This is what reporters/columnists are supposed to do. His column is not an endorsement, it just lays out the benefits and downsides of a serious budget. What a novel idea.
Addendum:
I noted the comments below on Zandi’s concern that stimulus is not needed because the economy is kicking into a higher gear. FWIW, Zandi has seen the economy kicking into a higher gear numerous times over the last four years.
For example, in December of 2010 he told David Leonhardt:
“In my previous baseline I expected real G.D.P. growth of 2.8 percent in 2011 and 4.2 percent in 2012, … I’m now expecting real G.D.P. growth of 3.9 percent in 2011 and 3.4 percent in 2012.”
Actual growth in 2011 was 2.0 percent and in 2012 1.6 percent.
An NYT article in April of 2012 told readers:
“‘I’m relatively optimistic,’ said Mark Zandi, the chief economist at Moody’s Analytics, who released a note this week showing unemployment dropping faster than he previously forecast. As for the more dire claims about an economy on the brink, ‘I don’t really take those seriously.'”
The average growth rate over the next three quarters was 1.5 percent.
It is worth taking this track record into account in assessing Zandi’s view of the benefits of stimulus at present. He has been seriously overly optimistic in his past forecasts.
This is what reporters/columnists are supposed to do. His column is not an endorsement, it just lays out the benefits and downsides of a serious budget. What a novel idea.
Addendum:
I noted the comments below on Zandi’s concern that stimulus is not needed because the economy is kicking into a higher gear. FWIW, Zandi has seen the economy kicking into a higher gear numerous times over the last four years.
For example, in December of 2010 he told David Leonhardt:
“In my previous baseline I expected real G.D.P. growth of 2.8 percent in 2011 and 4.2 percent in 2012, … I’m now expecting real G.D.P. growth of 3.9 percent in 2011 and 3.4 percent in 2012.”
Actual growth in 2011 was 2.0 percent and in 2012 1.6 percent.
An NYT article in April of 2012 told readers:
“‘I’m relatively optimistic,’ said Mark Zandi, the chief economist at Moody’s Analytics, who released a note this week showing unemployment dropping faster than he previously forecast. As for the more dire claims about an economy on the brink, ‘I don’t really take those seriously.'”
The average growth rate over the next three quarters was 1.5 percent.
It is worth taking this track record into account in assessing Zandi’s view of the benefits of stimulus at present. He has been seriously overly optimistic in his past forecasts.
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New York Governor Andrew Cuomo has been bragging about job growth on his watch. The NYT has a piece challenging Cuomo’s claims. It tells readers:
“The number of private-sector jobs increased by 4 percent in New York State from January 2011 to January 2013, according to the State Labor Department. Nationwide, over the same period, private sector jobs grew by 4.4 percent.
“Those figures come despite the fact that New York State lost fewer jobs, as a percentage, than the nation did in the Great Recession.”
Actually the fact that New York lost fewer jobs in the downturn would be an argument as to why it would create fewer jobs in the upturn.
Every state will have some amount of normal job growth consistent with the growth of the labor force. It will also have additional job growth associated with a backlog of unemployed workers who are looking to find work. In the extreme case where a state lost no jobs in the downturn this backlog would be zero. In that case, the only source of job growth will be the normal growth of the labor force.
Obviously New York did lose jobs in the downturn, but the fact that it lost a smaller number relative to the size of its labor force would be argument as to why we would expect slower job growth now, not an argument as to why growth would be faster.
I’ll let Cuomo’s crew argue their own case on their record, but on this particular point the NYT got it wrong.
New York Governor Andrew Cuomo has been bragging about job growth on his watch. The NYT has a piece challenging Cuomo’s claims. It tells readers:
“The number of private-sector jobs increased by 4 percent in New York State from January 2011 to January 2013, according to the State Labor Department. Nationwide, over the same period, private sector jobs grew by 4.4 percent.
“Those figures come despite the fact that New York State lost fewer jobs, as a percentage, than the nation did in the Great Recession.”
Actually the fact that New York lost fewer jobs in the downturn would be an argument as to why it would create fewer jobs in the upturn.
Every state will have some amount of normal job growth consistent with the growth of the labor force. It will also have additional job growth associated with a backlog of unemployed workers who are looking to find work. In the extreme case where a state lost no jobs in the downturn this backlog would be zero. In that case, the only source of job growth will be the normal growth of the labor force.
Obviously New York did lose jobs in the downturn, but the fact that it lost a smaller number relative to the size of its labor force would be argument as to why we would expect slower job growth now, not an argument as to why growth would be faster.
I’ll let Cuomo’s crew argue their own case on their record, but on this particular point the NYT got it wrong.
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That’s what the Washington Post told readers. There is a small problem here since China only has 1.35 billion people. Buy hey, what 250 million people more or less when you’re the Washington Post.
