I suppose the NYT should get credit for only doing it once, but it is still necessary to ask what information it thought it was providing readers in describing the Trans-Atlantic Trade and Investment Pact (TTIP) as a “free trade” agreement? As a practical matter, the formal trade barriers between the United States and the European Union are already near zero, so there is not much to be gained from further reducing the remaining barriers.
The TTIP is primarily about putting in places rules on intellectual property, investment, and health and safety regulations. It also establishes an extra-judicial process to enforce these rules. Free trade has almost to do with the TTIP, so why use the term to describe the pact? It is not providing accurate information to readers.
I suppose the NYT should get credit for only doing it once, but it is still necessary to ask what information it thought it was providing readers in describing the Trans-Atlantic Trade and Investment Pact (TTIP) as a “free trade” agreement? As a practical matter, the formal trade barriers between the United States and the European Union are already near zero, so there is not much to be gained from further reducing the remaining barriers.
The TTIP is primarily about putting in places rules on intellectual property, investment, and health and safety regulations. It also establishes an extra-judicial process to enforce these rules. Free trade has almost to do with the TTIP, so why use the term to describe the pact? It is not providing accurate information to readers.
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That would seem to be the implication of her Washington Post column, the headline of which told readers, “Republicans don’t like Kasich because he sounds like Obama.” What Rampell actually means by this is that Governor Kasich doesn’t sound angry, not that his political positions are at all similar to the ones advocated by President Obama. (In addition to the headline items, I should also mention that Kasich is opposed to the steps President Obama has taken to curb global warming and wants the Federal Reserve Board to raise interest rates.)
This obsession with tone rather than substance is common among reporters, but the Washington Post seems to have gone especially over the top in this area with reference to Mr. Kasich. (Anyone interested in verifying that Mr. Kasich actually has a very right-wing agenda can make a quick trip to his website.)
This obsession with Mr. Kasich’s moderate tone is remarkable because it flips the responsibilities of reporters on their head. Most of us are pretty good at listening to a politician and assessing whether they are angry, calm, reasoned, or other aspects of their demeanor. In any case, reporters don’t possess any obvious expertise in this area, they are not theater critics.
On the other hand, reporters should be in a position to know that the claim that large tax cuts will boost growth and increase revenue has been tried and repeatedly failed and that almost no economists accept this view. They also should know that the promise to maintain a balanced budget regardless of the condition of the economy would lead to long and severe recessions. And, they should know that the Fed’s expansionary monetary policy has helped to spur growth and reduce unemployment.
They should be sharing this information with readers so that they will understand that Mr. Kasich is making promises that are out of touch with reality. The amateur efforts at theater criticism have no place in serious political analysis.
That would seem to be the implication of her Washington Post column, the headline of which told readers, “Republicans don’t like Kasich because he sounds like Obama.” What Rampell actually means by this is that Governor Kasich doesn’t sound angry, not that his political positions are at all similar to the ones advocated by President Obama. (In addition to the headline items, I should also mention that Kasich is opposed to the steps President Obama has taken to curb global warming and wants the Federal Reserve Board to raise interest rates.)
This obsession with tone rather than substance is common among reporters, but the Washington Post seems to have gone especially over the top in this area with reference to Mr. Kasich. (Anyone interested in verifying that Mr. Kasich actually has a very right-wing agenda can make a quick trip to his website.)
This obsession with Mr. Kasich’s moderate tone is remarkable because it flips the responsibilities of reporters on their head. Most of us are pretty good at listening to a politician and assessing whether they are angry, calm, reasoned, or other aspects of their demeanor. In any case, reporters don’t possess any obvious expertise in this area, they are not theater critics.
On the other hand, reporters should be in a position to know that the claim that large tax cuts will boost growth and increase revenue has been tried and repeatedly failed and that almost no economists accept this view. They also should know that the promise to maintain a balanced budget regardless of the condition of the economy would lead to long and severe recessions. And, they should know that the Fed’s expansionary monetary policy has helped to spur growth and reduce unemployment.
