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Article Artículo

Did President Obama's Climate Change Speech Pass the Market Test?

It would be wrong to place too much emphasis on short-term movements in stock prices. As a practical matter they can be moved by almost anything, in either direction. Nonetheless, some folks were anxious to note a plunge in stock prices while President Obama was giving his speech on global warming as evidence that the President really meant business. For example, Andrew Revkin told readers:

"But if you doubt the reality of this shift [away from coal], just look at the news coverage from Monday of the drop in the price of shares in coal companies ahead of the speech. This headline in Street Insider says it all: 'Coal Stocks Routed as Pres. Obama Preps to Tackle Carbon Emissions.'"

Being a curious sort, I checked the price of the coal stocks listed and noticed that most had largely recovered by the end of the day, although they were down for the week. Here's what the picture looks like for the 5 coal companies mentioned in the referenced article.

pizza 28205 image001

Source: StreetInsider.com.

Dean Baker / June 29, 2013

Article Artículo

Wage Growth and Unemployment in the States

The median wage in 2012 (about $16.28/hr) was only 5.7 percent higher (in real, inflation adjusted dollars) than it had been in 1973. Part of this is explained by a 3.5 percent drop in the downturn, but the bigger story was the three prior decades of paltry wage growth.

The culprits in this story are legion and include--over the long haul--a collapse in private sector union density, a meager (in value and scope) minimum wage, workers-be-damned trade policy, and job growth crowded into low-wage service occupations.  But a big part of the story is simply slack in the labor market.  Over the past generation, the only respite from unrelenting downward pressure on wages came during a brief spell of full employment in the late 1990s.  Those years saw wage gains across the board, closely resembling the shared prosperity of the 1947-1973 era.  But on either side of that boom, when high rates of unemployment were the norm, wages (especially for those at the median and below) fell steadily.

We can see the importance of full employment at work in the relationship between wage growth and unemployment in the states across the boom of the late 1990s and across the last business cycle.  The graph below plots the change in real wages for two seven year periods: from 1996-2002 and from 2006-2012 (the latter running from the year before the recession to the most recent available annual data) against each state’s unemployment rate at the midpoint of the period (1999 and 2009).

In the late 1990s, state unemployment rates clustered around that national rate of just over 4 percent, and only three states suffered unemployment rates over 6 percent.  Workers at most deciles, accordingly, enjoyed robust wage growth.  Full employment was especially important for workers at the bottom of the wage distribution.  Wage growth—and the relationship between full employment and wage growth—was strongest at the 10th decile and weakest at the 90th.

CEPR and Colin Gordon / June 28, 2013

Article Artículo

The Social Security and Medicare Cutters are Very Unhappy

Who can blame them? The vast majority of people across the political spectrum oppose their plans to cut these programs. Furthermore, improved budget projections (partly because of cuts that are very bad news) have drastically reduced both current deficit projections and projections for longer term deficits. Finally, one of their main props for the urgency of deficit reduction turned out to be nothing more than a Harvard Excel spreadsheet error.

No, things have not gone well for those wishing to ax Social Security and Medicare, but they are not about to give up. And with the money and access to the media they enjoy, why should they?

Hence we have Jon Cowan and Jim Kessler from Third Way giving the Washington Post's house view in a column headlined, "the left needs to get real on Medicare, Social Security and the deficit." The proximate cause for Cowan and Kessler's ire is a column by Neera Tanden and Michael Linden from the Center for American Progress which argued that we should focus on fixing the economy's current problems by improving infrastructure and creating jobs. 

To their great credit, Tanden and Linden reversed their earlier concern with deficit reduction based on the evidence. The deficit has shrunk by more than had been projected and the downturn has been longer and deeper than they had expected. Faced with new facts, Tanden and Linden proposed different policies. This makes deficit dead-enders like Cowan and Kessler very unhappy. 

Let's see what they have to say.

Actually their main trick is pretty simple and right up front. They use the old whack them with a really big number trick. Cowan and Kessler tell us that in 2030 we are projected to have a deficit of $1.6 trillion. Got that, $1.6 TRILLION!!!!!! Yeah, that is lots of money and we're supposed to be really really scared.

Dean Baker / June 28, 2013

Article Artículo

Ecuador

Globalization and Trade

Latin America and the Caribbean

World

Ecuador Ruins U.S. Policymakers Fun

As we noted yesterday, there has been a chorus from policymakers, media outlets, and others urging a cutting of U.S. trade preferences for Ecuador if the Ecuadorean government grants Edward Snowden political asylum – despite that one of the main goals of the Andean Trade Promotion and Drug Eradication Act (ATPDEA) is to reduce coca cultivation. As the Wall Street Journal reported today, Senate Foreign Relations Committee Chair Robert Menendez issued a stern and patronizing warning to Ecuador:

"Our government will not reward countries for bad behavior," said Mr. Menendez in a news release. If Ecuador grants Mr. Snowden asylum, Mr. Menendez said he would lead the effort to cut Ecuador's duty-free access to the U.S. market. "I urge President [Rafael] Correa to do the right thing by the United States and Ecuador, and deny Snowden's request for asylum."

But now the Ecuadorean government has ruined Congress’ fun by giving up the ATPDEA benefits before Senator Menendez et al had a chance to take them away. The move is not merely symbolic. Before the whole Snowden issue came up the government of Ecuador and its embassy in the U.S. launched a large campaign to emphasize the importance of the ATPDEA, with events around Washington and ads like this one in the D.C. Metro:

 

Dan Beeton / June 27, 2013