…Compared to these women, we are lucky…. We are equals under the law. But the promise of equality is not equality…. Men run the world…. I recognize that [today] is a vast improvement from generations in the past…. But… women became 50% of the college graduates in this country in 1981, 30 years ago. Thirty years is plenty of time for those graduates to have gotten to the top of their industries, but we are nowhere close to 50% of the jobs at the top. That means that when the big decisions are made, the decisions that affect all of our worlds, we do not have an equal voice at that table. So today, we turn to you. You are the promise for a more equal world…. Only when we get real equality in our governments, in our businesses, in our companies and our universities, will we start to solve… gender equality. We need women at all levels, including the top, to change the dynamic, reshape the conversation, to make sure women’s voices are heard and heeded, not overlooked and ignored…
Category: Equitablog
Afternoon Must-Read: Paul Krugman: Stagflation Predictions
…But I say, oh yeah? I’ll see your Dick Morris (who cares, really?) and raise you a… Paul Ryan: ‘Thirty Years Later, a Return to Stagflation.’ That was, if you check the date, six years ago. But it’s worth remembering that not all prominent Republicans were predicting 70s-style stagflation; some of them were predicting Weimar-style hyperinflation instead…
…and his dithering endorsement of chaos in the region will send oil and gasoline prices skyrocketing, triggering a massive bout of stagflation… [which] will cripple the American economy for years to come. This is Obama’s true legacy…. $4-per-gallon gas, soon to go up to $5 or $6! And the fuel-price increases will take their place alongside food-price rises. Food prices for corn, soybeans, wheat and other basic crops have almost doubled in the past year. (The Consumer Price Index deliberately understates fuel and food inflation in its formula to avoid triggering cost-of-living adjustment increases in private pay and government programs.)
Finally, he has encouraged the Federal Reserve Board to almost triple the money supply, over $1 trillion of it based on the purchase of worthless mortgage-backed securities…. Reduced confidence in the dollar (at home and abroad) and the rises in fuel and food prices will force up prices as costs push them higher.
Already, the International Monetary Fund (IMF) has pressed for the replacement of the dollar as an international currency by ‘drawing rights’ printed by the IMF…. U.S. inflation can only fan that movement…. The Fed has got to stop printing money soon–lest it become wallpaper–interest rates, too, will rise…. But the economy cannot afford to pay these higher prices…. Political pundits have wondered if the economy would improve, helping Obama’s reelection chances. It now appears that the exact opposite is likely and that his reelection chances will be washed away by a massive flood of inflation as a consequence of his misguided policies.
Obama will doubtless blame oil companies and speculators… but his role… is apparent enough. He put the demand of the Egyptian people for political change ahead of America’s need for financial stability…
…The package threatens a return to the kind of stagflation last seen in the 1970s…. The headline price tag of $787 billion doesn’t include… [what will really be] as much as $2 trillion more. Add in the billions that are being used to prop up the financial system, and when the dust settles on 2009, with millions of baby boomers retiring and entitlement spending exploding, taxpayers will face a financial nightmare…. Advocates of borrow-and-spend… argue that for the United States, borrowing is uniquely cheap. But what happens when there is an excess supply of bonds on the worldwide markets?… Our fears will turn to inflation….
How high will interest rates rise? And more fundamentally, who will have the money to buy our bonds?… Pressure to ‘monetize’ our debt…. In fact, the Fed is already suggesting that it will buy long-term Treasury securities in order to lower borrowing costs…. Inflation is a destroyer of savings, a killer of wealth, a crusher of confidence…. Combine high inflation and high unemployment and you have stagflation…. Soon we may again find ourselves watching a rising ‘misery index’ of inflation and unemployment together…. Keynesian stimuli based on borrowing and spending have not worked and will not work…. Marginal cuts in tax rates do. We also must lower our job-killing corporate income tax rate…. We should also re-establish the sound dollar. For the past decade, the Federal Reserve has manipulated interest rates and vastly over-expanded the money supply…. Finally, we should tackle the entitlement crisis…. Then our credit will improve, the cost of necessary borrowing will drop, and we can stave off stagflation.
