FactCheck has decided to revive its campaign on Social Security contributing to the budget deficit in the context of claiming that Senator Bernie Sanders is wrong on this issue. The basic point that Sanders and other targets of FactCheck have made is that Social Security was explicitly set up to be funded separately from the rest of the budget. It is legally prohibited from spending any money other than what it receives through its designated taxes and from the interest on the bonds bought with these funds.
I have a fuller criticism of the FactCheck argument here, but Sanders is really just referring to the law on this one. FactCheck’s problem is with the law, not Sanders.
FactCheck has decided to revive its campaign on Social Security contributing to the budget deficit in the context of claiming that Senator Bernie Sanders is wrong on this issue. The basic point that Sanders and other targets of FactCheck have made is that Social Security was explicitly set up to be funded separately from the rest of the budget. It is legally prohibited from spending any money other than what it receives through its designated taxes and from the interest on the bonds bought with these funds.
I have a fuller criticism of the FactCheck argument here, but Sanders is really just referring to the law on this one. FactCheck’s problem is with the law, not Sanders.
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Actually, the NYT did not say that Bush wanted to raise taxes on small businesses and it would not say this because it is not true. If for some reason one of its reporters mistaken drafted a story saying that it was true, an editor undoubtedly would have insisted that they double-check their source to make sure they got it right. That would be good journalism.
On the other hand, the NYT apparently does not exercise the same care when it comes to reporting on tax proposals for Wall Street. This is why we got the Upshot article titled “solution without a problem.” The piece begins:
“If there’s one thing that the Democratic presidential candidates can agree on, it’s that high-frequency traders are a problem. Hillary Rodham Clinton has now followed Bernie Sanders and Martin O’Malley in calling for a tax on the traders who, they complain, use their high-speed computers and expensive data lines to pick the pockets of ordinary investors.
“The odd thing about all this concern is that most of the investors who are actually facing off against the high-frequency traders — often on behalf of retirement savers — don’t see this as anything like the most costly problem they are facing, even in the arcane realm of trading mechanics.”
While Clinton and O’Malley have talked about taxing high-speed trading, Sanders has been very clear that his intention is to tax trading in general. His argument is that the financial sector as a whole wastes too many resources in trading that has little or no economic value. He expects his tax to raise enough money to finance free college tuition at public universities, something that would clearly be impossible if he was just looking to impose the tax on high-speed trading.
The author of the piece, Nathanial Popper, surely could have discovered Sanders plan with a call to his campaign staff or a quick trip to the website (here and here). That would have been the responsible thing to do, but it might have made it more difficult to write an article telling us about a solution that lacked a problem.
Actually, the NYT did not say that Bush wanted to raise taxes on small businesses and it would not say this because it is not true. If for some reason one of its reporters mistaken drafted a story saying that it was true, an editor undoubtedly would have insisted that they double-check their source to make sure they got it right. That would be good journalism.
On the other hand, the NYT apparently does not exercise the same care when it comes to reporting on tax proposals for Wall Street. This is why we got the Upshot article titled “solution without a problem.” The piece begins:
“If there’s one thing that the Democratic presidential candidates can agree on, it’s that high-frequency traders are a problem. Hillary Rodham Clinton has now followed Bernie Sanders and Martin O’Malley in calling for a tax on the traders who, they complain, use their high-speed computers and expensive data lines to pick the pockets of ordinary investors.
“The odd thing about all this concern is that most of the investors who are actually facing off against the high-frequency traders — often on behalf of retirement savers — don’t see this as anything like the most costly problem they are facing, even in the arcane realm of trading mechanics.”
While Clinton and O’Malley have talked about taxing high-speed trading, Sanders has been very clear that his intention is to tax trading in general. His argument is that the financial sector as a whole wastes too many resources in trading that has little or no economic value. He expects his tax to raise enough money to finance free college tuition at public universities, something that would clearly be impossible if he was just looking to impose the tax on high-speed trading.
The author of the piece, Nathanial Popper, surely could have discovered Sanders plan with a call to his campaign staff or a quick trip to the website (here and here). That would have been the responsible thing to do, but it might have made it more difficult to write an article telling us about a solution that lacked a problem.
