Arin Dube has an interesting post on how people with college educations are increasingly turning to fast food restaurants for employment. This is highly correlated with state unemployment rates.
The story is that after going long enough being unable to find better jobs, these workers turn to fast food restaurants as a last resort. This means the fast food industry is getting an unusually skilled workforce. These college educated workers are probably for the most part displacing less educated workers, but there are likely cases where fast food restaurants take advantage of the availability of better educated workers to hire more people than they would otherwise.
Arin Dube has an interesting post on how people with college educations are increasingly turning to fast food restaurants for employment. This is highly correlated with state unemployment rates.
The story is that after going long enough being unable to find better jobs, these workers turn to fast food restaurants as a last resort. This means the fast food industry is getting an unusually skilled workforce. These college educated workers are probably for the most part displacing less educated workers, but there are likely cases where fast food restaurants take advantage of the availability of better educated workers to hire more people than they would otherwise.
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Tom Edsall is usually a thoughtful commentator on politics and the economy, but his piece on inequality today really misses the mark. It repeatedly asserts that the huge rise in inequality over the last three decades is a market story. This is very hard to accept when you look at the big winners.
At the top of the list of winners are the Wall Street money boys. Does anyone think they would be as rich if the government taxed the financial sector the same way it taxes every other sector in the economy. Even the International Monetary Fund has called for additional taxes on the financial sector in the range of $40 billion a year to make its contribution to the Treasury comparable to that of other sectors. (My favorite here is a financial speculation tax like the one the U.K. has applied to stock trades for more than three centuries.)
Then we have the Silicon Valley boys. While many of them do produce great breakthroughs that enrich our lives, the skill that produces the big bucks is suckering folks who manage large pools of money. This allowed the folks at Groupon, who came up with the brilliant innovation of selling coupons on the web, to become billionaires. I suspect that if pension fund managers were required to write a 500 word essay justifying their investment decision before putting $100 million into a startup, there would be many fewer Silicon Valley billionaires. The issue here is competent management of public and private pension funds.
Doctors, lawyers, dentists and other professionals who comprise much of the one percent manage to sustain their income through protectionism. (The NYT had a good piece on how doctors beat back foreign competition last month.) If the protectionist crew that dominates trade policy today were replaced by free traders, we could use the forces of globalization to bring down the income of these high earners by 70-80 percent.
And, we have a totally corrupt system of corporate governance in which CEOs select and pay off directors to look the other way as they pilfer the company by taking outlandish pay packages. Governments write the rules of corporate governance, not markets. Our broken rules let CEOs earn compensation that is often an order of magnitude higher than that earned by top executives in companies in Europe and Japan. This is not the market, this is the government.
I could go on, for example markets don’t give us copyright and patent monopolies, government do. But the point should be clear (read my free book, if it isn’t), we did not get this massive increase in inequality simply by the natural workings of the market. The rise in inequality was driven by government policies that redistributed income upward.
That is why the question posed by Edsall, whether we can do anything about inequality, is silly on its face. Just reverse the policies that gave us inequality — that won’t give us full equality of income (not sure anyone wants that), but it would make the income distribution much more equal than it is today.
Tom Edsall is usually a thoughtful commentator on politics and the economy, but his piece on inequality today really misses the mark. It repeatedly asserts that the huge rise in inequality over the last three decades is a market story. This is very hard to accept when you look at the big winners.
At the top of the list of winners are the Wall Street money boys. Does anyone think they would be as rich if the government taxed the financial sector the same way it taxes every other sector in the economy. Even the International Monetary Fund has called for additional taxes on the financial sector in the range of $40 billion a year to make its contribution to the Treasury comparable to that of other sectors. (My favorite here is a financial speculation tax like the one the U.K. has applied to stock trades for more than three centuries.)
Then we have the Silicon Valley boys. While many of them do produce great breakthroughs that enrich our lives, the skill that produces the big bucks is suckering folks who manage large pools of money. This allowed the folks at Groupon, who came up with the brilliant innovation of selling coupons on the web, to become billionaires. I suspect that if pension fund managers were required to write a 500 word essay justifying their investment decision before putting $100 million into a startup, there would be many fewer Silicon Valley billionaires. The issue here is competent management of public and private pension funds.
