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October 4, 2011

Latest Posts from Economist's View

Latest Posts from Economist's View

"The Biggest Policy-Related Threat"

Posted: 04 Oct 2011 02:25 AM PDT

Greg Ip notes that fiscal policy will be working against the recovery in coming months:

You know, if it weren't for the politicians, the economy would have a fighting chance. ...In America, the biggest policy-related threat is the fiscal tightening that will happen automatically in the next four months as prior stimulus expires and legislated cuts to discretionary spending bite. Barack Obama has proposed $447 billion in new or renewed stimulus to neutralise that threat, but it requires an ambitious deal in Congress' super committee, and odds of such a deal by its November 23rd deadline are shrinking. ... A global economy ... is being betrayed by politics. ...

The unemployed were abandoned long ago, and Congress isn't going to do anything meaningful to help now.

What Do We Mean When We Use The Word Uncertainty?

Posted: 04 Oct 2011 01:08 AM PDT

It's not uncertainty, it's fear:

Fear (of another recession), not uncertainty, by Antonio Fatas: What is keeping growth in advanced economies from recovering at a speed similar from previous recessions? ... There is one potential explanation that I find is being overemphasized: "it is all about uncertainty". And some make it more explicit and talk about regulatory uncertainty, uncertainty about taxes, about a sovereign default in Europe, etc.
No doubt that uncertainty plays a role in explaining macroeconomic fluctuations and I am a big fan of Nick Bloom's work, an economist at Stanford who has provided strong evidence that uncertainty increased during some of the most recent recessionary episodes.
But what do we mean when we use the word uncertainty to describe the current environment? I believe we are mixing two things: one is that the future is more difficult to predict (and this truly matches the notion of uncertainty) but the second one is that future scenarios are simply worse than what we thought before. This is not uncertainty, this is just bad news.
Here is an example:... businesses face uncertain demand but the real problem is that in the scenarios they are considering, most look bad and they have recently gotten worse...
My preference would be to use the word fear rather that the word uncertainty to describe what we are seeing these days. ... On average the future does not look great and this is the real problem.

links for 2011-10-04

Posted: 04 Oct 2011 12:06 AM PDT

Cantor Says Obama’s Job Bill Is Dead

Posted: 03 Oct 2011 02:16 PM PDT

That the jobs bill is dead is not a surprise, but given the national unemployment crisis we face the lack of will and urgency in Congress to do anything about it ought to add fuel to whatever fire recent protests have ignited. We need to do something to help the unemployed now, not tomorrow -- more should have been done already -- and the action needs to be bold and aggressive. Don't these people have any sense what it's like to look for a job for months and months and not be able to find one while every bit of hard-earned savings and then some withers away (if there's any savings to begin with given the stagnation in wages in recent decades)? Do they understand what the unemployed face in their day to day lives? Where's the compassionate conservatism we heard so much about? Do Republicans really think that trade agreements and tax cuts for government contractors -- while opposing a payroll tax cut -- is going to provide the help that is needed? And what's wrong with the centrist Democrats who are voting against Obama's plan? Whose interests are they protecting? It sure isn't the jobless. Like I said, this isn't unexpected, but (obviously) it still irks me to see it play out in this way:

Cantor: Obama's Job Bill Is Dead in Congress, by Janet Hook and Carol E. Lee, Washington Wire: President Barack Obama's $447 billion jobs bill was declared dead in Congress Monday, as Majority Leader Eric Cantor (R., Va.) said he did not expect the House to take it up as a package.
Mr. Cantor announced the House would consider elements of Mr. Obama's jobs agenda in the coming month, including trade agreements ... and a tax break for government contractors. But asked if the president's jobs bill as a whole is dead, Mr. Cantor replied, "Yes."
"The president continues to say, 'Pass my bill in its entirety,'" Mr. Cantor said in a press briefing. "As I've said from the outset, the all-or-nothing approach is just unacceptable."...
Mr. Obama ... has been flying around the country holding up a copy of his jobs bill and insisting that the House and Senate pass it "right away."Earlier on Monday, Mr. Obama said he wants Congress to schedule a vote this month and will "be insisting that we have a vote on this bill" in upcoming discussions with House and Senate leaders.
The Republican-led House isn't Mr. Obama's only obstacle. In the Senate,... top Democrats concede they would not have the votes within their own party ranks to pass the bill. Some conservative Democrats say the bill calls for spending too much. Oil state Democrats oppose proposed tax increases on oil and gas companies. ...
Although some Republicans have indicated they are willing to go along with Mr. Obama's payroll tax extension, that was not among the elements of the bill that Mr. Cantor said would be brought to the House floor. ...
Officials said the White House's goal over the next few months is to get elements of Mr. Obama's jobs bill passed, and in the process work to isolate Republicans as obstructionist in the event that doesn't happen.
Noting that Democrats have criticized elements of the president's jobs bill, Mr. Cantor said, "The president's got some whipping to do on his own side." ...

