New Deal Economics: George Will Trumps Amity Shlaes for Stupidity

Paul Krugman has busy keeping up with the nonsense from Amity Shlaes and George Will so we should forgive him for not covering every point.

I was going to let the following Schlaes line go even if this graph shows that total government spending and revenues did not significantly rise as a share of GDP during FDR’s first two terms:

New Dealers raised taxes again and again to fund spending.

But then Will had to compound the nonsense with:

But people whose recipe for recovery today is another New Deal should remember that America's biggest industrial collapse occurred in 1937, eight years after the 1929 stock market crash and nearly five years into the New Deal. In 1939, after a decade of frantic federal spending -- President Herbert Hoover increased it more than 50 percent between 1929 and the inauguration of Franklin Roosevelt -- unemployment was 17.2 percent.

One graph in this post does show an increase in Federal spending as a share of GDP during Hoover’s Administration - but for the 1929 to 1937 period, the increase in Federal revenues offset the increase in Federal spending. But could someone tell Mr. Will that Hoover was not President during the New Deal era?

Paying Interest on Bank Reserves

Since Peter Dorman has been questioning the Fed’s decision to pay interest on bank reserves, I thought it would be interesting to note how Real Time Economics posed the case for this decision:

Banks are required by law to hold a certain fraction of their deposits in reserve accounts at the Fed, but receive no interest on these deposits. Having the authority to pay interest would solve two technical headaches for the Fed. If they earned interest from the Fed, banks would have no incentive to lend out excess reserves for less. That would make the Fed’s benchmark federal-funds rate, which banks charge on overnight loans to each other, less likely to plunge below the Fed’s official target — now 2% — on days when the banking system was awash in cash. In addition, the Fed could theoretically combat the credit crunch by buying securities or extending loans without limit without causing the federal-funds rate to fall to zero, something that could fuel inflation or distort markets.

In other words, the concerns were that banks would hold too few reserves and that we would end up with higher inflation. But today’s concerns seem to be that banks are holding onto too many reserves and that we may be in for a deflationary spiral and inadequate aggregate demand.

This post also noted that Congress originally intended for interest to be paid on reserves starting in 2011 out of concern that the government might lose income to private banks. While pumping a few extra millions of dollars into the private sector right now might be good Keynesian economics, perhaps delaying this new policy until 2011 would have been better given the collapse of the money multiplier.

Conservatives – Relax: Government Ownership of Banks Will Not Be Permanent

Phillip Stevens seems worried that we’re turning into socialists:

We are watching a bonfire of the old orthodoxies as well as of the vanities. This week Barack Obama promised to spend hundreds of billions of taxpayers’ dollars to prop up the sinking US economy. Gordon Brown’s British government announced it would soak the rich to pay for an economic rescue package … "Something big is happening. What started out as a series of pragmatic ad hoc responses by governments and central banks is moving the boundary between state and market. Politicians are now overlaying expediency with ideology. Government is no longer a term of abuse. Things could move still faster in the months ahead. With their myriad rescue schemes and loan guarantees, the US and British governments have nationalised their respective banking systems in all but name. The banks pretend they are still answerable to their shareholders, but it is a charade. They survive only with the explicit financial guarantee of the state. Still, the markets remain frozen, starving business of the oxygen of credit. Unless things change soon, the politicians will have little choice but to take direct control, and quite possibly, ownership, of the banks. Nationalisation could be the first act of an Obama presidency.

Please! The free market is not working that well right now so government has to step in lest we face a major recession. Paul Krugman calmly explains what we should be doing:

