Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts

Monday, January 07, 2019

Quote of the Day

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance (although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has every implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

---The Economics of Soaking The Rich, Paul Krugman

Saturday, June 09, 2018

Trade War

Sunday, March 12, 2017

What The President (and all of us) Could Learn About The Economy

Great piece in today's Times about the economy, especially if you want to know the basics about economics. Here was my favorite part.

Oh, and about the dollar. Finally, the president’s economists will need to answer his question about the dollar. Here’s the simple version: The value of the dollar in foreign-exchange markets is just a price. Like other prices, whenever it changes, some people gain, and others lose. It is not useful to think of a stronger or a weaker dollar as either good or bad. One has to look at the situation at hand and the underlying drivers of the change.

Yep. I've heard so many arguments over the years for both strong and weak dollars that it gets frustrating after a while. This sums one simple paragraph sums up why it should be analyzed as such.

Saturday, July 02, 2016

Our Mice Are Alive, Your's Are Dead

California is now the 6th largest economy in the world? All while being run by those tax and spend Democrats? GDP at 4 percent? Surplus at $11 billion? Compare this to Kansas and Louisiana.

I know it's hard to let go of something so personal as an economic ideology but the definition of insanity is doing the same thing over and over again and expecting a different result. Supply side economics doesn't work. It never did. Conversely, raising taxes on the wealthy and increasing government spending improves economies. It ALWAYS has.

Wednesday, April 13, 2016

What's Behind the Revolt Against Global Integration?

Here's a great piece from the post on globalization and why, despite the evidence, people are revolting against it. The evidence?

This broad program of global integration has been more successful than could reasonably have been hoped. We have not had a war between major powers. Global standards of living have risen faster than at any point in history. And material progress has coincided with even more rapid progress in combating hunger, empowering women, promoting literacy and extending life. A world that will have more smartphones than adults within a few years is a world in which more is possible for more people than ever before.

Sadly, far too many people on my side of the aisle can't accept this.

Friday, May 29, 2015

Fantastic Words

I've been posting in a conversation about the minimum wage over at Real Clear Politics. Check out this gem from a fellow posting under the title "Actual Moderate Conservative."

Minimum wage laws address imbalances in bargaining power due to an oversupply of labour at lower level positions. While capitalism is by far the superior economic system, that imbalance is a natural outcome of capitalism, like it or not. Many things are a natural outcome of capitalism, and yet reasonable people (excluding hard libertarians, of course) will agree that our social compact dictates that we maintain laws to prevent some of them - monopolies, child labour, unsafe work conditions, etc. It is for this reason that America, and every other western nation, has always had a mixed economy of mostly capitalism, with some limitations (such as those above) mixed in to facilitate capitalism. 

Most even-handed people that i know fully acknowledge that minimum wage laws are necessary as part of that package of laws that establish limits on the natural outcomes of capitalism and maintain social order. If that is the case, then it is not a matter of having a minimum wage or not. It is, rather, what that level should be. To do that, one must establish what one is trying to accomplish with it - in other words, go back to first principles. 

Most of the posts here are simply arguing about issues like the impact of minimum wages as if there was no data on the subject. There is plenty, and there are plenty of real-world examples in the US AND (I cannot emphasize this enough) around the world. While the data is mixed, it seems clear from the evidence that minimum wage increases - at least at the levels that have actually been done, rather than silly $1,000/hour thought experiments - are washed out in the economy, as there are too many moving parts in any modern economy. 

So you have something that has virtually no macro impact but affects the real lives of hundreds of thousands of people. My suggestion is that people should be talking not about what the impact is, so much as they should be thinking about what the purpose of minimum wage laws are, and whether the current levels are accomplishing that goal.

I wish there were more conservatives out there like this person!

Wednesday, April 29, 2015

Thursday, February 26, 2015

How To Govern An Economy

Minnesota got another shout out for having a great economy despite the "destruction" that raising taxes, increasing the minimum wage, and increasing government spending brings with it.

Between 2011 and 2015, Gov. Dayton added 172,000 new jobs to Minnesota's economy -- that's 165,800 more jobs in Dayton's first term than Pawlenty added in both of his terms combined. Even though Minnesota's top income tax rate is the 4th-highest in the country, it has the 5th-lowest unemployment rate in the country at 3.6 percent. According to 2012-2013 U.S. census figures, Minnesotans had a median income that was $10,000 larger than the U.S. average, and their median income is still $8,000 more than the U.S. average today.

Take note that the predictions from Republicans were completely wrong.

I wonder if they'll get the message in Wisconsin...

