Monday, December 29, 2008
Several of the Times' examples are anecdotal. Shafer goes on to describe supporting anecdotes from other newspaper stories as well as some contradictory anecdotes.
The findings indicate that pledges are not only ineffective at stopping premarital sex but counter-productive in discouraging teens from taking reasonable precautions.
Teenagers who pledge to remain virgins until marriage are just as likely to have premarital sex as those who do not promise abstinence and are significantly less likely to use condoms and other forms of birth control when they do, according to a study released today.
One explanation for the findings may be that pledges convince teens that they don't need to take precautions. After all, you don't need condoms or other forms of birth control if you're not going to have sex in the first place. However, in the instances when sex does happen, the teens are unprepared. As the study indicates, the "instances" seem to be as frequent for the pledged teens as for the unpledged teens.
Another explanation is that pledges put up barriers between teens and responsible adults who might help arrange for contraception. It is difficult enough for a teen to start the "I need protection" conversation with a parent; imagine how much harder it is when the teen has pledged chastity.
Yet another explanation may be that parents become less vigilant regarding their children's behavior once a pledge has been made.
Pledges and abstinence programs generally are based on the unrealistic notion that we shouldn't send "mixed messages" to teens. However, the mixed message seems unavoidable. We should discourage teenagers from engaging in sex, but if they do, we want them to take precautions against pregnancy and disease.
The good news seems to be that teens as a group are getting the mixed message despite the actions of some adults. Teen birth rates and pregnancy rates are at relatively low levels. More comprehensive programs that recognize the inherent mixed message may help to reduce these rates more.
Tuesday, December 23, 2008
Investment bankers at Credit Suisse may be feeling a lot like Clark Griswold after finding out that most of their year-end bonuses are being paid out in the form of "junk bonds, mortgage-back securities and corporate loans" instead of cash.
Clark, whose Crunch enhancer non-nutritive cereal varnish actually added value to his company, deserved better and eventually got it.
The bankers, who created these crummy securities and pawned them off on their customers, are getting far better than they deserve.
Economists use the rational framework, without much controversey, to examine consumer (demand) and producer (supply) behavior in markets. Economists, most famously Gary Becker, have also used this model to examine other aspects of people's behavior including criminal activity.
Conservatives implicitly rely on the rational model when they argue that more police and tougher sentences deter criminal behavior. The argument is simple. These actions increase the likelihood of getting caught and the penalties associated with crime and thereby raise the cost of crime. For someone who is on the margin between committing and not committing a crime, the increase in costs will be enough to tip the scales against engaging in crime. Enforcement and penalities are examples of direct costs of crime. In the rational model, when these costs go up, criminal behavior goes down.
Conservatives, however, seem to have more trouble grasping another implication of the model, involving indirect or opportunity costs. When deciding between two alternatives, a person is less likely to choose one alternative if the value of the other alternative increases. Applied to criminal decisions, this means that people are less likely to engage in crime if the value of legitimate actions increases.
In his 1968 Journal of Political Economy article on "Crime and Punishment: An Economic Approach," Becker wrote (p. 177),
The rational model predicts a link between economic and criminal activity. When the economy sours and legitimate money-making opportunities dry up, criminal activity is likely to increase.
There is a function relating the number of offenses by any person to his probability of conviction, to his punishment if convicted, and to other variables, such as the income available to him in legal and other illegal activities, the frequency of nuisance arrests, and his willingness to commit an illegal act...
...a rise in the income available in legal activities or an increase in law-abidingness due, say, to "education" would reduce the incentive to enter illegal activities and thus would reduce the number of offenses.
A New York Times article this morning on shoplifting supports this analysis. It reports that,
As the economy has weakened, shoplifting has increased, and retail security experts say the problem has grown worse this holiday season. Shoplifters are taking everything from compact discs and baby formula to gift cards and designer clothing.The article identifies several other contributing factors, all of which fit within the rational framework.
Police departments across the country say that shoplifting arrests are 10 percent to 20 percent higher this year than last.
Much of the increase has come from first-time offenders... But the ease with which stolen goods can be sold on the Internet has meant a bigger role for organized crime rings, which also engage in receipt fraud, fake price tagging and gift card schemes, the police and security experts say. And as temptation has grown for potential thieves, so too has stores’ vulnerability.Acknowledging that bad economic conditions contribute to crime is neither a capitulation to lawlessness nor an argument against pursuing other policies. Instead, it provides us with a better understanding of one of the factors--there are many others--behind people's behavior.
'More people are desperate economically, retailers are operating with leaner staffs and police forces are cutting back or being told to deprioritize shoplifting calls,' said Paul Jones, the vice president of asset protection for the Retail Industry Leaders Association.
A rational analysis suggests that people, business owners, and law enforcement will need to be more vigilant during the tough economic months ahead.
Friday, December 19, 2008
According to the Times, "A Postal Service official in Washington, after an initial, limited acknowledgment of a 'privacy breach,' said that at one of the programs, not New York’s, a man whom a letter carrier recognized as a registered sex offender had 'adopted' a letter."
The problem with the program was that the Santas had the children's addresses and could provide gifts to children directly, sometimes in person.
The USPS is hoping to resume the program once it implements procedures to anonymize the children's letters. Under these arrangements, the post offices would act as clearing houses. They would replace the names and addresses in the letters with codes, and Santas would then only have the codes. Gifts would be brought to the post office, where workers would take care of subsequently unscrambling the codes and getting the gifts to the right children.
Sadly, even this wouldn't stop all possible abuses unless the USPS inspected the packages being sent to the children, as predators could still include their own contact information, or worse things, in the packages.
The USPS is absolutely right to take steps to protect the privacy and safety of children. It's terrible, though, that the bad actions of a few people could put such a worthwhile project at risk.
Monday, December 15, 2008
Tuesday, December 9, 2008
One thing that isn't discussed is how the investments should be structured. The government should consider using loans rather than outright grants to make many of these.
Loans would take advantage of the government's good credit and ability to borrow at low rates. They explicitly address the "credit crunch" aspects of the current downturn. And the low rates end up effectively subsidizing the investment projects.
Loans also acknowedge that one way or the other, the funds that are going toward the stimulus will need to be paid back. If the money is really going toward economically worthwhile investments, the direct returns on those investments should be the source of repayment.
As William Nordhaus has long argued, fiscal deficits, including deficits directed toward "induced innovation," should be viewed in terms of their investment components. Why not go one step further and structure the spending the way that businesses and private parties would structure their investments?
Monday, December 8, 2008
The increase in ridership occurred at time when gas prices were peaking (July); the increase also occurred during a period of growing unemployment. Not surprisingly, personal driving miles and gas consumption are down. Car sales are slumpting, too.
