| The Jobs Outlook (from Fairmodel) |
The forecast employment numbers are astounding. Here they are:
I will double check and change this post if warranted, but so far these are the predictions: 1. Job loss actually zeros out this quarter. By New Year's Day, 600,000 new jobs will have been generated by the recovery. 2. By September of 2004, a total of 3.6 million new jobs will have been generated. 3. By the election, those willing to round 4.458 up to 5 will be able to claim the policies of the Bush administration have "generated" 5 million new jobs. UPDATE: Even better, the model's now looking like the US natural rate of unemployment may be below the 5.5% I worried about since the last run of the model. Here are the annualized numbers: Year UR ------------- 2003 5.9% 2004 5.2% 2005 4.9% 2006 5.0% 2007 5.2% ======= Yes! Things are looking up indeed! UPDATE II: Thanks to Bill Hobbs (who has some cool graphics on employment thru various administrations) for reminding me to clarify where these numbers come from. UPDATE III: But what about those 3 million lost jobs, you ask? The ones everyone agrees haven't come back and may never come back? What about them? The answer is in the definition, of course. Those 3 million lost jobs are the manufacturing jobs. Here, from the BLS, is the picture people usually have in mind: 
Now don't get me wrong if I seem to be downgrading the importance of this sort of job loss. I am a manufacturer myself. This is a sector of the economy have strong feelings about. However: people lose jobs, and they while they sometimes get them back, they also sometimes find new ones. Here's another picture of the job situation from the same source. This is net job loss/gain of the entire civilian labor force, all workers 16 yrs of age and older: 
By this measure the recession at its lowest point wiped out (on a net basis) about 1.5 million jobs, but the loss/gain zeroed out in and around December of last year. Yes, you heard me right. By this way of measuring things, all the lost jobs came back about ten months ago! UPDATE IV: Don't leave this topic without revisiting Robert Musil's absolutely wonderful fact- and link-laden post entitled And Now a Word from the Bureau of Labor Statistics. |
| Link posted by Steve Antler : 1:23 PM |
| NEW NUMBERS FROM RAY FAIR'S MODEL |
| From the Forecast Memo:
Real Growth and the Unemployment Rate: The predicted growth rates for the next four quarters are 4.1, 3.6, 3.5, and 3.4 percent, respectively. The unemployment rate is predicted to fall to 5.6 percent by the middle of 2004. Inflation: Inflation as measured by the growth of the GDP deflator (GDPD) is predicted to rise to 2.5 percent by the middle of 2004. Monetary Policy: The [model] is predicting...the three month bill rate...will rise to 2.3 percent by the middle of 2004. Other Variables: The federal government is now running a large budget deficit, and the model is predicting that the deficit will continue to be large throughout the forecast period (see the predicted values for SGP). By the end of 2004 the deficit is about $400 billion (remember this is the deficit as measured in the NIPA accounts). This $400 billion is smaller than the federal government is projecting the deficit to be, and so the model is more optimistic about the government's budget than is the government. The U.S. current account deficit (variable -SR in the model) is forecast to be extremely large throughout the period (between $595.0 and $744.9 billion). |
| Link posted by Steve Antler : 12:34 PM |
| Two essays |
| The first, by Victor Davis Hanson, explains the second, by Tony Judt.
I think the Judt article might work quite well as background document for a new Wansee Conference. |
| Link posted by Steve Antler : 10:10 AM |
| This Just In: Bush, Krugman, and EconoPundit Agree on Likely Future Growth |
| Rocky Mountain News: Business: "'We are on the right track, but we've got work to do,' Bush told workers at Central Aluminum Co. in Columbus, Ohio. 'We can't expect economic growth numbers like this every quarter.'"
Paul Krugman: "My purpose is not to denigrate the impressive estimated 7.2 percent growth rate for the third quarter of 2003. It is, rather, to stress the obvious: we've had our hopes dashed in the past, and it remains to be seen whether this is just another one-hit wonder." Econopundit on September 12, 2003: 
If you go back to the original post you'll see the jobs picture improves steadily up to and including Q4 2004 (i.e. the election). Growth, however, spikes, goes back to trend, then fall below its "non-Iraq-reconstruction" trend for a full three quarters. Clearly we've got more information now. The model is scheduled for re-estimation and running some time this week or next. You can check directly at the model's URL, or keep checking in at EconoPundit. We'll bring you the new forecast memo as soon as we find it. UPDATE: Check posts above for new forecasts. |
| Link posted by Steve Antler : 5:42 AM |
| From the "Didn't Get Reported but Gets My Vote" Department |
| From the Oct. 30 Columbus, Ohio Remarks by President Bush on Energy:
Small businesses must have affordable health care for their employees. That's why we need association health care plans, so small businesses can pool risk just like big businesses do. Small businesses must be allowed to come together in order to pool risk in order to provide their employees with reasonably priced health care. And we need to have medical liability reform so that the frivolous lawsuits do not drive up the cost of health care. |
| Link posted by Steve Antler : 5:36 AM |
| Today's Krugman |
| So says Paul:
Still, it's possible that we really have reached a turning point. If so, does it validate the Bush economic program? Well, no. |
| Link posted by Steve Antler : 4:55 AM |
| Things don't add up, and even when it's not corruption it's still corruption but just, you know, a different kind of corruption |
| Two paragraphs from Charles Lewis' remarks to the press on the release of Windfalls of War:
Most of the companies that won contracts in Iraq and Afghanistan are political players. According to the Center's analysis, the companies, their political action committees and their employees contributed a total of nearly $49 million to national political campaigns and parties since 1990. Donations to Republican Party committees -- the Republican National Committee, the Republican Senatorial Campaign Committee and the National Republican Congressional Committee -- outpaced those to Democratic committees, 12.7 million to $7.1 million. These two wars in two years and their aftermaths have brought out the Beltway Bandit companies in full force, and there is a stench of political favoritism and cronyism surrounding the contracting process in both Iraq and Afghanistan. I am not just talking about the large political payments and excessive lobbying fees to land these fat contracts, or the already reported, cushy, no-bid circumstances surrounding the Vice President's former company, Halliburton. We found numerous instances in which companies with thin or no credentials landed major multimillion dollar contracts... The above two paragraphs show why the report will persuade no one and will get (as appears to be the case) little or no coverage. Out of "nearly" $49 million, less than half is actually accounted for. Out of this fraction, donations to Republicans "outpaced" donations to the other side by a frankly underwhelming margin of about two-thirds to one. The study also uncovers many contracts awarded to poorly-connected companies who made only modest political donations, but it actually dismisses these contracts as tainted owing to their having been awarded to unsuitable companies with "thin or no credentials!" I would say this isn't worth anyone's time, except it appears to document many contracts awarded to smaller, politically inactive, non-well-connected companies. It presents -- unintentionally, one might guess -- considerable evidence contradicting its central contention. UPDATE: More from Drezner, including a link to this absolutely wonderful and useful utility showing scatter diagrams associated with varying correlation coefficients. (Hmmm, shouldn't we add this to the EconoPundit blogroll? Under EconoData? Maybe a new category, EconoUtilities?...) UPDATE II: Steven Kelman, in the Washington Post, says those who know how the contracting process work simply laugh at the "cronyism" talk. Additionally: The charges of Iraq cronyism encourage the system to revert to wasting time, energy and people on redundant, unnecessary rules to document the nonexistence of a nonproblem...If Iraqi contracting fails, it will be because of poorly structured contracts or lack of good contract management -- not because of cronyism in the awarding process. By taking the attention of the procurement system away from necessary attention to the structuring and management of contracts, the current exercise in barking up the wrong tree threatens the wise expenditure of taxpayer dollars the critics state they seek to promote. |
| Link posted by Steve Antler : 4:20 AM |
Thursday, October 30, 2003
| Ha! Gotcha! You earned some profit! |
| Windfalls of War purports to be the definitive study of Iraq and Afghanistan postwar contracting and comes from the oh-so-nobly-named Center for Public Integrity. What will be batted around the media tonight is the study's assertion that contractors "donated more money to the presidential campaigns of George W. Bush -- a little over $500,000 -- than to any other politician over the last dozen years."