(Typo corrected — thanks Kat.)
That’s what the Washington Post told readers. There is a small problem here since China only has 1.35 billion people. Buy hey, what 250 million people more or less when you’re the Washington Post.
(Typo corrected — thanks Kat.)
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Good complaint, maybe she can talk to the Washington Post’s editorial board who are such huge supporters of NAFTA that they decided that Mexico’s GDP had quadrupled from 1987 to 2007. The data show a rise of just 83 percent. It would be great if the country had newspapers that didn’t insist on inventing their own reality to advance their agenda.
Good complaint, maybe she can talk to the Washington Post’s editorial board who are such huge supporters of NAFTA that they decided that Mexico’s GDP had quadrupled from 1987 to 2007. The data show a rise of just 83 percent. It would be great if the country had newspapers that didn’t insist on inventing their own reality to advance their agenda.
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Andrew Ross Sorkin’s piece arguing against the prosecution of large banks and other large companies might have led readers to believe that 28,000 people were out of work as a result of Arthur Anderson’s bankruptcy, following its prosecution. Of course this is not true.
There is no reason to believe that the demand for accounting services fell as a result of Arthur Anderson’s prosecution. While the people who had been working at Arthur Anderson lost their jobs when the company folded, the companies and individuals who were doing business with Arthur Anderson still needed accountants after the firm went out of business. This means that they would have turned to other firms with their business.
The firms who got the business lost by Arthur Anderson presumably hired more accountants and support staff to meet the additional demand. On net, there was probably little net change in employment in the accounting industry.
This point is important since banks and other large companies may try to make the same sort of argument as Sorkin to lead people to believe that there is a public interest in not holding them accountable for their crimes because it would lead to job loss. This is not true.
Andrew Ross Sorkin’s piece arguing against the prosecution of large banks and other large companies might have led readers to believe that 28,000 people were out of work as a result of Arthur Anderson’s bankruptcy, following its prosecution. Of course this is not true.
There is no reason to believe that the demand for accounting services fell as a result of Arthur Anderson’s prosecution. While the people who had been working at Arthur Anderson lost their jobs when the company folded, the companies and individuals who were doing business with Arthur Anderson still needed accountants after the firm went out of business. This means that they would have turned to other firms with their business.
The firms who got the business lost by Arthur Anderson presumably hired more accountants and support staff to meet the additional demand. On net, there was probably little net change in employment in the accounting industry.
This point is important since banks and other large companies may try to make the same sort of argument as Sorkin to lead people to believe that there is a public interest in not holding them accountable for their crimes because it would lead to job loss. This is not true.
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Bruce Bartlett has an interesting blog post in the NYT talking about changes in patterns of wealth distribution in recent years. Bartlett points out that the recent rise in the stock market is likely to provide little benefit to most middle income families since they have little, if any, wealth in the stock market. By contrast, the value of the housing stock is still far below its pre-recession level, at $17.7 trillion at the end of 2012 compared to a peak of $22.7 trillion in 2006. Bartlett notes that this is likely to have a large impact on consumption and the economy, citing recent work by Karl Case, John Quigley, and Robert Shiller showing that a $1 decline in housing wealth is associated with a 10 cent drop in annual consumption.
It is worth noting that the drop in the nominal value of the housing stock understates the impact of the housing crash on consumption. Potential GDP was almost 30 percent higher in 2012 than in 2006. This means that to provide the same spark to the economy as it did in 2006, the value of the housing stock in 2012 would have to be almost $30 trillion in 2012.
Bruce Bartlett has an interesting blog post in the NYT talking about changes in patterns of wealth distribution in recent years. Bartlett points out that the recent rise in the stock market is likely to provide little benefit to most middle income families since they have little, if any, wealth in the stock market. By contrast, the value of the housing stock is still far below its pre-recession level, at $17.7 trillion at the end of 2012 compared to a peak of $22.7 trillion in 2006. Bartlett notes that this is likely to have a large impact on consumption and the economy, citing recent work by Karl Case, John Quigley, and Robert Shiller showing that a $1 decline in housing wealth is associated with a 10 cent drop in annual consumption.
It is worth noting that the drop in the nominal value of the housing stock understates the impact of the housing crash on consumption. Potential GDP was almost 30 percent higher in 2012 than in 2006. This means that to provide the same spark to the economy as it did in 2006, the value of the housing stock in 2012 would have to be almost $30 trillion in 2012.
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Glenn Kessler has been doing a good job scrutinizing the claims of horrors of sequester in his job as the Washington Post fact checker. For example, in this piece on the Obama administration’s claim of the number of children who would be denied vaccines because of the sequester, he questions how many otherwise would have gotten vaccines and whether there were sources of flexibility in the program’s funding that would allow vaccines to continue to be offered to eligible children.
