Relevant and even prescient commentary on news, politics and the economy.

How the Internet Can Make You Smarter, Today’s FT Version

Today’s Page 1, above-the-fold, biggest type headlines for the FT:

  1. US PDF edition: “Obama proposes corporate tax rate cut: System ‘outdated, unfair, and inefficient’

  2. US Print edition: “Obama and Romney unveil rival tax plans: Proposals show strong support for reforms”

The latter piece waits until the 7th graf to Tell the Truth and Shame the Romney (as Rick Santorum might say):

Mr. Romney’s advisers said that their plan would not widen the deficit, but they relied on so-called “dynamic effects”, which assume that the lower rates mean greater economic growth and therefore more revenue. They did not say which tax breaks—such as the popular deduction for mortgage interest relief—they might scrap to pay for the lower rates.

The English translation of “dynamic effects” is “we’re going to reduce the velocity of money so that it is held by people whose Marginal Propensity to Consume is lower, and count that as a good thing, instead of it being used by people who will not hide it in the TOPIX, and who therefore don’t count in economic modeling. Because that worked well when we did it in 2001 and especially 2003.” (See Noah Smith for discussion.)

The print edition treats this mumbo-jumbo as if it were a real “tax plan.” Readers of the online PDF are saved such bollocks, and therefore better informed at the end of the article.

UPDATE: Ezra Klein (whom Google Plus seems to believe works for Bloomberg, not the web-inept Vast Wasteland that is Kaplan Prep Daily) delves into the Romney/Hubbard plan and finds pretty much what you would expect from the man who led the clusterfuck of 2003 and an at best ambiguous relationship with Medicare Part D* (“all of the expenses without any of the savings, unfunded”):

But for now, the narrative is clear: A Romney presidency will be tough on those who depend on government programs, and good for those who pay high taxes. That suggests a Romney presidency would, at least in its first few years, reduce the deficit by asking much more from the poor than from the rich. Is that really the narrative they want?

*Shorter Glenn Hubbard: “It happened on my watch, and I knew it was in the works, but the “gross mismanagement” of the Bush Administration in enacting Medicare Part D astounds me and I had nothing to do with it.”

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Tom Toles is a Priceless National Treasure, Part XIV

Via the overworked Tom Bozzo, who I keep hoping will post here about Ford’s plan to triple their Electric Car output for next year, Tom Toles Explains It All to You:

Oh the transgression was bad, but we the proud and truth-loving American public just cannot abide the lies! We are TRUTH-SEEKERS around here, and we punish the lying liars where they are found!

Except Tim Pawlenty when he says that he will fix the budget with MORE, HUGER THAN EVER tax cuts! Just like Bush’s only BIGGER! But THIS TIME they will pay for themselves! This will not be punished as a crazed lie, no, this will be reported straight-faced as a POLICY POSITION. And Pawlenty is running as the GUY WHO WILL TELL US HARD TRUTHS!

Journalists apparently understand that calling an underwear model shot “a penis” will get more links, which is their sole purpose in life, but actually noticing a lie that would impact people who are supposed to make rational decisions will lose them a key source who then takes the opportunity to lie to them with impunity and anonymity.

Note: If I Were Brad DeLong, I would be calling this series (which reveals my innumeracy, unless Google just can’t find entries 11 and 12) “Why Oh Why Can’t We Just Have the Good Part of the Press Corps?” Sadly, I’m not that clever, so it would be something like “Reasons to Be Cheerful…” There’s a reason he’s a Syndicated Columnist and I’m a blogger.

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There Hasn’t Been a Body Slam Like This Since to Glory Days of Hulk Hogan

David Neiwert (h/t Rebecca Lesses) doesn’t quite get it right:

There will be a lot of hand-wringing in the coming days over the shooting of Rep. Giffords this morning at a constituent event — some of it, almost certainly, from the folks at Fox, who will wonder aloud how this kind of thing could happen.

It can happen, in fact, because conservatives so thoughtlessly and readily use violent eliminationist rhetoric when talking about “liberals” (to wit: anyone who is not a conservative). They will adamantly deny it, of course, but the cold reality is that this kind of talk creates permission for angry and violent people to act it out.

Susan of Texas notes that The Atlantic, in the person of their resident economics and finance blogger, is rather married to the idea as well.

Go Read the Whole Thing.

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Forget Jumping the Shark? The WaPo is Doing the Tango with It

UPDATE: Jason Linkins at one of the non-Breast-Enhanced sites of the Huffington Post did a burlesque of which I can only dream on the same piece.

