Read More Leer más Join the discussion Participa en la discusión
Since folks seem to have difficulty understanding how assets can be relevant to the Reinhart-Rogoff debt kills growth story, I will give a concrete example. Brad Plumer had a piece this weekend in the Post that discussed the potential of a carbon tax to slow greenhouse gas emissions and raise revenue. He presents estimates that a $20 a ton tax would raise $1.2 trillion over the next decade.
Okay, at this point everyone should have heard of the idea of selling emissions permits as being roughly equivalent to a tax in terms of raising revenue and discouraging emissions. Suppose that we decided tomorrow to auction off permits that were issued in a number that was intended for carbon to be priced at $20 a ton. This should raise $1.2 trillion for the government, an amount equal to 7.5 percent of GDP. (I’m ignoring discounting to keep this simple, I’m trying to make a point. If we need more money we can make the permits good for 20 years.)
If we had crossed the Reinhart-Rogoff danger line of 90 percent, say with a debt-to-GDP ratio of 95 percent, this sale of permits would push us safely under the threshold with a debt-to-GDP ratio of 87.5 percent. If the Reinhart-Rogoff 90 percent cliff was real, how could anyone be opposed to this policy?
It would increase annual growth by something like 1.0 percentage point, while helping to save the planet. The cumulative gain to GDP would be somewhere in the neighborhood of $8 trillion or more than $100,000 in additional output for an average family of four.
The United States has many other carbon permit sale option type policies available. If we believed in the Reinhart-Rogoff cliff, these would be the obvious answer as these asset sales would provide incredible growth dividends.
I’m not personally advocating such asset sales because I don’t take the Reinhart-Rogoff cliff seriously. But any honest economist who does believe in the RR cliff should be highly vocal proponents of asset sales. (They are much easier politically than cutting Social Security and Medicare.)
So here’s the perfect lie detector test for economists arguing the RR case. Are they pushing large scale asset sales?
Since folks seem to have difficulty understanding how assets can be relevant to the Reinhart-Rogoff debt kills growth story, I will give a concrete example. Brad Plumer had a piece this weekend in the Post that discussed the potential of a carbon tax to slow greenhouse gas emissions and raise revenue. He presents estimates that a $20 a ton tax would raise $1.2 trillion over the next decade.
Okay, at this point everyone should have heard of the idea of selling emissions permits as being roughly equivalent to a tax in terms of raising revenue and discouraging emissions. Suppose that we decided tomorrow to auction off permits that were issued in a number that was intended for carbon to be priced at $20 a ton. This should raise $1.2 trillion for the government, an amount equal to 7.5 percent of GDP. (I’m ignoring discounting to keep this simple, I’m trying to make a point. If we need more money we can make the permits good for 20 years.)
If we had crossed the Reinhart-Rogoff danger line of 90 percent, say with a debt-to-GDP ratio of 95 percent, this sale of permits would push us safely under the threshold with a debt-to-GDP ratio of 87.5 percent. If the Reinhart-Rogoff 90 percent cliff was real, how could anyone be opposed to this policy?
It would increase annual growth by something like 1.0 percentage point, while helping to save the planet. The cumulative gain to GDP would be somewhere in the neighborhood of $8 trillion or more than $100,000 in additional output for an average family of four.
The United States has many other carbon permit sale option type policies available. If we believed in the Reinhart-Rogoff cliff, these would be the obvious answer as these asset sales would provide incredible growth dividends.
I’m not personally advocating such asset sales because I don’t take the Reinhart-Rogoff cliff seriously. But any honest economist who does believe in the RR cliff should be highly vocal proponents of asset sales. (They are much easier politically than cutting Social Security and Medicare.)
So here’s the perfect lie detector test for economists arguing the RR case. Are they pushing large scale asset sales?
Read More Leer más Join the discussion Participa en la discusión
My friend Jared Bernstein rightly points out that blocking the Keystone pipeline will not keep the tar sands oil in the ground. There are other ways to bring the oil to market and the industry will undoubtedly pursue these channels if opponents of the pipeline are successful.
