Compare with my predictions...
Washington--Romney, Paul, Santorum, Gingrich (67% correct)
Alaska--TBD
Georgia--Gingrich, Romney, Santorum, Paul (100% correct)
Idaho--Romney, Paul, Santorum, Gingrich (100% correct)
Massachusetts--Romney, Santorum, Paul, Gingrich (100% correct)
North Dakota--Santorum, Paul, Romney, Gingrich (83% correct)
Ohio--Romney, Santorum, Gingrich, Paul (100% correct)
Oklahoma--Santorum, Romney, Gingrich, Paul (83% correct)
Tennessee--Santorum, Romney, Gingrich, Paul (100% correct)
Vermont--Romney, Paul, Santorum, Gingrich (83% correct)
Virginia--Romney, Paul (100% correct)
That's 92% correct overall. If you just count Super Tuesday states, I was 94% correct. A/A- seems fair.
Note also that these contests could've played out in one of over 2.6 trillion different ways. Come on...fives.
Showing posts with label Politics. Show all posts
Showing posts with label Politics. Show all posts
Tuesday, March 6, 2012
Wednesday, February 29, 2012
Super Tuesday Forecast
I issued private forecasts for Arizona and Michigan, but forgot to post them on the blog. Needless to say, I nailed both. Now, onto Super Tuesday...but first, Washington (on March 3rd): Santorum, Romney, Paul, Gingrich
Super Tuesday contests (on March 6th)
----------------------------------------------------------------
Alaska: Romney, Paul, Santorum, Gingrich
Georgia: Gingrich, Romney, Santorum, Paul
Idaho: Romney, Paul, Santorum, Gingrich
Massachusetts: Romney, Santorum, Paul, Gingrich
North Dakota: Santorum, Romney, Paul, Gingrich
Ohio: Romney, Santorum, Gingrich, Paul
Oklahoma: Santorum, Gingrich, Romney, Paul
Tennessee: Santorum, Romney, Gingrich, Paul
Vermont: Romney, Santorum, Paul, Gingrich
Virginia: Romney, Paul
Enjoy.
Super Tuesday contests (on March 6th)
----------------------------------------------------------------
Alaska: Romney, Paul, Santorum, Gingrich
Georgia: Gingrich, Romney, Santorum, Paul
Idaho: Romney, Paul, Santorum, Gingrich
Massachusetts: Romney, Santorum, Paul, Gingrich
North Dakota: Santorum, Romney, Paul, Gingrich
Ohio: Romney, Santorum, Gingrich, Paul
Oklahoma: Santorum, Gingrich, Romney, Paul
Tennessee: Santorum, Romney, Gingrich, Paul
Vermont: Romney, Santorum, Paul, Gingrich
Virginia: Romney, Paul
Enjoy.
Sunday, February 12, 2012
Who's threatened by Iran?
Let me ask you a question: How many countries in possession of nuclear weapons have been attacked by a country not in possession of nuclear weapons? Take your time. In case you're still scratching your head, the correct answer is zero.
Let me ask you a second question: Does the United States possess nukes? Does Israel? (Yes, they both have lots of them, the US especially so).
Projecting past experience forward, then (the new riddle of induction notwithstanding), will the US or Israel be attacked by a non-nuclear Iran?
Okay, if you're still with me, let me ask you a third question: How many countries in possession of nuclear weapons have been attacked by a country also in possession of nuclear weapons? Again, take your time. In case you wanna cut to the chase, the correct answer (once more) is zero.
Projecting past experience forward, then, will the US or Israel be attacked by a nuclear Iran?
"Don't be silly," you say. "Just because something never happened in the past, doesn't mean it won't happen in the future. This time, my friend, really is different." Maybe so. But when there is a strikingly consistent pattern in the historical record, it's worth getting to the bottom of it. So let's.
Why have countries with nuclear weapons never been attacked by other countries? Here's a first stab at a solution. Political leaders, above all else, crave power. If they didn't, they wouldn't be willing to sacrifice as much as they do to acquire it, and to maintain it. In 1945, when the US demonstrated the destructive potential of nuclear weapons (essentially telling Japan, "if you give us so much as a papercut, we will set you on fire"), every political leader in the world was watching. What they learned is that, for small countries, getting nuked is a recipe for not having a country over which to rule anymore. For big countries, getting nuked is a recipe for losing power very, very quickly.
So, caring first and foremost about power, world leaders silently affirmed the 11th commandment: Thou shalt not fuck with nuclear states. Don't forget that, prior to 1945, war between great powers was the norm, not the exception. Since 1945, it's only been cold wars between nuclear states, which is to say, often tense but essentially non-violent relations.
"Don't be silly," you say again. "Iran isn't a cold, calculating government--it's a fanatical theocracy committed to the destruction of Israel. Nukes in its hands cannot be trusted." Maybe so. But consider this: How have the ayatollahs managed to (with relative stability) control Iran for 33 years? This is not a country whose government is protected from its people by outside governments. This is a country who has been the victim of CIA-led coups, internal uprisings egged on by outsiders, and social and economic volatility the likes of which Americans cannot even imagine. And yet these supposed loons have managed to maintain their grip. Something tells me that while they may be fanatical this-or-thats, they care a lot about political power, too. And something tells me that their cold, realistic calculations have a lot to do with why they still hold the reigns in what would otherwise be a tremendously unstable political environment. And recognition of the 11th commandment does not require a genius. So, why do you seem so sure that this time is different?
"Why, then, do they seem so hellbent on the development of a nuke?" you ask. Simple--when the most militarily powerful countries on Earth speak openly on a daily basis about their eagerness to destroy you, and when you know of the 11th commandment (refresher: Thou shalt not fuck with nuclear states), it would seem that getting hold of a nuke would help a lot with maintaining your grip on a country that is on the brink of revolution. Self-preservation is the name of the game in international relations.
Do I want Iran to have a nuke? Of course not. For one thing, lots of Iran's neighbors would be more or less defenseless against a nuclear Iran. The effect on the balance of power in the Middle East would almost certainly be unfavorable. And yes, the probability of Iran violating the 11th commandment is marginally higher than the probability of, say, Israel doing likewise. Nobody wants Iran to go nuclear. But that's not because Iran is a serious threat to US or Israeli security. It's simply for classic balance of power considerations.
What's in everyone's best interest is for a ratcheting down of tensions. If Iran is less concerned about the international community planning its destruction, it will be more willing to slow or halt its development of the bomb. And if we offer that, in exchange for healthier diplomatic relations, we may be able to create a more stable political situation in the Middle East than would otherwise obtain.
So, why aren't we doing that? Well, recall the 11th commandment. Once Iran has the bomb, we will no longer have the option of shaping their internal political situation (witness nuclear Pakistan, a fanatical government if there ever was one, who almost certainly hid bin Laden, but whom we don't give orders to). If we don't take out the ayatollahs while we have the chance, Iran is, for the foreseeable future, beyond our sphere of significant influence. But why do we care so much about influencing Iran? We obviously don't care much about influencing Syria at the moment (actions speak louder than words). The answer, not obvious to only the most deliberately obtuse, is that Iran has lots of oil. Our goal is not to steal their oil, or to secure it at a discount. Our goal--indeed, the Western world's goal, is to stabilize oil production and flows in international markets so as to minimize oil shocks to Western economies (the oil shocks of the late 2000s drove up headline inflation, triggering tighter monetary policy, triggering the worst recession since the Great Depression). Sure, we care about human rights, etc., too. But the reason we seem really eager to bomb some countries (Libya, Iran), and not others (Syria), is because access to a very important commodity is at stake. No conspiracy, no hegemony, just good old fashioned pursuit of strategic interests.
Let's, then, not sign off on another war without our eyes open to what's really at stake, and what our government's true motivations are.
Let me ask you a second question: Does the United States possess nukes? Does Israel? (Yes, they both have lots of them, the US especially so).
Projecting past experience forward, then (the new riddle of induction notwithstanding), will the US or Israel be attacked by a non-nuclear Iran?
Okay, if you're still with me, let me ask you a third question: How many countries in possession of nuclear weapons have been attacked by a country also in possession of nuclear weapons? Again, take your time. In case you wanna cut to the chase, the correct answer (once more) is zero.
Projecting past experience forward, then, will the US or Israel be attacked by a nuclear Iran?
"Don't be silly," you say. "Just because something never happened in the past, doesn't mean it won't happen in the future. This time, my friend, really is different." Maybe so. But when there is a strikingly consistent pattern in the historical record, it's worth getting to the bottom of it. So let's.
Why have countries with nuclear weapons never been attacked by other countries? Here's a first stab at a solution. Political leaders, above all else, crave power. If they didn't, they wouldn't be willing to sacrifice as much as they do to acquire it, and to maintain it. In 1945, when the US demonstrated the destructive potential of nuclear weapons (essentially telling Japan, "if you give us so much as a papercut, we will set you on fire"), every political leader in the world was watching. What they learned is that, for small countries, getting nuked is a recipe for not having a country over which to rule anymore. For big countries, getting nuked is a recipe for losing power very, very quickly.
