Bob Kuttner has a column in the Huffington Post warning of the dangers of the Trans-Atlantic Trade and Investment Pact (TTIP). Kuttner correctly points out that the deal is not really about reducing trade barriers, which are already minimal, but rather about locking in place a business-friendly structure of regulation (wrongly described as “deregulation”).
At one point Kuttner refers to projections that the TTIP will increase GDP in the EU and U.S. by 0.5 percent. It is important to note that this projection is for the period after the deal is fully implemented, more than a decade after it is signed. That means the projection implies an increase in the growth rate of less than 0.05 percentage points annually, an amount far too small to be measured accurately.
It is also worth noting that this projection does not incorporate any negative impact from the protectionist parts of the TTIP. The deal is likely to strengthen patent and copyright protections, leading to higher prices for drugs, software, and other products, all of which will be a drain on consumers and a drag on growth.
Bob Kuttner has a column in the Huffington Post warning of the dangers of the Trans-Atlantic Trade and Investment Pact (TTIP). Kuttner correctly points out that the deal is not really about reducing trade barriers, which are already minimal, but rather about locking in place a business-friendly structure of regulation (wrongly described as “deregulation”).
At one point Kuttner refers to projections that the TTIP will increase GDP in the EU and U.S. by 0.5 percent. It is important to note that this projection is for the period after the deal is fully implemented, more than a decade after it is signed. That means the projection implies an increase in the growth rate of less than 0.05 percentage points annually, an amount far too small to be measured accurately.
It is also worth noting that this projection does not incorporate any negative impact from the protectionist parts of the TTIP. The deal is likely to strengthen patent and copyright protections, leading to higher prices for drugs, software, and other products, all of which will be a drain on consumers and a drag on growth.
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That’s what readers of a NYT article on the drop in the value of the euro would conclude. The piece told readers that the recent rise in the dollar is:
“A strong dollar is a welcome reflection of a United States economy that is growing and adding jobs at a faster clip than many of its peers.”
Of course a strong dollar will make U.S. goods and services less competitive internationally, leading to a rise in the trade deficit. the drop in the trade deficit in the third quarter added 0.8 percentage points to the quarter’s growth. It is likely that the rise in the deficit in the fourth quarter will subtract at least that much from the growth rate. In an economy that, according to the Congressional Budget Office, is still operating at a level of output that is almost 4 percentage points (@ $600 billion a year) below its potential level of output, and is down close to 6 million jobs from its trend path, it is bizarre to call a rise in the dollar that will slow growth as “welcome.”
This article gets many other issues wrong as well. It tells readers;
“To jump-start growth and avoid deflation, many analysts say the most powerful policy arrow in Mr. Draghi’s quiver is to talk the euro sharply downward, which would bolster exports, increase the price of imports and ultimately, it is hoped, stimulate an increase in inflation.”
There is no reason to believe that Mr. Drago is in particular trying to avoid deflation unless he is a member of some bizarre cult of zero worshippers. Having the inflation rate cross zero doesn’t make any difference, the problem is that the inflation rate in the euro zone is too low. Draghi wants to raise the inflation rate, it’s that simple.
The piece also notes a shift in bank reserves from euros to dollars and comments that it, “could signal a long-term preference on the part of central bankers for high-yielding dollars in favor of less lucrative euros.”
Actually central banks usually are not especially interested in the returns on their reserve holdings and they certainly are not making long-term plans since they shift their holdings all the time. If there is a return issue at hand, some central banks may have made the bet that the euro would fall in the short-term against the dollar. Now that the euro has lost considerable ground, they may make a decision to start shifting back to euros from dollars.
Remarkably in the discussion of relative currency values the piece never refers to the trade deficit in the United States. This deficit is the primary cause of the secular stagnation, or lack of demand, that many economists have now determined to be the country’s main economic problem. The trade deficit pulls more than $500 billion in demand out of the economy every year. From an economic standpoint it has the same impact as if people suddenly decided to cut back their annual consumption by $500 billion. There is no easy way to replace this demand domestically, which is why the United States economy remains severely depressed more than seven years after the recession began.