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Hey, we should all be thankful that Ben Bernanke saved us from a Second Great Depression and a Martian invasion. Yes, the Second Great Depression theory is being touted yet again, this time by Robert Samuelson. He tells us that unemployment would have soared to 25 percent without the bailout of the banks.
As I’ve written any number of times, neither Bernanke, Samuelson, or anyone else has said a word as to why a big stimulus package from the government would not have quickly gotten the economy going again and unemployment falling. This is what finally got us out of the first Great Depression; the government spent a ton of money to fight World War II. There is no magic or mystery to spending on wars, any spending in the economy has the same effect.
If someone wants to make a political argument, that we could not have gotten political support for a serious stimulus, that’s fine, they should put that argument on the table. But that is a political argument, not an economic one. Furthermore, we have never seen our political leaders refuse to take steps to boost the economy out of a severe recession in the post-World War II era. George W. Bush signed the first stimulus when the unemployment rate was 4.7 percent. So it would be an interesting political argument, but one that lacks any evidence to support it.
After going through the account of how Bernanke saved us from the Martians (sorry, the Second Great Depression), Samuelson genuflects about the cause of the prolonged downturn. He notes that Bernanke blames the financial crisis, while he attributes the prolonged downturn to the loss of confidence. Fans of data everywhere attribute the weakness to the loss of $8 trillion in housing wealth.
With the plunge in house prices, we saw the end of the boom in residential construction, costing us roughly 4 percentage points of GDP (@$720 billion annually in today’s economy). The loss of wealth also led to a drop in consumption, in accordance with the housing wealth effect that economists have been writing about for around 60 years. The drop in consumption was around 2–3 percentage points of GDP ($360 billion to $540 billion annually in today’s economy).
There was nothing that would obviously rise up to fill this massive gap in demand. We did get the stimulus in 2009–2010, which helped a great deal. But it wasn’t large enough or long enough to get us back to full employment. It’s hard to imagine what anyone thought would fill the gap in the absence of a larger stimulus.
I know this is all distressingly simple, and folks really want to believe the downturn was very complicated and mysterious (who could have known?), but it wasn’t. The basic story was pretty much as clear as day for anyone who could look at the economy with open eyes. Unfortunately, we didn’t have anyone like that in a position of responsibility in the last decade.
Hey, we should all be thankful that Ben Bernanke saved us from a Second Great Depression and a Martian invasion. Yes, the Second Great Depression theory is being touted yet again, this time by Robert Samuelson. He tells us that unemployment would have soared to 25 percent without the bailout of the banks.
As I’ve written any number of times, neither Bernanke, Samuelson, or anyone else has said a word as to why a big stimulus package from the government would not have quickly gotten the economy going again and unemployment falling. This is what finally got us out of the first Great Depression; the government spent a ton of money to fight World War II. There is no magic or mystery to spending on wars, any spending in the economy has the same effect.
If someone wants to make a political argument, that we could not have gotten political support for a serious stimulus, that’s fine, they should put that argument on the table. But that is a political argument, not an economic one. Furthermore, we have never seen our political leaders refuse to take steps to boost the economy out of a severe recession in the post-World War II era. George W. Bush signed the first stimulus when the unemployment rate was 4.7 percent. So it would be an interesting political argument, but one that lacks any evidence to support it.
After going through the account of how Bernanke saved us from the Martians (sorry, the Second Great Depression), Samuelson genuflects about the cause of the prolonged downturn. He notes that Bernanke blames the financial crisis, while he attributes the prolonged downturn to the loss of confidence. Fans of data everywhere attribute the weakness to the loss of $8 trillion in housing wealth.
With the plunge in house prices, we saw the end of the boom in residential construction, costing us roughly 4 percentage points of GDP (@$720 billion annually in today’s economy). The loss of wealth also led to a drop in consumption, in accordance with the housing wealth effect that economists have been writing about for around 60 years. The drop in consumption was around 2–3 percentage points of GDP ($360 billion to $540 billion annually in today’s economy).
There was nothing that would obviously rise up to fill this massive gap in demand. We did get the stimulus in 2009–2010, which helped a great deal. But it wasn’t large enough or long enough to get us back to full employment. It’s hard to imagine what anyone thought would fill the gap in the absence of a larger stimulus.