So, caring first and foremost about power, world leaders silently affirmed the 11th commandment: Thou shalt not fuck with nuclear states. Don't forget that, prior to 1945, war between great powers was the norm, not the exception. Since 1945, it's only been cold wars between nuclear states, which is to say, often tense but essentially non-violent relations.
"Don't be silly," you say again. "Iran isn't a cold, calculating government--it's a fanatical theocracy committed to the destruction of Israel. Nukes in its hands cannot be trusted." Maybe so. But consider this: How have the ayatollahs managed to (with relative stability) control Iran for 33 years? This is not a country whose government is protected from its people by outside governments. This is a country who has been the victim of CIA-led coups, internal uprisings egged on by outsiders, and social and economic volatility the likes of which Americans cannot even imagine. And yet these supposed loons have managed to maintain their grip. Something tells me that while they may be fanatical this-or-thats, they care a lot about political power, too. And something tells me that their cold, realistic calculations have a lot to do with why they still hold the reigns in what would otherwise be a tremendously unstable political environment. And recognition of the 11th commandment does not require a genius. So, why do you seem so sure that this time is different?
"Why, then, do they seem so hellbent on the development of a nuke?" you ask. Simple--when the most militarily powerful countries on Earth speak openly on a daily basis about their eagerness to destroy you, and when you know of the 11th commandment (refresher: Thou shalt not fuck with nuclear states), it would seem that getting hold of a nuke would help a lot with maintaining your grip on a country that is on the brink of revolution. Self-preservation is the name of the game in international relations.
Do I want Iran to have a nuke? Of course not. For one thing, lots of Iran's neighbors would be more or less defenseless against a nuclear Iran. The effect on the balance of power in the Middle East would almost certainly be unfavorable. And yes, the probability of Iran violating the 11th commandment is marginally higher than the probability of, say, Israel doing likewise. Nobody wants Iran to go nuclear. But that's not because Iran is a serious threat to US or Israeli security. It's simply for classic balance of power considerations.
What's in everyone's best interest is for a ratcheting down of tensions. If Iran is less concerned about the international community planning its destruction, it will be more willing to slow or halt its development of the bomb. And if we offer that, in exchange for healthier diplomatic relations, we may be able to create a more stable political situation in the Middle East than would otherwise obtain.
So, why aren't we doing that? Well, recall the 11th commandment. Once Iran has the bomb, we will no longer have the option of shaping their internal political situation (witness nuclear Pakistan, a fanatical government if there ever was one, who almost certainly hid bin Laden, but whom we don't give orders to). If we don't take out the ayatollahs while we have the chance, Iran is, for the foreseeable future, beyond our sphere of significant influence. But why do we care so much about influencing Iran? We obviously don't care much about influencing Syria at the moment (actions speak louder than words). The answer, not obvious to only the most deliberately obtuse, is that Iran has lots of oil. Our goal is not to steal their oil, or to secure it at a discount. Our goal--indeed, the Western world's goal, is to stabilize oil production and flows in international markets so as to minimize oil shocks to Western economies (the oil shocks of the late 2000s drove up headline inflation, triggering tighter monetary policy, triggering the worst recession since the Great Depression). Sure, we care about human rights, etc., too. But the reason we seem really eager to bomb some countries (Libya, Iran), and not others (Syria), is because access to a very important commodity is at stake. No conspiracy, no hegemony, just good old fashioned pursuit of strategic interests.
Let's, then, not sign off on another war without our eyes open to what's really at stake, and what our government's true motivations are.
Friday, February 10, 2012
Everyone waive to all the children left behind
Well BamaBoi just modified the requirements for the "No Child Left Behind" idea by granting 10 states waivers, basically skirting around the law. Let's assume you know nothing about the "No Child Left Behind Act" (NCLBA) and walk you through some of the important bits of the act. The Act was signed into law circa 2002 by a bright-eyed, bushy-tailed individual in an effort to hold educators accountable for the academic performance of their students. The law is pretty simple: that by 2014, all schools receiving federal funding test "at grade level" in math and reading. I don't see any part of that statement being unreasonable - twelve years is one full academic cycle, meaning kids in first grade are now seniors in high school, meaning that you've had more than enough time to change the course of that student's academic career. Secondly, shouldn't students be testing "at grade level" already?
The weird thing is that educators have been up in arms over the repercussions for not meeting the requirements. The slaps-on-the-wrists occur on a graduated scale, summarized below (all actions are cumulative):
The role of educators is the preparation of students to be contributing members of society, each academic year building on the previous. Teaching is still a job and in jobs there are always performance metrics to gauge success. Failure to meet the metrics in your job and you get a pink slip - no asking for do-overs or extensions. The NCLBA sets the bar pretty low already (since schools average out student standardized test scores and that average is all that is needed to pass), why oh why are the educators crying the blues on this Act? Because they are being, for the first time, actually held accountable for their ability to educate students and their performance is being measured and reported on for the world to see.
I've never been a fan of unions as they often protect longevity rather than effectiveness - the teacher's union fits that bill pretty well. How many teachers have you heard about being fired for lack of performance? I haven't heard of any - the law of averages suggests that there has to be at least one bad teacher. How bout, being laid off due to budget cuts? I've heard a lot about those but it's always the newest teachers being the ones cut. Isn't it a little backwards to assume that just because a teacher has been in the union longer that they are a better teacher than a newbie?
I'm just saying, don't leave the kids behind with these stupid waivers - they are the ones being hurt by things like this. If educators couldn't correct a problem over the course of 12 years why are they still teaching?
The weird thing is that educators have been up in arms over the repercussions for not meeting the requirements. The slaps-on-the-wrists occur on a graduated scale, summarized below (all actions are cumulative):
- 2 Consecutive years of missing marks - School is labeled as "needing improvement" while administrators must put together a 2 year corrective actions plan. Parents are given the option to transfer students for free to another school in the district if one exists.
- 3 Years -Free tutoring and supplemental education services to be made available to schools.
- 4 Years - School is labeled as requiring "corrective action" opening the possibility for widespread staff replacement
- 5 Years - School administration is transferred to the state or privatized
The role of educators is the preparation of students to be contributing members of society, each academic year building on the previous. Teaching is still a job and in jobs there are always performance metrics to gauge success. Failure to meet the metrics in your job and you get a pink slip - no asking for do-overs or extensions. The NCLBA sets the bar pretty low already (since schools average out student standardized test scores and that average is all that is needed to pass), why oh why are the educators crying the blues on this Act? Because they are being, for the first time, actually held accountable for their ability to educate students and their performance is being measured and reported on for the world to see.
I've never been a fan of unions as they often protect longevity rather than effectiveness - the teacher's union fits that bill pretty well. How many teachers have you heard about being fired for lack of performance? I haven't heard of any - the law of averages suggests that there has to be at least one bad teacher. How bout, being laid off due to budget cuts? I've heard a lot about those but it's always the newest teachers being the ones cut. Isn't it a little backwards to assume that just because a teacher has been in the union longer that they are a better teacher than a newbie?
I'm just saying, don't leave the kids behind with these stupid waivers - they are the ones being hurt by things like this. If educators couldn't correct a problem over the course of 12 years why are they still teaching?
Thursday, February 9, 2012
Nukes for the environment
So the US approved the first nuclear reactors since 1979 with the Three Mile Island boogie. The real question is why this is the first approval since then? Why does this approval come so close to the near catastrophe in Japan? Heck Germany (the ones trying to tell everyone else how to run their balance sheets) has gone as far to say they are going to shut down all of their reactors to avoid the same potential fate as Japan. Now that the approvals are out in the open, I suspect you'll start seeing more sensational news reporting on radiation leaks at existing plants - heck in VT there were reports of radioactive fish being caught right outside the cooling towers sparking mass hysteria. A majority of media outlets are leaving out details, such as testing at the facilities report no radiation leaks and that other fish in the same stream at the other end of the state, 150 miles away, have the same radiation levels - good little tidbit which changes the severity of the situation. Not to mention, in America we don't build reactors on fault lines or earthquake central.
Not all that long ago, I lived 10 miles from an aging plant. Sure it wasn't the greatest landmark the area has known, but I really didn't mind it. Some of my lesser intelligent friends were even concerned for my life, I was moving so close to a reactor after all. These same friends also think that radiation causes three legged frogs and birth defects: lead and fertilizers cause that stuff, all radiation does is kill you or give you cancer. All I have to say is it's about damn time the flukes on capital hill moved along something that is actually beneficial to the prosperity of this great nation. There has never been a better thing for the environment than nuclear power - it's basically steam on steroids. No real waste products, no hazardous green house gases and jigga-what-whats (see what I did there?) of power for the masses. Sure you need to bury the spent fuel rods in barren deserts forever, but is that really all that bad?
