Angry Bear

10% of US population are immigrants? Is that a lot?

2008-07-07T09:07:00.000-04:00

AP reports on a PEW study on immigration and Americans taking jobs or not:

The U.S. had 28 million immigrants _ legal and illegal _ age 16 and older in 2000, an increase of 61 percent from 1990. By 2004, there were 32 million.

Immigrants tend to be younger and have less education than American workers. The study, however, found "no apparent relationship between the growth of foreign workers with less education and the employment outcome of native workers with the same low level of education."

The PEW study did not look at impact on wages. I wonder what predisposes us to first think of 'too lazy' versus 'low wages' or such as first thought? And given the lack of popular research, why policy seems uninformed? Lazy millionaires ?

A lot of examples of how immigrants gain work is taken from day labor or migrant labor. Then there is a claim that educated Americans do not take jobs as in high tech areas by another set of businesses. How can this be framed in some more accurate way?

Reliable and good gas mileage

2008-07-07T06:00:00.001-04:00

Ford a la Europe has a range of vehicles considered reliable with good gas mileage compared to US models. There are plans to sell here, but marketers are very cautious about how they might be received. Why might Americans be reluctant?

Nominal v. Real – Did Luskin Learn Economics from Kudlow?

2008-07-07T05:26:00.002-04:00

If anyone has had to endure Lawrence Kudlow’s cheerleading as to how wages have continued to grow, I would at least hope that you recognized that this National Review nitwit was talking about nominal wages and not real wages. Well, it seems that his good buddy - Donald Luskin is similarly challenged about this incredibly basic economic concept:

From the Krugman column yesterday: “In fact, wage growth actually seems to be slowing” Hasn’t he been telling us for 7 years that wages have been going down? How then is wage growth suddenly slowing?

Time to turn the microphone over to Brad DeLong:

The answer, of course, is simple: Measured real wages--that is, the number of dollars you have paid divided by the price level--have been at best flat or falling for almost this entire decade. That is because measured nominal wages--how many dollars you get paid--have been growing more slowly than prices. And just now the rate of nominal wage growth has been falling. If you understand that real wages and nominal wages are two different things, you don't get confused. Does Luskin understand this? I think not. I remember a similar mistake from the past: Luskin's attempt to compute the real exchange rate

I’ll let you check out the rest – but tell me something. Why does anyone bother to listen to either village idiot (Kudlow or Luskin)?

Not Painless, or "There's no way I could tell you/What he meant to me"

2008-07-06T20:24:00.003-04:00

Two years ago at Readercon, I found myself doing some hero-worship in the Green Room.

Friday, we had discovered that my piece on Jorge Luis Borges was the first of the appreciations of that year's Memorial Guest of Honor. (I assume this was because of its length.) Saturday, Shira and I had interviewed living GoH Jim Morrow. Sunday afternoon was going to be for seeing old friends.

Sunday morning, I came out of a panel, and there was Tom Disch, sitting alone in the Green Room.*

So I got five minutes—maybe ten—of getting to bubble over about "The Cardinal Detoxes" and On Wings of Song and Black Alice and The Castle of Indolence.

And he asked about why I was there, and I mumbled something, and Shira pointed out that I had written reviews for The Washington Post—to this man who had been the best reason to read The Nation for much of my early adult life.

And I asked about the rumors that he had stopped writing due to depression over his partner's death (possibly not that directly), and he said he was still writing, and a few week's later I found that he did indeed have some works scheduled to come out. And I believed him.

But apparently, that stopped being true.

If I'm at all qualified to have the politics of an Angry Bear, On Wings of Song should get much of the credit. (The excesses are mine.)

Subtitle reference (YouTube link).

*We had seen him on Friday night, having a pleasant dinner with Pamela Zoline, but that's not a conversation one interrupts to hero-worship, even if you're not trying to ride herd over two children in a dark bar.

Soc Sec XXX: 2 Questions Not Asked in 2000; or 2004 Either

2008-07-06T12:43:00.004-04:00

Lets take a trip in Mr. Wizard's Way Back Machine all the way to the year 2000. At that point we see Social Security geek Webb jumping in excitement (being one of the few people in history to get excited over Social Security financials). What is the source of this rather odd behavior? Well it came from an examination of the following number series.
1996---2029
1997---2029
1998---2032
1999---2034
2000---2037
Now when the Report was released in March 2000 it was certainly plausible that the next January would see the swearing in of President Gore. At that point no one had really heard of hanging chads or Diebold. Anyway it was reasonable to consider the long term implications of these dates.

The first column is Report Year, the second column projected Trust Fund Depletion, at that point in time the standard measure for 'Crisis'. Now you can look at this series as being an improvement of eight years over a four year period (March 1996 to March 2000) which gives you an improvement rate of 2 years per year, or you can push the envelope and date the improvement over three years (March 1997 to March 2000) which gives you a rate of 2 2/3 per year, but it really doesn't matter for our purposes. Because an event that retreats out on average at even one year per year is an event that never comes, if that rate is doubled that event rapidly recedes over the event horizon. Okay lets imagine President Gore approaching the end of his second term in 2008 having overseen a similar improvement at the 2 year per year rate in Depletion date. This would put depletion in the year 2053. A little calculation and we can see that Boomers would be ranging in age from 89 to 107, a point in time in which the mortality tables suggest more than half of our youngest cohort (the birth class of 64) will be dead. The suggestion that Social Security 'crisis', at least as it was defined in 2000, as being caused by Boomer Retirement would be just as dead.

