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Tales of Failed Stimulus Print
Written by Dean Baker   
Saturday, 30 July 2011 08:07

One result of the the revisions to GDP published by the Commerce Department yesterday is that the data now show a much steeper drop in GDP in the post-Lehman panic. At first glance, the new data would appear to make the stimulus look more effective. The chart below shows quarterly growth rates beginning with the 4th quarter of 2008 and the Congressional Budget Office's predicted effect of the stimulus (the average of the high and low numbers).

Click to Enlarge


Source: Bureau of Economic Analysis and Congressional Budget Office.

This is not a perfect fit, but no one expects the stimulus to be the only factor moving the economy. In any case, the pattern of growth does seem to fit the predicted impact of the stimulus. When we saw big boost to growth in 2009, the growth rate went from a large negative to a moderate positive. When the impact of the stimulus turned negative in 2010, growth began to slow. If the pattern continues, we should see more weak growth in the second half of the year.

There have been far more careful analyses of the impact of the stimulus, but this general picture sure supports the case that it had a real effect in turning the economy around. The problem is that it was not large enough or long enough. 

CEPR News July 2011 Print
Written by Dawn Lobell   
Friday, 29 July 2011 15:10

The following newsletter highlights CEPR's latest research, publications, events and much more.

CEPR on Debt Ceiling Deals and Deficits

CEPR has followed the debt ceiling talks closely. CEPR Co-director Dean Baker has commented on the impact of several of the potential deals, including this statement on using the Chained Consumer Price Index to determine Social Security Cost of Living Adjustments, arguing that “while it is often claimed that this switch will make the COLA more accurate, this is not clear. What is certain is that the switch would lower benefits.”

Dean restated his explanation in his Guardian column and in this op-ed on Al Jazeera English. He also discussed the debt ceiling debate on NPR’s Morning Edition, CNBC’s Kudlow Report,  the Nightly Business Report (PBS) and MSNBC’s The Ed Schultz Show. He was quoted in this article in the Los Angeles Times, and he sent this letter to Speaker John Boehner, countering Boehner’s assertion that entitlements are the biggest “drivers of the debt and deficits” and reminding Boehner that “ Social Security and other social insurance programs have no place whatsoever in the debt ceiling debate”. CEPR Co-director Mark Weisbrot weighed in on the debt ceiling negotiations in this piece on To the Point with Warren Olney.

Dean also participated in several related events on the hill. On July 27th Dean joined Congresswoman Barbara Lee and the co-chairs of the Congressional Out of Poverty Caucus in a press conference on the debt reduction plans and their possible impact on social safety net programs for people facing or living in poverty. And on the 28th, he took part in a panel discussion, along with Representative Xavier Becerra and speakers from the Aspen Institute on a soon-to-be-released brief, "Social Security: The House that Roosevelt Built."



The Real Crisis: Long-Term Unemployment Print
Written by Janelle Jones   
Friday, 29 July 2011 13:20

As the manufactured debt ceiling debate rages on, it looks like a real crisis in this country is getting some, albeit brief, attention in the national media. Within the last week, both the Wall Street Journal and the New York Times have released articles about the unfortunate state of the long-term unemployed. With unemployment at 9.2 percent and nearly five jobseekers for each new job opening, you would think employers would be more forgiving of long employment gaps on resumes. Well, you would be wrong.

WSJ has a very cool interactive graph that shows the share of long-term unemployed in each state. Nationally, about 25 percent of the unemployed have been jobless for at least 52 weeks, but it gets scarier. Nearly a dozen states have over 30 percent of their unemployed searching for work for at least a year. The New York Times piece from this week builds on a briefing paper by the National Employment Law Project (NELP) on hiring discrimination against the unemployed. The NELP report reviewed top online job listing sites over a four-week period and found over 150 ads had language excluding jobseekers based on their current employment status.

