Kentucky senator explains controversial proposed legislation that would subject Federal Reserve‘s monetary policy powers to outside scrutiny as it gets new life under a new administration – and may stand its best chance at becoming law.
SHANGHAI — Keith Bradsher Chinese officials cheered on the country’s stock market when it reached heady new highs, offering hope that it could become a new source of money to fix China’s economic problems. Then, last year, the market crashed.
“China is struggling with its own balancing act. The Chinese bond slump also stems from Beijing’s efforts to wring excess money from its financial system and to stop potential bubbles that may lurk in shadowy, hard-to-track corners of its economy. Should it continue with those efforts, bonds could fall further.”
Now another fast-growing part of China’s vast and increasingly complicated financial market is showing signs of distress: its $9 trillion bond market.
Prices for government and corporate bonds have tumbled over the past week, a sell-off that continued on Tuesday. The situation has spooked investors, prompting the government to temporarily restrain some trading and to make emergency loans to struggling financial institutions.
“The adjustment has not yet finished. It will continue and normalize until money is put where the government can see it.”
— Miao Zuoxing, a partner at the FXM Brothers Fund
The price drops have resulted in higher borrowing costs at a time when more Chinese companies need the money to cope with slowing economic growth. Yields reached new highs again on Tuesday.
In part, China is reacting to financial shifts across the globe. With the Federal Reserve raising short-term interest rates and many expecting the presidency of Donald J. Trump to lead to heavier government spending, investors worldwide are selling bonds.
“Due to recent, relatively large market fluctuations, our company decided to cancel the issue of the current bond, and will reissue it at a chosen time.”
— Jiangsu Sumec Group
But China is struggling with its own balancing act. The Chinese bond slump also stems from Beijing’s efforts to wring excess money from its financial system and to stop potential bubbles that may lurk in shadowy, hard-to-track corners of its economy. Should it continue with those efforts, bonds could fall further.
“The adjustment has not yet finished,” said Miao Zuoxing, a partner at the FXM Brothers Fund, a Shanghai-based investment fund that trades stocks, bonds and futures. “It will continue and normalize until money is put where the government can see it.”
At least 40 companies have said they would postpone or cancel bond offerings rather than risk being forced to pay high interest rates to sell the bonds — or being unable to sell them at all. Among them was the Jiangsu Sumec Group Corporation, an industrial trading house that exports items as varied as gardening tools and auto parts; the company said on Thursday that it would not go through with the sale of $130 million in short-term bonds.
“Due to recent, relatively large market fluctuations, our company decided to cancel the issue of the current bond,” Jiangsu Sumec Group said in a statement, “and will reissue it at a chosen time.”
China has particular reason to worry. As the world’s second-largest economy, after the United States, it relies on a rickety financial system that is mired in debt and susceptible to hidden stresses. Higher overseas interest rates could also prompt more Chinese investors to move their money out of the country, either to chase higher returns elsewhere or to avoid what some see as China’s growing problems.
Read the rest of this entry »
Mr. Grant confronts the subjectivity of economic measurement head-on in his book in an enlightening discussion of whether the 1921 depression was, in fact, a depression at all.
The Forgotten Depression: 1921 — The Crash That Cured Itself, by James Grant, Simon & Schuster, 2014.
Joseph Calandro Jr. writes: To better understand the current economic environment, financial analyst, historian, journalist, and value investor James Grant, who is informed by both Austrian economics and the value investing theory of the late Benjamin Graham, analyzes the Depression of 1920–1921 in his latest work, The Forgotten Depression: 1921 — The Crash That Cured Itself.
Grant understands that despite the pseudo-natural science veneer of mainstream economics the fact remains that economic value is inherently subjective and thus economic measurement is also subjective. Mr. Grant confronts the subjectivity of economic measurement head-on in his book in an enlightening discussion of whether the 1921 depression was, in fact, a depression at all.
Was It a Depression?