Okay remembering we are still in the year 2000, under a Democratic President committed to 'Save Social Security First' and a Presidential Candidate committed to the same goal (though using the ultimately misleading metaphor of 'Lock Box), what should have been the response to that number series? Well I'll tell you, two questions should have been asked:

1) What caused the dates to change in the way they did? and
2) Can whatever caused the changes go on?

But I can tell you from experience that hardly anyone in a position of influence was asking that question, if fact if you separate out Dean Baker and Mark Weisbrot that number starts approaching zero. Which is why Baker and Weisbrot called their 1999 book Social Security: the Phony Crisis. If you follow me below the fold I am going to make a stab at answering the question of why these questions were not asked and then offer some answers to both.

Well the kindest answer is that after all those numbers were not in fact in the bag and that we should just defer to the professional judgement of the staff of the Office of the Chief Actuary as signed off by the Trustees of Social Security. After all in 2037 the Boomers would be ranging in age from 73 to 91 and would still be projected to having a major though declining impact on Social Security.

A more cynical answer is that Social Security 'crisis' was in 2000 an advantage to both the Democratic Administration and its Republican opposition. For Clinton & Gore 'crisis' was largely defensive. Their argument was that tax cuts in the face of this impending crunch were reckless, and that far better would be to maintain budget restraint and pay down debt held by the public (which is what 'Lock Box' actually boils down to operationally). On the other hand for the Republicans crisis was an advantage in three ways. One it was a nice poster child for their overall 'Big Government is the Problem' narrative. Two its existence allowed them to push their then 64 year dream of killing Social Security in play. The third advantage was a little more subtle. Under their Supply Side theory the only real way to finance Social Security long term was to grow the economy through tax cuts, in their topsy-turvy world cutting taxes for the rich was simply a means to help out future elderly poor. Unfortunately their theory ran into trouble when it encountered our reality.

In the event asking those questions was not particularly convenient for either side at the time. Of course in the end the Republicans won the near term battle, they got to keep 'crisis' in play and get their tax cuts anyway. Alright! Back in the Way Back Machine and lets take a trip forward to Nov. 2004. How has our number series held up? Well pretty good.
2000---2037
2001---2038
2002---2041
2003---2042
2004---2042
The rate of improvement certainly had slowed down, but still we had a total of five years of improvement over a four year period, moreover we got those pesky Boomers a little bit older and more out of the way. In 2042 they would be 78 to 96 and generally shuffling off the Buffalo and points beyond.

By 2004 those questions should have been being asked loudly and often:
1) What caused the dates to change in the way they did? and
2) Can whatever caused the changes go on?
Instead BushCo simply maintained the same stance they did back before 2000, they needed Social Security 'crisis' in order to achieve their agenda, and their response was to cover their ears and shout "Wah, wah, wah. We can't hear you!!". Which didn't save them during the 'There is no Crisis' fight of 2005. But also didn't make them give up their long term goals.

So what are the answers to the questions? Well lets dispose of the first typical answer, the dates of depletion did not change year over year because of changes in demographic assumptions. Those assumptions remained relatively stable over the period of Report years in question. There is no doubt that demography is hugely important in determining the long term outlook, but it has little impact on year to year reporting because generally speaking the fertility and mortality numbers were already baked into the cake.

Nope in examining the Reports year over year to see what changed from say 1999 to 2000 to cause a three year improvement in a single ear and the answer is clear: the economy did much, much better than projected. Moreover as Prof. Rosser and I have demonstrated in the past, the response in the Reporting was odd. In the face of continual underestimates of current year performance the reaction of the actuaries was to actually lower their projections going forward in what for the world looked like a pure effort to maintain 'crisis'. This was particularly notable in the 2003 and 2004 Reports (see Tables V.B1 and V.B2). In particular rather inexplicable carving away at second year numbers went along with a milder slicing of current year numbers. The result as I showed in my Nov. 2004 post What is the Low Cost Alternative?, was Low Cost always returning the same operational result, Social Security funded but not over funded, a result which stayed constant through the 2007 Report year. (2008 shows Low Cost actually overfunding Social Security). So much for the first question: what changed? Economic growth numbers.

The answer to the second question is pretty easy, at least taken from when it was asked in 2000. Can this process continue? Absolutely because it did. The outlook for Social Security improved steadily from 2000 to 2003 because numbers on the whole came in better than expected. Now it is true that progress stalled in 2004 and actually went backwards in 2005 and 2006 only to improve again in 2007 and 2008 and we can if you like explore each of those Report years separately to see why that happened, but the general answer is that productivity stalled in such a way as to bring numbers more in line with Intermediate Cost than had been typical of the 1997 to 2003 period when outcomes closer or better than Low Cost.

(But all that goes to show you is that the idea that cutting taxes on the wealthy serves to boost investment and so productivity and so ultimately real wages for workers is not in fact supported by the actual numbers since the actual tax cut. But that would be to cut in on Spencer's turf.)

Can productivity (or GDP or real wage or whatever interrelated measure you like) improve in ways that come in better than Intermediate Cost and so continue the longer range trend that would have Depletion (and so 'crisis') continue to move out in time. Well opinions vary. All I can say is that the people who were dismissive of Low Cost in the 1997 to 2003 period were all by the numbers proved to be wrong. When those same people insist that I just don't get how ridiculous those assumptions are, I just have to ask "Well where were you when I was asking this question back in 2000?"

Olympics 2008

2008-07-06T10:49:00.002-04:00

This year's Olympics may well be a symbol or metaphor for rapid globalization. Sailing waters are choked with algae, a result of the chemical pollution; flotillas of boats are at work attempting to clear it so that sailors have at least a chance of moving off the starting line. As Bejiing grows, its water table continues to plummet. Attempts to supply the city with water may ultimately fail in the long term, according to some.

