the economy Archive

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Dean Baker shits on David Brooks so you don’t have to

By
Ben Nolan
– May 8, 2012

Link. Teaser:

I don’t know anyone who looks like cyclicalists that Brooks writes about. It would be good if he could toss out a few names for readers so that we know such people actually exist in the world and are not just Brooks’ hallucinations.Since the views Brooks attributes to the cyclicalists are sufficiently bizarre, it is hard to believe that such people exist.

For example, he tells us that the cyclicalists believe:

“the level of government spending is the main factor in determining how fast an economy grows.”

I have never come across anyone who had a view anything like this. I do know many economists, who argue that in a downturn more stimulus will lead to more economic growth, but this is nothing like the view that Brooks attributes to the cyclicalists. Does Brooks really think it is the same thing to say that more stimulus leads to more growth in a downturn and saying that government spending is the main factor determining growth in general? This is scary.

Krugman does too, without naming names.

3. Anyone who says something like “If deficit spending were the route to prosperity, Greece would be in great shape” should be immediately considered not worth listening to. People in my camp have repeated until we’re blue in the face that the case for fiscal expansion is very specific to circumstance — it’s desirable when you’re in a liquidity trap, and only when you’re in a liquidity trap. I know that some people like to project their own crudity onto others, but what they’re actually demonstrating is their own ignorance.

I don’t actually think Brooks is ignorant. I think he’s cynical and dishonest, which is worse.

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Congress doesn’t care about you because they are not you

By
Trevor Macomber
– January 6, 2012

With 535 people in congress (plus six non-voting members of the House of Representatives, but who gives a shit about them?), you’d hope that the law of large numbers would ensure that the American people are being represented by a relatively diverse cross-section of society in the national political process.

Then again, such hopes would also make you a naïve ass.

According to recent articles by ABC News (12/27/11) and MSN Money (1/15/12),

The average American’s net worth has dropped 8 percent during the past six years, while members of Congress got, on average, 15 percent richer, according to a New York Times analysis of financial disclosure.  The median net worth of members of Congress  is about $913,000, compared with about $100,000 for the country at large, the Times’ analysis found. [ABC]

Broken down:

  • Nearly half of the members of Congress are millionaires, according to the Center for Responsive Politics (CRP), a Washington watchdog.
  • The median net worth of a U.S. senator was $2.63 million in 2010, the most recent year for which financial data are available. That was up 11% from the year before, says CRP.
  • The median estimated net worth for House members was $756,765.
  • The median net worth of House members almost tripled from 1984 and 2009, while the net worth of Americans declined slightly during the same time, according to the Washington Post and the University of Michigan. [MSN]
Having trouble visualizing the disparity? Then please enjoy this pretty picture from Mother Jones (using 2009 data, hence the discrepancy):

At least Americans are realistic about how much they’re being screwed over, right? Yes, and we also love exercise and hate high fructose corn syrup!

More MJ:

See, Republicans? Nobody hates rich people because they’re rich. Hell, we wanna be rich, too! And we know we’ll never get there if some income disparity doesn’t exist in the first place. All we ask is that everyone play by the same rules (HA! “Studies by Alan Ziobrowski at Georgia State University conclude that our reps regularly outperform the markets by large amounts due to the ‘significant information advantage’ they derive from their jobs.” [MSN]) and that we are at least given the chance to pursue geniune upward mobility –  you know, without having to move to Canada or Europe.

Now where the hell did I put my cravat…?

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Yglesias Lampoons European Vacation

By
Trevor Macomber
– December 22, 2011

So you know how the PIIG countries are all effed ’cause their citizens are way lazier and/or drunker than the rest of their European brethren? And you know how Germany is doing baller because The Grand Teutons are simply harder working than the rest of their European brethren?

Turns out: no. Because, you know, facts and shit. Take it away Yglesias! (Matthew, I’m afraid — not Enrique):

It’s true that Germans and Greeks work very different amounts, but not in the way you expect. According to the Organization for Economic Co-operation and Development, the average German worker put in 1,429 hours on the job in 2008. The average Greek worker put in 2,120 hours. In Spain, the average worker puts in 1,647 hours. In Italy, 1,802. The Dutch, by contrast, outdo even their Teutonic brethren in laziness, working a staggeringly low 1,389 hours per year.

[...]