Grant concludes it was a depression, but mainstream economist Christine Romer, for example, concludes it was not a depression. As Grant observes, Ms. “Romer, a former chairman of the Council of Economic Advisors, presented her research, titled ‘World War I and the Postwar Depression,’ in a 1988 essay in the Journal of Monetary Economics. The case she made for discarding one set of GNP estimates for another is highly technical. But the lay reader may be struck by the fact that neither the GNP data she rejected, nor the ones she preferred, were compiled in the moment. Rather, each set was constructed some 30 to 40 years after the events it was intended to document” (p. 68).
In contrast, Mr. Grant surveys economic activity as it existed prior to and during 1920–21 and as it was evaluated during those times. Therefore, five pages into chapter 5 of his book, which is titled “A Depression in Fact,” we read that:
A 1920 recession turned into a 1921 depression, according to [Wesley Clair] Mitchell, whose judgment, as a historian, business-cycle theorist and contemporary observer, is probably as reliable as anyone’s. This was no mere American dislocation but a global depression ensnaring nearly all the former Allied Powers (the defeated Central Powers suffered a slump of their own in 1919). “Though the boom of 1919, the crisis of 1920 and the depression of 1921 followed the patterns of earlier cycles,” wrote Mitchell, “we have seen how much this cycle was influenced by economic conditions resulting from the war and its sudden ending. … If American business men were betrayed by postwar demands into unwise courses, so were all business men in all countries similarly situated.”
So depression it was … (p. 71)
- War finance (the currency debasement and credit expansion associated with funding war) has long been associated with economic distortion including World War I, which preceded “The Forgotten Depression.” Such distortions unfortunately continue to the present day.
- Scandal is also associated with booms and busts; for example, the boom preceding “The Forgotten Depression” had Charles Ponzi while the boom preceding “The Great Recession” had Bernie Madoff.
- The booms preceding both financial disruptions also saw governmental banking regulators not doing a very good job of regulating the banks under their supervision.
- Citibank famously fell under significant distress in both events.
- Both eras had former professors of Princeton University in high-ranking governmental positions: Woodrow Wilson was president of the United States at the beginning of “The Forgotten Depression” while Ben Bernanke was chairman of the Fed during “The Great Recession.”
- On the practitioner-side, value investor Benjamin Graham profited handsomely from the distressed investments that he made during “The Forgotten Depression” while his best known student, Warren Buffett, profited from the distressed investments that he made during “The Great Recession.”
The Crash That Cured Itself
Despite similarities, there are noteworthy differences between these two financial events. Foremost among the differences is the reason why “The Forgotten Depression” has, in fact, been forgotten: the government did nothing to stop it. Not only were interest rates not lowered and public money not spent, but interest rates were actually raised and debt paid down. The context behind these actions is fascinating and superbly told and analyzed by Mr. Grant. Read the rest of this entry »
The conversation on corporate tax expenditures is complicated by an official tax baseline that relies on a misleading definition of spending through the tax code.
The US government uses the term tax expenditure to describe both privileges granted to politically favored special interests and patches to the tax system that address economic inefficiencies created by the income tax code. This use of the term confuses two very different phenomena and muddies policy discussions about tax reform.
A new study from the Mercatus Center at George Mason University examines the current accounting of tax expenditures, presents case studies of some corporate tax expenditures, and proposes reforms to reduce favoritism in the tax code. The study investigates the difference between tax expenditures that privilege a particular group at the expense of others and tax provisions that, if properly accounted for, would not be counted as tax expenditures at all.
A corporate tax expenditure is defined as a provision in the tax code that allows a firm or group of firms to not pay a tax which would otherwise be collected.
- The modern US tax system is built on the income tax. This system double-taxes investment and savings, distorting market decisions and slowing economic growth.
- To correct these distortions in the income tax, some special tax provisions were created to mitigate biases against savings and investment and offset other distortions.
- Current methods employed by Congress’s Joint Committee on Taxation (JCT) and the administration’s Office of Management and Budget (OMB) for assessing the fiscal impact of tax expenditures use the income tax as the “baseline” from which to make their count.
