It passed in the House of Representatives yesterday. It is 647 pages long. This New York Times article, Components of Stimulus Vary in Speed and Efficiency, has what seems like a good over view in terms of facts and analysis. But when the whole thing is 647 pages, who knows.
But the same concerns apply that I mentioned last week. Getting the policies to work at the right time due to policy lags. There is also the issue of who will fill the jobs that the government creates, people currently unemployed or those currently unemployed. The economist Gary Becker has pointed out
"Some of this infrastructure spending may be very worthwhile-I return to this issue a bit later- but however merited, it is difficult to believe that they would provide much of a stimulus to the economy. Expansion of the health sector, for example, will add jobs to this sector, but it will do this mainly by drawing people into the health care sector who are presently employed in jobs outside this sector. This is because unemployment rates among health care workers are quite low, and most of the unemployed who had worked in construction, finance, or manufacturing are unlikely to qualify as health care workers without considerable additional training. This same conclusion applies to spending on expanding broadband, to make the energy used greener, to encourage new technologies and more research, and to improve teaching."
As some of my students know, different resources are better suited to different productive activities (which explains why the law of increasing opportunity cost is true). Alot of the workers who have lost their jobs are construction workers and only some of the stimulus can use their skills.
Friday, January 30, 2009
Wednesday, January 28, 2009
Tuesday, January 27, 2009
Some Basics On The Proposed Stimulus
There is an article called Stimulus 101: What's in the Bills. Its give a summary of what has been proposed plus the pros and cons.
Sunday, January 25, 2009
Worker Tax Cut: Maybe Not so Immediate
To find out why, go to Worker Tax Cut: Maybe Not so Immediate. This is really just another version of the post I had a few days ago on the policy lag problem. The government might want to help the economy, but it takes time for the policies to be put in place and have an effect.
Thursday, January 22, 2009
Job losses hitting men harder than women
To read about this go to Job losses hitting men harder than women. Here are some key exerpts:
"The economic crisis is hitting men much harder than women in the workplace, largely because male-dominated industries like construction and transportation are bearing the brunt of job losses, figures show.
Women, meanwhile, dominate sectors that are still growing, like government and healthcare, experts said.
Four-fifths of the 2.74 million people who lost their jobs between November 2007 and November 2008 were men, Sum said.
The biggest losses came in construction, where men comprise 87 percent of the work force, he said. Large losses also came in manufacturing and wholesale trade, where men make up more than two-thirds of the work force, he said.
"Males were dominant in sectors that were taking a bad hit," he said. "It's men and the blue-collar jobs. It's overwhelming."
According to the U.S. Bureau of Labor Statistics, men's employment as a ratio of the population dropped by 2.7 percent, while the ratio among women's dropped 0.8 percent from December 2007 to December 2008. The unemployment rate among men rose to 7.9 percent from 5.0, while among women, it rose to 6.4 percent from 4.8 percent, the agency said."
I am curious if any of my students have gotten laid off and whether you are male or female. Also, what about friends, relatives, co-workers, etc? Does it seem like more men or women are getting laid off? Of course, San Antonio has not been doing as badly as the rest of the country. In November, the national unemployment rate was 6.8% while it was 5.4% in San Antonio. The national rate went up to 7.2% in January.
"The economic crisis is hitting men much harder than women in the workplace, largely because male-dominated industries like construction and transportation are bearing the brunt of job losses, figures show.
Women, meanwhile, dominate sectors that are still growing, like government and healthcare, experts said.
Four-fifths of the 2.74 million people who lost their jobs between November 2007 and November 2008 were men, Sum said.
The biggest losses came in construction, where men comprise 87 percent of the work force, he said. Large losses also came in manufacturing and wholesale trade, where men make up more than two-thirds of the work force, he said.
"Males were dominant in sectors that were taking a bad hit," he said. "It's men and the blue-collar jobs. It's overwhelming."
According to the U.S. Bureau of Labor Statistics, men's employment as a ratio of the population dropped by 2.7 percent, while the ratio among women's dropped 0.8 percent from December 2007 to December 2008. The unemployment rate among men rose to 7.9 percent from 5.0, while among women, it rose to 6.4 percent from 4.8 percent, the agency said."
I am curious if any of my students have gotten laid off and whether you are male or female. Also, what about friends, relatives, co-workers, etc? Does it seem like more men or women are getting laid off? Of course, San Antonio has not been doing as badly as the rest of the country. In November, the national unemployment rate was 6.8% while it was 5.4% in San Antonio. The national rate went up to 7.2% in January.
Tuesday, January 20, 2009
Some Of Obama's Economic Policies Might Take Too Long To Help
You probably know that we are in a recession. Unemployment is at 7.2%, the highest in 15 years. As my macro students will learn later this semester, increasing aggregate demand (AD) through government spending can help the economy in recessions. But only if that spending hits the economy at the right time.
To read about the problems that Obama's policies might have, go to Much in Obama stimulus bill won't hit economy soon. Here are some key exerpts:
"It will take years before an infrastructure spending program proposed by President-elect Barack Obama will boost the economy, according to congressional economists.
Less than half of the $30 billion in highway construction funds detailed by House Democrats would be released into the economy over the next four years, concludes the analysis by the Congressional Budget Office. Less than $4 billion in highway construction money would reach the economy by September 2010.
The economy has been in recession for more than a year, but many economists believe a recovery may begin by the end of 2009. That would mean that most of the infrastructure money wouldn't hit the economy until it's already on the mend.