Doctors, lawyers, dentists and other professionals who comprise much of the one percent manage to sustain their income through protectionism. (The NYT had a good piece on how doctors beat back foreign competition last month.) If the protectionist crew that dominates trade policy today were replaced by free traders, we could use the forces of globalization to bring down the income of these high earners by 70-80 percent.
And, we have a totally corrupt system of corporate governance in which CEOs select and pay off directors to look the other way as they pilfer the company by taking outlandish pay packages. Governments write the rules of corporate governance, not markets. Our broken rules let CEOs earn compensation that is often an order of magnitude higher than that earned by top executives in companies in Europe and Japan. This is not the market, this is the government.
I could go on, for example markets don’t give us copyright and patent monopolies, government do. But the point should be clear (read my free book, if it isn’t), we did not get this massive increase in inequality simply by the natural workings of the market. The rise in inequality was driven by government policies that redistributed income upward.
That is why the question posed by Edsall, whether we can do anything about inequality, is silly on its face. Just reverse the policies that gave us inequality — that won’t give us full equality of income (not sure anyone wants that), but it would make the income distribution much more equal than it is today.
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Andrew Ross Sorkin shows his range of thought goes from one 40 yard line to the other when he contemplates a world where the government decided to rescue Lehman rather than allow it to fail. He considers various bailout scenarios, all of which leave the welfare dependents on Wall Street intact.
There was an alternative. It was possible to allow the market to work its magic, which would have certainly destroyed the other three remaining independent investment banks (Goldman Sachs, Morgan Stanley, and Merrill Lynch). Two of the megabanks, Citigroup and Bank of America, which were on life support at the time, surely would have failed as well. It is possible that the other two megabanks, J.P. Morgan and Wells Fargo, also would have been dragged down as well.
In this world, we would have quickly eliminated much of the waste that has developed over the decades in a coddled financial sector that uses its political power to get hundreds of billions of dollars of implicit and explicit subsidies from the government. The economy would have taken a big hit, but those of us old enough to remember 2008 recall that the economy did take a big hit even with the bailouts.
It would have been necessary to have major stimulus to reboot the economy, but spending money is a political problem, not an economic one. (Most of us know how to spend money.) It is certainly plausible that serious stimulus would have been easier with the Wall Street gang put out on the street, dodging law suits and indictments, rather than advising President Obama.
Unfortunately, Andrew Ross Sorkin can’t even think of such possibilities.
Andrew Ross Sorkin shows his range of thought goes from one 40 yard line to the other when he contemplates a world where the government decided to rescue Lehman rather than allow it to fail. He considers various bailout scenarios, all of which leave the welfare dependents on Wall Street intact.
There was an alternative. It was possible to allow the market to work its magic, which would have certainly destroyed the other three remaining independent investment banks (Goldman Sachs, Morgan Stanley, and Merrill Lynch). Two of the megabanks, Citigroup and Bank of America, which were on life support at the time, surely would have failed as well. It is possible that the other two megabanks, J.P. Morgan and Wells Fargo, also would have been dragged down as well.
In this world, we would have quickly eliminated much of the waste that has developed over the decades in a coddled financial sector that uses its political power to get hundreds of billions of dollars of implicit and explicit subsidies from the government. The economy would have taken a big hit, but those of us old enough to remember 2008 recall that the economy did take a big hit even with the bailouts.
It would have been necessary to have major stimulus to reboot the economy, but spending money is a political problem, not an economic one. (Most of us know how to spend money.) It is certainly plausible that serious stimulus would have been easier with the Wall Street gang put out on the street, dodging law suits and indictments, rather than advising President Obama.
Unfortunately, Andrew Ross Sorkin can’t even think of such possibilities.
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Remember President Obama’s 2008 campaign where he promised to cut Social Security, Medicare, and Medicaid? Yeah, that was where he said, “yes we can.”
Okay you probably don’t remember it because if he ever said he wanted to cut Social Security, Medicare, and Medicaid, the media strangely did not bother to report it. But that does not stop Fred Hiatt from claiming in his Washington Post column:
“President Obama came into office five years ago promising to make hard decisions, not to kick the can down the road, not to let entitlement programs — primarily Medicare, Medicaid and Social Security — swallow the rest of the budget.”
This is the Washington Post so perhaps we should not expect much in the way of accuracy, but even for the Post this is pretty far out. After all, in the real world Obama never said anything remotely like this in the 2008 campaign. Hiatt is just putting his senior-bashing agenda in the mouth of President Obama, hoping he can fool some readers. That is really pathetic.