Chinese officials recently announced that tap water is now potable; the first city in China to receive that accolade. Some wags are suggesting that you bring your own, just in case.

And then there is the air; we have all seen the pictures of people on the street with protective masks. Transworld News has a cheery piece covering much of this as well as the questionable food.

Thus globalization proceeds apace under the watchful, environmentally conscious WTO.

Energy and us

2008-07-06T08:14:00.004-04:00

by rdan

Calculated Risk discusses problems with certain reports concerning per centage of GDP being reported for energy costs as unrealistic, predicting real per centages to be as high as 14% of GDP if prices stay the same or rise.

There is a human side to the increase a few months from now that will possibly be of greater concern than high gas prices.

The Boston Globe notes an upcoming problem for the Northeast home heating season. I have seen oil for $4.80 plus a gallon, up about $2.00 a gallon from last year. Assuming similar degree days from last season January (08) could mean an increase of 40% in the seasons heating bill.

Assuming the very warm winter of January 07, it would not be so bad when we had plants like forsythia blooming in January in the Boston area. Then again, a different winter such as January 06 saw 30 days of continuous 0 degree temperatures in January, so 40% would be a conservative estimate.

Another tipping point for global trade patterns?

2008-07-06T06:51:00.005-04:00

by rdan

Hat tip to reader Henry Cobb.

Yahoo news has an article on new directions for globalization:

In an effort to cut costs Steiff began outsourcing production to Chinese factories in 2004, and even sent 300 workers there to make sure the bears were up to scratch.

But this week Steiff called time on its Chinese adventure.

"We are withdrawing from China step by step. For toys of high quality, China is simply not a reliable source," the Stuttgarter Nachrichten newspaper quoted chief executive Martin Frechen as saying.

But for this privately owned company, whose teddies sell for up to 120 euros (190 dollars) each and which is trying to win back market share for its trademark bear with a button sewn into its ear, quality is everything.

The multi-billion dollar toy industry has been at the forefront of the massive shift of manufacturing to China where it can pay workers a fraction of what it pays them in the West.

Four out of five toys sold in Europe were made in a Chinese factory, and China exported 22 billion of them of them in 2006.

But problems with quality and a series of scares about safety has made firms a lot more wary.

In the most high profile episode, US toy giant Mattel recalled 21 million toys like Barbie dolls and Batman action figures last year over concerns about toxic lead paint and small magnets that children could choke on.

Mattel admitted later its problems were down to design more than manufacturing flaws, and Chinese authorities have since tightened quality controls and have cracked down on factories producing dangerous toys.

But safety and quality problems remain, and stricter import laws are having the effect of reducing the cost advantage of going east, firms say.

"There are going to be new regulations in the European Union," said Ulrich Brobeil from the German toymakers association DVSI, so it is set to be "easier and cheaper to manufacture in Germany or in nearby countries."

The story is the same in other industries, as textile firms attest.

"We are feeling that there is a movement in this direction," of "returning," Silvia Jungbauer from the industry's federation in Germany told AFP.

"Geographical proximity is playing a predominant role again, quality too," Jungbauer said, and most importantly "cost in China have risen sharply in recent months."

Wages for Chinese workers are going up and up, and oil prices above 140 dollars a barrel are also making it significantly pricier for container ships full of teddies and radio-controlled mini-helicopters to sail around the world.

In the past year alone, the cost of producing in China has risen 30 percent, estimates Reinhard Doepfer from the European Fashion and Textile Export Council.

Apart from Chine, "Albania, Macedonia and Serbia-Montenegro are the hot topics for German industry," Doepfer said. "(But) I can't see production coming back to Germany, no way."

Indeed Steiff is not moving back to Germany, but to Portugal.

Update: Economist's View carried a post from VoxEU on 'The WTO tipping point?' worth reading.

Immigration Debate, Labor Shortages, and Market Wages

2008-07-06T06:06:00.002-04:00

Julia Preston has a few anecdotes about employers who are supposedly having trouble attracting employees at market wages:

Mike Gilsdorf, the owner of a 37-year-old landscaping nursery in Littleton, Colo., saw the need for action by businesses last winter when he advertised with the Labor Department, as he does every year, for 40 seasonal workers at market-rate wages to plant, prune and carry his shrubs in the summer heat. Only one local worker responded to the notice, he said, and then did not show up for the job. Mr. Gilsdorf was able to fill his labor force with legal immigrants from Mexico through a federal guest worker program. But that program has a tight annual cap, and Mr. Gilsdorf realized that he might not be so lucky next year. His business could fail, he said, and then even his American workers would lose their jobs. “We’re not hiring illegals, we’re not paying under the table,” Mr. Gilsdorf said. “But if we don’t get in under the cap and nobody is answering our ads, we don’t have employees.” His group, Colorado Employers for Immigration Reform, is pressing Congress for a much larger and more flexible guest worker program … “I can’t replace those people,” the executive said. She said that despite offering competitive wages from $9 to $17 an hour, the company had failed over the years in repeated efforts to attract nonimmigrant workers because of the state’s tight technology labor market and because of the nature of the work, exacting and tedious. If the workers were fired or arrested, she said, she could fail to meet her contracts.

This unnamed executive is reported to receive $20 million a year in compensation (late correction - no the article said it was $20 million company). Dean Baker has a problem with this reporting:

By contrast, the NYT tells us that many employers want to relax laws penalizing them for hiring undocumented workers because "they grappled, even in an economic downturn, with shortages of low-wage labor." In a market economy, the response to shortages is higher prices, or in this case higher wages. While it is understandable that employers do not want to pay higher wages, just like most of us do not want to pay higher gas prices, that is the way a market works. If they cannot afford to pay higher wages, then in a market economy, they go out of business, just as tens of millions of inefficient businesses have gone out of business as the economy has grown over the last century. It would be helpful if the NYT would apply some basic economics to its discussion of this economic issue.