That’s what readers of a NYT article on the drop in the value of the euro would conclude. The piece told readers that the recent rise in the dollar is:
“A strong dollar is a welcome reflection of a United States economy that is growing and adding jobs at a faster clip than many of its peers.”
Of course a strong dollar will make U.S. goods and services less competitive internationally, leading to a rise in the trade deficit. the drop in the trade deficit in the third quarter added 0.8 percentage points to the quarter’s growth. It is likely that the rise in the deficit in the fourth quarter will subtract at least that much from the growth rate. In an economy that, according to the Congressional Budget Office, is still operating at a level of output that is almost 4 percentage points (@ $600 billion a year) below its potential level of output, and is down close to 6 million jobs from its trend path, it is bizarre to call a rise in the dollar that will slow growth as “welcome.”
This article gets many other issues wrong as well. It tells readers;
“To jump-start growth and avoid deflation, many analysts say the most powerful policy arrow in Mr. Draghi’s quiver is to talk the euro sharply downward, which would bolster exports, increase the price of imports and ultimately, it is hoped, stimulate an increase in inflation.”
There is no reason to believe that Mr. Drago is in particular trying to avoid deflation unless he is a member of some bizarre cult of zero worshippers. Having the inflation rate cross zero doesn’t make any difference, the problem is that the inflation rate in the euro zone is too low. Draghi wants to raise the inflation rate, it’s that simple.
The piece also notes a shift in bank reserves from euros to dollars and comments that it, “could signal a long-term preference on the part of central bankers for high-yielding dollars in favor of less lucrative euros.”
Actually central banks usually are not especially interested in the returns on their reserve holdings and they certainly are not making long-term plans since they shift their holdings all the time. If there is a return issue at hand, some central banks may have made the bet that the euro would fall in the short-term against the dollar. Now that the euro has lost considerable ground, they may make a decision to start shifting back to euros from dollars.
Remarkably in the discussion of relative currency values the piece never refers to the trade deficit in the United States. This deficit is the primary cause of the secular stagnation, or lack of demand, that many economists have now determined to be the country’s main economic problem. The trade deficit pulls more than $500 billion in demand out of the economy every year. From an economic standpoint it has the same impact as if people suddenly decided to cut back their annual consumption by $500 billion. There is no easy way to replace this demand domestically, which is why the United States economy remains severely depressed more than seven years after the recession began.
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The it’s hard to get good help crowd keep trying to push the bizarre line that the world is running out of people. This theme appears in a NYT piece on Japan’s efforts to end gender discrimination in the work place and to make it easier for women to hold on to jobs as they raise children. For example, it tells readers:
“The national birthrate is just 1.4 children per woman, among the lowest in the world and well below the level needed to ward off a sharp decline in population in the coming decades. And when Japanese women do have children, they quit their jobs more often than mothers in other industrialized countries, leaving a hole in an already dwindling work force.”
There is no obvious problem with a declining work force. This means that there will be more demand for the workers Japan does have. They will shift from relatively low productivity jobs (e.g. the midnight shift at a convenience story or parking cars at restaurants) into higher productivity and higher paying jobs that otherwise might go vacant. From the standpoint of the well-being of the Japanese population, this is good news since it is likely to increase pay for most workers, even if it means less overall growth. It is per capita income that is relevant for well-being, not total GDP. People in Denmark are much wealthier than people in Bangladesh, in spite of the higher GDP in the latter.
Also, it is important to note that in even modest increase in productivity growth will swamp the impact of plausible differences in the dependency ratios that would result from more children. (Also, the relevant dependency ratio includes dependent children.) It is also necessary to remember that hours worked can various enormously. Since the collapse of its bubbles in 1990 the length of the average work year has declined by almost 15 percent in Japan, the equivalent of more than seven weeks of annual vacation. This is not a pattern we would expect to see in a country suffering from a shortage of workers.
Finally, a smaller population will make it easier for Japan to reduce its greenhouse emissions, helping to contain global warming. It will also make a densely populated island less crowded.
