David Dreier Takes Credit for Weak Labor Market

Brian Beutler has some fun with the following absurd claim from the GOP:

Top Republicans are claiming credit for a variety of metrics showing that the economy is improving. Expect this meme to snowball, particularly as Democrats have done little, so far, to stop it. On Fox News today, House Rules Committee Chair David Dreier (R-CA) contended the GOP deserves all the credit for recent economic growth. "[W]e can get our economy growing. And we've gotten some positive numbers. I think it's in large part because we won our majority and we're pursuing pro-growth policies," he said. In December, the Department of Labor announced that unemployment had fallen from 9.7 percent to 9.4 percent. Its data suggests private sector job growth has been increasing since the fall. The GOP has controlled the House for just over two weeks, but has yet to enact any major economic legislation -- and economists agree that even enacted fiscal policy will not be immediately reflected in economic growth.

As far as real GDP, we have not seen the report for the last quarter of 2010 but since the last quarter of 2009 when annualized growth was 5.0%, real GDP growth for the next 3 quarters was anemic especially in terms of the size of the GDP gap. Over the last 3 months of 2010 – employment per the payroll survey has risen by only 384,000 or just 128,000 new jobs per month. During the same period, the employment-population ratio has declined from 58.5% to 58.3%.

Simply put – the labor market has been very weak and not getting better. Brian is correct that we have yet to see any major economic legislation from the new Congress. But if David Dreier wants us to give his political party the credit for this mess – so be it!

The State Capitalist Mixed Economy of Singapore

The Heritage Foundation has just released its latest index of economic freedom around the world and has Singapore in a solid and rising second place behind Hong Kong. Fifth in real per capita income behind Qatar, Liechtenstein, Luxembourg, and Bermuda (CIA World Factbook data), Singapore is much praised by many as a "well-manicured" place with low corruption and transparent laws, although with considerable political autocracy based on the long-running rule in the country by Lee Kuan Yew and his son, the current prime minister (the father is Minister Mentor).

Despite this general perception of super laissez-faire-dom, Wikipedia labels it as I did in the title of this post. It is a curious mixture of socialism and state planning with innovative free market approaches. 60% of the GDP is produced by companies with at least partial state ownership. Nevertheless, one can start a new business in only three days, compared to a global average of 34 days. It is the first country to have congestion pricing (1992), and is now very green with limits on car ownership, given by the Certificates of Entitlement (COEs), or rights to buy a car, which in turn are auctioned off and currently selling for about 70,000 Singaporean dollars (1.3 of them to US $ roughly), or substantially more than most new cars cost. Public transport, infrastructure, and education are excellent and efficiently provided. Most housing is built by the government, with private citizens becoming owners under very strict regulations, including very active intervention in property markets to control speculative bubbles.

I just returned from a conference in this curious place, which has much to please for visitors, including diverse, high quality, and inexpensive food, as well as lively ethnic neighborhoods. However, I became aware of elements of the dark side of Singapore, which it must be said are not as bad in some other autocratic countries. Thus, political dissidents tend to get sued by the ruling family for defamation rather than thrown in prison or tortured. However, caning is widespread for many crimes and rising, doubling between 1993 and 2007. While some of the canable offenses are regular crimes, they also include illegally immigrating and engaging in illegal money lending, with Singapore receiving its lowest freedom ranking for "financial freedom" from Heritage at 60 (out of 100, Singapore's overall score is 87.2).

Unsurprisingly the darker side shows up in labor markets and income inequality. There are no reliable statistics on poverty. While I did see one beggar, they are reportedly picked up off the street and arrested. The latest Gini coefficient is 48, the same as Mexico's. Of 164 countries listed by CIA, only 27 have worse ones, 12 of those in Latin America, 11 in Africa, Bosnia and Herzegovina in Europe, and Hong Kong, Sri Lanka, and PNG worse in Asia.

