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August 7, 2012

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Latest Posts from Economist's View


Posted: 15 Jul 2012 12:06 AM PDT
Posted: 14 Jul 2012 09:09 AM PDT
Watching Amir Sufi give this paper arguing that a fall in aggregate demand rather than uncertainty, structurual change, and so forth is the major reason for the fall in employment (with the implication that replacing the lost demand can help the recovery):
What Explains High Unemployment? The Aggregate Demand Channel, by Atif Mian, University of California, Berkeley and NBER Amir Sufi University of Chicago Booth School of Business and NBER, November 2011: Abstract A drop in aggregate demand driven by shocks to household balance sheets is responsible for a large fraction of the decline in U.S. employment from 2007 to 2009. The aggregate demand channel for unemployment predicts that employment losses in the non-tradable sector are higher in high leverage U.S. counties that were most severely impacted by the balance sheet shock, while losses in the tradable sector are distributed uniformly across all counties. We find exactly this pattern from 2007 to 2009. Alternative hypotheses for job losses based on uncertainty shocks or structural unemployment related to construction do not explain our results. Using the relation between non-tradable sector job losses and demand shocks and assuming Cobb-Douglas preferences over tradable and non-tradable goods, we quantify the effect of aggregate demand channel on total employment. Our estimates suggest that the decline in aggregate demand driven by household balance sheet shocks accounts for almost 4 million of the lost jobs from 2007 to 2009, or 65% of the lost jobs in our data.
And, from the conclusion:
Alternative hypotheses such as business uncertainty and structural adjustment of the labor force related to construction are less consistent with the facts. The argument that businesses are holding back hiring because of regulatory or financial uncertainty is difficult to reconcile with the strong cross-sectional relation between household leverage levels, consumption, and employment in the non-tradable sector. This argument is also difficult to reconcile with survey evidence from small businesses and economists saying that lack of product demand has been the primary worry for businesses throughout the recession (Dennis (2010), Izzo (2011)).
There is certainly validity to the structural adjustment argument given large employment losses associated with the construction sector. However, we show that the leverage ratio of a county is a far more powerful predictor of total employment losses than either the growth in construction employment during the housing boom or the construction share of the labor force as of 2007. Further, using variation across the country in housing supply elasticity, we show that the aggregate demand hypothesis is distinct from the construction collapse view. Finally, structural adjustment theories based on construction do not explain why employment has declined sharply in industries producing tradable goods even in areas that experienced no housing boom.
Posted: 14 Jul 2012 06:03 AM PDT
Robert Reich says "You need to make a ruckus":
The Selling of American Democracy: The Perfect Storm, by Robert Reich: Who's buying our democracy? Wall Street financiers, the Koch brothers, and casino magnates Sheldon Adelson and Steve Wynn. And they're doing much of it in secret. It's a perfect storm:
The greatest concentration of wealth in more than a century — courtesy "trickle-down" economics, Reagan and Bush tax cuts, and the demise of organized labor.
Combined with…
Unlimited political contributions — courtesy of Republican-appointed Justices Roberts, Scalia, Alito, Thomas, and Kennedy, in one of the dumbest decisions in Supreme Court history, "Citizens United vs. Federal Election Commission"...
Combined with…
Complete secrecy about who's contributing how much to whom — courtesy of a loophole in the tax laws that allows so-called non-profit "social welfare" organizations to accept the unlimited contributions for hard-hitting political ads.
Put them all together and our democracy is being sold down the drain.
With a more equitable and traditional distribution of wealth, far more Americans would have a fair chance of influencing politics. ... Alternatively, inequality wouldn't be as much of a problem if we had strict laws limiting political spending or, at the very least, disclosing who was contributing what. 
But we have an almost unprecedented concentration of wealth and unlimited political spending and secrecy. 
I'm not letting Democrats off the hook. Democratic candidates are still too dependent on Wall Street casino moguls and real casino magnates... But make no mistake. Compared to what the GOP is doing this year, Democrats are conducting a high-school bake sale. ...
You need to make a ruckus. Don't fall into the seductive trap of cynicism. That's what the sellers of American democracy are counting on. If you give up on our system of government, they win everything.  
This coming Monday, for example, the Senate has scheduled a cloture vote on the DISCLOSE ACT, which would at least require that outfits like the Chamber of Commerce and Karl Rove's "Crossroads GPS" disclose who's contributing what. Contact your senators... If the DISCLOSE ACT is voted down, hold accountable those senators (and, when and if it gets to the House, those House members) who are selling out our democracy for the sake of their own personal ambitions.
I believe the political empowerment of the working class -- replacing, for example, what was lost with the demise of unions -- is the best way to make politicians more responsive to the needs of lower income households. The problem, of course, is how to make this happen.
Posted: 14 Jul 2012 05:22 AM PDT
I am here today.

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