Right now we're slugging our way thru the study to see exactly what this charge means and whether anyone should be scandalized by its supporting facts. So far here's what I've found. First and foremost, this study (of companies who "Reap the Windfalls of Post-war Reconstruction") is written by and for those who're scandalized by capitalism itself. Second, there are seventy (70!) companies -- some large, some small -- who, as the study says (charges?) "shared in the reconstruction bounty": Their tasks ranged from rebuilding Iraq's government, police, military and media to providing translators for use in interrogations and psychological operations. There are even contractors to evaluate the contractors. Presumably we're supposed to be scandalized by this listing of political contributions, but the table provides no links and no breakdowns. I suppose we're seeing total contributions to all parties and all candidates. (Or did GE really contribute $8.8 million to George W. Bush between 1990 and 2002? And, by the way, why is the column titled "contract total?") One naturally wants to know who was the runner-up and what did he get? Did the Clintons, for example, get $450,000? The ghost of C. Wright Mills haunts this study, which I suppose is appropriate given the current Halloween season. Its authors have rediscovered Mills' "power elite:" Nearly 60 percent of the companies had employees or board members who either served in or had close ties to the executive branch for Republican and Democratic administrations, for members of Congress of both parties, or at the highest levels of the military. But I can hear Mills' ghost howl -- "ONLY 60%? THERE'S GOT TO BE A MISTAKE! THE NUMBER SHOULD BE MUCH HIGHER!!! AAAAARGHHHH!!!!" To sum up, as the study says: The results of the Center's six-month investigation provide the most comprehensive list to date of American contractors in the two nations that were attacked in Washington's war on terror. We can only add this: "attacked?" The "two nations that were attacked?" I thought we liberated them. Silly me! |
| Link posted by Steve Antler : 12:03 PM |
| Economy Grows at Fastest Pace Since 1984 |
| AP reports:
The economy grew at a scorching 7.2 percent annual rate in the third quarter in the strongest pace in nearly two decades. Consumers spent with abandon and businesses ramped up investment, compelling new evidence of an economic resurgence. This is about a point higher and a quarter sooner than the forecast generated by my "Iraq Reconstruction run" of the Yale model. |
| Link posted by Steve Antler : 8:10 AM |
| More cultural disconnect... |
| As California burns, a complelling cultural rift comes to be apparent.
Here in the Midwest, lumberjacks are perceived as good guys -- they're fun, the stuff of legend and our childhood. When we camp in Northern Wisconsin, there's always that guy three campsites down who brought an axe so he can break up the kindling for himself. There are all those roadside diners with "Paul Bunyan Breakfast" specials. It is true for housing we're largely a red-brick society, but to us lumber and wood are special. New homes' deluxe features always include granite counters, jaccuzi tubs, and, yes, wood-burning fireplaces. But lumberjacks and the forest industry are spawn of the devil himself on the West Coast, judging by current editorial opinion. How can anyone oppose the Bush "Healthy Forests Initiative" while people are coughing and packing three day's worth of clothing into their cars? Because, as the LA Times says: Essentially, the forests would become "healthier" by cutting them down. The initiative would give loggers greater access to federal wild lands as a means of thinning them, thereby lowering fire risk. (You'll be shocked to learn the White House's point man on forestry is a former logging industry lobbyist.) Indeed, says the paper, the problem is too much forest thinning: And by the way...Southern California got only a tiny fraction of the state's 2003 U.S. Forest Service fire prevention funds. That's partly because [Diane] Feinstein backed timberland clearing in remote areas up north, while we got stiffed down here. Last time I checked, we had a few more people, and greater risks...Does it sometimes appear to you that there's a conspiracy to see Southern California burned to a crisp? As the fire story continues, this automatic and unthinking association of logging with evil will increasingly confuse the rest of the country. Spokepeople for the environmental lobby will only add to this confusion. Their isolation will increase as people continue to ask why it is better for the forests to burn down than be cut down. And, as their isolation increases, West Coast environmentalists will form stronger associations with their terrorist underground left wing. |
| Link posted by Steve Antler : 7:06 AM |
Wednesday, October 29, 2003
| Pollyanna Conspiracy versus the Gloomy Schopenhauer Left |
| Wm. Saffire:
...Why do the [Pollyanna Conspirators] treat...hyperactive inaction by Greenspan & Co. as such good news? Because the Fed knows in advance what Thursday's announcement of the increase in gross domestic product will be. The conspirators guess that the figure for the rate of America's economic growth will be a whopper: it is likely to be over 6 percent for the quarter, which is double the good growth in the previous quarter... But what about the [Gloomy Schopenhauer Left's] mantra, "Bush has caused a loss of three million jobs, a greater loss than any president since Hoover"? ... We [Pollyanna Conspirators]... say, "Wait'll next year." Come 2004, with economic growth steadying near a brisk 4 percent -- and, sustained by the low interest rates justified by productivity's suppression of inflation -- the current 6.1 percent unemployment rate should begin to trend downward. And it is the trend, more than the level, that makes news and affects elections.(Emphasis added) EconoPundit can only add this bit of anecdotal support. Last night I had dinner with a magician buddy who let me in on his plans to add a lunch counter to the front of his "business-is-currently-kinda-slow" retail magic shop. Low interest rates and his great location (across from the local commuter train) made it possible for him to diversify this way. He'd have to staff it with a new person, of course, and as I was driving home I suddenly thought "Wait a second here -- I just had dinner with a guy who had actually CREATED a new JOB!" |
| Link posted by Steve Antler : 1:53 PM |
| The Continuum of Evil |
| This is all around us and it has to be said, even though my friends will call me a McCarthyite.
