jobs

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A New Year — Happy or Not

I am not going to become involved in endless analysis of Trump’s presidency. I think we ought let it speak for itself.

Nor am I going to waste space critiquing the huge contribution that academic economics has made to Trump’s rise to power. I think the anti-democratic nature of mainstream economics is both palpable and speaks for itself too. Economics is largely a libertarian discipline and sneers at anything remotely involving “we the people” unless it can re-package us as some sort of mystical marketplace. In which case we all are perfect. It’s only when we vote that we, apparently, become venal, self-serving, irrational, and riddled with error.

Nor am I going to re-litigate the Clinton campaign, it was so lamentable in its total misunderstanding of the state of the nation that it deserves legendary status as an all time bust. Then again we ought to have been warned: Clinton was rejected in 2008 for very similar reasons. Quite why the Democratic Party powers-that-be allowed themselves to be fooled by her combination of incompetence and neoliberal nonsense is beyond me.

With that out of the way: we enter a new year of remarkable uncertainty. Trump is an extraordinarily weak man, he is prone to gaffes, he has no clue about economics, his foreign policy is already disrupting alliances and making the world less safe, and he will undoubtedly be at odds with the Republicans in Congress before long. My guess is that they realize how easily he can be maneuvered by the simplest of flattery and they are thus salivating at the chance to ram through their anti-social attack on workers, the safety net, and all things vaguely Obama as soon as things start up again later this month.

I would like to be able to say that Obama left the economy in reasonable shape, but the scar of inequality prevents me from being able to. The enormous gulf that has opened up in society, with one part able to trumpet opportunity, wealth, and optimism, and the much larger part facing decline, stagnation, pessimism, and decreasing healthiness is the legacy of the entire Reagan/Clinton/Bush/Obama era. It is a blot on our own sense of achievement. It is a blight that the next few decades will have to both endure and attempt to eliminate.

In many ways Trump is the perfect coda to that failed era.

No one in high policy position has had the courage to confront the great sea-changes in our prosperity being wrought by the scourge of globalization, automation, and oligarchic control of power. They all lie about the possibility of manufacturing returning to these shores. Perhaps it will, but only as an automated activity.

Nor do they address the emerging de-construction of traditional business being brought about by the relentless pursuit of shareholder value. Managerial capitalism is steadily cannibalizing itself as executives seek to maintain unattainable growth goals and to reward themselves for ever shorter-lived and less sustainable profit margins. Unlike a few others I don’t see this as a death knell for capitalism as a general phenomenon. I see it more as yet another mutation along the way. The oligarchs and executives will cling on for a while in order to squeeze unearned rents from the rest of us, but their own greed will eventually tip the economy into a new configuration that they no longer  control. The dawn of the “gig-economy” is upon us. Whilst it looks bleak at the moment — far too many people are sucked into it against their will — after a decade or so that will change and the power relationship will shift against the bureaucrats running our oligopolies.

What we need is a thorough revision of the institutional landscape that supports business activity in order to counter-balance the shift in risk that everyday workers have had to assume as business leaders have steadily attacked the old order of employment. That attack was instituted to bolster profit in the face of ever decreasing inventiveness and the growth opportunity. Business leaders compensated for their lack of imagination and talent by eroding the post-war contract with workers and replacing it with a patched-together alternative in which workers bore the brunt of life’s risks. That burden decreased people’s ability to spend, setting in motion the slow stagnation that now has us in its grip.

So retirement, training, health care, and other sorts of benefits that helped workers in the old order were steadily reduced or stripped away to save business money.

But as workers were forced to accept theses risks they were not compensated with higher rewards. No. Those rewards were syphoned off by capital owners who sought ever increasing returns even in an economy quite obviously incapable of supplying them in the longer term.

The result was a top-heavy economy, awash with excess capital which found its way into various bubbles, with stagnating wages and rising inequality, with lost opportunity, and with slowly foreclosing prospects for future generations. America has produced a class system in an economy that once was proudly the most egalitarian in the industrialized world. Enter Trump.

