’re not skilled enough for the wages they’re asking,’ Mr. Big said. He said construction workers without special skills were asking $15 an hour, well above the roughly $12 an hour he can afford.”
This presentation of the problem indicates the jobs really are not there. If people like Mr. Big are not prepared to pay enough to attract workers, then they really don’t have jobs to offer.
This is like if I want to see a doctor, but am only willing to pay $25 an hour. I probably would not find any doctors willing to work for that pay. In this case, I don’t really have a job for a doctor, or at least not in an economically meaningful sense. It is no surprise that jobs that offer pay below the market rate are not driving up wages.
Read More Leer más Join the discussion Participa en la discusión
Now that we seem on the edge of giving lots more tax dollars to Donald Trump and his rich friends, the deficit hawks feel newly empowered and have Social Security and Medicare clearly in their sights. Robert Samuelson is on the job, telling us that we haven’t prepared for the aging of the population.
His primary weapon is a new report from the OECD on the aging problem. The report says that the ratio of the over 65 population to the 25 to 65 population is projected to rise from 0.124 in 2015 to 0.196 in 2050. Oh wait, I made a mistake, that was the increase in this ratio in the thirty five years from 1945 to 1980. The ratio is projected to rise from 0.246 in 2015 to 0.379 in 2050.
The ratio is projected to rise faster in the next 35 years than it did in the earlier period, but the rise in the ratio in the earlier period did not prevent the country from enjoying huge increases in living standards. The same should hold true over the next 35 years. Real compensation per hour is projected to rise by roughly 60 percent over the the 35 years from 2015 to 2050.
Suppose we had a huge 5.0 percentage point increase in the payroll tax to pay for Social Security and Medicare taxes over this period. This would still leave workers with 50 percent more compensation after-tax than what they have today. Are we scared yet?
Normal productivity growth swamps the impact of demographics, as fans of arithmetic everywhere know. I should also point out, if the robot and artificial intelligence enthusiasts are even half right, productivity will increase far more than the wage projections in the Social Security trustees report assumes.
At this point, all good Beat the Press readers are yelling that most workers have not seen their share of wage growth. The money has gone to CEOs, Wall Street types, doctors and other high end professionals. If that continues over the next 35 years most workers will have a very difficult time dealing with any increase in payroll taxes.
That point is exactly right, which is why the living standards of our children depend hugely on reversing the upward redistribution of the last four decades. That is the point of Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.
This is where the real money is. Folks like Robert Samuelson and the billionaire Peter Peterson are trying very hard to distract us from going after the rich, and instead go after our parents’ Social Security and Medicare. It’s a cheap trick, but they won’t give up trying.
It is also worth mentioning in this respect that the GDP we’ve lost as a result of failing to rein in the growth of the housing bubble, and not having an adequate fiscal stimulus following its collapse, dwarfs any tax increases that may be needed to fund Social Security and Medicare in the years ahead. But Robert Samuelson and the Peterson gang would rather not have us talk about that fact either.
Now that we seem on the edge of giving lots more tax dollars to Donald Trump and his rich friends, the deficit hawks feel newly empowered and have Social Security and Medicare clearly in their sights. Robert Samuelson is on the job, telling us that we haven’t prepared for the aging of the population.
His primary weapon is a new report from the OECD on the aging problem. The report says that the ratio of the over 65 population to the 25 to 65 population is projected to rise from 0.124 in 2015 to 0.196 in 2050. Oh wait, I made a mistake, that was the increase in this ratio in the thirty five years from 1945 to 1980. The ratio is projected to rise from 0.246 in 2015 to 0.379 in 2050.
The ratio is projected to rise faster in the next 35 years than it did in the earlier period, but the rise in the ratio in the earlier period did not prevent the country from enjoying huge increases in living standards. The same should hold true over the next 35 years. Real compensation per hour is projected to rise by roughly 60 percent over the the 35 years from 2015 to 2050.