All I can say is, mother nature loves nuclear power and I'm sure the tree huggers are loving this. Plus it just might drive the cost of electricity down to where plug-in electric cars are cost effective in a person's lifetime.
Not all that long ago, I lived 10 miles from an aging plant. Sure it wasn't the greatest landmark the area has known, but I really didn't mind it. Some of my lesser intelligent friends were even concerned for my life, I was moving so close to a reactor after all. These same friends also think that radiation causes three legged frogs and birth defects: lead and fertilizers cause that stuff, all radiation does is kill you or give you cancer. All I have to say is it's about damn time the flukes on capital hill moved along something that is actually beneficial to the prosperity of this great nation. There has never been a better thing for the environment than nuclear power - it's basically steam on steroids. No real waste products, no hazardous green house gases and jigga-what-whats (see what I did there?) of power for the masses. Sure you need to bury the spent fuel rods in barren deserts forever, but is that really all that bad?
All I can say is, mother nature loves nuclear power and I'm sure the tree huggers are loving this. Plus it just might drive the cost of electricity down to where plug-in electric cars are cost effective in a person's lifetime.
Monday, February 6, 2012
Black History Month and affirmative action - 2012
Growing up you learn to appreciate history, if only in an effort to not repeat the mistakes others have made through out history. Things like the horrors of slavery, treatment of native Americans or the brutality of the Civil War. It's sort of funny looking at how history is written, some sort of fixation on the bad which has occurred rather than focusing on the lighter sides of things. Think that Tiger Woods will ever be remembered as a family man? How bout that OJ Simpson was actually a half decent football player?
Race is always a difficult subject to talk about - say something controversial and you'll have swarms of lawyers at your door step looking to pad their pockets with oodles of cash - but I have to ask...how did we get here? Why is it such a bad thing to call into question the merits of things? Why can't we talk about touchy subjects and not worry about things. February is a great time to discuss affirmative action and the merits for both the work force and educational settings while at the same time remembering the history of how we got to this state of society.
What is racism? It's the preferential treatment of one group of people versus another based on some physical or genetic aspect. What is affirmative action? Basically it's the legal foundation for reverse racism, that is to say, that in a given situation, preferential treatment of a protected person is legal. It was originally implemented to promote diversity in educational settings and later extended to the work place. The theory here being that by offering a move diverse learning experience, students will be better prepared for the work place and will increase the competitive advantage which American institutions bring to the world market place.
Inherent to affirmative action are multiple layers of racism. That, without some sort of legal protection, minorities or another protected group would never be privy to the same higher education or employment opportunities as their non-protected counter parts who take these things for granted. I read this as meaning that there is a general understanding that the skills and education performance for a protected individual is below that of an unprotected group of people. In addition to this general understanding, that the better equipped non-protected group should for some reason be discriminated against due to the fact that they arbitrarily fit into that non-protected class of peoples.
To me, this comes off as nothing but racist. Why should equally qualified students jockying for the same spot at a university be subject to differential treatment. Isn't the purpose of higher education to produce a highly qualified individual which contributes to society? If the university is no longer accepting the best student for a given position, isn't that somehow defeating the purpose of higher education at the cost of the other student's education?
I want to attempt a bit of a social experiment here, encouraging people to share their results. Think about high school or college - was there ever really a cross pollination of ideas across races or was there a stigma that like should hang out with like. I attended a well-to-do private high school with one of the most diverse campuses in the country. The one thing which always stuck out in my mind was the formation of cliques - Asians were always with Asians, Blacks were always hanging out with Blacks, Latinos with Latinos and so on. It makes sense, people want to be around people which similar experiences with them - it's a comfort factor that we all inadvertently became imbued with. Even in the classrooms for group projects I found groups were almost always homogenous.Even in groups where diversity was forced, I feel that the overall outcome was unchanged, meaning regardless of the experiences of the group we would have gotten the same grade on the project.
I am slightly jaded in the sense that I know of a few students with lower SAT scores and academic records being accepted into programs which I also applied to only to personally receive rejection letters. I'm pretty jealous of them, I'll admit it... but my argument still stands true - diversity would exist without affirmative action and the use of affirmative action is racist. Why can't we learn from the mistake that racism in any form (even reverse racism) does not benefit society?
I'd like to pull particular attention to two of my favorite Black inventors: Lonnie Johnston (inventor of the Super Soaker) and George Washington Carver (invented peanut butter)
Race is always a difficult subject to talk about - say something controversial and you'll have swarms of lawyers at your door step looking to pad their pockets with oodles of cash - but I have to ask...how did we get here? Why is it such a bad thing to call into question the merits of things? Why can't we talk about touchy subjects and not worry about things. February is a great time to discuss affirmative action and the merits for both the work force and educational settings while at the same time remembering the history of how we got to this state of society.
What is racism? It's the preferential treatment of one group of people versus another based on some physical or genetic aspect. What is affirmative action? Basically it's the legal foundation for reverse racism, that is to say, that in a given situation, preferential treatment of a protected person is legal. It was originally implemented to promote diversity in educational settings and later extended to the work place. The theory here being that by offering a move diverse learning experience, students will be better prepared for the work place and will increase the competitive advantage which American institutions bring to the world market place.
Inherent to affirmative action are multiple layers of racism. That, without some sort of legal protection, minorities or another protected group would never be privy to the same higher education or employment opportunities as their non-protected counter parts who take these things for granted. I read this as meaning that there is a general understanding that the skills and education performance for a protected individual is below that of an unprotected group of people. In addition to this general understanding, that the better equipped non-protected group should for some reason be discriminated against due to the fact that they arbitrarily fit into that non-protected class of peoples.
To me, this comes off as nothing but racist. Why should equally qualified students jockying for the same spot at a university be subject to differential treatment. Isn't the purpose of higher education to produce a highly qualified individual which contributes to society? If the university is no longer accepting the best student for a given position, isn't that somehow defeating the purpose of higher education at the cost of the other student's education?
I want to attempt a bit of a social experiment here, encouraging people to share their results. Think about high school or college - was there ever really a cross pollination of ideas across races or was there a stigma that like should hang out with like. I attended a well-to-do private high school with one of the most diverse campuses in the country. The one thing which always stuck out in my mind was the formation of cliques - Asians were always with Asians, Blacks were always hanging out with Blacks, Latinos with Latinos and so on. It makes sense, people want to be around people which similar experiences with them - it's a comfort factor that we all inadvertently became imbued with. Even in the classrooms for group projects I found groups were almost always homogenous.Even in groups where diversity was forced, I feel that the overall outcome was unchanged, meaning regardless of the experiences of the group we would have gotten the same grade on the project.
I am slightly jaded in the sense that I know of a few students with lower SAT scores and academic records being accepted into programs which I also applied to only to personally receive rejection letters. I'm pretty jealous of them, I'll admit it... but my argument still stands true - diversity would exist without affirmative action and the use of affirmative action is racist. Why can't we learn from the mistake that racism in any form (even reverse racism) does not benefit society?
I'd like to pull particular attention to two of my favorite Black inventors: Lonnie Johnston (inventor of the Super Soaker) and George Washington Carver (invented peanut butter)
I just wanna note real quick...
...that we nailed Nevada, Groundhog Day, and the Super Bowl winner. So...word to ya motha.
Onto Colorado and Minnesota we go:
1st: Rom Mittney
2nd: Sant Rickorum
3rd: Ging Newtrich
4th: Pan Roul
Same for bof states. Be amazed, y'all.
Onto Colorado and Minnesota we go:
1st: Rom Mittney
2nd: Sant Rickorum
3rd: Ging Newtrich
4th: Pan Roul
Same for bof states. Be amazed, y'all.
How much credit does Obama deserve for the recovery? How much blame?
I don't know. Economic models do not, in my view, qualify as successful scientific theories. They do, however, shed a bit of light on matters of public policy from time to time (some more than others). The perspective I offer on this question is one that I find persuasive, supported by what I think to be the most compelling models, but I hardly consider it the final word on the subject. So, take from it what you will.
The standard framework, in contemporary business cycle theory, for thinking about recessions is provided by the New Keynesian DSGE family of models. These models pin the blame for recessions upon insufficient aggregate demand (AD) for goods and services produced by the economy. Sticky prices (prices that change too slowly), in the face of negative AD shocks, cause the economy to produce less than it is capable of, rendering some fraction of the economy's basic inputs (land, labor, capital, etc.) idle. Given price stickiness, the recipe for greater utilization of the economy's capacity, which would increase output and employment, is more AD.