Thoughts on David Frum’s Excellent Review of Adam Tooze’s Superb “The Deluge” and “The Wages of Destruction”
Excellent work from David Frum–reviewing even more excellent work from Adam Tooze.
Let’s give David the floor:
The Real Story of How America Became an Economic Superpower: Reviewing Adam Tooze’s Histories of WWI and WWII:
“Adam Tooze’s… The Wages of Destruction… and The Deluge…
…amount together to a new history of the 20th century: the American century, which according to Tooze began not in 1945 but in 1916…. Yet Tooze’s perspective is anything but narrowly American….
Tooze’s portrait of Woodrow Wilson is one of the most arresting novelties of his book. His Wilson is no dreamy idealist. The president’s animating idea was an American exceptionalism of a now-familiar but then-startling kind…. Rather than join the struggle of imperial rivalries, the United States could use its emerging power to suppress those rivalries altogether…. What went wrong?…
Tooze writes…
the failure of the United States to cooperate with the efforts of the French, British, Germans and the Japanese [leaders of the early 1920s] to stabilize a viable world economy and to establish new institutions of collective security….
Peter Heather, the great British historian of Late Antiquity, explains human catastrophes with a saying of his father’s, a mining engineer:
If man accumulates enough combustible material, God will provide the spark
So it happened in 1929. The Deluge that had inundated the rest of the developed world roared back upon the United States. The Great Depression overturned parliamentary governments throughout Europe and the Americas….
In seeking to explain the urgency of Hitler’s aggression, historians have underestimated his acute awareness of the threat posed to Germany, along with the rest of the European powers, by the emergence of the United States as the dominant global superpower
Tooze writes…. [Hitler] dreamed of conquering Poland, Ukraine, and Russia as a means of gaining the resources to match those of the United States. The vast landscape in between Berlin and Moscow would become Germany’s equivalent of the American west, filled with German homesteaders living comfortably on land and labor appropriated from conquered peoples—a nightmare parody of the American experience with which to challenge American power.
Could this vision have ever been realized? Tooze argues in The Wages of Destruction that Germany had already missed its chance:
In 1870… the populationsUnited States and Germany was roughly equal…. Just before the outbreak of World War I the American economy… [was] roughly twice the size of that of Imperial Germany. By 1943… almost four times….
Germany was a weaker and poorer country in 1939 than it had been in 1914. Compared with Britain, let alone the United States, it lacked the basic elements of modernity… just 486,000 automobiles in Germany in 1932…. Yet this backward land, with an income per capita comparable to contemporary “South Africa, Iran and Tunisia,” wagered on a second world war even more audacious than the first.
The reckless desperation of Hitler’s war provides context for the horrific crimes of his regime. Hitler’s empire could not feed itself, so his invasion plan for the Soviet Union contemplated the death by starvation of 20 to 30 million Soviet urban dwellers after the invaders stole all foodstuffs….
On paper, the Nazi empire of 1942 represented a substantial economic bloc. But pillage and slavery are not workable bases for an industrial economy…. The Hitlerian vision of a united German-led Eurasia equaling the Anglo-American bloc proved a crazed and genocidal fantasy. Tooze’s story ends where our modern era starts…. Yet nothing lasts forever….
America’s… unique economic predominance… is now coming to an end as China does what the Soviet Union and Imperial Germany never could…. When it does, the fundamental basis of world-power politics over the past 100 years will have been removed. Just how big and dangerous a change that will be is the deepest theme of Adam Tooze’s profound and brilliant grand narrative.
And David Frum does gives a very, very nice summary of the major themes that emerge from Tooze’s two volumes.
Great Britain, the hyperpower of the 1815-1916 19th century, shaped the globe in the 19th-century in the interest of industrialization, free-trade, and its own imperialist predominance.
The United States, the hyperpower of the 1916-2025 20th century, shaped the globe in the interest of anti-Naziism, anti-imperialism, anti-Communism, free trade, industrialization, and democratization if not democracy–and if its form of anti-imperialism turned into a soft Cold War neoimperalism of its own.