Start with this notice in the Boston Herald: The Islamic organization poised to build the largest mosque in the Northeast on a site in Roxbury has long-standing ties to an Egyptian cleric who praises suicide bombings and a Muslim activist indicted last week in a terrorism financing probe. The Islamic Society of Boston, which has city approval to build a sprawling $22 million Islamic cultural center and mosque on Malcolm X Boulevard, has had a long association with Dr. Yusuf Abdullah al-Qaradawi, whose vocal support of the Palestinian terrorist group Hamas prompted the State Department to bar him from entering the U.S. four years ago. We're dealing not with an "axis" but with a continuum. As in the 30's, 40's, and 50's with World Communism, there exists a non-discrete, perfectly gradated array of activities in support of IslamoFascism. You come in at your own personal level of comfort. If suicide bombing is too demanding, you march in support of the suicide bombers. If marching for is too demanding, you support associated charities, organize for "peace," or open a new mosque whose leaders have certain connections. Always you can raise money thru front organizations, charities, ngo's, etc. It is painful and infuriating for someone like me to admit there actually were such things as Communist front organizations, fellow travellers, dupes, and, yes, even real spies. If cries of "McCarthyism!" succeed in shouting down those who say openly we have all these again, we will lose another few skyscrapers, another few thousand citizens, and maybe even a city or two, before we learn to say, simply: "Okay, we've heard you, now please just shut up and find something else to do. Right now we're busy." Boston Herald story via Andrew Sullivan. |
| Link posted by Steve Antler : 8:19 AM |
| Notice |
| FOXNews reports Democrats -- John Podesta in particular -- are opening a new liberal think tank. Says Podesta:
The conservative movement has really built up an infrastructure of not just ideas, but the ability to kind of get out there and do the kind of hard communications work to sell to the American public... What they seem to be talking about is paying lots of people to do what I do for free. Open Notice to John Podesta: While I think my principles can't be compromised for money, I'm actually not really sure because I don't really have the choice. So if you'd like to explore the matter, contact me at EconoPundit.com with, uh, you know, an offer? |
| Link posted by Steve Antler : 8:04 AM |
Tuesday, October 28, 2003
| Krugman Charges "Willful Ignorance" |
| Krugman says: "we'll lose the fight against terror if we don't make an effort to understand how others think...", but this self-lauditory statement is silly on the face of it. Many scholars -- Bernard Lewis and Fouad Ajami to name two -- have addressed this issue and concluded in specific and important ways the Arab World's thought processes are different from our own.
Interesting, isn't it, how "wilfully ignorant" the anti-Bush left is of this literature? It is as if they espoused a kind of religion that says everyone's just like us underneath -- because it's a small world, after all! Krugman continues, speaking of General Boykin: "Yet because of a domestic political struggle that seems ever more centered on religion, such attempts at understanding are shouted down." How interesting. This is a sort of misdirection, isn't it? If you shout loudly and often about someone else's religious beliefs, nobody will notice your own! UPDATE: Yes, I know Krugman said: "A lot of the speech sounds as if it had been written by Bernard Lewis, author of "What Went Wrong," the best-selling book about the Islamic decline." But Krugman's bizzare misinterpretation of the Mahathir speech seems to show he hasn't spent much time reading Mr. Lewis' work. |
| Link posted by Steve Antler : 10:59 AM |
Monday, October 27, 2003
| John McCutcheon's "Injun Summer" |
| Yep, sonny this is sure enough Injun summer. Don't know what that is, I reckon, do you? Well, that's when all the homesick Injuns come back to play; You know, a long time ago, long afore yer granddaddy was born even, there used to be heaps of Injuns around here -- thousands -- millions, I reckon, far as that's concerned. Reg'lar sure 'nough Injuns -- none o' yer cigar store Injuns, not much. They wuz all around here -- right here where you're standin'.
Don't be skeered -- hain't none around here now, leastways no live ones. They been gone this many a year. They all went away and died, so they ain't no more left. 
But every year, 'long about now, they all come back, leastways their sperrits do. They're here now. You can see 'em off across the fields. Look real hard. See that kind o' hazy misty look out yonder? Well, them's Injuns -- Injun sperrits marchin' along an' dancin' in the sunlight. That's what makes that kind o' haze that's everywhere -- it's jest the sperrits of the Injuns all come back. They're all around us now. 
See off yonder; see them tepees? They kind o' look like corn shocks from here, but them's Injun tents, sure as you're a foot high. See 'em now? Sure, I knowed you could. Smell that smoky sort o' smell in the air? That's the campfires a-burnin' and their pipes a-goin'. Lots o' people say it's just leaves burnin', but it ain't. It's the campfires, an' th' Injuns are hoppin' 'round 'em t'beat the old Harry. You jest come out here tonight when the moon is hangin' over the hill off yonder an' the harvest fields is all swimmin' in the moonlight, an' you can see the Injuns and the tepees jest as plain as kin be. You can, eh? I knowed you would after a little while. Jever notice how the leaves turn red 'bout this time o' year? That's jest another sign o' redskins. That's when an old Injun sperrit gits tired dancin' an' goes up an' squats on a leaf t'rest. Why I kin hear 'em rustlin' an' whisper in' an' creepin' 'round among the leaves all the time; an' ever' once'n a while a leaf gives way under some fat old Injun ghost and comes floatin' down to the ground. See -- here's one now. See how red it is? That's the war paint rubbed off'n an Injun ghost, sure's you're born. Purty soon all the Injuns'll go marchin' away agin, back to the happy huntin' ground, but next year you'll see 'em troopin' back -- th' sky jest hazy with 'em and their campfires smolderin' away jest like they are now. |
| Link posted by Steve Antler : 1:52 PM |
| John McCutcheon's "Injun Summer" |
Fall doesn't seem complete without this.
You can find a larger version with complete text here, and order a poster of it here. Do a google search to find some of the the astoundingly viscious political correctness that killed the Chicago Tribune's annual publication of this hauntingly beautiful cartoon. |
| Link posted by Steve Antler : 1:37 PM |
| Ancient Greeks and Western Civilization |
| Lots of response last week to this post, where we pointed out the Arab World never experienced the same domination by Greek culture as did the Jews during post-Alexander Hellenic Judaism.
Here's a must-read quote in yesterday's NYT: Fouad Ajami, a professor of Middle Eastern studies at Johns Hopkins University, said part of political Islam's antimodern approach was a rejection of the Western scientific method. So when some Islamists declared, for instance, that al Qaeda caused this summer's blackout on the East Coast, that could be accepted without any proof..."When there is a break in cause and effect," Mr. Ajami said, "it's easy to sell these views of the world." This is a must-read article. |
| Link posted by Steve Antler : 10:34 AM |
| From Andrew Sullivan |
| The geopolitical future looks like this:
...the fledgling links now forged between left-wing anti-war campaigners and Islamo-fascism will get stronger in the years ahead. The anti-globalization far left has nowhere else to go. Fanatical political Islam provides them with an over-arching structure for the loathing of the West. Now that Marxism is dead and post-modernism has shown itself inept as a basis for a real political movement, Islam will fill the void. |
| Link posted by Steve Antler : 10:27 AM |
| A response to Brad DeLong... |
| In connection with this post Brad DeLong writes the following to EconoPundit:
AHEM!...I wrote: "The message of Luke 12:13-21 is: "Fools! You need treasure in heaven, not treasure on earth. So sell all you have, give the proceeds to the poor, and follow me." Are you as big an idiot as you seem? EconoPundit responds: Brad, quoting yourself out of context doesn't help here. You were in a conversation with Bruce Bartlett I think. Please answer this question: how is it possible for you to voluntarily sell all you have and give the proceeds to the poor if someone (oh, let's say, just maybe, Big Government?) in effect does this for you? Without asking? Without consent? With regard to the last question, I'd have to mention in passing your insults lack imagination. You might try working around this by being more polite. On the question itself -- Brad, I don't know about you, but I'm way too old to worry about whether I'm smarter than anyone else. |
| Link posted by Steve Antler : 8:28 AM |
| Monday |
| Here's your economic calendar. (But remember the blogroll's version has great links.)