I find it hard to sympathize with a CEO who receives $20 million a year (OK - we're not sure what this CEO makes) but complains about not finding enough workers when her company is paying some workers less than $10 an hour. Markets respond to labor shortages by increasing the compensation of workers. Over the past 18 months, we have witnessed a fall in the employment to population ratio from 63.4% to 62.4%. Over the same period, real wages for production and nonsupervisory workers has declined to the levels witnessed at the end of 2001. Indeed we are facing another economic downturn at least from the perspective of the labor market. I’m all for eventually relaxing immigration laws, but let’s not kid ourselves – more immigration during this period of labor market weakness is going to make the labor surplus more severe.

Praise for Jesse Helms or an Insult to Conservatives?

2008-07-05T18:53:00.002-04:00

Over at the National Review – Mark Levin declares that the late Jesse Helms championed the causes of abused minorities. More praise came from President Bush:

“Jesse Helms was a kind, decent, and humble man and a passionate defender of what he called the Miracle of America.”

If I were a conservative, I would likely agree with Andrew Sullivan:

There was nothing decent about the policy record of Jesse Helms.

Matthew Yglesias sums up my thoughts:

One fascinating thing about the death of Jesse Helms is the conservative reaction. One might expect that Helms' death would prompt from conservatives the sorts of things that I might say if, say, Al Sharpton died -- that he and I had some overlapping beliefs and I don't regard him as the world-historical villain that the right does, but that he's a problematic guy and I regard him and his methods as pretty marginal to American liberalism. But instead conservatives are taking a line that I might have regarded as an unfair smear just a week ago, and saying that Helms is a brilliant exemplar of the American conservative movement. And if that's what the Heritage Foundation and National Review and the other key pillars of American conservatism want me to believe, then I'm happy to believe it. But it reflects just absolutely horribly on them and their movement that this is how they want to be seen -- as best exemplified by bigotry, lunatic notions about foreign policy, and tobacco subsidies.

If I were a conservative – I’d also be embarrassed by the serial nonsense published by the Heritage Foundation and National Review.

RPOs

2008-07-05T09:26:00.001-04:00

OMB Watch notes:

A House panel voted last week to tie the hands of agency regulatory policy officers (RPOs). The move comes in response to continued concern about President Bush's 2007 executive order that expanded the powers of RPOs.

President Bush's E.O. 13422 — http://www.ombwatch.org/article/archive/477which amended E.O. 12866, Regulatory Planning and Review — dramatically expands the power of the RPO. E.O. 13422 states, "no rulemaking shall commence" without the RPO's approval. Conveniently, E.O. 13422 does not define when a rulemaking commences, thus providing the RPO with wide latitude in exercising this new authority.

Ultimately, the RPO can act as a regulatory gatekeeper within the agency. OMB Watch has expressed concern that this power may be abused when the RPO's interest align more closely with those of the White House Office of Management and Budget than with the RPO's own agency or, more importantly, the public.

E.O. 13422 also requires the RPO be selected from among the presidentially appointed positions already existing within the agency.

While the provision does not technically remove any power from the RPOs, it would tie their hands by cutting off funding for their activities. The provision reads, "None of the funds made available by this or any other Act may be used" for Bush's changes related to RPOs.

The provision is included in the House FY 2009 Financial Services and General Government Appropriations bill, which the House Appropriations Committee approved by voice vote June 25. That bill funds the Executive Office of the President and some other agencies. However, because the provision states, "by this or any other Act," the bill would freeze funding for RPOs across the federal government.

As an official position or designation with attendant priveleges, is an RPO in every agency a usefull function? If used to INCREASE regulatory power, would you agree, since it appears to be a move to promote administrative idealogies against bureaucratic tendencies?

Is greater compliance of some kind useful? Does civil service have a value separate from as well as part of political governing?

Carbon tax and product re-design

2008-07-05T08:14:00.001-04:00

Aguanomics David Zetland has a take on carbon taxes and re-design of product:

Stories at Grist and AngryBear on the most recent demonic action of WalMart -- high efficiency milk containers.*

Basically, they save heaps of water (for cleaning) and energy (for hauling) by cutting out most of the infrastructure necessary to support the current gallon jugs. The bad news is that the plastic containers do not appear to be more reusuable than the current ones (let alone glass). A deposit and reuse system for these suckers would reduce trash and virgin materials use.

Bottom Line: WalMart arrived at this "innovation" by applying cost accounting to every step in the milk production and distribution process. If there is a carbon tax, WalMart will probably be the first company to change its practices in response -- and pass the savings to consumers.

How dry I am...

2008-07-04T23:40:00.003-04:00

By: Divorced one like Bush
No body knows, how dry I am. I went home, I rang the bell, my wife came out and gave me hell.

Juan posted a link to this paper: OPEC Pricing Power, The Need for a New Perspective

Besides the issue of how oil is priced, and the relationship of the futures market (yes, it is related to the real thingy) there are some numbers presented as to future expected oil production via IEA.

In an exercise which focuses on Middle East and North Africa (MENA) oil and gas resources, the IEA (2005) projects in the reference scenario a rise in MENA oil production from the 2004 level of 29 mbd to 33 mbd in 2010 and 50 mbd in 2030. In this scenario, Saudi Arabia will remain the largest supplier increasing its output from 10.4 mbd in 2004 to 11.9 mbd in 2010 and over 18 mbd in 2030.