However, there is some light in this jobless tunnel, and it’s coming from New Jersey. A recently passed state law is aimed at this exact problem. Employers with job advertisements that discriminate against the unemployed face fines of $1,000 for a first offense, and up to $5,000 for future offenses. Michigan and New York have also introduced legislation to tackle this problem. This state-level movement has spurred action at the federal level in the form of the Fair Employment Opportunity Act of 2011 introduced in the House earlier this month. This action cannot come a moment too soon. A 2010 paper by Slyvia Allegretto and Devon Lynch shows that of those unemployed, the share in long-term joblessness, increased 75.8 percent between 1983 and 2009, or twice the rate of increase of the entire labor force.

GDP Growth Slows as Economy Stagnates Print
Written by Dean Baker   
Friday, 29 July 2011 11:00

Weak consumption growth and shrinking government spending held GDP growth to 1.3 percent in the last quarter, according to the Bureau of Economic Analysis' latest report on the Gross Domestic Product. Consumption grew at just a 0.1 percent annual rate in the second quarter, while government spending shrank at a 1.1 percent rate. The report also revised first-quarter GDP growth down to just 0.4 percent from a previously reported 1.9 percent. All these numbers indicate that the economy is growing far below the 2.5 percent rate needed just to keep the unemployment rate from rising.

The overall picture in the latest report is that the economy is stagnating, with revisions suggesting the stimulus worked exactly as predicted. The economy shrank at a 7.8 percent annual rate in the fourth quarter of 2008 and first quarter of 2009 compared with a previously reported 5.9 percent annual rate. The decline in the second quarter was just 0.7 percent, followed by growth in the third quarter of 1.7 percent, suggesting that the stimulus was effective in turning the quarter around. The downward revision to the first-quarter data coupled with the revision of the fourth-quarter growth to 2.3 percent from 3.1 percent suggests that the winding down of the stimulus has seriously dampened growth.

For more, read our latest GDP Byte.

There’s Zero Accountability in Economics Print
Written by Dean Baker   
Thursday, 28 July 2011 12:00
Reuters invited leading economists to reply to Mark Thoma's Op-Ed on the "great divide" in economics. Below is Dean Baker's reply.

This is a very nice piece and Mark's points are well-taken. However, as someone largely on the outside, I would go a step further. I see zero accountability for bad performance within economics either among those who write about it as academics or for those who practice it in business and government.

This is very clear as we seem doomed to spend a decade or more digging out of the wreckage of the housing bubble. Instead of trying to hold people at the Fed, in the Bush Administration, at the regulatory agencies, at Fannie and Freddie accountable, the refrain "who could have known" is used as a collective alibi. Holding economists accountable for this policy failure of monumental proportions is seen as just plain vindictive.

Of course this is not the only policy failure for which economists have used the "who could have known" alibi. The collapse of the stock bubble gave us almost four full years of zero job growth. Still no one in policy circles saw their career suffer in any way for failing to see this bubble and the implications of its collapse.

There are many other examples where the economists in charge completely missed it (e.g. the East Asian financial crisis and the IMF response, Argentina's crisis and the IMF response, the Mexican peso crisis). The reality is that the main policy institutions are controlled and populated by "yes" men (and women) who know that getting ahead means repeating what the person ahead of you in the hierarchy wants to hear. There is never any penalty as long as you are wrong with everyone else.

Economics tells us what to expect when workers need not fear sanctions or dismissal even when they don't do they job, as long as they please their boss. We get dull, unimaginative workers who don't do their jobs. Welcome to the world of modern economics.

Do They Understand Inflation at Cato? Print
Written by David Rosnick   
Wednesday, 27 July 2011 15:31

Chris Edwards complains that John Boehner’s plan for spending cuts "doesn’t actually cut spending at all."  So says his chart.


Unfortunately Edwards chooses to report budget authority rather than outlays—the actual cash flow.  Under Boehner’s plan, outlays (still net of spending “in Afghanistan and Iraq”) rise only from $1.262 trillion to $1.278 trillion.  Rather than an apparent 18 percent increase, the rise in outlays is less than 1.3 percent.

More importantly, however, these numbers are not adjusted for inflation.  According to projections by the Congressional Budget Office, inflation will rise at least 18 percent from 2012-21.  Thus, Boehner’s plan has real outlays falling by more than 14 percent by 2021.


Chris Edwards is repeating himself. Not that there is anything wrong with that. But he is still wrong.