But there is an important point here. These other methods of getting the oil to consumers are more expensive. We know this because the industry would not be pushing the pipeline if it was not the lowest cost way to get the oil to the market.
In this way opposition to the pipeline is effectively raising the cost of tar sands oil. That is exactly what we should want to see. In a sane world we would have a carbon tax, which would discourage the use of oil in general and in particular oil that was associated with large amounts of carbon emissions.
For political reasons, a carbon tax seems a non-starter at the moment. With the failure of Washington to act responsibly, the Keystone protesters are effectively imposing their own carbon tax on tar sands oil by raising its price. It’s far from perfect, but it’s certainly a reasonable course of action under the circumstances.
My friend Jared Bernstein rightly points out that blocking the Keystone pipeline will not keep the tar sands oil in the ground. There are other ways to bring the oil to market and the industry will undoubtedly pursue these channels if opponents of the pipeline are successful.
But there is an important point here. These other methods of getting the oil to consumers are more expensive. We know this because the industry would not be pushing the pipeline if it was not the lowest cost way to get the oil to the market.
In this way opposition to the pipeline is effectively raising the cost of tar sands oil. That is exactly what we should want to see. In a sane world we would have a carbon tax, which would discourage the use of oil in general and in particular oil that was associated with large amounts of carbon emissions.
For political reasons, a carbon tax seems a non-starter at the moment. With the failure of Washington to act responsibly, the Keystone protesters are effectively imposing their own carbon tax on tar sands oil by raising its price. It’s far from perfect, but it’s certainly a reasonable course of action under the circumstances.
Read More Leer más Join the discussion Participa en la discusión
The NYT had a piece noting that as a result of political gridlock Congress has not fixed a number of glitches in the Affordable Care Act. While the piece does mention several items that are in fact glitches, it also includes a number of issues that are simply lobbying to benefit special interests.
For example, it correctly notes that the provision setting 30 hours a week of work as a cutoff for requiring employers to provide insurance or pay a penalty was a glitch, however it absurdly follows industry groups in implying that raising the numbers to 35 hours or 40 would fix it. Of course the problem is that it is a discrete number of hours rather than a pro-rated payment. Wherever the cutoff is placed there will be a strong incentive for firms to cluster hours just below it, unless the number is put high enough so that almost no employees would cross it in any case.
The article includes a death panel type assertion. The article begins by citing Scott DeFife, a restaurant industry lobbyist, warning of a trainwreck from the law. A few paragraphs later it quotes him:
“Are we really going to put the private sector in a situation where there’s a real potential mess for posturing points?”
The piece never describes the potential mess that Mr. DeFife is concerned about. Needless to say, the bill will create inconveniences for many businesses as does the current health care system. There is no evidence presented in the piece that the law would risk major damage to businesses, we just have the NYT taking empty assertions from an industry lobbyist at face value.
The NYT had a piece noting that as a result of political gridlock Congress has not fixed a number of glitches in the Affordable Care Act. While the piece does mention several items that are in fact glitches, it also includes a number of issues that are simply lobbying to benefit special interests.
For example, it correctly notes that the provision setting 30 hours a week of work as a cutoff for requiring employers to provide insurance or pay a penalty was a glitch, however it absurdly follows industry groups in implying that raising the numbers to 35 hours or 40 would fix it. Of course the problem is that it is a discrete number of hours rather than a pro-rated payment. Wherever the cutoff is placed there will be a strong incentive for firms to cluster hours just below it, unless the number is put high enough so that almost no employees would cross it in any case.
The article includes a death panel type assertion. The article begins by citing Scott DeFife, a restaurant industry lobbyist, warning of a trainwreck from the law. A few paragraphs later it quotes him:
“Are we really going to put the private sector in a situation where there’s a real potential mess for posturing points?”