Overall, only $26 billion out of $274 billion in infrastructure spending would be delivered into the economy by the Sept. 30 end of the budget year, just 7 percent. Just one in seven dollars of a huge $18.5 billion investment in energy efficiency and renewable energy programs would be spent within a year and a half.
And other pieces, such as efforts to bring broadband Internet service to rural and underserved areas won't get started in earnest for years, while just one-fourth of clean drinking water projects can be completed by October of next year."
The parts that will hit the economy quickly are the tax cuts and aid to states, who are facing budget problems due to lower tax revenue, which always happens in recessions. Later in the semester, we will also learn about something called the "policy lag problem."
A group of economists called the Monetarists believe that when a recession occurs, it takes too long for the government to recognize it and take action to end it. The action will probably cause AD to increase when the economy is already back to the full-employment GDP. This is called the Policy Lag Problem. Here is how it works:
A recession begins (the economy produces less and workers are laid off) and at least 6 months later, the government finally recognizes that we are in a recession, so there is a Recognition Lag.
A few months later (maybe more), the government finally decides to do something about the recession (it can take time for Congress to pass a spending bill), so there is a Decision Making Lag.
A few months later (maybe more), the government implements the spending plan (maybe Congress passed a spending bill for highways and companies have to be found, bids taken and so on), so there is an Implementation Lag.
A few months later (maybe more), the government spending finally has an effect on the economy (AD increases), so there is a Effectiveness Lag. By this time, the economy is normal or back to full-employment. Then alot of spending hits the economy. This could cause inflation. Inflation is too many dollars chasing too few goods. If there is too much money in the economy, prices rise.
To read about the problems that Obama's policies might have, go to Much in Obama stimulus bill won't hit economy soon. Here are some key exerpts:
"It will take years before an infrastructure spending program proposed by President-elect Barack Obama will boost the economy, according to congressional economists.
Less than half of the $30 billion in highway construction funds detailed by House Democrats would be released into the economy over the next four years, concludes the analysis by the Congressional Budget Office. Less than $4 billion in highway construction money would reach the economy by September 2010.
The economy has been in recession for more than a year, but many economists believe a recovery may begin by the end of 2009. That would mean that most of the infrastructure money wouldn't hit the economy until it's already on the mend.
Overall, only $26 billion out of $274 billion in infrastructure spending would be delivered into the economy by the Sept. 30 end of the budget year, just 7 percent. Just one in seven dollars of a huge $18.5 billion investment in energy efficiency and renewable energy programs would be spent within a year and a half.
And other pieces, such as efforts to bring broadband Internet service to rural and underserved areas won't get started in earnest for years, while just one-fourth of clean drinking water projects can be completed by October of next year."
The parts that will hit the economy quickly are the tax cuts and aid to states, who are facing budget problems due to lower tax revenue, which always happens in recessions. Later in the semester, we will also learn about something called the "policy lag problem."
A group of economists called the Monetarists believe that when a recession occurs, it takes too long for the government to recognize it and take action to end it. The action will probably cause AD to increase when the economy is already back to the full-employment GDP. This is called the Policy Lag Problem. Here is how it works:
A recession begins (the economy produces less and workers are laid off) and at least 6 months later, the government finally recognizes that we are in a recession, so there is a Recognition Lag.
A few months later (maybe more), the government finally decides to do something about the recession (it can take time for Congress to pass a spending bill), so there is a Decision Making Lag.
A few months later (maybe more), the government implements the spending plan (maybe Congress passed a spending bill for highways and companies have to be found, bids taken and so on), so there is an Implementation Lag.
A few months later (maybe more), the government spending finally has an effect on the economy (AD increases), so there is a Effectiveness Lag. By this time, the economy is normal or back to full-employment. Then alot of spending hits the economy. This could cause inflation. Inflation is too many dollars chasing too few goods. If there is too much money in the economy, prices rise.
Sunday, January 18, 2009
The Top Budget Vacation Spot Is...Austin, Texas!?
To read about this go to Top Budget Travel Destinations for 2009: The best value hot spots for the New Year. But if people really believe this and many of them go to Austin for fun or a vacation, things won't be very fun due to the crowds (which reminds me of something that Yogi Berra said about a restaurant: "nobody goes there anymore, it's too crowded").
This also illustrates what economist Steven Landsburg calls the "Indifference Principle." "Except when people have unusual tastes or unusual talents, all activities must be equally desirable." This applies to Austin or any of the other cities on the list in the article. Once everyone sees Austin as a good deal, they start going there. Only people with unusual tastes will really enjoy it. That is, you will have to like what Austin has to offer alot more than the average person or the crowds will erode your enjoyment. Austin won't be any better than anywhere else for a vacation. Other places will be just as desirable.
This also illustrates what economist Steven Landsburg calls the "Indifference Principle." "Except when people have unusual tastes or unusual talents, all activities must be equally desirable." This applies to Austin or any of the other cities on the list in the article. Once everyone sees Austin as a good deal, they start going there. Only people with unusual tastes will really enjoy it. That is, you will have to like what Austin has to offer alot more than the average person or the crowds will erode your enjoyment. Austin won't be any better than anywhere else for a vacation. Other places will be just as desirable.