Few postings until I get midterms written, adminstered, graded, and recorded. Go check this out if you missed it. |
| Link posted by Steve Antler : 8:13 AM |
Friday, October 24, 2003
| Syntax of the Annointed |
| It is really hard to read beyond this point:
John Snow, the Treasury secretary, told The Times of London on Monday that he expected the U.S. economy to add two million jobs before the next election -- that is, almost 200,000 per month...[N]othing in the data suggests that jobs are being created at that rate...Still, Mr. Snow may get lucky, and the job market may pick up. "Mr. Snow" get lucky? How about the newly-employed workers? The US economy? All of us? But seriously folks, this is about more than just "luck," isn't it? We're economists here. We deal with models, and numbers, you know, scientific stuff. About ten weeks ago, when the job market was much bleaker than today, EconoPundit reported: ...[I]t looks like all net job losses of the recession will zero out some time in the first two quarters of 2004, with the net job gain picture rapidly reversing itself thereafter. Unforseen events can change this conclusion, but best currently available evidence suggests those willing to round 1.77 up to 2.0 will, by election time, be able to claim the Bush Presidency has "created" 2 million new private sector jobs. (Emphasis added) This statement was based on published assumptions and numbers generated by an economic model of the US economy . Professor Krugman, we issue this public challenge to you. We've published all our data and announced the MODEL that generates PREDICTIONS similar to those of Secretary Snow. On what MODEL do you base your ALTERNATE PREDICTIONS? If you are not using a model are your predictions, rather, based on IRRATIONAL "GUT" FEELING? Maybe ASTROLOGY? Please let us know. Otherwise I think it will be clear you're speaking not as an economist, but merely as a Democrat hoping for bad economic news. UPDATE: Go to Brad DeLong for an alternate view, and check out the comments, especially this one from Jim Glass: "But I do have one complaint. Asking that Bush leave 'the job market no worse than he found it' is setting the bar too high by perhaps 2 million jobs or so." ~~ Very true. And I'm pleasantly surprised to read it here, since "the worst job market in 30 years / 50 years / since Hoover" meme, which I've read here before, depends on declaring it worst *relative* to an unsustainable bubble peak. Compared to the average job market of the last 30 years, the current market with its 6.1% unemployment rate is just modestly below average. Prof. Krugman gives us the Hoover campaign rhetoric: "Bear in mind that the payroll employment figure right now is down 2.6 million compared with what it was when George W. Bush took office. So Mr. Snow is predicting that his boss will be the first occupant of the White House since Herbert Hoover... " etc., etc. OK. So out of curiosity I just ran a 22-year trend line in payroll employment growth from 1973 (before the '74 recession) to 1995. Then carrying it forward from there one finds that during the 1998 to 2000 "bubble" years payroll employment suddenly rocketed up over trend to a top of 2.7 million above trend. What happened? Well, we may remember that in 1996 Prof. Krugman chastised -- in his usual tactful and modest manner -- the "four per centers" who argued for trying to achieve 4% annual GDP growth on the strength of the new productivity gains. Well, actually he ridiculed them for their ignorance in not realizing the obvious fact that 4% average growth for five years would reduce the unemployment rate to only 1.5%, which was clearly impossible so such growth was impossible -- pooh poohing their lame claims about productivity gains making any difference. Then he lectured them that if they couldn't master even such simple economic models as he just used to prove that five years of 4% growth was impossible, "you shouldn't use big words ... you may sound impressive and sophisticated but you will have no idea what you are talking about. And that, my friends, is the irritating truth." http://www.economicclub.org/Pages/archive/fulltext/arch-krugman.htm Immediately after which the US economy experienced five years of 4% average growth with the unemployment rate never dropping below 4%. So what was Prof K's error that his simple model overlooked? That the boom would create extraordinary offers for labor that would attract into the job market people normally not interested in work. During the same period in which payroll zoomed up 2.7 million over trend, the percentage of civilians in the workforce similarly zoomed. (One may remember stories in the business press from those days about people being recruited into jobs by being told they could bring their pets to work, retirees being recruited back to work from Florida, and so on). With the increased work force the zoom up in employment didn't reduce the unemployment rate as his simple model expected. Then the boom ended, the civilian work force participation rate returned to the long-term norm, people took their pets home and returned to Florida, and those 2.7 million jobs went away. And it is the loss of those 2 million+ unsustainable bubble-years jobs that Krugman and other Democrats will use to try to "Hooverize" Dubya during the coming year. Although using the same logic I could say my own "worst income years ever" were the years after I won the lottery -- because never had my income fallen so far! And it hasn't recovered yet! Just as if one could win the lottery every year. And I really don't see how Krugman can give Clinton the credit for creating all those jobs in the first place, as he seems to want to do in this piece, without also giving Clinton credit for the "bubble" that created them too -- and for the downside of the bubble as well. A much more realistic picture of the current employment situation is in light of the 30-year long-term trend. By that measure employment has been flat since 2000, neither rising nor falling significantly, with as Prof. DeLong fairly notes the loss of the unsustainable 2 million+ jobs disregarded. In his 1996 piece Prof. K. said that the minimum sustainable long-term rate of unemployment was probably 5.5%-6%. About that he might well have been right. Even now that he accepts news of the productivity gains, it's not clear what effect they will have on that, if any significant one at all. In any event, being that Prof. K himself noted that the historical optimum unemployment rate was about 6%, for him or anyone else to say that today's job market with a 6.1% rate is the worst in 30 years (look at 1982 or 1991) is ridiculous -- and to say "since Hoover" is ludicrous. And yes, that includes considering the "discouraged workers" who have dropped out of the labor force as measured by the labor force participation rate. Just look at the data. http://research.stlouisfed.org/fred2/series/CIVPART/12/Max Posted by Jim Glass at October 24, 2003 11:33 PM |
| Link posted by Steve Antler : 8:09 AM |
Thursday, October 23, 2003
| The Border |
| This is the kind of crackdown you just don't read about very often. Has the Administration been reading Derbyshire? |
| Link posted by Steve Antler : 12:57 PM |
| You should paraphrase simply, then interpret that... |
| When a renowned leader was addressing a large group, someone yelled out "tell my brother to share his wealth with me." The leader said "I don't have the authority, and why are you so greedy, anyway? You could die this afternoon -- what good would more wealth be to you then?"