The it’s hard to get good help crowd keep trying to push the bizarre line that the world is running out of people. This theme appears in a NYT piece on Japan’s efforts to end gender discrimination in the work place and to make it easier for women to hold on to jobs as they raise children. For example, it tells readers:
“The national birthrate is just 1.4 children per woman, among the lowest in the world and well below the level needed to ward off a sharp decline in population in the coming decades. And when Japanese women do have children, they quit their jobs more often than mothers in other industrialized countries, leaving a hole in an already dwindling work force.”
There is no obvious problem with a declining work force. This means that there will be more demand for the workers Japan does have. They will shift from relatively low productivity jobs (e.g. the midnight shift at a convenience story or parking cars at restaurants) into higher productivity and higher paying jobs that otherwise might go vacant. From the standpoint of the well-being of the Japanese population, this is good news since it is likely to increase pay for most workers, even if it means less overall growth. It is per capita income that is relevant for well-being, not total GDP. People in Denmark are much wealthier than people in Bangladesh, in spite of the higher GDP in the latter.
Also, it is important to note that in even modest increase in productivity growth will swamp the impact of plausible differences in the dependency ratios that would result from more children. (Also, the relevant dependency ratio includes dependent children.) It is also necessary to remember that hours worked can various enormously. Since the collapse of its bubbles in 1990 the length of the average work year has declined by almost 15 percent in Japan, the equivalent of more than seven weeks of annual vacation. This is not a pattern we would expect to see in a country suffering from a shortage of workers.
Finally, a smaller population will make it easier for Japan to reduce its greenhouse emissions, helping to contain global warming. It will also make a densely populated island less crowded.
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That’s what millions of readers of Ron Haskins’ column in the NYT on designing effective social programs will be asking. The column tells readers:
“When John M. Bridgeland led Mr. Bush’s Domestic Policy Council, he was amazed to find 339 federal programs for disadvantaged youth, administered by 12 departments and agencies, at a cost of $224 billion.”
The piece doesn’t indicate whether this spending is for one or ten years. (My guess is the latter, but I’m not really sure without looking at the research to see what is included.) Also, unless folks have a good memory, they are unlikely to know how important this spending was to the government and the economy. The budget was just under $1,800 billion in 2000, which would make the spending close to 12 percent of the budget for one-year. Projected spending for the ten-year budget horizon was over $20 trillion, which would have made the spending in question close to 1.0 percent of projected spending.
Ron Haskins is a serious researcher raising an important point, but it would be helpful if this number were expressed in a way that provided meaningful information to readers.
That’s what millions of readers of Ron Haskins’ column in the NYT on designing effective social programs will be asking. The column tells readers:
“When John M. Bridgeland led Mr. Bush’s Domestic Policy Council, he was amazed to find 339 federal programs for disadvantaged youth, administered by 12 departments and agencies, at a cost of $224 billion.”
The piece doesn’t indicate whether this spending is for one or ten years. (My guess is the latter, but I’m not really sure without looking at the research to see what is included.) Also, unless folks have a good memory, they are unlikely to know how important this spending was to the government and the economy. The budget was just under $1,800 billion in 2000, which would make the spending close to 12 percent of the budget for one-year. Projected spending for the ten-year budget horizon was over $20 trillion, which would have made the spending in question close to 1.0 percent of projected spending.
Ron Haskins is a serious researcher raising an important point, but it would be helpful if this number were expressed in a way that provided meaningful information to readers.
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The NYT reported that the European Union (EU) will start collecting a tax on digital transactions in 2015 that is expected to raise $1 billion this year. For those who are not very familiar with the size of the EU economy, it is projected to be close to $19 trillion in 2015, which means that the revenue from this tax will be a bit less than 0.006 percent of GDP.
The NYT reported that the European Union (EU) will start collecting a tax on digital transactions in 2015 that is expected to raise $1 billion this year. For those who are not very familiar with the size of the EU economy, it is projected to be close to $19 trillion in 2015, which means that the revenue from this tax will be a bit less than 0.006 percent of GDP.
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That’s what readers of his column on Rhode Island Governor Gina Raimondo would likely conclude. The column has the subhead, “Gina Raimondo’s approach to income inequality.”