Friday, January 16, 2009
Touching A Product Makes You More Likely To Buy It
That is the finding of an interesting study. Click on Study: You Touch It, You Buy It to read about it. This exerpt gives the basic idea:
"Participants in the study were shown an inexpensive coffee mug, and were allowed to hold it either for 10 seconds or 30 seconds. They were then allowed to bid for the mug in either a closed (where bids could not be seen) or open (where they could be seen) auction. The participants were told the retail value of the mug before bidding began ($3.95 in the closed auction; $4.95 in the open auction). The study, detailed in the August 2008 issue of the journal Judgment and Decision Making, found that on average, people who held the mug for longer bid more for it - $3.91 to $2.44 in the case of the open auction and $3.07 to $2.24 in the closed. In fact, people who held the mug for 30 seconds bid more than the retail price four out of seven times."
I am curious if any of my students have had experiences like this. Have you noticed buying something because you touched it? If so, why? Anybody work in a store where you encourage customers to touch the merchandise?
"Participants in the study were shown an inexpensive coffee mug, and were allowed to hold it either for 10 seconds or 30 seconds. They were then allowed to bid for the mug in either a closed (where bids could not be seen) or open (where they could be seen) auction. The participants were told the retail value of the mug before bidding began ($3.95 in the closed auction; $4.95 in the open auction). The study, detailed in the August 2008 issue of the journal Judgment and Decision Making, found that on average, people who held the mug for longer bid more for it - $3.91 to $2.44 in the case of the open auction and $3.07 to $2.24 in the closed. In fact, people who held the mug for 30 seconds bid more than the retail price four out of seven times."
I am curious if any of my students have had experiences like this. Have you noticed buying something because you touched it? If so, why? Anybody work in a store where you encourage customers to touch the merchandise?
Sunday, December 07, 2008
End Of Semester
This will be finals week at San Antonio College, so I will not post very much in the next month or so. Once the next semester start, I will go back to 3 posts a week.
Friday, December 05, 2008
Is An Electronic "Helicopter Drop" Feasible? (Part 2)
I first posted on this last January. Here is the link Is An Electronic "Helicopter Drop" Feasible?. Basically, people have debit cards with a zero balance. If the FED wants consumer spending to increase, then it puts money in everyone's accounts. I initially stated that there could be a time limit, so it gets spent quickly, tyring to avoid the policy lag problem. (some people have called Ben Bernanke "helicopter Ben"-this may not be fair, but "helicopter drop" is an old term that I recall from grad school in the 80s).
Here are some additional thoughts on this:
People could have two accounts. In one, they would have to spend the money by the end of the month. In the other the money could build up so you could buy a durable like an appliance. As before, you can't convert these accounts to cash. But the stores can.
We could prohibit them from being spent in grocery stores, so people just don't save money from their own paychecks and then use these accounts to buy necessities.
Some economists say that we need to create inflationary expectations to get AD increasing again (or at least reduce deflationary expectations so things don't get worse). Getting this kind of spending going so quickly might help.
Some articles that I am reading say the FED can basicially create as much money as it wants. It has added over $1 trillion to its balance sheet in the last year. So this would just be another way to do it.
This is consistent with the FED's interest in helping consumers which we see in its buying of credit card debt.
Bank's excess reserves are very high ($600 billion). But not enough is being loaned and spent. So we may need other ways to stimulate AD. Paul Krugman said the other day that it might take awhile to get the fiscal stimulus plans in place. Maybe something like this would work faster.
State sales tax collections might rise. States need money now, so this might help.
If businesses know that consumers will be spending, then they might be more willing to invest and not layoff workers.
The debit cards could be activated like other debit and credit cards. You call the FED and tell them your SS# and you can start spending.
We might have to give people more money each month than the fall in consumer spending to make sure they just don't save their own money and then use the debit cards to buy their normal goods.
The government gives out money anyway, like in unemployment insurance and welfare and food stamps.
It is possible that when economiy start to slide into recessions people might anticipate that the FED will put money in their accounts, so they will delay purchases. But knowing that consumer spending is going to rise might also affect expectations in positively, too. Also, some research suggest that unemployment insurance keeps people unemployed longer but no one calls for ending that program.
Maybe this could only be done if there are 3 straight months of falling consumer spending and it would have to be unanimous or close to it on the FOMC.
Here are some additional thoughts on this:
People could have two accounts. In one, they would have to spend the money by the end of the month. In the other the money could build up so you could buy a durable like an appliance. As before, you can't convert these accounts to cash. But the stores can.
We could prohibit them from being spent in grocery stores, so people just don't save money from their own paychecks and then use these accounts to buy necessities.
Some economists say that we need to create inflationary expectations to get AD increasing again (or at least reduce deflationary expectations so things don't get worse). Getting this kind of spending going so quickly might help.
Some articles that I am reading say the FED can basicially create as much money as it wants. It has added over $1 trillion to its balance sheet in the last year. So this would just be another way to do it.
This is consistent with the FED's interest in helping consumers which we see in its buying of credit card debt.
Bank's excess reserves are very high ($600 billion). But not enough is being loaned and spent. So we may need other ways to stimulate AD. Paul Krugman said the other day that it might take awhile to get the fiscal stimulus plans in place. Maybe something like this would work faster.
State sales tax collections might rise. States need money now, so this might help.
If businesses know that consumers will be spending, then they might be more willing to invest and not layoff workers.
The debit cards could be activated like other debit and credit cards. You call the FED and tell them your SS# and you can start spending.
We might have to give people more money each month than the fall in consumer spending to make sure they just don't save their own money and then use the debit cards to buy their normal goods.
