ES EN
Menu Menú

Publications

Publicaciones

Search Publications

Buscar publicaciones

Filters Filtro de búsqueda

to a

clear selection Quitar los filtros

none

Article Artículo

Steve Rattner's Incredibly Low Expectations

It's a bit scary what passes for good news in the economy today. Steve Rattner had a NYT blogpost this morning that began by telling readers:

"On its face, Friday’s announcement that the nation’s gross domestic product expanded at a 2.5 percent annual rate in the first quarter was good news, following as it did an only marginally positive result for the previous three-month period."

Well, positive growth is better than recession, but we have to remember that we are operating at a level of output that is 6 percentage points below potential, according to the Congressional Budget Office. The potential growth rate is in the range of 2.2-2.4 percent. Even if we take the bottom end of that range, a 2.5 percent growth rate would still only close this gap at a rate of 0.3 percentage points a year. [Added note: potential GDP growth refers to the rate that the economy could grow if it were fully employed as a result of the growth of the labor force and increases in productivity. The economy has to grow faster than potential in order to make up the sort of gap in output it is now seeing.]

That means that with a 2.5 percent growth rate it would take us twenty years to get back to potential GDP. We can mark 2033 on our calendar for the celebration, just after the end of Chelsea Clinton's second term.

Apart from the new low for good news Rattner is also annoying for his persistent ability to highlight Social Security and Medicare as problems in determined defiance of the data. Social Security's costs are projected to rise by roughly 1.0 percentage point of GDP over the next 15 years as the baby boomers retire. That's roughly the same increase in costs that we saw over the last 15 years. It is a bit more than half of the size of the increase in military spending associated with the wars in Iraq and Afghanistan. What's the big deal?

Dean Baker / April 30, 2013

Article Artículo

A Tale of Two Trials: Duvalier vs. Ríos Montt

Over the last decade the fight for accountability in Latin America for crimes committed by past dictatorships has seen a tremendous number of successes. In Peru, Alberto Fujimori is in jail. In Argentina dozens of defendants have been convicted in just the last year. But two ongoing cases continue to drag on, Efraín Ríos Montt in Guatemala and Jean-Claude Duvalier in Haiti. Both Ríos Montt and Duvalier enjoyed support of all kinds from the U.S. government, but the U.S.’s response to the cases illustrates the ongoing hypocrisy of the U.S. in the region.

In Guatemala, as numerous media outlets have described it, Ríos Montt is “the first former head of state in the Americas to stand trial for genocide in a national court.” While the case was recently suspended, after a week of legal maneuvers, it appears that it may be set to resume this week.  After the trial was suspended on April 18, investigative journalist Allan Nairn reported that “Guatemalan army associates had threatened the lives of case judges and prosecutors and that the case had been annulled after intervention by Guatemala’s president, General Otto Pérez Molina.” Nairn, who investigated atrocities in Guatemala in the ‘80s – including Pérez Molina’s involvement in them -- was supposed to testify at the trial.

But less than a week later, the U.S. sent Ambassador at Large for War Crimes Issues Stephen J. Rapp to Guatemala to “meet with U.S. Government and Embassy officials, local victims groups, and other international officials.” Last Friday, as the trial continued to be suspended, State Department Acting Deputy Spokesperson  Patrick Ventrell stated:

So we urge the Government of Guatemala to ensure that this legal case is conducted in accordance with Guatemala’s domestic and international legal obligations, and we expect the process and outcome will advance the rule of law.

The statement from the State Department came the same day that Rapp concluded his trip to Guatemala. Over the weekend, president Pérez Molina also seemed to partially walk back his previous statements criticizing the trial, calling the trial “historic” and pledging to not personally intervene.

In Haiti, on the other hand, the U.S. has been entirely absent.

Jake Johnston / April 29, 2013

Article Artículo

Robert Samuelson Tells the Middle Class and Poor that They Should Stop Expecting to Have Decent Lives Because His Rich Friends Want All the Money

That is the best way to describe Robert Samuelson's column in Monday's Washington Post. I could go through the piece in detail and offer point by point rebuttals, but what's the point in killing innocent electrons? We've been here before.

Let's just take the first and most obscene of his inaccuracies. He tells readers that the idea that the non-rich could enjoy decent living standards rest on unrealistic assumptions beginning with this one:

"First, that economists knew enough to moderate the business cycle, guaranteeing jobs for most people who wanted them. This seemed true for many years; from 1980 to 2007, the economy created 47 million non-farm jobs. The Great Recession revealed the limits of economic management."

Actually, many economists do know how to restore economic growth (it's simple, spend money), however people like Robert Samuelson and his friends at the Washington Post are doing everything they can to prevent the government from taking the steps needed to restore the economy to full employment. FWIW, they also helped to bury the arguments of those of us warning of this disaster before the housing bubble grew large enough so that its collapse would wreck the economy.

(It is bizarre that Samuelson picks 1980 as the beginning of his era of prosperity. This was actually the beginning of three decades of wage stagnation for most of the population and the end of three decades of broadly shared prosperity.)

The other points in Samuelson's diatribe are equally off the mark, but who cares. He just wants to convince ordinary people that they should get over the idea that they have any claim to the country's wealth; it's all going to the rich.