With gas prices now down substantially, it remains to be seen whether transit ridership levels will be sustained. There are reasons, however, to believe it will. A big hurdle to ridership is figuring out bus and train schedules and the methods for payment; once people have "invested" in obtaining this information, subsequent ridership becomes much easier. Even if they eventually go back to their cars, people with ridership experience are more likely to turn to occassional transit use when personal arrangements break down or when there are special events.
The new President and Congress are considering public infrastructure spending as part of their economic stimulus plans. Investments in transit infrastructure, including improvements in train tracks, should be included. Locally, bus routes need to be streamlined; regional services need to be better integrated, and bus service to the airport needs to be improved.
Saturday, December 6, 2008
To get even more academic for a moment and to borrow from George Will, those figures actually understate the number of jobs lost. In good times and bad, jobs are created and destroyed. Net job changes reflect the difference in the two flows, with new jobs offsetting some of the old jobs that were lost. A partial indication of the amount of dislocation is the more than 2 million people who have newly filed for unemployment claims in the past month. A better, though slightly dated, picture comes from the September job flows figures, which indicated that more than 4 million job separations occurred that month, along with about the same number of hires and 3.3 million job openings.
While distressing in themselves, we should brace ourselves for much worse job numbers in the coming months. From all indications, economic output is still contracting, with the pace of that contraction possibly accelerating. During that contraction, unemployment will get worse, and the job problems may not end there. Over the last two recessions, unemployment has been a lagging indicator. In the 1990-1 recession, unemployment didn't peak until June 1992 when it hit 7.8 percent, and in the 2001 recession, it didn't peak until June 2003 when it reached 6.3 percent. It's hard to say how much longer the economy will contract, but it's reasonable to assume that unemployment will continue to trend up through at least the coming year.
At 6.7 percent, the unemployment rate has now passed the peak from the last recession and on a path that would take it past the peak from the 1990-1 recession, perhaps as soon as next summer. Historically, (see the figures for the last 60 years from the BLS below), peak unemployment rates near 7 1/2 percent have happened before. However, as the country's experience in the late 1970s and early 1980s shows, post-war recessions can also produce much worse unemployment. For example, with the exception of just a few months, unemployment was at or above 7 1/2 percent from May 1980 until August 1984, peaking at nearly 11 percent at the end of 1982.
In some ways, we have been lucky to have had such little unemployment over the past 15 years; before the late 1990s, you have to go back to the 1960s to find a prolonged period of unemployment below 5 percent.
There is scant comfort that you can take out of the current job trends other than the perspective that the country has experienced some very bad economic times before and pulled through them. It will surely do so again.
Monday, December 1, 2008
Thursday, November 27, 2008
First of all, there are opportunities to work with a range of students. The most fun is teaching (and learning from) the students who are at the top of their game. These students engage you by asking important questions that you never thought about and by bringing their own analyses and research into the classroom or office hours. The most rewarding students are those who start off struggling with material and then find their way. The biggest challenge is in finding what works for the class you are teaching; it's often different from what worked for the class before. For various reasons, I've done less teaching overall and no undergraduate teaching since coming to UNCG; I especially miss the undergraduate part.
Second, academic jobs provide time for research and thinking. They allow you the freedom to research questions that interest you and to follow evidence wherever it goes. In practice, this means unlimited access to libraries full of books and journals and also the chance to work with or collect new data. The research leads to many provocative conversations with colleagues and collaborators over how to pose, frame, and interpret analyses. It sometimes also involves being given extra resources from your institution, the government, or private sponsors to gather more data or conduct more analyses. This aspect of the job is pure "nerd-vana."
Third, there is a wonderful cycle to the job. Things are crazy during the term while you are teaching, with work spiking just before the term as you prepare materials and near the end as big assignments and tests are made and come due. Between terms, things are quiet (at least if you are successful in hiding from deans and other administrators with committee assignments). When you are not teaching, the work is mostly self-paced. Salaries are usually provided for nine months' work, meaning that the summer can be your own.
Fourth, the job can offer some neat travel opportunities. I'm not sure if my trip in a few weeks to Ann Arbor (burr) counts as something to be thankful for but trips this year to Bonn, Hong Kong, London, Los Angeles, Taipei, and Washington certainly do.
Lastly, there is tremendous job security, at least for those lucky enough to have made it over the twin hurdles of finding a permanent job and then convincing our colleagues to grant us tenure. Tenure-track positions usually come with multi-year renewable contracts, so you can be sure of your status for that period of time. Those who don't get tenure (it took two tries for me) are typically offered an additional year of employment, during which you can search for the next position. If tenure is awarded...well, you can't be thankful enough for that kind of job security.
Academic jobs don't come without a tremendous amount of support. While some people pay their entire way through undergraduate and graduate school, I was fortunate to be supported by my parents in undergraduate school and by fellowships, assistanceships, and grants in graduate school. Schools public and private also receive copious amounts of taxpayer support. Graduate students require a lot of advice and guidance, so there are many generous and patient professors to be grateful for; several of those professors continue to provide advice and support. Along the way, there are mentors inside and outside your institution. These colleagues read and offer advice on your research, answer questions, help you with your teaching, call and write letters on your behalf to potential employers and sponsors, invite you to their institutions, and generally serve as a sounding board on the days you might not feel so thankful (but should). The help from families is also invaluable, from the ramen-noodle days of school, through the ups and downs of the job, and even through disruptive relocations. I can't thank them enough.
Wednesday, November 26, 2008
The President-elect and his team have the right idea in trying to cut wasteful spending. However, as this particular case shows, there may be less waste to cut than first meets the eye.
The GAO study looked at tax records of people who received farm payments over the period 2003-2006. Over that time, the farm subsidy programs paid $16 billion per year ($64 billion over the four years of the study) to some 1.8 million households. From the 2002 Farm Bill, payments were supposed to be limited to people and entities whose incomes over the preceding three years averaged less than $2.5 million.
The GAO found that $49 million in payments went to 2,702 individuals whose taxable incomes exceeded $2.5 million. The potential waste here is large in an absolute sense at a little over $12 million a year; however, it is puny when compared to the size of the program. The individuals who were identified represent just 0.15 percent of subsidy recipients, and the possible overpayments represent just below 0.08 percent of program costs. Yes, USDA should be more careful, and yes, it might be able to save money, but such small fractions of program costs are going to be hard to root out.
The use of the words "potential" and "possible" in the preceding paragraph is purposeful because the report may be overstating the amounts of overpayments. Eligibility for the payments is sometimes determined on the basis of entity (business) income rather than individual income. Some of the 2,702 individuals may have been partners in eligible businesses; if so, the business's subsidy would have been reduced by that partner's share, though the business would still get a subsidy. Also, there are some subsidies that were not subject to the $2.5 million limit.