Tuesday, February 10, 2015

"It's Just Made Up"

From Ronald Reagan's chief economist...

As for the idea that cutting regulations will lead to significant job growth, Bartlett said in an interview, "It's just nonsense. It's just made up." Government and industry studies support his view.

The Bureau of Labor Statistics, which tracks companies' reasons for large layoffs, found that 1,119 layoffs were attributed to government regulations in the first half of this year, while 144,746 were attributed to poor "business demand."

I think things being just made up are a cornerstone of conservative economic theory.

Friday, November 28, 2014

Evil Liberals Spur Third Fastest Revenue Growth In The Country

As I have stated previously...

Part of the reason is that Minnesota has structured state tax collections to take advantage of progressive taxes, which levy higher tax rates the wealthier a person becomes, Hamline University economics professor Stacie Bosley said. “There is a heavier reliance on the income tax [in Minnesota],” she said. “If you see the most gains in the highest income groups, a progressive tax system gets more revenue.”

Wait...huh? I thought taxes were JOB KILLERS. There goes that fucking theory...again!

Tuesday, September 16, 2014

“We’re going to be bankrupt in two or three years if we keep going his way.”

The state of Kansas has become an excellent example of exactly what happens when you run a government with they type of policies championed by right wing bloggers.

In his 40 years living in Kansas, Konrad Hastings cannot remember voting for a Democrat. He is the type who agonizes over big purchases, trying to save as much money as possible. He is against stricter gun laws, opposes abortion in most cases and prefers less government involvement in his life.

But when he casts his ballot for governor in November, he plans to shun the leader of this state’s conservative movement, the Republican incumbent, Sam Brownback, and vote for the Democratic challenger. “He’s leading Kansas down,” said Mr. Hastings, 68, who said he voted for Mr. Brownback four years ago, when he easily won his first term. “We’re going to be bankrupt in two or three years if we keep going his way.”

Apparently, other Republicans feel the same way because Brownback is down in the polls in a deep red state like Kansas. Just to put this in perspective...Barack Obama lost Kansas by more than 20 points in the 2012 election. And look who else is in trouble because of his policies. The one thing that both Kansas and Wisconsin have in common?

A right wing blogger view of government and economies.

Ironic that their predictions of doom and gloom are actually self-created:)

Speaking of the fall elections, where is that Republican wave I kept hearing about? Kay Hagan is pulling away from Thom Tillis in North Carolina. Bruce Braley (not a good candidate) has continued to stay ahead of Jodi Ernst. The GOP challengers in Alaska and Arkansas are barely staying ahead of their opponents. This does not look at all like what we saw in September of 2010.

Perhaps it has something to do with the fact that the GOP approval rating is half of the president's approval rating. 

Sunday, June 29, 2014

NPR Plays The Cult of Both Sides

Last Friday, the president spoke in my hometown and NPR in Minnesota aired a post speech analysis. At about the 12 minute mark, Keith Downy, chair of the Minnesota Republican party joins the conversation and, thus, any criticism of NPR being liberal goes directly out of the fucking window. For the next few minutes, Downy spins the usual yarn about how the free market can just sort itself out. If we had only left the government out of it in 2008, all would be well with our economy today.

What fucking planet are these people living on?

Worse, he's being terribly dishonest because he would have done the exact same thing the president did. I'd like Mr. Downy or any other free market fundamentalist to point to real world evidence of their theory. Show me a recession that was that bad and then show me how doing nothing worked out.

Of course the real treat of the segment was Andy from Sioux Falls, a small business owner fed up with federal taxes, who comes in at around 14 minutes into the segment. After hearing his remarks, I have to question whether or not this man was an actual small business owner or whether he was a Tea Party troll calling in to wax Ayn Rand. No business owner (large, medium, or small) turns down making more money because they are worried about paying federal taxes. What a ludicrous bunch of nonsense! After Downy's ad hom on the woman the president met with to discuss local economic concerns, I was left to wonder how NPR let themselves get into such a position.

When will the "liberal" media stop playing the cult of both sides? Sometimes there is only one side to a story. Supply side economics doesn't work. Even the guys that came up with it (David Stockman, Bruce Bartlett) have admitted they were wrong. You can't simply ignore aggregate demand and pretend it doesn't exist. The problem with our economy today is that there are not enough people buying things so businesses don't hire people. There isn't enough population at the top to support our economy.

The middle class is the engine that drives our economy and when they have more money, our economy will improve.

Monday, October 14, 2013

Inhaling Inelastic Demand

The Times had a great piece in yesterday's paper which illustrated yet again how the relative inelasticity of demand in many health care markets leads directly to unfair pricing and erosion of consumer surplus.