The administration ought to be able to make Republicans pay for their obstructionism if they have any political skill at all, but their past history leads to doubts that they can. This is a big part of the problem.

Stiglitz: To Cure the Economy

Posted: 03 Oct 2011 12:24 PM PDT

Joe Stiglitz argues that our economic problems are deeper than most people realize:

To Cure the Economy, by Joseph E. Stiglitz, Commentary, Project Syndicate: As the economic slump that began in 2007 persists, the question on everyone's minds is obvious: Why? Unless we have a better understanding of the causes of the crisis, we can't implement an effective recovery strategy. And, so far, we have neither. ...
The financial sector's inexcusable recklessness, given free rein by mindless deregulation, was the obvious precipitating factor of the crisis. The legacy of excess real-estate capacity and over-leveraged households makes recovery all the more difficult.
But the economy was very sick before the crisis; the housing bubble merely papered over its weaknesses. Without bubble-supported consumption, there would have been a massive shortfall in aggregate demand. ... So anyone who talks about the consumer "coming back" – even after deleveraging – is living in a fantasy world.
Fixing the financial sector was necessary for economic recovery, but far from sufficient. To understand what needs to be done, we have to understand the economy's problems before the crisis hit. ...[continue reading]...

Sachs: Corporatocracy is Replacing Democracy

Posted: 03 Oct 2011 09:45 AM PDT

Jeff Sachs:

Paul Ryan, American Values and Corporatocracy, by Jeff Sachs: My new book, The Price of Civilization, describes why America needs a "mixed economy," one where a more effective federal government regulates business and invests alongside the business sector. In his review of my book, Congressman Paul Ryan, an avowed libertarian, describes my book as anti-American in its values. ...
Ryan ignores the extensive evidence in the book showing that Americans support the values of a mixed economy, not of Ryan's free-market libertarianism. Americans today by large majorities support public education, Medicare, Social Security, help for the indigent, stronger regulation of the banks, and higher taxation of the rich. ...
On issue after issue, Washington is presently bucking the public's values, rather than respecting them. A majority of the public wants to preserve social programs, but they are being cut anyway. A majority wants higher taxes on the rich, but they are being cut rather than raised. A majority wants to end the wars, but they continue anyway.
The reason is the following. America is losing its democracy as our politicians trade their votes for campaign contributions from the corporate lobbies. We have a corporatocracy rather than a democracy, and Ryan stands at the center of it. The Wall Street Journal, which commissioned Ryan's review of my book, is the leading print mouthpiece for the corporatocracy.
Since entering Congress in 1999, Ryan has helped to prevent effective oversight and regulation of the banking sector. ... Ryan's re-elections have been consistently funded by the insurance, banking, and homebuilding industries. Banks such as the Bank of America and Citigroup, two of the largest bailout recipients, have been high on Ryan's contribution list; so too have major lobbying groups for the financial industry, such as the American Bankers Association and the Securities Industry & Financial Market Association.
America's corporatocracy is governed by vested interests rather than moral or economic principles. After financial deregulation led to the 2008 collapse, Ryan's enthusiasm for free enterprise suddenly took a second place to his new enthusiasm to rescue the banks through a giant taxpayer-funded bailout. The "free-market" Wall Street Journal similarly defended the bank bailout, all of a sudden lecturing its readers about market failures and the limits of the free market.
As soon as the banks were saved with public money, Ryan, the Journal, and most of the political class swung back to deregulation. Ryan voted against reforms of Wall Street. He inveighed against taxing or otherwise controlling the bonuses received by the CEOs and senior managers of the bailed-out banks. When it comes to the poor, however, Ryan has a different response: slash Medicaid spending, come what may. ...
My views ... run to the very idea of America: a democracy of the people, by the people, and for the people, not a government of the corporations, by the corporations and for the corporations. ...

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