What the world needs right now is a rescue operation. The global credit system is in a state of paralysis, and a global slump is building momentum as I write this. Reform of the weaknesses that made this crisis possible is essential, but it can wait a little while. First, we need to deal with the clear and present danger. To do this, policymakers around the world need to do two things: get credit flowing again and prop up spending ... The obvious solution is to put in more capital. In fact, that's a standard response in financial crises. In 1933 the Roosevelt administration used the Reconstruction Finance Corporation to recapitalize banks by buying preferred stock—stock that had priority over common stock in terms of its claims on profits. When Sweden experienced a financial crisis in the early 1990s, the government stepped in and provided the banks with additional capital equal to 4 percent of the country's GDP—the equivalent of about $600 billion for the United States today—in return for a partial ownership. When Japan moved to rescue its banks in 1998, it purchased more than $500 billion in preferred stock, the equivalent relative to GDP of around a $2 trillion capital injection in the United States. In each case, the provision of capital helped restore the ability of banks to lend, and unfroze the credit markets … My guess is that the recapitalization will eventually have to get bigger and broader, and that there will eventually have to be more assertion of government control—in effect, it will come closer to a full temporary nationalization of a significant part of the financial system. Just to be clear, this isn't a long-term goal, a matter of seizing the economy's commanding heights: finance should be reprivatized as soon as it's safe to do so, just as Sweden put banking back in the private sector after its big bailout in the early Nineties. But for now the important thing is to loosen up credit by any means at hand, without getting tied up in ideological knots. Nothing could be worse than failing to do what's necessary out of fear that acting to save the financial system is somehow "socialist."

Exactly. Paul also turns his attention to the need to increase government spending:

The next plan should focus on sustaining and expanding government spending—sustaining it by providing aid to state and local governments, expanding it with spending on roads, bridges, and other forms of infrastructure.

We should also keep in mind that this boost in spending will not be a permanent increase in the size of the government. The President-elect has already told us he intends to find ways of scaling back portions of Federal spending over the longer-term. Conservative critics would do well to stop and think about the difference between the short-term economic crisis versus long-run economics before writing silly things like this op-ed from Mr. Stevens.

Collapse of the Money Multiplier

Paul Krugman writes:

A central theme of Keynes’s General Theory was the impotence of monetary policy in depression-type conditions. But Milton Friedman and Anna Schwartz, in their magisterial monetary history of the United States, claimed that the Fed could have prevented the Great Depression — a claim that in later, popular writings, including those of Friedman himself, was transmuted into the claim that the Fed caused the Depression. Now, what the Fed really controlled was the monetary base — currency plus bank reserves. As the figure shows, the base actually rose during the great slump, which is why it’s hard to make the case that the Fed caused the Depression. But arguably the Depression could have been prevented if the Fed had done more — if it had expanded the monetary base faster and done more to rescue banks in trouble. So here we are, facing a new crisis reminiscent of the 1930s. And this time the Fed has been spectacularly aggressive about expanding the monetary base.

Paul graphs the monetary base, which increased by 72 percent from September 10 to November 19 of this year. We should also note that the money supply – whether measured by M1 or by MZM – has increased by less than 1 percent. Over the same period, this has been a very substantial increase in bank reserves. Much of what the Fed has been doing has been to accommodate this increase in bank reserves so as to avoid a fall in the money supply.

A Better Stimulus Plan

From a quarter millennium ago:

"that they deceived every man into his own ruin; and ruined the nation, to enrich the directors and themselves: They sold their own stock, and that of the directors, under false and fictitious names, contrary to the obligation of their bond to the City, which obliges them to declare the name of the seller to the buyer, as well as the name of the buyer to the seller; for they knew that no man would have been willing to buy, had he known that the brokers and directors were in haste to sell. Thus they used false dice, and blinded men’s eyes, to pick their pockets. “And surely, Mr. Ketch,” says the counsellor, “if he who picks a man’s pocket is to be hanged, the rogues that pick the pockets of the whole country, ought to be hanged, drawn, and quartered.”

Matter and Antimatter: How to Create a Crisis: A Thanksgiving Rant

Skilled physicists do not know how to take nothing and turn it into matter and antimatter, but finance behaves as if it had the capacity to do something similar. Imagine a simple market economy about to create a bubble. I want to tell the story of this bubble, only to put the current, crazy stimulus package into perspective.

Somebody says to me they have a piece of paper worth $1 million. I can buy for half the price. I borrow the money to cover most of the cost. People are willing to lend me the money confident in the belief that my paper will increase in value. Other people are engaging in the same transaction, spreading confidence that these papers are now increasing in value, say to $600,000.

The seller of the paper now has a half-million dollars, having given up nothing but blank piece of paper. I have a capital gain of hundred thousand dollars. My lenders have a credit with a half-million dollars. We are all better off, even though nothing has been produced.