Even if this is the best way to think about most recessions, one may always suppose that this time was different, that this was a fundamentally different kind of recession. The evidence, however, suggests otherwise. Nominal gross domestic product (NGDP) measures the aggregate level of money expenditures. It is, therefore, the statistic that most closely tracks AD. During the postwar period, variation in NGDP growth explains about 2/3rds of the variation in output growth. Variation in output growth, in turn, explains about 3/4ths of the variation in unemployment. These figures increase, not decrease, when we restrict the data to the most recent recession (plus the subsequent recovery). In other words, this time looks to have been no different from a run-of-the-mill recession--just a very deep one, precipitated by a steep decline in NGDP. While the housing crisis, or the financial crisis, may have done something to NGDP, the economic plunge did not begin when the housing market started to collapse, nor when the shadow banking system suffered a run; it began when NGDP went south (before the demise of Lehman).
To me, therefore, it seems the focus of our inquiry should be on AD. Did Obama's policies (not only those he implemented, but also those he pursued aggressively) stimulate AD relative to what would have otherwise occurred? And to the extent that they did, were there other ways to stimulate AD that would have had fewer negative side effects? These are the questions we ought to be asking, in my view. There is much to economic policy besides AD, of course, but Obama's impact on the recovery from recession is almost entirely a story about AD. My next post will be about whether Obama could've done more to boost AD, and whether his efforts to date have been successful.
The standard framework, in contemporary business cycle theory, for thinking about recessions is provided by the New Keynesian DSGE family of models. These models pin the blame for recessions upon insufficient aggregate demand (AD) for goods and services produced by the economy. Sticky prices (prices that change too slowly), in the face of negative AD shocks, cause the economy to produce less than it is capable of, rendering some fraction of the economy's basic inputs (land, labor, capital, etc.) idle. Given price stickiness, the recipe for greater utilization of the economy's capacity, which would increase output and employment, is more AD.
Even if this is the best way to think about most recessions, one may always suppose that this time was different, that this was a fundamentally different kind of recession. The evidence, however, suggests otherwise. Nominal gross domestic product (NGDP) measures the aggregate level of money expenditures. It is, therefore, the statistic that most closely tracks AD. During the postwar period, variation in NGDP growth explains about 2/3rds of the variation in output growth. Variation in output growth, in turn, explains about 3/4ths of the variation in unemployment. These figures increase, not decrease, when we restrict the data to the most recent recession (plus the subsequent recovery). In other words, this time looks to have been no different from a run-of-the-mill recession--just a very deep one, precipitated by a steep decline in NGDP. While the housing crisis, or the financial crisis, may have done something to NGDP, the economic plunge did not begin when the housing market started to collapse, nor when the shadow banking system suffered a run; it began when NGDP went south (before the demise of Lehman).
To me, therefore, it seems the focus of our inquiry should be on AD. Did Obama's policies (not only those he implemented, but also those he pursued aggressively) stimulate AD relative to what would have otherwise occurred? And to the extent that they did, were there other ways to stimulate AD that would have had fewer negative side effects? These are the questions we ought to be asking, in my view. There is much to economic policy besides AD, of course, but Obama's impact on the recovery from recession is almost entirely a story about AD. My next post will be about whether Obama could've done more to boost AD, and whether his efforts to date have been successful.
Iranian agression or puffs of smoke
Iran upped the ante in their most recent attempts to catch the ire of the world by conducting a new series of war games - this time in the air. You know, paper airplanes and surface to air missiles that always miss their mark. More than likely this is in response to some of the fluff floating around on the interwebs concerning Israel's likely hood of launch air strikes to delay Iran's ever vigilant quest for the power of the atom. Mr Poopy Pants, otherwise known as Ayatollah Ali Khamenei (for those of you living under rocks he's the supreme ruler of Iran not to be confused with Mr Douchebag Mahmoud Ahmadinejad), recently talked about eliminating the state of Israel from the world forum - who would have thunk it?
Every one should really appreciate radical thinkers, you know the ones that think outside the box but Iran might be fingering the wrong country here to pick a fight with. Let's look at war as a pure numbers game: Iran expends roughly $7 billion a year (2010 estimates) versus Israel's $13 billion. Iran certainly talks the big talk but Israel walks the big walk - heck almost their entire air force is comprised of US born jets. Let's not forget Israel's largest backer - the US government (military expenditures on the order of almost $700billion for a point of reference).
Staying on that numbers game, Israel totes a lean 176,000 active troops at any one time versus Iran's 550,000. Money doesn't buy u everything but it certainly buys you the latest gagetry to blow your enemy away with. Maybe a good way to look at it is to compare the dollar per active troop in assessing an all out brawl between the two: Israel - $74k versus Iran's $13k - more than 550% difference. I know if I had to pick the military to join, I'd go with the one spending more money.
Given the recent slue of empty threats coming out of Iran as of late, I wouldn't be surprised by a sudden mass air strike spear headed by Israel (maybe even a little US involvement). Like the little kid in the school yard, eventually he can no longer take it and beats the piss out of the bully. It's not like Israel has really cared in the past about this sort of stuff anyway (see any number of disproportionate responses to aggressions by enemies of Israel - like the 'Gaza War' where ~1100 Palestinian's died versus 13 Israelis, 4 of which were friendly fire).
Pakistan is also in the process of shooting themselves in the foot by saying any act of aggression towards Iran will bring them into the mix. Oh no, we don't support terrorists (see the leaked UN memo on Pakistan's terror involvement or the countless CIA drone strikes for counter evidence) which makes our involvement in something like this more of a religious zeal than anything else. That's going to be an interesting situation when the US suddenly drops all aid to the country (actually $700million is already frozen by lawmakers since Pakistan can't get their act together). Will Pakistan stick to their guns and come to Iran's aid? Only time will tell.
If a fight does break out in the Middle East, it's not going to be pretty. Right now we're talking about Iran, Pakistan, Israel and through association the United States. Remember kiddies, the US is just after Iranian oil afterall...
Every one should really appreciate radical thinkers, you know the ones that think outside the box but Iran might be fingering the wrong country here to pick a fight with. Let's look at war as a pure numbers game: Iran expends roughly $7 billion a year (2010 estimates) versus Israel's $13 billion. Iran certainly talks the big talk but Israel walks the big walk - heck almost their entire air force is comprised of US born jets. Let's not forget Israel's largest backer - the US government (military expenditures on the order of almost $700billion for a point of reference).
Staying on that numbers game, Israel totes a lean 176,000 active troops at any one time versus Iran's 550,000. Money doesn't buy u everything but it certainly buys you the latest gagetry to blow your enemy away with. Maybe a good way to look at it is to compare the dollar per active troop in assessing an all out brawl between the two: Israel - $74k versus Iran's $13k - more than 550% difference. I know if I had to pick the military to join, I'd go with the one spending more money.
Given the recent slue of empty threats coming out of Iran as of late, I wouldn't be surprised by a sudden mass air strike spear headed by Israel (maybe even a little US involvement). Like the little kid in the school yard, eventually he can no longer take it and beats the piss out of the bully. It's not like Israel has really cared in the past about this sort of stuff anyway (see any number of disproportionate responses to aggressions by enemies of Israel - like the 'Gaza War' where ~1100 Palestinian's died versus 13 Israelis, 4 of which were friendly fire).
Pakistan is also in the process of shooting themselves in the foot by saying any act of aggression towards Iran will bring them into the mix. Oh no, we don't support terrorists (see the leaked UN memo on Pakistan's terror involvement or the countless CIA drone strikes for counter evidence) which makes our involvement in something like this more of a religious zeal than anything else. That's going to be an interesting situation when the US suddenly drops all aid to the country (actually $700million is already frozen by lawmakers since Pakistan can't get their act together). Will Pakistan stick to their guns and come to Iran's aid? Only time will tell.
If a fight does break out in the Middle East, it's not going to be pretty. Right now we're talking about Iran, Pakistan, Israel and through association the United States. Remember kiddies, the US is just after Iranian oil afterall...
Sunday, February 5, 2012
Let's talk about the budget deficit, baby
What is the government's budget deficit? It is the difference between the government's expenditures and its income in a given year. The government's expenditures must be financed--if not by income, then by borrowing. Hence, the budget deficit is the contribution that a given year makes to the public debt.
What causes the budget deficit to grow? If the government's expenditures rise, other things being equal, or if the government's income falls, other things being equal, the budget deficit increases. That's it. It is always one, the other, or both that cause the deficit to swell. Consequently, any recipe for shrinking the budget deficit must involve less expenditures, more income, or some mix of the two.
Why does the budget deficit matter? The government's savings is, like for a household, the difference between its income and its expenditures in a given year. Thus, a bigger budget deficit implies less public savings. As long as decreases in public savings do not induce equal or offsetting increases in private savings, therefore, a bigger budget deficit makes for less national savings. Less national savings either contracts the supply of loanable funds, expands the demand for loanable funds, or both, raising the natural rate of interest. A higher natural rate of interest, other things being equal, stimulates the aggregate demand for goods and services (AD).