- Under the current accounting methods, broadly available tax expenditures that correct for economic bias are economically indistinguishable from government-provided tax subsidies that benefit some businesses and industries at the expense of others.
- A superior tax expenditure baseline would rely on consumption, which would provide a more equal
treatment of economic activity and focus attention on tax provisions that truly provide unfair advantages.
However, even by the standards of a consumption baseline, most corporate tax expenditures are unnecessary privileges that provide unfair advantages to certain industries and firms.
- Sixty-five percent of corporate tax expenditures privilege certain activities or industries while excluding others.
- The proliferation of corporate tax expenditures results in disparate effective tax rates that distort consumption and investment and motivate wasteful rent-seeking.
- The growth of tax expenditures also increases compliance costs by contributing to the lengthening of the tax code, which in the past 30 years has nearly tripled in length, from 26,300 pages in 1984 to the almost 75,000-page behemoth it is today.
[VIDEO] Divisive, Angry, Racial Fear-Stoking Left-Wing President Accuses ‘Right-Wing’ Radio and Cable of Stoking Racial FearsPosted: June 2, 2016
T. Becket Adams reports: “Right-wing radio” and “some cable news stations” are actively stoking racial fears among white Americans, President Obama warned Wednesday.
“I have been listening to the stuff for a while now,” he told a crowd of supporters in Elkhart, Ind. “I’m concerned when I watch the direction of our politics. We have been hearing this story for decades: Tales about welfare queens, talking about ‘takers,’ talking about the 47 percent.”
“It is the story that is broadcast every day on some cable news stations, on right-wing radio. It is pumped into cars and bars and VFW halls all across America,” he added.
If you repeat a lie enough times, people start to believe it, Obama explained. Read the rest of this entry »
Factory activity cools for fifth month running as overseas demand for Chinese goods continues to fall
A further slowdown in China’s vast manufacturing sector has intensified worries about the year ahead for the world’s second largest economy.
“Against the backdrop of a faltering global economy, turmoil in the country’s stock markets and overcapacity in factories, Chinese economic growth has slowed markedly. The country’s central bank expects growth in 2015 to be the slowest for a quarter of a century.”
The latest in a string of downbeat reports from showed that activity at China’s factor ies cooled in December for the fifth month running, as overseas demand for Chinese goods continued to fall.
Against the backdrop of a faltering global economy, turmoil in the country’s stock markets and overcapacity in factories, Chinese economic growth has slowed markedly. The country’s central bank expects growth in 2015 to be the slowest for a quarter of a century.
After growing 7.3% in 2014, the economy is thought to have expanded by 6.9% in 2015 and the central bank has forecast that it may slow further in 2016 to 6.8%.
A series of interventions by policymakers, including interest rate cuts, have done little to revive growth and in some cases served only to heighten concern about China’s challenges.
Friday’s figures showed that the manufacturing sector limped to the end of 2015. The official purchasing managers’ index (PMI) of manufacturing activity edged up to 49.7 in December from 49.6 in November.
The December reading matched the forecast in a Reuters poll of economists and marked the fifth consecutive month that the index was below 50, the point that separates expansion from contraction. Read the rest of this entry »
One can only wonder why the president continues to overlook the American businessmen and women who build the healthy economy that enables workers to find jobs and careers.
Andy Puzder writes: In his remarks at a White House event last week called the Summit on Worker Voice, President Obama said that people who work hard “should be able to get ahead” but went on to acknowledge that workers are “seeing their wages and their incomes flatlining.”
“Here’s the reality: Wages and incomes for workers are stagnant because there aren’t enough jobs…When the job market is strong and businesses must compete for employees, wages and benefits improve. The solution, then, is more jobs. This isn’t rocket science.”
The reason, according to Mr. Obama, is dwindling union membership. “Union membership today is as low as it’s been in about 80 years, since the ’30s,” he said. “And I believe that when folks attack unions, they’re attacking the middle class.” Thus he recommends “making it easier, not harder, for folks join a union.”