Suppose we had a huge 5.0 percentage point increase in the payroll tax to pay for Social Security and Medicare taxes over this period. This would still leave workers with 50 percent more compensation after-tax than what they have today. Are we scared yet?
Normal productivity growth swamps the impact of demographics, as fans of arithmetic everywhere know. I should also point out, if the robot and artificial intelligence enthusiasts are even half right, productivity will increase far more than the wage projections in the Social Security trustees report assumes.
At this point, all good Beat the Press readers are yelling that most workers have not seen their share of wage growth. The money has gone to CEOs, Wall Street types, doctors and other high end professionals. If that continues over the next 35 years most workers will have a very difficult time dealing with any increase in payroll taxes.
That point is exactly right, which is why the living standards of our children depend hugely on reversing the upward redistribution of the last four decades. That is the point of Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.
This is where the real money is. Folks like Robert Samuelson and the billionaire Peter Peterson are trying very hard to distract us from going after the rich, and instead go after our parents’ Social Security and Medicare. It’s a cheap trick, but they won’t give up trying.
It is also worth mentioning in this respect that the GDP we’ve lost as a result of failing to rein in the growth of the housing bubble, and not having an adequate fiscal stimulus following its collapse, dwarfs any tax increases that may be needed to fund Social Security and Medicare in the years ahead. But Robert Samuelson and the Peterson gang would rather not have us talk about that fact either.
Read More Leer más Join the discussion Participa en la discusión
Making mistakes is part of life. Serious people own up to them and correct themselves. Unfortunately, when it comes to NAFTA, this is not the practice of the Washington Post.
Ten years ago today, December 7, 2007, a Washington Post editorial attacked the three leading contenders for the Democratic nomination over their pledge to renegotiate NAFTA. The Post had long been a strong supporter of NAFTA, biasing both its news coverage and opinion pages to push pro-NAFTA views. Its editorial page staff was obviously upset to see Senators Hillary Clinton, John Edwards, and Barack Obama attack their beloved trade agreement.
The editorial, ironically titled “Trade Distortions,” told readers how NAFTA had provided large benefits to the United States. Then it stated:
“Not that any of the Democratic candidates seem to care, but the impact of NAFTA seems to have been both larger and more positive in Mexico than in the United States. Mexico’s gross domestic product, now more than $875 billion, has more than quadrupled since 1987.”
This one was a headscratcher for two reasons. First, NAFTA took effect in 1994 — why was the Post telling us about Mexico’s growth since 1987?
But this was the less important gaffe in this sentence. Mexico’s GDP “has more than quadrupled?” That is a pretty incredible claim on its face. If GDP quadruples in two decades, it implies an annual growth rate of 7.2 percent. While many developing countries have a brief spurt where they grow at this pace for two or three years, sustaining this sort of growth for two decades is truly extraordinary. China managed to do it, but not many other countries have. Was there another China growth miracle hiding south of the border that had somehow had gone unnoticed?
It turns out there wasn’t. According to the International Monetary Fund, adjusting for inflation, Mexico’s GDP went from 6,564 billion pesos in 1987 to 12,088 billion pesos in 2007.[1] That translates into cumulative growth of 84.2 percent, quite a bit different from the “more than quadrupled” claimed by the Washington Post. Rather than being a near-record-setting growth pace, this translates into a thoroughly mediocre 3.1 percent annual rate of growth.
On a per capita basis, Mexico’s growth trailed growth in the United States, averaging just 1.5 percent annually, compared to 1.9 percent in the United States. That’s not the expected story. Poor countries are supposed to be catching up to rich countries.
So how did the Post get this one so badly wrong? It’s possible that it looked at Mexico’s nominal GDP growth. This measure doesn’t adjust for the effects of inflation. Since Mexico had a very serious problem with inflation over most of this period, its nominal GDP did more than quadruple.
In fact, Mexico’s nominal GDP increased by more than a factor of 50, from 217.6 billion pesos in 1987 to 11,403.3 billion pesos in 2007. That certainly qualifies as “more than quadrupled.”