Via Chris Hayes’s Twitter feed (and he got it from David Sirota), the following is from “No more ‘me first’ mentality on entitlements“:

While it does not happen often, our political system is capable of making unpopular decisions that are in our collective best interest. In 2008, during the most severe financial crisis in 80 years, Republican and Democratic leaders in Washington came together to do something deeply unpopular: bail out the financial system via the Troubled Assets Relief Program. These leaders understood the consequence of inaction was economic devastation for Americans. Passing TARP was the right thing to do.

[B]ailing out the financial system went directly against our shared beliefs in free markets and fair play. While the vast majority of Americans did not cause the financial crisis, we all had to sacrifice to stop it. Such a cultural violation has angered people nationwide, which makes cutting entitlements more difficult because it will again betray our sense of fairness.

The challenge of entitlements is more difficult than the financial crisis: First, we must reach consensus to make cuts before the fiscal crisis is upon us….If we wait until the bond market shuns Treasurys, the economic consequences could be dire. Virtually overnight, we could have far less money to spend on priorities such as defense, education and research.

Cutting entitlement spending requires us to think beyond what is in our own immediate self-interest. But it also runs against our sense of fairness: We have, after all, paid for entitlements for earlier generations. Is it now fair to cut my benefits? No, it isn’t. But if we don’t focus on our collective good, all of us will suffer.

I’ve resequenced the above paragraphs a bit, but remained faithful to the argument as presented.

The author: Neel Kashkari, who is described as “a managing director of the investment management firm PIMCO, served as an assistant Treasury secretary during the George W. Bush administration. He led the Office of Financial Stability and ran the Troubled Assets Relief Program until May 2009.”

His sacrifices for the sake of TARP are well known; indeed, documented in the paragraph above. And, gosh, isn’t it nice that he pushes an argument that would make fixed-rate securities—you know, the thing PIMCO is famous for trading—more valuable?

It’s good to know that “Me First” needs to change, and nice to see the Post presenting a prime example of why.

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The NY Times Jumps the Shark — Again

UPDATE: Tristero piles on the details that I assumed. And Bloix in comments there makes it clear that the diagram which has the Generals’s panties in twists is relatively straightforward compared to a car’s electrical system (as anyone who has used Erwin or Visio or even Powerpoint to build data flow diagrams can tell you).

Why does Elizabeth Bulmiller have a job? Because she writes nonsense quoting Important Sources:

The slide has since bounced around the Internet as an example of a military tool that has spun out of control. Like an insurgency, PowerPoint has crept into the daily lives of military commanders and reached the level of near obsession. The amount of time expended on PowerPoint, the Microsoft presentation program of computer-generated charts, graphs and bullet points, has made it a running joke in the Pentagon and in Iraq and Afghanistan.

“PowerPoint makes us stupid,” Gen. James N. Mattis of the Marine Corps, the Joint Forces commander, said this month at a military conference in North Carolina.

Now, some of my best friends live in North Carolina, so I won’t say Gen. Mattis got cause and effect backwards. But if you really believe that the article’s attached graphic is either a bad representation of the situation in Afghanistan or an impediment to understanding, then you shouldn’t be in a position to command hundreds, if not thousands, of military personnel.

In short, you probably thought it was a good idea to invade in the first place because everything would be perfect and you would be greeted with flowers, not putting them on 5,000+ American graves to date.

Because you didn’t understand that countries are both made up of living organisms and that they, in turn, act as if they are living organisms, with interactions that change depending on the conditions, facilities, and income flows (or, as the graphic says, “narcotics”).

If you don’t understand that, then you don’t understand nation-building, and have no excuse to claim that is what you are doing.

It’s a poor craftsman who blames his tools, and an even poorer reporter who takes those claims at face-value and presents them in “the paper of record.”

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EconTalk Jumps the Shark

Russ Roberts could at least pretend that Amity Shlaes (B.A., English Literature) had written a book related to economics, no matter how badly contrived and poorly researched it was.

But what’s his excuse for this (B.A., English Literature, Penn; MBA Chicago)?

Sadly, it appears he has stopped even pretending to be interested in economics, and has just decided to shill for the cheapest huckster.

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Why is this so difficult to understand?

Suppose I make my monthly budget, and assume I’m going to spend $600 for food.

At the end of the month, I discover that I only spent $520.

I expected to take $80 out of savings that I now do not have to. My bank account is now $80 higher than I expected it to be at the end of the month.

Is this difficult to understand? Apparently it is if you’re a financial journalist:

The White House, we are told, won’t be using about $200 billion of the $700 billion authorized under the Treasury’s Troubled Asset Relief Program, a lifeline for ailing banks. Instead it plans to use money never borrowed, never spent, that nonetheless increased the projected 2010 deficit, to narrow that projection of $1.4 trillion, according to a Congressional Budget Office estimate.

