When it comes to issues of an aging population the Washington Post gets very arithmetic challenged. An article discussing the plight of the rural elderly noted that many can’t count on assistance from either the government or their children. It tells readers:
“The rapid aging of China’s society is one of its most profound economic challenges. By 2053, the number of senior citizens is expected to grow to 487 million, or 35 percent of the population, compared with just over 12 percent now, according to the China National Committee on Aging. There will be more retired Chinese people than the entire U.S. population by that date.
“But even before then, the country faces the prospect of growing old before it grows rich. Chinese citizens who have grown up under the one-child policy could end up caring for two parents and four grandparents each as they enter late middle age, a potentially crippling economic burden.”
These assertions are wrong on their face. According to the International Monetary Fund, China’s per capita income has increased by 4000 percent since 1980. This means that it easily has the ability to support both its retirees and its working population at standards of livings that are far higher than they would have seen in the recent past. The impact of this extraordinary growth rate dwarfs the demographics associated with the one-child policy.
If there are problems supporting China’s elderly then it is due to too much money going to the wealthy. The focus on the demographics is mistaken and misleading.
When it comes to issues of an aging population the Washington Post gets very arithmetic challenged. An article discussing the plight of the rural elderly noted that many can’t count on assistance from either the government or their children. It tells readers:
“The rapid aging of China’s society is one of its most profound economic challenges. By 2053, the number of senior citizens is expected to grow to 487 million, or 35 percent of the population, compared with just over 12 percent now, according to the China National Committee on Aging. There will be more retired Chinese people than the entire U.S. population by that date.
“But even before then, the country faces the prospect of growing old before it grows rich. Chinese citizens who have grown up under the one-child policy could end up caring for two parents and four grandparents each as they enter late middle age, a potentially crippling economic burden.”
These assertions are wrong on their face. According to the International Monetary Fund, China’s per capita income has increased by 4000 percent since 1980. This means that it easily has the ability to support both its retirees and its working population at standards of livings that are far higher than they would have seen in the recent past. The impact of this extraordinary growth rate dwarfs the demographics associated with the one-child policy.
If there are problems supporting China’s elderly then it is due to too much money going to the wealthy. The focus on the demographics is mistaken and misleading.
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The Hill sees the onset of fall as providing support for Republican efforts to cut the budget. Okay, they didn’t quite say this, but what they did say didn’t make much more sense. It told readers:
“Republicans argue that their cost-cutting initiatives will foster the economic growth needed to reduce the stubbornly high poverty rate. Their efforts were boosted by a Congressional Budget Office report on Tuesday that shows the national debt increasing to from 73 percent to 100 percent of the economy over the next 25 years.”
The Hill sees the onset of fall as providing support for Republican efforts to cut the budget. Okay, they didn’t quite say this, but what they did say didn’t make much more sense. It told readers:
“Republicans argue that their cost-cutting initiatives will foster the economic growth needed to reduce the stubbornly high poverty rate. Their efforts were boosted by a Congressional Budget Office report on Tuesday that shows the national debt increasing to from 73 percent to 100 percent of the economy over the next 25 years.”
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This point would have been worth including in a NYT piece that reported on how the state of Florida appeared to be undercutting provisions of the Affordable Care Act (ACA) that were designed to curtail abuses by insurers. The ACA requires insurers to make benefit payments that are at least equal to 80 percent of its premiums, unless they have been given an explicit exemption from this provision.
This provision is enforced by the Department of Health and Human Services. It should limit the extent of insurer abuses even if a state is determined to look the other way.
Thanks to Robert Salzberg for calling this to my attention.
This point would have been worth including in a NYT piece that reported on how the state of Florida appeared to be undercutting provisions of the Affordable Care Act (ACA) that were designed to curtail abuses by insurers. The ACA requires insurers to make benefit payments that are at least equal to 80 percent of its premiums, unless they have been given an explicit exemption from this provision.
This provision is enforced by the Department of Health and Human Services. It should limit the extent of insurer abuses even if a state is determined to look the other way.