The piece never describes the potential mess that Mr. DeFife is concerned about. Needless to say, the bill will create inconveniences for many businesses as does the current health care system. There is no evidence presented in the piece that the law would risk major damage to businesses, we just have the NYT taking empty assertions from an industry lobbyist at face value.
Read More Leer más Join the discussion Participa en la discusión
Read More Leer más Join the discussion Participa en la discusión
The mainstream of the economics profession continue to try to rescue Carmen Reinhart and Ken Rogoff (R&R) from the consequences of their famous Excel spreadsheet error. The latest is Michael Heller, who has pronounced Paul Krugman the loser in his exchanges with R&R because he conceded that countries with debt-to-GDP ratios that exceed 90 percent of GDP have slower growth.
This is the sort of piece that should really have the general public thinking about defunding economics programs everywhere. The fact that countries with higher debt-to-GDP ratios have slower growth than countries with lower debt-to-GDP ratios was never at issue. The corrected spreadsheet shows this to be true across the board at every debt level. There is no importance to 90 percent.
The 90 percent cliff came about because of the Excel spreadsheet error, it does not otherwise exist in the data. Heller’s claim that R&R never said anything about a 90 percent cliff is an effort to re-write history. This number was embedded in the Bowles-Simpson report that came to be the guidepost for debate on the deficit in Washington policy circles. It also has been used by top officials in the European Union and elsewhere as a basis for austerity.
Using the corrected data the closest thing resembling a cliff can be found in the range of debt-to-GDP ratios of 20 percent of GDP. There would be no reason that 90 percent would ever appear in a discussion of debt in the corrected R&R debt-to-GDP data.
Also, as Krugman and others have repeatedly pointed out, the correlations in R&R tell us nothing about causation. There are lots of sick people at hospitals. Would we not have sick people if we shut our hospitals?
The efforts to examine causation have found the direction is overwhelmingly from slow growth to debt, not the other way around. And of course there is the issue that debt is only half of a balance sheet. If there really was a sharp growth penalty due to crossing some debt-to-GDP barrier then the logical policy response would be to sell some asset(s) to get back below the magic bar. That would surely beat a decade of high unemployment due to austerity. Unfortunately, balance sheets are apparently too difficult a concept for most economists.
Anyhow, if Heller can read Krugman’s latest column and declare R&R the winner, he must also believe that George Foreman defeated Muhammed Ali back in Rumble in the Jungle back in 1975. Such is the state of the economics profession.
The mainstream of the economics profession continue to try to rescue Carmen Reinhart and Ken Rogoff (R&R) from the consequences of their famous Excel spreadsheet error. The latest is Michael Heller, who has pronounced Paul Krugman the loser in his exchanges with R&R because he conceded that countries with debt-to-GDP ratios that exceed 90 percent of GDP have slower growth.
This is the sort of piece that should really have the general public thinking about defunding economics programs everywhere. The fact that countries with higher debt-to-GDP ratios have slower growth than countries with lower debt-to-GDP ratios was never at issue. The corrected spreadsheet shows this to be true across the board at every debt level. There is no importance to 90 percent.
The 90 percent cliff came about because of the Excel spreadsheet error, it does not otherwise exist in the data. Heller’s claim that R&R never said anything about a 90 percent cliff is an effort to re-write history. This number was embedded in the Bowles-Simpson report that came to be the guidepost for debate on the deficit in Washington policy circles. It also has been used by top officials in the European Union and elsewhere as a basis for austerity.
Using the corrected data the closest thing resembling a cliff can be found in the range of debt-to-GDP ratios of 20 percent of GDP. There would be no reason that 90 percent would ever appear in a discussion of debt in the corrected R&R debt-to-GDP data.
Also, as Krugman and others have repeatedly pointed out, the correlations in R&R tell us nothing about causation. There are lots of sick people at hospitals. Would we not have sick people if we shut our hospitals?