China, the likely hyperpower-to-be of the 21st century, will shape the globe in… what?
But there is another story–one that, I think, Winston Churchill would have stressed and rightly stressed.
In 1846 British Prime Minister Robert Peel accepted the U.S. proposal to draw the border between British Columbia and the Oregon Territory at the 49th Parallel, rather than doing what the British government usually did in the mid-nineteenth century: insist on its own proposal (the Columbia River or the northern boundary of California) and if the counterparty did not agree, send the British navy to burn its capital. This inaugurated an unusual era of… forbearance in geopolitics, coupled with a 70 year cultural wooing of the United States, of which the Rhodes Scholarships are a reminder to this day.
As a result, when 1916 came, Americans perceived Britain as their friend. Americans perceived the British Empire as by and large a force for good in the world. This is in striking contrast to how Britain was perceived in 1850: the cruel corrupt ex-colonial power that had just starved a quarter of all Irishmen to death.
This mattered a lot.
This meant that when Britain got into trouble in the twentieth century–whether with Wilhelm II or Hitler or Stalin and his successors–it had wired aces as its hole cards in the poker game of seven-card stud that is international relations.
The willingness of the United States to send Pershing and his army Over There, to risk war with and then to fight Hitler, and to move U.S. tanks from Ft. Hood, TX, to the Fulda Gap–these were all powerfully motivated by America’s affinity with Britain, Britain’s geostrategic causes, and Britain’s security. Even after Britain was no longer the world’s hyperpower, it had banked its hyper power for the future by a very wise use indeed of soft power in the second half of the 19th-century. It had then created a world in which the 20th century’s hyperpower would use its muscle to make the world comfortable for Britain to live in.
Is the United States using its soft power now with the same skill and foresight?
Not really–and really not really back in the George W. Bush administration before 9/11, when confrontation with China was the rage.
Alexis de Tocqueville projected before the Civil War that the U.S. and Russia were likely to become twentieth-century superpowers. We project today that at least one of India and China–perhaps both–will become late-twenty first century superpowers. And so we have an interest in building ties of affinity now: it is very important for the late-twenty first century national security of the United States–and the global security of the world–that, fifty years from now, schoolchildren in India and China be taught that America is their friend that did all it could to help them become prosperous and free. It is very important that they not be taught that America wishes that they were still barefoot, powerless, and tyrannized, and has done all it can to keep them so.
This matters a lot.
In the long run we all have an enormous mutual common interest in peace, tolerance, and prosperity. And we have virtually no interest in most of what governments choose to fight about. Who cares today whether the signs in Strasbourg say “Strasbourg” or “Strassburg”? Who today is willing to fight and die to make Vancouver part of the United States of America? Who cares today whether the eighteenth century saw members of the Bourbon or the Habsburg dynasty seated on the throne of Spain?
When diplomats talk about international trade and finance, they talk about them as carrots and sticks: we give people we want to reward access to our markets; we punish people who we want to punish by slapping on trade embargos. “Economic diplomacy” is like bombing, only less so. And arguments that it is much more important to build large and profitable positive-sum games that align interests than to win zero- (or negative!) sum games that lead to the domination of one government’s conception of its momentary interest over another’s? They blow right past the diplomats, the State Department people as if they were just gentle breezes.
Economists, when they talk about international trade and finance, at least focus on building institutions to allow for mutually-beneficial acts of economic exchange. They talk about diminishing barriers and increasing confidence. They talk about playing positive-sum games with people in other countries that increase wealth, trust, and confidence and that ultimately align interests: the larger is the surplus from international trade and finance, the bigger is that stake that everyone has in continuing the free-trade-and-finance game.
But neither side today focuses on the long-run game of cultural and ideological influence that every temporary hyperpower needs to play: on trying to make it so that the next hyperpower seeks to create a prosperous, free, and peaceful world for the ex-hyperpower to be comfortable in.
Weekend reading
This is a weekly post we publish on Fridays with links to articles we think anyone interested in equitable growth should be reading. We won’t be the first to share these articles, but we hope by taking a look back at the whole week we can put them in context.
