Things to Read on the Morning of April 10, 2014
Must-Reads:
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James Pethokoukis: Is the temp economy permanent?: ”
If the US job market were undergoing some sort of major, long-lasting transformation, how would we know? Well, the data might start looking kind of weird. Maybe the labor force participation would collapse, or wages would stagnate, or job creation would shrivel. Or we might see something like a big rise in temporary workers…. So are we are headed to where Japan already is? A third of its workers are temps who are paid less, receive fewer benefits, and have less job security…. If this trend is longer-term, it argues for better education and training so workers can do the high-value things machines can’t. Government should also be careful of polices that raise hiring costs like mandating benefits or wage floors… should take a deep look at wage subsidies for lower-skilled workers… -
Christina Romer: “After A Financial Crisis, Economic Disaster Is Not Inevitable”:
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Gauti Eggertsson and Neil Mehrotra: A Model of Secular Stagnation: “The Japanese malaise that has by now lasted two decades and has many of the same symptoms as the U.S. Great Depression…. In Summers’ words, we may have found ourselves in a situation in which the natural rate of interest – the short-term real interest rate consistent with full employment – is permanently negative…. There has not, to the best of our knowledge, been any attempt to formally model this idea…. The goal of this paper is to fill this gap…. Successful policy actions include, among others, a permanent increase in inflation and a permanent increase in government spending…. Policies such as committing to keep nominal interest rates low or temporary government spending, however, are less powerful than in models with temporary slumps…”
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James Pethokoukis: Is the temp economy permanent?: “If the US job market were undergoing some sort of major, long-lasting transformation, how would we know? Well, the data might start looking kind of weird. Maybe the labor force participation would collapse, or wages would stagnate, or job creation would shrivel. Or we might see something like a big rise in temporary workers…. So are we are headed to where Japan already is? A third of its workers are temps who are paid less, receive fewer benefits, and have less job security…. If this trend is longer-term, it argues for better education and training so workers can do the high-value things machines can’t. Government should also be careful of polices that raise hiring costs like mandating benefits or wage floors… should take a deep look at wage subsidies for lower-skilled workers…
Should-Reads:
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Mark Thoma: Who’s to Blame for the Power Shift at the Fed?: “Federal Reserve Board governor Jeremy Stein announced that he is stepping down at the end of May. That could leave the Board of Governors severely short-handed. Presently, three of the seven positions on the Board are open. There are nominations for two… Stanley Fischer and Lael Brainard…. However, President Obama has not yet nominated anyone to fill the third open seat… if Senate confirmation for Fischer and Brainard does not occur before June, then only three of the seven Board positions will be filled…. Normally, the twelve member FOMC is comprised of the seven members of the Board of Governors, the president of the NY Fed… and four seats that rotate annually among the other eleven regional Fed presidents…. Board members can dominate monetary policy decisions 7-5. But… it could move to 3-5 in favor of the regional Fed banks if Brainard and Fischer are not confirmed soon…. [That] is certainly not what was intended when the Federal Reserve System was constructed…”
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Derek Thompson: How the Rich and Poor Spend Money Today—and 30 Years Ago: “The poorest quintile of Americans spends about $22,000 each year. The richest spends about $100,000 each year…. The biggest difference between the lowest- and highest-earning Americans is what they spend on housing. Less than 40 percent of the bottom quintile owns a home, compared with 90 percent of Americans at the top. As a result, the top quintile outspends the bottom on housing by $21,000 a year (remember: that gap alone is basically the entire budget of a lower-income family) and $13,000 more on transportation. At just about every income level, we spend about half our income on living and getting around…. The poor spend nearly twice as much (as a share of their budget) on food at home and utilities; the rich spend more on entertainment and education. Reaching back to 1984, education spending has nearly doubled as a share of the richest quintile’s budget. Health care spending and housing has also grown. By contrast, the portion of spending dedicated to things like reading, smoking, and clothes has declined rather significantly. For the lowest-earning group… rent has nearly doubled as a share of the budget. In 1984, somebody in the poorest quintile of the country spent $3,800 on housing—and $67 on books, newspapers, and other reading material. In 2012, they spent $8,800 on housing—and $44 on reading. Once again, clothes and reading have gotten cheap for everybody—the former because of apparel manufacturing’s globalization; the latter, because the Internet…”
Should Be Aware of:
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Suzy Khimm: The case for another stimulus: “Washington’s fever for deficit reduction seems to have finally broken. But Congress’s ongoing allergy to fiscal stimulus may do lasting harm to an economy that’s still damaged by the Great Recession. With millions still unemployed and businesses cautious about hiring, the economy is performing well below its potential, dampening growth projections and raising our long-term deficit. Three economists believe that trend is likely to continue for years to come unless there’s a major change of course. And they argue that the most effective solution would be fiscal expansion—a mix of tax cuts and government spending that has become politically toxic on Capitol Hill. ‘The purported benefits of austerity would be achieved by its opposite’, said former Obama economic adviser Larry Summers on Wednesday, presenting a new paper for the Center on Budget and Policy Priorities…”
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Paul Krugman: Channels of Oligarchic Influence: An Example: “How does [the] influence [of the 0.1%] work? Well, there are multiple channels… crude buying of influence… promise of campaign contributions… financing think tanks and media organizations. But an important channel, I believe, is personal: oligarchs quite literally wine and dine people who go along with their views and interests…. The famous letter warning that quantitative easing would debase the dollar. The first name on that list is the hedge fund manager Cliff Asness… close ties to the finance group at the University of Chicago, whose reigning leader is the recently Nobelized Eugene Fama…. Fama said something strange about modern economic history in defense of the finance industry, asserting that the rise of finance had ushered in “a period of extraordinary growth” after the early 1980s. As anyone even slightly familiar with the data knows, this is all wrong…. So what might make someone who gets his economic history from talking to his social set believe that great stuff has happened since 1980?… You see my point: the sheer wealth of the 0.1 percent has a kind of gravitational attraction, pulling people into their orbit and their worldview…”
And:
- Mark Thoma: Explainer: Why is deflation so harmful?
- Katherine Grace Carman and Christine Eibner: Changes in Health Insurance Enrollment Since 2013: Evidence from the RAND Health Reform Opinion Study