These are reasonable points to raise. They imply that steps can be taken to prevent the sequester from being as harmful as simple across the board cuts may first appear.
In fact, this is a reasonable way to assess any claim about budgets. Unfortunately this critical approach does not get applied to standard framework in which Washington budget debates are taking place.
This framework holds that we must commit the country now to achieving some debt target (e.g. 73 percent of GDP) as of 2023, with the country then on a stable path of a debt to GDP ratio, or something really bad will happen. The implicit counter-factual in this framework is that even as the budget situation deteriorates later in this decade and early in the next decade, and financial markets get ever more antsy demanding ever higher interest rates, Congress does nothing.
This has never happened in U.S. history. There has never been a prolonged stretch in which the budget situation has deteriorated without a response from Congress. Nor have the financial markets ever panicked to the point where the government had any difficulty selling its debt.
In other words, the horror stories of exploding deficits and debt and resulting financial market panic have no historical precedent. They assume that future congresses will be far more irresponsible that any we have seen in the past.
This is of course possible, but it is a very strong assumption. It certainly would be worth pointing out to readers. Many Post readers have probably been led to believe that if the country does not do something about its deficit now there will be a problem as opposed to a situation where the deficit begins to pose major problems over the next decade and Congress still doesn’t do anything. This confusion is far more important to current policy debates than the exact number of vaccines that will not be given due to the sequester.
Glenn Kessler has been doing a good job scrutinizing the claims of horrors of sequester in his job as the Washington Post fact checker. For example, in this piece on the Obama administration’s claim of the number of children who would be denied vaccines because of the sequester, he questions how many otherwise would have gotten vaccines and whether there were sources of flexibility in the program’s funding that would allow vaccines to continue to be offered to eligible children.
These are reasonable points to raise. They imply that steps can be taken to prevent the sequester from being as harmful as simple across the board cuts may first appear.
In fact, this is a reasonable way to assess any claim about budgets. Unfortunately this critical approach does not get applied to standard framework in which Washington budget debates are taking place.
This framework holds that we must commit the country now to achieving some debt target (e.g. 73 percent of GDP) as of 2023, with the country then on a stable path of a debt to GDP ratio, or something really bad will happen. The implicit counter-factual in this framework is that even as the budget situation deteriorates later in this decade and early in the next decade, and financial markets get ever more antsy demanding ever higher interest rates, Congress does nothing.
This has never happened in U.S. history. There has never been a prolonged stretch in which the budget situation has deteriorated without a response from Congress. Nor have the financial markets ever panicked to the point where the government had any difficulty selling its debt.
In other words, the horror stories of exploding deficits and debt and resulting financial market panic have no historical precedent. They assume that future congresses will be far more irresponsible that any we have seen in the past.
This is of course possible, but it is a very strong assumption. It certainly would be worth pointing out to readers. Many Post readers have probably been led to believe that if the country does not do something about its deficit now there will be a problem as opposed to a situation where the deficit begins to pose major problems over the next decade and Congress still doesn’t do anything. This confusion is far more important to current policy debates than the exact number of vaccines that will not be given due to the sequester.
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A NYT piece discussing the prospects of another budget deal would have benefited enormously by answering this question. The piece referred to a proposal to restructure Medicare under which the government, “could potentially charge the affluent elderly more.”
The definition of “affluent” matters enormously. When it came to raising taxes, President Obama and the Republican leadership agreed not to raise taxes for couples earning less than $450,000 a year. If this same definition of “affluent” is applied to elderly then it would only affect 0.1-0.2 percent of Medicare beneficiaries.
While the rich have a hugely disproportionate share of the country’s income, their per person Medicare expenses are roughly the same as everyone else’s. (Actually they would be somewhat less since the premiums for the program are already means tested.) This means that if President Obama and congressional leaders are planning to apply a cutoff for being affluent for Medicare that is comparable to what was used in the tax negotiations then the amount of money at stake is trivial and it is hardly worth the paper’s time to be reporting on the negotiations.
Alternatively, if the proposal is intended to raise a serious amount of revenue then it will likely mean that seniors with incomes around $50,000-$60,000 would be paying more for their Medicare. This is not a level of income that is generally regarded as “affluent.” If this is the sort of cutoff being considered in the negotiations then the NYT is badly misleading its readers by saying that they are discussing charging fees to the affluent elderly. In this case they are talking about charging higher fees to people who almost everyone would consider middle income.
A NYT piece discussing the prospects of another budget deal would have benefited enormously by answering this question. The piece referred to a proposal to restructure Medicare under which the government, “could potentially charge the affluent elderly more.”
The definition of “affluent” matters enormously. When it came to raising taxes, President Obama and the Republican leadership agreed not to raise taxes for couples earning less than $450,000 a year. If this same definition of “affluent” is applied to elderly then it would only affect 0.1-0.2 percent of Medicare beneficiaries.