Links
Mike Konczal on how the recent conversation about robots and the labor market has helped rebalance “our intellectual portfolio of inequality stories.” [rortybomb]
ATMs were supposed to be the perfect example of technology displacing labor. But the data tell a different story, Tim Taylor writes. [conversable economist]
Peter Orzag argues that if you really want to reduce wealth inequality, you should tax land. [bloomberg view]
Lydia DePilis reports on the broken workers’ compensation system. [wonkblog]
Noah Smith thinks the United States could take a lesson from France when it comes to family-friendly policies. [bloomberg view]
Friday Figure
Cyclical and Structural Employment Gaps: An Announcement
In the past year, the cyclical employment gap for prime-aged males has shrunk and is now smaller than the structural employment gap:
That is all.
Labor market slack and the Affordable Care Act
The latest jobs numbers released today by the U.S. Bureau of Labor Statistics indicate further steps are necessary to boost employment demand, which is still not close to the level that will generate healthy wage growth. Although the U.S. economy added 295,000 jobs in February, wages grew by only 2.0 percent over the past year according to the new BLS data. At an employment-to-population ratio of 77.3 percent for prime-age workers, the steady but incremental jobs gains mean policymakers should weigh the importance of policies that can eliminate slack and raise wages by reducing labor supply.
One such policy: the Affordable Care Act. The new law subsidizes health insurance purchases and increases access to health insurance outside of one’s job. Preliminary evidence suggests that because of the Affordable Care Act, there are now more individuals voluntarily working part-time, and other research finds that public health insurance access can have large effects on the labor supply.
There are two ways this reduction in labor supply will increase wages. First, because many employees will be less “locked” to their job for health insurance, employers will need to raise wages in order to recruit and retain workers. Second, if lower paid workers eligible for subsidies work less, then on average wages will rise.
Economists do not have a solid handle on how large these wage gains will be due to the Affordable Care Act, but the U.S. Congressional Budget Office analysis of the law implies economically meaningful increases. CBO found that because the law would reduce total hours worked by more than the reductions in total labor compensation, it will increase average hourly compensation by about 0.5 to 1.0 percent.
This kind of boost to paychecks could be telling given current employment trends. The jobs numbers in February indicate that African American unemployment rates seem poised to drop below 10 percent sometime in the near future, the lowest rate since the middle of 2008. At the peak of the last business cycle, in 2007, the black unemployment rate was about 8 percent. The black unemployment rate fell to 7 percent in 2000, when the overall unemployment rate was below 4 percent.
The strengthening labor market also is improving the employment situation for teens. In particular, the teen employment rate was 31.4 percent in February compared to 25.9 percent a year ago. Black teen employment also is picking up, although employment rates are much lower for black teens than are rates for white teens. The black teen employment rate last month was 20.4 percent, up about 12 percent over its 2014 average. In contrast the white teen employment rate of 31.4 percent last month grew by only 5 percent over the same time period.
Nevertheless, the latest progress in youth employment obscures how far it has fallen in recent years. The teen employment rate peaked at 45.9 percent during the economic boom in 2000, but then it plummeted and remained roughly in the 36-to-37 percent range during the last business cycle expansion ending in December 2007. After no substantial improvements, the Great Recession of 2007-2009 effectively decimated teen employment, bringing the share of working teens to a low of 25.1 percent by the middle of 2010. Teen employment has never been so low in the post-World War II period as it has been since the Great Recession.
For teens and the overall workforce alike, the Great Recession continues to exact a heavy price despite recent improvements in the labor market. Sub-par employment rates help to ensure that most wage gains will be limited and will not meaningfully reverse harmful trends in wage stagnation and income inequality. The anticipated boost in demand for employment generated by the Affordable Care Act is one factor policymakers should pay attention to.
Things to Read on the Morning of March 6, 2015
Must- and Shall-Reads:
- : Departmental Seminar: Machine-learning in Economics
- : 2009 FOMC transcripts
- : “People say that having cameras in the courtroom would undermine the solemn seriousity of Supreme Court oral arguments…. Antonin Scalia might start ranting like a third-tier winger talk radio host! Stephen Breyer might start asking lengthy… hypotheticals that… don’t… go… anyplace! Michael Carvin might come off like a sexist bully!… The justices already play to an audience; there’s no neutral form of oral argument that televised proceedings would undermine.”