Feeling secure in the increasing value of our paper, I along with the other "investors" now start consuming more, spreading prosperity for the economy. Virtually everybody is enjoying the benefit of the bubble. Within a short period of time, people throughout the economy making decisions based on the increasing appearance of health and the economy.

At some point, people realize that this paper is nothing more than a blank sheet of writing paper. The bubble may have stimulated some investment that is capable of producing real economic benefits, but mostly it has induced people to consume and commit themselves to pay back debts.



Remember, this prosperity was built out of nothing. In the end, matter and antimatter collided. The lenders have lost their money. The speculators and consumers are in debt. Most lack the wherewithal to repay their debts. But in the case of the current bubble, the economy does not have the productive capacity to put everything together. The loans came from abroad and so did many consumer goods.

At the same time, the government loans are ultimately dependent on another set of loans, also largely from abroad. How will these loans ever be repaid? Will new loans keep coming as the bubble engulfs the rest of the world?

Should the government come in and give me a half-million dollars so that I can repay my loan? Should I be rewarded for my stupidity and naïveté? Will that policy really make the economy healthy? Or will it policy just facilitate the creation of even greater bubbles?

Obviously, the most sensible decision would be to put the money into making a more healthy economy, one less susceptible to speculation -- something impossible under capitalism, but that is another question. Eventually, somebody will have to pay the piper. The policy today seems to be an effort to shield the very people who created the crisis, placing the burden on the most innocent.

The graphic picture of the stimulus package that I posted yesterday suggests a government response just as foolish as the speculations that set off the bubble in the first place.

Happy Thanksgiving.

EU Economic Orthodoxy Stumbles On

In the same survey of stimulus planning, the NY Times reported on the latest EU fiscal initiative, which calls for contributions of 1.2% GDP on the part of most member countries. This infusion, which is much too small relative to the impending output gap, will still bump up against the Maastricht criteria. What to do?

The monetary affairs commissioner, Joaquín Almunia, said that countries that breached the deficit ceiling of 3 percent of G.D.P. would face official reprimands, but would be given longer than usual to bring their budgets back into line because of the exceptional circumstances.

In other words: we know the criteria are absurd under the current conditions, but we will pretend that they still apply.

The EU has been built on a grand compromise, a broadly progressive stance in social and environmental policy and rigid orthodoxy in economic affairs. As in the academic version, the left got the sociology department and the right was given economics, finance and business. It was a bad deal, since misguided economics can do damage faster than the social workers can clean it up. So now Europe has a central bank with hardly any lender of last resort tools and fiscal guidelines that all but rule out serious countercyclical measures.

The current economic crisis should be put to positive political use. You can’t have a “Social Europe” with double-digit unemployment. (You also can’t have a sustainable Europe without getting the economic part of sustainability in place.) There needs to be a shift within the economic regime, and not just in the balance between “economic” and “social” interests. As for fiscal guidelines, they need to be flexible enough to permit rational economic management, and they also have to be responsive to regional trade imbalances. In fact, to constrain fiscal deficits without managing trade aggregates is to put all the recycling burden on private debt, and we are still in the process of finding out where that leads.

China and the US: Stimulus vs Bailouts

In its latest roundup of crisis management from around the world, the NY Times discusses Chinese monetary policy initiatives. Cutting reserve requirements for banks seems counterintuitive to me, but perhaps there are aspects of banking in China that justify it. What really jumped out, though, is this:

To give banks an extra incentive to lend money instead of hoarding reserves, the central bank also lowered by 0.27 percentage points the interest rates that it pays banks for reserves deposited with it.

That does make sense, and it is exactly the opposite of policy in the US, where the Fed has raised the interest it pays on these reserves. But, of course, we need $400 billion in excess reserves to finance the bailout program, so that losses from bad investments can be transferred to the public. This is so much more important than getting new finance out into a frozen economy.

The Absurdity of the Stimulus Package

Here is a graphic from the Wall Street Journal regarding the size of the stimulus package.

I hope to comment on it more tomorrow.

2.5 Million Jobs IV

From: AFL-CIO American Federationist | November 1962, pp. 19-21.
ECONOMIC TRENDS & Outlook

CREATING JOBS THROUGH SHORTER HOURS

Employment Effects of Shorter Hours

If the workweek is shortened with no loss in pay, what effect will it have on unemployment? There is no firm answer nor can specific estimates be calculated reliably.