The government gives out money anyway, like in unemployment insurance and welfare and food stamps.
It is possible that when economiy start to slide into recessions people might anticipate that the FED will put money in their accounts, so they will delay purchases. But knowing that consumer spending is going to rise might also affect expectations in positively, too. Also, some research suggest that unemployment insurance keeps people unemployed longer but no one calls for ending that program.
Maybe this could only be done if there are 3 straight months of falling consumer spending and it would have to be unanimous or close to it on the FOMC.
Tuesday, December 02, 2008
Why We Are In A Recession And Why Fiscal Policy (increasing government spending) Might Not Help
Normally I don't like to just put in links to other blogs since you can read that stuff by clicking on my links to those blogs. But since the economy is in the news so much and since alot of that is on what caused the crisis and what needs to be done, these two links are important in giving a different perspective.
The first one is What Really Happened? by Larry White of the University of Missouri. He blames the FED keeping interest rates too low for too long and there being too many "sub prime" loans, that is, loans with lower standards for incomes of the borrowers and downpayments. The government encouraged these home loans. Adjustable rate mortgages play a role, too.
Then there is Fiscal Policy Puzzles where Harvard professor Greg Mankiw disucsses the fact that fiscal policy might not work the way we want it to. That is, increasing government spending might not help very much (although he says " I am not sure what model I should use to explain" this). He also says "At the very least, these puzzles should give us reason to pause when using the Keynesian framework for policy analysis. There is still a lot about macroeconomics that remains deeply puzzling."
Another post by Mankiw is The Bils-Klenow Stimulus Plan. This suggests that cutting payroll taxes (social security taxes) is the best stimulus.
The first one is What Really Happened? by Larry White of the University of Missouri. He blames the FED keeping interest rates too low for too long and there being too many "sub prime" loans, that is, loans with lower standards for incomes of the borrowers and downpayments. The government encouraged these home loans. Adjustable rate mortgages play a role, too.
Then there is Fiscal Policy Puzzles where Harvard professor Greg Mankiw disucsses the fact that fiscal policy might not work the way we want it to. That is, increasing government spending might not help very much (although he says " I am not sure what model I should use to explain" this). He also says "At the very least, these puzzles should give us reason to pause when using the Keynesian framework for policy analysis. There is still a lot about macroeconomics that remains deeply puzzling."
Another post by Mankiw is The Bils-Klenow Stimulus Plan. This suggests that cutting payroll taxes (social security taxes) is the best stimulus.
Sunday, November 30, 2008
Another One For The Law Of Unintended Consequences File: Problems Plague U.S. Flex-Fuel Fleet
But first, a funny cartoon by Steve Breen of the San Diego Union-Tribune.
The cartoon has nothing to do with the topic. It comes from this Washington Post article Problems Plague U.S. Flex-Fuel Fleet. It seems the idea was to have government vehicles use alternative fuels to save gas. But the opposite has happened. Here are the key exerpts:
"But the costly effort to put more workers into vehicles powered by ethanol and other fuel alternatives has been fraught with problems, many of them caused by buying vehicles before fuel stations were in place to support them"
"Often, the vehicles come only with larger engines than the ones they replaced in the fleet. Consequently, the federal program -- known as EPAct -- has sometimes increased gasoline consumption and emission rates, the opposite of what was intended."
"The Postal Service illustrates the problem. It estimates that its 37,000 newer alternative-fuel delivery vans, which can run on high-grade ethanol, consumed 1.5 million additional gallons of gasoline last fiscal year because of the larger engines."
"The vehicles that would allow the agency to meet federal mandates were available in six- and eight-cylinder models"
"Alternative fuel was used less than 1 percent of the time in 2007-2008."
"Agencies were required to buy alternative-fuel vehicles but did not have to run them on alternative fuel."
This illustrates The Law Of Unintended Consequences. We may have well-meaning laws that should benefit society but people react to those laws and change their behavior sometimes in unexpected and undesirable ways. We see this here in this article. Another example would be rent controls. If you legally keep down the price of rent, landlords have less incentive to keep their buildings or construct new apartments. So the rental market (and renters) suffer even though that was not the intended result.
The cartoon has nothing to do with the topic. It comes from this Washington Post article Problems Plague U.S. Flex-Fuel Fleet. It seems the idea was to have government vehicles use alternative fuels to save gas. But the opposite has happened. Here are the key exerpts:
"But the costly effort to put more workers into vehicles powered by ethanol and other fuel alternatives has been fraught with problems, many of them caused by buying vehicles before fuel stations were in place to support them"
"Often, the vehicles come only with larger engines than the ones they replaced in the fleet. Consequently, the federal program -- known as EPAct -- has sometimes increased gasoline consumption and emission rates, the opposite of what was intended."
"The Postal Service illustrates the problem. It estimates that its 37,000 newer alternative-fuel delivery vans, which can run on high-grade ethanol, consumed 1.5 million additional gallons of gasoline last fiscal year because of the larger engines."
"The vehicles that would allow the agency to meet federal mandates were available in six- and eight-cylinder models"
"Alternative fuel was used less than 1 percent of the time in 2007-2008."
"Agencies were required to buy alternative-fuel vehicles but did not have to run them on alternative fuel."
This illustrates The Law Of Unintended Consequences. We may have well-meaning laws that should benefit society but people react to those laws and change their behavior sometimes in unexpected and undesirable ways. We see this here in this article. Another example would be rent controls. If you legally keep down the price of rent, landlords have less incentive to keep their buildings or construct new apartments. So the rental market (and renters) suffer even though that was not the intended result.