“Businesses create jobs; labor unions do not. To the contrary, labor unions often discourage businesses from creating jobs, particularly entry-level ones, by increasing the cost of labor without increasing its value.”
Here’s the reality: Wages and incomes for workers are stagnant because there aren’t enough jobs. It’s a matter of supply and demand. When jobs are scarce and people are unemployed, wages and benefits decline. When the job market is strong and businesses must compete for employees, wages and benefits improve. The solution, then, is more jobs. This isn’t rocket science. One can only wonder why the president continues to overlook the American businessmen and women who build the healthy economy that enables workers to find jobs and careers.
Businesses create jobs; labor unions do not. To the contrary, labor unions often discourage businesses from creating jobs, particularly entry-level ones, by increasing the cost of labor without increasing its value. Even if labor unions could magically lift wages for those lucky enough to have a job in this economy, what about the unemployed?
In September the labor-force participation rate—the percentage of Americans employed or actively looking for work—continued its decline under Mr. Obama, hitting 62.4%, a low last seen 38 years ago during the Carter administration. Read the rest of this entry »
WASHINGTON— Laura Meckler writes: Sen. Bernie Sanders, whose liberal call to action has propelled his long-shot presidential campaign, is proposing an array of new programs that would amount to the largest peacetime expansion of government in modern American history.
“Sen. Sanders’s agenda does cost money. If you look at the problems that are out there, it’s very reasonable.”
— Warren Gunnels, Sanders’s policy director
In all, he backs at least $18 trillion in new spending over a decade, according to a tally by The Wall Street Journal, a sum that alarms conservatives and gives even many Democrats pause. Mr. Sanders sees the money as going to essential government services at a time of increasing strain on the middle class.
His agenda includes an estimated $15 trillion for a government-run health-care program that covers every American, plus large sums to rebuild roads and bridges, expand Social Security and make tuition free at public colleges.
To pay for it, Mr. Sanders, a Vermont independent running for the Democratic nomination, has so far detailed tax increases that could bring in as much as $6.5 trillion over 10 years, according to his staff.
“One of the demands of my campaign is that we think big and not small.”
— Bernie Sanders
A campaign aide said additional tax proposals would be offered to offset the cost of some, and possibly all, of his health program. A Democratic proposal for such a “single-payer” health plan, now in Congress, would be funded in part through a new payroll tax on employers and workers, with the trade-off being that employers would no longer have to pay for or arrange their workers’ insurance.
“The Sanders program amounts to increasing total federal spending by about one-third—to a projected $68 trillion or so over 10 years.”
Mr. Sanders declined a request for an interview. His campaign referred questions to Warren Gunnels, his policy director, who said the programs would address an array of problems. “Sen. Sanders’s agenda does cost money,” he said. “If you look at the problems that are out there, it’s very reasonable.”
Calling himself a democratic socialist, Mr. Sanders has long stood to the left of the Democratic Party, and at first he was dismissed as little more than a liberal gadfly to the party’s front-runner, Hillary Clinton. But he is ahead of or tied with the former secretary of state in the early-voting states of Iowa and New Hampshire, and he has gained in national polling. He stands as her most serious challenger for the Democratic nomination.
“By way of comparison, the 2009 economic stimulus program was estimated at $787 billion when it passed Congress, and President George W. Bush’s 2001 tax cuts were estimated to cost the federal treasury $1.35 trillion over 10 years.”
Mr. Sanders has filled arenas with thousands of supporters, where he thunders an unabashedly liberal agenda to tackle pervasive economic inequality through more government services, higher taxes on the wealthy and new constraints on banks and corporations. Read the rest of this entry »
Chelsea German writes: According to Gallup, more Americans think of themselves as “have-nots” today than at any point since Gallup began posing the question almost thirty years ago, while fewer Americans see themselves as “haves.” (Please see Emily Ekins’s earlier post for an in-depth analysis from a different angle). But do Americans actually have less in 2015 than in 1988? Let’s dig into the data to see whether Americans might have more than they realize.