The truth is that countries aren’t rich because their people work hard. When people are poor, that’s when they work hard. Platitudes aside, it takes considerably more “effort” to be a rice farmer or to move sofas for a living than to be a New York Times columnist. It’s true that all else being equal a person can often raise his income by raising his work rate, but it’s completely backward to suggest that extraordinary feats of effort are the way individuals or countries get to the top of the ladder. On the national level the reverse happens—the richer Germans get, the less they work.

Well, it’s tough to dispute the work-hour data, but it’s tough to dispute Germany’s economic dominance, too. So if they’re not on top by dint of that famed German work ethic and infamed devotion to the fatherland above all else, what’s their secret?

Closer to the mark is the observation that Germans (like the Dutch and the Austrians) arethrifty, net savers who consume less than they produce and therefore export more than they import.

Oh, well, bingo! If we can just get the little piggies to zip their ham holes a little more diligently, crisis resolved, right? Or am I missing something?

Oh…

Even if there is some sense in which Germany’s trade surplus and attendant thrift is admirable, it simply isn’t possible for all countries to emulate Germany and export more than they import. Your exports are my imports. Your saving is my borrowing. Your assets are my debts. Living within one’s means certainly sounds like a good idea, but it’s not really advice that everyone can take. If every European country strives to reduce government and private borrowing simultaneously, a severe recession and steep decline in output is the only possible outcome. Which is just a reminder that what makes sense as edifying advice to a new college graduate doesn’t necessarily work as a large-scale policy prescription. It would be convenient from the standpoint of moral instruction if laziness were at the root of the European crisis, but the real world is more complicated than that. And faced with those complexities, just about the worst thing we can do is to fall prey to the distinctive torpor of the pundit class and rely on stereotype and hazy generalization instead of cold, hard facts. [emphasis my own]

I like this guy, Yglesias. He uses words I understand to explain concepts I don’t!

1

Success Story of the Day

By
Tom OHare
– December 1, 2011

Ooh, ooh! Pick me, pick me!

Ladies and gentlemen, I somehow convinced my bosses that I am not incompetent and that I can actually run a small business. My position was written into the 2012 budget (not that it matters much since we’re all doomed by the Mayans, BUT STILL), and I won’t have to go job hunting this December.

It’s going to be one hell of a merry Christmas, motherfuckers. EGG NOG FOR EVERYONE! MAZEL TOV AND SHIT!

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I don’t know how I feel about this

By
Trevor Macomber
– September 7, 2011

When I first read the AP story on Tuesday that Michigan governor Rick Snyder had

signed into law a stricter, four-year lifetime limit on cash welfare benefits, prompting advocates for the poor to warn that tens of thousands of residents will find themselves without cash assistance on Oct. 1.

my immediate reaction was, “Surprise surprise, another republican who’d rather empty his bowels than his pockets on poor people.”

But then I read the stipulation that

the state will offer exemptions to the limit for those with a disability who can’t work, those who care for a disabled spouse or child and those who are 65 or older and don’t qualify for Social Security benefits or receive very low benefits.

Some recipients who are the victims of domestic violence also may be temporarily exempted.

and I thought, “Well, okay, that seems much less assholish, at least.” Throw in Snyder’s seemingly reasonable statement that the state is finally attempting to return “cash assistance to its original intent as a transitional program to help families while they work toward self-sufficiency” and the fact that “the state still will help the poor by offering food stamps, health care coverage through Medicaid, child care and emergency services,” and I can honestly almost get on board with the whole revision. After all, an open-ended welfare system for able-bodied, dependent-less individuals seems somewhat antithetical to the point of living in America.

That said, there’s no denying that the timing is just god-fucking-awful considering that we’re still dealing with an effective national unemployment rate of more than 16 percent. By all means, pass the law while shoring up loopholes to ensure that no one who truly needs assistance falls through the cracks, but at least delay enacting it until “stagnant” is no longer our go-to adjective for describing the economy. To retroactively enforce the four-year deadline for welfare recipients who probably thought they’d have this cushion for much longer is a supremely dick move when the majority of them have no chance of finding a job in the short term.

4

Obama has lost his goddamn mind

By
Trevor Macomber
– September 6, 2011

From Bloomberg:

President Barack Obama may press Congress for tax cuts that would exceed his past proposals as well as some of the offerings from House Republicans to strengthen his hand in talks on measures to boost the U.S. economy, according to a person familiar with the discussions.

With Obama set to lay out his plans in a Sept. 8 address to Congress, the administration is focusing on cuts targeted at middle-income Americans to spur consumer spending, which accounts for 70 percent of the economy, said the person, who spoke on condition of anonymity to discuss internal deliberations.

