A couple of weeks ago, DC wrote about “The Error Heard ‘Round the World”, about Reinhart and Rogoff (hereafter called RR) and their calculation errors that became the basis for austerity measures in several countries.
I have posted an Excel spreadsheet which is an extension of one included in a zip file posted by Herndon, Ash and Pollin (hereafter called HAP). I will use data from that spreadsheet to look at the HAP criticisms of the RR paper.
A good starting point is the now infamous Excel spreadsheet shown to the right.
After noting the coding error by which five rows were excluded, the first question that occurred to me was “where’s the beef?”. The number of countries on which the 90 percent threshold is based is a mere seven (Belgium having been left out by RR). The HAP critique points out that RR is using only 71 data points (110 after Belgium and 14 other excluded data points are added). Since there were relatively few data points, my first inclination was to try to look at that data so see how it was distributed. (more…)
There have been a number of cases when Republicans opposed timely disaster relief when the catastrophe happened to other states, but demanded it when something bad happened in their own back yard. A perfect example is Senator Ted Cruz (R-TX), who voted against Hurricane Sandy relief in January, but is now trying to get federal money to help with the explosion of a fertilizer plant in West, Texas. I was preparing to write an article about this tendency, concentrating on Cruz, when I stumbled upon this article over at Fox News (yes, I do frequently read their site), describing one of the Senator’s complaints about President Obama. As I read, I sat in awe at the Senator’s dishonesty and Orwellian misrepresentations, and at the eager gullibility and almost breathless hero-worship of Fox News reportage.
Earlier this month, Senator Cruz released a “report” titled, “The Legal Limit: The Obama Administration’s Attempts To Expand Federal Power.” This paper describes six Supreme Court cases in which the Court unanimously ruled against the litigant supported by the Obama Administration. While it may be a surprise to many to see the Roberts Court to be united in a given ruling, it is hardly unusual for the Supreme Court to issue unanimous rulings, and every presidential administration sees its share of loses before the Court.
What is far more interesting, bordering on the breathtaking in its dishonesty, is the way Cruz misrepresented the issues in these six cases, and the motivations behind the position the Obama Administration held in each case.
On November 29th, the Bureau of Economic Analysis released the preliminary estimate of corporate profits for the 3rd quarter of 2012 (a revised estimate was released on December 20th). Soon after, a number of publications ran stories reporting that corporate profits had reached a record high while wages had fallen to a record low. For example, CNN Money ran an online story on December 4th. Following is an excerpt:
In the third quarter, corporate earnings were $1.75 trillion, up 18.6% from a year ago, according to last week’s gross domestic product report. That took after-tax profits to their greatest percentage of GDP in history.
But the record profits come at the same time that workers’ wages have fallen to their lowest-ever share of GDP.
“That’s how it works,” said Robert Brusca, economist with FAO Research in New York, who said there is a natural tension between profits and the cost of labor. “If one gets bigger, the other gets smaller.” (more…)
Following on dcpetterson’s excellent summary of Obama’s deficit plan, I want to look at some other options on the table. It’s unlikely the White House plan will be accepted as is, and there’s still a lot of fighting still to do. Some elements of these plans may resurface, or at least be mentioned. The plans I’ll look at are:
- The “Fiscal Cliff” plan. Just letting the Bush Tax cuts expire and letting sequestration take its course
- The Simpson-Bowles plan, the iconic model for “responsible” deficit cutting.
- The White House plan, the real model for responsible deficit cutting
- The Domenici-Rivlin Plan, also known as “Restoring America’s Future”
Unfortunately, the current Republican offer is not sufficiently fleshed out to do a comparison, and at any rate doesn’t add up to the minimum requirement. It’s discouraging when you can’t compare the options because one side won’t even state what theirs is, but that’s getting to be the Republican habit.
I believe the Ryan plan “Path to Prosperity” is both unworkable and dead, so I’ll ignore it. If it rears its ugly head later I may do a separate article covering it.
There is a new plan put out this week by the Center for American Progress (CAP), important at least because of the people who signed it. The plan both raises marginal rates and converts itemized deductions to percentage tax credits. I haven’t included it in this analysis, but it bears watching.
Following Simpson-Bowles, I won’t discuss Social Security. I think we can separate this program out because it has completely separate funding (unlike, say, Medicare), because it contributes little to the deficit, and because it can be fixed by internal changes (again unlike Medicare). It deserves a post of its own.
On June, 11th, The New York Times published a story on the just-released Survey of Consumer Finances (SCF) titled “Family Net Worth Drops to Level of Early ’90s, Fed Says”. The SCF is a cross-sectional survey of U.S. families which has been done every three years since 1989 and includes information on families’ balance sheets, pensions, income, and demographic characteristics. The New York Times’s story begins:
The recent economic crisis left the median American family in 2010 with no more wealth than in the early 1990s, erasing almost two decades of accumulated prosperity, the Federal Reserve said Monday.
A hypothetical family richer than half the nation’s families and poorer than the other half had a net worth of $77,300 in 2010, compared with $126,400 in 2007, the Fed said. The crash of housing prices directly accounted for three-quarters of the loss.
Economists use a measure called the Gini coefficient to describe, in mathematical terms, the inequality in a population. It’s an imperfect measure, and only one of many tools, but it provides useful insight into the mathematical distribution of income (or any other quality, say, bolt sizes).
Basically, if we assume income distribution should be a normal distribution (i.e., bell-shaped curve), then the Gini Coefficient tells us how fat the tail at the far right end of the distribution is. A Gini coefficient of zero means everyone makes the same amount of money (“all animals are equal”). A Gini coefficient of one means that one pig has all the dough.
Andy over at the blog Organizing Entropy has helpfully plotted Gini coefficients based on Organization for Economic Coöperation and Development (OECD) data (that is, data from developed, first-world countries). He’s gone a step further, and sorted the bar graphs by total income (red bars) and by income after taxes and transfers (blue bars). His graphs are shown after the jump. (more…)