Thursday, November 27, 2008
We Already Have a CEA And An NEC, So Do We Need An ERAB?
I guess we should all be thankful for having so many teams of ecnomists. Must be nothing to worry about.
Obama has created a new President‘s "Economic Recovery Advisory Board" or ERAB. You can read about it here and here and here. Here is the general idea:
"President-elect Barack Obama announced Wednesday that he is creating a new economic recovery board to provide a "fresh perspective" for his administration. The board will advise Obama on how to revive the ailing economy, offering independent, nonpartisan information, analysis and advice to the president as he formulates and implements his plans for economic recovery, Obama's transition office said."
But we alreay have a Council of Economic Advisers. Here is what the CEA is all about:
"From the "Employment Act of 1946":
"There is hereby created in the Executive Office of the President a Council of Economic Advisers (hereinafter called the "Council"). The Council shall be composed of three members who shall be appointed by the President, by and with the advice and consent of the Senate, and each of whom shall be a person who, as a result of his training, experience, and attainments, is exceptionally qualified to analyze and interpret economic developments, to appraise programs and activities of the Government in the light of the policy declared in section 2, and to formulate and recommend national economic policy to promote employment, production, and purchasing power under free competitive enterprise. The President shall designate one of the members of the Council as Chairman.
It shall be the duty and function of the Council--
to assist and advise the President in the preparation of the Economic Report;
to gather timely and authoritative information concerning economic developments and economic trends, both current and prospective, to analyze and interpret such information in the light of the policy declared in section 2 for the purpose of determining whether such developments and trends are interfering, or are likely to interfere, with the achievement of such policy, and to compile and submit to the President studies relating to such developments and trends;
to appraise the various programs and activities of the Federal Government in the light of the policy declared in section 2 for the purpose of determining the extent to which such programs and activities are contributing, and the extent to which they are not contributing, to the achievement of such policy, and to make recommendations to the President with respect thereto;
to develop and recommend to the President national economic policies to foster and promote free competitive enterprise, to avoid economic fluctuations or to diminish the effects thereof, and to maintain employment, production, and purchasing power;
to make and furnish such studies, reports thereon, and recommendations with respect to matters of Federal economic policy and legislation as the President may request."
Now, what about the NEC or National Economic Council? It sure sounds like the ERAB and the CEA:
"Keith Hennessey is Assistant to the President for Economic Policy and Director of the National Economic Council (NEC). The NEC was established in 1993 within the Office of Policy Development and is part of the Executive Office of the President. It was created for the purpose of advising the President on matters related to U.S. and global economic policy. By Executive Order, the NEC has four principal functions: to coordinate policy-making for domestic and international economic issues, to coordinate economic policy advice for the President, to ensure that policy decisions and programs are consistent with the President's economic goals, and to monitor implementation of the President's economic policy agenda.
The purview of the NEC extends to policy matters affecting the various sectors of the nation's economy as well as the overall strength of the U.S. and global macro-economies. Therefore, the membership of the NEC comprises numerous department and agency heads within the administration, whose policy jurisdictions impact the nation's economy. Director Hennessey works in conjunction with these officials to coordinate and implement the President's economic policy objectives. He is also supported in his capacity as an adviser to President Bush by a staff of policy specialists whose expertise pertains to the council's specific areas of decision-making.
Included on this staff are a Deputy Assistant to the President and several Special Assistants to the President who report on a variety of economic policy issues including: agriculture, commerce, energy, financial markets, fiscal policy, healthcare, labor, and Social Security."
Don't forget that we also have The Domestic Policy Council. Here is what they do:
"The Domestic Policy Council coordinates the domestic policy-making process in the White House and offers policy advice to the President. The DPC also works to ensure that domestic policy initiatives are coordinated and consistent throughout federal agencies. Finally, the DPC monitors the implementation of domestic policy, and represents the President's priorities to other branches of government."
Also
"Under President Bush, the Domestic Policy Council oversees major domestic policy areas such as education, health, housing, welfare, justice, federalism, transportation, environment, labor and veteran's affairs. The Office of National AIDS Policy (ONAP), the Office of National Drug Control Policy (ONDCP), USA Freedom Corps (USAFC), the Council on Environmental Quality (CEQ) and the Office of Faith-Based and Community Initiatives (OFBCI) are also affiliated with the Domestic Policy Council. The Domestic Policy Council’s formal membership includes the cabinet Secretaries and Administrators of federal agencies that affect the issues addressed by the DPC."
Obama has created a new President‘s "Economic Recovery Advisory Board" or ERAB. You can read about it here and here and here. Here is the general idea:
"President-elect Barack Obama announced Wednesday that he is creating a new economic recovery board to provide a "fresh perspective" for his administration. The board will advise Obama on how to revive the ailing economy, offering independent, nonpartisan information, analysis and advice to the president as he formulates and implements his plans for economic recovery, Obama's transition office said."
But we alreay have a Council of Economic Advisers. Here is what the CEA is all about:
"From the "Employment Act of 1946":
"There is hereby created in the Executive Office of the President a Council of Economic Advisers (hereinafter called the "Council"). The Council shall be composed of three members who shall be appointed by the President, by and with the advice and consent of the Senate, and each of whom shall be a person who, as a result of his training, experience, and attainments, is exceptionally qualified to analyze and interpret economic developments, to appraise programs and activities of the Government in the light of the policy declared in section 2, and to formulate and recommend national economic policy to promote employment, production, and purchasing power under free competitive enterprise. The President shall designate one of the members of the Council as Chairman.