2015 is the first year when Americans spent more money dining out than they spent on groceries. Let’s examine why that might be. In 2015, U.S. GDP per person (adjusted for inflation) reached an all-time high. At the same time that average personal wealth is rising, many necessities like food are going down in price. As a result, spending on the basics takes up a smaller and smaller share of an American’s personal disposable income—dropping from 39% in 1988 to 32% in 2013. This means that Americans have more money left at the end of the day, which they can then choose to save, invest, or spend on luxuries like dining out.
Not only are Americans wealthier on average, but they are also working less. The average American worker in 2015 works 30 fewer hours in a year than her counterpart in 1988, and yet is almost $18,000 dollars richer in real terms.
HumanProgress.org advisory board member Mark Perry recently pointed out that today’s young Americans may actually be the luckiest generation in history, based on what they can buy with earnings from a summer job….(read more)
Source: Cato @ Liberty
Bi Fujian, a popular satirist and China Central Television host, came under fire in April when a video of him mocking the Communist Party leader during a private dinner was mysteriously leaked online.
Felicia Sonmez reports: A well-known Chinese TV personality who joked about revolutionary leader Mao Zedong behind closed doors will face “serious” punishment, according to state-run media, months after a video of the remarks went viral online.
Bi Fujian, a popular satirist and China Central Television host, came under fire in April when a video of him mocking the Communist Party leader during a private dinner was mysteriously leaked online. Mr. Bi swiftly apologized, but CCTV suspended him from his job and announced that it would be investigating the incident, which it said had “led to grave social consequences.”
“Before a word leaves your mouth, you are its master. Afterwards, it is your master. You can pull a nail out from a board, but it’s impossible to take a word back once it has been uttered.”
— Weibo user
Little has been heard about Mr. Bi’s case in the months since. But on Sunday, a newspaper affiliated with the Communist Party’s internal watchdog, the Central Commission for Discipline Inspection, sternly warned that authorities view the host’s quip as no laughing matter.
“…this is not just an ordinary disciplinary problem but rather a serious violation of political discipline.”
— China Discipline and Supervision Daily
“(Party authorities) believe that this is not just an ordinary disciplinary problem but rather a serious violation of political discipline,” the aptly-named China Discipline and Supervision Daily wrote, adding that Mr. Bi’s case would be “seriously dealt with.” It did not give further details.
The episode comes as China’s top media regulator, the State Administration of Press, Publication, Radio, Film and Television, is tightening control over the TV industry with a series of new regulations aimed at keeping presenters and content in line with “socialist core values.” Read the rest of this entry »
Since the recession ended in June 2009, the economy has advanced at a 2.2% annual pace through the end of last year. That’s more than a half-percentage point worse than the next-weakest expansion of the past 70 years, the one from 2001 through 2007.
Eric Morath reports: The economic expansion—already the worst on record since World War II—is weaker than previously thought, according to newly revised data.
From 2012 through 2014, the economy grew at an all-too-familiar rate of 2% annually, according to three years of revised figures the Commerce Department released Thursday. That’s a 0.3 percentage point downgrade from prior estimates.
The revisions were released concurrently with the government’s first estimate of second-quarter output.
“While there have been highs and lows in individual quarters, overall the economy has failed to break out of its roughly 2% pattern for six years.”
Since the recession ended in June 2009, the economy has advanced at a 2.2% annual pace through the end of last year. That’s more than a half-percentage point worse than the next-weakest expansion of the past 70 years, the one from 2001 through 2007. While there have been highs and lows in individual quarters, overall the economy has failed to break out of its roughly 2% pattern for six years.
The latest revision, however, did significantly upgrade what was seen as a historically wretched winter of 2014.
The output reading for the first quarter of last year was recast to a 0.9% contraction instead of a 2.1% annualized drop. The prior figure represented the worst contraction on record outside of a recession. The new number isn’t even the worst quarterly contraction of the expansion. GDP declined at a 1.5% annual pace in the first quarter of 2011. Read the rest of this entry »
Doubling Capital Gains Tax Rate on Short-Term Investments: Campaign officials have said that their goal is not to address income inequality or to raise money for the federal treasury, but to ‘change investor behavior’.