Addendum:
Those interested in what President Obama did actually say about Social Security during the 2008 campaign can get a sample here.
Remember President Obama’s 2008 campaign where he promised to cut Social Security, Medicare, and Medicaid? Yeah, that was where he said, “yes we can.”
Okay you probably don’t remember it because if he ever said he wanted to cut Social Security, Medicare, and Medicaid, the media strangely did not bother to report it. But that does not stop Fred Hiatt from claiming in his Washington Post column:
“President Obama came into office five years ago promising to make hard decisions, not to kick the can down the road, not to let entitlement programs — primarily Medicare, Medicaid and Social Security — swallow the rest of the budget.”
This is the Washington Post so perhaps we should not expect much in the way of accuracy, but even for the Post this is pretty far out. After all, in the real world Obama never said anything remotely like this in the 2008 campaign. Hiatt is just putting his senior-bashing agenda in the mouth of President Obama, hoping he can fool some readers. That is really pathetic.
Addendum:
Those interested in what President Obama did actually say about Social Security during the 2008 campaign can get a sample here.
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A NYT article discussing the possibility that Silvio Berlusconi may have his seat in the Italian Senate taken away following a criminal conviction for tax fraud, noted that this could lead to a collapse of the coalition government ruling Italy, which it tells readers could pose risks:
“to the tentative economic recovery under way in Europe.”
It is worth noting that Italy has not shared in this recovery having seen its economy contract for 8 consecutive quarters. In the most recent quarter it contracted at a 0.8 percent annual rate. This may make Italians less concerned about jeopardizing the recovery.
A NYT article discussing the possibility that Silvio Berlusconi may have his seat in the Italian Senate taken away following a criminal conviction for tax fraud, noted that this could lead to a collapse of the coalition government ruling Italy, which it tells readers could pose risks:
“to the tentative economic recovery under way in Europe.”
It is worth noting that Italy has not shared in this recovery having seen its economy contract for 8 consecutive quarters. In the most recent quarter it contracted at a 0.8 percent annual rate. This may make Italians less concerned about jeopardizing the recovery.
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Paul Krugman corrected my earlier comment to note that he in fact did say that the 1990-91 and 2001 recessions were qualitatively different than prior ones in that the recoveries did not have the same sort of strong bounce back that followed prior recessions. These recessions were also attributable at least in part to the collapse of asset bubbles. In this sense, the 2007-2009 downturn is not unique.
This is certainly fair, but at the risk of picking nits, there is another important point. Given the weakness of the current recovery, we all agree (I’m implicating Mike Konczal here as well) that stimulatory fiscal policy was and is appropriate to boost the economy out of the current downturn. However, are we in agreement that fiscal stimulus would have been useful following the 2001 downturn and perhaps the 1990-1991 recession also?
That seems to me the bigger issue. Maybe we are all in agreement and think that a fiscal response would have been appropriate for these prior two recessions as well, but I am not sure on this point.
(“Knit” corrected, thanks folks.)
Paul Krugman corrected my earlier comment to note that he in fact did say that the 1990-91 and 2001 recessions were qualitatively different than prior ones in that the recoveries did not have the same sort of strong bounce back that followed prior recessions. These recessions were also attributable at least in part to the collapse of asset bubbles. In this sense, the 2007-2009 downturn is not unique.
This is certainly fair, but at the risk of picking nits, there is another important point. Given the weakness of the current recovery, we all agree (I’m implicating Mike Konczal here as well) that stimulatory fiscal policy was and is appropriate to boost the economy out of the current downturn. However, are we in agreement that fiscal stimulus would have been useful following the 2001 downturn and perhaps the 1990-1991 recession also?
That seems to me the bigger issue. Maybe we are all in agreement and think that a fiscal response would have been appropriate for these prior two recessions as well, but I am not sure on this point.
(“Knit” corrected, thanks folks.)
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If the new Fed chair was being selected by people without names, Larry Summers would win hands down. The Post gives us yet another article assuring us that Larry Summers is a good guy that depends almost entirely on unnamed sources.
The article gives us supportive comments from “many of his colleagues,” “people close to Summers,” and “one person who knows Summers.” There is one named source in the piece. That would be Chrtistine Romer, the former head of the Council of Economic Advisers, who opposes appointing Summers as Fed chair.
Most serious newspapers try to restrict the use of unnamed sources to exceptional situations. The reason is that it allows them to use the paper to advance their agenda. Apparently the Post has little interest in such journalistic standards.