As, however, a new generation rises up within this new landscape, it has the chance to re-make the egalitarian dream. It can, and I think it will, break the back of the oligarchs. Why? Because the oligarchs represent the past of business. They are cannot comprehend the future nature of the loose employment contracts that they seek to exploit because they see them in the context of the industrial era institutional arrangements they benefit from. But as the institutions of the economy change, and as those new institutions restore the balance of risk and reward in the economy, the oligarchs themselves become less and less relevant.

The new year is simply a step into this tumultuous future. Changes are afoot. Trump is a reflection of what has gone. He is nothing to do with the future beyond, of course, his ability to muck things up over the next four years.

And here’s the exciting part: as we move into the post-industrial economy more deeply the ability of capital to dictate its course diminishes. The digital economy is based more on intangible goods and services than on massed-produced stuff. Intangible things use less capital to produce. Indeed we can self-produce a part of it ourselves. So the capital accumulation of the past hundred years — those few generations in which the might of industry dominated our economic lives — will become an historic aberration. There will be an excess of capital. Not simply because of the incompetence of our businesses in generating innovations in which to invest, but also because future innovations are less capital intensive.

That leaves a great pool of capital sitting around for us to tax and re-distribute.

Now if only we had politicians who realized that.

Happy New Year.

 

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Interest Rates, Faith, and Democracy

What a pickle!

The Federal Reserve Board’s meetings have become a media event. The last few days – weeks if you want to be more inclusive – have been awash with media chatter and analysis about the probability that the Fed will, at last, raise interest rates. As a public service here are the pros and cons as seen through the eyes of the Economist:

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And here, in its entirety is a letter to the editor of the Financial Times just yesterday from someone called Thaddeus Walkowicz, who lives in East Hampton, New York:

Fed’s focus on creating jobs comes at huge cost to the rest of US society

“Sir, Although is universally described as the “smartest man in the room”, Lawrence Summers’ article on “neutral interest rates” (Central bankers do not have as many options as they think”, Dec 7) is simply a part of the nest chapter of trying to perpetuate failed Keynesian perspectives and a desperate attempt to institutionalize acceptance of “observations” that masquerade as policy-justifying “research”.

As developing countries grab a greater share of world gross domestic product through the provision of cheap labor, governments and central bankers of the industrialized west have resorted to “serial stimulus” to try to achieve historical levels of growth, almost as if their countries were entitled to the levels of growth. The accompanying monetary stimulus has driven down real interest rates, and these rates are now included as data points with the perverse circular narrative that the lower levels represent some form of appropriate “real rate equilibrium”. (This is indeed true if generational theft is an integral part of policy.)

Ignoring the theft of senior’s savings imparted by negative real interest rates, completely missing from Professor Summers’ article is any discussion about the effects Generation X’s and Millennials’ savings required for retirement, with the negative real rates and lower risk premiums on all asset classes, and more importantly what this means for current and future spending/growth.

It’s time to face the music: the simple reality, as harsh as it may be for those without marketable skills or even PhDs and for central bankers protecting an “intellectual” legacy, is that an overextended focus on job creation is not worth the long-term cost to the rest of society in terms of the continued upheaval of a free-market economy, one characterized by a fair, market-driven balance between lenders and borrowers.”

Wow.

Interest rates, faith, and democracy all bound up in one big spewing forth of anti-economics venom.

Tell us what you think Thaddeus.

It’s hard to know how to respond, but I want to pick out a few points.

First, Thaddeus clearly has a deep disregard for economics. In this I must admit he is not alone. Just yesterday Lars Syll referred to a book by Dani Rodrik and explained that Rodrik’s comments were more about economists than the substance of their work. Here’s what Syll said:

“There’s much in the book I like and appreciate, but there is also a very disturbing apologetic tendency to blame all of the shortcomings on the economists and depicting economics itself as a problem-free smorgasbord collection of models.”