It shall be the duty and function of the Council--
to assist and advise the President in the preparation of the Economic Report;
to gather timely and authoritative information concerning economic developments and economic trends, both current and prospective, to analyze and interpret such information in the light of the policy declared in section 2 for the purpose of determining whether such developments and trends are interfering, or are likely to interfere, with the achievement of such policy, and to compile and submit to the President studies relating to such developments and trends;
to appraise the various programs and activities of the Federal Government in the light of the policy declared in section 2 for the purpose of determining the extent to which such programs and activities are contributing, and the extent to which they are not contributing, to the achievement of such policy, and to make recommendations to the President with respect thereto;
to develop and recommend to the President national economic policies to foster and promote free competitive enterprise, to avoid economic fluctuations or to diminish the effects thereof, and to maintain employment, production, and purchasing power;
to make and furnish such studies, reports thereon, and recommendations with respect to matters of Federal economic policy and legislation as the President may request."
Now, what about the NEC or National Economic Council? It sure sounds like the ERAB and the CEA:
"Keith Hennessey is Assistant to the President for Economic Policy and Director of the National Economic Council (NEC). The NEC was established in 1993 within the Office of Policy Development and is part of the Executive Office of the President. It was created for the purpose of advising the President on matters related to U.S. and global economic policy. By Executive Order, the NEC has four principal functions: to coordinate policy-making for domestic and international economic issues, to coordinate economic policy advice for the President, to ensure that policy decisions and programs are consistent with the President's economic goals, and to monitor implementation of the President's economic policy agenda.
The purview of the NEC extends to policy matters affecting the various sectors of the nation's economy as well as the overall strength of the U.S. and global macro-economies. Therefore, the membership of the NEC comprises numerous department and agency heads within the administration, whose policy jurisdictions impact the nation's economy. Director Hennessey works in conjunction with these officials to coordinate and implement the President's economic policy objectives. He is also supported in his capacity as an adviser to President Bush by a staff of policy specialists whose expertise pertains to the council's specific areas of decision-making.
Included on this staff are a Deputy Assistant to the President and several Special Assistants to the President who report on a variety of economic policy issues including: agriculture, commerce, energy, financial markets, fiscal policy, healthcare, labor, and Social Security."
Don't forget that we also have The Domestic Policy Council. Here is what they do:
"The Domestic Policy Council coordinates the domestic policy-making process in the White House and offers policy advice to the President. The DPC also works to ensure that domestic policy initiatives are coordinated and consistent throughout federal agencies. Finally, the DPC monitors the implementation of domestic policy, and represents the President's priorities to other branches of government."
Also
"Under President Bush, the Domestic Policy Council oversees major domestic policy areas such as education, health, housing, welfare, justice, federalism, transportation, environment, labor and veteran's affairs. The Office of National AIDS Policy (ONAP), the Office of National Drug Control Policy (ONDCP), USA Freedom Corps (USAFC), the Council on Environmental Quality (CEQ) and the Office of Faith-Based and Community Initiatives (OFBCI) are also affiliated with the Domestic Policy Council. The Domestic Policy Council’s formal membership includes the cabinet Secretaries and Administrators of federal agencies that affect the issues addressed by the DPC."
Tuesday, November 25, 2008
The New Chair Of The Council Of Economic Advisors Is Christina Romer
You can read about her at this New York Times article Christina D. Romer. She is a highly regarded scholar, being an expert on the Great Depression and business cycles. It looks like a good choice by Obama. In addition to publishing many articles in technical journals, she wrote a very good overview of the Depression for Britannica. Click on Great Depression to read it. Maybe her ability to communicate clearly to a general audience will be an asset as chief economic advisor.
Sunday, November 23, 2008
Economists Offer Conflicting Views Of The Stimulus
The 2008 winner of the Nobel Prize, Paul Krugman is definitely pro-stimulus:
"So we need a fiscal stimulus big enough to close a 7% output gap. Remember, if the stimulus is too big, it does much less harm than if it’s too small. What’s the multiplier? Better, we hope, than on the early-2008 package. But you’d be hard pressed to argue for an overall multiplier as high as 2.
When I put all this together, I conclude that the stimulus package should be at least 4% of GDP, or $600 billion."
From Stimulus math (wonkish).
But Brian Riedl of the Heritage Foundation, writing in the Wall Street Journal, says
"But where does government get this money? Congress doesn't have its own stash. Every dollar it injects into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It's merely redistributed from one group of people to another.
Of course, advocates of stimulus respond that redistributing money from "savers" to "spenders" will lead to additional spending. That assumes that savers store spare cash in their mattresses, thereby removing it from the economy. In reality, nearly all Americans either invest their savings (where it finances business investment) or deposit it in banks (which quickly lend it to others to spend). The money gets spent whether it is initially consumed or saved.
Governments don't create new purchasing power out of thin air. If Congress funds new spending with taxes, it is redistributing existing income. If the money is borrowed from American investors, those investors will have that much less to invest or to spend in the private economy. If the money is borrowed from foreigners, the balance of payments must still balance. That means reducing net exports through exchange-rate adjustments, thereby leaving net spending on the economy unchanged."
