Both the overall and core deflators for personal consumption expenditures (PCE) fell in March. This brought the change in the core PCE deflator over the last year down to 1.6 percent. The Fed officially targets a 2.0 percent as an average rate. This means that it wants inflation to occasionally be above 2.0 percent in order to average out the times when it is below 2.0 percent. That should mean that it would want to see the inflation rate accelerate slightly to meet this target.
The Fed is widely expected to raise interest rates at least twice more in 2017 and quite likely three times. With inflation well below its target rate, it is reasonable to ask why?
Just to remind folks, this is not an argument about a baseball box score. The point of raising interest rates is to slow the economy and keep people from getting jobs. Also, by keeping labor markets weaker, higher interest rates prevent workers from getting higher pay increases. So, this does matter.
Both the overall and core deflators for personal consumption expenditures (PCE) fell in March. This brought the change in the core PCE deflator over the last year down to 1.6 percent. The Fed officially targets a 2.0 percent as an average rate. This means that it wants inflation to occasionally be above 2.0 percent in order to average out the times when it is below 2.0 percent. That should mean that it would want to see the inflation rate accelerate slightly to meet this target.
The Fed is widely expected to raise interest rates at least twice more in 2017 and quite likely three times. With inflation well below its target rate, it is reasonable to ask why?
Just to remind folks, this is not an argument about a baseball box score. The point of raising interest rates is to slow the economy and keep people from getting jobs. Also, by keeping labor markets weaker, higher interest rates prevent workers from getting higher pay increases. So, this does matter.
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For some reason the Washington Post has trouble just telling us what Donald Trump says and does. It instead feels the need to go beyond this to make all sorts of inferences that are not supported by evidence.
Tonight we are told in a headline that, “Trump guarantees protection for those with preexisting medical conditions — but it’s unclear how.” This should have been written “Trump says he guarantees protection for those with preexisting medical conditions — but it’s unclear how.”
Someone reading the headline quickly might have thought that Trump actually made some sort of guarantee of providing health care insurance to people with preexisting conditions. He didn’t.
For some reason the Washington Post has trouble just telling us what Donald Trump says and does. It instead feels the need to go beyond this to make all sorts of inferences that are not supported by evidence.
Tonight we are told in a headline that, “Trump guarantees protection for those with preexisting medical conditions — but it’s unclear how.” This should have been written “Trump says he guarantees protection for those with preexisting medical conditions — but it’s unclear how.”
Someone reading the headline quickly might have thought that Trump actually made some sort of guarantee of providing health care insurance to people with preexisting conditions. He didn’t.
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Steven Rattner went full Trump in his criticisms of Donald Trump’s tax cut plans in a NYT column this morning. Essentially, Rattner blamed the 1981–82 recession on Reagan’s tax cuts. The piece tells readers:
“For its part, the Reagan tax cut increased the budget deficit, helping elevate interest rates over 20 percent, which in turn contributed to the double-dip recession that ensued. The stock market fell by more than 20 percent.”
This hugely misrepresents the situation in 1981. Inflation had reached double-digit rates at the end of the 1970s due to the jump in world oil prices caused by the Iranian revolution. (Millions of barrels of daily exports were removed from world markets.)
Federal Reserve Chair Paul Volcker was determined to reduce inflation to low single digit rates. He jacked up interest rates to slow the economy before Reagan was even in the White House. The federal funds rate peaked at just under 19 percent in December of 1980. This rise in the federal funds rate is what caused the recession and the stock market plunge. (The stock market subsequently soared. This was arguably a result of Reagan’s tax cuts to the rich and corporations. The stock market measures the expected future value of after-tax corporate profits; it is not a measure of economic well-being.)
There are few, if any, economists who would blame the 1981–82 recession on the Reagan tax cuts. It is unfortunate that Rattner apparently feels he has to make this claim to argue against the Trump tax cuts.
It is also worth noting that Rattner’s concern about the government debt is hugely misplaced. The ratio of debt service to GDP is around 0.9 percent, near a post-war low. By comparison, it was over 3.0 percent of GDP in the early and mid-1990s. This is the burden the debt places on the economy.
Rattner also ignores patent and copyright rents. This is an alternative way in which the government imposes burdens on the public to pay for items. At present, patent rents in prescription drugs alone come to close to $400 billion a year, more than 2 percent of GDP. This is the difference between the patent protected price of drugs and the free market price. Effectively, patent and copyright monopolies are privately collected taxes. An honest analyst would have to include the effect of these monopolies in assessing the burden the government is creating for taxpayers in the future.
Steven Rattner went full Trump in his criticisms of Donald Trump’s tax cut plans in a NYT column this morning. Essentially, Rattner blamed the 1981–82 recession on Reagan’s tax cuts. The piece tells readers:
“For its part, the Reagan tax cut increased the budget deficit, helping elevate interest rates over 20 percent, which in turn contributed to the double-dip recession that ensued. The stock market fell by more than 20 percent.”