Under the Clinton plan, investments held between one and two years would be taxed at the normal income-tax rate of 39.6%, nearly double the existing 20% capital gains rate. Neither figure counts an extra 3.8% tax on net investment income included as part of the health-care law, a campaign official said.
MSM handling bad news about Hillary like… pic.twitter.com/Wqj7CCoJXY
— Matt (@Matthops82) July 24, 2015
The campaign isn’t proposing any changes to the capital gains rate for lower-income taxpayers. The change would affect top-bracket single filers with taxable income above $413,201 and married couples filing jointly with taxable income above $484,850.
The rate for top-bracket taxpayers would be set on a sliding scale, with the lowest rate applied to investments held the longest. To qualify for the existing 20% rate, one would have to hold an investment for at least six years.
Mrs. Clinton will lay out the plan in a speech Friday in New York City, where she plans to spotlight what she sees as unhealthy corporate efforts to boost stock prices. She will argue that a focus on short-term results is undercutting longer-term economic growth and hurting American workers.
Capital gains recap, since 1997: Bill: CUT 28% to 20% W: CUT 20% to 15% O: HIKE 15% to 23.8% Hillary (proposed): HIKE 23.8% to 43.4%
— Phil Kerpen (@kerpen) July 24, 2015
Mrs. Clinton will also endorse a $15 per hour minimum wage proposal for fast-food workers in New York, a campaign official said. Asked about this on Thursday, she hedged as to whether the minimum wage should be that high nationally but said certain cities can justify higher minimums. “I do recognize that the cost of living in Little Rock is different than the cost of living in Manhattan,” she told reporters. Asked if $15 per hour is justified in New York, she said, “That’s up to local leaders in New York. They certainly believe it is.”
The campaign said she would also call for greater disclosure of stock buybacks by companies, saying that while they may give a quick lift to stock prices, they often come at the expense of research and development spending. She will also call for a review of securities rules related to shareholder activism and rules governing tax treatment of executive compensation. Read the rest of this entry »
James Pethokoukis writes: US productivity growth, at least as measured, has been in low gear for a decade. And especially so since the Great Recession, averaging just 0.6% annually from 2010 through 2014. We’re aren’t going to consistently hit 3% GDP growth, much less 4%, like that.
Then again, productivity growth has slowed in most OECD countries over the past decade. A new OECD research note doesn’t think the problem is a lack of innovation, so much as an inability to spread innovation broadly throughout advanced economies. “A breakdown of the diffusion machine” is what the OECD calls it.
The gap between high productivity firms and low productivity firms is increasing. (Maybe also helping to explain rising inequality.) So why aren’t innovations spreading as fast as they used to? The WSJ’s analysis of the paper sums it up nicely:
One key reason appears to be that the process of “creative destruction” identified by Austrian economist Joseph Schumpeter as essential to capitalism’s dynamism appears to have lost some of its ferocity. In the OECD’s words, “market selection is weak.” One reason for that is government policy, which the OECD said favors incumbents across a whole range of areas, from regulations designed to protect the environment, to taxation. As a result, older firms that suffer from low productivity growth endure, often “trapping” workers in jobs for which they are over qualified. Read the rest of this entry »
A perfect storm of economic forces is fueling the trend
Timothy Aeppel reports: Having devoured many of the world’s factory jobs, China is now handing them over to robots.
China is already the world’s largest market for industrial robots—sales of the machines last year grew 54% from 2013. The nation is expected to have more factory robots than any other country on earth by 2017, according to the German-based International Federation of Robotics.
A perfect storm of economic forces is fueling the trend. Chinese labor costs have soared, undermining the calculus that brought all those jobs to China in the first place, and new robot technology is cheaper and easier to deploy than ever before.
Not to mention that many of China’s fastest-growing industries, such as autos, tend to rely on high levels of automation regardless of where the factories are built.