There is not much in the piece that directly addresses income inequality as most of us would think about it. The piece highlights Raimondo’s cuts to the pensions of public sector workers. This is not a group of people that ordinarily is considered to be among the rich. While the piece tells us that she “framed the cutbacks as progressive,” it doesn’t follow that they are in fact progressive. (The piece neglected to mention that under Raimondo’s plan hedge funds may make large profits on handling the state’s pension fund money at the expense of public sector workers and taxpayers.)
The piece then tells readers that the pension cuts:
“provided a template for how politicians in Washington could try to rein in Social Security and Medicare spending, if they wished.”
The piece also indicates that Raimondo is either incredibly naive or dishonest. It reports:
“She said that she has told Wall Street titans point blank that they should be paying higher federal taxes and leveling the playing field, but with this message: ‘I need you to double down on America. We need you. We need your brains, we need your money, we need your engagement — not because it’s Wall Street versus Main Street, but because you’re some of the smartest, richest people in the world, and you need to be a part of fixing America, because you want to live in an America that’s the best country in the world.'”
Wall Street titans make investment choices based on profits, not admonitions from politicians. If Raimondo doesn’t understand this fact, she is dangerously naive. If she does, then her comment was meant to deceive the public.
That’s what readers of his column on Rhode Island Governor Gina Raimondo would likely conclude. The column has the subhead, “Gina Raimondo’s approach to income inequality.”
There is not much in the piece that directly addresses income inequality as most of us would think about it. The piece highlights Raimondo’s cuts to the pensions of public sector workers. This is not a group of people that ordinarily is considered to be among the rich. While the piece tells us that she “framed the cutbacks as progressive,” it doesn’t follow that they are in fact progressive. (The piece neglected to mention that under Raimondo’s plan hedge funds may make large profits on handling the state’s pension fund money at the expense of public sector workers and taxpayers.)
The piece then tells readers that the pension cuts:
“provided a template for how politicians in Washington could try to rein in Social Security and Medicare spending, if they wished.”
The piece also indicates that Raimondo is either incredibly naive or dishonest. It reports:
“She said that she has told Wall Street titans point blank that they should be paying higher federal taxes and leveling the playing field, but with this message: ‘I need you to double down on America. We need you. We need your brains, we need your money, we need your engagement — not because it’s Wall Street versus Main Street, but because you’re some of the smartest, richest people in the world, and you need to be a part of fixing America, because you want to live in an America that’s the best country in the world.'”
Wall Street titans make investment choices based on profits, not admonitions from politicians. If Raimondo doesn’t understand this fact, she is dangerously naive. If she does, then her comment was meant to deceive the public.
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That’s a question millions are asking after seeing the results of a Kaiser Family Foundation poll that showed that 41 percent of the public believes the Affordable Care Act created
“a government panel to make decisions about end-of-life care for people on Medicare.”
An equal number knew that no such panel existed and the rest didn’t know. If we assume that support for Obamacare among the 41 percent who believe in death panels is in the single digits, then support among the people who know that the ACA did not create death panels must be well over 70 percent.
That’s a question millions are asking after seeing the results of a Kaiser Family Foundation poll that showed that 41 percent of the public believes the Affordable Care Act created
“a government panel to make decisions about end-of-life care for people on Medicare.”
An equal number knew that no such panel existed and the rest didn’t know. If we assume that support for Obamacare among the 41 percent who believe in death panels is in the single digits, then support among the people who know that the ACA did not create death panels must be well over 70 percent.
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A NYT article on efforts to overcome stagnating incomes for the middle class bizarrely skipped over the most obvious and proven method: low unemployment. The problem shows up in the very first sentence, which tells readers:
“For average American families, the United States economy is like a football team that cannot move the ball, and has not been able to for 30 years.”
Actually, the football team moved the ball very well in the years from 1996 to 2001, when families at middle and bottom of the income ladder saw large wage gains. In fact, this five year period accounted for all the growth in wage income for middle class families since 1980. The problem was that the recession that began in 2001 following the collapse of the stock market bubble led to higher unemployment and took away workers bargaining power.
