Archive

  • The Housing Crash Recession is Coming

    Had this website been working, I would have been saying a lot about the economic news on Friday. The Commerce Department reported that non-residential construction fell by 0.7 percent in October following a downwardly revised fall of 0.6 percent in September. This should put to an end silly claims that growth in the non-residential sector would offset plumetting residential construction. The residential sector is twice as large as the non-residential sector, which by itself made such an offset unlikely. Furthermore, there was no basis for any sustained boom in the non-residential sector. There is still plenty of vacant office space, retail stores are cutting back, the manufacturing sector is stagnant or declining -- what would support a boom? Friday's data also included a release from the Institute of Supply Management that showed the manufacturing sector declining in November and weaker than expectd car sales. In addition, on Thursday we had a sharp jump in weekly unemployment claims...
  • The Chinese Central Bank is Not Run by Morons

    Would the Chinese central bank be concerned about the fall in the dollar against the euro and other free floating currencies? Absolutely, the bank is targetting the price of its currency in order to sustain demand Chinese exports. If the dollar falls against other currencies, this means that the yuan is falling against other currencies. Other things equal, this increases demand for China's exports from other countries, which could mean that they would opt to raise the value of the yuan against the dollar to offset this increase. (The Chinese government has been worried about its economy growing too fast.) Is the Chinese bank worried that this reduces the value of its dollar holdings as the NYT claims ? Not unless they are morons, which is not plausible. Virtually every economist in the world believes that the dollar will be falling at some point in the future. The logic is simple. The trade deficit is unsustainable. The only way (other than a prolonged and severe recession) to bring...
  • More Plans to Default on the Social Security Trust Fund

    BTP is back after being silenced by evil doers inside the Internet. The involuntary break gave me the opportunity to calm down after seeing an NYT personal finance column that told people to assume that they will collect little or none of their Social Security benefits (" Plan to Retire But Leave Social Security Out of the Equation "). The columnist bought the scare stories hook line and sinker. Just to remind everyone, the porjections from the non-partisan Congressional Budget Office show that the program can pay all scheduled benefits through the year 2046, with no changes whatsoever. Even after this date, the program could continue to pay 80 percent of scheduled benefits indefinitely, again assuming that no changes are ever made. Of course, Congress would almost certainly vote to raise taxes enough to sustain benefits, as it did in the decades of the 60s, 70s, and 80s. I base this assessment on the fact that the elderly will be more than twice as large a share of the electorate in...
  • Why the Protectionism?

    The NYT had a very interesting piece about a new laptop computer, designed for the developing world, which is supposed to sell for $150 a piece, with the price projected to drop to $100 in a couple of years. (The computer uses a Linux operating system.) While this sounds like it could potentially be a great advance for people, and especially school children, in the developing world, the article reports that the innovator behind the project insists that people in rich countries should pay $450 for Dell computers. The reporter should have pressed this one a bit. According to the article, the manufactuer will be making a profit selling the computer at $100-$150. What's wrong with letting people in rich countries also benefit from this technology? It won't take away the benefits for the poor. A good reporter would ask this question. Fortunately, markets being what they are, the computers will find their way into rich countries regardless of the innovator's intentions, but it would seem to...
  • Chris Farrell: When it Comes to Social Security Most People Are Nobody

    Chris Farrell demonstrated the incredible contempt with which the elites view the American public in his comments on MarketPlace this morning. He assured us that "everyone" agrees on what a solution to the Social Security solvency problem looks like. At the top of his list was raising the retirement age. All the polls that I have seen show that large majorities of the public (more than 60 percent) strongly oppose raising the retirement age beyond 67 (the age reached in 2022 in current law). This leaves one wondering who is the "everyone" in Mr. Farrell's world. I assume that he is referring to some group of policy types who he talks to. Of course, all the policy people I talk to know that the non-partisan Congressional Budget Office projects Social Security to be fully solvent until 2046 with no changes whatsoever. Even after that date it will always be able to pay much higher benefits than current retirees receive, even if no changes are ever made. Given the distant and relatively...
  • JAILBIRD ROCK? ...

