Category: Economics
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Want Prosperity and Stability? It’s About Wages and Salaries
What caused the Great Depression? What caused the current…whatever it is? According to James Livingston, the roots of both lie in shares of income. When not enough people are getting not enough wages and salaries–and when a large share of income is derived from financial investments, not work–we’re in bubble land, and things fall apart.…
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Businesses Constrained by Lack of Investment? Oh, Maybe Not.
A while back I pointed out that in 2007, only 9 percent of U.S. privately-held businesses cited a shortage of investment money as a constraint on their growth. In response to a rather maniacal comment on that post, I went looking to see what things are like today. Answer: about the same. The National Federation…
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Drill Here Drill Now! Oh….Wait…
It’s now clear that the McCain/Palin shout-outs for more domestic drilling were not, in fact, tawdry and childish pitches to get votes from jingoistic know-nothings. They were, in fact, calls for an energy policy that would lead this country into a future of responsibility, prosperity, and well-being. The free market is speaking… Related posts: Economist…
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Seattle’s a Happy Place! Outstate Washington, Appalachia: Not So Much
Showing that great minds think alike, my friend Steve also noticed the new national survey of well-being from Gallup. Though he only seems to have read an article about it, and based on that he wonders:
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Banks? Who Needs ‘Em?
James Livingston once again sheds serious light on our current situation, as illuminated by the Great Depression. Condensed: Economic recovery was actually going gangbusters ’33-’37. It wasn’t because banks started lending; they didn’t. The government (Reconstruction Finance Corporation) was doing the lending. We should try doing the same thing now. More detail on those four…
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Home-Work: Increase GDP by a Third?
I wrote recently about the fact that non-remunerated work — anything that doesn’t involve a money transfer — isn’t included in GDP. So painting your mother’s house, fixing your car, or cooking dinner isn’t reflected in that key measure of our prosperity and well-being — even though that work quite clearly contributes greatly to our…
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An Open Letter to Robert Barro
Robert J. Barro is Paul M. Warburg Professor of Economics at Harvard University, a senior fellow of the Hoover Institution of Stanford University, and a research associate of the National Bureau of Economic Research. He is the third-ranked economist in the world, according to RePEc. Dear Professor Barro: I’m compelled to write after following your…
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Republicans, In Lockstep, Oppose Largest Tax Cut in History
Yeah, that’s the one: the one Obama just handed them. The compromise stimulus plan includes $282 billion in tax cuts over two years. According to the Wall Street Journal, Bush’s first two years of tax cuts amounted to $174 billion. A second batch in 2004 and 2005 cost $231. And those were thought to be…
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Exports Ended the Great Depression: Yeah, Right
A commenter tagged arogersb replied to one of my comments on Bruce Bartlett’s Forbes article (see my previous post), reiterating a familiar canard: True, the US recovered after WWII. But the reason of that recovery was not debt, it’s that the rest of the world factories were destroyed and had to import from the US.…
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Reagan Supply Sider on The New Deal: “Deficits were too small, not too large.”
Forget “centrism.” How about “sensible-ism”? Bruce Bartlett displays it in spades in his new Forbes article. Just as he did–to some extent–in his book Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. Bartlett also wrote Reaganomics: Supply-Side Economics in Action–which is decidedly admiring of that belief system–so you know where he’s…
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(Paul) Romer: Start New Banks?
Paul Romer, husband and co-author to CEA head Christy Romer, has a suggestion that on the surface makes all kinds of sense. Paul Romer Says Starting New Banks Would Keep TARP Money Away From Bad Banks – WSJ.com. Everyone agrees that the United States urgently needs a few good banks. Turning bad banks into good…
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Tyler Cowen: $10 Trillion in Stimulus Would Have No Effect
I heard him on an NPR show last night, and was pulling my hair out with frustration. I admit that was partly because of comments by Cato’s Chris Edwards, who acts as if Keynesians don’t believe in monetary policy, calling them “childish.” When in fact it’s fundamentalist monetarists (read: supply-siders) who refuse to believe in…
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We Need to Spur Business Investment. Yeah, Right.
Comes before the court: Floyd Norris to point out that the heady dividends delivered by corporations 2004-2008 were in many cases not profits, but recycled loans. They borrowed the money, then paid it out to shareholders. Every penny in profits ($2.4 trillion) went out in dividends ($.9 trillion) and stock buybacks ($1.7 trillion), plus another…
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The Massive Missing Link in GDP: Home-Work
I’ve spilled a lot of electronic ink over the last few years arguing about what causes GDP growth (especially in developed countries like the U.S.), tacitly accepting that GDP per capita was a reasonably good proxy for prosperity and well-being. And it is–reasonably. It has the advantage of being widely and fairly consistently measured throughout…
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Depression Lessons: How Much Fiscal Stimulus?
There's lots of talk these days on upcoming fiscal stimulus–how much it should be and how it should be delivered. The NYT Economix blog offers recommendations from several economists, assuming a $500-billion package. Here's one that Greg Mankiw likes. When it comes to the size of the stimulus–and as Krugman argues quite cogently, in this…
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Medicare: Government Does It Right
I recently had occasion to go through two years of my 84-year-old mom's medical and insurance statements, to be sure that everything was kosher and that insurers were, in fact, paying all the bills they were supposed to be paying. You've undoubtedly attempted similar, so you can imagine that it was a daunting task–trying to…
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Mankiw (Mis) Channels Romer
In the grand conservative tradition of cherry-picking convenient quotations, Greg Mankiw pulls one from Christina and David Romer’s paper, “The Macroeconomic Effects of Tax Changes” (PDF). Tax changes have very large effects on output. Our baseline specification suggests that an exogenous tax increase of one percent of GDP lowers real GDP by roughly three percent.…
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Investing: Government Knows Better
I know: that headline is hate speech. But the fact is that it’s sometimes true. Take education. Here’s the kind of reliable payoffs we get from investing there: And this doesn’t even count the long-term aid to business that education spending provides. Remember: few businesses are seriously constrained by a lack of investment capital (only…
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Tyler Cowen Ignores the Elephant
Tyler Cowen’s Sunday NYT discussion of The New Deal is getting all sorts of play in the econoblogosphere–pro and con. What’s not getting much discussion (except here) is the elephant that Tyler rather inexplicably fails to even mention: massive government (deficit) spending during the war. (It’s not the war, stupid, it’s the spending.) The consensus…
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Do Wealthy Investors Create Growth and Prosperity? Not So Much
Here’s the central tenet of supply-side/trickle-down/voodoo Reaganomics: If rich people get (and keep) more money, they will invest it and promote economic growth, so everyone will prosper. That would (perhaps) be true if a shortage of investment were an important constraint on businesses and on economic growth. But according to the people who run those…