The central bank is usually tasked with managing AD by way of managing the market rate of interest. If AD was previously on target, by the central bank's lights, then the market rate of interest will be raised in order to offset the AD stimulus induced by the swelling of the budget deficit. Thus, under normal circumstances, a bigger budget deficit raises interest rates. At higher interest rates, private borrowers do not wish to borrow as much, which means that the government's additional borrowing is "crowding out" some private borrowing. In most cases, therefore, it only makes sense to increase the budget deficit if we have reason to believe that the government's borrowing will prove to be more productive than the private investment it is crowding out.
Additionally, the government's financing need not come solely from domestic lenders. Foreign lenders who wish to buy the government's debt will first have to exchange their own currency for the domestic currency. This expands the demand for the domestic currency, causing it to strengthen in foreign exchange markets. A stronger currency makes importing from the domestic country more expensive, causing the domestic country's exports to fall. Thus, a bigger budget deficit also produces a bigger trade deficit.
There is also a question of how the debt produced by bigger budget deficits is to be retired. One option is to roll over the debt, which is to say, borrow some more to make principal and interest payments on the debt in a timely manner. This is feasible so long as interest rates on government debt remain low. Another option is to increase the government's savings, by increasing its income (collecting more tax revenues), decreasing its expenditures, or a bit of both, in order to pay down the debt. A final option is to default on the debt.
The first option is the most painless. A government's ability to service its debt depends upon its power to tax its citizens, for this is its only (significant) source of income. As a result, the higher a country's GDP, the more able it is to service its debt, for this makes possible the raising of greater tax revenues. A government's ability to service its debt, therefore, is best revealed by its debt-to-GDP ratio, rather than its debt in absolute terms. So long as the country's economy is growing as fast, or faster, than the government's debt, investors do not have cause for concern. In such cases, the government typically enjoys low interest rates, making rolling over its debt feasible (forever, potentially).
The second option is more or less painful depending on the circumstances. Economic growth raises the government's income--often reducing its expenditures on safety net programs, too--thereby increasing its savings without anyone making sacrifices. In countries with serious growth problems, or serious debt problems, though, this may not be enough. In such cases, sacrifices must be made. Either tax rates go way up, expenditures go way down, or both. The more growth-friendly the reforms, and the more slowly they're phased in, the less painful the transition. The longer a country waits to make these sacrifices, the more hurried and more extreme they have to be.
If a country's debt problems get out of hand, the result is a 'hard landing'. Investors lose confidence in the government's ability or willingness to service its debts, so they charge higher interest rates for the greater risk they're bearing. Higher interest rates, in turn, worsen the government's finances, causing investors to charge even higher interest rates, worsening the problem further, etc. Eventually, it becomes impossible for the government to service its debts through either economic growth or budget reforms (see, e.g., Greece). At that point, the choice is between explicit default, or implicit default through debt monetization. Only countries with their own currencies have the latter option, and this option usually serves to slow the aforementioned interest rate death spiral. Both courses subject economies to severe financial/macroeconomic dislocation in the short run (due to either banking panics or currency crises), and much higher borrowing costs in the long run.
There's more to say on the subject, but the short story is: maintain budget deficits when crowding out is not much of a problem (i.e., when financing productive public investments, in the midst of a recession, etc.), but maintain budget surpluses the rest of the time, so that investors chillax and the government doesn't risk a hard landing. Don't wait to fix long-term deficit problems--the more thoughtfully they're approached, and the more slowly they're implemented, the happier the outcome. And don't worry so much about future generations. Debt is indeed a burden upon them, but they'll be richer than us, so, whatever.
ADDENDUM: In the United States, bigger budget deficits have not, of late, raised interest rates. The reason is that the US central bank, the Federal Reserve, would like to see lower interest rates, but its policy rate is near zero (its lower bound). As a result, the Fed has not raised interest rates in order to offset bigger budget deficits--in effect, it is having fiscal policy to do some of the work (of stimulating AD) that would normally be performed entirely by monetary policy. Nor have investors lost confidence in the US government (yet!), because they expect currently bloated budget deficits to shrink substantially as the US economy returns to full employment. The real deficit problem in the US stems from the implicit liabilities of Medicare, Medicaid, Social Security, etc. Without reform, these programs imply (under plausible assumptions) unsustainably large budget deficits that would, almost surely, shake investor confidence. Investors have been giving us quite a bit of breathing room to reform these programs, but the longer we take to do so, the more likely it is that we (or the next generation) will suffer a hard landing.
What causes the budget deficit to grow? If the government's expenditures rise, other things being equal, or if the government's income falls, other things being equal, the budget deficit increases. That's it. It is always one, the other, or both that cause the deficit to swell. Consequently, any recipe for shrinking the budget deficit must involve less expenditures, more income, or some mix of the two.
Why does the budget deficit matter? The government's savings is, like for a household, the difference between its income and its expenditures in a given year. Thus, a bigger budget deficit implies less public savings. As long as decreases in public savings do not induce equal or offsetting increases in private savings, therefore, a bigger budget deficit makes for less national savings. Less national savings either contracts the supply of loanable funds, expands the demand for loanable funds, or both, raising the natural rate of interest. A higher natural rate of interest, other things being equal, stimulates the aggregate demand for goods and services (AD).
The central bank is usually tasked with managing AD by way of managing the market rate of interest. If AD was previously on target, by the central bank's lights, then the market rate of interest will be raised in order to offset the AD stimulus induced by the swelling of the budget deficit. Thus, under normal circumstances, a bigger budget deficit raises interest rates. At higher interest rates, private borrowers do not wish to borrow as much, which means that the government's additional borrowing is "crowding out" some private borrowing. In most cases, therefore, it only makes sense to increase the budget deficit if we have reason to believe that the government's borrowing will prove to be more productive than the private investment it is crowding out.
Additionally, the government's financing need not come solely from domestic lenders. Foreign lenders who wish to buy the government's debt will first have to exchange their own currency for the domestic currency. This expands the demand for the domestic currency, causing it to strengthen in foreign exchange markets. A stronger currency makes importing from the domestic country more expensive, causing the domestic country's exports to fall. Thus, a bigger budget deficit also produces a bigger trade deficit.
There is also a question of how the debt produced by bigger budget deficits is to be retired. One option is to roll over the debt, which is to say, borrow some more to make principal and interest payments on the debt in a timely manner. This is feasible so long as interest rates on government debt remain low. Another option is to increase the government's savings, by increasing its income (collecting more tax revenues), decreasing its expenditures, or a bit of both, in order to pay down the debt. A final option is to default on the debt.
The first option is the most painless. A government's ability to service its debt depends upon its power to tax its citizens, for this is its only (significant) source of income. As a result, the higher a country's GDP, the more able it is to service its debt, for this makes possible the raising of greater tax revenues. A government's ability to service its debt, therefore, is best revealed by its debt-to-GDP ratio, rather than its debt in absolute terms. So long as the country's economy is growing as fast, or faster, than the government's debt, investors do not have cause for concern. In such cases, the government typically enjoys low interest rates, making rolling over its debt feasible (forever, potentially).
The second option is more or less painful depending on the circumstances. Economic growth raises the government's income--often reducing its expenditures on safety net programs, too--thereby increasing its savings without anyone making sacrifices. In countries with serious growth problems, or serious debt problems, though, this may not be enough. In such cases, sacrifices must be made. Either tax rates go way up, expenditures go way down, or both. The more growth-friendly the reforms, and the more slowly they're phased in, the less painful the transition. The longer a country waits to make these sacrifices, the more hurried and more extreme they have to be.
If a country's debt problems get out of hand, the result is a 'hard landing'. Investors lose confidence in the government's ability or willingness to service its debts, so they charge higher interest rates for the greater risk they're bearing. Higher interest rates, in turn, worsen the government's finances, causing investors to charge even higher interest rates, worsening the problem further, etc. Eventually, it becomes impossible for the government to service its debts through either economic growth or budget reforms (see, e.g., Greece). At that point, the choice is between explicit default, or implicit default through debt monetization. Only countries with their own currencies have the latter option, and this option usually serves to slow the aforementioned interest rate death spiral. Both courses subject economies to severe financial/macroeconomic dislocation in the short run (due to either banking panics or currency crises), and much higher borrowing costs in the long run.
There's more to say on the subject, but the short story is: maintain budget deficits when crowding out is not much of a problem (i.e., when financing productive public investments, in the midst of a recession, etc.), but maintain budget surpluses the rest of the time, so that investors chillax and the government doesn't risk a hard landing. Don't wait to fix long-term deficit problems--the more thoughtfully they're approached, and the more slowly they're implemented, the happier the outcome. And don't worry so much about future generations. Debt is indeed a burden upon them, but they'll be richer than us, so, whatever.