They should be sharing this information with readers so that they will understand that Mr. Kasich is making promises that are out of touch with reality. The amateur efforts at theater criticism have no place in serious political analysis.
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It’s too bad the NYT doesn’t have a policy of fact-checking their columnists. (I realize, it might make it harder to get columnists, but it would make their columns more informative.) Ross Douthat’s confused piece on “The Democrats After Sanders” definitely would have benefited from more attachment to reality.
In the second paragraph Douthat tells us about the constraints on the budget since we are likely to face “the prospect of structural deficits for as long as baby boomers are taking Medicare.” Actually, the baby boomers use of Medicare has relatively little to do with budget deficits. Medicare is projected to rise as a share of GDP from roughly 3.6 percent today to 5.5 percent in two decades (Figure II.D1). The costs are then projected to rise gradually to 6.0 percent of GDP by 2080.
In other words, there is no reduction in costs after the baby boomers are all dead. The rise in costs is not due to baby boomers, but rather the fact that people are projected to live longer (the cruel things we do to our kids). Also, the excessive cost of health care in the United States is a big factor raising the cost of the program.
But this confusion is symptomatic of Douthat’s analysis. He argues that young people would be unlikely to want to pay the taxes to support a large welfare state once they are older and have higher incomes. Of course a big part of the issue is what happens to workers before tax income. If progressive Democrats are pursuing policies that lead to broadly shared wage growth, in other words workers get their share of productivity growth in wage growth, then workers can pay higher taxes and still enjoy much higher after-tax income.
For example, the Social Security Trustees Report projects that on average real wages will grow by 50 percent over the next three decades. If most workers share in these increases, then they may not be bothered much by a 1–2 percentage point increase in the Social Security tax. They would still have more than 45 percent in after-tax income than they do today.
While Mr. Douthat might want people to be concerned only about their taxes, economic theory would say that people care about their after-tax income. For after-tax income the extent to which workers can benefit from sharing productivity growth will matter far more than modest increases in tax rates.
It is also worth pointing out Douthat’s confusion about the impact of deficits. As long as the economy is well below its full employment level of output, deficits will not matter except to the politicians and columnists who like to yell about them. If the economy actually is up against its resource constraints and is reaching full employment, then deficits do matter. This is actually a much simpler story than Douthat seems to recognize.
Of course, if the economy is near full employment, we will have more tax revenue and be paying out less money for unemployment benefits and other transfer programs. This will go far towards eliminating any deficits, as was the case in the high employment years of the late 1990s.
It’s too bad the NYT doesn’t have a policy of fact-checking their columnists. (I realize, it might make it harder to get columnists, but it would make their columns more informative.) Ross Douthat’s confused piece on “The Democrats After Sanders” definitely would have benefited from more attachment to reality.
In the second paragraph Douthat tells us about the constraints on the budget since we are likely to face “the prospect of structural deficits for as long as baby boomers are taking Medicare.” Actually, the baby boomers use of Medicare has relatively little to do with budget deficits. Medicare is projected to rise as a share of GDP from roughly 3.6 percent today to 5.5 percent in two decades (Figure II.D1). The costs are then projected to rise gradually to 6.0 percent of GDP by 2080.
In other words, there is no reduction in costs after the baby boomers are all dead. The rise in costs is not due to baby boomers, but rather the fact that people are projected to live longer (the cruel things we do to our kids). Also, the excessive cost of health care in the United States is a big factor raising the cost of the program.
But this confusion is symptomatic of Douthat’s analysis. He argues that young people would be unlikely to want to pay the taxes to support a large welfare state once they are older and have higher incomes. Of course a big part of the issue is what happens to workers before tax income. If progressive Democrats are pursuing policies that lead to broadly shared wage growth, in other words workers get their share of productivity growth in wage growth, then workers can pay higher taxes and still enjoy much higher after-tax income.
For example, the Social Security Trustees Report projects that on average real wages will grow by 50 percent over the next three decades. If most workers share in these increases, then they may not be bothered much by a 1–2 percentage point increase in the Social Security tax. They would still have more than 45 percent in after-tax income than they do today.