Thanks to Robert Salzberg for calling this to my attention.
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This is only a very slight caricature of Jonathan Weisman’s “Congressional Memo” in today’s NYT. He tells readers:
“For three years, Congressional leaders have relied on tactical maneuvers, sleights of hand and sheer gimmickry to move the nation from one fiscal crisis to the next — with little strategy to deal with the actual problems at hand. Medicare and Social Security continue to swell with an aging population. Health care costs grow. A burdensome tax code remains unchanged, and economic revival is shadowed by the specter of Washington’s crisis-driven mismanagement.”
Remember, this is in a context in which we are still almost 9 million jobs below trend level. We have millions more working at part-time jobs who would like full-time jobs. Real wages have not grown in more than a decade. And, we are losing $1 trillion in output every year or more than $80 billion a month because there is not enough demand in the economy.
This situation is leading to families being ruined and children being deprived of the sort of upbringing that will allow them to be successful as adults.
Yet, we have someone telling us that that the actual problems at hand are Medicare and Social Security? The claim on health care costs is bizarre since we have seen a sharper downturn in the rate of growth of spending that we had any reason to believe would come from health care reform. The tax code is a mess, but so what? It was a mess in the 1940s, 1950s, and 1960s yet we still saw solid growth.
The latest set of long-term projections from the Congressional Budget Office show that in the baseline scenario we have decades before we reach debt to GDP ratios that anyone would consider a serious problem. In a world where the immediate problems are so immense, it is difficult to believe that any serious person can be upset that we are not focusing on long-term problems that may not even exist.
This is only a very slight caricature of Jonathan Weisman’s “Congressional Memo” in today’s NYT. He tells readers:
“For three years, Congressional leaders have relied on tactical maneuvers, sleights of hand and sheer gimmickry to move the nation from one fiscal crisis to the next — with little strategy to deal with the actual problems at hand. Medicare and Social Security continue to swell with an aging population. Health care costs grow. A burdensome tax code remains unchanged, and economic revival is shadowed by the specter of Washington’s crisis-driven mismanagement.”
Remember, this is in a context in which we are still almost 9 million jobs below trend level. We have millions more working at part-time jobs who would like full-time jobs. Real wages have not grown in more than a decade. And, we are losing $1 trillion in output every year or more than $80 billion a month because there is not enough demand in the economy.
This situation is leading to families being ruined and children being deprived of the sort of upbringing that will allow them to be successful as adults.
Yet, we have someone telling us that that the actual problems at hand are Medicare and Social Security? The claim on health care costs is bizarre since we have seen a sharper downturn in the rate of growth of spending that we had any reason to believe would come from health care reform. The tax code is a mess, but so what? It was a mess in the 1940s, 1950s, and 1960s yet we still saw solid growth.
The latest set of long-term projections from the Congressional Budget Office show that in the baseline scenario we have decades before we reach debt to GDP ratios that anyone would consider a serious problem. In a world where the immediate problems are so immense, it is difficult to believe that any serious person can be upset that we are not focusing on long-term problems that may not even exist.
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Brad Plummer has a good set of charts showing how different segments of the population have fared in the downturn. I have two minor quibbles with the selection. First, to show the decline in the labor share of output, chart 5 shows the labor share of GDP over the last three decades. This is slightly misleading. The depreciation share of GDP has risen by roughly two percentage points over this period, which means that if the division of wages and profits had stayed constant, the chart would still show a declining share of wages in GDP.
Folks should get in the habit if using net domestic product as the denominator. No one eats depreciation, if we want to look at distribution we should focus on net output, not gross output.
My other quibble is the use of the Sentier Research data for median income. This is a relatively new series which many journalists are turning to as a measure of family income. Unlike almost all the other widely used data sources, this one is not available for free. It might be worth paying for Sentier’s data if there were some valued added, but there really isn’t.
The Census produces annual data on family income. This is what people should look to for movements in median income over time. Sentier produces their data on a monthly basis, which may seem like a big gain, but it isn’t. The monthly movements (it’s actually a 3-month moving average) are dominated by noise. We are not really finding out what is happening with family income month to month, we are just picking up the impact of statistical quirks and erratic seasonal adjustment factors.