The answer depends in good part on how much the workweek is shortened, how and when it is done, how widely the reduction is applied—and on what other economic developments accompany it. Hours reduction will not take place in a vacuum; its effects necessarily are linked to whatever else is occurring before, during and after the reduction.

No one seriously considers it a magic solution to unemployment or the sole answer by itself. Its strongest advocates claim only that it is but one tool although a fundamental one.

There also are different views on whether its principal value is as a defensive or holding measure— one which prevents increased unemployment—or whether it is equally important as a stimulus, one which generates additional employment.

There is wide recognition, particularly at the individual plant level, that shortening of hours will help prevent layoff of more workers (“cutting hours means less cutting of men”). How effectively it does this depends largely on productivity changes and trends in demand.

The extent to which it will lead to hiring of additional workers is a more complex question. It depends on such factors as management attitudes and its judgment about future needs for labor, the level and trend in demand for the company’s products, the nature of its labor requirements and availability of appropriate types of workers in the area or elsewhere.

But under the most typical and likely circumstances, a company reducing its workweek by several hours ordinarily will have to immediately hire additional workers to provide those hours of work if it wants to maintain approximately the same output or service as before.

The longer-run effects then hinge on productivity movements and whether demand for its products increases sufficiently to enable savings from economies of increased production to finance continued payment to workers. In principle, the combination of the new hiring by this and other companies will build aggregate worker income and, in turn, demand for the products.

The pivotal question, of course, is to what extent, by serving to maintain and often to increase employment, shorter hours will be the dynamic new ingredient needed to bolster demand and increase it to the point where more and more companies have to expand employment further and thereby carry along an accelerating rate of economic and employment growth.

Although no reliable answers can be offered, some rough statistical estimates may be useful to show the potential magnitude and significance of hours reduction in relation to current unemployment levels.

Consider the most recent data available at the time of this calculation. Total employment of non-agricultural wage and salary workers in mid-1962 was 51.3 million (not counting the self-employed, domestic servants or unpaid family workers). Many of these workers (11.2 million) were on workweek schedules under 40 hours for various reasons. This left 40.1 million on workweeks of 40 hours or longer.

For every hour cut from the workweek of this fulltime wage and salary workforce, the number of new employees required to provide the same national total workhours is roughly one million. If 2.5 hours were cut from the workweek, the number of additional employees needed at a 37.5-hour week to maintain the same total workhours would be 2.7 million.

There obviously are many practical limitations in such calculations. It would not be feasible, for example, to reduce hours in all non-agricultural industries uniformly or at the same time.

There also are many factors affecting the actual number of new hires likely to take place immediately upon reduction of hours. The number of new hires would be reduced, for instance, to the extent that some companies made up lost hours by putting involuntary part-timers back on fulltime or by working present employees overtime. Another limitation on hiring is that reduced hours of present employees are not always directly replaceable by new employees. Much would depend on the extent to which work needed in the reduced hours coincided with the skills and geographical location of idle labor. Other significant factors also are involved, some making for even greater hiring. To the extent that new hiring occurs, for example, it would quickly increase demand and touch off additional production and hiring.

But even if the rough ratio of a 1-hour cut in the workweek to 1 million new jobs may be too high for practical purposes, it demonstrates the enormous potential of revision of the workweek as a force for enlarged employment.

If reduction took place for only half the fulltime non-farm workforce, for instance, the rough replacement ratio would be halved: One hour’s cut equals half a million new employed workers. A 5-hour cut to a 35-hour week for only half the workforce would release enough workhours for over 2.5 million jobs. [s-man: the punchline!]

What if similar rough calculations are made for manufacturing alone? There are roughly 14.3 million fulltime wage and salary workers on schedules of 40 hours a week or more (of 16.7 million total employment). The replacement ratio for a 1-hour cut in the workweek for these fulltime workers is 3 65,000 additional workers. For a 2.5-hour cut, it is 950,000 employees. For a 5-hour cut to a 35-hour week, it is over 2 million new employees.

In construction, comparable figures are more difficult to calculate because data on hours worked are often affected by weather and other factors. But very rough estimates indicate about 3 million construction industry workers are on workweeks of 40 hours or more. A 1-hour cut in their workweek would be equivalent to fulltime jobs for about 75,000 additional workers. A 5-hour reduction would be replaceable by over 400,000 new jobs.

