Jonathan Chait took a few swipes at Paul Ryan for his budget work and economic forecasts in a piece headlined “Paul Ryan Declares War Against Math.” Most of Chait’s shots are well-deserved, for example he notes Ryan’s claims that the Obama deficits would lead to a surge in inflation and that Obamacare would cause health care costs to soar.
However one of the Chait’s shots is definitely in the cheap seats. He tells readers:
“‘Reality’ [a sarcastic reference to Ryan’s world view] is Ryan’s description for a world in which Bill Clinton’s punishing tax hikes on the rich hindered the economy, which was restored to health when George W. Bush cut taxes.”
Actually in the reality where most of us reside, George W. Bush’s tax cuts almost certainly did provide a boost to the economy. At the time the economy was experiencing a recession due to the collapse of the stock bubble (the cause of the Clinton budget surpluses). The economy desperately needed a source of demand to replace the demand generated by the collapse of the stock bubble. This is a point that is now acknowledged even by Larry Summers, President Clinton’s last Treasury Secretary. The Fed was approaching the zero lower bound with its interest rate policy, as the federal funds rate was lowered to 1.0 percent in the summer of 2002.
This meant that fiscal policy was badly needed to provide a boost to the economy. In that context, the Bush tax cuts were almost certainly a positive for the economy, leading to more consumption and therefore more demand and employment than if there had been no expansionary fiscal policy. Of course the same amount of money would have provided more stimulus if it had gone to support infrastructure, education, or other forms of spending. It would have also given the economy more of a boost if it was less tilted towards those at the top end of the income distribution.
But given a choice between the Bush tax cuts and doing nothing, the Bush tax cuts were almost certainly the better way to go. They may not have been sufficient to offset the damage caused by the collapse of the stock bubble, but they were a step in the right direction.
Note: Jonathan Chait’s name was originally misspelled as “Chiat.”
Jonathan Chait took a few swipes at Paul Ryan for his budget work and economic forecasts in a piece headlined “Paul Ryan Declares War Against Math.” Most of Chait’s shots are well-deserved, for example he notes Ryan’s claims that the Obama deficits would lead to a surge in inflation and that Obamacare would cause health care costs to soar.
However one of the Chait’s shots is definitely in the cheap seats. He tells readers:
“‘Reality’ [a sarcastic reference to Ryan’s world view] is Ryan’s description for a world in which Bill Clinton’s punishing tax hikes on the rich hindered the economy, which was restored to health when George W. Bush cut taxes.”
Actually in the reality where most of us reside, George W. Bush’s tax cuts almost certainly did provide a boost to the economy. At the time the economy was experiencing a recession due to the collapse of the stock bubble (the cause of the Clinton budget surpluses). The economy desperately needed a source of demand to replace the demand generated by the collapse of the stock bubble. This is a point that is now acknowledged even by Larry Summers, President Clinton’s last Treasury Secretary. The Fed was approaching the zero lower bound with its interest rate policy, as the federal funds rate was lowered to 1.0 percent in the summer of 2002.
This meant that fiscal policy was badly needed to provide a boost to the economy. In that context, the Bush tax cuts were almost certainly a positive for the economy, leading to more consumption and therefore more demand and employment than if there had been no expansionary fiscal policy. Of course the same amount of money would have provided more stimulus if it had gone to support infrastructure, education, or other forms of spending. It would have also given the economy more of a boost if it was less tilted towards those at the top end of the income distribution.
But given a choice between the Bush tax cuts and doing nothing, the Bush tax cuts were almost certainly the better way to go. They may not have been sufficient to offset the damage caused by the collapse of the stock bubble, but they were a step in the right direction.
Note: Jonathan Chait’s name was originally misspelled as “Chiat.”
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Thomas Edsall has a good discussion of the shift of income from labor to capital in the years since 2000. His piece puts the blame largely on the way the United States has structured global trade to put downward pressure on the wages of ordinary workers.
While Edsall’s discussion of the period since 2000 is largely on target (it does miss the impact of macroeconomic fluctuations and the fact that we have been well below full employment for most of this period), it errs in telling readers:
“Until 1999, median household income (as distinct from wealth) rose in tandem with national economic growth. That year, household income abruptly stopped keeping pace with economic growth and has fallen steadily behind then.”