The efforts to examine causation have found the direction is overwhelmingly from slow growth to debt, not the other way around. And of course there is the issue that debt is only half of a balance sheet. If there really was a sharp growth penalty due to crossing some debt-to-GDP barrier then the logical policy response would be to sell some asset(s) to get back below the magic bar. That would surely beat a decade of high unemployment due to austerity. Unfortunately, balance sheets are apparently too difficult a concept for most economists.
Anyhow, if Heller can read Krugman’s latest column and declare R&R the winner, he must also believe that George Foreman defeated Muhammed Ali back in Rumble in the Jungle back in 1975. Such is the state of the economics profession.
Read More Leer más Join the discussion Participa en la discusión
In his contribution to the debate over whether there is a group of open-minded “reformed” conservatives, Paul Krugman misrepresents the central focus of the left-right divide in national politics. He tells readers:
“Start with the proposition that there is a legitimate left-right divide in U.S. politics, built around a real issue: how extensive should be make our social safety net, and (hence) how much do we need to raise in taxes? This is ultimately a values issue, with no right answer.”
This is not an accurate characterization of the left-right divide in U.S. politics since there is actually little difference between Republicans and Democrats or self-described conservatives and liberals in their support of the key components of the social safety net: Social Security, Medicare, Medicaid, and even unemployment insurance. Polls consistently show that the overwhelming majority of people across the political spectrum strongly support keeping these programs at their current level or even expanding them.
The main impulse for cutting back these programs comes from elites of both political parties who would like to pay less in taxes. There are also industry groups, who are generally more aligned with the Republicans, who support privatizing a larger portion of these programs in the hopes of getting more profits. Describing this privatization drive as a values issue would be a gross mischaracterization.
There are much smaller programs that are designed primarily to help the poor or near poor where there is a clearer partisan divide (e.g. TANF, SSI, WIC). While it may be more accurate to describe the debate over these programs as a values issue (with a strong racial component), they amount to a relatively small portion of government budgets. These programs may be important to the people directly affected, but they are not central to debates over the budget.
It is plausible to argue that these anti-poverty programs have taken an outsize role in national debates, but this is largely because the electorate is poorly informed about their size. In that case the debate is not over values (I would be for cutting back TANF too if I thought it was one-third of the federal budget), but simply an issue of misinformation.
(Thanks to Robert Salzberg for calling this one to my attention.)
In his contribution to the debate over whether there is a group of open-minded “reformed” conservatives, Paul Krugman misrepresents the central focus of the left-right divide in national politics. He tells readers:
“Start with the proposition that there is a legitimate left-right divide in U.S. politics, built around a real issue: how extensive should be make our social safety net, and (hence) how much do we need to raise in taxes? This is ultimately a values issue, with no right answer.”
This is not an accurate characterization of the left-right divide in U.S. politics since there is actually little difference between Republicans and Democrats or self-described conservatives and liberals in their support of the key components of the social safety net: Social Security, Medicare, Medicaid, and even unemployment insurance. Polls consistently show that the overwhelming majority of people across the political spectrum strongly support keeping these programs at their current level or even expanding them.
The main impulse for cutting back these programs comes from elites of both political parties who would like to pay less in taxes. There are also industry groups, who are generally more aligned with the Republicans, who support privatizing a larger portion of these programs in the hopes of getting more profits. Describing this privatization drive as a values issue would be a gross mischaracterization.
There are much smaller programs that are designed primarily to help the poor or near poor where there is a clearer partisan divide (e.g. TANF, SSI, WIC). While it may be more accurate to describe the debate over these programs as a values issue (with a strong racial component), they amount to a relatively small portion of government budgets. These programs may be important to the people directly affected, but they are not central to debates over the budget.
It is plausible to argue that these anti-poverty programs have taken an outsize role in national debates, but this is largely because the electorate is poorly informed about their size. In that case the debate is not over values (I would be for cutting back TANF too if I thought it was one-third of the federal budget), but simply an issue of misinformation.