This is my short, nonpoetic paraphrase of the Luke 12:13-21. Brad DeLong, who interprets this as obviously favoring forced redistribution of wealth from rich to poor (via for example the inheritance tax), should probably stay away from exegesis whenever possible. I also found his sneering reference to Bruce Bartlett's "peculiar [Texas(?)] (sic) form of Christianity" unimaginative and distasteful. UPDATE: Jon Henke adds the following: Regarding people who advocate forced redistribution.....funny, I always thought "thou shalt not covet" covered that territory fairly well. {start libertarian mode} Stealing somebody's property must not violate a commandment, so long as 51% of the population says you can stick it to him. {end libertarian mode} EconoPundit Responds: Now you've got me totally primed to discuss Locke, the labor theory of value, and the precise relationship of these to Genesis (as compared with alternate creation stories), Sinai, and the Third Commandment. However, this can all wait. |
| Link posted by Steve Antler : 10:29 AM |
Wednesday, October 22, 2003
| Okay, let's talk about that "real world"... |
| Nicholas D. Kristof thinks George W. Bush should be reading the Iliad and the Odyssey because
Homer's most powerful lessons include the need to restrain hubris, to cooperate with allies, to engage the real world rather than black-and-white caricatures. If Achilles and Odysseus can learn those lessons, maybe there's hope for Mr. Rumsfeld or even the mighty Mr. Bush. Kristof's warm and fuzzy worldview (presumably we're the Greeks, the world of Islam the Trojans?) misses something we learned in Western Civ (before they stopped teaching it). Ancient Greek culture influences us strongly because it came through three independent channels: (1) Ancient Rome's love of Greek culture, (2) Early Christianity's espousal of "Neo-Platonism," and, earliest but connected to the last, (3) Ancient Judaism's domination by Greece following Alexander. The Arab World never experienced domination by Greek culture. They discovered some of it through the Arab scholarship of the Middle Ages, but this scholarship, and most of the Greek influence, was quickly abandoned. What's the meaning? First and most important our current war is nothing like the Trojan War. There, the two sides shared the same culture. With our enemies in the current war, by contrast, we share little culture -- not even a basic idea of "truth," or the nature of the world itself. Consider this last point. "Truth" isn't really a universal idea at all. To Westerners truth is seeing the world much like the Ancient Greeks did -- as genuine discoverable reality, in other words. In the Islamic World "truth" is more poetic. They see the world as a kind of metaphor, with infinite shading and perpetually shifting, subtle meanings. It is neither a "black and white caracature," nor "racist," nor "Orientalist" to say the world of Islam does not share our definition of truth. The most recent posting at MEMRI illustrates this. A set of stories of castration, magic, sorcery, and witchcraft arrests, it shows just how far Islamic culture remains from anything resembling a "modernizing force." Perhaps we should envy them, living so much closer to magic than we do. Truly engaging the "real world" (once again using Kristoff's words) means appreciating the our opponents' true nature. This means accepting the grim reality of profound historical and cultural differences rather than glossing them over. We are not Greeks, nor they Trojans. At the extreme, in our worst moments, we might feel the current war has more in common with H.G. Wells' The War of the Worlds than it does with Homer's poetic Iliad. UPDATE: What explains Mahathir Mohamad's bizzare leaps of logic? Perhaps, as Paul Krugman believes, he is a rational Western politician masquerading as Islamic leader. Or maybe, just maybe, his thought processes are different from ours. I've always wondered how the same people who persistently demand we mentally walk in others' shoes for better understanding can so easily start singing "It's a Small World After All" when it suits them. |
| Link posted by Steve Antler : 1:17 PM |
Tuesday, October 21, 2003
| Name Withheld... |
| Regarding Don Luskin's important work, an anonymous reader sends us this to ponder:
Luskin on Krugman: "The nervous, stammering, shifty-eyed, twitching, ill-tailored, gray homunculus..." Luskin on DeLong: "This pudgy dweeb..." It's really rather hard to avoid the impression that Mr. Luskin's treehouse is missing a few more slats than Krugman's. EconoPundit responds: I like and respect Don Luskin, but I agree his writing style might not be for everyone. Big deal, so what? If you don't like it, don't read it. It is important to remember in this context that Don Luskin's objection is not that Krugman is un-civil, but rather that he is a liar. The civility part of it is kind of, well, outside Luskin's chosen area of concentration. Others have addressed it. The civility issue is important. I think it is a serious matter when the country's most well known academic economist calls his colleagues liars and worse over issues subject to honest, informed disagreement. My personal feeling is this behavior violates the basic ethics of academic economics. But not everyone cares so much about this civility business, and they have the right to their opinion. If Luskin cares to refer to DeLong in an un-civil fashion, as a "pudgy dweeb" for example, well, I guess I'll just have to decide if the description is apt when and if I finally meet DeLong face to face -- if I remember, that is. I think everyone does or should care about the "honesty" thing, though. Luskin has caught Krugman making a number of factual and numerical misrepresentations. (I've even found one or two myself.) A major public figure who is a professional economist should not be (select one of the following:) (a) making these mistakes or (b) engaging in these misrepresentations. UPDATE: I think we may need a new term for Don Luskin's writing style, which can easily shift from rough edges like those cited to the very sublime -- as when for example he likens Paul Krugman (with all his apparent distaste for markets) to a veterinarian who dislikes puppies. Maybe the right term is "econogonzo?" Has someone else thought of this, or am I the first? UPDATE II: Luskin comments: I get a lot of criticism on this point. In fact that line about the homunculus seems to have inspired particular ire. Sometimes such criticism is used by people who are just trying to find something wrong with my Krugman critiques so they can ignore me in comfort, and other times it's constructive and thoughtful advice that I might be more effective if I stuck to factual assertions, rather than ad hominem ones. Be honest about this -- the factual outnumbers the ad hominem in my posts by so many multiples that the point is almost moot. But perhaps a little bit of ad hominem goes a long way, so let me explain why I do this -- there is method to the seeming madness. The homunculus line is a perfect example. That line did not just show up in that column just to get off a cheap shot. It was part of an essential point that I wanted to make, which was that Krugman on TV was startlingly less powerful, effective and credible than he appears in print, especially when he is draped I the majesty of the New York Times. The full context surrounding that isolated quote makes this abundantly clear. Did you read the whole thing, or just uncritically accept the letter-writer's out-of-context phrase? I am trying to do more than just fact-check Krugman. I am trying to defuse the entire Krugman phenomenon, which involves the hijacking of an iconography of credibility -- New York Times, Princeton, Bates Medal and so on. I am trying to expose "the smallness of evil" as I believe the saying goes. Krugman is not what he seems. He's not a great authority. He's a bumbling little homunculus. That revelation may mean nothing to certain readers (and may put off some, too) -- but for others, it may help them read Krugman in the future in a more critical and thoughtful way. Same thing for DeLong. Have you ever actually looked at his website? Have you ever seen writings of such pomposity, self-aggrandizement and self-importance? It helps disrupt the reality distortion field that he tries to project to draw attention to the truth about the sorry little photographs of