In labor markets there is the largely unreported matter of indentured laborers from other countries (the unemployment rate is very low). I saw some in the backs of trucks, and I was told to avoid certain parts of Little India on Sunday because they congregate there and are reputedly engage in theft on their one day off (although some indentured domestic servants get no time off). A good source on them and their situation from 2006 can be found at http://newamericamedia.org/news/view_article.html?article_id=8a93766ff16fec2a9dfdfc2516f87482. If that does not work, just google, "indentured labor Singapore" and it is (or was) the top hit. Ironically, or perhaps unsurprisingly, Heritage praises Singapore's labor laws, ignoring this indentured labor situation while praising their lack of any restrictions on laying off workers, and giving them a 98.0 on "labor freedom" (just behind their 98.2 for "business freedom,").

So, Singapore is not what it seems in many media accounts, in many ways a progressive and innovative society that is growing rapidly economically, while also experiencing substantial inequality and repression in various forms. It is unsurprising that many commentators have seen the former communist/socialist and now Confucian Lee Kuan Yew's system as a model for the post-Mao Dengist reform movement in China.

The Second Amendment in Congress

In the wake of the Arizona shooting, Congress is discussing a number of ways to protect themselves from gun violence. The most interesting suggestion is to enclose the will House Gallery in Plexiglas.


http://www.rawstory.com/rs/2011/01/gop-congressman-plexiglas-bubble-congress/



At the same time, lawmakers have been proposing making guns as accessible as possible, even in bars and schools. Given this ideology, one should expect that members of would welcome this, many armed visitors as possible. Perhaps, to help the federal budget deficit, visitors could rent guns when they attend sessions of Congress.

Guns Not A Right Anywhere But US

The gun nuts can go to hell. They have managed recently to get the US Supreme Court to change the longstanding interpretation of the Second Amendment from its emphasis on providing for a militia in a period when there was no DOD, to an absolute right to own guns. If you listen to them, this right is up there with the First Amendment ones about speech, religion, press, and assembly. Wrong. While there are many nations on this planet who embarrass themselves by having some or all of those in their constitutions or laws while violating them severely (which the US does on occasion as well), there is no nation on the planet other than the US very recently that accepts the idea that there is some fundamental right to own guns. We are now seeing the fruits of this misguided belief.

Small Cuts in a Large Federal Spending Program?

According to this source, Federal government purchases were almost 8.1% of GDP during 2009. While the Republican Party tells us that they want to reduce the Federal deficit even as they cut taxes by reducing government spending, they typically rule out cuts in defense spending even that it was almost 5.5% of GDP during 2009.

Tony Capaccio reports that Defense Secretary Robert Gates is trying to get at least some control of defense spending over the long-term:

Gates, who plans to brief congressional leaders tomorrow, has received guidance from the White House that about $554 billion for defense, not including war spending, will be part of the budget that the administration will submit to Congress for the fiscal year that begins Oct. 1. That figure is $12 billion less than what the Pentagon planned, yet still allows for real growth over the fiscal 2011 budget, an analyst said. If implemented, the five-year cut would represent about a 2.67 percent reduction to what is a $2.99 trillion defense plan, not including war spending

This reporting ends with some appropriate cynicism:

Congress may add some of that money back in. An increase to $554 billion would represent growth of about 4.5 percent in nominal terms, or about 2.5 percent after adjusting for inflation, Daggett said.

Bet the bank that Republicans such as John McCain will lead the charge to adding back what little this Administration has decided to carve out of the original $3 trillion defense plan. We are not going to see significant reductions in overall Federal spending even if the new Speaker does push through his plans to have large cuts in small programs.

Okun’s Law and Current Unemployment

Here’s a short snippet from my unfolding macro text:

It is possible that this relationship has been changing over time. If you plotted only the years 1990-2009 (not shown), the corresponding trend line would be

change in unemployment rate = 2/3 (2.7 - GDP growth)

The only difference is that unemployment remains constant at a somewhat lower rate of economic growth; above or below this point the impact of growth on unemployment is the same. What is the significance of Okun’s Law today? At the time this is being written, the unemployment rate in the US is too high at 9.8%. Suppose we would like it to fall to 5%. If the more recent relationship continues to hold, it is telling us we need 7.2% of extra growth (4.8%, the desired reduction in unemployment, divided by 2/3, which means multiplied by 3/2) above the 2.7 level. We could accomplish this in a single year if we could get to 9.9% growth, but this is almost certainly out of reach. To get to 5% in three years would mean averaging 5.1% over that period. (Divide 7.2 by three and add to 2.7.) This is highly unlikely as well unless the government undertakes a much more aggressive adjustment program than we have yet seen. In fact, current growth hovers close to the break-even level itself, suggesting that high unemployment is likely to remain a fact of life for a long time.