While the rich have a hugely disproportionate share of the country’s income, their per person Medicare expenses are roughly the same as everyone else’s. (Actually they would be somewhat less since the premiums for the program are already means tested.) This means that if President Obama and congressional leaders are planning to apply a cutoff for being affluent for Medicare that is comparable to what was used in the tax negotiations then the amount of money at stake is trivial and it is hardly worth the paper’s time to be reporting on the negotiations.
Alternatively, if the proposal is intended to raise a serious amount of revenue then it will likely mean that seniors with incomes around $50,000-$60,000 would be paying more for their Medicare. This is not a level of income that is generally regarded as “affluent.” If this is the sort of cutoff being considered in the negotiations then the NYT is badly misleading its readers by saying that they are discussing charging fees to the affluent elderly. In this case they are talking about charging higher fees to people who almost everyone would consider middle income.
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The Washington Post once again left its readers stumped. It printed an op-ed column by David Goldhill, the president and CEO of the Game Show Network, the main point of which seems to be that Medicare must still confront rent-seeking by health care providers.
Goldhill apparently is arguing against the merits of expanding Medicare or adopting a single payer type system in the United States, telling readers:
“Single-payer advocates contend that other nations have managed to better control health-care spending — volumes and prices — by enforcing a true budget for cost. But any review of how our Medicare system actually works illustrates why a single-payer system would be so difficult here: Our government has a pervasive inability to say “no.” Only in the United States is public health care an unbudgeted entitlement: Our government promises to pay for any care seniors need and providers respond by relentlessly expanding the definition of need. It’s no coincidence.”
This statement implies that Medicare somehow does worse in containing costs and preventing unnecessary procedures than private insurers. The data does not support this claim. According to the Center for Medicare and Medicaid Services (Table 3), the per person cost of Medicare has consistently risen less rapidly than for private insurers. Over the whole period from 1969 to 2011, costs in Medicare rose by an average annual rate of 8.6 percent compared to 9.9 percent for private insurers. For common services the gap was even larger, 7.9 percent compared to 9.3 percent. (Medicare has expanded services, most notably the prescription drug benefit. This expansion reflected the fact that prescription drugs were a trivial expense when the program was created in 1966 and therefore were not covered.)
In the most recent period, 2007-2011, the gap was even larger with annual costs rising 3.6 percent in Medicare and 5.3 percent for private insurers. For common benefits the numbers are 2.8 percent and 5.6 percent.
While lobbyists of providers will certainly try to push for higher payments for their clients, the evidence is that Medicare is still more effective in containing costs than the private sector. To bring costs in line with those in other wealthy countries it will be necessary to impose more market discipline on doctors, drug companies, medical equipment suppliers and other providers, but it seems clear that Medicare is better equipped to do this than private insurers.
The Washington Post once again left its readers stumped. It printed an op-ed column by David Goldhill, the president and CEO of the Game Show Network, the main point of which seems to be that Medicare must still confront rent-seeking by health care providers.
Goldhill apparently is arguing against the merits of expanding Medicare or adopting a single payer type system in the United States, telling readers:
“Single-payer advocates contend that other nations have managed to better control health-care spending — volumes and prices — by enforcing a true budget for cost. But any review of how our Medicare system actually works illustrates why a single-payer system would be so difficult here: Our government has a pervasive inability to say “no.” Only in the United States is public health care an unbudgeted entitlement: Our government promises to pay for any care seniors need and providers respond by relentlessly expanding the definition of need. It’s no coincidence.”
This statement implies that Medicare somehow does worse in containing costs and preventing unnecessary procedures than private insurers. The data does not support this claim. According to the Center for Medicare and Medicaid Services (Table 3), the per person cost of Medicare has consistently risen less rapidly than for private insurers. Over the whole period from 1969 to 2011, costs in Medicare rose by an average annual rate of 8.6 percent compared to 9.9 percent for private insurers. For common services the gap was even larger, 7.9 percent compared to 9.3 percent. (Medicare has expanded services, most notably the prescription drug benefit. This expansion reflected the fact that prescription drugs were a trivial expense when the program was created in 1966 and therefore were not covered.)
In the most recent period, 2007-2011, the gap was even larger with annual costs rising 3.6 percent in Medicare and 5.3 percent for private insurers. For common benefits the numbers are 2.8 percent and 5.6 percent.
While lobbyists of providers will certainly try to push for higher payments for their clients, the evidence is that Medicare is still more effective in containing costs than the private sector. To bring costs in line with those in other wealthy countries it will be necessary to impose more market discipline on doctors, drug companies, medical equipment suppliers and other providers, but it seems clear that Medicare is better equipped to do this than private insurers.
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