himself that he posts on his site, which I believe I linked to in that post where I called him a "pudgy dweeb" (if I didn't, then I did in another similar one). Why does he post the photos if he doesn't expect them to be seen, and their nature evaluated? Are we permitted to react only to the words on his site, and not the pictures? Considering the whole man is part of the argument when what you are dealing with is a media phenomenon where more than ideas are at stake. EconoPundit responds: Look Don -- just hold off on this "Did you read the whole thing?" and "Have you ever actually looked at his website?" stuff. I did and I have. Furthermore, don't tell me to "Be honest about this." It's what I'm doing. Okay, now that I got that off my chest, let me say I think what you're doing is very important and that you're doing it very well. To read is to pay a very short visit to someone else's mind. "Gonzo" invites the reader in for a more intimate stay, allowing access to flavors, aromas, emotions -- stuff like that. Don't get me wrong -- I know you're not Uncle Duke or Hunter S Thompson. (And it should go without saying this has nothing to do with drugs.) What I mean is you've invented a new genre, a fact-based but angry economic journalism that directly and very effectively confronts the now-crumbling hypocritical politico-economic elitist ideology that exalts all things planned by government and sneers at dull, old-fashioned capitalist businesspeople and their workers. What's the first thing a new visitor learns about Don Luskin? "The Conspiracy to Keep You Poor and Stupid" is his chosen blog title. Says a lot, I think. Keep up the good work! And if you want to be vivid in your descriptions of people -- GO FOR IT! |
| Link posted by Steve Antler : 1:24 PM |
| Econopundit makes it to the big time? |
| Well, probably not. Fox News Special Report last night finally mentioned our MEMRI-based story regarding a documented Iraq/Al-Qa'ida pre 9/11 training linkup. |
| Link posted by Steve Antler : 11:41 AM |
| Gee! We squandered all that post-9/11 sympathy! |
| I can't pass this up. Says Paul Krugman:
Thanks to its war in Iraq and its unconditional support for Ariel Sharon, Washington has squandered post-9/11 sympathy and brought relations with the Muslim world to a new low. On 9/12 I seem to remember Palestinians dancing in the street and lots of Paul's friends explaining why the rest of the world correctly hates us. UPDATE: Oh yes, and we lost the sympathy of those who wanted us to bring the matter to the World Court -- but only after we had unidisputable proof Bin Laden was actually involved. We also lost the sympathy of those who felt Bin Laden was popular because of all the day care centers he'd built throughout the Arab world. |
| Link posted by Steve Antler : 11:06 AM |
| More from Mahathir |
| Via Drudge, from the Bangkok Post:
In my speech I condemned all violence, even the suicide bombings, and I told the Muslims it's about time we stopped all these things and paused to think and do something that is much more productive. That was the whole tone of my speech, but they picked up one sentence where I said that the Jews control the world,'' he told Bangkok Post in an exclusive interview yesterday, which covered aspects of his 22 years as leader of Malaysia, as well as his straight-forward views on terrorism, democracy and US policy. Dr Mahathir added, however, that "...the reaction of the world shows that they [Jews] do control the world'." |
| Link posted by Steve Antler : 9:28 AM |
| Wirus? Vorm? |
| Light posting today. I used my laptop in class last night and this morning it doesn't work. |
| Link posted by Steve Antler : 9:19 AM |
| From the "In Case You Missed It" Department... |
| Instapundit has linked to this, so my doing so is irrelevant and unneccessary. Also Don Luskin linked to this, so I don't need to. |
| Link posted by Steve Antler : 9:16 AM |
Monday, October 20, 2003
| Bottom line: we're older... |
| Howard Gleckman of Business Week explains why health care costs keep going up. |
| Link posted by Steve Antler : 1:50 PM |
| The Plan |
| Michael Novak has published the administration's twenty-four point plan for successful postwar Iraq occupation. Point ten is:
Encourage the founding of scores, even hundreds, of newspapers, magazines, and other media of communication, and encourage open public debates, protests, marches, and the free exercise of religion, including pilgrimages and processions: In other words, inspire all of the ordinary expressions of liberty that had been repressed during the long tyranny of Saddam Hussein. Without realizing we were publishing evidence of the plan's success, EconoPundit has been posting links to MEMRI translations of free Iraqi press editorials from the beginning. We'd like to remind you the most recent of these contained evidence of a strong pre-9/11 Iraq-Al Qa'ida link. |
| Link posted by Steve Antler : 8:51 AM |
| Monday |
| Here's your economic calendar.
Have you ever noticed nothing seems to rhyme with "calendar?" If someone showed up at your office brandishing a weapon demanding you immediately finish a poem whose next-to-last line had the words "orange calendar," you'd be finished! (What a cruddy thought to start the week with. Sorry.) UPDATE: Dave Ivers sends us this proposed solution: I don't know about calendar, but I've always advocated passing a law to officially make silver rhyme with orange. Maybe we just arbitrarily make calender rhyme with both orange and silver. Think of it as the Krugman Solution. UPDATE II: We have what may be an acceptable solution from Ross Nordeen! "Door hinge collander" might be close enough to same someone's life! (Not really sure about the "collander" part, though.) |
| Link posted by Steve Antler : 6:11 AM |
| Krugman a Victim? |
| Hopefully we will soon get to see Don Luskin on prime time TV once again. Check it out. Oh yes, and there's this -- how do you "stalk somebody on the web?" Are there other potential offenses we should know about? Have some of us been victimized in yet other, more obscure ways, or committed crimes nobody's yet dreamed of?
UPDATE: I'm coming to think none of this is funny. I'd change the post but someone has to keep some kind of sense of humor. Still, think of it. Is it really "stalking" to show up at an intellectual opponent's lecture? If an extremely liberal student registers for yet another one of my courses, is that person "stalking" me? What an astonishingly irresponsible use of language! |
| Link posted by Steve Antler : 6:07 AM |
Sunday, October 19, 2003
| In Memoriam Edward Said |
| D-squared has an obituary poem for the late scholar. |
| Link posted by Steve Antler : 8:09 PM |
| I thought only Reuters used them... |
| Tom Friedman proposes what in the 60's we called unilateral disarmament:
What should America's response...be? We should stop talking about "terrorism" (sic) and W.M.D. and make clear that we're in Iraq for one reason: to help Iraqis implement the Arab Human Development Reports, so the war of ideas can be fought from within. Then we should get out of the way. |
| Link posted by Steve Antler : 8:54 AM |
| Who says math is just for guys? |
| Ann Coulter has been doing some quantitative research:
Rush Limbaugh's misfortune is apparently a bigger story than his nearly $300 million radio contract signed two years ago. That was the biggest radio contract in broadcasting history. Yet there are only 12 documents on LexisNexis that reported it. The New York Times didn't take notice of Rush's $300 million radio contract, but a few weeks later, put Bill Clinton comparatively measly $10 million book contract on its front page. Meanwhile, in the past week alone, LexisNexis has accumulated more than 50 documents with the words "Rush Limbaugh and hypocrisy." That should make up for the 12 documents on his $300 million radio contract. This will have to stand in for this Sunday mornings' In Memoriam Punditwatch. I'm teaching and immediately going off with friends to the Goodman Theater. All of you will get to see the programs long before I see the TIVO replay. Send me your favorite moments and I'll post them. |
| Link posted by Steve Antler : 6:17 AM |
| Ha ha... |
| Ohioans are revolting. |
| Link posted by Steve Antler : 4:52 AM |
Friday, October 17, 2003
| Bad Week for Krugman |
| The economy is recovering and he's discovered the Bush tax cuts really do benefit the middle class.