MENA was projected to pump 50,000,000 barrels per day in just 22 years from now.

From this paper: Analysis of Crude Oil Production in the Arctic National Wildlife Refuge May 2008

In the low and high ANWR oil resource cases, additional oil production resulting from the opening of ANWR peaks in 2028 at 510,000 and 1.45 million barrels per day, respectively.
Between 2018 and 2030, cumulative additional oil production is 2.6 billion barrels for the mean oil resource case, while the low and high resource cases project a cumulative additional oil production of 1.9 and 4.3 billion barrels, respectively.

So, let us apply some Angry Bear thinking. At the pumping rate in 2030 of MENA, under the best of realizations of ANWR (4.3 billion barrels of oil waiting for our binge), MENA could pump it dry in 86 days! Three months. A lousy 3 months.

But you say: Hey bartender, Hey man, looka here...
In 2003 they say we have 59,090,000,000 barrels of oil in the lower 48 and off shore. With ANWR's best reality, that gives us a total of 63,390,000,000 barrels of oil. Billions and billions of barrels.

A draw one, draw two, draw three four glasses of beer... at 50,000,000 barrels a day we can drink for 1267.8 days. That is 3.47 years. That's it. No more home brew. At our rate of use, 20,687,000 barrels/day, we're dry in 8.4 years. That's only about 2/3rds of the amount of time I keep a vehicle. I won't be able to wear out my car!

Still not convinced that drilling is not much of an answer? Then consider that in 2005 the US drank 7,500,000,000 gallons of beer. There are 42 gallons in a barrel of oil. That means the US drank in that year 1,785,471,428.6 OBB (oil barrels of beer). Thus, at the rate we drink beer, we could hit the bottom of the barrel in 35.5 years. If EIA's highend is correct, we can drink ANWR beer for 2.4 year. If not, then we're going to be jonesing in just over 1 year.

Soc Sec XXIX: What does patriotism have to do with Social Security 'crisis'

2008-07-04T11:46:00.003-04:00

Well more than you might think.

If you examine the economic and demographic assumptions that together generate the standard Intermediate Cost alternative of the Social Security Trustees you see a picture of a future America that is kind of bleak. I mean I lived through the period from 1968 to 1983 and economically it was not much fun. We had war and assasinations and oil crises and three recessions and a constitutional crisis over impeachment. It wasn't all doom and gloom, over that same rough time period the world transtioned from the baseline assumption that nuclear armeggedon was pretty much ultimately unavoidable to a place where that prospect seemed inconceivable. And as a kid who grew up with school "duck and cover" drills that was an unalloyed good, but still there was a widespread sense that in particular these kind of economic outcomes were outside the norm, that times had been better before and that times would be better again. In part this was just nostalgia for an America that for a lot of people really never was, after all 'Happy Days' and 'Back to the Future' were not exactly documentaries, but Reagan's 'Morning in America' had a real resonance to people, there was a real sense that the future could be better than the immediate past and even the imagined past of the fifties as seen through the lens of 'Father Knows Best'.

But none of that optimism shows up in the Tables and Figures of the Social Security Reports. Instead they and commenters thereon insist that the future is simply going to mirror the outcomes of 1968-1983, indeed just the other day I had a commenter that insisted that Low Cost outcomes were impossible because they were inconsistent with the last forty years. Well that is what happens when you pick a starting point that manages to take in all of the worst post-war years and ignores everything that happened before. I will be unpacking some numbers below the fold but want to leave these doomsayers with a hopefully provocative question.

Why the hell are you betting against America? While we maybe well and truly entering permanent Roubini-land why are you doubling down based on that?

As I say it all starts with the numbers, and in particular the numbers as seen in Table V.B1: Principal Economic Assumptions, Table V.B2: Additional Economic Factors, and Table V.A1: Principal Demographic assumptions, all of which (and many more) to be found in 2008 Social Security Report: List of Tables. The Economic tables show outcomes in five year periods since 1960 and annually since 1997 and then turn around and project annual results for the following ten years and then for multi-year periods (V.B1) or intervals (V.B2) after that. The Demographic table reports both by interval back to 1940 and then annually from 1995. Going forward Table V.A1 projects results with 5 year intervals.

Generally speaking the various models of the Trustees' Report assume that under all three alternatives (Low Cost, Intermediate Cost, and High Cost) results will settle out in the relatively short term at ultimate levels. Which is just another way of defining long term sustainability of the US economy under projections that are presumed to range from optimistic (Low Cost) to pessimistic (High Cost) with Intermediate serving as a median. So lets take a look at some of those numbers and contrast them with 2004, a year of good economic performance but not one that most people would remember as exceptional.

Productivity: 2004 2.4%; High Cost ultimate 1.4%; Intermediate Cost 1.7%; Low Cost 2.0%
Real Wage: 2004 1.8%; High Cost .6%; Intermediate Cost 1.1%; Low Cost 1.6%
Unemployment: 2004 5.5%; High Cost 6.5%; Intermediate Cost 5.5%; Low Cost 4.5%
Real GDP: 2004 3.6%; High Cost 1.2%; Intermediate Cost 2.1%; Low Cost 2.9%
Immigration: 2004 1.25 million; High Cost .77 million; Intermediate Cost 1.025 million; Low Cost 1.305 million

Now I know some people will want to jump in and start the standard defense of 'Boomers!' and 'Covered worker ratio!!'. And yeah I get that but these ultimate numbers are all for period beyond 2050 when the impact of the Boomers on the economy should be pretty much a fading memory (we will be 86 to 104 in 2050). Why on earth should we assume that even optimistic numbers for the second half of the twenty-first century will trail the numbers of the second half of the twentieth century so badly? I understand that conditions approaching perma-recession could happen, I am the farthest thing from a global warming denier or from not recognizing the food/fuel crisis going forwards. On the other hand I am not just ready to simply write America's economic future off as a lost cause either.