This is a case where free really is better. If you want to know what is going on with family income, stick with the Census Bureau.
Brad Plummer has a good set of charts showing how different segments of the population have fared in the downturn. I have two minor quibbles with the selection. First, to show the decline in the labor share of output, chart 5 shows the labor share of GDP over the last three decades. This is slightly misleading. The depreciation share of GDP has risen by roughly two percentage points over this period, which means that if the division of wages and profits had stayed constant, the chart would still show a declining share of wages in GDP.
Folks should get in the habit if using net domestic product as the denominator. No one eats depreciation, if we want to look at distribution we should focus on net output, not gross output.
My other quibble is the use of the Sentier Research data for median income. This is a relatively new series which many journalists are turning to as a measure of family income. Unlike almost all the other widely used data sources, this one is not available for free. It might be worth paying for Sentier’s data if there were some valued added, but there really isn’t.
The Census produces annual data on family income. This is what people should look to for movements in median income over time. Sentier produces their data on a monthly basis, which may seem like a big gain, but it isn’t. The monthly movements (it’s actually a 3-month moving average) are dominated by noise. We are not really finding out what is happening with family income month to month, we are just picking up the impact of statistical quirks and erratic seasonal adjustment factors.
This is a case where free really is better. If you want to know what is going on with family income, stick with the Census Bureau.
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Adam Davidson raised this possibility in his discussion of possible ramifications of the debt ceiling battle. He suggested that one possible outcome is that investors and foreign central banks cease to view the dollar as the world’s reserve currency. This would lead them to switch their dollar holdings to other currencies. The result would be a decline in the value of the dollar.
This is exactly what is needed to make U.S. goods more competitive in the world economy. If the dollar were to fall by 20 percent against the currencies of our trading partners it would have roughly the same effect on the trade deficit as if we would imposed a 20 percent tariff on imports and had a 20 percent subsidy on U.S. exports.
The trade deficit is now close to $500 billion a year or 3 percent of GDP. If we had balanced trade it would add roughly $750 billion a year to GDP (@ 4.6 percent of GDP), assuming a multiplier of 1.5 on traded items. This would lead to more than 7 million additional jobs bringing the economy close to full employment.
This sounds like very good news, especially since no economist has any good story as to how the U.S. economy can get back to full employment with a trade deficit of the size that we have seen over the last 15 years. We only managed to reach levels of output close to full employment during this period when the economy was being driven by bubbles (stock and housing).
If there is an alternative route to full employment, no one has bothered to write about it. From this perspective, a flight from the dollar as a result of a battle over the debt ceiling is probably the economy’s best hope for generating large numbers of jobs any time soon.
Adam Davidson raised this possibility in his discussion of possible ramifications of the debt ceiling battle. He suggested that one possible outcome is that investors and foreign central banks cease to view the dollar as the world’s reserve currency. This would lead them to switch their dollar holdings to other currencies. The result would be a decline in the value of the dollar.
This is exactly what is needed to make U.S. goods more competitive in the world economy. If the dollar were to fall by 20 percent against the currencies of our trading partners it would have roughly the same effect on the trade deficit as if we would imposed a 20 percent tariff on imports and had a 20 percent subsidy on U.S. exports.
The trade deficit is now close to $500 billion a year or 3 percent of GDP. If we had balanced trade it would add roughly $750 billion a year to GDP (@ 4.6 percent of GDP), assuming a multiplier of 1.5 on traded items. This would lead to more than 7 million additional jobs bringing the economy close to full employment.
This sounds like very good news, especially since no economist has any good story as to how the U.S. economy can get back to full employment with a trade deficit of the size that we have seen over the last 15 years. We only managed to reach levels of output close to full employment during this period when the economy was being driven by bubbles (stock and housing).
If there is an alternative route to full employment, no one has bothered to write about it. From this perspective, a flight from the dollar as a result of a battle over the debt ceiling is probably the economy’s best hope for generating large numbers of jobs any time soon.
