Wednesday, April 24, 2013
Monday, April 22, 2013
Professor Krugman nails our central and persistent economic problem:
F.D.R. told us that the only thing we had to fear was fear itself. But when future historians look back at our monstrously failed response to economic depression, they probably won’t blame fear, per se. Instead, they’ll castigate our leaders for fearing the wrong things.
For the overriding fear driving economic policy has been debt hysteria, fear
Well, the famous red line on debt, it turns out, was an artifact of dubious statistics, reinforced by bad arithmetic. And America isn’t and can’t be Greece, because countries that borrow in their own currencies operate under very different rules from those that rely on someone else’s money. After years of repeated warnings that fiscal crisis is just around the corner, the U.S. government can still borrow at incredibly low interest rates.But while debt fears were and are misguided, there’s a real danger we’veignored: the corrosive effect, social and economic, of persistent high unemployment. And even as the case for debt hysteria is collapsing, our worst fears about the damage from long-term unemployment are being confirmed.
Now, some unemployment is inevitable in an ever-changing economy. Modern America tends to have an unemployment rate of 5 percent or more even in good times. In these good times, however, spells of unemployment are typically brief. Back in 2007 there were about seven million unemployed Americans — but only a small fraction of this total, around 1.2 million, had been out of work more than six months.Then financial crisis struck, leading to a terrifying economic plunge followed by a weak recovery. Five years after the crisis, unemployment remains elevated, with almost 12 million Americans out of work. But what’s really striking is the huge number of long-term unemployed, with 4.6 million unemployed more than six months and more than three million who have been jobless for a year or more. Oh, and these numbers don’t count those who have given up looking for work because there are no jobs to be found.
Sunday, April 21, 2013
Dean Baker catches fake journalism at The New York Times:
The NYT appears to be following the pattern of journalism practiced by the diatribe against the Danish welfare state that is headlined, "Danes Rethink a Welfare State Ample to a Fault." There's not much ambiguity in that one. The piece then proceeds to present a state of statistics that are grossly misleading and excluding other data points that are highly relevant.
The first paragraphs describe the generosity of the welfare state then we get this ominous warning in the 5th paragraph:
"But Denmark’s long-term outlook is troubling. The population is aging, and in many regions of the country people without jobs now outnumber those with them."
oooooh, scary! Yeah people are living longer in Denmark, that's something that's been happening for a couple of hundred years or so. Like every other wealthy country people live longer in Denmark than in the United States. While they are projected to continue to see gains in life expectancy and further aging of the population, the increase is actually going to much slower than in the United States.
From 2012 to 2025 the percentage of the Danish population over age 65 is projected to rise from 17.8% to 21.2%, an increase of 3.4 percentage points. By comparison, in the United States the share of the population over age 65 is projected to rise from 13.6% to 18.1%, an increase of 4.5 percentage points over the same period, from a considerably smaller base. The impact of aging on the economy and the government budget will clearly be much larger in the U.S. than Denmark, especially since the government first starts paying for health care for people after they turn age 65 in the United States. (Like every other wealthy country, Denmark has national health insurance.)
The concern that, "in many regions of the country people without jobs now outnumber those with them," is especially touching. In the United States we have such a region, it's called the "United States." In March, 143.3 million people were employed out of a total population of 323 million for a ratio of workers to population nationwide of roughly 44.4 percent. In many parts of the country it would be much lower.
The piece then goes on to describe the extent of the Danish welfare state with its 56 percent top marginal income tax rate, telling readers:
"But few experts here believe that Denmark can long afford the current perks. So Denmark is retooling itself, tinkering with corporate tax rates, considering new public sector investments and, for the long term, trying to wean more people — the young and the old — off government benefits."
Hmmm, it would be interesting to know what data the experts are looking at.
Tuesday, April 16, 2013
Reflections on tax day by Joseph Stiglitz @ NYTs:
No one enjoys paying taxes, and yet all but the extreme libertarians agree, as Oliver Wendell Holmes said, that taxes are the price we pay for civilized society. But in recent decades, the burden for paying that price has been distributed in increasingly unfair ways.
About 6 in 10 of us believe that the tax system is unfair — and they’re right: put simply, the very rich don’t pay their fair share. The richest 400 individual taxpayers, with an average income of more than $200 million, pay less than 20 percent of their income in taxes — far lower than mere millionaires, who pay about 25 percent of their income in taxes, and about the same as those earning a mere $200,000 to $500,000. And in 2009, 116 of the top 400 earners — almost a third — paid less than 15 percent of their income in taxes.