While median household income did keep pace with economic growth from 1993 to 1999, it actually lagged far behind in the years from 1978 to 1993. Over this period real per capital income rose by 30.0 percent, while median household income barely changed. This divergence of median income from growth was associated with an upward redistribution of wage income, with high end earners (e.g. Wall Street types, CEOs, and doctors) gaining at the expense of most workers.
In this period, most college graduates (@ 25 percent of the workforce at the time) were among the winners. By contrast, in the period since 2000 only workers at the very top of the income distribution and owners of capital have been winners.
Thomas Edsall has a good discussion of the shift of income from labor to capital in the years since 2000. His piece puts the blame largely on the way the United States has structured global trade to put downward pressure on the wages of ordinary workers.
While Edsall’s discussion of the period since 2000 is largely on target (it does miss the impact of macroeconomic fluctuations and the fact that we have been well below full employment for most of this period), it errs in telling readers:
“Until 1999, median household income (as distinct from wealth) rose in tandem with national economic growth. That year, household income abruptly stopped keeping pace with economic growth and has fallen steadily behind then.”
While median household income did keep pace with economic growth from 1993 to 1999, it actually lagged far behind in the years from 1978 to 1993. Over this period real per capital income rose by 30.0 percent, while median household income barely changed. This divergence of median income from growth was associated with an upward redistribution of wage income, with high end earners (e.g. Wall Street types, CEOs, and doctors) gaining at the expense of most workers.
In this period, most college graduates (@ 25 percent of the workforce at the time) were among the winners. By contrast, in the period since 2000 only workers at the very top of the income distribution and owners of capital have been winners.
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This point would have been worth including in a discussion of President Obama’s effort to get China to agree to emission reductions. China remains much poorer than the United States, even though it has surpassed the United States in GDP, because it has four times the population.
Furthermore, many of its emissions are associated with goods that are produced for export to the United States and other countries. In that sense, the United States has effectively exported emissions connected to its own consumption to China. Also, the problem of global warming is associated with the accumulation of carbon dioxide over time. The United States and other wealthy countries have been contributing to this buildup on a large scale for more than a century. If they had not put so much carbon dioxide in the atmosphere, global warming would not be a problem today. China has far to go before it catches up to the United States in total carbon dioxide emissions over time.
This point would have been worth including in a discussion of President Obama’s effort to get China to agree to emission reductions. China remains much poorer than the United States, even though it has surpassed the United States in GDP, because it has four times the population.
Furthermore, many of its emissions are associated with goods that are produced for export to the United States and other countries. In that sense, the United States has effectively exported emissions connected to its own consumption to China. Also, the problem of global warming is associated with the accumulation of carbon dioxide over time. The United States and other wealthy countries have been contributing to this buildup on a large scale for more than a century. If they had not put so much carbon dioxide in the atmosphere, global warming would not be a problem today. China has far to go before it catches up to the United States in total carbon dioxide emissions over time.
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The Washington Post gave us the ostensibly bad news that home sales were down slightly in August. It later uses as a point of reference the number of mortgages issued in 2001. The housing market had already entered its bubble phase in 2001 with house prices running well above trend levels. If we compare total sales (new and existing homes) with sales in the pre-bubble years 1993-1995, they would actually be somewhat higher today, even after adjusting for population growth.
While there may be an issue of many people being unable to qualify for mortgages because of their credit history, this does not appear to be having a negative effect on the state of market. Prices are already about 20 percent above their trend levels.
It also is not clear that all of the people being denied mortgages are being harmed. Because of the weak labor market, workers often have to move to find or keep jobs. There are large transactions costs associated with buying and selling a home. These average around 10 percent of the purchase price. If a person can’t expect to stay in a home for at least five years they will likely lose by buying rather than renting. it is especially likely they will lose in a context where higher future interest rates, which are almost universally predicted, will put downward pressure on house prices. It is worth noting that many of the people pushing homeownership today were also pushing it as the housing bubble was reaching its peaks in the years 2005-2007.