(Thanks to Robert Salzberg for calling this one to my attention.)
Read More Leer más Join the discussion Participa en la discusión
Okay boys and girls, is California’s projected budget surplus of $4.4 billion bigger or smaller than Connecticut’s projected surplus of $150 million or Wisconsin’s projected surplus of $2.1 billion? I don’t mean in absolute size, I mean in importance for the states. Offhand, I couldn’t tell you, since I don’t know the size of their economies that precisely and I also don’t know whether these are figures for 1-year or 2-year budgets. (Many states have 2-year budgets.)
So why the hell does the NYT report on budget numbers this way? What information do they think they are giving readers? Couldn’t they tell their reporters to look up the state budgets and report the numbers as percentages? (California’s surplus is roughly 4.5 percent of projected spending, Connecticut’s is 0.8 percent, and Wisconsin’s is 3.0 percent.)
This is a problem with budget reporting more generally. It is standard practice to write down sums in the billions or trillions that mean almost nothing to anyone other than a small group of budget wonks. I know the NYT has very well-educated readers, but it is absurd to imagine that the vast majority have any clue what the numbers mean when they write down a five-year appropriation for transportation or 10-year projections for domestic discretionary spending. (Often the number of years covered is not even mentioned.) Most readers have so little clue about the budget that they would think the same about these numbers if a zero was added or removed.
I have raised this issue with reporters numerous times. None has tried to claim that most of their readers actually know what these numbers mean. So why do news outlets report budget numbers this way? I know it is the fraternity ritual, but I’m sorry it makes no sense. Their job is supposed to be to convey information, they are not doing so.
People do understand percentages. If the standard model was to always report budget numbers as a percent of total spending then the media would be providing information. This is supposed to be their job, not mindlessly following some ritual of budget reporting of unknown origin.
We know from polling data that the public is grossly misinformed about where their budget dollars go. It is fashionable in elite circles to laugh at people for being dumb for thinking that one-third of the budget goes to foreign aid or TANF. The laughter is much better directed at the NYT, Washington Post and NPR who have reporters who are too dumb to figure out to how to convey their subject matter in a way that is understandable to their audience.
Okay boys and girls, is California’s projected budget surplus of $4.4 billion bigger or smaller than Connecticut’s projected surplus of $150 million or Wisconsin’s projected surplus of $2.1 billion? I don’t mean in absolute size, I mean in importance for the states. Offhand, I couldn’t tell you, since I don’t know the size of their economies that precisely and I also don’t know whether these are figures for 1-year or 2-year budgets. (Many states have 2-year budgets.)
So why the hell does the NYT report on budget numbers this way? What information do they think they are giving readers? Couldn’t they tell their reporters to look up the state budgets and report the numbers as percentages? (California’s surplus is roughly 4.5 percent of projected spending, Connecticut’s is 0.8 percent, and Wisconsin’s is 3.0 percent.)
This is a problem with budget reporting more generally. It is standard practice to write down sums in the billions or trillions that mean almost nothing to anyone other than a small group of budget wonks. I know the NYT has very well-educated readers, but it is absurd to imagine that the vast majority have any clue what the numbers mean when they write down a five-year appropriation for transportation or 10-year projections for domestic discretionary spending. (Often the number of years covered is not even mentioned.) Most readers have so little clue about the budget that they would think the same about these numbers if a zero was added or removed.
I have raised this issue with reporters numerous times. None has tried to claim that most of their readers actually know what these numbers mean. So why do news outlets report budget numbers this way? I know it is the fraternity ritual, but I’m sorry it makes no sense. Their job is supposed to be to convey information, they are not doing so.
People do understand percentages. If the standard model was to always report budget numbers as a percent of total spending then the media would be providing information. This is supposed to be their job, not mindlessly following some ritual of budget reporting of unknown origin.