“We think of them producing cheap widgets,” but that’s not what they’re focused on, says Adams Nager, an economic research analyst at the Information Technology & Innovation Foundation in Washington. Mr. Nager says China is letting low-cost production shift out of the country and is focusing instead on capital-intensive industries such as steel and electronics where automation is a driving force.
China’s emergence as an automation hub contradicts many assumptions about robots. Read the rest of this entry »
The suit seeks $2 million in compensation and $139 million in punitive damages, which together equal $1 from every adult man in America.
In a 25-page brief, attorneys for Sarah Miller-Jones, 24, argue that gender discrimination from the patriarchy has prevented their client from finding gainful employment since she graduated from university three years ago.
“It is outrageous that the patriarchy refuses to offer our client a decent career. She has applied for over 20 positions in the recording, publishing and television industries and has been rejected every single time.”
The suit seeks $2 million in compensation and $139 million in punitive damages, which together equal $1 from every adult man in America.
“Despite the fact that Ms. Miller-Jones graduated with a 2.8 GPA from the prestigious University of Oregon, she has been unable to find a job fitting her qualifications,” the document reads.
“We all know that terms like ‘no experience’ and ‘lack of relevant education’ are codewords the patriarchy uses to keep keep women in their place. But Ms. Miller-Jones refuses to be a housewife or a nurse. She deserves a real job.”
“Ms. Miller-Jones has been on unemployment benefits for 18 months. And despite extensive coursework in Zambian feminist hip-hop she has only received six job offers — all of which were for entry-level call center and health care positions.
“It is outrageous that the patriarchy refuses to offer our client a decent career. She has applied for over 20 positions in the recording, publishing and television industries and has been rejected every single time.
“Despite extensive coursework in Zambian feminist hip-hop she has only received six job offers — all of which were for entry-level call center and health care positions.”
“We all know that terms like ‘no experience’ and ‘lack of relevant education’ are codewords the patriarchy uses to keep keep women in their place. But Ms. Miller-Jones refuses to be a housewife or a nurse. She deserves a real job.”
— The Economist (@TheEconomist) June 10, 2014
WASHINGTON (AP) — The U.S. economy slowed drastically in the first three months of the year as a harsh winter exacted a toll on business activity. The sharp slowdown, while worse than expected, is likely to be temporary as growth rebounds with warmer weather.
The economy’s growth slowed to a barely discernible 0.1 percent annual rate in the January-March quarter, the Commerce Department said Wednesday. That was the weakest pace since the end of 2012 and was down from a 2.6 percent growth rate in the October-December quarter.
Consumer spending grew at a 3 percent rate. But that gain was dominated by a 4.4 percent rise in spending on services, reflecting higher utility bills. Spending on goods barely rose. Also dampening growth were a drop in business investment, a rise in the trade deficit and a fall in housing construction.
The scant 0.1 percent increase in the gross domestic product, the country’s total output of goods and services, was well below the 1.1 percent rise economists had been predicting. The last time the quarterly growth rate was so slow was in the final three months of 2012, when it was also 0.1 percent. Read the rest of this entry »
2013 brought little more than uncertainty to an already uncertain nation.
2013 was an excellent opportunity to learn the lesson that we failed to learn in 1857, 1933, 1971, and 2008: Uncertainty is the destroyer. Economic growth remains unsteady, with a consensus among experts that the economy is slowing down as the year closes — Bloomberg calculates the average of economic-growth forecasts at a tepid 1.8 percent. Key figures remained negative in 2013, from the labor-force participation rate (down 2.7 percentage points since Barack Obama took office) to the employment-to-population ratio (down 2 percentage points during the same period). The most important of those economic indicators, at least so far as future growth is concerned, is net domestic private investment, which remains far away from returning to pre-crash levels.
Weak private investment means weak growth and bleak long-term employment prospects. There is no way to finesse away that fact. The question is: Why are we still in this position, all these years after the end of the recession?