However, runaway inflation hardly makes a good case for NAFTA. While concerns over inflation have arguably been excessive in recent decades, inflation running well into the double digits is certainly a problem. In any case, higher inflation is hardly an outcome worth boasting about.
Anyhow, whatever the cause of the original error, the really disturbing part of the story is the Post’s refusal to correct it even after I called it to their attention. People view a newspaper like the Post as authoritative. As long as the mistaken numbers on Mexico’s growth appear on the paper’s website, it is possible that readers will find the piece and assume the numbers are correct. This is why serious newspapers append a correction to the bottom of an article or column that includes a major error.
For some reason, the Post has chosen not to acknowledge and correct its error over the last ten years. Let’s hope we don’t have to write a second edition of this piece in 2027.
[1] This uses 2008 constant pesos.
Making mistakes is part of life. Serious people own up to them and correct themselves. Unfortunately, when it comes to NAFTA, this is not the practice of the Washington Post.
Ten years ago today, December 7, 2007, a Washington Post editorial attacked the three leading contenders for the Democratic nomination over their pledge to renegotiate NAFTA. The Post had long been a strong supporter of NAFTA, biasing both its news coverage and opinion pages to push pro-NAFTA views. Its editorial page staff was obviously upset to see Senators Hillary Clinton, John Edwards, and Barack Obama attack their beloved trade agreement.
The editorial, ironically titled “Trade Distortions,” told readers how NAFTA had provided large benefits to the United States. Then it stated:
“Not that any of the Democratic candidates seem to care, but the impact of NAFTA seems to have been both larger and more positive in Mexico than in the United States. Mexico’s gross domestic product, now more than $875 billion, has more than quadrupled since 1987.”
This one was a headscratcher for two reasons. First, NAFTA took effect in 1994 — why was the Post telling us about Mexico’s growth since 1987?
But this was the less important gaffe in this sentence. Mexico’s GDP “has more than quadrupled?” That is a pretty incredible claim on its face. If GDP quadruples in two decades, it implies an annual growth rate of 7.2 percent. While many developing countries have a brief spurt where they grow at this pace for two or three years, sustaining this sort of growth for two decades is truly extraordinary. China managed to do it, but not many other countries have. Was there another China growth miracle hiding south of the border that had somehow had gone unnoticed?
It turns out there wasn’t. According to the International Monetary Fund, adjusting for inflation, Mexico’s GDP went from 6,564 billion pesos in 1987 to 12,088 billion pesos in 2007.[1] That translates into cumulative growth of 84.2 percent, quite a bit different from the “more than quadrupled” claimed by the Washington Post. Rather than being a near-record-setting growth pace, this translates into a thoroughly mediocre 3.1 percent annual rate of growth.
On a per capita basis, Mexico’s growth trailed growth in the United States, averaging just 1.5 percent annually, compared to 1.9 percent in the United States. That’s not the expected story. Poor countries are supposed to be catching up to rich countries.
So how did the Post get this one so badly wrong? It’s possible that it looked at Mexico’s nominal GDP growth. This measure doesn’t adjust for the effects of inflation. Since Mexico had a very serious problem with inflation over most of this period, its nominal GDP did more than quadruple.
In fact, Mexico’s nominal GDP increased by more than a factor of 50, from 217.6 billion pesos in 1987 to 11,403.3 billion pesos in 2007. That certainly qualifies as “more than quadrupled.”
However, runaway inflation hardly makes a good case for NAFTA. While concerns over inflation have arguably been excessive in recent decades, inflation running well into the double digits is certainly a problem. In any case, higher inflation is hardly an outcome worth boasting about.
Anyhow, whatever the cause of the original error, the really disturbing part of the story is the Post’s refusal to correct it even after I called it to their attention. People view a newspaper like the Post as authoritative. As long as the mistaken numbers on Mexico’s growth appear on the paper’s website, it is possible that readers will find the piece and assume the numbers are correct. This is why serious newspapers append a correction to the bottom of an article or column that includes a major error.
