Economy

Time for a Little More R and R

26
1 week ago
by Reed Davis in

Rogoff and Rinehart Excel errorA 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…)

Cruzin’ for a Bruzin’

21
1 month ago
by dcpetterson in , ,
English: Ted Cruz at the Republican Leadership...

Orwell in Overdrive

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.
(more…)

Wages, Productivity and Corporate Profits

30
4 months ago
by Reed Davis in

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…)

Deficit Delirium

49
5 months ago
by PWS in

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.
(more…)

Who Got Hurt the Most?

12
7 months ago
by Reed Davis in

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.

(more…)

Letting the Gini Out of the Bottle

14
7 months ago
by Monotreme in

“Ani­mal Farm”, by Jim Conte (jim​conte​.com)

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…)

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