But there is zero reason to believe that if we again got the unemployment rate down to the levels of the late 1990s that we would not again see income growth for middle and lower income families. Bringing back the football analogy, this discussion is like bringing in a new quarterback just before half-time, who quickly leads the team to a touchdown. The coach then brings in the old quarterback in the second half. As he watches his team flounder, he is just perplexed as to what he can do to develop some offense.
We do know the answer, it’s involves bringing the economy back to full employment. That will likely require more demand, with the most obvious sources being a larger budget deficit or a smaller trade deficit. (The proven way to lower the trade deficit is a lower-valued dollar, an item found in every intro text book but almost never mentioned in policy circles.) If taboos on discussion of budget deficits and trade deficits prevent us from going the route of increased demand we can look to follow the German model and lower the unemployment rate by reducing the supply of labor. This would mean work-sharing, paid sick days and family leave, and other mechanisms that reduce the average number of hours per worker.
Anyhow, we do know how to increase income growth for the middle class, even if we’re not supposed to talk about it in polite circles.
A NYT article on efforts to overcome stagnating incomes for the middle class bizarrely skipped over the most obvious and proven method: low unemployment. The problem shows up in the very first sentence, which tells readers:
“For average American families, the United States economy is like a football team that cannot move the ball, and has not been able to for 30 years.”
Actually, the football team moved the ball very well in the years from 1996 to 2001, when families at middle and bottom of the income ladder saw large wage gains. In fact, this five year period accounted for all the growth in wage income for middle class families since 1980. The problem was that the recession that began in 2001 following the collapse of the stock market bubble led to higher unemployment and took away workers bargaining power.
But there is zero reason to believe that if we again got the unemployment rate down to the levels of the late 1990s that we would not again see income growth for middle and lower income families. Bringing back the football analogy, this discussion is like bringing in a new quarterback just before half-time, who quickly leads the team to a touchdown. The coach then brings in the old quarterback in the second half. As he watches his team flounder, he is just perplexed as to what he can do to develop some offense.
We do know the answer, it’s involves bringing the economy back to full employment. That will likely require more demand, with the most obvious sources being a larger budget deficit or a smaller trade deficit. (The proven way to lower the trade deficit is a lower-valued dollar, an item found in every intro text book but almost never mentioned in policy circles.) If taboos on discussion of budget deficits and trade deficits prevent us from going the route of increased demand we can look to follow the German model and lower the unemployment rate by reducing the supply of labor. This would mean work-sharing, paid sick days and family leave, and other mechanisms that reduce the average number of hours per worker.
Anyhow, we do know how to increase income growth for the middle class, even if we’re not supposed to talk about it in polite circles.
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The NYT apparently still doesn’t know that the young invincibles are dead. The idea that Obamacare needed young healthy people to enroll is one of the big myths that was killed in 2014. For the economics of the system to work, it needs healthy people to sign up. It is actually better for the system if they are older and healthy than younger and healthy because older people pay higher premiums.
Unfortunately the NYT is still confused on this basic point. In an article reporting on the situation with Obamacare in Kentucky, the NYT told readers:
“supporters say the private insurance exchanges will need robust business, including young and healthy customers that help balance the cost of sicker ones, to thrive.”
The point here is that it really doesn’t matter whether the people are young, it matters that some healthy people, who pay more in premiums than they get back in benefits, join the system.
The NYT apparently still doesn’t know that the young invincibles are dead. The idea that Obamacare needed young healthy people to enroll is one of the big myths that was killed in 2014. For the economics of the system to work, it needs healthy people to sign up. It is actually better for the system if they are older and healthy than younger and healthy because older people pay higher premiums.
Unfortunately the NYT is still confused on this basic point. In an article reporting on the situation with Obamacare in Kentucky, the NYT told readers:
“supporters say the private insurance exchanges will need robust business, including young and healthy customers that help balance the cost of sicker ones, to thrive.”
The point here is that it really doesn’t matter whether the people are young, it matters that some healthy people, who pay more in premiums than they get back in benefits, join the system.
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