- Paul Krugman: Plutocrats Against Democracy
- Links for 10-24-14
- 'How Mainstream Economic Thinking Imperils America'
- ''A Few Comments on QE''
- 'The Effects of a Money-Financed Fiscal Stimulus'
- 'Does Raising the Minimum Wage Hurt Employment? Evidence from China'
- Links for 10-23-14
Posted: 24 Oct 2014 12:24 AM PDT
"What's a plutocrat to do?":
Plutocrats Against Democracy, by Paul Krugman, Commentary, NY Times: ...The ... political right has always been uncomfortable with democracy..., there is always an undercurrent of fear that the great unwashed will vote in left-wingers who will tax the rich, hand out largess to the poor, and destroy the economy. ...
This is a fantasy. ... All advanced nations have had substantial welfare states since the 1940s... But you don't, in fact, see countries descending into tax-and-spend death spirals — and no, that's not what ails Europe.
Still, while the "kind of politics and policies" that responds to the bottom half of the income distribution won't destroy the economy,... the top 0.1 percent is paying quite a lot more in taxes right now than it would have if Mr. Romney had won. So what's a plutocrat to do?
One answer is propaganda: tell voters, often and loudly, that taxing the rich and helping the poor will cause economic disaster, while cutting taxes on "job creators" will create prosperity for all. There's a reason conservative faith in the magic of tax cuts persists no matter how many times such prophecies fail (as is happening right now in Kansas): ...
Another answer, with a long tradition in the United States, is to make the most of racial and ethnic divisions — government aid just goes to Those People, don't you know. And besides, liberals are snooty elitists who hate America.
A third answer is to make sure government programs fail, or never come into existence, so that voters never learn that things could be different.
But these strategies for protecting plutocrats from the mob are indirect and imperfect. The obvious answer is...: Don't let the bottom half, or maybe even the bottom 90 percent, vote.
And now you understand why there's so much furor on the right over the alleged but actually almost nonexistent problem of voter fraud, and so much support for voter ID laws that make it hard for the poor and even the working class to cast ballots. American politicians don't dare say outright that only the wealthy should have political rights — at least not yet. But if you follow the currents of thought now prevalent on the political right to their logical conclusion, that's where you end up.
The truth is that a lot of what's going on in American politics is, at root, a fight between democracy and plutocracy. And it's by no means clear which side will win.
Posted: 24 Oct 2014 12:06 AM PDT
Posted: 23 Oct 2014 01:01 PM PDT
Posted: 23 Oct 2014 11:04 AM PDT
After A Few Comments on QE, Bill McBride ends with:
...My view is QE was not a panacea, but overall QE was a success. I was a frequent critic of the Fed prior to the financial crisis - I think the Fed was almost anti-regulation during the housing bubble, and initially the Fed was behind the curve when the crisis was looming - however once Bernanke became aware of the severity of the crisis, the Fed was aggressive and effective. Perhaps they were a little slow in implementing QE3 - and with low inflation an argument could be made now to extend QE - but overall I think QE was a success.
Posted: 23 Oct 2014 09:13 AM PDT
The Effects of a Money-Financed Fiscal Stimulus, by Jordi Galí, September 2014: Abstract I analyze the effects of an increase in government purchases financed entirely through seignorage, in both a classical and a New Keynesian framework, and compare them with those resulting from a more conventional debt-financed stimulus. My findings point to the importance of nominal rigidities in shaping those effects. Under a realistic calibration of such rigidities, a money-financed fiscal stimulus is shown to have very strong effects on economic activity, with relatively mild inflationary consequences. If the steady state is sufficiently inefficient, an increase in government purchases may increase welfare even if such spending is wasteful.
Posted: 23 Oct 2014 08:36 AM PDT
This was in today's links (which were posted later than usual):
Does Raising the Minimum Wage Hurt Employment? Evidence from China, by Prakash Loungani, iMFDirect: ...China accounts for nearly 25 percent of the global labor force...
Our study is the first to use data on minimum wage changes for over 2400 counties in China. We combine the information on minimum wages changes with employment data from the Annual Survey of Industrial Firms, which covers over 70 percent of China's manufacturing employment. While China instituted a minimum wage system in 1994, enforcement of compliance with the law was significantly tightened only in 2004; the results described below are based on post-2004 data.
So what does the evidence show? On average across all firms, we find that an increase in the minimum wage leads to a small decline in employment: a 10% percent increase in the minimum wage lowers employment by a little over 1% percent.
The impact differs across firms, being greater in low-wage firms than in high-wage firms. ... In the decile of firms with the lowest wages, a 10% increase in minimum wages lowers employment by nearly 1.8%. The impact declines steadily such that for the decile of firms with the highest wages, the impact is 0.6%.
We also find that the impact of the minimum wage on a firm's wages depends on where the firm stands in the distribution of wages. On average, an increase in the minimum wage raises wages by about 1%. But ... in the lowest decile, the increase is about 2.5%. The effect declines steadily and there is essentially no impact for the highest decile. ...
Posted: 23 Oct 2014 12:06 AM PDT
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