Boehner’s amended proposal was scored by CBO as saving an additional $46 billion over the first two years, and guess what? As a result of those deeper cuts, spending goes up even faster than before! Rather than an increase in outlays of 1.3 percent (not adjusted for inflation) outlays now increase 3.0 percent.

Maybe, just maybe, Edwards has a ridiculous way of thinking about spending cuts.


What?  Did you say that stuff costs more today than it did a couple years ago?  Maybe somebody really ought to tell Chris Edwards over at Cato.  For the third time in only a few days, Edwards showed a chart of Speaker Boehner’s proposed discretionary budget authority and forgot to adjust for inflation.

At last check, Boehner proposed that by 2021 the government spend 14.9 less on discretionary outlays when adjusted for consumer prices.

If you fail to take prices into account, you might wind up saying ridiculous things like private spending was 10.1 percent higher in April through June than it was when Barack Obama took office.  Or you might say that despite the loss of millions of jobs, Americans managed to “produce” 8.0 percent more.

If you fail to account for inflation, then the economy grew 57 percent under Jimmy Carter—a whopping 12 percent per year!  By Edwards’ measure, national income grew more rapidly under Carter’s presidency than in any four-year period since the end of World War II.

Heritage Fails to Check Source, Blows Another Call Print
Written by David Rosnick   
Wednesday, 27 July 2011 09:15

Over at the Heritage blog, David Weinberger attempted a fact-check.  He wrote, “But both Professor Krugman and President Obama have their history entirely incorrect. Total government spending never decreased in the 30s, certainly not after 1937. Rather, total government spending went up”

Sure enough, the graph presented shows no fall in government spending between 1936 and 1937.


Weinberger should have taken a closer look at his own source material.  Ignoring for the moment that the spending is in current dollars, not adjusted for inflation (even though usgovernmentspending.com allows the option) let us look at the table at Weinberger’s source.



Will Work For Health Insurance Print
Written by David Rosnick   
Tuesday, 26 July 2011 13:00

An interesting story was posted last week over at the website of the National Education Association.  A Massachusetts special-education teacher — Kathy Meltsakos — was laid off and then rehired by another school district.  At lower base wages, and bearing a greater share of her health-insurance costs, her take-home pay was reduced to zero.

This story may sound crazy at first, but is far from implausible.  According to the pay stub in the accompanying photograph, Meltsakos earned $622.92 in 58 hours of work.  Over nine months, this would total $12,146.94.  An indicated Medicare tax withholding and an 8 percent pension contribution would reduce pre-tax income to $564.78 every two weeks.

If she must pay 60 percent of the price of a full year’s medical and dental insurance over the course of nine months of employment, then $564.78 in deductions every other week implies total premiums of $18,255 per year—or $1,530 per month.  This may be on the high side even for low-deductible plans, but the article does not specify if the insurance covers anyone in addition to her.

That is, it is plausible that this teacher is working nine months out of the year for nothing more than health insurance and a small pension — with nothing left for living expenses.  Because Medicare seems to have been withheld, but not Social Security, it is safe to assume that Meltsakos is exempt from the program and will not receive a retirement benefit in addition to her pension.

Case-Shiller Index Shows Housing Price Increases for Second Month Print
Written by Dean Baker   
Tuesday, 26 July 2011 10:45

The 20-City Case-Shiller Index rose 1.0 percent in May, the second consecutive increase after eight consecutive months of decline. Seventeen of the 20 cities in the index experienced increases in housing prices, with the biggest increases in Washington, D.C., Minneapolis and Boston. The only cities that saw declines were Tampa Bay, Las Vegas and Detroit.

The 2.4 percent price increase in D.C. continued a pattern, as prices have now risen at a 10.7 percent annual rate over the last three months and are up 1.3 percent over the last year. The 2.6 percent price jump in Minneapolis, however, is the most surprising since prices had been falling sharply in the city. But this also raises the possibility that the increase is simply a result of quirks in measurement.

The Census Department will release data on vacancy rates later this week, which will give us more information on the overall state of supply and demand in the housing market. The recent movement in rents provides no reason for believing that there is any underlying tightening of the market. Owners' equivalent rent is rising at just over a 1.0 percent annual rate.