There is some debate on the right about whether President Obama is a fundamentally well-intentioned incompetent or a more Machiavellian figure so power-hungry that he is willing to kneecap key sectors of the U.S. economy in order to advance his political agenda. My own view is that the distinguishing feature of Obama’s ideology is the utter inability of the president and his partisans to distinguish between the national interest and their own political interests. (That is one problem with electing a messiah rather than a chief administrator.) If you believe that your guy is a uniquely gifted, once-in-a-lifetime transformational figure with a mandate to save the country, and that he is opposed by uniquely wicked servants of Mammon and partisans of unreason, then it follows that your political interests are identical to the national interest, and consequently you have such grey eminences as Bill Clinton, who has managed to secure for himself a career as an elder statesman without ever having been a statesman, insisting that Republicans are “begging for America to fail” — because they oppose large parts of the president’s health-care program, which the president now opposes, too, having set aside measures that are too unworkable or punitive to act on until some more politically opportune time.
The poor and the middle class are falling behind, and it has nothing to do with the 1 percent
Kevin D. Williamson writes: President Barack Obama gave a very silly speech in which he affirmed that economic inequality is to be the centerpiece of his remaining time in office. He has made similar suggestions about other issues — global warming and gun control, notably — and, President Obama being President Obama, it is very likely the case that his laser-like focus will consist of a series of speeches and very little else. The politics of the moment will determine which issue actually gets his attention, though he could go with his admirers at Washington Monthly, who contend that some of them are the same issue: Mass shootings, Daniel Luzer argues in a particularly batty piece of connect-the-imaginary-dots, has “everything to do with the distribution of wealth in America.”
It is difficult to take President Obama seriously on these issues, but it is difficult to not take seriously Josh Barro and Paul Krugman, both of whom have offered what seem to me to be inconclusive arguments, Mr. Barro under the headline “Sorry, Libertarians, Inequality Does Matter,” Professor Krugman under “Why Inequality Matters.” Strangely, neither of these erudite gentlemen quite manages to establish that inequality matters.
Mr. Barro writes: “Economic growth is not the same thing as well-being. The point of economic growth is that it leads to improvements in standards of living. If the gains from economic growth are not broadly shared, but instead accrue disproportionately to people already at the top of the income distribution, then a lot of economic growth will only generate a little improvement in living standards for most people. For this reason, rising inequality is a problem even if it does not hold back GDP.” This is true in a sense, but it reverses cause and effect: Incomes among the bottom half of earners are not stagnating because of increasing inequality; inequality is increasing because incomes among the bottom half of earners is stagnating. It could have been the case that incomes among the bottom half of earners were stagnating while incomes for the top half were absolutely crashing, in which case you would have a situation in which there was less inequality but everybody was worse off, or at least no better off. Conversely, we could have an economy in which the poor and the middle class see strong gains in their income and their wealth, but the very well off experience twice those gains, which would mean a society of increasing inequality in which everybody is better off. I have encountered progressives who state their preference for the outcome in which we are all poorer but more equal over the outcome in which we are all richer but less equal, which puzzles me.
“To the victors belong the spoils”
— Senator William L. Marcy of New York, 1786-1857, arguing why victorious political parties deserve government jobs.
WASHINGTON — Robert Samuelson writes: We are, I fear, slowly moving from “the affluent society” toward a “spoils society.” In 1958, Harvard economist John Kenneth Galbraith published his best-seller, “The Affluent Society,” which profoundly influenced national thinking for decades. To the Great Depression’s survivors, post-World War II prosperity dazzled. Suburbia offered a quiet alternative to crowded and noisy cities. New technologies impressed — television, frozen foods, automatic washers and dryers. Never, it seemed, had so much been enjoyed by so many.
This explosive abundance, Galbraith argued, meant the country could afford both private wants and public needs. It could devote more to schools, roads, parks and pollution control. Economic growth became the holy grail of government policy. Production was paramount. It muted social conflict.
The “spoils society” reverses this logic. It de-emphasizes production and fuels conflict. Here’s why. Read the rest of this entry »