Oh yeah, there's this too. As he puts it: "Almost every expert not on the administration's payroll now sees budget deficits equal to about a quarter of government spending for the next decade, and getting worse after that." (Don't you especially like that "almost?" It makes everything feel like grade school, no?) Anyway, here's a printout of budget deficits as a percentage of federal spending from 1952 thru 2006 as forecast by the Yale Model (which is not on the administration's payroll as far as I know). 
There are two things to notice here. First, "about a quarter" isn't really "almost" a quarter, as it turns out. It's more like 17% (which I think is almost 15%). And if we project downward in a straight line we don't get to 20% even within this decade. Second, we've been here before and we've done worse! The deficit was a larger percentage of total spending during the early 80's and 90's! What was Paul Krugman saying then? UPDATE: I can answer the question. Check page 77 of Paul Krugman's The Age of Diminished Expectations (1990, MIT Press): "While there are possibilities of disaster, they don't have to materialize. It is not only possible but probable that budget deficits at more or less the current level will continue for the rest of the century. There will be costs to these deficits, but they may never reach the crisis stage." UPDATE II: How is it Robert Samuelson can go over the same material and even reach similar conclusions without misrepresenting the numbers, calling people names, or leaving you with that sour feeling of intellectual violation? Is it that Samuelson is smarter than Krugman? A better economist? Willing to articulate both sides of an issue? More of a human being? UPDATE III: Here's the data smoothed, to better illustrate that the current deficit brings us nowhere near terra incognita. 
UPDATE IV: Don't write to tell me. I know Samuelson is a journalist, not a trained economist. This of course raises these matching question -- Is the problem that Paul is not a journalist? Or is it rather that he is an economist? I think maybe we better not go there. |
| Link posted by Steve Antler : 7:09 PM |
| Just Posted at MEMRI |
| The independent Iraqi weekly Al-Yawm Al-Aakher says training of Al-Qa'ida members, operating under the orders of Saddam's Presidential Palace, took place in Iraq two months before the September 11 attacks:
An Iraqi officer [reports that] a Land Cruiser belonging to the Personal Security Force (Al-Amn Al-Khass, responsible for the protection of Saddam Hussein) arrived and a senior officer from the Presidential Palace stepped out of it..."A few days later, about 100 trainees arrived. They were a mixture of Arabs, Arabs from the Peninsula [Saudi Arabia], Muslim Afghans, and other Muslims from various parts of the world. They were divided into two groups,... and the second...was the group that was trained to hijack airplanes. The training was under the direct supervision of major general (M. DH. L)...who now serves as a police commander in one of the provinces. Upon the completion of the training most of them left Iraq, while the others stayed in the country through the last battle in Baghdad against the coalition forces. Read it all, this could be a smoking gun or directions toward one or more of them. Then again, maybe it's the New Iraqi Free Press National Enquirer. |
| Link posted by Steve Antler : 2:46 PM |
| Maybe it was taken out of context? |
| My Way News: "WASHINGTON (AP) - A senior editor of the New Republic magazine is apologizing for saying in his column that the producers of the hit movie 'Kill Bill' are 'Jewish executives' who 'worship money above all else.'" |
| Link posted by Steve Antler : 11:54 AM |
| 16% of paragraph = "I" or "myself" or "my" |
| "'I know one of the worst side effects of this whole thing is the way it's ravaged my own image of myself, taken my mind off the higher things, restricted my ability to become involved in good causes or with other people -- I honestly feel so screwed up tight that I am incapable, I think, of giving myself, or really loving.'" (Emphasis added.)
William Clinton, writing about the Vietnam War (in or around 1968)... Quoted in Lucianne Goldberg's review of Rich Lowry's Legacy: Paying the Price for the Clinton Years ( Regnery, 470 pp., $27.95) |
| Link posted by Steve Antler : 10:52 AM |
| Percentiles are not people... |
| Truck and Barter on inequality and mobility. Good post, lots of links. |
| Link posted by Steve Antler : 6:52 AM |
| "Because we're important too! -- That's why!" |
| In the great tradition of Robert Nozik's Why Do Intellectuals Oppose Capitalism?, Thomas Sowell wonders why, puzzlingly, American journalists wage a never-ending war on those who are successful. |
| Link posted by Steve Antler : 6:48 AM |
| In case you missed it elsewhere... |
| Here's George W Bush's official blog. (You thought I was kidding, right?) |
| Link posted by Steve Antler : 6:34 AM |
| You gotta just love this stuff... |
| Great little bibliography built into this (Do Budget Deficits Raise Long-Term Interest Rates?), even if you do have to go to the library:
But is there any evidence that long-term interest rates rise because of budget deficits? In the 1980s, economists began to examine the facts.[2] What they found, as Robert Barro reported in his 1987 Macroeconomics textbook, is that 'this belief does not have evidence to support it.'[3] A 1985 analysis by Paul Evans found that historical periods of high budget deficits in the United States did not coincide with high interest rates.[4] A 1993 survey of academic studies by John Seater concluded, 'They are inconsistent with the traditional view that government debt is positively related to interest rates.'[5] Confronted with this evidence, some began to say that it was not nominal interest rates that were driven up by deficits but real interest rates. But the only way deficits could raise real rates without raising nominal rates would be if deficits caused inflation to fall, which does not make sense. We were sent there by Rich Lowry: [I]nterest rates did not cooperate with the Clintonites...The Clinton budget passed and was signed into law August 1993. In February 1994, just six months later, Alan Greenspan raised rates to address new inflation worries. This was the first in a series of seven increases during the next year. By April 1994, long-term rates were 7.4 percent, higher than when Clinton took office, and the 10-year rate peaked around the time Republicans captured Congress in November 1994... Then, there are the other uncomfortable facts. The deficit reached its 1990s high of $290 billion in fiscal year 1992 and fell to $255 billion in fiscal year 1993, a roughly $40 billion reduction even before Clinton got started. Why was the deficit already declining? The deficit tends to rise during recessions, and fall during expansions. It climbed with the recession of 1990-91, before declining again as the recovery took hold. So, just as Clinton was taking office, natural forces were already working to reduce the deficit. |
| Link posted by Steve Antler : 5:55 AM |
Thursday, October 16, 2003
| In the Great Tradition of... |
| The Foundation which bears his name continues in the same spirit to maintain the same tradition he so vigorously espoused. |
| Link posted by Steve Antler : 1:28 PM |
| When Will the States' Fiscal Crisis Heal Itself? |
| The Census Bureau of the Department of Commerce announced today that advance estimates of U.S. retail and food services sales for September, adjusted for seasonal, holiday, and trading-day differences, but not for price changes, were $320.6 billion, a decrease of 0.2 percent...from the previous month, but up 7.5 percent...from September 2002. Total sales for the July through September 2003 period were up 6.4 percent...from the same period a year ago. The July to August 2003 percent change was revised from +0.6 percent...to +1.2 percent...