This is what Thaddeus is saying too. Only with less precision. If we view economics as an array of models to be taken out and deployed whenever we wish, then we rapidly approach the “observations” that masquerade as policy-justifying “research” that Thaddeus dismisses rather contemptuously. After all such an array does start to look an awful lot like a whimsical toy-box full of goodies that an economist can take out and play with arbitrarily. What, a quizzical onlooker might well ask, determines which model we deploy? An examination of the facts? if so, which facts? What triggers are we responding to? What is our desired goal? The sad matter is that economics has many models for most occasions and the choice can, indeed, appear arbitrary.

Worse, it can appear faith-based or ideologically driven.

Back to Thaddeus’ letter: I like the way he dismisses Keynes as being a “perspective”, or, rather, a “failed perspective”. He doesn’t even dignify Keynes as having produced a theory or the kind of model Rodrik talks about. That’s pretty low. But it fits neatly with a right of center narrative that markets are natural phenomena that we meddle with at our peril. Poor old Keynes might have thought he was saving capitalism from itself, but he doesn’t get many thanks from our capitalist class.

Just for the record: markets are social constructions that occasionally display “law-like” behavior, but they are profoundly human and thus exhibit all our human frailties.

I also like the”theft”  concept that Thaddeus tosses about. It’s clear that in his eyes low interest rates are a form of theft. With the aggrieved party being, presumably, anyone who is saving or has saved for retirement. That’s my best spin. I suspect though that underneath the surface Thaddeus is really making a statement on behalf of rentiers everywhere: how’s a good rentier to make a buck in this low rate environment?

Thaddeus also seems to have bought into secular stagnation. He doesn’t mention it explicitly, but the idea lurks behind his suspicion that central bankers are trying to pump up growth because it’s “almost as if their countries were entitled to the levels of growth”. Naughty industrial countries! Such entitlement. Only rentiers are allowed to have real entitlements.

Speaking of which: Thaddeus clearly holds every day workers in even more contempt than he does economists. His apparent reference to the days of growth being gone and to the speciousness of attempts to create jobs speaks volumes for his empathy for his fellow citizens.

The sad part Thaddeus is not alone. His lack of empathy is matched and often outdone by economists who have fallen foul of the “laws” of economics. If you believe – have faith in – in the natural nature of the economy and ignore its human origins, if, in other words, you tend to refer to people as “agents” or “units” or any other elision of their human reality, it is quite possible to look upon job creation as a false activity. What you are likely to be more focused on is the urgency of avoiding debasement of the currency and the preservation, at all costs, of faith in the value of the dollar. In other words the Fed needs to fight inflation, and not to worry about jobs. Especially for those “without marketable skills”,  as Thaddeus so amiably puts it.

When I read letters like this I wonder how it was that mainstream economics became so resolutely anti-democratic. Perhaps that’s too harsh. Perhaps it is just that the “natural laws” that drive the economy are so anti-democratic, and economists are simply swept along by their observation. In this narrative economists are only the bearers of bad news, constantly telling us that our lives are subject to the great machinery of supply and demand and not at all to human intentions and/or interventions.

I suppose that all this is simply my way of saying that when I approach that smorgasbord of models I look first for those that preserve democracy and tend to shun those that undermine it.

Which brings me all the way back to interest rates: yes, I think the Fed will raise them. No, I don’t agree – there’s too much downside risk. Yes, the Fed ought to focus on job creation – its the democratic thing to do! And, by the way, looking back into history we find that the so-called “normal” and thus higher rate levels rentiers are pining for are the exception not the rule. Low rates are here to stay.

Well that’s what some of the models say. As for the other models …

You see what I’m saying?

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Interest Rate Mania

People keep asking me about interest rates. I wish they would stop. The question always make me feel like mimicking Eugene Fama: rates are rates. They are what they are. Perfect reflections of whatever they meant to be reflections of. And so on.