- (2009): Economist’s View: Are Macroeconomic Models Useful?
- : Federal Reserve Communication with Congress
-
: Medicare: A Seasoned Adult Conceived and Born in Sin: “MEDICARE AND MEDICAID! We all know you had breech births and your life has been tough. But you made it to your 50th birthday in spite of all your handicaps, that that is an achievement! In the meantime, you have kept us in the club of civilized nations. Prior to passage of Medicare and Medicaid, close to 40% of America’s elderly were too poor to afford the then available, modern health care, as were millions of non-elderly Americans. Leading members of the WWII generation who had emerged from the Great Depression and WWII with a strong egalitarian streak sought to respond to this problem. But the providers of health care… permitted the U.S. Congress to express this egalitarian sentiment in legislation only on the condition that it surrender to them the key to the U.S. Treasury…. It was unseemly for powerful interest groups to demand from Congress the key to the nation’s Treasury. Of course, it was also clear that the promises made to these interest groups sooner or later would have to be broken–and broken it was, in the 1980s and early 1990s.It seems to come as surprise to many that in spite of these earlier, built-in handicaps imposed on Medicare, over the long run Medicare actually has been able to constrain the growth of Medicare spending per beneficiary better than… the private sector…” -
: Economist’s View: Ten Years: “Today is the ten-year anniversary for this blog. Ten years! It hardly seems like that long. When I started, I didn’t expect much. So far as I can recall, I haven’t missed a single day in all that time. Sometimes it’s just a simple post with links, etc., but there have been new posts every single day for 10 years. My life has changed a lot in the last year and a half, and I can’t promise that I won’t miss a day now and then–there will be times soon, I think, when the record may end. Ten years straight seems like enough in any case. But for now, it continues… Thanks to all who have stopped by over the years!” -
: NIMBYism Is Holding Back Silicon Valley and the American Economy: “Most city leaders would be overjoyed to be selected as the site of a new headquarters for one of the world’s richest companies…. The Mountain View City Council has been unenthusiastic about Google’s plans to build a new headquarters… worried about the traffic, and about further development changing the character of their city… that Google employees could become a majority of the city’s voter base…. Other technology companies in the region have also faced resistance from not-in-my-backyard (NIMBY) advocates. The result: not only is the Valley failing to deal effectively with growing congestion and soaring housing costs, these myopic local policies could end up hampering the country’s most important driver of economic growth. So what looks like a local issue has broader implications…” -
: Deferring to the IRS: “Given the Chief Justice’s near-silence at oral argument in King v. Burwell, much will be made of Justice Kennedy’s sensitivity to the argument that accepting the plaintiffs’ interpretation of the statute would raise serious federalism concerns. That’s completely appropriate. But I want to call attention to a different question that Kennedy asked… whether Chevron should apply…. ‘Well, if [the statute is] ambiguous, then we think about Chevron. But it seems to me a drastic step for us to say that the Department of Internal Revenue and its director can make this call one way or the other when there are, what, hundreds of millions, billions of dollars of subsidies involved here?… And it–it seems to me our cases say that if the Internal Revenue Service is going to allow deductions using these, that it has to be very, very clear.’… There’s an answer to Kennedy’s question. I drafted an amicus brief…. ‘It is true–but irrelevant–that “when an agency claims to discover in a long-extant statute an unheralded power to regulate ‘a significant portion of the American economy’, this Court typically greets its announcement with a measure of skepticism.”… [Yet, f]ar from unexpectedly arrogating to itself regulatory powers on the basis of statutes enacted some decades earlier, Treasury has issued a predictable… rule…. It is unclear how Treasury could have implemented the tax-credit provision at all without first resolving whether tax credits were available in states that declined to establish their own exchanges.’ Chevron deference is all the more appropriate when agencies confront big, difficult questions that arise in the course of administration. ‘It is then that the agency’s expertise and political accountability are most essential—and where the structure of the federal government most forcefully counsels judicial restraint.’ The plaintiffs are also wrong to suggest that Chevron has no application where the statute in question involves tax credits… Mayo Foundation… v. United States…”
Should Be Aware of:
- : “Carvin argued in 2012 that the tax credits are essential…. Scalia, Kennedy, Clarence Thomas and Samuel Alito embraced Carvin…. Kennedy, to his credit, appears to be willing to accept the implications of the opinion he signed in 2012…. Scalia and Alito, by contrast… said one thing in 2012 when it was useful to opponents of the Affordable Care Act, but they are now willing to claim… [otherwise]. Carvin… is an advocate…. Scalia and Alito do not have the same excuse.”