Unlike other countries, where the government directly or indirectly sets an allowed national wholesale price for each drug, the United States leaves prices to market competition among pharmaceutical companies, including generic drug makers. But competition is often a mirage in today’s health care arena — a surprising number of lifesaving drugs are made by only one manufacturer — and businesses often successfully blunt market forces.

Exactly right. With only one manufacturer, the sole supplier can set his price way above the natural equilibrium of the market. That's why in cases like this the government needs to step in to improve market efficiency.

Of course, as Stiglitz points out many times in his book, the government doesn't actually do that and, instead, makes the problem worse.

Thanks in part to the $250 million last year spent on lobbying for pharmaceutical and health products — more than even the defense industry — the government allows such practices. Lawmakers in Washington have forbidden Medicare, the largest government purchaser of health care, to negotiate drug prices. Unlike its counterparts in other countries, the United States Patient-Centered Outcomes Research Institute, which evaluates treatments for coverage by federal programs, is not allowed to consider cost comparisons or cost-effectiveness in its recommendations. And importation of prescription medicines from abroad is illegal, even personal purchases from mail-order pharmacies

“Our regulatory and approval system seems constructed to achieve high-priced outcomes,” said Dr. Peter Bach, the director of the Center for Health Policy and Outcomes at Memorial Sloan-Kettering Cancer Center. “We don’t give any reason for drug makers to charge less.” 

And taxpayers and patients bear the consequences.

In trying to find common ground in this day and age of hyperpartisanship, we should look to the very simple solution of government actually doing its job as opposed to succumbing to special interests. This is where critics on the right always misread the left and it has to stop. As a Democrat, I don't want "bigger" government. I simply want better government and that means no more lobbying.

Let's just do that first and then we can worry about the size of government.

Sunday, May 19, 2013

What Happens When You Raise Taxes?


The Congressional Budget Office said the unanticipated $203 billion cut to the current-year shortfall -- a 24 percent drop from just three months ago -- comes from higher-than-expected individual and corporate tax payments and $95 billion in expected dividend payments from mortgage-finance companies Fannie Mae and Freddie Mac.   

The $845 billion in red ink in February would have put the deficit at 5.4 percent of economic output. The new projection would put the deficit at 4 percent of gross domestic production. The deficit was 7 percent of the budget in 2012 and 10.1 percent in 2009.

I'm confused. I thought that raising taxes and bailing out Fannie and Freddie would make things worse.

Saturday, April 06, 2013

To Hike or Not To Hike

There have been lot of rumblings of late regarding the minimum wage. The president has suggested that it be raised to $9 per hour. Elizabeth Warren has been a staunch champion lately on this issue has been summarily raked over the coals by the usual collection of mouth foamers with the same bullshit argument that claims they know something about economics and that liberals know nothing. Well, here are the facts, based on the simple economics they claim to grasp so easily.

If the minimum wage is set below the market equilibrium, it will have no effect on the efficiency of the market. Even though the government has set a price floor, the market is bearing a higher price so it doesn't matter. Yet, if the price floor is set above the market equilibrium, unemployment will occur because employers would be induced to higher fewer workers, given the higher cost they must now pay their employees. More people would enter the labor market and jobs would be scarcer.

So, the question becomes...where is the market equilibrium? Well, with so many different markets out there in this country, it would depend on which market you are talking about and that's why the mouth foamers can get away with painting with such a broad and dishonest brush. If there is to be a minimum wage increase, then there should be a series of studies that examine the market equilibrium for those markets most affected my the hike. I would think the service industry and the retail industry would be good places to start.

Monday, March 04, 2013

On Siglitz: Part Six

The sixth chapter of Joseph Stiglitz's The Price of Inequality is called, "1984 is Upon Us." In this section, Stiglitz details how many of the wealthy in this country try to frame the discussion in a way that benefits their interests, realizing that, in democracy, they cannot simply impose their rules on others. He posits that, in one way or another, they have to "co-opt" the rest of society to advance their agenda. They do this using their own, more subtle version of "newspeak."

An example of this can be seen in how our society responds to the word "socialism."

In American parlance, "socialism" is akin to communism , and communism is the ideology we battled for sixty years, triumphing only in 1989 with the fall of the Berlin Wall. Hence labeling anything as socialism is the kiss of death. Medicare is a single payer system-the government pays the bill, but the individual gets to choose the provider. Most of the elderly love Medicare. But many are convinced that government can't provide services efficiently that they believe that Medicare must be private.