ADDENDUM: In the United States, bigger budget deficits have not, of late, raised interest rates. The reason is that the US central bank, the Federal Reserve, would like to see lower interest rates, but its policy rate is near zero (its lower bound). As a result, the Fed has not raised interest rates in order to offset bigger budget deficits--in effect, it is having fiscal policy to do some of the work (of stimulating AD) that would normally be performed entirely by monetary policy. Nor have investors lost confidence in the US government (yet!), because they expect currently bloated budget deficits to shrink substantially as the US economy returns to full employment. The real deficit problem in the US stems from the implicit liabilities of Medicare, Medicaid, Social Security, etc. Without reform, these programs imply (under plausible assumptions) unsustainably large budget deficits that would, almost surely, shake investor confidence. Investors have been giving us quite a bit of breathing room to reform these programs, but the longer we take to do so, the more likely it is that we (or the next generation) will suffer a hard landing.
Friday, February 3, 2012
It's morning in America
US economy grows 243,000 jobs in the month of January. In other news, Obama is looking to be a safer bet for re-election everyday.
Addendum: I should explain what I think is happening. In part two of my series on the jobs crisis, I said that too-high (cyclical) unemployment is due to interest rates being too high. To be more precise, there is a so-called "natural" rate of interest, which is the interest rate that would equate planned savings and planned investment, keeping aggregate demand on target. Aggregate demand management involves moving the market rate of interest to keep up with movements in the natural rate of interest. The Fed has been keeping its policy rate near zero since late 2008, so why is the (cyclical) employment situation improving? My view is that the natural rate of interest is rising, which effectively makes the Fed's unchanged stance more expansionary than it was previously.
Why is the natural rate of interest rising? Well, folks haven't been spending a whole lot (hence weak aggregate demand). Consumer durables (e.g., cars) only work for so long. At some point, you cannot delay that new car purchase any longer, so, you have to borrow more (more planned investment) and consume more (less planned savings). Together, that makes for a higher natural rate of interest. In other words, when a recession hits, consumers delay a lot of discretionary purchases until they're more comfortable with their financial circumstances, but you can only delay such purchases for so long. This crisis has been going on so long, and Americans are sufficiently impatient, that they're starting to go ahead with those purchases anyway. And that means that the Fed is effectively stimulating aggregate demand more than it was before, even if its interest rate policy is effectively the same (though they have been dragging out the first projected rate hike for some time, so that probably helps, too). If enough people begin to replenish their consumer durables, a self-sustaining recovery may be underway, as long as the Fed doesn't prematurely strangle it. Hence, it's morning in America...I think. (Buy stocks, sell bonds).
P.S. Matt Yglesias agrees with me to an eery extent. In fairness I generally see things the same way he does...
Addendum: I should explain what I think is happening. In part two of my series on the jobs crisis, I said that too-high (cyclical) unemployment is due to interest rates being too high. To be more precise, there is a so-called "natural" rate of interest, which is the interest rate that would equate planned savings and planned investment, keeping aggregate demand on target. Aggregate demand management involves moving the market rate of interest to keep up with movements in the natural rate of interest. The Fed has been keeping its policy rate near zero since late 2008, so why is the (cyclical) employment situation improving? My view is that the natural rate of interest is rising, which effectively makes the Fed's unchanged stance more expansionary than it was previously.
Why is the natural rate of interest rising? Well, folks haven't been spending a whole lot (hence weak aggregate demand). Consumer durables (e.g., cars) only work for so long. At some point, you cannot delay that new car purchase any longer, so, you have to borrow more (more planned investment) and consume more (less planned savings). Together, that makes for a higher natural rate of interest. In other words, when a recession hits, consumers delay a lot of discretionary purchases until they're more comfortable with their financial circumstances, but you can only delay such purchases for so long. This crisis has been going on so long, and Americans are sufficiently impatient, that they're starting to go ahead with those purchases anyway. And that means that the Fed is effectively stimulating aggregate demand more than it was before, even if its interest rate policy is effectively the same (though they have been dragging out the first projected rate hike for some time, so that probably helps, too). If enough people begin to replenish their consumer durables, a self-sustaining recovery may be underway, as long as the Fed doesn't prematurely strangle it. Hence, it's morning in America...I think. (Buy stocks, sell bonds).
P.S. Matt Yglesias agrees with me to an eery extent. In fairness I generally see things the same way he does...
Thursday, February 2, 2012
Issue #1: Unemployment in America, Pt. III
The recipe for a lower unemployment rate, then, is lower interest rates. Why isn't the US government delivering? Well, the Federal Reserve, the central bank of the United States, which is responsible for setting interest rate policy, lowered its policy rate to essentially zero in late 2008, in response to the bottom falling out of the US economy. But why didn't it lower it some more? Why didn't the Fed go negative?
Suppose you have cash on hand. Your decision is whether to lend it to others or not. The Fed has pushed interest rates below zero. What do you do? I dunno about you, but I'd hang onto my cash. Why? Simple--cash earns (nominal) interest at a rate of precisely 0% per year. Zero sounds pretty bad, but I'd prefer zero to, say, negative three. Thus, if the Fed tries to push its policy rate into negative territory, folks will just hoard their cash, which does nothing for the unemployed.
What, in that case, can the Fed do for the unemployed under these circumstances? The Fed may no longer be able to lower interest rates today, but don't forget about tomorrow. Interest rates won't remain at zero forever, so there is surely a time at which the Fed is expected to raise interest rates. What the Fed can do today is to convince the public that it will not raise interest rates until there is enough aggregate demand to fully employ America's labor force.
Here is a picture of aggregate demand, as measured by nominal gross domestic product (NGDP) over the last decade:
Notice that when NGDP plunged, so did employment. Notice also that even though it has stopped plunging, we never caught up with the pre-crisis trend. That's why unemployment has remained so stubbornly high.
What the Fed ought to do is to make a commitment to keep interest rates near 0% until NGDP recovers to its pre-crisis trend level. In short, the solution to high unemployment is NGDP targeting. Think I'm pulling this out of my ass? Here's Goldman motherfucking Sachs. (Note that I was totally on this first--Jan Hatzius, bow to your sensai.)
That, my fellow Americans, is what I would do to put you back to work. Just hang in there for 13 years.
Next up: fossil fuels, deforestation, global warming, etc...
[Earlier posts in this series:
Announcing my bid for the US presidency
Issue #1: Unemployment in America
Issue #1: Unemployment in America, Pt. II
]
Suppose you have cash on hand. Your decision is whether to lend it to others or not. The Fed has pushed interest rates below zero. What do you do? I dunno about you, but I'd hang onto my cash. Why? Simple--cash earns (nominal) interest at a rate of precisely 0% per year. Zero sounds pretty bad, but I'd prefer zero to, say, negative three. Thus, if the Fed tries to push its policy rate into negative territory, folks will just hoard their cash, which does nothing for the unemployed.
What, in that case, can the Fed do for the unemployed under these circumstances? The Fed may no longer be able to lower interest rates today, but don't forget about tomorrow. Interest rates won't remain at zero forever, so there is surely a time at which the Fed is expected to raise interest rates. What the Fed can do today is to convince the public that it will not raise interest rates until there is enough aggregate demand to fully employ America's labor force.
Here is a picture of aggregate demand, as measured by nominal gross domestic product (NGDP) over the last decade:
Notice that when NGDP plunged, so did employment. Notice also that even though it has stopped plunging, we never caught up with the pre-crisis trend. That's why unemployment has remained so stubbornly high.
What the Fed ought to do is to make a commitment to keep interest rates near 0% until NGDP recovers to its pre-crisis trend level. In short, the solution to high unemployment is NGDP targeting. Think I'm pulling this out of my ass? Here's Goldman motherfucking Sachs. (Note that I was totally on this first--Jan Hatzius, bow to your sensai.)
That, my fellow Americans, is what I would do to put you back to work. Just hang in there for 13 years.
Next up: fossil fuels, deforestation, global warming, etc...
[Earlier posts in this series:
Announcing my bid for the US presidency
Issue #1: Unemployment in America
Issue #1: Unemployment in America, Pt. II
]
Monday, January 30, 2012
Issue #1: Unemployment in America, Pt. II
Suppose that you expect to have a certain amount of funds at your disposal (you're expecting your next paycheck, for example). What may you plan to do with those funds? One option is to spend them today, consuming goods and services produced by the economy. Another option is to save them today, so that you may consume goods and services down the line. If you decide upon the latter, you have two more options to choose from. The first is to free up your savings so that someone else may make use of them, in exchange for a promise of repayment (with interest) when you're ready to spend. The second is to keep your savings to yourself--that is, to hoard money--until you're ready to spend.
Whether you decide to consume (spend your funds yourself) or to invest (let someone else spend your funds), you're contributing to the aggregate demand for goods and services produced by the economy. It's only if you engage in hoarding that you deprive the economy of aggregate demand. The job of financial markets is to match savers with borrowers. If interest rates are just right, savers want to save as much as borrowers want to borrow. Consequently, there is little hoarding, and aggregate demand is plentiful. If interest rates are too high, savers want to save more than borrowers want to borrow, causing hoarding, thereby reducing aggregate demand.