    JAILBIRD ROCK? Newt Gingrich (who I still believe will be the Republican nominee in 2008, so get used to him) got some attention in New Hampshire this week for giving a speech at "First Amendment" dinner and declaring that the War on Terror called for "a totally different set of rules" on speech. But what he would take away with one hand, he gives back with another. In the interest of, he said, "expanding First Amendment rights," he called for the elimination of all limits on campaign contributions, in exchange for candidates' and parties' reporting all contributions on the Internet. This proposal is not new: Fred Wertheimer of Democracy 21 informs me that when it was introduced in Congress a few years ago, it was known as " DeLay-Doolittle-Ney ." Now that the first of those is under indictment, the third has copped a plea, and the middle one is under serious investigation, one has to wonder: What should you call a piece of legislation when all of its cosponsors are in jail? (By the...
  • BUT DID ANYONE...

    BUT DID ANYONE TELL HIS POLITICAL ADVISORS? I don't know how this process works, but Mitt Romney has named his two primary economic advisors for the 2008 campaign, and, to his credit, they're proponents of, quite arguably, the most politically radioactive ideas in economics. Greg Mankiw 's current obsession is a significant gasoline tax, a policy he's so committed to he's created a Facebook group to promote it. Meanwhile, Glenn Hubbard provided crucial backup support when Mankiw admitted that outsourcing was good for the economy -- a position that doesn't play so well in The Rust Belt. In a weird way, both these moves speak well of Romney. Mankiw's "Pigou tax" obsession is arguable policy, but it's an undoubtedly serious -- and even unpopular -- attempt to deal with a profound threat. And taking a fatalistic view of outsourcing, while again up for debate (which I'll leave to Dean Baker ), is at least ideologically honest. Both these guys are serious about policy -- more so, in fact,...
  • FASCISTS OR HYSTERICAL PUNDITS?

    FASCISTS OR HYSTERICAL PUNDITS? : Diane McWhorter has the most bizarre interpretation of this year�s election results to date, in Slate *. It appears to argue that the midterm elections confirm not that Americans are more populist, or even more conservative, but that they are more fascist. Based on a 66 year old musing from Eleanor Roosevelt , McWhorter asserts--without a shred of empirical evidence--that Americans have a long standing tolerance for any political movement that can instill confidence in the public that they will competently carry out their agenda whatever it may be. At the time, Roosevelt fretted that Nazism would appeal to Americans for that reason. Therefore, she leaps to conclude that Americans only voted Democratic on November 7, because they rejected President Bush� s incompetence, not his policies. While I�m not one to gainsay the importance of the government�s failed response to Hurricane Katrina and violence in Iraq as decisive factors, I think her assertion...
  • NO SHAME IN...

    NO SHAME IN HIS GAME. I don't know how to find the audio of it, but David Frum gave a really rocking commentary on NPR today. It argued -- without shame or self consciousness -- that just as Republicans entered office and passed massvie subsidies for the oil industry, Democrats are about to pass massive subsidies for some of their big supporters. And which sinister sector will the Democrats be lavishing funds on? Public universities. The degree to which the GOP message machine has fallen apart ("Democrats: They'll expand your Pell Grants!") is really quite remarkable. Update : Here it is. --Ezra Klein
  • FRIST IN FLIGHT....

    FRIST IN FLIGHT. All of us in punditry shed a tear today upon news of Bill Frist 's withdrawal from the 2008 presidential contest. His absence will deprive us of a seemingly limitless number of gaffes, craven flip-flops, and opportunistics overreaches, all of which make for excellent copy. Given the sad news, it's worth going back to our November issue and reading Brian Beutler' s send-off to Frist. Beutler seems to be operating under the belief that Frist was a bad majority leader. Speaking as a liberal, I believe he's one of the greatest leaders Republicans have ever had, and I hope they keep the mold intact. --Ezra Klein

Pages