We know from polling data that the public is grossly misinformed about where their budget dollars go. It is fashionable in elite circles to laugh at people for being dumb for thinking that one-third of the budget goes to foreign aid or TANF. The laughter is much better directed at the NYT, Washington Post and NPR who have reporters who are too dumb to figure out to how to convey their subject matter in a way that is understandable to their audience.
Read More Leer más Join the discussion Participa en la discusión
That’s what readers of Uwe Reinhardt’s blog post on doctor’s pay are probably asking. Reinhart shows the pay for doctors by specialty, which makes everyone look pretty well paid in my book. The median in several of the higher paying specialties is over $500,000 a year. Even the median family care physician pockets almost 14 times as much as a minimum wage worker at $208,700 a year.
Reinhardt then tells us that the situation is more ambiguous if we look at the dispersion. I must be looking at different numbers. (Actually, I am looking at different numbers. The medians shown in the chart giving dispersion are somewhat higher than in the chart that just shows the medians. The median family care physician earned $219,400 in this chart.) Anyhow, the dispersion is less than I might have naively expected. Reinhardt’s chart shows that 80 percent of family practitioners make more than $174,900 a year (@12 minimum wage workers). It shows us that 80 percent of orthopedic surgeons make more than $400,000 a year.
Reinhardt tells us that doctors’ return on their investment in education is not especially high when we compare it to pay on Wall Street. Why isn’t Wall Street pay on the table when it comes to talking about the pay of public sector workers or domestic care workers? The fact that we have a grossly bloated and inefficient financial sector should not be an excuse for excessive pay to high end workers elsewhere.
There are hundreds of thousands, or more likely millions, of workers in the developing world who would be delighted to train to U.S. standards and work for half of U.S. wages. We don’t let them in because doctors have much more power than the STEM workers fighting against Microsoft and Google over the number of H1B equivalent visas.
If economists were honest, the question on doctors would be a no-brainer. Open the doors, everyone will gain but the doctors. But honest economists, oh well.
That’s what readers of Uwe Reinhardt’s blog post on doctor’s pay are probably asking. Reinhart shows the pay for doctors by specialty, which makes everyone look pretty well paid in my book. The median in several of the higher paying specialties is over $500,000 a year. Even the median family care physician pockets almost 14 times as much as a minimum wage worker at $208,700 a year.
Reinhardt then tells us that the situation is more ambiguous if we look at the dispersion. I must be looking at different numbers. (Actually, I am looking at different numbers. The medians shown in the chart giving dispersion are somewhat higher than in the chart that just shows the medians. The median family care physician earned $219,400 in this chart.) Anyhow, the dispersion is less than I might have naively expected. Reinhardt’s chart shows that 80 percent of family practitioners make more than $174,900 a year (@12 minimum wage workers). It shows us that 80 percent of orthopedic surgeons make more than $400,000 a year.
Reinhardt tells us that doctors’ return on their investment in education is not especially high when we compare it to pay on Wall Street. Why isn’t Wall Street pay on the table when it comes to talking about the pay of public sector workers or domestic care workers? The fact that we have a grossly bloated and inefficient financial sector should not be an excuse for excessive pay to high end workers elsewhere.
There are hundreds of thousands, or more likely millions, of workers in the developing world who would be delighted to train to U.S. standards and work for half of U.S. wages. We don’t let them in because doctors have much more power than the STEM workers fighting against Microsoft and Google over the number of H1B equivalent visas.
If economists were honest, the question on doctors would be a no-brainer. Open the doors, everyone will gain but the doctors. But honest economists, oh well.
Read More Leer más Join the discussion Participa en la discusión
I’m tan, rested, and ready! No, I have not been reincarnated as Dick Nixon (I actually am not especially tan), but I am back and looking to get lots done. Vacations are good. Thanks for all the kind words.
I’m tan, rested, and ready! No, I have not been reincarnated as Dick Nixon (I actually am not especially tan), but I am back and looking to get lots done. Vacations are good. Thanks for all the kind words.
Read More Leer más Join the discussion Participa en la discusión