In broad summary, then, reduction in hours without curtailment of weekly pay is looked to by the labor movement as a vital new tool to swing into action against excessive and rising unemployment.

Since 1953, after Korea, unemployment has doubled, from less than 3 percent then to nearly 6 percent today. For the decade ahead, with the labor force due to grow at a faster rate and advance in technology gaining momentum, unemployment is threatening to mount even more. If the economy does no better in creating new jobs in the 1960s than it did in the 1950s, the decade would close with an unemployment rate of nearly 10 percent—at least 7 to 8 million fully unemployed.

More from the NY Galbraith Conference

More from the Nov. 14 conference in New York organized by James Galbraith, as promised.

Bernard Schwarz called for the government to take over basic R&D for the Big Three automakers to come up with a truly green engine and to help reduce their expenses.

Bill Black supported bringing back the Glass-Steagall Act. I opposed this, but now seeing the collapse of Citibank am more open to the idea.

Pierre Calame called for the formation of regional monetary systems around the world.

Ping Chen called for a new relationship between the US and China in which the US would relax its restrictions on industries and firms that China can invest in, while China invests more directly in the building of US infrastructure and also in financially supporting its educational institutions.

George Papandreou, former foreign minister of Greece and president of the Socialist International, thanked James Galbraith for his father having saved the life of George's father, who was an economist and later prime minister, who was nearly executed by the junta. Papandreou called for a redistribution of wealth and power with green development to combat "barbarism on the planet."

(Happy Thanksgiving everybody)

So Shrink the Beast, Already!

by the Sandwichman

In the past, people trembled in fear of dragons, demons, gods, and monsters, sacrificing anything – virgins, money, newborn babies – to appease them. We know now that those fears were superstitious imaginings, but we have replaced them with a new behemoth: the economy. -- David Suzuki

David Suzuki is the Canadian counterpart to Carl Sagan -- a renowned scientist turned TV and radio celebrity. He's also an outspoken environmentalist with his own foundation and a weekly column published in newspapers and magazines across Canada. In last week's column, Suzuki highlighted a new book by Peter Victor, Managing Without Growth: Slower by Design, Not Disaster.

A key element of Professor Victor's proposed low-growth economic strategy is reducing work time. Although the discussion of reduced work time doesn't show up until the final chapter, it is hard to imagine a viable alternative to endless economic growth without it. As Suzuki wrote in his column, "This current economic crisis provides an opportunity to re-examine our priorities." (See also the New Scientist on The Folly of Growth).

This current economic crisis... and the political transition in the US. Back in August the New York Times Magazine published an article by David Leonhardt on "Obamanomics." The dramatic climax appeared toward the end of the article when a press aide walked back to Leonhardt's seat on the Obama campaign plane to tell him that Obama had more to say.

"Two things," he said, as we were standing outside the first-class bathroom. "One, just because I think it really captures where I was going with the whole issue of balancing market sensibilities with moral sentiment. One of my favorite quotes is — you know that famous Robert F. Kennedy quote about the measure of our G.D.P.?"

I didn’t, I said.

"Well, I’ll send it to you, because it’s one of the most beautiful of his speeches," Obama said.

In it, Kennedy argues that a country’s health can’t be measured simply by its economic output. That output, he said, "counts special locks for our doors and the jails for those who break them” but not "the health of our children, the quality of their education or the joy of their play."

The second point Obama wanted to make was about sustainability. The current concerns about the state of the planet, he said, required something of a paradigm shift for economics. If we don’t make serious changes soon, probably in the next 10 or 15 years, we may find that it’s too late.

"Something of a paradigm shift for economics" would require a move away from economic growth for growth's sake. Otherwise, it wouldn't be much of a paradigm shift. Managing without growth necessitates the reduction of working time. Otherwise, unemployment and poverty will destroy social stability.

The Sandwichman would like to call attention again to his "American Vision", submitted to the change.gov transistion website, of a Shorter Work Time Jubilee.

Five versions of ‘truth’ for the Three Mile Island nuclear disaster.