While Mr. Douthat might want people to be concerned only about their taxes, economic theory would say that people care about their after-tax income. For after-tax income the extent to which workers can benefit from sharing productivity growth will matter far more than modest increases in tax rates.
It is also worth pointing out Douthat’s confusion about the impact of deficits. As long as the economy is well below its full employment level of output, deficits will not matter except to the politicians and columnists who like to yell about them. If the economy actually is up against its resource constraints and is reaching full employment, then deficits do matter. This is actually a much simpler story than Douthat seems to recognize.
Of course, if the economy is near full employment, we will have more tax revenue and be paying out less money for unemployment benefits and other transfer programs. This will go far towards eliminating any deficits, as was the case in the high employment years of the late 1990s.
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The Washington Post gave high marks to Ohio Governor John Kasich after he met with the Post’s editorial board. The lead editorial noted that Mr. Kasich, “does not dismiss science.” It goes on to point out that he recognizes that climate change is human caused, although he has no plan to address the problem. (Kasich does reject President Obama’s plan, as the piece notes.) Editorial writer Charles Lane was even more effusive, asking readers, “what’s not to like?”
People who follow politics and economics would have little difficulty answering that question. For example, Mr. Kasich signed a bill prohibiting the state of Ohio from contracting for health services with Planned Parenthood or any other organization that performs abortions. Kasich also has bizarre views on economic policy.
In addition to supporting tax cuts for the rich, which the Post criticized because of the impact on the deficit, Kasich also criticized the Fed for its quantitative easing policy. According to Kasich, this only led to companies “buying up more of their stock and making the rich richer.” It is difficult to envision how Kasich thinks this process works.
Most immediately, quantitative easing leads to lower interest rates. For believers in economics, this lead to more borrowing for things like buying homes and both public and private investment. It also frees up money for homeowners who refinance their mortgages. This allows them to spend money on other things. Lower interest rates also mean a lower valued dollar, other things equal. This makes our goods and services more competitive internationally, reducing our trade deficit.
All of these things create more jobs, which also puts workers in a better position to get wage gains. It is true that lower interest rates can also make it easier for companies to borrow to buy back shares of stock, although it is pretty bizarre to find a Republican who would argue against a policy that leads to more growth and jobs, just because it can increase the wealth of the rich. (Low interest rates also help to raise house prices, which are the main source of wealth for the middle class.)
Anyhow, the Post apparently thinks great things about a candidate who seems to have zero understanding of economics and has no ideas on how to address a potentially catastrophic environmental problem. It is worth noting that he proposed tax cuts, rather than tax increases for the rich.
The Washington Post gave high marks to Ohio Governor John Kasich after he met with the Post’s editorial board. The lead editorial noted that Mr. Kasich, “does not dismiss science.” It goes on to point out that he recognizes that climate change is human caused, although he has no plan to address the problem. (Kasich does reject President Obama’s plan, as the piece notes.) Editorial writer Charles Lane was even more effusive, asking readers, “what’s not to like?”
People who follow politics and economics would have little difficulty answering that question. For example, Mr. Kasich signed a bill prohibiting the state of Ohio from contracting for health services with Planned Parenthood or any other organization that performs abortions. Kasich also has bizarre views on economic policy.
In addition to supporting tax cuts for the rich, which the Post criticized because of the impact on the deficit, Kasich also criticized the Fed for its quantitative easing policy. According to Kasich, this only led to companies “buying up more of their stock and making the rich richer.” It is difficult to envision how Kasich thinks this process works.
Most immediately, quantitative easing leads to lower interest rates. For believers in economics, this lead to more borrowing for things like buying homes and both public and private investment. It also frees up money for homeowners who refinance their mortgages. This allows them to spend money on other things. Lower interest rates also mean a lower valued dollar, other things equal. This makes our goods and services more competitive internationally, reducing our trade deficit.
All of these things create more jobs, which also puts workers in a better position to get wage gains. It is true that lower interest rates can also make it easier for companies to borrow to buy back shares of stock, although it is pretty bizarre to find a Republican who would argue against a policy that leads to more growth and jobs, just because it can increase the wealth of the rich. (Low interest rates also help to raise house prices, which are the main source of wealth for the middle class.)