For more, read the latest Housing Market Monitor.

College Print
Written by John Schmitt   
Tuesday, 26 July 2011 08:33

Catherine Rampell had a post last week declaring that “College is (Still) Worth It“. The piece is the latest in a series that she and her Economix blog colleague, David Leonhardt, have written on the financial benefits of college.

I agree with Rampell and Leonhardt that college is, on average, a good investment for the people who make it. But, Rampell and Leonhardt’s posts completely sidestep the key issue: why is it that when confronted with compelling evidence that college pays a big financial dividend, so many young people still don’t get a college degree?

Heather Boushey and I argue that the short answer  is that for a surprising share of college graduates, the large price tag may actually not pay off.

Rampell’s latest installment includes this nice graph of weekly earnings by worker characteristics, including educational attainment on the right-hand side:


Source: New York Times, Bureau of Labor Statistics



Labor Market Policy Research Reports, July 16-22, 2011 Print
Written by Jane Farrell   
Friday, 22 July 2011 13:15

The Center for Economic and Policy Research, Demos, Economic Policy Institute, Employment Policy Research Network, and National Employment Law Project released reports on labor-market policy over the past week.

Center for Economic and Policy Research

The Risk of Dismissal for Union Organizing and the Need to Modify the Process

Dean Baker


Under Attack: Washington’s Middle Class and the Jobs Crisis

Under Attack: Pennsylvania’s Middle Class and the Jobs Crisis



New Fed Survey: What Is It Telling Us? Print
Written by David Rosnick   
Monday, 18 July 2011 15:00

I wish I had caught this a few months ago when it came out, but the Federal Reserve went ahead and re-interviewed folks studied in the 2007 Survey of Consumer Finances.  The SCF does not usually follow specific people through time—the last panel SCF was in 1989—so this study offers an interesting opportunity to see what happened to family finances following the collapse of the housing bubble.

Of course, we have produced several papers based on SCF data in which we estimate the impact on various groups of people based on housing and stock prices.  But a follow-up study of the 2007-vintage respondents would in theory be a better approach.

According to the Fed study, median family net worth fell 23 percent from $125,400 in 2007 to only $96,000 in 2009.  Largely, this change reflected falling assets rather than increased debt.  In particular, the median value of primary residences fell 15 percent from $207,100 to $176,000.

However, the numbers reported by the Fed do show something surprising.  According to the panel results, the percent of families owning their primary residences in 2007 stood at 68.9 percent.  This figure is slightly higher than the quarterly numbers reported by Census over the survey period (67.8-68.2 percent.)  Over the same period two years later, Census reported homeownership rates had fallen to between 67.1-67.4 percent.  The Fed, on the other hand, estimates that in 2009 some 70.3 percent of the 2007 panel families owned their primary residence.



The Blame for Fannie and Freddie Print
Written by Dean Baker   
Sunday, 17 July 2011 08:40

It is entertaining to see all the folks who missed the housing bubble try to apportion blame after the fact. Tyler Cowan is the latest entrant, pronouncing Fannie and Freddie at least partially responsible. While his indictment is impressive, the real question should be, “what is the charge?”

Of course Fannie and Freddie are at least partially responsible, they purchased hundreds of billions of dollars of loans that were used to buy properties at what they should have recognized as bubble-inflated prices. If they had refused to buy such loans, it almost certainly would have brought the irrational exuberance of the housing bubble to a quick halt.

Fannie and Freddie could have adopted a policy of requiring appraisals of rent, and refused to purchase any loan for a purchase price that exceeded a 15 to 1 ratio to rent (adjusted by metro area). This policy would almost certainly have required many buyers and lenders to give more serious thought to their purchase price.

Since housing is all that Fannie and Freddie do, it is reasonable to expect that they would have recognized the bubble and taken steps to counter it and protect themselves. [I was beating them up on the bubble since 2002]. Instead, they continued to throw money into the housing market even as prices grew ever more out of line with fundamentals.