Finally, the period of the study was covered by the 2002 Farm Bill. The new 2008 Farm Bill, which took effect in October, sets lower income eligibility limits and requires USDA to use additional verification tools may well reduce the identified expenditures.
In addition to the potential overpayments, the GAO also found that a very high proportion of subsidy payments went to people making more than $500,000 per year. For instance, while only 0.4 percent of tax filers had adjusted incomes between $500,000 and $1 million, 1.2 percent of farm subsidy recipients had incomes in this range. Again, though, the 2008 Farm Bill is supposed to address some of this.
Farm subsidies must be reined in, and payments to ineligible millionaires should be the first to go. However, we shouldn't overstate the possible savings, especially in a program that is slated to change. Bringing the budget into balance will require much harder choices.
Tuesday, November 25, 2008
D.C. officials say that Rep. Charles B. Rangel (D-N.Y.), who recently has been buffeted by questions about his personal taxes and real estate dealings, was incorrectly given a tax break on a house he owned in the District.
Rangel received the "homestead exemption," a property tax break for people who live in a permanent, primary home in the city.
When asked about his numerous shady tax and real estate issues, Rep. Rangel "said that he did nothing 'morally wrong' and that, at worst, he could be accused of sloppy record-keeping."
Rep. Rangel is either as inept as he claims, dishonest and a cheat, or some combination of these. Either way he has shown himself, now for yet another time, to be unsuited for the chairmanship of the Ways and Means Committee.
Monday, November 24, 2008
One pleasant surprise along the way was the continued drop in gas prices. I usually stop for gas along interstate 95 at exit 61, just north of Petersburg or about two-thirds of the way up to Washington. Gas prices there were below $1.70/gallon. Just a few months ago, prices were $2/gallon higher.
One less pleasant observation (it wasn't really a surprise) was a return to rampant speeding. On previous trips during the last year and especially this fall, the right-hand lane saw a good share of the traffic moving at the posted speed limits. That wasn't the case on this trip though. I set the cruise control at 65 mph for most of the trip, and increased it to 70 mph for the 60 miles of interstate 85 that are posted at that speed. With the exception of the truck traffic that seemed to be keeping to those speeds, it was a lonely vigil in the right-hand lane.
The relatively relaxed pace of the journey provided some time to think about the many costs of speeding.
- Let's start with the obvious, speeders cost themselves money. The U.S. Department of Energy estimates that fuel economy falls about 10 percent for each 5 mph you travel over 60 mph. Even at the cheap prices along the NC-VA route, that works out to roughly a 17-20 cent a gallon surcharge for traveling 70 mph in a 65 mph zone or a 34-40 cent a gallon surcharge for traveling 75 in the same zone. Put another way, each 5 mph over the limit costs drivers the same as the federal gasoline tax (18.4 cents per gallon).
- Multiplied many times over when you consider all of the speeding that occurs, that behavior also increases gasoline demand, which in turn pushes up gas and oil prices. One individual keeping to the posted limits doesn't bring down prices, but a large share driving this way does. Many things have contributed to the recent changes in gas prices, but reduced demand certainly plays a role. U.S. petroleum consumption has declined every month this year, with the August 2008 consumption figure being lower than at any other time since the end of 2001.
- Energy prices are a component in most other prices; so, reduced demand helps to bring down the costs of many other goods.
- Reduced speeding saves lives and property. Estimates from 1998 indicate that speeding was a factor in one-third of vehicle crashes and that those accidents cost $28 billion a year.
- Speeding pollutes more and contributes to excess greenhouse gases; the extraction, refinement, and transportation of petroleum also pollute.
- Because the U.S. produces only a fraction of the petroleum that it consumes, the excess demand from speeding adds to our net imports and weakens our dollar. That weaker dollar means that you pay more for other imported goods.
- Where to those import revenues go? Directly or indirectly the revenues end up in the government coffers of a host of delightful countries, including Venezuela, Iran, Russia, and Angola (note that even though we don't purchase oil directly from Iran, other countries do). Each and every speeder brings smiles to the faces of Hugo Chavez, Vladimir Putin, and Mahmoud Ahmadinejad. Speeders are truly their friends.
Thursday, November 20, 2008
And when I told my oldest son that the stock market would be at the same sorry level, 11 years later, he responded
I really don't want to drag out any earlier photos.
The foolishness of their travel arrangements is evident and probably put the last nail in the coffin of their bail-out hopes. But let's consider for a moment what the trip and the general travel policies say about the executives' and their companies' priorities.
The cost figure tossed around in the articles is $20,000 for each of the round-trip flights; let's go ahead and work with that figure. If the three executives had simply jet-pooled, they could have saved $40,000, enough to pay one of the companies' $15/hour workers for a year, assuming a 33% fringe benefit rate.
First-class same-day tickets on Northwest Airlines with no advance purchase between Detroit and Washington cost less than $1,400. So, the executives could have flown even less expensively, while still enjoying first-class service.
Clearly, this isn't the only trip any of them will make this year. Assuming that each executive makes dozens of trips each year, there are dozens of jobs that could be saved just by simple economizing measures. We're not talking about a cut in the executives extravagent salaries, just some adjustments in travel arrangements.
A CNN article quotes a GM spokesperson as saying, "Making a big to-do about this when issues vital to the jobs of millions of Americans are being discussed in Washington is diverting attention away from a critical debate that will determine the future health of the auto industry and the American economy." But "a big to-do" should be made when a simple bit of coordination yesterday could have saved one of those jobs and when slightly more frugal policies could save dozens more.
It's telling that the trade-off never even occurred to the executives.
Businesses cut prices at a record rate last month, builders started fewer new homes than anytime on record, and last week more people filed for new unemployment benefits than in any week since 1992, according to government data, as the outlook for the economy continues to dim.And the Fed is becoming more bearish:
The economy "would remain very weak next year" and "the subsequent pace of recovery would be quite slow," the Fed said in its new economic projections. "The unemployment rate would increase substantially further."(The Fed isn't exactly going out on a limb with that last prediction, as the unemployment rate had already reached 6.5 percent in October.)
The Fed projected that the national unemployment rate will rise to between 6.3 percent and 6.5 percent this year.
Oh, and the stock market continues its slide.
Monday, November 17, 2008
The agreement, which must still be ratified by the Iraqi parliament, partly reflects the improved security situation. While the situation is still chaotic, Iraqis feel confident enough to go it alone in a few years.
The agreement also restricts U.S. military operations, starting next year. By next summer, U.S. forces are to withdraw from urban areas of the country. There are also restrictions on cross-border operations, like the one that just targeted Syria.