This hugely misrepresents the situation in 1981. Inflation had reached double-digit rates at the end of the 1970s due to the jump in world oil prices caused by the Iranian revolution. (Millions of barrels of daily exports were removed from world markets.)
Federal Reserve Chair Paul Volcker was determined to reduce inflation to low single digit rates. He jacked up interest rates to slow the economy before Reagan was even in the White House. The federal funds rate peaked at just under 19 percent in December of 1980. This rise in the federal funds rate is what caused the recession and the stock market plunge. (The stock market subsequently soared. This was arguably a result of Reagan’s tax cuts to the rich and corporations. The stock market measures the expected future value of after-tax corporate profits; it is not a measure of economic well-being.)
There are few, if any, economists who would blame the 1981–82 recession on the Reagan tax cuts. It is unfortunate that Rattner apparently feels he has to make this claim to argue against the Trump tax cuts.
It is also worth noting that Rattner’s concern about the government debt is hugely misplaced. The ratio of debt service to GDP is around 0.9 percent, near a post-war low. By comparison, it was over 3.0 percent of GDP in the early and mid-1990s. This is the burden the debt places on the economy.
Rattner also ignores patent and copyright rents. This is an alternative way in which the government imposes burdens on the public to pay for items. At present, patent rents in prescription drugs alone come to close to $400 billion a year, more than 2 percent of GDP. This is the difference between the patent protected price of drugs and the free market price. Effectively, patent and copyright monopolies are privately collected taxes. An honest analyst would have to include the effect of these monopolies in assessing the burden the government is creating for taxpayers in the future.
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Amazon, which famously made itself into one of the world’s largest retailers as a result of a massive government subsidy in the form of an exemption from the requirement to collect state sales taxes, is again looking for the government’s help. The NYT reported that Amazon has taken out a patent on custom clothing ordering over the Internet.
It’s not clear what rights Amazon intends to secure with this patent. If it means to secure the very specific process outlined in the NYT, then it probably wasted money by filing, since it would be very easy for a competitor to alter one or more of the processes detailed in the patent and therefore avoid Amazon’s claim.
On the other hand, if the Amazon is claiming the exclusive right to make clothes to order over the Internet, then this is yet another great effort by a private company to use the patent system to stifle innovation. Selling made to order clothes on the Internet is what would ordinarily be viewed as an obvious innovation that is not patentable. (It’s in the category of telling someone to turn left at the fork in the road to reach their destination. The driving directions are not patentable.)
While it might seem far-fetched to imagine that Amazon thinks that it can patent the right to sell made to order clothes on the Internet, the company did patent one-click shopping back in the 1990s. It has used this government granted monopoly to force competitors to pay it a fee for the last twenty years.
As Jeff Bezos knows well, it’s always easier to rely on the government to give you money than to earn it in the market.
Amazon, which famously made itself into one of the world’s largest retailers as a result of a massive government subsidy in the form of an exemption from the requirement to collect state sales taxes, is again looking for the government’s help. The NYT reported that Amazon has taken out a patent on custom clothing ordering over the Internet.
It’s not clear what rights Amazon intends to secure with this patent. If it means to secure the very specific process outlined in the NYT, then it probably wasted money by filing, since it would be very easy for a competitor to alter one or more of the processes detailed in the patent and therefore avoid Amazon’s claim.
On the other hand, if the Amazon is claiming the exclusive right to make clothes to order over the Internet, then this is yet another great effort by a private company to use the patent system to stifle innovation. Selling made to order clothes on the Internet is what would ordinarily be viewed as an obvious innovation that is not patentable. (It’s in the category of telling someone to turn left at the fork in the road to reach their destination. The driving directions are not patentable.)
While it might seem far-fetched to imagine that Amazon thinks that it can patent the right to sell made to order clothes on the Internet, the company did patent one-click shopping back in the 1990s. It has used this government granted monopoly to force competitors to pay it a fee for the last twenty years.
As Jeff Bezos knows well, it’s always easier to rely on the government to give you money than to earn it in the market.
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No, the Post would never try to read the president’s mind to make Trump look bad. Instead it read Trump’s mind to make him look good. The second paragraph of the lead article told readers:
“With an eye toward keeping his core promise of creating jobs and ramping up economic growth, Trump has fixated on tax reform as the next undertaking of his administration — an opportunity for him to land a first major legislative victory after repeated failures to pass a health-care package.”
Hmmm, so the Post knows that the reason Donald Trump wants to eliminate the estate tax is to create jobs and ramp up economic growth, as opposed to save his children and those of other billionaires from paying billions of dollars in taxes? It’s great they have such mind-reading abilities, otherwise we would might find it hard to believe, since eliminating the estate tax is likely to have no noticeable impact on growth.
In the same vein, Trump’s proposal to create the mother of all loopholes, by allowing pass-through corporations to just pay a 15 percent tax rate (as opposed to the 39.6 percent tax rate now paid by high income individuals) was intended to give his family and other rich people an enormous tax break. The only job creation from this tax cut is likely to be in the tax shelter industry as the nation’s rich restructure their income to show up in pass-through corporations.