For some reason, the Post has chosen not to acknowledge and correct its error over the last ten years. Let’s hope we don’t have to write a second edition of this piece in 2027.
[1] This uses 2008 constant pesos.
Read More Leer más Join the discussion Participa en la discusión
The NYT has an article discussing the ways in which Mick Mulvaney is changing the Consumer Financial Protection Bureau in his capacity as an acting director. There is one item on which it is somewhat misleading. The piece indicates that Mulvaney’s status as an acting director is an accident, telling readers that Trump could appoint a new director, but the confirmation process could take months.
While confirmation can be lengthy, depending on the quality of the nominee (Republicans do control the process), Trump has obviously made a decision not to put up a nominee for the directorship. Cordray’s decision to resign before his term ended was widely expected. Most administrations would already have a candidate in mind whose name could be submitted as soon as the resignation was announced. However, a nominee for director would be subject to various disclosure requirements and would also have to testify before the Senate. After being approved the director could only be removed for cause.
By contrast, an acting director is not required to make the same sorts of disclosures, nor do they have to demonstrate their competence to the Senate. Also, the acting director serves entirely at the will of the president. Trump can remove Mulvaney any time he chooses for any reason whatsoever.
Trump has followed a similar path with the position of the Comptroller of the Currency and the Commissioner of the Internal Revenue Service. In each case, he has an acting head of agencies that are supposed to operate in a non-political manner. As with Mulvaney, Trump has the ability to remove these heads any time he chooses.
This abuse of the appointment process has received little attention. It threatens the integrity of all three agencies.
The NYT has an article discussing the ways in which Mick Mulvaney is changing the Consumer Financial Protection Bureau in his capacity as an acting director. There is one item on which it is somewhat misleading. The piece indicates that Mulvaney’s status as an acting director is an accident, telling readers that Trump could appoint a new director, but the confirmation process could take months.
While confirmation can be lengthy, depending on the quality of the nominee (Republicans do control the process), Trump has obviously made a decision not to put up a nominee for the directorship. Cordray’s decision to resign before his term ended was widely expected. Most administrations would already have a candidate in mind whose name could be submitted as soon as the resignation was announced. However, a nominee for director would be subject to various disclosure requirements and would also have to testify before the Senate. After being approved the director could only be removed for cause.
By contrast, an acting director is not required to make the same sorts of disclosures, nor do they have to demonstrate their competence to the Senate. Also, the acting director serves entirely at the will of the president. Trump can remove Mulvaney any time he chooses for any reason whatsoever.
Trump has followed a similar path with the position of the Comptroller of the Currency and the Commissioner of the Internal Revenue Service. In each case, he has an acting head of agencies that are supposed to operate in a non-political manner. As with Mulvaney, Trump has the ability to remove these heads any time he chooses.
This abuse of the appointment process has received little attention. It threatens the integrity of all three agencies.
Read More Leer más Join the discussion Participa en la discusión
Ross Douthat goes over what he sees as the good and the bad in the Republican tax plans in his column today. He notes the ending of the mandate that people buy health care insurance in the Senate version of the bill and then says:
“In the long run any universal health insurance system will be on a firmer political footing if it finds a way to work without requiring people to buy a product they don’t want.”
A “universal” system does mean that everyone has to have health insurance even if they don’t want it. It is possible to effectively make people “buy” insurance through the back door if it is paid for with tax revenue. In this case, people pay for their premiums through their taxes, but they don’t directly “buy” insurance.
It’s possible that Douthat is arguing for some Medicare for All type system, but it’s also possible that he doesn’t really want a universal health care system.
Thanks to Robert Salzberg for calling this to my attention.
Ross Douthat goes over what he sees as the good and the bad in the Republican tax plans in his column today. He notes the ending of the mandate that people buy health care insurance in the Senate version of the bill and then says:
“In the long run any universal health insurance system will be on a firmer political footing if it finds a way to work without requiring people to buy a product they don’t want.”