The plan is a boon for President-elect Obama, who has promised to withdraw troops on a somewhat faster schedule. Some months ago, it appeared that President Bush wanted to tie the hands of his successor to an open-ended commitment to Iraq. The agreement quashes that.
There are sure to be bumps along the road; however, the road map for ending substantial U.S. involvement in Iraq is in place. We should all hope that the Iraqis are up to the challenge.
Friday, November 14, 2008
Thursday, November 13, 2008
GM needs an additional $10 billion simply to pay its bills next year and $15 billion more to close plants, compensate redundant workers and dump some of its lesser-performing brands.
On the other hand, if GM were to fall into bankruptcy it could drag the rest of the economy over the cliff. While employment at GM is down substantially from where it was in the past, GM purchases from many suppliers and still is responsible for many legacy costs.
It's heads we lose, tails we lose a lot.
Wednesday, November 12, 2008
Fortunately, the Republicans' under-handed "big lie" approach didn't work in this election. It would be wishful thinking, however, to believe that this disreputable page is permanently out of candidates' playbooks.
The plan would help borrowers who have missed at least three mortgage payments, who are owner-occupiers, and who have not yet filed for bankruptcy, renegotiate their mortgages down to a level where payments would only be 38 percent of their monthly gross incomes.
Given the state of the housing market and home finances, such renegotiations are overdue. The plan is a good start and should provide some help. However, because of the limited coverage of the plan, we shouldn't expect much help in the broader market.
What act of Congress might be fairly easy to pass and might produce revenue for bridge and road repair while ensuring that energy innovation would be encouraged? How about pegging the price of gasoline nationwide at a level that accomplishes the above while retaining the relief that consumers now enjoy?I like Hallock's opening paragraph more than mine.
One quibble with Hallock's plan is that he would adjust the tax up and down to keep the after-tax price in "the present range." Leaving an escape hatch to rescind or defer the tax for extraordinarily high increases makes sense, but price controls should not be a fundamental goal.
Tuesday, November 11, 2008
The lower prices provide immediate relief to families, many of whom are already struggling with debt and joblessness. The prices obviously make travel easier, but also free up some money for other purchases.
That said, there is also a downside to the lower prices. Since the start of the year, Americans have dramatically cut back on their energy use and begun to reassess their love affair with gas-guzzling SUVs and trucks. While people are better off with lower prices, somewhat higher prices do serve a purpose.
With gas prices where they are and possibly falling further, it's time for the federal government to consider raising the gas tax, perhaps by 25 cents this year and 25 cents next year. The federal tax currently stands at 18.4 cents per gallon, which is the same level that it was in 2003. An adjustment for inflation alone would increase the tax by 10 cents a gallon.
Revenue from the gas tax could go to much needed-highway infrastructure projects and to public transportation projects, like rail improvements along the Eastern U.S. corridor. Revenue could also go to deficit relief.
The increases could also be conditioned on subsequent gas prices. If prices shot back up, the increases could be deferred or temporarily rescinded.
Tax increases are never popular, but the timing is right here to raise gas taxes before consumers grow accustomed to the lower prices.
Friday, November 7, 2008
Thursday, November 6, 2008
In the past few years retailers have been reluctant to acknowledge the reason for this shopping season -- Apparently, the whole sections of stores devoted to Christmas ornaments and decorations, Christmas cards, creches, etc.; the Christmas songs and carols blaring on the loud speakers, and the Christian churches every few blocks fail to get the message across.The letter and more generally the myth about the "war against Christmas" are really about one thing, putting some Christians' beliefs squarely in the face of others, regardless of how the recipients might feel. Rather than respect the many types of religious belief (and non-belief) that are present in our society, these busy-bodies would rather impose their particular beliefs on everyone.
Why shouldn't that employee say or hear the words "Merry Christmas?" It would be common courtesy -- Why shouldn't employees say "Happy Holidays," which would be a more common courtesy (i.e., a greeting appreciated by and applicable to everyone)?
The politically correct don't want Christ or God mentioned in promotions in or outside their stores -- Far from it, the politically correct are not reaching into homes and churches to stamp out Christian worship.
The whole movement also reflects a sad and peculiar insecurity. After all, a person who was genuinely secure in his or her beliefs wouldn't need those beliefs acknowledged. And surely that person wouldn't need to demand extra acknowledgement beyond knowing that his/her belief was already shared by a majority of society, already fully protected in private worship, already enshrined in official holidays, and already reflected in the types of goods being offered in stores. A genuinely secure person wouldn't need more, right?
At one point the Romans threw Christians to the lions; now, merchants cater to their every shopping whim and wish them "Happy Holidays." The equivalence in persecution is pretty easy to see.
So a little earlier than usual and at some risk of giving offense, let me say "Happy Holidays" to all and "lighten up" to some.
Wednesday, November 5, 2008
Tuesday, November 4, 2008
Phil Busse, a visiting professor at St. Olaf College in Minnesota, blogged on the Huffington Post, bragging about his exploits stealing McCain/Palin campaign signs. He wrote, "Yanking out the signs and running like a scared rabbit back to my idling car was one of the single-most exhilarating and empowering political acts that I have ever done."
He acknowledges that his actions were illegal but adds the weasel words that "because campaign laws regulate that candidates cannot give out gifts or anything beyond 'de minimis' value, a political lawn sign, by its very definition, has no value." He goes on to (falsely) equate his actions with free speech; regarding one large sign that he had stolen, he wrote, "I had said my piece."
Destroying property and interfering with people's political expression are the polar opposites of supporting free speech. As an academic, Busse had a responsibility to promote ideas, expression and discussion, not tear them down.
Upon hearing of Busse's antics, St. Olaf College forced his resignation, according to the Northfield News. The college officials got it exactly right.
Busse's moral confusion, however, remains. The Northfield News article quotes him, "Writing the essay was an opportunity to explore and talk about political speech and the desire that most of us have to express our politics — both in mature and immature ways, and sometimes a mix of the two... I’m disappointed that most readers seem to have focused on the thefts, and not on the larger thoughts."
Larger thoughts, right.
Monday, November 3, 2008
Sunday, November 2, 2008
The time change is not my friend this year, though. I'm still jet-lagged from the trip back from Taipei and the 12-hour time difference between here and there. So, this morning, I woke up, saw that the clock said a little after 4, knew that meant a little after 3, and then darkly realized that I was now going to be up for an extra hour today.
For those of you who were able to sleep in, enjoy the morning.
Saturday, November 1, 2008
My guess is that he's now collecting an oral history of the saints.
Thursday, October 30, 2008
Two questions that came up repeatedly with the Taiwanese economists were the election and the U.S. economy. The Taiwanese are just stunned that a black man may soon be elected President of the U.S. They are only slightly less stunned that such a lightly-qualified politician rose so fast. I'm not sure that my explanations about the host of other unpalatable choices among the Democrats and the erratic campaign by the Republican were all that convincing. They are clearly excited for us.
The other question about the depth of problems in the U.S. economy conveyed more concern. Taiwan and the other countries of Asia are heavily dependent on exports. With the U.S. economy now turning down (today's initial GDP reading for the third quarter showed a 0.3 percent drop), the Taiwanese are seeing their exports drop and their own economy stall. The official unemployment rate in Taiwan has climbed to 4.3 percent, a four-year high. The rate may sound enviable to U.S. ears, but the Taiwanese rate masks a tremendous amount of marginal and under-employment. Because of its high national savings rate, Taiwan is well-positioned to weather the coming economic storm. However, they would prefer that the storm passed them by.
Continental is calling the flight.
Wednesday, October 29, 2008
It's not his campaign, disjointed though that's been, that finally repulses me; it's his rapidly deteriorating, increasingly anti-intellectual, no longer even recognizably conservative Republican Party.And Christopher Hitchens on the McCain/Palin contempt for scientific research:
This is what the Republican Party has done to us this year: It has placed within reach of the Oval Office a woman who is a religious fanatic and a proud, boastful ignoramus. Those who despise science and learning are not anti-elitist. They are morally and intellectually slothful people who are secretly envious of the educated and the cultured. And those who prate of spiritual warfare and demons are not just "people of faith" but theocratic bullies. On Nov. 4, anyone who cares for the Constitution has a clear duty to repudiate this wickedness and stupidity.Eight years of an anti-science, anti-intellectual agenda is too much already.
Tuesday, October 28, 2008
Academia Sinica boasts a beautiful campus. It's located outside the downtown area of Taipei, so it's more relaxed and tranquil. It's a terrific place to conduct research.
The Institute of Economics has a large and active research staff whose interests cover the range of major economic fields. The researchers publish regularly in Western journals, so aside from the change in scenery and the exceptional hospitality, the academic portion of the visit has been much like a stay on a U.S. campus.
The Institute is hiring this year. It would be a great opportunity for a research-oriented economist.
Sunday, October 26, 2008
Saturday, October 25, 2008
This appears to be the opening inning in the blame game.
Thursday, October 23, 2008
Taipei is bordered by mountains that rise more than 3,000 feet and features one of the world's tallest buildings, Taipei 101. A visitor would be excused though for not knowing this because these landmarks are obscured by the smog.
As you can see on the right, there are also more than a few motorbikes. The picture was taken while the bikes were staging at a traffic light. In the foreground, you may be able to see the toddler strapped to the rider's chest. Slightly older children rode in parents' laps. A few of the children actually had helmets.
If I wasn't coughing so hard, I might have said something.
Wednesday, October 22, 2008
Yesterday I was able to travel down to Hong Kong itself. It's a 20 minute train ride from CUHK (you can see the train line in the picture).
I've got to work for my supper today, delivering a paper this afternoon. Tomorrow I head off for a week in Taipei to attend a conference and give a few more papers.
Monday, October 20, 2008
The trip was smooth, though I would have really appreciated being able to sleep past 1 a.m. this morning.
Besides the wonderful views, the highlight of the trip has been a gecko who appears to be the original tenant in the apartment. He hasn't tried to hit me up for insurance ("Dave, have you ever thought about what your wife and kids would do if you weren't around and how a universal policy might help?"). However, there will probably be a few free hours before the sun comes up early tomorrow morning when he might be able to catch me.
Sunday, October 19, 2008
Maybe today's endorsement will be the mark the start of a dedicated effort to solve problems in this country and not just point fingers and jockey for partisan advantage.
On the one hand, if their child is truly trans-gendered, the parents can help their child move into his or her "affirmed" (non-anatomical) status with less physical and psychological trauma, possibly going so far as to provide puberty-blocking drugs that will greatly reduce the need for subsequent surgery.
On the other hand, only a small subset of young children with gender identity issues actually turn out to be trans-gendered. For these children who are not, accommodating their early identity issues is harmful and may mask other underlying (and sometimes treatable) problems.
The trouble, of course, is that there is no way to know for certain how the child's gender identity will evolve. Parents must make a decision for their child before all of the information is in. Making things more difficult are the social stigma associated with being trans-gendered, growing advocacy from the trans-gendered community, and the general tendency of all of us to get in parents' business about how they should raise their children.
The rational decision seems to be to go with the odds--that is, to try to redirect the child back toward his or her anatomical gender and to get counseling for this and other possible issues. However, it's far from a perfect decision. Ex ante, it may be the most reasonable, but ex post, it may cause significant harm.
We face these kinds of dilemmas in many other situations with uncertain conditions and outcomes. This is especially true of parenting. Sometimes there just isn't an unequivocal "right" decision, and even making a decision that seems best with the best possible motives and advice initially can be devastating in hindsight.
There is, however, an unequivocal lesson. In a world with so much uncertainty, we (I) need to be more understanding, less critical, and more supportive of the tough calls that people must make.
Monday, October 13, 2008
Thursday, October 9, 2008
There’s so many things that we can do today to start getting us on that path towards energy independent. And it involves conservation and alternative sources of energy being plugged in also...Of course, the devil is in the details. It's easy to be "for" alternatives and conservation and then to nix specific measures to encourage these outcomes. Nevertheless, the comments, along with the suggestion that we need to boost domestic production, are sensible and play to Gov. Palin's strengths as the chief executive of
...People are realizing that these non-renewable sources of energy, once they’re gone, they’re gone. And we do have conserve and we have to start looking at the alternative sources.
If she and her running mate had emphasized a balanced approach instead of mindlessly chanting "drill, baby drill," the race for the White House might be a little more competitive.
*Corrected 10/10/08; thanks Roch.
Tuesday, October 7, 2008
Thursday, September 25, 2008
Luigi Zingales recommends that the bail-out be structured closer to a bankruptcy proceeding,
As during the Great Depression and in many debt restructurings, it makes sense in the current contingency to mandate a partial debt forgiveness or a debt-for-equity swap in the financial sector. It has the benefit of being a well-tested strategy in the private sector and it leaves the taxpayers out of the picture...Forcing a debt-for-equity swap or a debt forgiveness would be no greater a violation of private property rights than a massive bailout, but it faces much stronger political opposition.Aaron Edlin writes an open letter to Secretary Paulson:
Today, I read the U.S. Treasury’s humble request for the authority to spend 700 billion taxpayer-owned dollars. This taxpayer’s answer: "No."Edlin continues,
You could under this legislation pay $700 billion for "paper" having a face value of $800 billion even though the paper’s market value has sunk to $100 billion or even though the paper has no market, so long as you think the purchase promotes stability sufficiently. You could do so with no review and no appeal. I suppose, taking the words of your legislation literally, you could spend the entire $700 billion buying a single mortgage owned by Goldman Sachs if you thought such a cash injection was just the trick...Sadly, Congress is more focused on window-dressing for the bail-out than on fundamentally restructuring it to make it more effective and less costly. Yes, we need to do something to clean up the financial mess, but the bail-out is not the way to go.
And here is a disturbing thought: if the initial tab is $700 billion, is it possible you may wind up coming back for much more? Could the administration that brought us the $2 trillion dollar war bring us a $2 trillion dollar bailout?
Wednesday, September 17, 2008
The legislation is far from perfect. Oil drilling would only occur if the affected states allowed it (a good thing). However, the states do not get any revenue from the drilling; so, they bear the risk of potential environmental damage but get few of the benefits.
Also, the legislation plays games with the strategic petroleum reserve. The reserve should be maintained for true emergencies, such as a devastating hurricane in the Gulf of Mexico, an embargo by some increasingly unfriendly producers, or a disruption in production or shipping from the Middle East.
The process for considering the legislation was also flawed, with the Democrats not releasing the text of the bill until shortly before the vote.
However, the House bill is a significant compromise, and it isn't the final version. The Senate will take up the legislation next where there will be opportunities to fix some of these provisions.
Energy policy still faces a long and tough track. Democrats and Republicans both seem to be looking for poison pill amendments to derail the legislation and then use negative votes against their opponents come November. Hopefully, the grown-ups in the parties will keep the bill moving forward.
Tuesday, September 9, 2008
It's fine if the Governor wants to maintain a residence separate from the Governor's mansion in Juneau, but she shouldn't stick taxpayers with the bill.
The Post also reported that the Gov. has charged the state for $43,000 in travel expenses for her family, including funds for ferrying the family to Juneau.
As we've seen in North Carolina, governors seem to view these travel funds as their own personal piggy banks. I wonder if our own state voters, who have been so outraged at Gov. Easley's behavior will be equally upset with Gov. Palin's.
Friday, September 5, 2008
Americans struggling in a soft economy have not responded with an outpouring of giving as they did three years ago when Katrina left indelible images of devastation and suffering. Gustav spared New Orleans the death and destruction that forecasters predicted but also dampened donations to the Red Cross, which mounted one of its largest mobilizations in years.The Red Cross anticipates spending $70 million for Gustav-related relief efforts but has only raised $5 million so far.
With several months to go in the current hurricane season and with at least two more storms poised to strike the U.S., the Red Cross needs all the help that it can get.
Tuesday, September 2, 2008
Alaska Gov. Sarah Palin, the Republican vice-presidential nominee..., earlier this year used her line-item veto to slash funding for a state program benefiting teen mothers in need of a place to live.It looks like when it comes to supporting teen parents, the self-declared "hockey mom," just doesn't give a puck.
After the legislature passed a spending bill in April, Palin went through the measure reducing and eliminating funds for programs she opposed. Inking her initials on the legislation -- "SP" -- Palin reduced funding for Covenant House Alaska by more than 20 percent...Covenant House is a mix of programs and shelters for troubled youths, including Passage House, which is a transitional home for teenage mothers.
Earlier today the Associated Press reported that Sen. John McCain (Ariz.), the presumptive Republican presidential nominee, opposed funding to prevent teen pregnancies, a position that Palin also took as governor. "The explicit sex-ed programs will not find my support," she wrote in a 2006 questionnaire distributed among gubernatorial candidates.So, no "straight talk" for teenagers, at least about the birds and the bees.
Monday, September 1, 2008
It seemed odd that they weren't directing people to the American Red Cross, which is already operating and which needs help to replenish its funds. Moreover, the Red Cross is incredibly efficient with just over 94 cents of every dollar contributed going to program operations.
Instead, their web-site directs donors to the Baton Rouge Area Foundation, an organization with an overhead rate 33 percent higher than the Red Cross (see the 2006 BRAF IRS 990 Forms). It also directs donors to Texas' OneStar Foundation, an organization that spent more than 1/6 of what it raised in 2006 on management expenses.
Republicans regularly rail against waste but apparently have a blind spot when it comes to private organizations. Please give generously to organizations, like the Red Cross, which operate efficiently.
As for her claim that she "told Congress 'thanks but no thanks' on that Bridge to Nowhere," Alaska kept ALL of the money that Congress had appropriated for the bridge, the state just spent it elsewhere.
Gov. Palin's conversion to earmark "reform" is not only inconsistent but also very recent. The Times article goes on to report
As the new mayor of tiny Wasilla, Alaska, in 2000, Ms. Palin initiated a tradition of making annual trips to Washington to ask for more earmarks from the state’s Congressional delegation, mainly Representative Don Young and Senator Ted Stevens, both Republicans.Update: Although Gov. Palin is stating in rallies that she "told Congress 'thanks but no thanks,'" her actual press statement at the time said
“It was about being face-to-face with those who were actually writing the budget,” she told The Anchorage Daily News in 2006, boasting that she brought home more money for priorities like upgrades to the local sewer system.
She directed Wasilla to employ Washington lobbyists to press for federal money for the town, helping obtain more than $8 million in earmarks for projects ranging from waterworks to a shelter.
"Ketchikan desires a better way to reach the airport, but the $398 million bridge is not the answer," said Governor Palin. "Despite the work of our congressional delegation, we are about $329 million short of full funding for the bridge project, and it's clear that Congress has little interest in spending any more money on a bridge between Ketchikan and Gravina Island," Governor Palin added. "Much of the public's attitude toward Alaska bridges is based on inaccurate portrayals of the projects here. But we need to focus on what we can do, rather than fight over what has happened."Funny, the words "thanks but no thanks" are neither stated nor implied. Shouldn't a candidate who was selected to bring "change and reform that we need in Washington" be just a tad more honest?
Saturday, August 30, 2008
- didn't understand the job of Vice President before being selected
- believes that creationism should be taught in science classes,
- believes that global warming is not man-made,
- has "been so focused on state government," that she hasn't "really focused much on the war in Iraq" but still blindly "support(s) our president, Condoleezza Rice and the administration," and
- is under investigation for possibly abusing her office.
Wednesday, August 27, 2008
In particular, incomes for the middle three-fifths of the income distribution rose, while incomes for the bottom fifth were unchanged and incomes for the top fifth decreased. As a result, real average household incomes (income per capita) fell as did income inequality.
Overall health insurance coverage rose. The number of uninsured people fell from an estimated 47 million people to 45.7 million people.
Unfortuntately, the positive overall health insurance rate masks a negative trend. The increase in coverage comes entirely from public health insurance; private health insurance coverage continues to shrink. While the number of people covered by private plans was unchanged, the population grew, leading to a decrease in the percentage covered from 67.9 percent to 67.5 percent. Also, the percentage of people covered by employment based plans decreased from 59.7 percent to 59.3 percent.
Just over one-sixth of full-time workers were uninsured in 2007, and just under one-quarter of part-time workers were without insurance. Among adults 18-64 who didn't work, the uninsurance rate was also a quarter.
The economy was growing for most of 2007. Employment has declined substantially during 2008. The 2007 report may be the last one with any positive news for a while.
Explainer: Why 2007, you ask? The primary data source for the report is a survey conducted in March of each year that asks income questions about the preceding calendar year. The survey is timed to coincide with tax season, when people might be better able to recall their sources of income for the preceding year. So, the 2007 data were collected in March of 2008. Add in a few months to process and analyze the data and that brings you to August.
Thursday, August 21, 2008
First there was the embarrassing revelation just two days after the report was released that the CFTC was going after a holding company and two of its subsidiaries for manipulating the prices of oil futures contracts. So, contrary to the report, there was direct evidence that a small number of traders had been able to move prices.
Today, the Washington Post reports that a few large speculators hold enormous positions in the futures markets.
Even more surprising to the commodities markets was the massive size of Vitol's portfolio -- at one point in July, the firm held 11 percent of all the oil contracts on the regulated New York Mercantile Exchange.Concentration is seldom good news for a market. The problem here has been a series of steps that have deregulated commodity futures markets.
The discovery revealed how an individual financial player had gained enormous sway over the oil market without the knowledge of regulators. Other CFTC data showed that a significant amount of trading activity was concentrated in the hands of just a few speculators.
...CFTC data show that at the end of July, just four swap dealers held one-third of all NYMEX oil contracts that bet prices would increase. Dealers make trades that forecast prices will either rise or fall. Energy analysts say these data are evidence of the concentration of power in the markets.
Futures markets exist to provide some stability to buyers and sellers who need to exchange goods over time. The markets allow each side to contract prices for their transactions sometime into the future, removing some of the uncertainty associated with market swings. During the most recent oil price rise, several airline companies used futures contracts to great advantage to lock in moderate fuel prices.
Prior to the early 1990s, producers and users of commodities could conduct unlimited transactions in these markets, but speculators and pure traders were restricted to hold small positions. An administrative reinterpretation of the rules during the first Bush administration, removed the transaction restrictions for large investment houses.
In 2000, Congress passed and President Clinton signed the Commodity Futures Modernization Act. Buried in this act was a provision introduced by Sen. Phil Gramm on behalf of Houston-based Enron to allow energy trading to be conducted in over-the-counter markets, outside the reach or view of regulators. These markets are sometimes referred to as "dark markets." A tepid provision to narrow this loophole was enacted over President Bush's veto this summer.
A sensible solution would be to extend a consistent regulatory umbrella over all energy markets--that is, to completely repeal the Enron loophole. The current system of regulating some markets but not others is unfair to established markets and leaves the door open for abuse and manipulation. Another sensible solution is to require investors to put up more cash for their positions; currently much of the trading in these markets is highly leveraged, which increases the chances of both bubbles and spectacular crashes.
Looking forward, Sen. Obama has called for closing the Enron loophole, while Sen. McCain, who has been advised by Phil Gramm, continues to support it.
Wednesday, August 20, 2008
The policy is ineffective (do you really think that any immigrants are going to be deterred from entering or staying in the country because they can't get into community college?) and self-defeating (we lose any positive economic and non-economic externalities from members--even temporary members--of our community being better educated). But that's immaterial to people who feel that we should give no quarter to illegal immigrants.
Since Doug holds strong--and I hope sincere--beliefs in this matter, I've asked him why his campaign against illegals can't start with the News & Record itself. Right now, the News & Record delivers papers to homes across the Triad with no checks at all on the residency status of the occupants. The paper contains want ads (and Dilbert cartoons) that are intended to facilitate employment. As you're reading this, immigrants could be scanning those ads and either applying for those good jobs themselves or telling their compadres across the border to get their resumes in order.
So a simple proposition for Doug and the News & Record is to require proof of either citizenship (birth certificate, passport, etc.) or legal residency (visa, green card) for all new home subscribers. Inconveniences to be sure, but minor ones to people with nothing to hide. This small step will give the News & Record the moral authority to advocate for even tougher policies.
Silly and ineffective, you say? Exactly.
Topic for next week: Should News & Record paper carriers be required to alert authorities to households suspected of harboring undocumented residents?
Monday, August 18, 2008
Friday, August 15, 2008
Apparently, Kermit had it right.
CNNMoney.com reports on how difficult it is to come up with green products.
The product in question is a water box for kids (think juice box but with water). This, however, leads to a more fundamental question--wouldn't it be even more environmentally friendly to just drink from a water fountain?
Wednesday, August 13, 2008
Tuesday, August 12, 2008
Pigtailed and smiling, Lin Miaoke, age 9, stood in a red dress and white shoes during last Friday’s Olympic opening ceremonies and performed “Ode to the Motherland” in what would become one of the evening’s most indelible images: a lone child, fireworks blazing overhead, singing a patriotic ballad before an estimated one billion viewers.
Except that she was not really singing.
...Under pressure from the highest levels of the ruling Communist Party to find the perfect face and voice, the ceremony’s production team concluded the only solution was to use two girls instead of one. Miaoke, a third grader, was judged cute and appealing but “not suitable” as a singer. Another girl, Yang Peiyi, 7, was judged the best singer but not as cute. So when Miaoke opened her mouth to sing, the voice that was actually heard was a recording of Peiyi.
Monday, August 11, 2008
Once I got to the apartment, there were a couple of "must-do" items to attend to. First on the list was to get down to the open-air market at the center of town, the Marktplatz, to get a bratwurst and roll. This will probably be the lunch routine for most of the visit. The second thing was to stock up on provisions for Sunday, when all of the shops and many of the restaurants are closed. The produce and bakery stalls in the Marktplatz were perfect for this.
One jarring sight during the provisioning trip was the dozens of bees in the bakery stalls. The bees seemed to be everywhere, flying around the stalls, buzzing in the display cases, and alighting on the goods. The clerks were completely oblivious to them; the bees must not eat much. I gingerly pointed to the rolls I wanted (my international pointing, nodding, and dumb smiling skills are quite advanced). After paying and leaving the stall, I checked my bag verrry carefully. Even so, I kept it at arms length during the walk back to the apartment and poked the bag a few times before opening it.
Fed and provisioned, I headed off to the beer garden next to the apartment building to point at their menu and then sit, drink, watch the Rhine roll by, and try to stay awake until dinner.
Wednesday, August 6, 2008
Sen. Elizabeth Dole recently stood on the U.S. Senate floor and requested that the AIDS Relief Bill be named after Jesse Helms!Though I would fault her on many issues, Sen. Dole has always come across as sensible. Moreover, given her former position as the head of the Red Cross and that organization's struggles with the safety of the blood supply, one would think that she would be sensitive to issues associated with AIDS. So, it just seemed inconceivable that she would do something so outrageous and offensive. After all, this is the same Jesse Helms that fought for AIDS funding cuts, arguing that gays' "deliberate, disgusting, revolting conduct" caused the disease and that "we've got to have some common sense about a disease transmitted by people deliberately engaging in unnatural acts."
So much for giving her the benefit of the doubt.
If I had been following the papers and blogs more closely a month ago, I would have seen that she did indeed try and fail to get an AIDS bill named after our esteemed former senator.
We're left with two equally disturbing explanations for Sen. Dole's. Either she's cluelessly insensitive to Helms' hateful legacy, or she's fully aware of that legacy and shamelessly pandering to Helms' former supporters in her tight re-election race with Kay Hagan. Both explanations suggest that it's time for her to retire.
In the meantime, who knows what other bill naming opportunities Sen. Dole might be contemplating for notable North Carolinians. The Eric Rudolph Women's Reproductive Freedom Act? The Coy Privette Defense of Marriage Act? The Dwight Watson Safe Streets and Traffic Management Act?
Sen. Dole has recently announced that she won't be attending the Republican convention. Maybe she's become too much of an embarrassment even for them.
Tuesday, August 5, 2008
Among the many daunting challenges facing Shira Rosenthal as she enters her freshman year at the University of Maryland is this conundrum: Which trash can to buy?Shira was very sensible. However, if I couldn't have the $29 trash can, I'd just, you know, die.
There is one from Pottery Barn spinoff PBteen that costs $29 and is painted in pastel colors and emblazoned with catchy eco-slogans like "Think Green." Then there is the plain white wastebasket from Target for just $4 -- less than the cost of a gallon of gas. Rosenthal went with the latter.
Oil prices are falling sharply, and that's good news. But not nearly as good as you might think.The headline and opening paragraph suggest the falling energy prices may cause additional problems. A careful read of the article, however, reveals that a weakening economy and weakening demand are contributing to the price fall. In this sense, prices are an indicator of economic conditions but are not necessarily the cause of those conditions.
Moderating energy prices in and of themselves are unambiguously good for jobs, output, and household finances. The economy faces myriad other challenges and does not need the additional disruption of rising fuel prices.
The main "downsides" of falling prices have more to do with the environment, conservation, and the feasibility of alternatives. The high prices for oil, while painful to the pocketbook, have begun to prompt important and beneficial changes in behavior. Hopefully, we can lock in those gains with modestly lower prices.
Monday, August 4, 2008
As the job record is unlikely to improve between now and the end of the Bush presidency, this seems like a good time to review that record.
When President Bush took office in January 2001, the national unemployment rate was 4.2 percent. The tech collapse and bursting stock market bubble produced a mild (by historic standards) recession that resulted in unemployment climbing to as high as 6.3 percent. From the middle of 2003 until early 2007, unemployment fell, reaching a low of 4.4 percent. Since 2007, the rate has climbed again.
Administration apologists point out that the U.S. has suffered through much higher rates of unemployment. For instance, near the end of the recovery in the late 1980s, unemployment was just over 5 percent, and unemployment was much higher during earlier recessions. Nevertheless, an unemployment rate heading up toward 6 percent isn't going to win any economic bragging rights and stands in sharp contrast to the unemployment rates that were achieved during the final two years of the Clinton administration.
Unemployment rates can be hard to interpret because they only count people who report that they are looking for work and exclude other people, such as discouraged workers, from both the numerator and the denominator. A different picture emerges when we simply take the number of people who are working and divide it by the relevant civilian population, that is when we look at the employment-to-population ratio. The graph below shows this ratio for U.S. adults aged 25-54.
The graph shows that the employment rates in the aftermath of the last recession were nearly as low as they had been in the early 1990s. And the recovery in employment never came close to the rates achieved during the second half of the Clinton administration. The Bush record occurred despite an expansionary fiscal policy (deficits every year since 2001) and an accommodating monetary policy (low-to-neutral interest rates). Those tax cuts certainly didn't produce a supply-side employment miracle.
So far, the new economic downturn has been modest in absolute terms; unemployment is 1.3 percent above its last trough, while the employment ratio is less than a percent below its last peak. One reasonable explanation, however, for the strong sense of pessimism right now is that conditions never improved that much during the recovery.
The Bush administration is likely to be remembered for many things. It's doubtful though that job creation will be one of them.
Friday, August 1, 2008
The gloomier news was further down in the report, where the government provided its annual revisions to the last three years of GDP estimates. These revisions are made when sources such as the annual economic and government finance surveys from the Census Bureau and tax return data from the Internal Revenue Service become available. The revisions shaved 0.2 percent from growth rates for 2005 and 2007 and 0.1 percent from the growth rate for 2006. The revised GDP growth rates for 2005-7 were 2.9 percent, 2.8 percent, and 2.0 percent, respectively.
To put the figures in context, consider the historical relationship between GDP growth and unemployment, known as Okun's Law, which suggests that growth rates of between 2 to 3 percent are associated with steady unemployment. Faster growth is associated with increasing joblessness, while slower growth is associated with falling joblessness. Okun's Law provides a helpful benchmark for identifying sub-par economic performance. Let's take the lower range number of 2 percent as that benchmark. The growth in 2005-6 was strong enough to bring down unemployment, while the growth in 2007 was not. The growth rates from the final quarter of last year and the first two quarters of this year were below the threshold associated with steady unemployment.
The revised quarter-by-quarter numbers further reveal that instead of slowly growing in the first and fourth quarters of last year, the economy actually stalled. GDP increased at an annual rate of 0.1 percent in 2007.I and decreased at a rate of 0.2 percent in 2007.IV.
The downward revisions also make the modest growth from the first two quarters of this year less impressive, as they represent growth from a lower base. Even with this, the estimated growth rate for the first quarter of this year was shaved down 0.1 percent.
As the rising unemployment rate and falling number of jobs from this morning's monthly jobs report indicate, the economy continues to under-perform. The bottom isn't falling out, but hardships are increasing.