Dean Baker / April 29, 2013

Article Artículo

Interest Burdens and Debt

Since the NYT is doing Reinhart and Rogoff 24-7, I suppose BTP should follow suit. One point that some of us keep making that continually disappears into the ether (as opposed to eliciting a response from our Harvard duo or their accomplices) is that rather than being high, the interest burden of the debt is near post-war lows. It is currently less than 1.5 percent of GDP. In fact, it is less than 1.0 percent of GDP if we subtract the $80 billion that the Fed refunds to the Treasury from the assets it is holding. This means that rather than being an extraordinary burden right now, the debt is actually a very low burden.

Insofar as this point draws a response, it is generally that interest rates will rise in the future as the economy recovers. That may well be true, but we will have contracted large amounts of debt at very low interest rates. This means that even in a story where the Fed does raise interest rates as the economy recovers, the interest burden will just be rising back to levels we have seen before. In fact, in the Congressional Budget Office's projections we will not get back to the early 1990s interest burden of more than 3.0 percent of GDP until 2021. It is also worth remembering that this interest burden did not prevent the United States from having strong growth through the decade of the 1990s.

Again, the interest burden can be lowered by more than half of a percentage point of GDP if the Fed continues to hold assets, refunding the interest to the Treasury. This would require an alternative mechanism for restricting the money supply, specifically raising reserve requirements. While there are reasons for not wanting to go this route, given the large potential savings to the government (@ $80-$100 billion a year), it is an option for budget savings that Congress certainly should be considering.

btp-interest-percent-gdp

Dean Baker / April 27, 2013

Article Artículo

Latin America and the Caribbean

Venezuela

World

The Venezuelan Presidential Vote — What is the Probability That It Could Have Been Stolen?

Opposition candidate Henrique Capriles is currently “boycotting” a second audit of the voting results for the April 14 presidential election, which the National Electoral Council has agreed to undertake.  Capriles claims that the election was stolen through fraud.

In a CEPR press release we note that it is practically impossible to have obtained the results of the audit that took place after the polls closed on April 14, if the election were actually stolen through fraud. 

When the polls closed, a random sample of 53 percent[i] of all the machines (20,825 out of 39,303) was chosen, and a manual tally was made of the paper receipts.  This “hot audit” was done on site, in the presence of the observers from both campaigns, as well as witnesses from the community.  There were no reports from witnesses or election officials on site of discrepancies between the machine totals and the hand count.

The following is a calculation of the probability of auditing 20,825 machines and finding zero errors when there are actually 50 among all 39,303 (this means that there are 50 machines with errors among the ones that were not audited).  The assumption here is that there would have to be at least 50 bad machines -- i.e. where the machine count did not match the paper ballot – in order to reverse a margin of 272,000 votes.

This assumption is of course understating the number of bad machines that would be necessary to reverse the result. The average machine has only about 360 votes, and the maximum was about 564. And here we are assuming the election is stolen by moving about 2700 votes per machine from Capriles to Maduro,  on 50 machines.  If more machines were bad, then the probability below gets even (vastly) smaller.  So the calculation below is actually a very high estimate of the probability of obtaining the April 14 audit results, if the election were stolen.

CEPR / April 26, 2013

Article Artículo

Argentina

Latin America and the Caribbean

World

Paid to Trash Argentina, Raben Does Just That, Without Disclosing Financial Interests

Taking to the Huffington Post this week, former Assistant Attorney General Robert Raben attacks Argentina’s position regarding the ongoing litigation with vulture funds, a case readers of this space are familiar with. Raben states that, “The Argentine government's behavior toward U.S. courts and U.S. judges has gone beyond contempt, and its ongoing defiance of our legal system must come to an end.” Anticipating the possibility of the case going to the Supreme Court, Raben saves some criticism for the United States, which has sided with Argentina in the court case:

the U.S. executive branch made the disappointing and unfortunate decision to support Argentina at the lower-court level, on the unsubstantiated grounds that holding Argentina accountable would somehow undermine the vague U.S. foreign-policy goal of promoting the orderly restructuring of defaulted sovereign debt.

Raben concludes that, “It would be downright dangerous for the Department of Justice to maintain its support for Argentina after its disgraceful displays of disrespect for the U.S. judicial system.”Raben would have you believe that his conclusion and expertise in the matter is simply based on his previous experience:

As a former assistant attorney general, I am familiar with the struggles and the balancing involved in weighing various legal and policy questions and deciding whether to ask the Supreme Court to review a case.

But readers of the Huffington Post might be interested in something else not mentioned in Raben’s article: that his lobbying firm, The Raben Group, has been paid over $2.1 million by a group representing the same vulture funds that are suing Argentina, according to lobbying disclosure documents. In fact, the American Task Force Argentina (ATFA), of which Raben is the Executive Director, has spent nearly $4 million lobbying the White House, Treasury Department and U.S. Congress. Nowhere in the article does Raben disclose this relationship. His 382 word Huffington Post bio notes his past working for Barney Frank, his time as Assistant Attorney General and his current position “on the boards of the American Constitution Society and Alliance for Justice,” yet never mentions his management position at ATFA or even the existence of his lobbying firm.

Jake Johnston / April 26, 2013