I am not happy with the status of America today. Which doesn't mean I have lost faith in its possibilities tommorrow. Which know it or not is exactly what embracers of Social Security 'crisis' have done. Dudes and dudettes what caused you to lose your faith here? Criminy its the Fourth of July.

Unleash Fiscal Policy?

2008-07-04T10:40:00.003-04:00

So says Robert Reich. And what he means is investment in infrastructure.

When Philip Swagel, the administration's spokesman, was asked if the economy needs another stimulus package after having lost 62,000 jobs, all he could say was

"I-it seems, you know, it seems like that's, that's enough, uh, enough."
What might trigger another round of economic stimulus?
"I don't, I guess I don't have an answer, I mean, you know, beyond saying we look at all the data and, um -- so, my usual line."

Neither men will address the problem of trade. Both see fiscal policy as governing economic health, albeit in differences large enough to continue the irrelevant debate that has consumed both political parties since time began. Boiled down into sound bites, which seems the only way either party can function, the fiscal argument usually revolves around taxation and spending.
Meanwhile, the twin deficits continue to rise. Our last trade surplus was in 1975--mostly downhill from then. Strangely enough our account deficit has risen since then. Conclusion? We relied more and more on credit, both personal and governmental.

Clintonites will argue, of course, that under their watch, there were account surpluses. I would point out, however, that the trade balance began to rise sharply in the Clinton watch, moving from -70 billion in 1993 to -378 billion in 2000.

Clinton rode the dot.com wave....lucky. He happened to govern while the U.S. led the world in a marvelous IT revolution. While jobs increased and government coffers filled, the trade deficit increased sharply, over 500%. In short, the central issue of trade was muffled. Have you ever heard a Clintonite brag about trade surpluses?

Since Clinton, of course, the trade deficit has doubled. The only bright spot in the trade deficit has been services, mostly financial. (Republicans like bankers. Unfortunately, financial services while a golden opportunity for a few, were not so good for the average American.) Various arguments have been used to soften this harsh reality; economists have gone to measure deficits in terms of percentage of GDP, hopefully to show us that it aint all that bad. Well, it is. Trade is important.

Some economists argue that the falling dollar will make our goods cheaper on the world market, thus dramatically improving our trade balance. Hmmmm. Aint happened yet. We keep shedding manufacturing jobs.

To keep ahead of the downward curve, businesses outsource or overseas everything, from teeth to sneakers. Of course, the fallling dollar will encourage foreign tourists.... but now there is the problem of oil. On this last and most dramatic of our headaches, I would suggest that it may be the straw that breaks the camel's back or it may be ironically be our savior.

How our savior? If the present spike in oil is not primarily speculation--and I suggest that we will know this by year's end-- and if exporting countries stop subsidizing the cost of oil--, then we may have to become more local. Transportation costs of goods will rise, from ships and planes to trucks. Rail will be less expensive. (Now there's an infrastructure worth talking about.)

Additionally, we will have either to find alternatives to oil in the manufacturing of some goods (plastics, for example) or find suitable alternatives that do do require oil. We also need cars with much, much better mileage. In other words, inventiveness will again count. Shortcuts--cheap labor and environmental degradation--will be throttled.

If the present spike is speculation--and I suspect it isn't--, then we will be left with facing our old bugaboo: Trade. And no amount of pump priming fiscal policy a la tax cuts or infrastructure will do the complete job.

"Yours!"

2008-07-03T20:05:00.005-04:00

Fed values Bear Stearns assets at a level where it has ~~only~~ cost them ~~$100,000~~nothing—so far. (Indeed, there's a $50,000 "buffer" left.)

Strangely, the scuttlebutt in the market yesterday was that the valuation should be around $24 billion. Or at least that's how I read this paragraph:

If the portfolio's value were to drop to below about $24 billion, that could indicate mortgage-backed securities have fared even worse in the second quarter than markets have already reflected, analysts said.

So the Fed thinks the market for those securities is about 23% higher than market professionals were telling Reuters it was yesterday.

If I were a Fed policymaker, and I hadn't been worying about the TSLF before, I would be now.

via CR

Beginning path to a career in econ

2008-07-03T17:37:00.005-04:00

Hat tip Robert Waldmann post autistic thought...er, economic ... stochastic...er. Just press the button already.

Ken Houghton says the race is on. A man who likes this video should be a guest...he takes himself seriously.

More Gloom and Doom

2008-07-03T16:24:00.001-04:00

Barack Obama has been reading the Wall Street Journal.

High Gasoline Prices: Pete Davis v. Lawrence Kudlow

2008-07-03T14:50:00.002-04:00

Let’s start with the comments of someone who can actually think:

Up on Capitol Hill today, talking to a senior Democratic Senate staff protege, I was asked "What can we do to counter the Republicans on offshore drilling for oil?" My response was, "There is no short-term fix to our long-term energy problems. Drilling won't do it because it will take years to land any oil." "Yes, but the voters think it's going to help now." I responded, "Now you're asking me for cosmetics, not a solution." In a nutshell, that's why we're 58% dependent upon foreign oil. Every time we have an energy crisis, in 1973, 1979, 1990, and 2008, we rush short-term expedients and cosmetics into law without doing much to solve the long-term problem. If we were serious about the long-term problem we would never have allowed gas guzzling SUV's onto the road; we wouldn't have starved mass transportation; we would have developed much more renewable energy; we would have done a lot more conservation; and MOST OF ALL we wouldn't have allowed prices to decline after the crisis, killing energy saving investments and leading us right back to profligate energy consumption. Our energy policy is like our diets. We diet frequently, but we never stick to our diets long enough or change our lifestyles enough to lose weight. Then, when diabetes and heart disease sets in, we rush to our doctors for the miracle cure that isn't there ... Until we learn to live with somewhat higher energy prices, we'll continue to be at the mercy of OPEC and of periodic energy crises. As long as we demand quick fixes from our political leaders, that's all we will get -- quick fixes that don't work.