Such amazing analytical insight is worthy of one of those pseudo Nobel prizes.

Seriously though: people do seem a little more concerned than usual. Why?

Because rates have been low for so long and don’t seem to have accomplished much for all that. I think it’s hard for some people – including quite a few prominent economists – to grasp why interest rates are mired in this near historically low trough. I would have thought the answer is obvious: the economy sucks.

It still sucks after all these years.

Let’s look at it through the eyes of the textbook – this doesn’t imply we all agree with the textbook, so please relax. What are we looking for? Something called the “natural rate”. Let’s set aside that there’s absolutely nothing “natural” about the economy simply because it is an entirely humankind construction reflecting the complex interplay of a zillion intentions and expectations. Economists love to pretend that there are such “natural” things in the economy and this so-called natural interest rate is one of them.

What is it?

Well, that’s simple: it’s the rate of interest at which the economy settles into its Goldilocks comfort zone. Not too hot. Not too cold. Just right. This zone is what economists strive to maneuver the economy towards. It’s where they all imagine the economy with a gigantic happy face. People are employed. Wages are rising, but not so fast they induce inflation. Profits are good. Demand is strong enough to get businesses to invest, but not not over-invest. It is, as I said, a happy place. It’s just right.

So: how do we know what this natural rate is? Aah. That’s a tad more difficult. It depends. And therein lies the rub.

The natural rate of interest appears to be much lower now than in the past. This, so we are told, is because the potential of the economy is more limited and thus the in- and out-flows of investment are reduced. If you believe that the in- and out-flows are what gives rise to the natural rate – a big if – then a reduction implies a lower rate.

This simply begs the question: why is potential so much lower?

There are a few reasons proffered for this. A common one is that our current wave of technological innovation is simply not very good at translating into economic growth. At least when compared to waves of innovation in the past. This ineffectiveness of technological advance tends to bend the trajectory of growth downwards, which limits sales potential and thus reduces investment opportunity. This is the standard “stagnation” argument and is often touted alongside stern warnings about how this decline in potential also limits our ability to pay for all those entitlement programs we want for ourselves – the economy will be growing too slowly to generate the tax revenue to pay for them. Naturally this notion is attractive to anyone on the right who is inclined to dislike entitlements anyway. So we tend to get this from mainstream economists and their libertarian friends.

Another cause of a slowdown in potential would be demographics. It is often overlooked in our discussions of economics, but a growing population is associated with a growing economy. At least as we currently measure economic growth. The reason ought to be obvious: the more there are of us to buy stuff the greater the opportunity for profit, sales, and employment etc. So a faster growing population is closely associated with a faster growing economy. That and an equable climate, but that’s another question.

So a decline in the rate of population growth, and/or a shift into retirement and out of prime consumption mode of a large proportion of the population will slow the economy. Which is what we’ve witnessed in the past few years. So, no surprises if lower potential drags down the so-called natural rate of interest: the economy is simply settling into a lower state of activity.

Then there’s the stagnation of wages over the past few decades and the enormous rise in inequality. Not many economists want to talk about this: the distribution of income is something they are remarkably indifferent to. Their obsession with efficiency and inventing complicated models to show how we might achieve maximal efficiency precludes them worrying much about inequality. This is because their models, in order to squeeze that maximal efficiency out of the economy just assume inconvenient stuff like the distribution of incomes to be of no importance. And if you don’t go looking for something like that you won’t often find it.