Conservatives like to point out that the richest Americans’ tax payments make up a large portion of total receipts. This is true, as well it should be in any tax system that is progressive — that is, a system that taxes the affluent at higher rates than those of modest means. It’s also true that as the wealthiest Americans’ incomes have skyrocketed in recent years, their total tax payments have grown. This would be so even if we had a single flat income-tax rate across the board.
What should shock and outrage us is that as the top 1 percent has grown extremely rich, the effective tax rates they pay have markedly decreased. Our tax system is much less progressive than it was for much of the 20th century. The top marginal income tax rate peaked at 94 percent during World War II and remained at 70 percent through the 1960s and 1970s; it is now 39.6 percent. Tax fairness has gotten much worse in the 30 years since the Reagan “revolution” of the 1980s.
Wednesday, April 10, 2013
Saturday, April 6, 2013
He Who Makes the Rules - A long but very worthwhile piece in the Washington Monthly details how the banks are chipping away at Dodd-Frank:
In late 2010, Bart Chilton, one of three Democratic commissioners at the U.S. Commodity Futures Trading Commission (CFTC), walked into an upper-floor suite of an executive office building to meet with four top muckety-mucks at one of the biggest financial institutions in the world.
There were a handful of staff members present, but it was a pretty small gathering—one, it turns out, that Chilton would never forget.
The main topic Chilton hoped to discuss that day was the CFTC’s pending rule on what are known as “position limits.” If implemented properly, position limits would put a leash on speculation in the commodities market by making it harder for heavyweight traders at places like Goldman Sachs and JPMorgan Chase to corner a market, make a killing for themselves, and screw up prices for the rest of us. Position limits are also one of many ways to tamp down the amount of risk big institutions can take on, which keeps them from going belly up and minimizes the chance taxpayers will have to bail them out.
The financial institution Chilton was meeting with that day was a big commodities exchange, which is like a stock exchange except that instead of trading stocks they trade derivatives based on the value of actual products, like oil and gas. Chilton wouldn’t say which major commodities exchange he was meeting with that day, but suffice it to say two of the biggest—the Chicago Mercantile Exchange and Intercontinental Exchange—have a lot to lose from federally administered position limits. To them, the more derivatives traded, the better. They’ve been fighting the CFTC’s attempts to establish position limits for years.
The passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010 seemed to promise meaningful reform on this front. The law includes Section 737, which explicitly directs the CFTC to establish position limits and lays out detailed guidelines on how they should do so. “The Commission shall by rule, regulation or order establish limits on the amount of positions, as appropriate,” it reads.
Still, even with the strength of the law behind him, Chilton waited until the end of the meeting to broach what he knew would be a tense subject. He began diplomatically. Now that the CFTC was required by law to establish position limits, his commission wanted to do so “in a fashion that made sense—one that was sensitive to, but not necessarily reflective of, the views of the exchange,” he told the executives.
Chilton’s gracious overture fell flat. His hosts, who had been openly discussing other topics moments before, were suddenly silent. They deferred instead to their top lawyer, who explained that the exchange’s interpretation of Section 737 was that the CFTC was not required to establish position limits at all.
Chilton was blindsided. While other parts of Dodd-Frank were, admittedly, vague and ambiguous and otherwise frustrating to those, like him, who were tasked with writing the hundreds of rules associated with the act, Section 737 didn’t exactly pull any punches. The Commission shall establish limits on the amount of positions, as appropriate.
“You gotta be kidding,” Chilton told the executives. “The law is very clear here. The congressional intent is clear.”
Monday, April 1, 2013
Krugman @ New York Times looks West:
Modern movement conservatism, which transformed the G.O.P. from the moderate party of Dwight Eisenhower into the radical right-wing organization we see today, was largely born in California. The Golden State, even more than the South, created today’s religious conservatism; it elected Ronald Reagan governor; it’s where the tax revolt of the 1970s began. But that was then. In the decades since, the state has grown ever more liberal, thanks in large part to an ever-growing nonwhite share of the electorate.
As a result, the reign of the Governator aside, California has been solidly Democraticpolitical balance shifted, conservatives have declared the state doomed. Their specifics keep changing, but the moral is always the same: liberal do-gooders are bringing California to its knees.
A dozen years ago, the state was supposedly doomed by all its environmentalists. You see, the eco-freaks were blocking power plants, and the result was crippling blackouts and soaring power prices. “The country’s showcase state,” gloated The Wall Street Journal, “has come to look like a hapless banana republic.”But a funny thing happened on the road to collapse: it turned out that the main culprit in the electricity crisis was deregulation, which opened the door for ruthless market manipulation. When the market manipulation went away, so did the blackouts.Undeterred, a few years later conservatives found another line of attack. This time they said that liberal big spending and overpaid public employees were bringing on collapse.