Thanks for the wisdom Pete, but now I have to ruin the Fourth of July weekend for our AB readers but noting what some village idiot has been saying:

Where in the world is John McCain on this very same issue? It’s simple: Sen. McCain should be pummeling Barack Obama daily on drill, drill, drill. Why? Because oil and gas pump prices are potentially the single-biggest wedge issue in the presidential campaign. Mr. McCain has to pound the point home. According to a new Rasmussen poll, 48 percent of Americans say lower gas prices are the key to an economic recovery, and 60 percent are in favor of off-shore drilling.

I guess Kudlow hasn’t realized that McCain – who once opposed offshore drilling – flip flopped and took this idiotic advice. I say idiotic as every analysis that I’ve seen holds that the immediate impact on gasoline prices would be zero and the effect after a generation would be very small. It’s really funny because McCain had to later admit that his pandering proposal would do nothing to lower the current high gasoline prices. But I guess Kudlow hasn’t figured that one out either. I might advocate that we try to drill, drill, drill some commonsense into Kudlow’s feeble little brain but our friend Pete Davis would likely argue that such efforts wouldn’t work either.

Update: The Pray at the Pump Movement has a plan to lower gasoline prices:

(CNSNews.com) - As the price of oil continues to rise, some are turning to God and prayer for an answer to their financial troubles. The Pray at the Pump Movement, founded by Rocky Twyman, has been holding prayer vigils at gas stations across the country. On Monday, Twyman decided to take his movement from Exxon and Shell stations straight to the steps of the Embassy of Saudi Arabia in Washington, D.C., hoping to encourage the oil-rich country to raise the amount of barrels they release each day from 200,000 to 1.2 million.

Don’t knock divine intervention as it sounds better than anything John McCain has come up with!

Same lithium battery, new connection X10 power

2008-07-03T11:00:00.001-04:00

Reader ddrew2u sends this post:

Readers of December's Popular Mechanics know that Stanford University scientists have already engineered a lithium ion enhancement that promises to multiply charge capacity ability about four times in the short term and as much as ten times in the long term.

For 30 years it has been known that building lithium ion batteries with silicon wires (instead of carbon wires) could yield ten times the power holding ability but, because silicon wires expanded and contracted too much as they cycled, they quickly destroyed themselves. The development of nano wires – about a thousandth of the width of a sheet of paper -- has solved that drawback -- while potentially making lithium ion batteries more stable (safer) at the same time!

Near term, only the anode side of the batteries will be manufactured with nano wires, yielding the quadruple jump (up powering GM’s Volt to go 160 miles on one charge instead of 40?). Long term, when the cathode side can be manufactured with silicon nano wires the ten multiple target is expected to be reached (introducing hybrid, long distant trucks?).

Maybe someone should donate a Popular Mechanics subscription to the McCain campaign -- could save the Treasury $300 million dollars.

Rdan here: Additional information below

Stanford researchers have found a way to use silicon nanowires to reinvent the rechargeable lithium-ion batteries that power laptops, iPods, video cameras, cell phones, and countless other devices.

The new technology, developed through research led by Yi Cui, assistant professor of materials science and engineering, produces 10 times the amount of electricity of existing lithium-ion, known as Li-ion, batteries. A laptop that now runs on battery for two hours could operate for 20 hours, a boon to ocean-hopping business travelers.

"It's not a small improvement," Cui said. "It's a revolutionary development."
...
The breakthrough is described in a paper, "High-performance lithium battery anodes using silicon nanowires," published online Dec. 16 in Nature Nanotechnology, written by Cui, his graduate chemistry student Candace Chan and five others.
...
"Usually people want low surface area to make batteries safe," says Mark Obrovac, senior scientist at the 3M Lithium Ion Battery Laboratory. "The surface area of a nanowire electrode must be astronomical." Adds Obrovac: "It's a great thing he's done making silicon cycle, but it will require a lot of work before we'll see this in a commercial application."

Research on silicon in batteries began three decades ago. Chan explained: "The people kind of gave up on it because the capacity wasn't high enough and the cycle life wasn't good enough. And it was just because of the shape they were using. It was just too big, and they couldn't undergo the volume changes."

I am a sucker for improvements that are part of a bigger system and catch me by surprise.

But Unemployment Did Not Increase

2008-07-03T10:42:00.002-04:00

The latest Employment Situation Summary was released a couple of hours ago:

Nonfarm payroll employment continued to trend down in June (-62,000), while the unemployment rate held at 5.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Employment continued to fall in construction, manufacturing, and employment services, while health care and mining added jobs.

Something tells me that the Bush cheerleaders at the National Review are thinking about rehashing their mantra about how the Household Survey is a better measure than the Payroll Survey as they argue that the fact that the unemployment did not rise in June is an indication that things are not so bad after all. But they should check a couple of things before they write this down as employment per the Household Survey fell by 155,000. This from the BLS is really fascinating:

The employment-population ratio was 0.6 percentage point lower than a year earlier.