In any case it seems fairly clear that the enormous redistribution of incomes upwards to the higher echelons of income earners has had a deleterious effect on economic potential. That is not potential as measured in terms of possible output, but as measured in terms of possible demand. You would have thought that in a world in which supply and demand are tossed about as inseparable twins, economists would look  at potential demand a little more carefully. But many don’t, so they also often forget to mention the downward influence of sluggish demand. I am afraid that the old, and foolish, Say’s Law still lurks in the backs of too many economic minds. If you redistribute incomes way from people who might spend that income and put it in the hands of people who are more likely to save it – they have already managed to buy most of the stuff they want so the extra cash is simply saved and not spent – what do you generate? A whole lot of “excess” savings. That is cash looking for a place to go. At the same time you have reduced the potential sales for business and so have reduced the demand for investment. That is to say you have reduced the productive places for all that cash to go.

The net result?

Lower interest rates.

Now the supply and demand for all that cash does not produce the interest rate. The supply and demand for investment does. And the supply and demand for investment is supposed to be a response to economics potential. So we are back where we started.

What does monetary policy have to do with all this?

Simple: monetary policy is designed to get interest rates to settle at the “natural rate”. This, of course, implies that the central banks have an idea of what economic potential is. Which is why we read so much at the moment about what the Federal reserve Board is thinking and about how the economy is doing and what it is likely to be doing.

So, when you ask about what interest rates are likely to do, you are engaging in a sort of mind reading exercise. You are really asking what the Fed is thinking.

Which, right now, seems to be a little confused.

There are few at the Fed talking about how weak the economy still is, about how employment is not strong, and how, therefore, the Fed ought to keep rates low. That is they think that by keeping rates low they can nudge potential back upwards and create room for more growth. After that, these folk argue, will come a time to raise rates.

But there is another camp, which sounds a lot more strident, which argues for higher rates sooner rather than later. These people – the so-called hawks – are those who believe we are on the precipice of rapid inflation, that the economy is about to heat up, and that employment is just dandy. They are arguing, in other words, that we are about to exit our Goldilocks state and enter into one that is overheated. So, they suggest, we need to act and foreclose such a possibility and raise rates. Perhaps as soon as this coming year end.

Which is right?

Well it depends on whether you think we are indeed in a Goldilocks state. You have probably guessed by now that I would err on the side of caution. Demand is weak. Too weak. Goldilocks be damned, things are still too cool. Raising rates might help those who make a living by owning assets, but it would harm those who live by working for a wage, and those people have been hammered enough by stagnant wages long enough.

So when you next ask me what I think interest rates should be, think twice. You really don’t want me to have to run through all this again simply to end up saying something really simple like: they need to stay low.

You knew that already.

 

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Health Care Reform Costs – Fact or Fiction?

Oh dear. I think I’ve just wasted a morning. Here’s the story: a friend of mine points me to an article in the New York Post by someone called Paul Sperry. I don’t read the Post, so I have no idea who that is. The article turns out to be the usual far right series of complaints about Obamacare. This one is almost a perfect  summary of all them. So I thought I would get into the details and try to understand the epic grumpiness of it all. Anyway, one full morning later all I have learned is that highly selective statistics, cheeky calculations, and some outright fibbing are all it takes to get published in the NY Post.

But I knew that anyway. Hence the waste of time.

Since I’ve done the work here’s the result.

Perry starts early with the notion that 20% of fourth quarter GDP growth came from health care, and that the majority of that was Obamacare subsidies.

Well, he’s kind of right. He obviously read the Bureau of Economic Analysis news release from last week. On page 7 it breaks the economy down and gives the contribution that each category made to the headline 2.6% growth. Down there on line 17 we find that health care spending contributed 0.51% of that 2.6%. Some simple arithmetic tells us that .51 out of 2.6 is around 20%.

Thus Perry is correct for total health care. Just for reference, the health care contribution in the first quarter of 2014 was -0.16. Those quarterly numbers tend to jump about a bit. The BEA report doesn’t break out the Obamacare subsidy effect though, so we have no way of telling what share it contributed. So Sperry’s throw away comment that ‘the majority of that spending was taxpayer-funded subsidies from Obamacare’ is entirely unsubstantiated in the report. For all we know Sperry just made that up

He probably did. He needed to. Because his next sentence is one he wants to emphasize:

“In other words, the stimulus never ended”

Really?