If the new Fed chair was being selected by people without names, Larry Summers would win hands down. The Post gives us yet another article assuring us that Larry Summers is a good guy that depends almost entirely on unnamed sources.
The article gives us supportive comments from “many of his colleagues,” “people close to Summers,” and “one person who knows Summers.” There is one named source in the piece. That would be Chrtistine Romer, the former head of the Council of Economic Advisers, who opposes appointing Summers as Fed chair.
Most serious newspapers try to restrict the use of unnamed sources to exceptional situations. The reason is that it allows them to use the paper to advance their agenda. Apparently the Post has little interest in such journalistic standards.
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A NYT article applauded reports that the birth rate stabilized in 2012 after declining sharply in the years from 2007 to 2011. While it is clearly good news insofar as birth rates are a measure of the economic security of young families, there is no reason that the rest of us should want to see more children.
The piece tells readers that higher birth rates are associated with higher economic growth. This is true, but they are not necessarily associated with higher per capita growth. Bangladesh has a higher GDP (on a PPP basis) than Denmark, but no one would say that Bangladesh is richer than Denmark. This is because Denmark has a far higher per capita GDP.
There are also many items related to population density that are not captured by GDP. For example, if people spend more time commuting because roads and infrastructure are more crowded this will not be picked by in GDP. The same is true for recreational sites like parks and beaches. Also, a larger population will make it more difficult to attain targets for reducing greenhouse gas emissions for folks who care about things like global warming.
One final point that is worth noting, the piece effectively confuses levels and changes. The fact that the decline has stopped at its 2011 level implies that families in 2012 were as pessimistic as at any point in the downturn. Insofar as we can see the birthrate as a measure of economic security, that is not a good story.
A NYT article applauded reports that the birth rate stabilized in 2012 after declining sharply in the years from 2007 to 2011. While it is clearly good news insofar as birth rates are a measure of the economic security of young families, there is no reason that the rest of us should want to see more children.
The piece tells readers that higher birth rates are associated with higher economic growth. This is true, but they are not necessarily associated with higher per capita growth. Bangladesh has a higher GDP (on a PPP basis) than Denmark, but no one would say that Bangladesh is richer than Denmark. This is because Denmark has a far higher per capita GDP.
There are also many items related to population density that are not captured by GDP. For example, if people spend more time commuting because roads and infrastructure are more crowded this will not be picked by in GDP. The same is true for recreational sites like parks and beaches. Also, a larger population will make it more difficult to attain targets for reducing greenhouse gas emissions for folks who care about things like global warming.
One final point that is worth noting, the piece effectively confuses levels and changes. The fact that the decline has stopped at its 2011 level implies that families in 2012 were as pessimistic as at any point in the downturn. Insofar as we can see the birthrate as a measure of economic security, that is not a good story.
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A NYT article on Raghuram Rajan, the new head of India’s central bank, told readers:
“Some of the biggest problems bedeviling the Indian economy are beyond his control, like the trade and government budget deficits and the crippling shortage of roads and other infrastructure.”
Actually the trade deficit is fairly directly under the central bank’s control. It can raise or lower the value of the rupee, India’s currency. By allowing the rupee’s value to fall, Rajan can make India’s goods more competitive in the world economy, thereby reducing its trade deficit.
It is worth noting that India’s current account deficit (the broadest measure of the trade deficit) is around 5 percent of GDP. This is not obviously too large for a rapidly growing developing country. In fact, it is exactly what textbook economics would predict since capital is supposed to flow from slow growing rich countries to developing countries where it can be put to better use.
A NYT article on Raghuram Rajan, the new head of India’s central bank, told readers:
“Some of the biggest problems bedeviling the Indian economy are beyond his control, like the trade and government budget deficits and the crippling shortage of roads and other infrastructure.”
Actually the trade deficit is fairly directly under the central bank’s control. It can raise or lower the value of the rupee, India’s currency. By allowing the rupee’s value to fall, Rajan can make India’s goods more competitive in the world economy, thereby reducing its trade deficit.
It is worth noting that India’s current account deficit (the broadest measure of the trade deficit) is around 5 percent of GDP. This is not obviously too large for a rapidly growing developing country. In fact, it is exactly what textbook economics would predict since capital is supposed to flow from slow growing rich countries to developing countries where it can be put to better use.
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