I know this is all distressingly simple, and folks really want to believe the downturn was very complicated and mysterious (who could have known?), but it wasn’t. The basic story was pretty much as clear as day for anyone who could look at the economy with open eyes. Unfortunately, we didn’t have anyone like that in a position of responsibility in the last decade.
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Nope, that isn’t the complaint of leftist agitators in Greece or Latin America, that is a comment from Axel A. Weber, who is identified in the NYT as “a former senior official at the European Central Bank who is now chairman of the investment bank UBS.” This comment appears along with several other complaints from bankers about the I.M.F.’s support for low interest rates by the Fed, the European Central Bank, and other rich country central banks. Of course the I.M.F. comments on monetary policy all the time and has done so since it was created 70 years ago.
The piece also has this gem:
“‘When I travel around the world, I find hardly anyone supporting the Fed’s policy on interest rates,’ said a senior European official, who did not want to be publicly identified criticizing the I.M.F. ‘The fund has become very short-term-oriented.'”
This tells us a great deal about who this senior European officials speaks with.
Nope, that isn’t the complaint of leftist agitators in Greece or Latin America, that is a comment from Axel A. Weber, who is identified in the NYT as “a former senior official at the European Central Bank who is now chairman of the investment bank UBS.” This comment appears along with several other complaints from bankers about the I.M.F.’s support for low interest rates by the Fed, the European Central Bank, and other rich country central banks. Of course the I.M.F. comments on monetary policy all the time and has done so since it was created 70 years ago.
The piece also has this gem:
“‘When I travel around the world, I find hardly anyone supporting the Fed’s policy on interest rates,’ said a senior European official, who did not want to be publicly identified criticizing the I.M.F. ‘The fund has become very short-term-oriented.'”
This tells us a great deal about who this senior European officials speaks with.
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Eduardo Porter had a good piece in the NYT pointing out the importance of having independent evaluations of government programs. The point is that the agencies undertaking a program have a strong incentive to exaggerate its benefits. He discusses this in the context of weatherization programs, but the problem applies more generally.
One of the areas noted by Porter is in the rating of mortgage backed securities (MBS). During the housing bubble years, the bond-rating agencies routinely gave investment grade ratings to MBS that were stuffed with junk mortgages. They ignored the quality of the mortgages because they wanted the businesss. They knew if they gave honest ratings, the investment banks would take away their business.
While Porter notes this is a problem with the issuer pays model (the banks pay the rating agencies), there actually is a very simple solution. In the debate on Dodd-Frank, Senator Al Franken proposed an amendment which would have the Securities and Exchange Commission pick the rating agency, instead of the issuer. The bank would still pay the fee, but since they were no longer controlling who got the work, it eliminated the conflict of interest problem. The amendment passed the senate 65-34, with considerable bi-partisan support.
Unfortunately, as Geithner indicated in his autobiography, the Obama administration apparently did not like the dismantling of the perfect system we have today. The Franken amendment was removed in the conference committee and the existing structure was left in place. This was possible because the bond-rating agencies and the banks have real lobbies, whereas the folks who like honest evaluations don’t. Of course the news media didn’t help much, giving the issue very little coverage. And what attention it did get largely reflected the views of the financial industry.
Anyhow, this is a good example of the difficulties in putting in place the sort of independent auditing process that Porter seeks.
Eduardo Porter had a good piece in the NYT pointing out the importance of having independent evaluations of government programs. The point is that the agencies undertaking a program have a strong incentive to exaggerate its benefits. He discusses this in the context of weatherization programs, but the problem applies more generally.
One of the areas noted by Porter is in the rating of mortgage backed securities (MBS). During the housing bubble years, the bond-rating agencies routinely gave investment grade ratings to MBS that were stuffed with junk mortgages. They ignored the quality of the mortgages because they wanted the businesss. They knew if they gave honest ratings, the investment banks would take away their business.
While Porter notes this is a problem with the issuer pays model (the banks pay the rating agencies), there actually is a very simple solution. In the debate on Dodd-Frank, Senator Al Franken proposed an amendment which would have the Securities and Exchange Commission pick the rating agency, instead of the issuer. The bank would still pay the fee, but since they were no longer controlling who got the work, it eliminated the conflict of interest problem. The amendment passed the senate 65-34, with considerable bi-partisan support.