Talk, Talk, Talk, but What Are You Doing About it?

From an interview with John Hall, ex-rocker, ex-Congressman:

Hall declined to comment on his future plans. Rumors have been floating around that he is up for a job in the Obama administration or with soon-to-be Governor Andrew Cuomo, possibly as head of the Department of Environmental Conversation.

Some misprints are pure genius.

YouTube video discussing the Invisible Handcuffs

I just posted a YouTube video discussing the Invisible Handcuffs, which comes out in two days on January 1.

http://www.youtube.com/watch?v=qV8o_oAnQdo

Former Bush Speechwriter "Advises" Obama To Cut Social Security Benefits

Indeed, on today's Washington Post editorial page, Michael Gerson advises Obama to do exactly this, even as he recognizes that there is little political support for it, particularly among Democrats. But repeating the long buzz in certain circles that it should be done because it is easier to do than dealing with rising medical care costs or raising taxes or cutting defense spending, he should do it, with the aid of supposedly willing Republicans, and even though the system is the least contributor to the deficit of any major part of the federal budget, although neither he nor anybody else notes that this does a big fat zero about the near term deficit. My my. Unfortunately, I fear that those around Obama may be getting to him, as there is this well-known group of Democrats tied to Wall Street that likes this sort of argument. Rumors keep surfacing that he will put some sort of variation of what came out of his Deficit Commission on this matter into his State of the Union speech next month.

Over a week ago on Angry Bear the estimable Bruce Webb argued that the 2% cut in payroll taxes was picked by insider Dems as part of an old plan to be offered to be put into private accounts, long the goal of the Wall Street gang. I fear he may be right on this, see http://www.angrybearblog.com/2010/12/2-non-solution-part-two.html. Bah, humbug!

Greece: A Political Economy

This remarkable analysis has appeared on Open Economy. If you have wondered how a country can get into such a deep, deep hole, take a look. Doxiadis discusses the rentier economy (a populist rentier economy), the breakdown of cooperation, the preference for a mix of income opportunities rather than specialization, and reason why unproductive small businesses dominate.

Just to give you a flavor, here is what he writes about populist rent-seeking:

[Rent] does not contribute to growth, it only shares in what is there. Therefore, it secured by militant claims, not by productive work. It breeds populism, whose fundamental strategy is to shift responsibility for the whole to the opposite pole, the enemy. In populist discourse citizens identify with the weakest groups, regardless of their actual position in society; so they feel entitled to demand more on grounds of fairness, or even on humanitarian grounds. They do not feel responsible about production of wealth, nor about setting priorities for redistribution to the truly weak. It is others who are responsible for the big picture. Populism differs radically in this from a socialist strategy which starts from the mode of production before the mode of distribution; as well as from a political program of solidarity towards the really poor and excluded.

Read the whole thing.

The Scrooge Who Forecloses On Homes Too Quickly

Today is Boxing Day, which in the UK is traditionally a day that those better off put things in boxes to give to the poor, particularly the homeless poor. In that regard it may be worth noting a story that appeared on the front page of the Christmas Eve Washington Post by David S. Hilzenrath, "Virginia puts homeowners on fast track to foreclosure." While many states allow those who are facing foreclosure on their homes due to falling behind on mortgage payments a "day in court" to contest it, with some adequate time to prepare for this, Virginia, along with an unnamed set of 28 other states, have "trustees" hired by lenders making the judgments. A VA banking official defends this as "hastening the day when banks can move delinquent loans off their books, it can dut their losses."

Now in many of these "nonjudicial" states there is some effort to make sure that those being foreclosed on have some time to respond to such an effort. However, in Virginia a notice of the foreclosure is sent 14 days in advance, which means the homeowner generally will not see it until even closer to the time the foreclosure is to happen. It is very difficult to overcome this with many barriers and restrictions put in place to challenge a questionable action, leading in one reported case to "a Catch 22: To obtain evidence that that might flesh out those suspicions, his lawyer needed to file a lawsuit and enter the court-supervised process known as discovery. To file the lawsuit, however, the lawyer needed evidence."