In my previous post, I contended that greater aggregate demand would reduce the unemployment rate, putting willing workers back to work. If the preceding discussion is correct, then, the recipe for stimulating aggregate demand is lower interest rates. What, then, my fellow Americans, is my diagnosis of our jobs crisis? The interest rate is too damn high!
In my final post on this subject, I'll explain why lower interest rates may not be so easy for the government to engineer, under the unusual circumstances of the present.
[Earlier posts in this series:
Announcing my bid for the US presidency
Issue #1: Unemployment in America
]
Whether you decide to consume (spend your funds yourself) or to invest (let someone else spend your funds), you're contributing to the aggregate demand for goods and services produced by the economy. It's only if you engage in hoarding that you deprive the economy of aggregate demand. The job of financial markets is to match savers with borrowers. If interest rates are just right, savers want to save as much as borrowers want to borrow. Consequently, there is little hoarding, and aggregate demand is plentiful. If interest rates are too high, savers want to save more than borrowers want to borrow, causing hoarding, thereby reducing aggregate demand.
In my previous post, I contended that greater aggregate demand would reduce the unemployment rate, putting willing workers back to work. If the preceding discussion is correct, then, the recipe for stimulating aggregate demand is lower interest rates. What, then, my fellow Americans, is my diagnosis of our jobs crisis? The interest rate is too damn high!
In my final post on this subject, I'll explain why lower interest rates may not be so easy for the government to engineer, under the unusual circumstances of the present.
[Earlier posts in this series:
Announcing my bid for the US presidency
Issue #1: Unemployment in America
]
Issue #1: Unemployment in America
Suppose that you own and operate a single firm. For whatever reason, it seems that the demand for what your firm produces has declined. Recognizing this, what should you do? Well, if consumers do not want to buy as much of your output as they did before, you should not produce as much output as you did before. There's no profit to be made in producing stuff nobody wants to buy.
Now that you have decided to scale back your output, it occurs to you that you no longer require as many inputs as you once did. Among your many inputs is labor. If you do not require as much labor as you did before, some of your workers must be laid off.
Responding to a fall in demand, therefore, you have in a very small way raised the unemployment rate. Your ex-workers do not have jobs, but continue to actively seek employment. But why has the demand for your firm's output pulled back? Presumably, other firms in the economy have either begun producing the same goods and services more cheaply (due to technological progress, say), or begun producing different goods and services which consumers want more than the goods and services you produce (due to a shift in consumer preferences, say). Whichever is the case, just as the demand for what you produce is falling, the demand for what others produce is rising. Needing to produce more output to meet growing demand, these other firms must draw upon more inputs--in particular, more labor. This raises the demand for labor, offsetting the fall caused by your firm, thereby restoring full employment in relatively short order. The unemployment rate is elevated only slightly, and only briefly.
Suppose instead that the aggregate demand for goods and services produced by the US economy declines. Much like your firm, the economy "recognizes" that the demand for its output has fallen, causing it to scale back production. Just as your firm would do in the course of scaling back production, the economy disemploys many of its inputs--most visibly, labor. The unemployment rate rises as in the previous case.
In contrast to our earlier example, however, a fall in aggregate demand is not offset elsewhere in the economy. Remember that, in this instance, we're talking about the economy as a whole--there is no elsewhere. Does this mean that the unemployment rate will be permanently elevated?
Ideally, no. The reason is that, usually, prices adjust to clear markets. In our first example, the way that the economy signals to the newly unemployed workers to shift out of your declining firm into other expanding firms is by pushing down the wages you offer, while pushing up the wages they offer. Similarly, if the aggregate demand for goods and services produced by the economy declines, this ought to lower wages in general, encouraging firms to hire more workers. And if wages fall far enough, quickly enough, the number of people looking for work but unable to find it will be as low as always. That is, the unemployment rate will quickly return to normal levels.
In reality, however, this does not happen. The reason, in the view of many macroeconomists, is that wages are 'sticky', or 'rigid'. When there is a drop in aggregate demand, instead of wages falling instantaneously, many wages fall rather sluggishly, or in lots of cases not at all. No single theory as to why this is the case commands a consensus, but the evidence in favor of wage stickiness is quite solid. If wages do not fall immediately when aggregate demand falls, then laid off workers will continue to apply for increasingly scarce job opportunities, keeping the unemployment rate elevated in the short run. In the long run, wages will fall far enough to restore the economy to full employment, but as J. M. Keynes famously remarked, "in the long run, we are all dead." A lot of unnecessary suffering is evitable if policymakers properly deploy the instruments at their disposal to stimulate aggregate demand, encouraging the economy to scale up production, which in turn encourages the re-employment of unemployed workers. In my next post, I will explain how best to do just that.
[Earlier posts in this series:
Announcing my bid for the US presidency
]
Now that you have decided to scale back your output, it occurs to you that you no longer require as many inputs as you once did. Among your many inputs is labor. If you do not require as much labor as you did before, some of your workers must be laid off.
Responding to a fall in demand, therefore, you have in a very small way raised the unemployment rate. Your ex-workers do not have jobs, but continue to actively seek employment. But why has the demand for your firm's output pulled back? Presumably, other firms in the economy have either begun producing the same goods and services more cheaply (due to technological progress, say), or begun producing different goods and services which consumers want more than the goods and services you produce (due to a shift in consumer preferences, say). Whichever is the case, just as the demand for what you produce is falling, the demand for what others produce is rising. Needing to produce more output to meet growing demand, these other firms must draw upon more inputs--in particular, more labor. This raises the demand for labor, offsetting the fall caused by your firm, thereby restoring full employment in relatively short order. The unemployment rate is elevated only slightly, and only briefly.
Suppose instead that the aggregate demand for goods and services produced by the US economy declines. Much like your firm, the economy "recognizes" that the demand for its output has fallen, causing it to scale back production. Just as your firm would do in the course of scaling back production, the economy disemploys many of its inputs--most visibly, labor. The unemployment rate rises as in the previous case.
In contrast to our earlier example, however, a fall in aggregate demand is not offset elsewhere in the economy. Remember that, in this instance, we're talking about the economy as a whole--there is no elsewhere. Does this mean that the unemployment rate will be permanently elevated?
Ideally, no. The reason is that, usually, prices adjust to clear markets. In our first example, the way that the economy signals to the newly unemployed workers to shift out of your declining firm into other expanding firms is by pushing down the wages you offer, while pushing up the wages they offer. Similarly, if the aggregate demand for goods and services produced by the economy declines, this ought to lower wages in general, encouraging firms to hire more workers. And if wages fall far enough, quickly enough, the number of people looking for work but unable to find it will be as low as always. That is, the unemployment rate will quickly return to normal levels.
In reality, however, this does not happen. The reason, in the view of many macroeconomists, is that wages are 'sticky', or 'rigid'. When there is a drop in aggregate demand, instead of wages falling instantaneously, many wages fall rather sluggishly, or in lots of cases not at all. No single theory as to why this is the case commands a consensus, but the evidence in favor of wage stickiness is quite solid. If wages do not fall immediately when aggregate demand falls, then laid off workers will continue to apply for increasingly scarce job opportunities, keeping the unemployment rate elevated in the short run. In the long run, wages will fall far enough to restore the economy to full employment, but as J. M. Keynes famously remarked, "in the long run, we are all dead." A lot of unnecessary suffering is evitable if policymakers properly deploy the instruments at their disposal to stimulate aggregate demand, encouraging the economy to scale up production, which in turn encourages the re-employment of unemployed workers. In my next post, I will explain how best to do just that.
[Earlier posts in this series:
Announcing my bid for the US presidency
]
Sunday, January 29, 2012
Predicting the Florida Republican primary
1. Mitt Romney
2. Newt Gingrich
3. Rick Santorum
4. Ron Paul
If I'm right, you owe me a cookie. Make it oatmeal raisin, please.
2. Newt Gingrich
3. Rick Santorum
4. Ron Paul
If I'm right, you owe me a cookie. Make it oatmeal raisin, please.
Saturday, January 28, 2012
That's no moon...
Earlier this week, Newt Gingrich haughtily announced his plans to establish an American colony on the moon by the end of his second term as president. He laid out preliminary plans to fund the moon base by taking a portion of NASA's budget to use as prize money for private companies to do the leg work. The plans included the possibility of the moon colony petitioning for statehood once the population reached 13,000. It's no surprise that Gingrich's announcement came days before the Republican debate in Cocoa, Florida, the so-called "Space Coast".
Other than the good people of Cocoa, whose livelihoods depend so deeply on the space industry, many have scoffed at Gingrich's fantastical plan, as if it came out of a work of science fiction. During the CNN debate this week, Mitt Romney took a crack at Gingrich's proposal saying, "If I had a business executive come to me and say they wanted to spend a few hundred billion dollars to put a colony on the moon, I’d say, ‘You’re fired.’” Rick Santorum added his viewpoint of the economic irresponsibility of the plan, while Ron Paul also weighed in, making some comment about how he wants to go to the moon or something.