However, giving the primary blame to Fannie and Freddie and the government policy of promoting homeownership ignores the fact that the worst subprime loans were sold to Merrill Lynch, Citigroup and other private investment banks. These banks do not have any pretense of having a mission of promoting homeownership; they are there to make money. And, in the peak years of the housing bubble, they were booking huge profits on the loans that they repackaged into mortgage backed securities and more complex financial instruments.

If the moral of the story is supposed to be that financial institutions don’t make reckless and often fraudulent loans without the prodding of the government, no one can make this case with a straight face. Angelo Mozillo’s Countrywide and Robert Rubin’s Citigroup issued and securitized bad mortgages because it was profitable. No government bureaucrat forced them to do it to advance homeownership. In fact, the main motive of Fannie and Freddie in this period was also almost certainly profit, which allowed their top executives to pocket tens of millions in compensation that they still hold.

In the blame game there is plenty to go around. Certainly the economic policy wonks, regulators and business media who totally missed the largest asset bubble in the history of the world should all be wearing dunce caps for the rest of their career. The top executives of Fannie and Freddie also deserve to occupy one of the inner rings of hell. The fact these characters were able to pocket tens of millions from this disaster should have all right thinking people outraged. But no one acted worse than the issuers of subprime loans who often committed outright fraud by putting in false information to allow people to get loans for which they were not otherwise qualified. And the investment banks who securitized this garbage and the rating agencies who blessed it as investment grade come in a close second.

Unfortunately, the main lesson seems to be that crime pays. With few exceptions, the evils doers are doing just fine – in fact much better than almost anyone who doesn’t break the law for a living. And, we also seem to have learned nothing about pushing homeownership, as some community groups are now devoting their efforts to ensure nothing is done that could raise the interest rate on higher risk, low down payment loans.

If we were to ask George W. Bush’s famous question:

“Is our policy wonks learning?”  The answer would undoubtedly be no.

There is one final point that is worth noting on Tyler Cowan's scorekeeping between the banks and Fannie and Freddie. The banks got far more generous bailout terms than Fannie and Freddie, getting loans and loan guarantees at way below market rates. (In keeping to their deference to Wall Street, almost no economists are so rude as to point out that below market loans and guarantees involve massive subsidies. This allows people like Timothy Geithner to claim that we actually made money on the TARP, even though every card carrying economist knows this is nonsense.)

Also the policy of temporarily propping up the housing market with the first time homebuyers tax credit and Fed purchases of mortgage-backed securities allowed millions of mortgages, that would have otherwise soured, to be transferred from the banks to Fannie and Freddie through being sold or refinanced. So if Fannie and Freddie end up with the bulk of the bill it was not just the result of their bad judgment. It was a conscious goal of government policy.

Labor Market Policy Research Reports, July 8-15, 2011 Print
Written by Jane Farrell   
Friday, 15 July 2011 15:15

This week, Demos, Economic Policy Institute, and National Employment Law Project released LMPRR reports and briefs.


Under Attack: Florida’s Middle Class and the Jobs Crisis

Putting Massachusetts Money to Work for Massachusetts
Heather C. McGhee, Jason Judd, and Sarah Babbage

Economic Policy Institute

J visas: Minimal oversight despite significant implications for the U.S. labor market
Daniel Costa

National Employment Law Project

Hiring Discrimination Against the Unemployed: Federal Bill Outlaws Excluding the Unemployed

Labor Market Policy Research Reports, July 1 - July 7, 2011 Print
Written by Jane Farrell   
Friday, 08 July 2011 10:56

This week, the LMPRR features reports and briefs from Demos, Economic Policy Institute, and Institute for Women’s Policy Research.


Enduring Flaws: FTA Deal With Colombia Still Has Major Problems
David Callahan and Lauren Damme

Economic Policy Institute

Historically Deep Job Loss, but Not An Unusual Recovery
Josh Bivens and Isaac Shapiro

Institute for Women’s Policy Research

Paid Sick Days and Employer Penalties for Absence
Kevin Miller, Ph.D, Robert Drago, Ph.D., and Claudia Williams

Labor Market Policy Research Reports, June 25 - July 1, 2011 Print
Written by Jane Farrell   
Friday, 01 July 2011 11:31

This week, the LMPRR features reports from Center on Budget and Policy Priorities, Demos, Economic Policy Institute, Institute for Research on Labor and Employment, and Institute for Women’s Policy Research.