The Washington Post gave us the ostensibly bad news that home sales were down slightly in August. It later uses as a point of reference the number of mortgages issued in 2001. The housing market had already entered its bubble phase in 2001 with house prices running well above trend levels. If we compare total sales (new and existing homes) with sales in the pre-bubble years 1993-1995, they would actually be somewhat higher today, even after adjusting for population growth.
While there may be an issue of many people being unable to qualify for mortgages because of their credit history, this does not appear to be having a negative effect on the state of market. Prices are already about 20 percent above their trend levels.
It also is not clear that all of the people being denied mortgages are being harmed. Because of the weak labor market, workers often have to move to find or keep jobs. There are large transactions costs associated with buying and selling a home. These average around 10 percent of the purchase price. If a person can’t expect to stay in a home for at least five years they will likely lose by buying rather than renting. it is especially likely they will lose in a context where higher future interest rates, which are almost universally predicted, will put downward pressure on house prices. It is worth noting that many of the people pushing homeownership today were also pushing it as the housing bubble was reaching its peaks in the years 2005-2007.
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There are many issues raised by Uber, Airbnb, and other major companies that are part of the “sharing economy.” For example Uber drivers don’t have to pass the same tests, undergo the same background checks, or carry the same insurance as drivers for traditional taxis. Uber cars also don’t have to meet rules about being handicap accessible.
The same sorts of issues arise with rooms rented through Airbnb. These rooms don’t have to meet the safety and accessibility standards imposed on hotels. Also, many people living in apartment buildings rent out rooms, creating a nuisance for their neighbors who didn’t expect to be living in a hotel.
These and other issues have been raised by people concerned about the spread of the sharing economy in both Europe and the United States. The NYT has however determined that these concerns are not real, telling readers:
“As in the United States, where tech start-ups have also faced legal challenges, the wide-ranging response in Europe often comes down to whether lawmakers view the companies as a threat to local businesses or an opportunity to improve economic growth.”
Apparently the NYT believes that people who raise concerns about hotels being accessible to people with disabilities or that they should not be fire hazards are actually only interested in protecting existing businesses. That’s an interesting position to express in a news article.
There are many issues raised by Uber, Airbnb, and other major companies that are part of the “sharing economy.” For example Uber drivers don’t have to pass the same tests, undergo the same background checks, or carry the same insurance as drivers for traditional taxis. Uber cars also don’t have to meet rules about being handicap accessible.
The same sorts of issues arise with rooms rented through Airbnb. These rooms don’t have to meet the safety and accessibility standards imposed on hotels. Also, many people living in apartment buildings rent out rooms, creating a nuisance for their neighbors who didn’t expect to be living in a hotel.
These and other issues have been raised by people concerned about the spread of the sharing economy in both Europe and the United States. The NYT has however determined that these concerns are not real, telling readers:
“As in the United States, where tech start-ups have also faced legal challenges, the wide-ranging response in Europe often comes down to whether lawmakers view the companies as a threat to local businesses or an opportunity to improve economic growth.”
Apparently the NYT believes that people who raise concerns about hotels being accessible to people with disabilities or that they should not be fire hazards are actually only interested in protecting existing businesses. That’s an interesting position to express in a news article.
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Josh Barro has an interesting article noting how conservatives in the U.S. appear to have a love affair with Canada, based on its tax cuts and promotion of fossil fuel production. Barro points out that a big part of Canada’s low-cost government is its single payer, or universal Medicare, system. According to the OECD, Canada spends 10.4 percent of its GDP on health care (mostly from the government) whereas the U.S. spends 16.2 percent of GDP (a bit more than half from the government). The difference would come to more than $1 trillion a year in the current U.S. economy.
The housing bubble is the other striking story of the Canadian economy. The ratio of house prices to rent has more than doubled since the turn of the century. When this bubble bursts, Canada is not likely to look very pretty.