Holy shit. Assuming this is true, I think we may have legitimate cause to despair that nobody in this administration knows how economies work. [Editor's note: That's a terribly written sentence, but fuck it.] Yes, putting 500 bucks in my pocket when I’m unemployed is certainly going to provide a temporary economic stimulus since I have to, you know, eat and pay my bills and provide for my lazy-ass children and shit. But once that $500 is gone, I’m still out of a fucking job, and your stimulus disappears like a hummingbird’s fart during Hurricane Irene.

Is there really no better way you can think of to spend this money other than providing a short-lived, one-time GDP boost? Would we even be talking about this if we hadn’t already been sucked into the interminable and ever-earlier election cycle vortex?

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Yes, we have no bananas jobs

By
Trevor Macomber
– September 2, 2011

Here’s a happy-go-lucky bit of news to warm the cockles of ye olde blood pumper. According to the New York Times,

The economy failed to add new jobs in August, the first time there has been no increase in net jobs in the United States in 11 months.

Now, we all know that the reason the jobs market is stuttering is because taxes are too high to allow businesses and rich people to start hiring and investing again (even though both individuals and companies are actually hoarding cash to an unprecedented degree). But here’s an idea: why not take the billions that the government has to spend restoring power in the wake of even moderate storms every year and preemptively spend some of that to put the whole damn system underground? Yes, yes, I know, it would increase TEH DECIFIT!!! (as Tom likes to render it), but it would also put tens of thousands of people back to work for years to come, doing something that, in the long run, would actually save us money. And the beauty of it all is, you can apply the concept to hundreds of different projects and make an immediate (well, as immediate as government work projects go) and dramatic impact on the national un- and underemployment rate. But again, only if you’re willing to extend the deficit in the short term in order to address basic infrastructural concerns that will save us time, money, and even lives in the long term.

Alternately, you can simply wait for Amazon to hire the entire country, which may not be as far-fetched as it sounds, considering they’ve already

promised to hire 7,000 more people in California if the state puts a recently enacted online sales tax on hold for two years

Sigh…

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Jon Huntsman fails to adapt to the realities of the 21st century economy

By
Trevor Macomber
– August 31, 2011

From First Read today:

In New Hampshire at 4:30 pm ET, Jon Huntsman will unveil his jobs/economy plan. According to excerpts his campaign has released, Huntsman will say, “The president believes that we can tax and spend and regulate our way to prosperity. We cannot. We must compete our way to prosperity. When I was born, manufacturing comprised 25% of our GDP; today, it’s down to 10%.” Huntsman continues, “This does not reflect a decline in American ingenuity or work ethic; it reflects our government’s failure to adapt to the realities of the 21st century economy. We need American entrepreneurs not only thinking of products like the IPhone or Segway; we need American workers building those products.  It’s time for Made in America to mean something again.”

Holy shit, where to begin. First of all, America was already admirably (if not historically) prosperous before a bunch of naive home buyers, unethical bankers, and bespoke-suited gamblers with leveraged access to hundreds of billions of dollars of other people’s money came within a few deals of torpedoing the entire global economy for decades, rather than years. After the dot com bust in 2001, GDP rose from 1.1 percent to 3.1 percent by 2005 [cite], with manufacturing making up 14.4% of GDP at that time [cite]. To say that the continued decline in our manufacturing sector “reflects our government’s failure to adapt to the realities of the 21st century economy” is to admit that you have no idea what comprises a 21st century economy.

See, the way economies work is, Jon, the more prosperous and innovative a country becomes, the more leeway it has to offload the shitty, menial, repetitive, dangerous jobs like those that make up a manufacturing sector onto more desperate workers in other countries, while our own workers continue to educate themselves to the point that they don’t need to pull a lever for ten hours a day while risking the occasional digit or limb. Likewise, the invention of machines (or “magic robots,” if that’s more to your liking) that do the work of 10, 100, or 1,000 men more safely and efficiently than any human ever could may be painful in the short run to the individual worker whose job has been displaced, but in the long run, this allows that same worker to, again, educate himself into another job or field — perhaps one that didn’t even exist a few years earlier — thus preventing the job market from stagnating and curtailing the cycle of innovation.

So yes, Jon, manufacturing has declined since you were born. But you know what else has declined since then? Lots of shit. See, for example, the percentage of white people in this country. Or living members of the Beatles. Or smallpox. But as the great Stuart Smalley wonderfully illustrates in his seminal polemic, Lies and the Lying Liars Who Tell Them, it’s all about context:

The point is, Jon, if we start making iPhones and Segways ourselves again, it means we’ll have taken a step backward, not a step forward, so unless you wanna start manufacturing cotton gins and LaserDisc players again too, I suggest you brush up on the 21st century economics that you feign such a concrete grasp of, because otherwise concrete is the only place your ideas will find any traction. Which is to say, concrete boots, though I suppose we could start manufacturing those too. Now that’s what I call a win win!

2

Ali Velshi makes sense on The Daily Show

By
Trevor Macomber
– August 18, 2011

It’s kind of a cop-out to post clips from The Daily Show since it doesn’t exactly need the exposure (not that that’s ever stopped me before), but after Tom pointed out the flaw in my Dragon Tattoo citation from Tuesday…

Me [paraphrased]: stock markets are irrelevant poopy heads

Tom [not paraphrased]:

I think the problem with the Larsson thing is pretty clear, though, right? He’s dead on with regard to what the stock market actually produces (not much of value), but completely wrong with the way in which the economy actually functions. A collapse of confidence can have huge effects on the real-world, day-to-day economy, despite the fact that, as Ben’s quote demonstrates, trading stocks and bonds is pretty much just a poker game (see, for example, Brothers, Lehman, circa 2008).

Moreover, with more and more people tying themselves to the performance of the stock market via 401ks and the like, it’s taking up an ever greater share of our “wealth,” broadly construed. In other words (tl;dr): it’s all a giant game, of course. But its effects play out nationwide.

I needed something to raise my spirits. Enter, Ali Velshi, making a shit-ton of sense in a short tin of time:

1

Joe Nocera makes a compelling case that both Democrats and Republicans are useless when it comes to job creation

By
Trevor Macomber
– August 17, 2011

When I can’t tell what political party someone belongs to after reading their article, that’s when I start to take them seriously. Case in point: Joe Nocera’s column in the NYT on Monday entitled What Is Business Waiting For? It’s short, but here are some of the salient grafs to get you started:

President Obama’s idea of job creation is extending unemployment insurance, on the one hand, and painting grandiose pictures of far-off “green jobs,” on the other. He is bereft of ideas for creating jobs in the here and now. Meanwhile, the Republicans insist — despite mounds of evidence to the contrary — that more tax cuts would create jobs. By now, most Americans have lost hope that our current government will come up with a viable jobs program. It won’t.

I am coming more and more to think that with the government essentially paralyzed for the foreseeable future, the only way we’re going to get jobs is by turning to actual job creators: business itself. With all their cash, companies shouldn’t be waiting for Congress to give them tax incentives to hire people. They should be trying to jump-start the economy — and fend off another recession — by making investments, and hiring workers, that will lead to renewed prosperity.

So why the eerily accurate sloth imitation, fellas?

What makes that hard for executives is that they’ve spent the last 30 years having it beaten into them that the only thing that matters is delivering “shareholder value.” Over time, this phrase has become code for focusing on short-term profits — and chief executives who have ignored this mantra have often found themselves kicked to the street by impatient investors like Carl Icahn.

But fuck short-term profits, says Nocera (though not in so many words).

Indeed, it turns out that the focus on short-term profits is nowhere enshrined in the law. On the contrary: Delaware law, where many big companies are incorporated, gives directors enormous leeway to ignore short-term gain if they believe that doing so would ultimately benefit the corporation.

Of course, if you’re the only company in your industry willing to sacrifice in the near future to ensure stability in the medium-to-distant future, you’re probably going to be operating under somewhat of a disadvantage. Perhaps what is needed, then, is an approach akin to the one Tom described last week involving the hoped-for obliteration of the electoral college.

Marc Groz, a financial risk expert I’ve gotten to know, has what I think is a more intriguing approach, which he calls a “contingent commitment facility.” “Everyone is waiting for someone else to go first,” he told me the other day. Using his facility, a company would agree to hire X number of new workers. But the commitment would only become binding if certain conditions were met — such as having other companies in the same industry agree to do likewise. Once that happened, all the companies would have to do what they’d promised.

Groz’s idea is new and fresh and untested. It could fail. In other words, it is exactly the kind of out-of-the-box “job creation” idea that our stymied government no longer has the ability to come up with. The ball’s in business’s court now.

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