That is from Why Spending Stimulus Plans Fail
A professor at Gettysburg College is very critical of Riedl. They say "No, no, NO! F! John Maynard Keynes demonstrated 75 years ago to the satisfaction of economists everywhere that this logic is fatally flawed. Governments can create purchasing power out of thin air when the economy is in recession and there are unemployed workers and other factors of production."
That is from Brian Riedl fails my Intermediate Macroeconomics class.
But Donald J. Boudreaux, Chairman of the Department of Economics at George Mason University, says "Brian Riedl is correct: economic-stimulus packages are economic snake oil."
That is from Dear WSJ: Economic Snake Oil Not Stimulating
No wonder people are confused.
"So we need a fiscal stimulus big enough to close a 7% output gap. Remember, if the stimulus is too big, it does much less harm than if it’s too small. What’s the multiplier? Better, we hope, than on the early-2008 package. But you’d be hard pressed to argue for an overall multiplier as high as 2.
When I put all this together, I conclude that the stimulus package should be at least 4% of GDP, or $600 billion."
From Stimulus math (wonkish).
But Brian Riedl of the Heritage Foundation, writing in the Wall Street Journal, says
"But where does government get this money? Congress doesn't have its own stash. Every dollar it injects into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It's merely redistributed from one group of people to another.
Of course, advocates of stimulus respond that redistributing money from "savers" to "spenders" will lead to additional spending. That assumes that savers store spare cash in their mattresses, thereby removing it from the economy. In reality, nearly all Americans either invest their savings (where it finances business investment) or deposit it in banks (which quickly lend it to others to spend). The money gets spent whether it is initially consumed or saved.
Governments don't create new purchasing power out of thin air. If Congress funds new spending with taxes, it is redistributing existing income. If the money is borrowed from American investors, those investors will have that much less to invest or to spend in the private economy. If the money is borrowed from foreigners, the balance of payments must still balance. That means reducing net exports through exchange-rate adjustments, thereby leaving net spending on the economy unchanged."
That is from Why Spending Stimulus Plans Fail
A professor at Gettysburg College is very critical of Riedl. They say "No, no, NO! F! John Maynard Keynes demonstrated 75 years ago to the satisfaction of economists everywhere that this logic is fatally flawed. Governments can create purchasing power out of thin air when the economy is in recession and there are unemployed workers and other factors of production."
That is from Brian Riedl fails my Intermediate Macroeconomics class.
But Donald J. Boudreaux, Chairman of the Department of Economics at George Mason University, says "Brian Riedl is correct: economic-stimulus packages are economic snake oil."
That is from Dear WSJ: Economic Snake Oil Not Stimulating
No wonder people are confused.
Friday, November 21, 2008
Corporations Pay A Lower Tax Rate Than The Official Rate
Last week I talked about how Americans in general might not be paying all the taxes they are supposed to. The same might be true about corporations. You can read about it at Tax Data Highlight Corporate Loopholes. Here is an exerpt:
"The Internal Revenue Service found that U.S. companies paid federal income taxes on their reported U.S. profits at far less than the 35% statutory rate, offering a potential revenue source for an incoming presidential administration that faces a yawning budget deficit.
Newly released data from the IRS show companies paid federal and foreign income taxes on their U.S. book income -- the amount reported to shareholders -- at a rate of 25.3% during 2005, the most recent year for which data were made available by the IRS."
Another is:
"Differences between accounting rules and tax laws mean companies keep two sets of books. Tax rules often allow them to take deductions on their tax returns that don't eat into their book profits reported to shareholders.
The IRS requires companies to file a form reconciling the gap between their book and taxable profits, called the Schedule M-3. U.S. companies included in the data reported about $1.35 trillion in pretax U.S. book income to their investors in 2005, but about $1.03 trillion to the IRS -- a difference of about 23%."
"The Internal Revenue Service found that U.S. companies paid federal income taxes on their reported U.S. profits at far less than the 35% statutory rate, offering a potential revenue source for an incoming presidential administration that faces a yawning budget deficit.
Newly released data from the IRS show companies paid federal and foreign income taxes on their U.S. book income -- the amount reported to shareholders -- at a rate of 25.3% during 2005, the most recent year for which data were made available by the IRS."
Another is:
"Differences between accounting rules and tax laws mean companies keep two sets of books. Tax rules often allow them to take deductions on their tax returns that don't eat into their book profits reported to shareholders.
The IRS requires companies to file a form reconciling the gap between their book and taxable profits, called the Schedule M-3. U.S. companies included in the data reported about $1.35 trillion in pretax U.S. book income to their investors in 2005, but about $1.03 trillion to the IRS -- a difference of about 23%."
Wednesday, November 19, 2008
Good Career Advice
The article is It May Be a Good Job, but Is It ‘Good Work’? from Sunday's New York Times. It says that a good job is "a calling that combines excellent performance, expresses one’s ethics and offers a pleasing sense of engagement."
Research shows that "people working in very challenging professions or settings who were technically excellent might find their work difficult unless it was also important to their mission in life.”
Also
"An unexpected finding was that joy was a crucial ingredient of good work."
and
"There are three questions people can ask about their jobs to evaluate their good-work level: Does it fit your values? Does it evoke excellence; are you highly competent and effective at what you do? Does it bring you that subjective barometer of engagement, joy?"
If you are looking for a job
“Decide what you really like to do and what you would like to spend your life doing. That’s more important than deciding what particular job to hold, because the employment landscape is changing radically and quickly. Then ask, ‘Where could I carry that out?’ and be very flexible about the milieu and venue — but not about what you get a kick out of and can be good at.