Hence the famous "Keep your government hands off my Medicare" line. The irony here, aside from the obvious, is just how much socialism there is in this country that hasn't delivered the promised tyranny we now daily from the Right and, in fact, has been enormously beneficial to our country. Even famed "unbridled capitalist" Adam Smith wrote, in The Wealth of Nations, that the sovereign has

The duty of erecting and maintaining certain public works and certain public institutions which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a greater society.

Here, Smith champions elements of socialism and states that they are essential to any successful society. They have certainly worked out very well for us as we are the greatest nation this world has ever seen.

So, the dichotomy here is very frustrating given how the framing of American parlance operates. When we start discussing economics and the high level of inequality we have in this country, we see it again. As Stiglitz notes

Mainstream economics assumes that individuals have well defined preferences and fully rational expectations and perceptions. Individuals know what they want. But in this respect, traditional economics is wrong. If it were true, there would be little need for advertising. Corporations use recent advances in psychology and economics that extend our understanding and preferences and beliefs can be shaped to induce people to buy their products. 

Exactly right. One of the major problems I have with the whole "people act in their own enlightened self interest" meme is that..well...people don't. They are often foolish, emotionally unintelligent, and behave poorly, even engaging in criminal activity. That's why "leaving it all up to the free market to sort out" doesn't work given that the powerful people who run many of these markets can be characterized as all the above.

More importantly, people who don't really know what they want and aren't rational can be easily manipulated. Because of this simple fact, Stiglitz notes that most Americans have no earthly idea how much inequality there is in this country. They believe there is less economic inequality than there is, they underestimate its adverse economic effects, and they overestimate the costs of taking action.

In a recent study respondents on average thought that the top fifth of the population had just short of 60 percent of the wealth, when in truth that group holds approximately 85 percent of the wealth. Interestingly, respondents described an ideal wealth distribution as one in which the top 20 percent hold just over 30 percent of the wealth. Americans recognize that some inequality is inevitable, and perhaps even desirable if one is to provide incentives; but the level of inequality in American society is well beyond that level.

I've brought up this study before but I think it should be revisited given the context of Stiglitz's argument. People don't have any idea just how much the wealthy have in this country. Of course, any discussion about it results in Orwellian screeches and howls from the Right about "Marxism" and "class warfare." Yet this sort of wealth concentration at the top is exactly where liberal economic theory was born. Men like Adam Smith and Samuel Stiles bemoaned the hoarding of wealth by the aristocracy through mercantilism and other protectionist practices. In many ways, Stiglitz has argued the same thing in previous chapters by pointing out the endless cycle of rent seeking, incompetent government action and government inaction. Regardless of the times or the mechanism, the wealthy are continuing to do what they always do: consolidate power.

Now, this is usually the point when people ask, "how much inequality is bad and how much is good?" Well, before we do that, we have to get back to the perception problem.

Not only do Americans misperceive the level of inequality; they underestimate the changes that have been going on. Only 42 percent of Americans believe that inequality has increased in the past ten years, when in fact the increase has been tectonic. Misperceptions are evident, too, in views about social mobility. Several studies (here, here, and here) confirmed that perceptions of social mobility are overly optimistic.

So, we need to solve the problem of awareness first before we can detail any sort of serious metric regarding acceptable or unacceptable levels of inequality. That means we have to combat the 1984ish messaging we see every day from the 1 percent.

After we've done that, the best place to start is the most commonly used measure of inequality: the Gini-coefficient. There is also the Theil index, which has more sub group and sub region development, the Decile dispersion ratio, and the Share of income/consumption of the poorest x%. All of these metrics should be used in tandem for a more accurate analysis.

In taking a look at where we are today, it's obvious that we really do have some very serious perception problems.

Bear in mind, these figures are only through 2010, the last time the Census Bureau did their estimate. Two years ago we were at 46.9 which means we are very close to that .5 tipping point where we quite literally have a country of haves and have-nots. The study from above shows that Americans want our country to be more like Sweden. That's not surprising, given that there Gini coefficient is .23, nearly half of what our's is today.

Stiglitz has much more to say in this chapter regarding perceptions in terms of market behavior, fairness, and a whole host of other issues like the public view on estate taxes and bank recapitalization. It's quite a bit of information to absorb so I chose to focus on the more general theme of the chapter-the perception of inequality. For the finer points, as always, I recommend reading the book and the sources contained at the end of each section, some of which I have listed here.

So, the facts show that it's a more subtle version of newspeak, isn't it? It's not quite war is peace (although the Right's view on guns is certainly close to that) but it's still just as contradictory. The people of this country need to know just how much inequality there is and, as Stiglitz noted in previous chapters, the detrimental effects it is inflicting on our country.