It's easy to be negative on such visionary plans. Especially with a plan as insanely flawed as one for a moon colony in eight years. But once you wade through the swamp of insignificant problems like funding and managing this program, there is beaucoup merit to be found. With tourism being such a large industry here on Earth, why wouldn't the same hold true for the moon? I know I'd like to see what it feels like to smash a golf ball into low orbit and do some sweet tricks in a low gravity moon buggy. The tourism would bolster the slipping air transport and cruise industries. It's been found that some people can't handle the relative isolation of visiting a small island for too long, this is referred to as island fever. If people are being babies and crying to come home from a vacation on a sun bathed tropical island for a few months, think how quickly and frequently people will get moon fever. The airline industry could make a killing with their standard 3000% charge for one-way tickets, alone. As for cruises to the moon, there aren't nearly as many icebergs lurking out in space, ready to sneak up on unsuspecting cruise ships and there's a very low risk of running aground. Also, no space pirates. Yet. Furthermore, the moon's supply of some pricey minerals is many times that of Earth's. The moon is pretty much a giant cash cow and we need to get in there while the getting is good. And who can forget the Helium 3. Helium 3, people!
The only beef I have with Gingrich's plan is that he claims he wants to accomplish this before the Chinese. Well, way to blow the element of surprise there, big guy. If the Chinese weren't already thinking about this, they definitely are now, probably.
Did you know they think the Man in the Moon is actually a woman...
Other than the good people of Cocoa, whose livelihoods depend so deeply on the space industry, many have scoffed at Gingrich's fantastical plan, as if it came out of a work of science fiction. During the CNN debate this week, Mitt Romney took a crack at Gingrich's proposal saying, "If I had a business executive come to me and say they wanted to spend a few hundred billion dollars to put a colony on the moon, I’d say, ‘You’re fired.’” Rick Santorum added his viewpoint of the economic irresponsibility of the plan, while Ron Paul also weighed in, making some comment about how he wants to go to the moon or something.
It's easy to be negative on such visionary plans. Especially with a plan as insanely flawed as one for a moon colony in eight years. But once you wade through the swamp of insignificant problems like funding and managing this program, there is beaucoup merit to be found. With tourism being such a large industry here on Earth, why wouldn't the same hold true for the moon? I know I'd like to see what it feels like to smash a golf ball into low orbit and do some sweet tricks in a low gravity moon buggy. The tourism would bolster the slipping air transport and cruise industries. It's been found that some people can't handle the relative isolation of visiting a small island for too long, this is referred to as island fever. If people are being babies and crying to come home from a vacation on a sun bathed tropical island for a few months, think how quickly and frequently people will get moon fever. The airline industry could make a killing with their standard 3000% charge for one-way tickets, alone. As for cruises to the moon, there aren't nearly as many icebergs lurking out in space, ready to sneak up on unsuspecting cruise ships and there's a very low risk of running aground. Also, no space pirates. Yet. Furthermore, the moon's supply of some pricey minerals is many times that of Earth's. The moon is pretty much a giant cash cow and we need to get in there while the getting is good. And who can forget the Helium 3. Helium 3, people!
The only beef I have with Gingrich's plan is that he claims he wants to accomplish this before the Chinese. Well, way to blow the element of surprise there, big guy. If the Chinese weren't already thinking about this, they definitely are now, probably.
Did you know they think the Man in the Moon is actually a woman...
Friday, January 27, 2012
Utopian tax policy
Every month, the government would provide each citizen with a check for, say, $250. Businesses would report their revenue from sales, from which they would deduct the cost of their inputs (including labor costs), paying a flat rate of, say, 25% on the difference. Individual workers would report their wages and benefits, paying in line with a graduated rate schedule beginning at 0% for very low-wage workers, and ending at 25% (the rate on businesses) for very high-wage workers. There would be no further deductions, exclusions, credits, etc.
There would also be selective taxes on negative externalities (e.g., pollution), subsidies for positive externalities (e.g., basic scientific research), and if necessary, paternalistic carrots and sticks (e.g., encouraging retirement savings, discouraging addictive drugs).
That's it. It would take a worker about 5 minutes, and a business about 15 minutes, to complete their respective tax returns each year. No Turbotax, no tax attorneys, just your basic calculator and a postcard.
I'm a gradualist, so I wouldn't shift to this regime overnight. To move in the right direction, however, we should begin to broaden the tax base (eliminate wasteful deductions, exclusions, credits, etc.), lower tax rates on saving and investment (cut personal income, corporate income, capital gains, dividend, and inheritance tax rates, among others), up the progressivity of consumption taxes (e.g., payroll taxes), implement Pigouvian (externality-correcting) taxes/subsidies, and reform entitlements--substituting a lump-sum subsidy for Medicare, Medicaid, Social Security, etc. Doing a bit on each of these fronts would be a very good start, and would also be a good way to go about reigning in the long-run budget deficit (a la Bowles-Simpson).
My proposal (which is little different from the Bradford "X Tax") is rather uncontroversial in public finance circles. Note also that under the ideal system, Mitt Romney would (as far as I can tell) have an effective (statutory) tax rate near 0%. So, there's that.
There would also be selective taxes on negative externalities (e.g., pollution), subsidies for positive externalities (e.g., basic scientific research), and if necessary, paternalistic carrots and sticks (e.g., encouraging retirement savings, discouraging addictive drugs).
That's it. It would take a worker about 5 minutes, and a business about 15 minutes, to complete their respective tax returns each year. No Turbotax, no tax attorneys, just your basic calculator and a postcard.
I'm a gradualist, so I wouldn't shift to this regime overnight. To move in the right direction, however, we should begin to broaden the tax base (eliminate wasteful deductions, exclusions, credits, etc.), lower tax rates on saving and investment (cut personal income, corporate income, capital gains, dividend, and inheritance tax rates, among others), up the progressivity of consumption taxes (e.g., payroll taxes), implement Pigouvian (externality-correcting) taxes/subsidies, and reform entitlements--substituting a lump-sum subsidy for Medicare, Medicaid, Social Security, etc. Doing a bit on each of these fronts would be a very good start, and would also be a good way to go about reigning in the long-run budget deficit (a la Bowles-Simpson).
My proposal (which is little different from the Bradford "X Tax") is rather uncontroversial in public finance circles. Note also that under the ideal system, Mitt Romney would (as far as I can tell) have an effective (statutory) tax rate near 0%. So, there's that.
Mitt Romney wins the debate
According to Intrade, Romney's nomination prospects were significantly up by the end of yesterday's debate, compared with where they were at the start of the debate. By contrast, Gingrich's prospects were significantly down, while Paul and Santorum more or less flat lined. Given how much of a lock Romney already was for the nomination, his performance (as measured by Intrade) was impressive indeed. At this point, unless we find out Romney is a Kenyan anti-colonialist Muslim socialist, I think this thing is over with.
A lot of Democrats seem to want Gingrich to be the nominee, for he will supposedly be easier for Obama to beat. What they forget, however, is that in every presidential election, no matter how extreme or incompetent the candidates, the Republican and the Democrat each have a sizeable chance of winning. Do they really want to risk a Gingrich presidency just to boost Obama's chances by a percentage point or two? Or would they rather have both parties serve up the best they have to offer, so that the worst case scenario is not so bad?
Whatever else you may say about Romney, if you were an employer hiring someone to perform the duties of the president, Romney's resume would make him a rather attractive candidate. Gingrich's simply would not. If you're a Democrat, his being a Republican may be enough to get you to support Obama (fair enough). But I'd sleep easier knowing that whichever party wins, the president isn't going to be an doughboyish, crazy, unpredictable buffoon with no demonstrated experience managing a large bureaucracy like the US government.
But that's just me. And for the record, Senator Assyfuck McNutdick continues to enjoy my support.
A lot of Democrats seem to want Gingrich to be the nominee, for he will supposedly be easier for Obama to beat. What they forget, however, is that in every presidential election, no matter how extreme or incompetent the candidates, the Republican and the Democrat each have a sizeable chance of winning. Do they really want to risk a Gingrich presidency just to boost Obama's chances by a percentage point or two? Or would they rather have both parties serve up the best they have to offer, so that the worst case scenario is not so bad?
Whatever else you may say about Romney, if you were an employer hiring someone to perform the duties of the president, Romney's resume would make him a rather attractive candidate. Gingrich's simply would not. If you're a Democrat, his being a Republican may be enough to get you to support Obama (fair enough). But I'd sleep easier knowing that whichever party wins, the president isn't going to be an doughboyish, crazy, unpredictable buffoon with no demonstrated experience managing a large bureaucracy like the US government.
But that's just me. And for the record, Senator Assyfuck McNutdick continues to enjoy my support.
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