Anyhow, the Post apparently thinks great things about a candidate who seems to have zero understanding of economics and has no ideas on how to address a potentially catastrophic environmental problem. It is worth noting that he proposed tax cuts, rather than tax increases for the rich.
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The Census Bureau put out some pretty bad numbers on housing yesterday. March starts were down 8.8 percent from the February level and permits were down by 7.7 percent. The drop in starts was across categories and regions. There was no obvious weather-related factors to explain this drop.
Monthly housing data are erratic, but these numbers do deserve some attention. Residential construction is one of the few bright spots in an economy seeing weak consumption growth, stagnating equipment investment, and a rising trade deficit. If this is not just a one-month blip, it would be a very bad sign for the strength of the recovery.
In this respect it is worth noting that the latest number for first quarter growth from the Atlanta Fed ‘s “GDPNow” estimate is just 0.3 percent. This is not a good story.
The Census Bureau put out some pretty bad numbers on housing yesterday. March starts were down 8.8 percent from the February level and permits were down by 7.7 percent. The drop in starts was across categories and regions. There was no obvious weather-related factors to explain this drop.
Monthly housing data are erratic, but these numbers do deserve some attention. Residential construction is one of the few bright spots in an economy seeing weak consumption growth, stagnating equipment investment, and a rising trade deficit. If this is not just a one-month blip, it would be a very bad sign for the strength of the recovery.
In this respect it is worth noting that the latest number for first quarter growth from the Atlanta Fed ‘s “GDPNow” estimate is just 0.3 percent. This is not a good story.
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The Washington Post had a major article telling readers, “why populist uprisings could end a half-century of greater economic ties.” The piece notes the rise of populist sentiment in both Europe and the United States. In the former case it is turning against immigration and also the European Union. In the case of the United States, populist sentiment is directed against trade agreements and immigration (also efforts to cut Social Security and Medicare.)
The piece doesn’t give elites the credit they deserve for this backlash to their efforts to construct a system that serves their interest. In both Europe and the United States, elites have pushed policies of fiscal austerity that have the effect of keeping millions of people out of work and depressing the wages of tens of millions more by reducing their bargaining power. Overwhelmingly, the people who are victims of this austerity policy are less educated workers. There are few doctors and dentists thrown out of work by policies to reduce budget deficits. (It is worth noting that in the United States the Federal Reserve Board seems prepared to raise interest rates to throw workers out of work, if they start to get enough bargaining power to make up the ground they lost in the downturn.)
The elites have also structured economic integration to redistribute income upward. This is especially notable in the United States, where protections for doctors, dentists, and other highly paid professionals have been largely left in place, while trade agreements have sought to put U.S. manufacturing workers in direct competition with their low-paid counterparts in the developing world. The predicted and actual effect of this pattern of trade is to increase inequality.
Both Europe and the United States have used trade deals to make patent and copyright protection longer and stronger. The intent of this policy is also to redistribute income upward. They have also put in place extra-judicial mechanisms to provide special protection to businesses that they do not enjoy under national law.
In other words, populists are revolting against policies that are designed to redistribute income from the bulk of the population to the elites. The elites have tried to imply that such policies are necessary for integration. This is not true. It is just as easy to design policies that promote integration that benefit people equally, but elites in Europe and the United States have little interest in integration on these terms.
The Washington Post had a major article telling readers, “why populist uprisings could end a half-century of greater economic ties.” The piece notes the rise of populist sentiment in both Europe and the United States. In the former case it is turning against immigration and also the European Union. In the case of the United States, populist sentiment is directed against trade agreements and immigration (also efforts to cut Social Security and Medicare.)
The piece doesn’t give elites the credit they deserve for this backlash to their efforts to construct a system that serves their interest. In both Europe and the United States, elites have pushed policies of fiscal austerity that have the effect of keeping millions of people out of work and depressing the wages of tens of millions more by reducing their bargaining power. Overwhelmingly, the people who are victims of this austerity policy are less educated workers. There are few doctors and dentists thrown out of work by policies to reduce budget deficits. (It is worth noting that in the United States the Federal Reserve Board seems prepared to raise interest rates to throw workers out of work, if they start to get enough bargaining power to make up the ground they lost in the downturn.)