I assume he is referring to the stimulus of the early crisis years. The one that has completely ended.

We can check that by using the same table on page 7 of the same report. On line 53 it helpfully tells us the contribution of Federal budget spending on the same headline growth figure of 2.6%. It turns out to be -0.54%. In other words, not only did the stimulus vanish, but the Federal budget is now acting as the complete opposite. It is a drag in GDP, it isn’t a stimulus at all.

But let’s not allow facts to ruin the story.

So we move on.

Next Sperry alerts us to the fact that:

“Health care is what Americans are spending most of their money on today – far more than they spend on housing and utilities combined ..”

OK. Let’s take a look.

The very next page of our BEA report gives us the details. Line 2 tells us that personal consumption expenditures in the fourth quarter were $12,112.3 billions. And on line 17 it tells us that health care spending was $2,034.3 billions. Now, I agree that’s a lot of health care spending, but it isn’t ‘most’ of total spending – it’s only 17%.

Handily on the line above health care spending we find the details for housing and utilities. It happens to have been $2,188.6 billions. So how can Sperry say that health care spending was ‘far more’ than housing and utilities, when it was actually less? Beats me.

But let’s not forget: he’s trying to tell us a story.

Next he’s on to arguing Obama misled us all in his State of the Union speech by ignoring that:

“… health care accounted for a whopping two-thirds of the uptick in consumer spending and much of the overall economic improvement.”

That’s terrible. If it’s true. Is it?

Well. No.

Here are the facts: personal spending grew $110 billions in the fourth quarter. Health care spending grew $26 billions. So health care accounted for 24% of the growth, not ‘a whopping two-thirds’. Where he came up with that whopper, I have no idea.

He doesn’t stop. He sweeps on by the Congressional Budget Office estimate that Obamacare enrollment will rise to 34 million people by 2016, and launches his next missile: health care spending will continue to outpace GDP growth over the next few years.

Yes it will. At least according to the Government actuaries projecting Medicaid and Medicare costs, which is where, I think, he gets his numbers. he uses a forecast of 6.1% annual growth in health care spending between 2016 and 2023 – he calls that ‘whopping’ too. According to the CBO the economy will grow about 4.2% a year over that same period [not adjusted for inflation].  Sperry wants us all to believe this faster rate in health care spending is due to the evils of Obamacare, so he neglects to tell us that the more important factor is the upcoming bulge in the number of retirees qualifying for Medicare. That plus the expected rising cost of medical services are the greater source of growth than Obamacare. At least to the same ‘government actuaries’ that Sperry appears to be quoting.

Let’s not worry about this though. Sperry’s story beckons.

And here we are getting to the nub of his article:

“Over time, higher taxes and spending act as a drag on the economy, crowding out private investment. Almost 90% of Obamacare users get federal aid. As a result, a new CBO report projects Obamacare subsidies will balloon to nearly $2 trillion over the next decade, only partially paid for by the more than $640 billion in taxes and fines, which means more government spending and more upward pressure on interest rates.”

That’s quite a mouthful. Let’s unpack it slowly.

First we get the usual criticism of deficit spending: it will ‘crowd out’ private investment. Maybe if the economy was running at full tilt, and its arguable even then. But whilst we are still in crawl-out-of-the-hole mode it is very much not true. The government can’t crowd out something that doesn’t want to exist.

Second, we hear that 90% of all Obamacare ‘users’ get federal aid. Well, duh! The entire operation is targeted at people who are poor and who cannot afford health care without some ‘aid’. There’s no news in this.

Third we see the CBO estimates for subsidies and taxes. The numbers Sperry gives us come straight from the CBO report on page 117. They are for the entire period 2016 – 2025. They are: costs of $1,993 billions, offset by $644 billions of revenues, producing an apparent budget loss of $1,349 billions. Never mind that the CBO warns us that these estimates are in the process of being revised, and that they don’t take into account the CBO’s more recent estimates of the economy in general. So Sperry is being correct, but the CBO wants us to put an asterisk against the numbers.