Sales taxes have been stagnating -- here are actual and (20003:3 and thereafter) Yale-model-forecast total values of indirect business taxes collected by state and local governments. As you can see, substantial recovery of these revenues is slated to begin now, possibly even today with the the above announcement retail sales are up over 7% compared with last year. S&L Indirect Business Taxes Collected ($B) 20023 ==112.4 20024 ==111.5 20031 ==111.2 20032 ==111.6 20033 =113.1 20034 =114.6 20041 =116.2 20042== 117.8 20043== 119.5 20044== 121.2 So when can we expect a recovery of state budgets? Here, finally, is the NIPA surplus/deficit of state and local governments ($B) as forecast by Fairmodel: 20033 ==/-25.4 20034 ==-17.2 20041 ==/-8.2 20042 ==/0.4 20043 ===/7.6 Red ink gives way to black ink during the first or second quarters of next year, largely owing to the sales tax recovery. UPDATE: Here's anecdotal evidence from the GBST (Great Bloggers' State of Tennessee): Strong growth in sales tax collections - an indicator of a growing economic recovery - generated $10.8 million more than was projected in September, and for the two-month period, the sales tax has generated $21.9 million in surplus revenue. |
| Link posted by Steve Antler : 6:19 AM |
Wednesday, October 15, 2003
| Let's Cut to the Chase... |
| I'll finish the Damocles Index series, but let's look at the real issue right now.
Here's the best measure of the burden of all our foreign borrowing, regardless of whether this originated to finance government deficits or imports. This simple measure is total US private plus public interest payments to rest-of-world, expressed as a percent of our GDP. 
(The source of these numbers is the Yale US model database.) As the chart shows, the US changed from international creditor to major international debtor during the mid-1980's. The dramatic plunge into debt stabilized by the late 80's, but around 1992 the downward movement re-engaged for roughly five years, when it apparently stabilized into our current position. And just what is this position? What is the burden of debt? It amounts to just a bit under 1.2% of GDP, denominated in US Dollars. While we might wish the number was lower, it is doubtful any foreign investor or domestic economic analyst -- so long as he is not politically motivated to reach pessimistic conclusions -- could consider this a high enough burden to constitute anything like a default risk. Will someone please enlighten me? What in the world is Krugman talking about?!? |
| Link posted by Steve Antler : 9:58 PM |
| Medicare Premiums to Jump 13.5 Percent |
| I think this is real news:
WASHINGTON - Medicare premiums will rise next year by 13.5 percent to $66.60 a month for about 40 million Americans in the program, the third-largest increase in its history, the government said Wednesday...Reflecting rapidly escalating health care costs, the $7.90-per-month increase in premiums is for the portion of Medicare that pays doctor visits and other expenses outside of hospital care. Meantime, key lawmakers in Congress working on a prescription drug bill moved closer to a consensus to require higher-income seniors to pay more than other beneficiaries for health coverage under Medicare. If enacted, that would mark a historic policy shift for a program that has always provided a standard benefit at a fixed price for every participant. |
| Link posted by Steve Antler : 7:31 PM |
| JUST IN |
| The JEC has just released new reports on the strengthening economy and the incredible shrinking-but-still-massive deficit. |
| Link posted by Steve Antler : 12:34 PM |
| More Damocles Numbers... |
| We continue to apply the Lehman Damocles index to test for weakness in the US economy, in connection with Paul Krugman's inappropriate use of the index.
Here's the best I can come up with so far for Damocles Indicator #4: 
We seem to be moving up there, no? Damocles' alarm threshold is 50%. The index as computed here measures below 35% -- but it is, indeed, testing an historic high. I'm using credit market assets held by rest of world as a proxy here. I'm embarrased to say that, while one can easily swim in international data, it seems incredibly difficult to locate time series of US external and short-term external debt! UPDATE: Don Luskin writes: On the chart of US credit market assets held by the rest of the world as a % of GNP, I think a very important qualifier is in order. It's one made by the Lehman authors, and even by Krugman. It's that in the typical emerging markets Damocles analysis, such debt is denominated in some other currency than the country's own. I would argue that this currency risk component of foreign indebtedness is what gives *foreign* indebtedness its special, and especially risky, character. Without that character, of what significance is it that some or all of one's debt happens to be to extra-nationals? To keep the scoring "fair" then, we shouuld measure the US foreign indebtedness not denominated in dollars. I'll bet the amount is trivial. |
| Link posted by Steve Antler : 12:07 PM |
| Sounds very much like you-know-who... |
| I wonder whether Paul Krugman has been reading Marshall Auerback, who seems to have been saying this for a long time:
A country with an unsustainable external debt burden, an overvalued exchange rate leading to increasingly large current account deficits, a huge and deteriorating fiscal position: Argentina 2001 or the USA 2003?...We have examined this parallel before in the context of trying to assess how the US extricates itself from its current mess... |
| Link posted by Steve Antler : 10:36 AM |
| I never knew you could hear someone rolling his eyes over the telephone... |
| Don Luskin has done major investigative work on Krugman's inappropriate use of the Lehman Damocles index:
Next I called Lehman's UK-based Chief International Economist Russell Jones, the author of the report on Damocles. He'd seen Krugman's column -- I could hear the sound of his eyes rolling all the way from London. He told me "Krugman can be somewhat twisted and bitter on occasion. This analytic tool was not intended to be applied to developed countries. Damocles gave him an in to write a piece he wanted to write. He's making a career out of this kind of thing." Strong words from Jones, who told me at the same time that Krugman is not wrong, in principle, to be concerned about the US's "rapid accumulation of debt," and that indeed the US scores poorly by Damocles' standards. But he firmly admonished, "to apply this to the US is not that relevant." A tip of the EconoPundit hat to Luskin for this investigation and for obtaining the Lehman Damocles documents. And, as well, we thank him for sharing these. |
| Link posted by Steve Antler : 8:10 AM |
| Holding Our Noses |
| Even Kristof is finding some good news:
...some elements of the budget (like much of our Iraq operation) seem too rooted in our own expectations. In northern Iraq, U.S. engineers reported that it would take $50 million to bring a cement factory in the area to Western standards. The U.S. general there, lacking that kind of money, found some Iraqis who got it going again for $80,000. The title, by the way, is Kristof's, but I must admit the words spring to mind every time I see that name. UPDATE: Sorry, had a senior moment there, I take it back! I forgot Kristof is the guy we thank for ending the Wison/Plame spy scandal! |
| Link posted by Steve Antler : 5:51 AM |
Tuesday, October 14, 2003
| Just In |
| New tax report from JEC:
The Internal Revenue Service (IRS) has released its most recent data on the distribution of income and personal income tax payments. The IRS data show that a small group of earners accounts for most federal income tax revenue and highlight how dependent tax revenues are on the incomes of the highest earners (e.g. the top 5% of income earners pay over 50% of all income taxes). Incomes of the top 1% of earners declined significantly in the recession year of 2001 (the data arrive with a two-year lag), leading to lower tax collections. |