I had a phone call from a member of the Australian Citizens' Electoral Council this morning. The CEC is the Australian arm of Lyndon La Rouche's group and, as such, this branch is also heavily involved in the promotion of the expansion of nuclear power across the globe. When I questioned the wisdom of promoting such a dangerous and unsustainable form of energy I was assured by the caller that the science surrounding nuclear power is sound. I decided to have yet another look at some of the studies done. To simplify, I focussed on those related to Three Mile Island and specifically on the way the exposure levels of radiation were determined. What I found was a divergence of 'objective' observations clearly at odds with each other. (References 3, 4 and 5 all refer to the one report, the 1990 Hatch-Susser study.]

Harold Denton, Director of the Office of Nuclear Reactor Regulation ““They are getting 63 curies per second…[in] the order of three times what they were yesterday, which would put us in the 1200 millirems per hour." [1]

Joseph M Henri Chairman of the Office of Nuclear Reactor Regulation: “To a distance of about five miles. I have got a reading. During one of these burst, releases up over the plant several hours ago, up over the plant about 1200 millirems per hour which seems to calculate out, by the time the plume comes to the ground where people would get it, would be about 120 millirems per hour. Now, that is still below the EPA evacuation trigger levels; on the other hand, it certainly is a pretty husky dose rate to be having off-site [2]

The American Nuclear Society: “in every instance, the level of exposure was deemed to be very low” – an average of approximately 10 millirems and projected maximum dose of 100 millirems. [3]

Jan Beyea (nuclear physicist involved in the Hatch-Susser study): He estimates the maximum was 200 millirems. He said the figure could be up to four times that much, but said that was "very, very unlikely." Average doses in the area northwest of the plant - the direction in which the radiation plume traveled - were about 28 millirems, he said….. Some of the gauges simply were not able to measure amounts as high as what was released, said Jan Beyea…"It was insane," Beyea said of the inadequate monitoring. "It was sort of a sign of the optimism that nothing would ever go bad." [4]

Text from the scientific abstract of the Hatch-Susser study as published in the American Journal of Epidemiology: “the model of accident emissions was validated by readings from off-site dosimeters.” [5]



It is alarming to witness the parallels occuring in the fields of enviromental monitoring with that of the pesticide industry. Industry and government technicians seek out the areas where toxins are most likely to be watered down and base their observations and conclusions on studies in those areas. The vulnerability of individuals to narrow swathes of intense bands of poisons is ignored completely.

At this juncture in time I believe that it is justifiable for one to conclude - on the basis of a long history of disasters and accidents - that nuclear technology has been truly tested 'in the field'. Like many other industrial sectors it has been found wanting and so have the associated regulatory and academic institutions. Governance has simply not kept pace with the dangerous technologies employed by the world's transnational corporations.

[1] Pittburgh Post-Gazette Monday, April 16, 1979. The newspaper published a special report from the Associated Press that included excerpts of tape recordings of the proceedings of the Nuclear Regulatory Commission including the transcripts of the taped voices of Harold Denton, Director and Joseph M Henri Chairman of the Office of Nuclear Reactor Regulation. Their voices were taped on 30th March 1979 as they responded to the enormous release of radioactive gases at the Three Mile Island nuclear power plant in the US. As published in ‘SECRET FALLOUT - LOW-LEVEL RADIATION FROM HIROSHIMA TO THREE-MILE ISLAND – Chapter 18 ‘Too Little Too Late’ by Ernest Sternglass.
http://www.ratical.org/radiation/SecretFallout/SFchp18.html

[2] Pittburgh Post-Gazette Monday, April 16, 1979. The newspaper published a special report from the Associated Press that included excerpts of tape recordings of the proceedings of the Nuclear Regulatory Commission including the transcripts of the taped voices of Harold Denton, Director and Joseph M Henri Chairman of the Office of Nuclear Reactor Regulation. Their voices were taped on 30th March 1979 as they responded to the enormous release of radioactive gases at the Three Mile Island nuclear power plant in the US. As published in ‘SECRET FALLOUT - LOW-LEVEL RADIATION FROM HIROSHIMA TO THREE-MILE ISLAND – Chapter 18 ‘Too Little Too Late’ by Ernest Sternglass.
http://www.ratical.org/radiation/SecretFallout/SFchp18.html

[3] Health Studies Find No Cancer Link to TMI. From the American Nuclear Socity website. Accessed on 26th November 2008.
http://www.ans.org/pi/resources/sptopics/tmi/healthstudies.html