Lastly comes the consequence: this extra spending will put upward pressure on interest rates. Possibly. Possibly not. That rather depends on a host of other factors. And need I remind you that we have just navigated five years or so of vastly expanded deficit whilst interest rates have been near zero. The connection between government spending and interest rates, if it ever existed, has been non-existent during the crisis.

Wait, there’s more: we next are pointed towards a University of Chicago professor – Casey Mulligan – who has calculated that Obamacare will damage growth because it costs jobs and slows productivity growth.

Let me ignore my normal aversion to anything produced by the University of Chicago and pretend that Mulligan has done serious research. Sorry, that doesn’t work. He hasn’t. He has cherry-picked the data in order to ‘prove’ the usual Chicago point that government is a very bad thing. I don’t think I ought to spend much time on Mulligan. He has been a star for the far right since he started to publish analyses building off of the CBO report of last February. In that report the CBO highlighted the effects that Obamacare would have on the supply of labor. Specifically the CBO pointed out that many low wage workers keep a job not because they want to work, but because they need health insurance. To the extent that health care reform such workers now have the choice of opting out of work. Additionally, some full time workers might now choose to drop down to part-time employment for the same reason.

The upshot of this supply impact is that there will be a slight drop in the employment to population ratio, and slight drop in the hours worked. Both these would normally have the effect of slowing GDP growth.

The question that Mulligan sweeps imperiously past, is exactly how do we estimate this impact given that we have no reliable history?

Let me not dwell on it. Both Paul Krugman and Paul Gruber have demolished Mulligan. I see no need to pile on.

Besides, my target is Sperry.

So, back to his article.

After our detour through the Mulligan maze, we are told that there has been a large decline in adult employment measured as a ratio as the adult population. Apparently:

“[it] is at an alarmingly low 44%. In fact, ‘The number of full-time jobs as a percentage of the total population is the lowest it’s ever been,’ Gallup CEO Jim Clifton warns.”

That 44% number is sourced from the Gallup polling organization. It measures the number of people who say they are employed at least 30 hours as a percent of the total population over 18 years old.

The problem is that the total population figure includes retirees – people who don’t want work anymore. This renders it rather meaningless. As the population ages we ought to expect that the Gallup metric would produce ever smaller percentages. This is a familiar issue and has nothing to do with health care reform. Then there’s the issue I have with Clifton’s statement [as quoted by Sperry] that the Gallup metric is now at its lowest in history. It isn’t. The equivalent figure for January 2014 was 42%, and it was 41.7% in January 2011. Oh, and the ‘history’ for this particular measure is since 2010, when Gallup decided it could make a buck by producing an alternative to the official numbers for its right wing clientele.

By the way: Clifton has withdrawn his more aggressive statements. Apparently Sperry sees no need to update us on that.

Phew. We are nearly there.

Let’s leave aside the comments about part time work. It’s clear that health care reform is having an effect: many employers are cutting hours per employee to below 30 per week because that allows them to avoid paying for insurance. This is the infamous ’29-er’ problem the right wingers keep on about. They never seemed to care about the long term trend towards reduced hours before, but now it is a national disgrace. I agree. Employers ought to be taken to task for such a transparent effort to avoid providing their employees with basic health care coverage.

Sperry, however moves on quickly to one last zinger: Obamacare also depresses wages. The source? A recent poll conducted by the national Federation of Independent Businesses. That poll tells us that, of 900 firms polled, 26% have held wages flat because of the added costs of Obamacare.

Umm. That means 74% didn’t. So the vast majority of businesses have not adjusted wages despite having a higher cost. I would have thought that would be the real news.