This ratio was 63.0% as of June 2007, was 62.6% as of May 2008, and now stands at 62.4%. So why didn’t the unemployment rate rise? It seems the labor force participation rate fell from 66.2% as of May 2008 to 66.1% as of June 2008. Then again – it was 66.1% as of June 2007.

The unemployment rate last June 2007 was only 4.6%. With the labor force participation rate over the past year being unchanged, the rise in the unemployment rates just happens to track the drop in the employment-population rate quite well.

And the news is really bad indeed. In fact, when we compare the employment-population ratio as of December 2006, which was 63.4%, to the 62.4% as of last month - things look dreadful.

Update: The White House finds its silver lining:

Nonfarm payroll employment decreased by 62,000 jobs in June and the unemployment rate remained unchanged at 5.5 percent, in line with expectations. Although these numbers are disappointing, the unemployment rate remains below the averages for the past three decades. Despite slow growth, the economy continues to demonstrate resilience. The first quarter GDP was revised up to one percent at an annual rate, and other data suggest growth in the second quarter may be stronger than the first quarter

Republicans warn that Democrats will cause a difference

2008-07-03T08:31:00.008-04:00

I'm looking for a bumper stickers that says,
Bin Laden still has his job, do you?

But seriously, when Bush took office in January 2001:

The unemployment rate was 4.2%, now it is 5.5%.

The inflation rate was 3.7%, now it is 4.1%.

Gasoline was around $1.45, now it is over $4.00.

The S&P 500 was 1,342 and now it is 1,261.

The trade weighted dollar was 122.7, now it is 96.0.

The Republicans keep warning us that if we elect a Democratic president things will go in the
opposite direction.

Concealed Guns in Airports

2008-07-03T07:57:00.001-04:00

The NYT notes the following on gun bans:

A decision by Georgia legislators to relax the state’s gun laws has led to a dispute over whether people can legally carry concealed firearms in the nation’s busiest airport, Hartsfield-Jackson Atlanta International.

A Georgia gun rights group filed a lawsuit in Federal District Court in Atlanta on Tuesday after airport officials said they would continue to enforce a ban on concealed weapons in the terminal despite the changes to the state law. The changes, which were approved by the Georgia legislature in the spring and took effect on Tuesday, relax the state’s prohibition on carrying weapons on public transportation and in some other areas, including restaurants serving alcohol.

Benjamin R. DeCosta, the airport director, said the changes applied only to public transportation like buses and the city subway and were not intended to allow people to carry guns at the airport. He said allowing civilians to carry concealed weapons in the terminal, which serves millions of travelers each year, would pose severe problems for the police and airport security workers.

Sorting out change for basic law is always a process. It certainly is an exception to the argument for an absolute right to carry in my mind.

Cross posting with Naked Capitalism

2008-07-03T07:51:00.002-04:00

We've mentioned we are going to go to Alaska to watch the ice melt. That means no Internet from August 3 to August 10, inclusive, save maybe a visit to an Internet cafe to check e-mail.

Those who might want to try their hand at guest blogging (or have an established blog and would cross post) please contact me at yves@nakedcapitalism.com. Thanks!

Who's your daddy?

2008-07-03T06:38:00.003-04:00

Mark Thoma has original attribution at Economist's View

Economic Dreams-Economic Nightmares discusses Jamie Galbraith's recent presentation:

Hyman Minsky, John Kenneth Galbraith and John Maynard Keynes take center stage as James Galbraith throws down the gauntlet to contemporary mainstream economists. Speaking at the 25th Annual Milton Friedman Distinguished Lecture at Marietta College, Marietta, Ohio, Jamie Galbraith asks Fed Chair Ben Bernanke and a host of others to embrace the " intellectual victory of John Maynard Keynes, of John Kenneth Galbraith, of Hyman Minsky." — else to explain "why not". We will search and update on any "why nots" if and when they surface.

To Galbraith:

The Collapse of Monetarism and the Irrelevance of the New Monetary Consensus [PDF], by James K. Galbraith, March 31, 2008 : … I come to bury Milton [Friedman], not to praise him. But I would like to do so on the terrain that he favored, where he was strong, and over which he ruled for many decades. This is monetary policy, monetarism, the natural rate of unemployment and the priority of fighting inflation over fighting unemployment. It is here that Friedman had his largest practical impact and also his greatest intellectual success. It was on this battleground that he beat out the entire Keynesian establishment of the 1960s, stuck as they were on a stable Phillips Curve. It was here that he set the stage for the counter-revolution that has dominated academic macroeconomics for a generation, and that – far more important — also dominated and continues to influence the way in which most people think about monetary policy and the fight against inflation.

What was monetarism? Friedman famously defined it as the proposition that "inflation is everywhere and always a monetary phenomenon." This meant that money and prices were tied together. But more than that, Friedman believed that money was a policy variable — a quantity that the Central Bank could create or destroy at will. Create too much, there would be inflation. Create too little, and the economy might collapse. There followed from this that the right amount would generate the right result: stable prices at what Friedman came to call the natural rate of unemployment.

The intent and effect of this line of reasoning was to defend a core proposition about capitalism: that free and unfettered markets are intrinsically stable. In Friedman's gospels government is the lone serpent in Eden, while the task of policy is to stay out of the way. Just as this was the vulgar lesson of "Free to Choose" so it turns out it was also the deep lesson of the larger structure of Friedman's thought. Friedman and Schwartz's Monetary History for all its facts and statistics carried a simple message: the market did not fail; the government did.

The paper is long for here, but worth a visit to Economic Dreams-Economic Nightmares.

Update: Original is at Economist's View