Scrooge, we knew you when, and apparently you have found a nice home in Virginia.

The Problem For Editors Of Plagiarism Accusations

On my way out as JEBO editor, I have written an essay to appear in a book of these by economics journal editors being edited by Michael Szenberg. Mine is entitled "From the Editors' Crypt: Accusations of Plagiarism True, Uncertain, and False." It can be accessed on my website at http://cob.jmu.edu/rosserjb, scroll all the way down. Aside from the various cases I discuss, a major theme is that false accusations can sometimes be more of a problem than true ones.

In the meantime, Merry Christmas to everyone, along with any other holidays of this season you are of a mind to celebrate, or have recently finished celebrating.

Market Liberalism and the Grip of Sovereignty in Euroland

I’ve just had a look at this bracing commentary, originally posted at VoxEU and mirrored on Naked Capitalism, on the sickness at the heart of the Eurozone. It clarifies for me an issue that I have been thinking about for some time. Consider:

The Maastricht Treaty reinforced a reliance on market forces to provide discipline and stability. The only collective mechanism for dealing with crises was the Stability and Growth Pact that accompanied the treaty. This was essentially an agreement on sovereign debt burdens, less inflexible than many thought, but the overall framework implied that governments, not financial markets, were the problem – if the rules were properly applied, stability would prevail. The Treaty thus favoured price stability and the fight against inflation over growth, employment, and social policies.

The question for me was how to explain, from a political economic perspective, the intense liberalism on all matters financial imposed by the EU. What makes it a question is that this drive coexists with a parallel “Social Europe” of relatively aggressive environmental regulation, nondiscrimination, mandatory works councils, etc. Because all of this is embedded in a capitalist order, financial liberalism has tended to erode social protection, but why should there be this left hand/right hand problem?

This could be examined through the prisms of class and ideology, but here we see another dynamic stemming from nationalism. The problem of constructing an integrated economic area is one of coordination in core markets—labor, goods, capital. This can be accomplished directly through public and private institutions that explicitly regulate and standardize across the entire domain, which has been the story of the United States since the end of the Civil War. One reason this was possible was the war itself, which destroyed the ideological and political basis for states’ economic sovereignty. But Europe’s “wars between the states” in the last century were not about disunion but hegemony, and their outcome is a cooperative, non-hegemonic arrangement between sovereign nations. There is little political support for making Brussels the primary locus of economic rule-making.

The alternative to organized integration, however, is self-organized integration. By using capital market liberalization as a battering ram, the EU can hope to dismantle, over time, barriers to the single market in all dimensions without a direct assault on subsidiarity. The Eurozone addition, of course, is the Stability and Growth Pact, which is intended to limit the exercise of fiscal policy at the national level, now that monetary policy is safely tucked away in the ECB.

Liberalism presents itself as a strategy for integration in the absence of robust supranational authority. Of course, this aspect of the situation is not walled off from the class and ideological aspects. Financial liberalization became the dominant policy framework because of the political ascendancy of individuals who viewed their economic interests in financial terms, as I argued earlier.

The practical issue remains how to advance European integration on democratic lines, overcoming nationalism from below and across rather than outside (market liberalism). The current crisis should be an opportunity to construct a programmatic counter-vision, but I am not hearing much of this from where I sit.

Decoding Economic Ideology link is fixed

Sorry for any inconvenience

Decoding Economic Ideology

Molière’s 1670 play, The Bourgeois Gentleman, presented before the court of Louis XIV, mocked a foolish, social‑climbing merchant. In his effort to remake himself, the merchant takes lessons to help him pass as an aristocrat. In a basic lesson on language, he is both surprised and delighted to learn he had been speaking prose all his life without knowing it. Almost three and a half centuries later, much of the world finds itself speaking a different language ‑‑ economics ‑‑ also without full awareness.

more at
http://michaelperelman.files.wordpress.com/2010/12/decoding.pdf