Unfortunately, as Geithner indicated in his autobiography, the Obama administration apparently did not like the dismantling of the perfect system we have today. The Franken amendment was removed in the conference committee and the existing structure was left in place. This was possible because the bond-rating agencies and the banks have real lobbies, whereas the folks who like honest evaluations don’t. Of course the news media didn’t help much, giving the issue very little coverage. And what attention it did get largely reflected the views of the financial industry.
Anyhow, this is a good example of the difficulties in putting in place the sort of independent auditing process that Porter seeks.
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The Washington Post deserves credit for being the first major media outlet to discover the sharp increase in women’s labor force participation in Japan. It ran a piece headlined, “How American women fell behind Japanese women in the workplace,” which pointed out that employment rates are now higher for women in Japan than for the United States. (The difference in employment rates would be even larger if the article focused on prime-age — 25–54 — women.)
This shift has been clear in the OECD data for several years, but has been almost completely ignored. (There have been a few rants on the topic at BTP, for example here, here, and here.) Anyhow, it is always good to see the media discovering major trends in the world, even if they might be a bit slow to notice.
The Washington Post deserves credit for being the first major media outlet to discover the sharp increase in women’s labor force participation in Japan. It ran a piece headlined, “How American women fell behind Japanese women in the workplace,” which pointed out that employment rates are now higher for women in Japan than for the United States. (The difference in employment rates would be even larger if the article focused on prime-age — 25–54 — women.)
This shift has been clear in the OECD data for several years, but has been almost completely ignored. (There have been a few rants on the topic at BTP, for example here, here, and here.) Anyhow, it is always good to see the media discovering major trends in the world, even if they might be a bit slow to notice.
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Why does the NYT find it so hard to separate its news reporting from opinion when it comes to trade deals? Yet again, we are told that the Trans-Pacific Partnership (TPP) can be “legacy making” for President Obama. After all it is:
“drawing together countries representing two-fifths of the global economy, from Canada and Chile to Japan and Australia, into a web of common rules governing trans-Pacific commerce. It is the capstone both of his economic agenda to expand exports and of his foreign policy ‘rebalance’ toward closer relations with fast-growing eastern Asia, after years of American preoccupation with the Middle East and North Africa.”
Sounds really exciting right? Well the vast majority of the “two-fifths of the global economy” is accounted for by the United States, Mexico, Canada, and Australia, countries that were already drawn together in trade deals. For these countries the TPP will have little impact on trade. The only countries in the deal that really qualify as “fast-growing eastern Asia” would be Malaysia and Vietnam.
As a practical matter, the stronger patent and copyright protections in the pact may do more to impede trade than the tariff reductions do to promote trade, making its status as a “free-trade” agreement questionable. (To its credit, the NYT piece did not use this term.) It would be useful if the paper focused more on the facts and less on the celebration.
Why does the NYT find it so hard to separate its news reporting from opinion when it comes to trade deals? Yet again, we are told that the Trans-Pacific Partnership (TPP) can be “legacy making” for President Obama. After all it is:
“drawing together countries representing two-fifths of the global economy, from Canada and Chile to Japan and Australia, into a web of common rules governing trans-Pacific commerce. It is the capstone both of his economic agenda to expand exports and of his foreign policy ‘rebalance’ toward closer relations with fast-growing eastern Asia, after years of American preoccupation with the Middle East and North Africa.”
Sounds really exciting right? Well the vast majority of the “two-fifths of the global economy” is accounted for by the United States, Mexico, Canada, and Australia, countries that were already drawn together in trade deals. For these countries the TPP will have little impact on trade. The only countries in the deal that really qualify as “fast-growing eastern Asia” would be Malaysia and Vietnam.
As a practical matter, the stronger patent and copyright protections in the pact may do more to impede trade than the tariff reductions do to promote trade, making its status as a “free-trade” agreement questionable. (To its credit, the NYT piece did not use this term.) It would be useful if the paper focused more on the facts and less on the celebration.
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