A “universal” system does mean that everyone has to have health insurance even if they don’t want it. It is possible to effectively make people “buy” insurance through the back door if it is paid for with tax revenue. In this case, people pay for their premiums through their taxes, but they don’t directly “buy” insurance.
It’s possible that Douthat is arguing for some Medicare for All type system, but it’s also possible that he doesn’t really want a universal health care system.
Thanks to Robert Salzberg for calling this to my attention.
Read More Leer más Join the discussion Participa en la discusión
That could have been the headline, at least if the New York Times article reporting on the action is accurate. The NYT told readers that when Clinton first created the Grand Staircase National Monument in 1996:
“When Mr. Clinton formed Grand Staircase, the move halted plans for a coal mining project there that would have brought desperately needed jobs to a poor county.”
Since the demand for coal is not hugely elastic, if coal was being mined from the area that became the monument, it would have largely displaced coal that was being mined elsewhere in the United States. As it was, employment in the coal industry fell from roughly 90,000 in 1996 (0.08 percent of total employment) to 52,000 in the most recent data (0.03 percent of total employment). The decline in employment in areas now producing coal would have been even sharper if the Grand Staircase had been open to mining, according to the NYT.
That could have been the headline, at least if the New York Times article reporting on the action is accurate. The NYT told readers that when Clinton first created the Grand Staircase National Monument in 1996:
“When Mr. Clinton formed Grand Staircase, the move halted plans for a coal mining project there that would have brought desperately needed jobs to a poor county.”
Since the demand for coal is not hugely elastic, if coal was being mined from the area that became the monument, it would have largely displaced coal that was being mined elsewhere in the United States. As it was, employment in the coal industry fell from roughly 90,000 in 1996 (0.08 percent of total employment) to 52,000 in the most recent data (0.03 percent of total employment). The decline in employment in areas now producing coal would have been even sharper if the Grand Staircase had been open to mining, according to the NYT.
Read More Leer más Join the discussion Participa en la discusión
Robert Samuelson used his column today to say he doesn’t understand budget deficits. This is hardly a surprise to regular readers of his column. But, he bizarrely argues that because he is confused, everyone else is also.
Samuelson tells readers:
“The truth is that we don’t fully understand the effects of budget deficits on the business cycle.”
No, “we” do understand the effects of budget deficits. It really is pretty simple, deficits increase demand compared to a balanced budget or surplus. Of course, not all spending or taxes are equal. Direct spending on goods and services has more impact than transfer payments, and transfer payments have more impact on demand if they go to lower income people who will spend them than higher income people who save much of their income. The same is true of taxes.
Also, it is important to note that the budget only captures a portion of the government’s commitments of revenue. Government-granted patent and copyright monopolies can easily involve a commitment in excess of $1 trillion a year (4–6 percent of GDP) in payments for rents. These are effectively privately collected taxes.
Anyhow, it’s unfortunate that Samuelson is confused on this issue. It is even more unfortunate that the Post could not find an economic columnist who understands economics.
Robert Samuelson used his column today to say he doesn’t understand budget deficits. This is hardly a surprise to regular readers of his column. But, he bizarrely argues that because he is confused, everyone else is also.
Samuelson tells readers:
“The truth is that we don’t fully understand the effects of budget deficits on the business cycle.”
No, “we” do understand the effects of budget deficits. It really is pretty simple, deficits increase demand compared to a balanced budget or surplus. Of course, not all spending or taxes are equal. Direct spending on goods and services has more impact than transfer payments, and transfer payments have more impact on demand if they go to lower income people who will spend them than higher income people who save much of their income. The same is true of taxes.
Also, it is important to note that the budget only captures a portion of the government’s commitments of revenue. Government-granted patent and copyright monopolies can easily involve a commitment in excess of $1 trillion a year (4–6 percent of GDP) in payments for rents. These are effectively privately collected taxes.
Anyhow, it’s unfortunate that Samuelson is confused on this issue. It is even more unfortunate that the Post could not find an economic columnist who understands economics.
Read More Leer más Join the discussion Participa en la discusión