[4] Gaps in research have angered some who were there in 1979
TOM AVRIL / Philadelphia Inquirer 26mar04
http://www.mindfully.org/Nucs/2004/Three-Mile-Island26mar04.htm

[5] American Journal of Epidemiology Vol. 132, No. 3: 397-412
Copyright © 1990 by The Johns Hopkins University School of Hygiene and Public Health
research-article
CANCER NEAR THE THREE MILE ISLAND NUCLEAR PLANT: RADIATION EMISSIONS
MAUREEN C. HATCH1,, JAN BEYEA2, JERI W. NIEVES1 and MERVYN SUSSER1,3
http://aje.oxfordjournals.org/cgi/content/abstract/132/3/397

1Division of Epidemiology, Columbia University School of Public Health New York, NY
2National Audubon Society New York, NY
3Gertrude H. Sergievsky Center, Columbia University New York, NY

2.5 Million Jobs III

From: AFL-CIO American Federationist | November 1962, pp. 19-21.
ECONOMIC TRENDS & Outlook

CREATING JOBS THROUGH SHORTER HOURS

The Government’s Role

The government could encourage bargaining to reduce hours, set an example by adjusting hours on government work and/or enact new workweek legislation. A positive policy would require specific announcement that the Administration would not discourage reductions in hours and would welcome this, at least in particular industries, as one of the variety of measures individual industries might use to bolster employment security.

Setting an example, in its role as an employer as it has done in the past. would require establishment of new reduced workweeks for employees to serve as an experiment and broad guide for private industry. It is worth noting that about a third of U.S. municipal governments already have fulltime workweek schedules shorter than 40 hours for their administrative and clerical employees.

New workweek legislation could of course take many forms. The principal approaches suggested have called for a reduction in the 40-hour standard established by the Fair Labor Standards Act, either immediately or in several steps spread over a period of time and either uniformly for all covered industries or through a special industry committee procedure functioning on an industry-by-industry basis. Each of these alternatives has some past legislative precedent.

Another major suggested legislative approach is a flexible workweek to be adjusted according to changes in the unemployment rate. A federal fund financed by a tax on employers could be established to help maintain weekly pay and national consumer purchasing power upon such reduction in hours. If the payments from the fund were scaled according to whether the employer hired more workers when he reduced hours, there would be an additional incentive for increased employment.

The Return of Rubinomics

As the President-elect announced the appointment of Peter Orszag as head of OMB, he said something that might cheer up those deficit hawks:

In these challenging times, when we are facing both rising deficits and a sinking economy, budget reform is not an option. It is an imperative," Obama said in the statement. "We cannot sustain a system that bleeds billions of taxpayer dollars on programs that have outlived their usefulness, or exist solely because of the power of a politician, lobbyist, or interest group," he said. Obama said he would ask his economic team to "think anew and act anew" to meet new challenges. "We will go through our federal budget -- page by page, line by line -- eliminating those programs we don't need, and insisting that those we do operate in a sensible cost-effective way," Obama said.

Rubinomics – at least as I understood it – meant that we accelerate Federal spending in the midst of a recession but tell Wall Street over the long-term, we are serious about long-term fiscal restraint. We might also give tax cuts to liquidity constrained people such as the working poor but raise taxes on those who are not liquidity constrained – such as Bill Gates and Warren Buffet. In other words, short-term fiscal restraint to actually REDUCE national savings with some assurance to Wall Street that once this recession is over, we restore a commitment to increasing savings and investment.

While John Taylor seems confused about this one, Paul Krugman gets it:

Thus, John Taylor — a very good economist, when he wants to be — insists that we must respond to the economy’s temporary weakness with a permanent tax cut. Let us reason together. Does it make sense to let one recession dictate tax policy in perpetuity? What happens if there’s a boom; can we increase taxes (no, because then the cut wouldn’t have been permanent.) What if there’s another recession? Do we permanently cut taxes again? Is there a tax-cut ratchet (or maybe racket)? Think this through, and it makes no sense at all. And Taylor’s argument against the obvious answer — government spending as stimulus — is pure gobbledygook

In just a few weeks, we will finally have a President who also gets it even if that lame duck never did.