- : Elusive El Niño arrives
-
: The Dilemmas of King v. Burwell: “I’m not convinced by the plaintiffs’ argument that the people responsible for drafting for Obamacare consciously intended to limit subsidies in order to induce states to set up their own exchanges…. [Since] we’re talking about the intent of the drafters as a collaborative group, my sense is that they’re telling the truth about having no such plan in mind, and thus that the text as we have it is the result of accident and oversight and blundering…. Hopefully the potentially-awful politics of letting the problem fester would suffice to motivate Republicans to get serious about health policy, or at least to act to keep the subsidies available while they try harder to get serious. I’m sure, though, that the Congress is filled with lawmakers who would rather not put that possibility to the test…. The administration really is dealing with an extraordinary level of congressional dysfunction…. Unless [Roberts] or Kennedy comes up with a clever constitutional move, the court would be… enabling congressional abdication and dysfunction…. That in turn is why… I find myself hoping that the court rules for the plaintiffs..” <–
I can only classify this as yet another example of low-functioning sociopathology: Douthat’s position is: “Congressional Republicans misbehave, so let’s punish the red states’ working poor and lower middle class!”
Morning Must-Read: Uwe Reinhardt: Medicare: A Seasoned Adult Conceived and Born in Sin
…But you made it to your 50th birthday in spite of all your handicaps, that that is an achievement! In the meantime, you have kept us in the club of civilized nations. Prior to passage of Medicare and Medicaid, close to 40% of America’s elderly were too poor to afford the then available, modern health care, as were millions of non-elderly Americans. Leading members of the WWII generation who had emerged from the Great Depression and WWII with a strong egalitarian streak sought to respond to this problem. But the providers of health care… permitted the U.S. Congress to express this egalitarian sentiment in legislation only on the condition that it surrender to them the key to the U.S. Treasury…. It was unseemly for powerful interest groups to demand from Congress the key to the nation’s Treasury. Of course, it was also clear that the promises made to these interest groups sooner or later would have to be broken–and broken it was, in the 1980s and early 1990s.It seems to come as surprise to many that in spite of these earlier, built-in handicaps imposed on Medicare, over the long run Medicare actually has been able to constrain the growth of Medicare spending per beneficiary better than… the private sector…
Afternoon Must-Read: Mark Thoma: Ten Years!
…Ten years! It hardly seems like that long. When I started, I didn’t expect much. So far as I can recall, I haven’t missed a single day in all that time. Sometimes it’s just a simple post with links, etc., but there have been new posts every single day for 10 years. My life has changed a lot in the last year and a half, and I can’t promise that I won’t miss a day now and then–there will be times soon, I think, when the record may end. Ten years straight seems like enough in any case. But for now, it continues… Thanks to all who have stopped by over the years!
Afternoon Must-Read: Timothy B. Lee: NIMBYism Is Holding Back Silicon Valley and the American Economy
…The Mountain View City Council has been unenthusiastic about Google’s plans to build a new headquarters… worried about the traffic, and about further development changing the character of their city… that Google employees could become a majority of the city’s voter base…. Other technology companies in the region have also faced resistance from not-in-my-backyard (NIMBY) advocates. The result: not only is the Valley failing to deal effectively with growing congestion and soaring housing costs, these myopic local policies could end up hampering the country’s most important driver of economic growth. So what looks like a local issue has broader implications…