Further, the long term and very large run-ip in health care costs, especially private insurance costs, are a major reason why wages have been flat for years. This issue existed long before Obamacare. As long as health care is viewed as some sort of optional ‘benefit’ to workers its cost will always enter into the total compensation calculations run by business. If that cost is rising rapidly, as it has for a decade or more, there will be less left to pay workers a wage increase. And since private health care insurance costs are expected to rise more quickly than public costs are, the wage/benefit trade-off is more pressing outside of Obamacare than it is within.

OK. That’s it. As I said I wasted a goodly amount of time on this.

In sum: people like Sperry, and Mulligan for that matter, make no attempt to inform the public or to undertake balanced research. They are single minded in their efforts to create a false aura around Obamacare in order to undermine the public’s support for it.

That’s a shame because we need to improve the reform and learn from its weaknesses. To do that the public needs good, not distorted, information. Clearly the New York Post sees no need to provide such information. It prefers to bend the truth as far as it can. And, periodically, fib.

One last thing: lost in all this is any reference to that fact that our society now has far fewer uninsured people that it ever did. That was the reform’s big objective. It has succeeded.

So, to that extent, reform’s opponents have lost the battle.

Good.

 

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Employment Recovers

Just a very quick note regarding last week’s employment numbers.

They were good. That’s all we need to know. It’s been a long time since I have reported on the economy here, I have been distracted by my journey into the relationship between democracy and capitalism. But, since a couple of you asked, here is a comparison between the two most recent recessions and subsequent recoveries:

 

Employment

 

I think it is pretty clear that our current and still ongoing recovery was more substantial than that during the Bush years after 2001. When you look closely you can see that total employment at the end of the Bush administration was almost the same as it was at the beginning. In other words the entire eight years produced negligible progress, with all the gains after the earlier recession being offset by the dramatic collapse in 2008.

In contrast, the Obama years have seen steady improvements throughout, with that minor exception at the end of 2010 and the beginning of 2011.

Clearly Obama has been better at job creation than Bush.

Having said that, of course, I would not endorse recent economic policy which has, by and large been on the timid side of tepid. We could have had faster growth in jobs and the economy at large had the Republicans not obstructed each and every attempt to reflate thee economy. That is now, however, an academic argument.

What is clear is that the nature of both recent recessions was substantively different from those we were used to in the earlier post-World War II years. Those earlier recessions were forced on us by the Federal Reserve Board aggressively tightening money supply in order to choke of what it thought of as too rapid a pace of growth. Because those recessions were ‘artificially’ created they could also be easily undone. The Fed simply had to reduce interest rates when it had the pace of growth under control and the threat of inflation had subsided. These recessions thus tended to be short, with sharp job losses offset by sharp gains once the Fed eased.

Unfortunately these ‘artificial’ recessions are a thing of the past. Both the recessions whose employment numbers are plotted on the chart above began life as private sector adjustments. They were not created by the Fed, but were consequences of over-reach and then retrenchment by businesses and households. They have proven to be much more difficult to recover from, with monetary policy being much less effective than we had become used to in earlier post-war decades. One salient feature of these more modern recessions is that while job losses have been sharp, as they were before, the recovery in employment has been a much longer, more painful, affair.

This need not have been the case: the relative powerlessness of monetary policy could have been augmented by a more aggressive reflationary fiscal policy. In other words, the demand side of the economy could have been given a positive jolt to get employment recovering more rapidly than was likely under ‘normal’ circumstances.

This, however, would imply that the government can play an active and positive role in managing the economy. Since this is anathema to right wing politicians, they preferred to let the economy fester, rather than encourage action.

While this was callous and did great harm to millions of Americans, it allowed the Republicans to use the meager recovery as a political weapon – as the recent elections so dramatically demonstrate. It is a shame when one of our political parties acts so cynically, but that’s the way Washington is nowadays.

In any case: Those of you who are on the left of the spectrum can take heart in knowing that the Obama years have been good for the economy by and large. And that the recovery is better than anything we saw under Bush.

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