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This is a fact that would have been worth mentioning in a piece discussing a plan to raise the minimum wage in California to $10 an hour by 2016. The federal minimum wage had risen in step with productivity growth over the years from 1938-1968. Since then it has not even kept pace with the rate of inflation. The unemployment rate in 1968 was less than 4.0 percent.
This is a fact that would have been worth mentioning in a piece discussing a plan to raise the minimum wage in California to $10 an hour by 2016. The federal minimum wage had risen in step with productivity growth over the years from 1938-1968. Since then it has not even kept pace with the rate of inflation. The unemployment rate in 1968 was less than 4.0 percent.
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There has been a huge drop in employment in this downturn with the employment to population ratio (EPOP) still only 0.4 percentage points above its low for the downturn. It is still more than four full percentage points below its pre-recession level. Clearly part of this is due to the weakness of the economy, but part can be due to people voluntarily opting out of the labor force.
One reason to think the latter could be important is the aging of the baby boomers. The oldest baby boomers are now 67 and more than 40 percent are over age 60. With an increasing portion of this group edging into retirement, it is reasonable to expect a decline in the employment to population ratio. However, it turns out that aging is not a major factor in the drop of the EPOP. According to the OECD the EPOP for prime age workers (ages 25-54) is also four full percentage points below its pre-recession level.
Gavyn Davies looked at these data and concluded that most of the drop-off in EPOPs can be explained by a long-term trend towards lower labor force participation rates for men. There are two problems with his story.
First, we don’t expect every trend to continue. The labor force participation rate for prime age men fell by more than 8 percentage points from the early 1970s to 2010. Do we really think it will fall by another 8 percentage points over the next 40 years? Davies indicates this decline may be in part attributable to a more even sharing of child care responsibilities and presumably more women in the paid labor force. However the latter trend has largely ended, so this cannot provide a basis for a further drop in men’s labor force participation.
However the more bizarre part of Davies story is that while he focuses on trends supporting his contention that labor force participation should drop, he ignores the obvious one pointing in the opposite direction. This would be the sharp rise in labor force participation among older workers. This has risen by more than 10 percentage points since 1990. Barring a major change in the financial situation of older workers (Obamacare could be one such change), it is likely that this ratio will continue to rise in the years ahead as many baby boomers continue to work rather than retire.
There has been a huge drop in employment in this downturn with the employment to population ratio (EPOP) still only 0.4 percentage points above its low for the downturn. It is still more than four full percentage points below its pre-recession level. Clearly part of this is due to the weakness of the economy, but part can be due to people voluntarily opting out of the labor force.
One reason to think the latter could be important is the aging of the baby boomers. The oldest baby boomers are now 67 and more than 40 percent are over age 60. With an increasing portion of this group edging into retirement, it is reasonable to expect a decline in the employment to population ratio. However, it turns out that aging is not a major factor in the drop of the EPOP. According to the OECD the EPOP for prime age workers (ages 25-54) is also four full percentage points below its pre-recession level.
Gavyn Davies looked at these data and concluded that most of the drop-off in EPOPs can be explained by a long-term trend towards lower labor force participation rates for men. There are two problems with his story.
First, we don’t expect every trend to continue. The labor force participation rate for prime age men fell by more than 8 percentage points from the early 1970s to 2010. Do we really think it will fall by another 8 percentage points over the next 40 years? Davies indicates this decline may be in part attributable to a more even sharing of child care responsibilities and presumably more women in the paid labor force. However the latter trend has largely ended, so this cannot provide a basis for a further drop in men’s labor force participation.
However the more bizarre part of Davies story is that while he focuses on trends supporting his contention that labor force participation should drop, he ignores the obvious one pointing in the opposite direction. This would be the sharp rise in labor force participation among older workers. This has risen by more than 10 percentage points since 1990. Barring a major change in the financial situation of older workers (Obamacare could be one such change), it is likely that this ratio will continue to rise in the years ahead as many baby boomers continue to work rather than retire.
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