The elites have also structured economic integration to redistribute income upward. This is especially notable in the United States, where protections for doctors, dentists, and other highly paid professionals have been largely left in place, while trade agreements have sought to put U.S. manufacturing workers in direct competition with their low-paid counterparts in the developing world. The predicted and actual effect of this pattern of trade is to increase inequality.
Both Europe and the United States have used trade deals to make patent and copyright protection longer and stronger. The intent of this policy is also to redistribute income upward. They have also put in place extra-judicial mechanisms to provide special protection to businesses that they do not enjoy under national law.
In other words, populists are revolting against policies that are designed to redistribute income from the bulk of the population to the elites. The elites have tried to imply that such policies are necessary for integration. This is not true. It is just as easy to design policies that promote integration that benefit people equally, but elites in Europe and the United States have little interest in integration on these terms.
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Okay, he does it against Donald Trump as well, but the theme of his column is to denounce both of them for pushing a “single story” for the difficulties confronting working people. While Sanders blames an economy rigged to favor the rich and Trump blames immigrants and the unfair trading practices of foreign countries, Brooks tells us that the real issue behind wage stagnation is “intricate structural problems.”
Get it? Brooks used the words “intricate” and “structural,” that means that he is a complex guy not wedded to a single story because these are big words.
Does Brooks happen to have any clue what these intricate structural problems might be? He doesn’t give any hint in his piece. Perhaps he was referring to the now disproven story promoted by M.I.T. economist David Autor about the “hollowing out of the middle,” which meant the loss of middle class jobs. More recent research shows that the only occupations seeing substantial growth in relative shares since 2000 were at the bottom end of the wage distribution, yet that didn’t stop more income from going to the top. In other words, there is no obvious story linking the growth of income inequality and wage stagnation for those at the middle to technology.
The remaining villains are items like trade, restrictive fiscal policy that keeps the unemployment rate unnecessarily high, anti-union policies that undermine workers’ bargaining power, and stronger and longer patent and copyright protection that increases the price that ordinary workers must pay for many items.
But Brooks isn’t interested in looking at these topics, that could make you a single story sort of person. He’d rather just stick with his intricate structural problems even if there is no coherence to the argument that he might make. This way you can call the people you don’t like names in The New York Times.
Okay, he does it against Donald Trump as well, but the theme of his column is to denounce both of them for pushing a “single story” for the difficulties confronting working people. While Sanders blames an economy rigged to favor the rich and Trump blames immigrants and the unfair trading practices of foreign countries, Brooks tells us that the real issue behind wage stagnation is “intricate structural problems.”
Get it? Brooks used the words “intricate” and “structural,” that means that he is a complex guy not wedded to a single story because these are big words.
Does Brooks happen to have any clue what these intricate structural problems might be? He doesn’t give any hint in his piece. Perhaps he was referring to the now disproven story promoted by M.I.T. economist David Autor about the “hollowing out of the middle,” which meant the loss of middle class jobs. More recent research shows that the only occupations seeing substantial growth in relative shares since 2000 were at the bottom end of the wage distribution, yet that didn’t stop more income from going to the top. In other words, there is no obvious story linking the growth of income inequality and wage stagnation for those at the middle to technology.
The remaining villains are items like trade, restrictive fiscal policy that keeps the unemployment rate unnecessarily high, anti-union policies that undermine workers’ bargaining power, and stronger and longer patent and copyright protection that increases the price that ordinary workers must pay for many items.
But Brooks isn’t interested in looking at these topics, that could make you a single story sort of person. He’d rather just stick with his intricate structural problems even if there is no coherence to the argument that he might make. This way you can call the people you don’t like names in The New York Times.
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Paul Krugman had a good column this morning pointing to a lack of competition as an explanation for relatively weak investment in spite of low interest rates and high corporate profits. His immediate target is Verizon, where workers are now striking, which shows little interest in expanding its Fios high-speed Internet network in spite of soaring profits. Krugman points out that with little competition, Verizon sees little need to invest more to improve the quality of its service. He then argues that this weak investment is a major cause of secular stagnation, the ongoing weakness of demand that prevents the economy from reaching full employment.
