Redirect


This site has moved to http://economistsview.typepad.com/
The posts below are backup copies from the new site.

March 8, 2013

Latest Posts from Economist's View


Latest Posts from Economist's View


Posted: 08 Mar 2013 12:24 AM PST
Conservatives have been warning about disasters ahead such as high inflation and interest rate spikes -- none of which have actually happened -- as a way of blocking policies they don't approve or, or to provide a basis to implement policies that accord with their ideological preferences. That is, they are "simply projecting their own preferences onto the alleged mind of the market," or worse, consciously constructing arguments about the "mind of the market" that they may or may not believe to support their ideological preferences:
The Market Speaks, by Paul Krugman, Commentary, NY Times: Four years ago, as a newly elected president began his efforts to rescue the economy and strengthen the social safety net, conservative economic pundits — people who claimed to understand markets and know how to satisfy them — warned of imminent financial disaster. Stocks, they declared, would plunge, while interest rates would soar. Even a casual trawl through the headlines of the time turns up one dire pronouncement after another. ...
Sure enough, this week the Dow Jones industrial average has been hitting all-time highs, while the current yield on 10-year U.S. government bonds is roughly half what it was...
O.K., everyone makes a bad prediction now and then. But ... the important point ... is that they came from people who constantly invoke the potential wrath of the markets as a reason we must follow their policy advice. Don't try to cover America's uninsured, they told us; if you do, you will undermine business confidence and the stock market will tank. Don't try to reform Wall Street, or even criticize its abuses; you'll hurt the plutocrats' feelings, and that will lead to plunging markets. Don't try to fight unemployment with higher government spending; if you do, interest rates will skyrocket.
And, of course, do slash Social Security, Medicare and Medicaid right away, or the markets will punish you...
So what the bad predictions tell us is that we are, in effect, dealing with priests who demand human sacrifices to appease their angry gods — but who actually have no insight whatsoever into what those gods actually want, and are simply projecting their own preferences onto the alleged mind of the market.
What, then, are the markets actually telling us? ... Those low interest rates are the sign of an economy that is nowhere near ... full recovery... Under these conditions, of course, the government should ... ramp up spending to support the economy. Unfortunately, policy makers have been intimidated by those false priests, who have convinced them that they must pursue austerity or face the wrath of the invisible market gods. ...
So the message from the markets is by no means a happy one. What the markets are clearly saying, however, is that the fears and prejudices that have dominated Washington discussion for years are entirely misguided. And they're also telling us that the people who have been feeding those fears and peddling those prejudices don't have a clue about how the economy actually works.
Posted: 08 Mar 2013 12:03 AM PST
Posted: 07 Mar 2013 05:47 PM PST
pgl follows up on the post about education costs:
Public Support for Education in Real Terms, EconoSpeak: Travis Waldron is rightfully worried about the cost of a college education and the diminishing support from the government:
Only 12 states now spend more on higher education than they did before the recession. The decrease in funding has contributed to the six-fold increase in college tuition over the last 30 years.
A six-fold increase? Let's be fair – consumer prices today are about 2.5 times what they were 30 years ago – so in real terms, college tuition is up by a factor of 2.5 or so. But OK – this is a staggering increase. Mark Thoma highlighted this as well and is getting some comments doubting that government support for education has declined. This table labeled "Table 3.15.6. Real Government Consumption Expenditures and Gross Investment by Function, Chained Dollars" shows that in real terms (2005$), total government spending on education was $690 billion in 2009 but was only $648 billion in 2011. I know that the austerity freaks in the Republican Party want to claim reducing government spending is good for growth but they are wrong on two fronts. Any fiscal restraint now prolongs this Great Recession. And this kind of austerity impairs the creation of human capital needed for long-term growth. It is not just the cutbacks in higher education that concern me but the general tendency for state and local governments to layoff teachers in order to balance their budgets.
Posted: 07 Mar 2013 11:05 AM PST
Via ThinkProgress:
...CNN Money reports:
Average tuition costs – the amount students paid in tuition and fees after state and institutional aid was taken into account — rose by 8.3% to an average of $5,189 in the 2011-12 school year ,the State Higher Education Executive Officers Association reported. In the previous academic year, students paid an average of $4,793.
At the same time, state and local funding for operating expenses, research and student aid fell by 9% to $5,896, the lowest level in 25 years, said association president Paul Lingenfelter.
The upward trend is likely to continue in 2013, since state governments plan to spend 10.8 percent less on higher education this year than they did in the year prior to the Great Recession. ... The decrease in funding has contributed to the six-fold increase in college tuition over the last 30 years. ...
We're headed in the wrong direction.
Posted: 07 Mar 2013 10:43 AM PST
Dean Baker's blog is called "Beat the Press," but he praised this effort (the original is quite a bit longer, and makes additional points):
The War On Entitlements, by Thomas Edsall, Commentary, NY Times: ...Currently, earned income in excess of $113,700 is entirely exempt from the 6.2 percent payroll tax that funds Social Security benefits... Simply by eliminating the payroll tax earnings cap — and thus ending this regressive exemption for the top 5.2 percent of earners — would, according to the Congressional Budget Office, solve the financial crisis facing the Social Security system.
So why don't we talk about raising or eliminating the cap – a measure that has strong popular, though not elite, support? ... The Washington cognoscenti are more inclined to discuss two main approaches...: means-testing of benefits and raising the age of eligibility for Social Security and Medicare. ... Means-testing and raising the age of eligibility as methods of cutting spending appeal to ideological conservatives for a number of reasons.
First, insofar as benefits for the affluent are reduced or eliminated under means-testing, social insurance programs are no longer universal and are seen, instead, as a form of welfare. Public support would almost certainly decline, encouraging further cuts in the future. Second, the focus on means-testing and raising the age of eligibility diverts attention from a much simpler and more equitable approach: raising the payroll tax to apply to the earnings of the well-to-do, a step strongly opposed by the ideological right. ... Third, and most important in terms of the policy debate, while both means-testing and eliminating the $113,700 cap on earnings subject to the payroll tax hurt the affluent, the latter would inflict twice as much pain. ...
Theda Skocpol ... of ... Harvard and an authority on the history of the American welfare state contended ... that policy elites avoid addressing the sharply regressive nature of social welfare taxes because, "at one level, it's very, very privileged people wanting to make sure they cut spending on everybody else" while "holding down their own taxes." ...

No comments: