Monday, August 18, 2008
Georgia
The New York Times has an excellent article, detailing the actions that led up to Russia's invasion of Georgia. At the Washington Post, Fred Hiatt reminds us that Russian imperialism lies at the heart of the matter.
Friday, August 15, 2008
It's not easy being green
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
A bright, Bonn-y day
The view from my office in Bonn this afternoon. Looking through the trees, I can see a bend in the Rhine, along with the occasional passing barge or tour boat.
Tuesday, August 12, 2008
Rhymes with Karioke?
The Chinese, with their lax intellectual property standards, have now ripped off Milli Vanilli.
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
Going, going, Bonn
I'm working at the Institute for the Study of Labor this week. I flew over on the direct US Air flight from Charlotte to Frankfurt Friday night. From Frankfurt, it's a two hour train ride to Bonn. I left the house just after lunch on Friday and arrived at my apartment in Bonn just before lunch on Saturday. All-in-all, the trip is pretty convenient, though it would be nice to have some other carrier besides US Air.
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.
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
Is Sen. Dole out of her mind?
Many letters in our local paper, the News & Record, contain wild and unbelievable accusations (along with exciting punctuation!!!). So, I didn't give much initial credence to this letter, which said
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.
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
Good news for IKEA
The Washington Post reports that hard times are leading college students to furnish their rooms more spartanly.
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.
Beware of oil price decreases?
An article on CNNMoney.com warns of the downside of falling oil prices.
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.
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
Bush's weak job record
Over the last year, the housing collapse, financial crunch, manufacturing slowdown, and energy and food price spikes have all taken a toll on the economy and contributed to rising joblessness. In its last monthly report, the Department of Labor estimated that unemployment had risen to 5.7 percent, the highest level since 2004. The rate is now only about a half a percent below the peak from the recession earlier this decade.
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.
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
Economy has been slightly worse than we thought
A lot of the economic news yesterday focused on the government's advance second quarter GDP estimate of 1.9 percent annual growth. The growth figure represents decidedly mixed news. On the one hand, the number was positive, so output was advancing rather than declining. On the other hand, the rate was very modest, especially given that it came from the quarter in which the stimulus checks were distributed and the Fed's lower interest rates were in effect.
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.
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.
Thursday, July 31, 2008
A letter to the Ribaz's new pen-pal, John McCain
Dear John,
Thanks so much for your letter of July 25. It's certainly a special day in the "Ribaz" household when a "PERSONAL - URGENT" letter with a presorted postage stamp shows up in the mailbox, and a letter dunning us for a contribution no less. It's a privilege to be on your mailing list.
This being our first letter from you, we were surprised that so much of it focused on your opponent and not you. Indeed, the parts warning that your opponent is "plotting to spend and do whatever it takes to bring (your) campaign down" and cautioning that you need to be "ready to counter the distortions, innuendoes and accusations" seemed, well, ironic in light of your campaign's activities.
I mean really John, do you think that your opponent "would rather lose a war than lose a campaign" or, as you write in your letter, that he "will surrender to Al Qaeda in Iraq?" Isn't there an air of doing "whatever it takes" when you run an ad accusing your opponent of raising gas prices by supporting the very drilling policy that you advocated in your 2000 campaign, a policy that President Bush's Department of Energy says won't produce any additional oil for a decade and even then won't affect gas prices by more than a few pennies? Or how about your more recent ad, falsely accusing your opponent of snubbing wounded veterans? Or more sleazy yet, the news that you had an ad script accusing him of using the troops as a prop if he did visit?
You write that you "intend to fight as hard as (you) can," and the recent ads are certainly evidence of that. But I hope that you can also see how a set of damned if you do, damned if you don't ads seem like a below-the-belt punch.
As you've probably guessed by now, the "Ribaz" household won't be sending the suggested minimum campaign contribution of $35. Please don't "whine" at this negative economic outcome. If it's any consolation, we won't be asking for your cheapo gas tax holiday either. By our book, that makes us about even.
We hope that you will continue to write often, but we also hope that future letters and ads will be a bit more positive.
Warmly,
The Ribazes
Thanks so much for your letter of July 25. It's certainly a special day in the "Ribaz" household when a "PERSONAL - URGENT" letter with a presorted postage stamp shows up in the mailbox, and a letter dunning us for a contribution no less. It's a privilege to be on your mailing list.
This being our first letter from you, we were surprised that so much of it focused on your opponent and not you. Indeed, the parts warning that your opponent is "plotting to spend and do whatever it takes to bring (your) campaign down" and cautioning that you need to be "ready to counter the distortions, innuendoes and accusations" seemed, well, ironic in light of your campaign's activities.
I mean really John, do you think that your opponent "would rather lose a war than lose a campaign" or, as you write in your letter, that he "will surrender to Al Qaeda in Iraq?" Isn't there an air of doing "whatever it takes" when you run an ad accusing your opponent of raising gas prices by supporting the very drilling policy that you advocated in your 2000 campaign, a policy that President Bush's Department of Energy says won't produce any additional oil for a decade and even then won't affect gas prices by more than a few pennies? Or how about your more recent ad, falsely accusing your opponent of snubbing wounded veterans? Or more sleazy yet, the news that you had an ad script accusing him of using the troops as a prop if he did visit?
You write that you "intend to fight as hard as (you) can," and the recent ads are certainly evidence of that. But I hope that you can also see how a set of damned if you do, damned if you don't ads seem like a below-the-belt punch.
As you've probably guessed by now, the "Ribaz" household won't be sending the suggested minimum campaign contribution of $35. Please don't "whine" at this negative economic outcome. If it's any consolation, we won't be asking for your cheapo gas tax holiday either. By our book, that makes us about even.
We hope that you will continue to write often, but we also hope that future letters and ads will be a bit more positive.
Warmly,
The Ribazes
Wednesday, July 30, 2008
Medical privacy should extend to illegal immigrants
The News & Observer has a story this morning about an illegal immigrant in nearby Alamance County who was arrested after using the county's public health clinic.
In what is becoming a favorite tactic of immigration enforcement, the woman was charged with four federal felonies related to her use of false documents. While law enforcement officials are fond of saying that they only pursue illegal immigrants who commit or are suspected of committing crimes, the documentation statutes mean that nearly all working immigrants fall into this category.
What is more alarming in this case, however, is that the information that was used to pursue the immigrant appears to have come from the health department itself. The health department is being investigated for providing notes and other documents for illegal immigrants that use the immigrants' assumed identities instead of their true identities. It appears that the arrested immigrant's name came up in that investigation.
While immigration extremists advocate a scorched earth policy of making every institution in the U.S. as inhospitable to illegal immigrants as possible, there are good reasons for maintaining confidentiality when receiving health services or reporting crimes. In the case of health clinics, the community has a vested interest in all residents getting treatment and in the health department being able to track diseases. The risks of highly communicable diseases like TB, meningitis, or severe flu spreading through a community are too high. In this particular case, the immigrant is the parent of a U.S. citizen, so there is an additional interest in that child being able to get treatment.
Sometimes officials need to look the other way for the greater good. The arrest in Alamance County appears to be especially short-sighted.
In what is becoming a favorite tactic of immigration enforcement, the woman was charged with four federal felonies related to her use of false documents. While law enforcement officials are fond of saying that they only pursue illegal immigrants who commit or are suspected of committing crimes, the documentation statutes mean that nearly all working immigrants fall into this category.
What is more alarming in this case, however, is that the information that was used to pursue the immigrant appears to have come from the health department itself. The health department is being investigated for providing notes and other documents for illegal immigrants that use the immigrants' assumed identities instead of their true identities. It appears that the arrested immigrant's name came up in that investigation.
While immigration extremists advocate a scorched earth policy of making every institution in the U.S. as inhospitable to illegal immigrants as possible, there are good reasons for maintaining confidentiality when receiving health services or reporting crimes. In the case of health clinics, the community has a vested interest in all residents getting treatment and in the health department being able to track diseases. The risks of highly communicable diseases like TB, meningitis, or severe flu spreading through a community are too high. In this particular case, the immigrant is the parent of a U.S. citizen, so there is an additional interest in that child being able to get treatment.
Sometimes officials need to look the other way for the greater good. The arrest in Alamance County appears to be especially short-sighted.
Thursday, July 24, 2008
I'm feeling manipulated
The Commodity Futures Trading Commission (CFTC) Tuesday:
The ... preliminary analysis to date does not support the proposition that speculative activity has systematically driven changes in oil prices.The CFTC today:
The U.S. Commodity Futures Trading Commission (CFTC) announced today its case against Optiver Holding BV, two of its subsidiaries, and three employees, charging them with manipulation and attempted manipulation of New York Mercantile Exchange (NYMEX) Light Sweet Crude Oil, New York Harbor Heating Oil, and New York Harbor Gasoline futures contracts during March 2007.So speculators can't manipulate prices, unless they do.
The complaint charges all defendants with 19 separate instances of attempted manipulation involving the aforementioned energy futures contracts on 11 days in March 2007. The complaint further alleges that in at least five of those 19 attempts, defendants successfully manipulated certain of these energy futures contracts, causing artificial prices.
The minimum wage: some history and a modest proposal
The federal minimum wage increases 70 cents today from $5.85 to $6.55 per hour. The increase is the second since the Fair Minimum Wage Act of 2007 was passed. At that time the federal minimum wage was $5.15 and had remained at that level since 1997. Next year the minimum wage will increase again to $7.25.
At first glance, the increases appear to be very generous. However, when adjusted for inflation (using the Consumer Price Index for All Urban Consumers), the recent wages are quite modest in historic terms. To see this, consider the minimum wages before and after changes over the last four decades.
Over the last 40 years, the real value of the minimum wage has been as high as $10 per hour (1968) and as low as $5.59 per hour (2006). Over the decade of the 1970s the real minimum wage averaged $8.61; over the 1980s, it averaged $7.04, and over the 1990s, it averaged $6.59.
Today's value of $6.55 is below all of those averages. Assuming that inflation over the next year is at or above 4 percent, next year's nominal increase to $7.25 would be worth less than $7.00 in today's dollars--below the average from the 1980s and below the value from 1997. All in all, these are very modest amounts.
Minimum wage policy is subject to intense political squabbling. Democrats generally favor higher minimum wages on fairness grounds. Republicans generally oppose the increases because they raise costs for businesses and can reduce employment. In the past, these differences have led to long impasses where the nominal wage remains fixed. Before the 2007 legislation, the minimum wage had not been adjusted in a decade. Minimum wages were also fixed in nominal terms for five years in the 1990s and for nine years in the 1980s. During these periods, the real value of the wage declined substantially.
Regardless of your views on the effectiveness of the minimum wage, this is a terrible way to make policy--letting the wage drift down and then coming back with large adjustments every year. It's hard to rationalize a saw-tooth pattern in wage rates.
A modest proposal is to accept that next year's value of $7.25 represents a consensus of where the federal minimum wage "should" be. If this is the consensus value, it should be automatically adjusted/indexed for inflation starting in 2010. Should a new consensus or new circumstances develop, the wage could subsequently be legislated up or down. Effectively, indexing would change the default for minimum wage policy from one in which the real value generally erodes to one in which the real value stays constant.
Businesses and their conservative backers should be willing to accept indexing because it removes some uncertainty from wage policy, keeps the wage at a historically modest level, and takes the steam out of progressive calls for wage jumps. Progressives should accept it because it establishes the minimum wage near its highest real value in the last 20 years.
What about it Washington?
At first glance, the increases appear to be very generous. However, when adjusted for inflation (using the Consumer Price Index for All Urban Consumers), the recent wages are quite modest in historic terms. To see this, consider the minimum wages before and after changes over the last four decades.
| Year | Nominal value | Real value (2008 dollars) |
|---|---|---|
| 1968 | $1.60 | $10.06 |
| 1973 | $1.60 | $7.88 |
| 1974 | $2.00 | $8.88 |
| 1975 | $2.10 | $8.54 |
| 1976 | $2.30 | $8.84 |
| 1977 | $2.30 | $8.30 |
| 1978 | $2.65 | $8.89 |
| 1979 | $2.90 | $8.74 |
| 1980 | $3.10 | $8.23 |
| 1981 | $3.35 | $8.06 |
| 1989 | $3.35 | $5.91 |
| 1990 | $3.80 | $6.36 |
| 1991 | $4.25 | $6.83 |
| 1995 | $4.25 | $6.10 |
| 1996 | $4.75 | $6.62 |
| 1997 | $5.15 | $7.02 |
| 2006 | $5.15 | $5.59 |
| 2007 | $5.85 | $6.17 |
| 2008 | $6.55 | $6.55 |
| 2009 | $7.25 |
Over the last 40 years, the real value of the minimum wage has been as high as $10 per hour (1968) and as low as $5.59 per hour (2006). Over the decade of the 1970s the real minimum wage averaged $8.61; over the 1980s, it averaged $7.04, and over the 1990s, it averaged $6.59.
Today's value of $6.55 is below all of those averages. Assuming that inflation over the next year is at or above 4 percent, next year's nominal increase to $7.25 would be worth less than $7.00 in today's dollars--below the average from the 1980s and below the value from 1997. All in all, these are very modest amounts.
Minimum wage policy is subject to intense political squabbling. Democrats generally favor higher minimum wages on fairness grounds. Republicans generally oppose the increases because they raise costs for businesses and can reduce employment. In the past, these differences have led to long impasses where the nominal wage remains fixed. Before the 2007 legislation, the minimum wage had not been adjusted in a decade. Minimum wages were also fixed in nominal terms for five years in the 1990s and for nine years in the 1980s. During these periods, the real value of the wage declined substantially.
Regardless of your views on the effectiveness of the minimum wage, this is a terrible way to make policy--letting the wage drift down and then coming back with large adjustments every year. It's hard to rationalize a saw-tooth pattern in wage rates.
A modest proposal is to accept that next year's value of $7.25 represents a consensus of where the federal minimum wage "should" be. If this is the consensus value, it should be automatically adjusted/indexed for inflation starting in 2010. Should a new consensus or new circumstances develop, the wage could subsequently be legislated up or down. Effectively, indexing would change the default for minimum wage policy from one in which the real value generally erodes to one in which the real value stays constant.
Businesses and their conservative backers should be willing to accept indexing because it removes some uncertainty from wage policy, keeps the wage at a historically modest level, and takes the steam out of progressive calls for wage jumps. Progressives should accept it because it establishes the minimum wage near its highest real value in the last 20 years.
What about it Washington?
Monday, July 21, 2008
Proposed credit card changes
In the not exactly news category, the Federal Reserve this May proposed changing several regulations for credit card issuers. The new regulations are intended to rein in some of the "gotcha" practices of the card companies. The regulations include:
Though card issuers are opposed, these are all sensible restrictions. The Fed is taking comments through August 4.
Consumers should remember that the best ways to hold down fees are to use credit cards responsibly, to understand the terms of their existing cards, and to shop around for the best rates and terms for their individual circumstances.
- Giving consumers more reasonable amounts of time to make payments and setting more reasonable due dates for payments.
- Limiting the circumstances under which an issuer can increase interest rates on existing balances, such as to changes in pegged rates or to missed payments on those balances. This rule would prohibit the current practice of raising rates on outstanding card balances if something else in your credit situation changes.
- Requiring issuers to apply at least some of the payments in excess of the minimum to balances that have high interest rates. For instance, if part of your balance comes from cash advances, which typically have very high interest rates, and part comes from regular purchases, which usually have lower rates, the issuer would have to apply part or all of any excess payment to the cash advance balance.
- Eliminating "two-cycle" billing. This would restrict issuers to only charge interest and fees on balances from the current billing cycle.
- Preventing over-limit fees for credit card holds. Card issuers could charge fees for actual charges that push you over your credit limit but not for temporary holds by hotels, gas stations, and others that do not result in actual charges.
Though card issuers are opposed, these are all sensible restrictions. The Fed is taking comments through August 4.
Consumers should remember that the best ways to hold down fees are to use credit cards responsibly, to understand the terms of their existing cards, and to shop around for the best rates and terms for their individual circumstances.
Sunday, July 20, 2008
In debt reporting
The New York Times has a heart-rending but all too common story about one American's struggles with debt. The story encapsulates so much that was wrong with the easy credit and serial refinancings of the last decade.
Saturday, July 19, 2008
More energy gamemanship
The Hill reports that the Democratic leadership of the House is considering bringing another energy bill up under special up-or-down voting rules that prohibit amendments but require a two-thirds vote. The bill would call for a release of 10 percent of the Strategic Petroleum Reserve (SPR), new rules against oil speculation, and "use-it-or-lose-it" regulations for existing oil leases.
The first provision is irresponsible. The SPR is intended to provide oil in a supply emergency, not to manipulate prices. We're not in a supply emergency now, but could be if tensions with Iran grow worse or if there is a major hurricane in the Gulf of Mexico. The other two propositions are mostly for show, with the last being included only to embarrass Republicans.
In any case, it's all a political game as the bill is unlikely to get enough Republican support to pass.
A final quote in The Hill article provides some insight into the legislators' mindset. Discussing the proposed release from the SPR, Rep. Ed Markey (D-MA) said, "You don't have to deploy it every day. You just have to know when to deploy it, to make sure that the speculators don’t control the price of oil, the American government controls the price of oil."
How about the forces of supply and demand controlling the price of oil?
The first provision is irresponsible. The SPR is intended to provide oil in a supply emergency, not to manipulate prices. We're not in a supply emergency now, but could be if tensions with Iran grow worse or if there is a major hurricane in the Gulf of Mexico. The other two propositions are mostly for show, with the last being included only to embarrass Republicans.
In any case, it's all a political game as the bill is unlikely to get enough Republican support to pass.
A final quote in The Hill article provides some insight into the legislators' mindset. Discussing the proposed release from the SPR, Rep. Ed Markey (D-MA) said, "You don't have to deploy it every day. You just have to know when to deploy it, to make sure that the speculators don’t control the price of oil, the American government controls the price of oil."
How about the forces of supply and demand controlling the price of oil?
Friday, July 18, 2008
Shocking priorities of the military brass
An interesting juxtaposition of articles in the Washington Post and New York Times this morning.
The Washington Post leads with a story about Air Force brass trying to divert counter-terrorism to buy plush Senior Leader Intransit Comfort Capsules (SLICC) for trips in military planes.
The New York Times leads with a story about shoddy electrical work at U.S. bases in Iraq killing and injuring more of our troops than previously disclosed.
The Washington Post leads with a story about Air Force brass trying to divert counter-terrorism to buy plush Senior Leader Intransit Comfort Capsules (SLICC) for trips in military planes.
Explaining his instructions to subordinates, [the officer in charge of the program] said he used the term world class "in just about everything I discuss. . . . That represents an attitude." He said he wanted to "create an environment that whoever was riding in that would be proud of," the government would be proud of and "the people of the United States" would be proud of.Important decisions about the capsules, including the color of the carpets, leather upholstery, and even the seat belts, consumed significant amounts of top officers' time. The Post web-site has pictures of the proposed capsules.
The New York Times leads with a story about shoddy electrical work at U.S. bases in Iraq killing and injuring more of our troops than previously disclosed.
Another environment that the people and government of the U.S. can be proud of.During just one six-month period ... at least 283 electrical fires destroyed or damaged American military facilities in Iraq, including the military’s largest dining hall in the country.
And while the Pentagon has previously reported that 13 Americans have been electrocuted in Iraq, many more have been injured, some seriously, by shocks, according to the documents. A log compiled earlier this year at one building complex in Baghdad disclosed that soldiers complained of receiving electrical shocks in their living quarters on an almost daily basis.
Thursday, July 17, 2008
What's good for T. Boone Pickens, Jr. might be good for us
As you've probably already seen on TV, oilman and energy developer, T. Boone Pickens, Jr., has been hawking a prescription for increased energy independence that he modestly calls, The Pickens Plan.
Pickens is an unabashed conservative and active in Republican politics. He not only supported George W. Bush in the last two elections but also helped to fund the despicable Swift Boat smear campaign against John Kerry. So, he's not exactly a darling of progressives.
What then is he advocating? Pickens calls for developing wind turbines for electricity across the middle of the country from the Dakotas to Texas and developing the transmission infrastructure necessary to send that electricity to the rest of the country. He estimates the cost at $1.2 trillion--an enormous investment but one that compares favorably to what we currently spend on energy.
Pickens further advocates using the new generation capacity from the wind turbines to replace power plants that run on natural gas and reallocating the natural gas freed up from power generation to natural gas vehicles. He estimates that these measures could reduce U.S. imports of oil by a third.
What's his motivation? Pickens has invested in the development and supply of natural gas for at least a decade. He would have a clear commercial interest in expanding this market. More recently, he has also invested in giant wind farms. As such, he also has an interest in subsidies and reduced regulatory bottlenecks to support transmission lines for those farms.
Crony capitalism notwithstanding, Pickens' plan dovetails with U.S. needs. He is putting his own money into the wind generators and would be providing clean energy. The U.S. already needs to invest in its electrical transmission infrastructure. His plan would mostly benefit the environment and help reduce our dependence on oil.
The specifics of his plan need to be examined carefully. However, it could end up being a wind-wind solution to our energy problems.
Pickens is an unabashed conservative and active in Republican politics. He not only supported George W. Bush in the last two elections but also helped to fund the despicable Swift Boat smear campaign against John Kerry. So, he's not exactly a darling of progressives.What then is he advocating? Pickens calls for developing wind turbines for electricity across the middle of the country from the Dakotas to Texas and developing the transmission infrastructure necessary to send that electricity to the rest of the country. He estimates the cost at $1.2 trillion--an enormous investment but one that compares favorably to what we currently spend on energy.
Pickens further advocates using the new generation capacity from the wind turbines to replace power plants that run on natural gas and reallocating the natural gas freed up from power generation to natural gas vehicles. He estimates that these measures could reduce U.S. imports of oil by a third.
What's his motivation? Pickens has invested in the development and supply of natural gas for at least a decade. He would have a clear commercial interest in expanding this market. More recently, he has also invested in giant wind farms. As such, he also has an interest in subsidies and reduced regulatory bottlenecks to support transmission lines for those farms.
Crony capitalism notwithstanding, Pickens' plan dovetails with U.S. needs. He is putting his own money into the wind generators and would be providing clean energy. The U.S. already needs to invest in its electrical transmission infrastructure. His plan would mostly benefit the environment and help reduce our dependence on oil.
The specifics of his plan need to be examined carefully. However, it could end up being a wind-wind solution to our energy problems.
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