Josh Barro has an interesting article noting how conservatives in the U.S. appear to have a love affair with Canada, based on its tax cuts and promotion of fossil fuel production. Barro points out that a big part of Canada’s low-cost government is its single payer, or universal Medicare, system. According to the OECD, Canada spends 10.4 percent of its GDP on health care (mostly from the government) whereas the U.S. spends 16.2 percent of GDP (a bit more than half from the government). The difference would come to more than $1 trillion a year in the current U.S. economy.
The housing bubble is the other striking story of the Canadian economy. The ratio of house prices to rent has more than doubled since the turn of the century. When this bubble bursts, Canada is not likely to look very pretty.
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The NYT had a fascinating piece on medical care freelancers: health care professionals of various types who show up at hospitals and pass along huge bills to patients undergoing treatment. According to the article these contractors generally do not make their employment status known to patients at the time, so they would reasonably assume that they are hospital staff who would be covered under normal billing procedures. Patients often first discover that this is not the case when they get bills for services, which can run into the tens or hundreds of thousands of dollars.
The piece explains that there have been some efforts to regulate these practices, but the industry has been largely successful in blocking serious restrictions. This presents another case of the enormous potential gains from free trade in health care. Other wealthy countries do not have medical scammers running around in their hospitals. If people could arrange to go to Canada, Europe, and many of the top notch facilities in the developing world, they could save a huge amount on their procedures, even after covering the cost of travel for themselves and their family members. Large-scale trade would likely put the medical scammers in the United States out of business quickly, since hospitals that did not bar them would not be able to get any patients.
Unfortunately, protectionists largely dominate public debate so freer trade in health care is almost never discussed. Economists like to help the protectionists in this respect by politely agreeing not to discuss trade in medical services. This makes it easier for them to say silly things about inequality being due to globalization and technology. They get to conveniently ignore the fact that our doctors make twice as much as doctors in other wealthy countries, not because of technology and globalization, but because they enjoy protection from international competition.
The NYT had a fascinating piece on medical care freelancers: health care professionals of various types who show up at hospitals and pass along huge bills to patients undergoing treatment. According to the article these contractors generally do not make their employment status known to patients at the time, so they would reasonably assume that they are hospital staff who would be covered under normal billing procedures. Patients often first discover that this is not the case when they get bills for services, which can run into the tens or hundreds of thousands of dollars.
The piece explains that there have been some efforts to regulate these practices, but the industry has been largely successful in blocking serious restrictions. This presents another case of the enormous potential gains from free trade in health care. Other wealthy countries do not have medical scammers running around in their hospitals. If people could arrange to go to Canada, Europe, and many of the top notch facilities in the developing world, they could save a huge amount on their procedures, even after covering the cost of travel for themselves and their family members. Large-scale trade would likely put the medical scammers in the United States out of business quickly, since hospitals that did not bar them would not be able to get any patients.
Unfortunately, protectionists largely dominate public debate so freer trade in health care is almost never discussed. Economists like to help the protectionists in this respect by politely agreeing not to discuss trade in medical services. This makes it easier for them to say silly things about inequality being due to globalization and technology. They get to conveniently ignore the fact that our doctors make twice as much as doctors in other wealthy countries, not because of technology and globalization, but because they enjoy protection from international competition.
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Gretchen Morgenson had a good piece on the decision by the California Public Employees Retirement System (Calpers) to stop investing in hedge funds. She pointed out that such investments have been big losers for pension funds since the money transferred to the managers vastly exceeded any investment gains.
Interestingly, just last week the NYT praised to the sky Rhode Island’s Treasurer and now Democratic gubernatorial candidate Gina Raimondo for a pension “reform” strategy that put much of the state’s pension funds into hedge funds. Apparently, public subsidies for Wall Street still rank as an important policy goal in some circles.
Gretchen Morgenson had a good piece on the decision by the California Public Employees Retirement System (Calpers) to stop investing in hedge funds. She pointed out that such investments have been big losers for pension funds since the money transferred to the managers vastly exceeded any investment gains.
Interestingly, just last week the NYT praised to the sky Rhode Island’s Treasurer and now Democratic gubernatorial candidate Gina Raimondo for a pension “reform” strategy that put much of the state’s pension funds into hedge funds. Apparently, public subsidies for Wall Street still rank as an important policy goal in some circles.
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