I’d agree with virtually everything in the piece (Krugman may be a bit overly optimistic about the interest in the Obama administration in pursuing a serious competition policy), but there is an aspect to the argument that bothers me. While we should perhaps expect investment to be booming in a context of high profits and very low interest rates, investment actually is not low measured as a share of GDP.
At 12.7 percent of GDP in the 4th quarter, it’s comparable to its pre-recession peaks. Given the weak growth of demand (yes, this is partly circular — stronger investment would mean stronger demand — but companies make their investment decisions individually, not collectively), investment is certainly not low by historical measures.
On the other hand, we continue to run a trade deficit that is close to 3.0 percent of GDP, or more than $500 billion a year. Suppose that our trade deficits were still in the neighborhood of 1.0 percent of GDP, which was the case before the East Asian financial crisis in 1997.
This difference of 2 percentage points of GDP would have the same impact on demand as increasing investment by 2 percentage points of GDP. That would be a huge increase in investment. If better competition policy could increase demand by even half of this amount everyone would view it as an enormous success.
So the question is, why do Krugman and others highlight the lack of competition in many areas as a cause of secular stagnation, but largely ignore the trade deficit? This question is further aggravating since the trade deficit has featured very prominently in the upward redistribution of income in the last two decades.
Note that contrary to the latest thinking in elite circles, it is not normal for rich countries to run large trade deficits with poor countries. The textbook economics say that capital is supposed to flow in the opposite direction. It is an incredible failure of the international financial system, traceable to the botched bailout from the East Asian financial crisis, that poor countries have been forced to grow by lending capital to rich countries. It certainly is not a necessary path for development and it has had horrible consequences for the working class in the United States and other rich countries.
Paul Krugman had a good column this morning pointing to a lack of competition as an explanation for relatively weak investment in spite of low interest rates and high corporate profits. His immediate target is Verizon, where workers are now striking, which shows little interest in expanding its Fios high-speed Internet network in spite of soaring profits. Krugman points out that with little competition, Verizon sees little need to invest more to improve the quality of its service. He then argues that this weak investment is a major cause of secular stagnation, the ongoing weakness of demand that prevents the economy from reaching full employment.
I’d agree with virtually everything in the piece (Krugman may be a bit overly optimistic about the interest in the Obama administration in pursuing a serious competition policy), but there is an aspect to the argument that bothers me. While we should perhaps expect investment to be booming in a context of high profits and very low interest rates, investment actually is not low measured as a share of GDP.
At 12.7 percent of GDP in the 4th quarter, it’s comparable to its pre-recession peaks. Given the weak growth of demand (yes, this is partly circular — stronger investment would mean stronger demand — but companies make their investment decisions individually, not collectively), investment is certainly not low by historical measures.
On the other hand, we continue to run a trade deficit that is close to 3.0 percent of GDP, or more than $500 billion a year. Suppose that our trade deficits were still in the neighborhood of 1.0 percent of GDP, which was the case before the East Asian financial crisis in 1997.
This difference of 2 percentage points of GDP would have the same impact on demand as increasing investment by 2 percentage points of GDP. That would be a huge increase in investment. If better competition policy could increase demand by even half of this amount everyone would view it as an enormous success.
So the question is, why do Krugman and others highlight the lack of competition in many areas as a cause of secular stagnation, but largely ignore the trade deficit? This question is further aggravating since the trade deficit has featured very prominently in the upward redistribution of income in the last two decades.
Note that contrary to the latest thinking in elite circles, it is not normal for rich countries to run large trade deficits with poor countries. The textbook economics say that capital is supposed to flow in the opposite direction. It is an incredible failure of the international financial system, traceable to the botched bailout from the East Asian financial crisis, that poor countries have been forced to grow by lending capital to rich countries. It certainly is not a necessary path for development and it has had horrible consequences for the working class in the United States and other rich countries.
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