Center on Budget and Policy Priorities

New Fiscal Year Brings Further Budget Cuts to Most States, Slowing Economic Recovery
Michael Leachman, Erica Williams and Nicholas Johnson


Wisconsin’s Middle Class and the Jobs Crisis

New York’s Middle Class and the Jobs Crisis

Economic Policy Institute

The Need for Paid Sick Days
Elise Gould, Kai Filion and Andrew Green

Institute for Research on Labor and Employment

Do Frictions Matter in the Labor Market? Accessions, Separations, and Minimum Wage Effects
Arindrajit Dube, T. William Lester and Michael Reich

Institute for Women’s Policy Research

Pension Crediting for Caregivers: Policies in Finland, France, Germany, Sweden, the United Kingdom, Canada, and Japan
Elaine Fultz, Ph.D.

CEPR News June 2011 Print
Written by Dawn Lobell   
Thursday, 30 June 2011 12:28

The following highlights CEPR's latest research, publications, events and much more.

CEPR on Greece
CEPR Co-director Mark Weisbrot’s views on the Greek debt crisis continue to garner media attention. Mark was one of the first to suggest that Greece at least consider defaulting on its debt rather than accepting further austerity measures. Mark has become a sought-after expert on the Greek debt crisis. He appeared on Democracy Now! On June 29th, commenting on the breaking news that the Greek parliament had approved the harsh austerity package of budget cuts and tax increases.  

In his latest Guardian column, Mark discusses the potential impact of the Greek crisis on the U.S., and asks “Where is the U.S. government?” As Mark pointed out on NPR’s All Things Considered, the austerity demands being pushed on Greece by the IMF and European Central Bank are a form of collective punishment against the Greek people. But as Mark explained on Bloomberg Television, default might be a better option for Greece than continued recession.

Mark also wrote about the recent protests in Greece in thisGuardian column, and was cited in coverage by the BBC, Voice of America, and Firstpost (India’s largest news site), among others. Mark has also discussed Greece’s debt crisis on a string of radio programs. Mark’s, and CEPR’s, perspective on Greece have carried into the Greek media, where Mark continues to be interviewed by a variety of outlets, and other European coverage as well. His latest interview with the BBC can be seen here.



Home Prices Rise for First Time Since Last July Print
Written by Dean Baker   
Tuesday, 28 June 2011 09:45

For the first time since July of last year, the Case-Shiller 20-City Index rose 0.7 percent in April. Thirteen of the 20 cities showed increases in April, with several cities such as Atlanta, Seattle and Washington D.C. showing large price jumps. Atlanta and Seattle experienced price increases of 1.6 percent, while Washington, D.C., saw prices rise 3.0 percent.

The Atlanta market had price increases in all three tiers, but the bottom tier showed by far the biggest jump with an 8.6 percent gain. The Seattle market was driven by a 1.7 percent price rise for houses in the upper tier, which may be explained by the lowering of the loan limit for Fannie Mae and Freddie Mac. In Washington, D.C.,  prices are rising sharply all across the board, with the biggest rise being a 3.7 percent jump in the bottom tier. This segment of the market has risen at an 18.4 percent annual rate over the last three months. This is the sort of price rise that was seen in the bubble and may reflect some irrational exuberance about the D.C. market. It will not be sustained.

Many analysts seem to have missed the fact that the plunge in house prices has sharply reduced homeowners’ equity. According to data from the Federal Reserve Board, the ratio of homeowners’ equity to value at the end of the first quarter was just 38.0 percent at the end of the first quarter, the lowest on record. This massive loss in household wealth explains weaker consumption, not consumer pessimism.

For more, read the latest Housing Market Monitor.

Potshot at Progressive Economics Misses the Mark Print
Written by Dean Baker   
Monday, 27 June 2011 19:47
In his diatribe against progressive economics Rob Atkinson included the Center for Economic and Policy Research (CEPR) in the list of institutions who he is attacking. I will let my friends at the Economic Policy Institute, the Levy Institute, Demos, and Center for American Progress argue their own cases, but Atkinson makes a number of mistakes that should be corrected.