And then, third, if you have any choice over where to work, when you’re considering a job, go there and talk to people. Ask yourself, ‘Is this the kind of place where I can see myself in others?’ You might make five times more money at one place, but does it reflect who you are and who you want to be? Are my colleagues people I’d admire or people I’d prefer to avoid?”
Research shows that "people working in very challenging professions or settings who were technically excellent might find their work difficult unless it was also important to their mission in life.”
Also
"An unexpected finding was that joy was a crucial ingredient of good work."
and
"There are three questions people can ask about their jobs to evaluate their good-work level: Does it fit your values? Does it evoke excellence; are you highly competent and effective at what you do? Does it bring you that subjective barometer of engagement, joy?"
If you are looking for a job
“Decide what you really like to do and what you would like to spend your life doing. That’s more important than deciding what particular job to hold, because the employment landscape is changing radically and quickly. Then ask, ‘Where could I carry that out?’ and be very flexible about the milieu and venue — but not about what you get a kick out of and can be good at.
And then, third, if you have any choice over where to work, when you’re considering a job, go there and talk to people. Ask yourself, ‘Is this the kind of place where I can see myself in others?’ You might make five times more money at one place, but does it reflect who you are and who you want to be? Are my colleagues people I’d admire or people I’d prefer to avoid?”
Sunday, November 16, 2008
A Megabyte Of Memory Costs 10,000 Times Less Than It Did In 1989
In 1989, I bought a computer and an external hardrive that had 40 megabytes of memory.The drive cost $700 (and that was with the student discount at the Washington State University computer store). The consumer price index has gone up about 75% since then. So raising 700 by 75% gives us about 1226. So if we bought that 40 megabyte hardrive today, it would be $1,226. That works out to $30.67 per megabyte.
My wife recently bought me an 8 gigabyte flash drive for $25. A gigabyte is 1,024 megabytes. So the flash drive has 8,192 megabyters. At $25, that works out to $0.003. That is less than one cent per megabyte. Since $30.67/.003 = 10,051, it means that a megabyte now costs 10,000 times less than it did in 1989.
My wife recently bought me an 8 gigabyte flash drive for $25. A gigabyte is 1,024 megabytes. So the flash drive has 8,192 megabyters. At $25, that works out to $0.003. That is less than one cent per megabyte. Since $30.67/.003 = 10,051, it means that a megabyte now costs 10,000 times less than it did in 1989.
Of course I am no computer expert, so maybe there are even better deals out there for memory. If anyone has purchased memory for less than 1 cent per megabyte, let me know.
Friday, November 14, 2008
Shocking News: Americans Cheat On Their Taxes!
The link is Report: IRS issued $1B in bad refunds in 2007. Here is the key exerpt:
"The IRS has estimated that the tax gap _ the difference between taxes owed and taxes actually paid _ at about $290 billion a year. Of that, about 57 percent comes from individuals understating incomes or overstating deductions and exemptions."
In both fiscal 2007 and fiscal 2008, the federal government took in about $2.5 trillion. So the amount lost due to cheating is about 11.6% of what is actually collected. It would have more than covered the deficit of $162 billion in fiscal 2007 and it would be about 2/3 of the $450 billion deficit for fiscal 2008.
"The IRS has estimated that the tax gap _ the difference between taxes owed and taxes actually paid _ at about $290 billion a year. Of that, about 57 percent comes from individuals understating incomes or overstating deductions and exemptions."
In both fiscal 2007 and fiscal 2008, the federal government took in about $2.5 trillion. So the amount lost due to cheating is about 11.6% of what is actually collected. It would have more than covered the deficit of $162 billion in fiscal 2007 and it would be about 2/3 of the $450 billion deficit for fiscal 2008.
Wednesday, November 12, 2008
New York City Tax Payers To Pay $1 Billion To See Baseball
The article is As Stadiums Rise, So Do Costs to Taxpayers from the New York Times. Here is an exerpt:
"Though the teams are indeed paying about $2 billion to erect the two stadiums, the cost to the city for infrastructure — parks, garages and transportation improvements — has jumped to about $458 million, from $281 million in 2005. The state is contributing an additional $201 million.
Those totals do not include an estimated $480 million in city, state and federal tax breaks granted to both teams. In addition, neither team has to pay rent or property taxes, though both are playing on city-owned land."
Adding the $458 million to the $480 million puts it at $938. So that is closing in on $1 billion. I recall reading in a book by Andrew Zimbalist (who is quoted in the above article) that sports economists generally agree that public (tax payer) funded stadiums are not worth it. It looks like New Yorkers will be paying more for baseball whether they like it or not.
"Though the teams are indeed paying about $2 billion to erect the two stadiums, the cost to the city for infrastructure — parks, garages and transportation improvements — has jumped to about $458 million, from $281 million in 2005. The state is contributing an additional $201 million.
Those totals do not include an estimated $480 million in city, state and federal tax breaks granted to both teams. In addition, neither team has to pay rent or property taxes, though both are playing on city-owned land."
Adding the $458 million to the $480 million puts it at $938. So that is closing in on $1 billion. I recall reading in a book by Andrew Zimbalist (who is quoted in the above article) that sports economists generally agree that public (tax payer) funded stadiums are not worth it. It looks like New Yorkers will be paying more for baseball whether they like it or not.
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