We might say the same about Trump’s plan to eliminate the alternative minimum tax. While this move is likely to score pretty much a zero on the job creation front, it would likely save Trump tens, if not hundreds, of millions annually on his tax bill.
Newspapers with reporters less skilled in mind reading would be stuck reporting on just what the president and his staff say and do. Thankfully, we have the Washington Post to tell us Donald Trump’s real motives.
No, the Post would never try to read the president’s mind to make Trump look bad. Instead it read Trump’s mind to make him look good. The second paragraph of the lead article told readers:
“With an eye toward keeping his core promise of creating jobs and ramping up economic growth, Trump has fixated on tax reform as the next undertaking of his administration — an opportunity for him to land a first major legislative victory after repeated failures to pass a health-care package.”
Hmmm, so the Post knows that the reason Donald Trump wants to eliminate the estate tax is to create jobs and ramp up economic growth, as opposed to save his children and those of other billionaires from paying billions of dollars in taxes? It’s great they have such mind-reading abilities, otherwise we would might find it hard to believe, since eliminating the estate tax is likely to have no noticeable impact on growth.
In the same vein, Trump’s proposal to create the mother of all loopholes, by allowing pass-through corporations to just pay a 15 percent tax rate (as opposed to the 39.6 percent tax rate now paid by high income individuals) was intended to give his family and other rich people an enormous tax break. The only job creation from this tax cut is likely to be in the tax shelter industry as the nation’s rich restructure their income to show up in pass-through corporations.
We might say the same about Trump’s plan to eliminate the alternative minimum tax. While this move is likely to score pretty much a zero on the job creation front, it would likely save Trump tens, if not hundreds, of millions annually on his tax bill.
Newspapers with reporters less skilled in mind reading would be stuck reporting on just what the president and his staff say and do. Thankfully, we have the Washington Post to tell us Donald Trump’s real motives.
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The NYT had a major story about a ruling from a Chinese court requiring shoe manufacturers there to pay New Balance for using its logo on their shoes. The article repeatedly used the term “counterfeit” to refer to items that are similar to those produced by a major brand, but sell at a far lower price. This is inaccurate.
For an item to be counterfeit, the buyer must be deceived. In other words, the people buying the shoes with the New Balance logo must wrongly believe that they are buying New Balance shoes. From the article it appears that this is not generally the case. It tells us that the companies use names that are like New Balance, but are not New Balance. This is presumably telling consumers their shoe is similar to the one produced by New Balance, but it is not actually a New Balance shoe.
This distinction is important for two reasons. First, as long as it is clear that these shoes are not actually made by New Balance, the company does not have to worry that its reputation could be damaged by an inferior product. If the items were true counterfeits, then their poor quality would hurt the reputation of New Balance, which would be a real source of damage to the company.
The other reason the distinction is important is that the consumer is an ally in cracking down on actual counterfeits. In this case, the consumer is deceived because she paid a premium to get a presumably high-quality product, which she did not actually get. Consumers who are victims of counterfeits would be likely to cooperate with enforcement efforts.
On the other hand, consumers who knowingly buy unauthorized copies of major brands are benefiting from the opportunity to buy the copy at a lower cost than the brand product. They presumably are willing to trust the quality of the product produced by the knock-off manufacturer, given the savings. In this case, consumers have no reason to cooperate with enforcement efforts, since they will force them to pay more for the products they are buying.
It would be helpful if the NYT and other news outlets were careful to make the distinction between counterfeits and unauthorized copies in their reporting.
The NYT had a major story about a ruling from a Chinese court requiring shoe manufacturers there to pay New Balance for using its logo on their shoes. The article repeatedly used the term “counterfeit” to refer to items that are similar to those produced by a major brand, but sell at a far lower price. This is inaccurate.
For an item to be counterfeit, the buyer must be deceived. In other words, the people buying the shoes with the New Balance logo must wrongly believe that they are buying New Balance shoes. From the article it appears that this is not generally the case. It tells us that the companies use names that are like New Balance, but are not New Balance. This is presumably telling consumers their shoe is similar to the one produced by New Balance, but it is not actually a New Balance shoe.
This distinction is important for two reasons. First, as long as it is clear that these shoes are not actually made by New Balance, the company does not have to worry that its reputation could be damaged by an inferior product. If the items were true counterfeits, then their poor quality would hurt the reputation of New Balance, which would be a real source of damage to the company.
The other reason the distinction is important is that the consumer is an ally in cracking down on actual counterfeits. In this case, the consumer is deceived because she paid a premium to get a presumably high-quality product, which she did not actually get. Consumers who are victims of counterfeits would be likely to cooperate with enforcement efforts.
On the other hand, consumers who knowingly buy unauthorized copies of major brands are benefiting from the opportunity to buy the copy at a lower cost than the brand product. They presumably are willing to trust the quality of the product produced by the knock-off manufacturer, given the savings. In this case, consumers have no reason to cooperate with enforcement efforts, since they will force them to pay more for the products they are buying.
It would be helpful if the NYT and other news outlets were careful to make the distinction between counterfeits and unauthorized copies in their reporting.
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