First, his basic economic story is more than a bit confused. He is anxious to tout Germany and Japan as successes to contrast with the United States failure. While CEPR has put out numerous papers and articles over the years touting aspects of Germany's labor market policy along with that of other European welfare states (for example here, here, and here), and in particular its short work policy which has allowed Germany to actual lower its unemployment rate in this downturn, it's not clear that Germany and Japan have actually been successes in the way that Atkinson claims. Germany and Japan's productivity growth has consistently trailed that of the U.S. over the last 15 years. The gap is not huge, but it goes the wrong way for Atkinson's argument.

Germany and Japan do have large trade surpluses, as opposed to a trade deficit in the U.S., but this has a lot to do with informal protectionist barriers that presumably Atkinson does not want to see adopted in the U.S. The other major factor hurting U.S. trade is a dollar that is seriously over-valued, making U.S. goods uncompetitive. CEPR has written a great deal on this issue, arguing in numerous papers that the trade deficit will not be brought down to a manageable level until the dollar declines to a point where U.S. goods can be competitive in international markets.

Atkinson also seems not to like a vast body of research that indicates that growth is demand driven. Atkinson is right that this argument is getting old, but so is the theory of evolution. When he has some evidence showing that this research is wrong, I'm sure that he will have no problem getting an audience.

However, it is most bizarre to see Atkinson say that CEPR is not concerned about the supply conditions that foster growth. It would be almost impossible to look at our website without realizing that we deal with supply conditions all the time.

For example, we have written on alternatives to the incredibly inefficient patent system for supporting prescription drug research. In a free market drugs are cheap. As a result of patent protection, the U.S. Is projected to spend $3.7 trillion over the next decade on drugs. We could save close to 90 percent of this money ($3.3 trillion) if drugs were sold in a free market. Replacing the research currently supported by patents would cost us at most one-fourth this amount.

We have also proposed alternatives to copyright support for recorded music and videos, software, and even textbooks. The potential savings from ending copyright monopolies in these areas could easily exceed $100 billion a year.

We have also proposed a financial speculation tax which could raise close to $150 billion a year, while making the financial sector more efficient by eliminating tens of billions in transactions that serve no productive purpose.

We have also proposed expanding trade to subject highly paid professionals, like doctors, engineers, and lawyers to the same of international competition as autoworkers and steelworkers currently face. Patients could save themselves tens of thousands of dollars by getting major medical procedure in countries with more efficient health care systems. The government could save itself trillions of dollars if it let Medicare beneficiaries buy into the more efficient health care systems of countries like Canada and Germany. Unfortunately, when it comes to highly paid professional services Atkinson is an old-fashioned protectionist.

Atkinson would know that his caricature of progressive economists does not fit CEPR if he had ever looked at our website. Of course, anyone reading Atkinson's article would know there is a lot of material that he has not read.

One final point: it really is entertaining to be lectured about economics by someone who completely missed the stock and housing bubbles, the two largest asset bubbles in the history of the world.

Talk About Coincidence! Print
Written by Nicole Woo   
Friday, 24 June 2011 16:26

Yesterday CEPR released a new report about how work sharing can help prevent layoffs and reduce unemployment,  On the same day, both the Center for American Progress and the New America Foundation also published issue briefs about work sharing.

Really, it was a coincidence!  But is it a sign that work sharing is an idea whose time has come?

As "the first of our ideas that we believe could be achievable in Washington today," CAP's proposal provides context and analysis of how work sharing fits in today's political context.  It concludes:

Work sharing may not create jobs, but it will certainly help keep those who have a job at work if employers need to reduce hours. We’ve seen this policy work—very effectively—in other countries. And it’s a relatively simple (and cheap) way to reduce unemployment here at home. For workers and their families and for the broader pace of economic recovery, Congress clearly needs to consider these job-sharing ideas, and soon.

NAF's policy brief goes into more detail, looking at the effects of work sharing in OECD countries, with special focus on Germany and Canada, as well as in the U.S. states that currently have work sharing programs in place.




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