This un-borrowed, un-spent money qualifies as deficit reduction?

Yes. We expected a $1.4B deficit, it will only be $1.2B.

Next silly question.

For Asia’s emerging economies, Geithner’s high road entails strengthening “their social safety nets through sustainable health and retirement-benefit schemes, thus reducing the need for high precautionary saving that contributes to global imbalances.”

Uh, I think I’ll leave the rest of this to Bruce. Who knows better than to bother with resent Valuing only one future cash stream and pretending it’s the same as the current budget.

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Seasonal Posting: NYTFail, Part 2

First, David Leonhardt argued that this recession was good for workers.

Now, Floyd Norris apparently has decided to mix and match data. (I wonder if the fact many NYT employees who are looking at their 45-day severance offers is having an effect on its economic coverage.)

One of the standard “economist jokes” is about the one who died because he forgot to “seasonally adjust” his pool. In that tradition, Norris declares:

The adjustments are for seasonality. For some reason, October is the month with the largest seasonal adjustment down in jobs. So the increase in the unemployment rate does not reflect people actually losing jobs. It reflects the belief that seasonal factors should have added more jobs than they did.

All this may be very reasonable, and there is no way I can think of to test whether the seasonal adjustments are reliable. [emphases mine]

Gosh, I wonder why October would have a larger seasonal adjustment, and whether there is any BLS data to support that adjustment?

Apparently, employers traditionally hire a lot of people in October for “the Holiday Season.” And while it’s possible that they will be doing all that hiring in November this year, it hasn’t been the way to bet during this millennium.

Norris continues:

But I suspect seasonal factors are less important this year, when the economy may be changing directions, than they normally are.

It was with such optimism that Napoleon went to Russia, people bought VA Linux at $100 a share, and the Bush/Cheney/Rumsfeld axis decided to run a two-front war in Afghanistan and Iraq. With statements similar to Norris’s:

In reality, the government report says unemployment rates remained steady at 9.5 percent. And the number of jobs actually rose, by 80,000. And the number of jobs for college-educated Americans rose more than in any month in the last six years.

Well, the number of jobs rose (as one would expect, given the Holiday Sales push) but Table B-1 is closer to 40,000 than 80,000:

Where we do see an 80,000 job increase is in the private sector, which is more than 500,000 workers lower than it was in August. If you want to play a non-seasonally adjusted, private-sector only game with the data, you should at least be honest about it.

More vitriol and data below the break.

The details of that 80,000 look even worse: declines in all Goods-producing areas (except about 200 new jobs in primary metals, 300 in “miscellaneous manufacturing,” and 1,100 in motor vehicles and parts; cash for clunkers, anyone?) which are balanced by the Service sector, most notably the 63,500 new Retail jobs. Can you say “seasonal employment”? Floyd Norris apparently cannot.

The rest of the Non-Seasonally Adjusted figures are even less encouraging. Table A-8 of the report shows more than 100,000 people added to “not on temporary layoff”:

while Table A-9 is depressing: a larger number of unemployed at all durations, with the median duration of unemployment increased by more than one month (in a month):

And while the BLS has not updated their Job Openings data for October, the graphic through September isn’t exactly pointing to a decline in that median (or a robust recovery):

Is there a recovery in process? Maybe, though I’m not convinced, since most of the positive data seems, as Paul Krugman noted, “unrepresentative.”

But things are not so good as Floyd Norris wants to pretend, even (or especially) using the data he chooses to highlight.

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One of These Things is Not Like the Others

I try to like the NYTimes Economics Reporting. I really do. Heck, any place that publishes Uwe Reinhardt can’t be all bad.

But David Leonhardt, as he does often enough that I hesitate to read his work, again goes beyond the pale today, and clearly does so deliberately. The offending paragraph:

Twenty-two months after the start of the mid-1970s recession, real weekly pay was down 7 percent. For the early 1980s recession, the decline was 4 percent. Today, thanks to moderate pay growth and scant inflation, pay is 1 percent higher than when the Great Recession began in December 2007.

Let’s (1) remember that wages are sticky and (2) look at this declaration.

Both of the previous recessions are cited as being about 16 months. The current one probably ran 18 for economists’s purposes, and is in its 23rd month for the rest of us. But let’s give him a pass on that.

Note, however, the careful phrasing at the end of the paragraph: “thanks to moderate pay growth and scant inflation.” What does that mean? Well, let’s look at the Annual inflation Rate (CPI) for the actual recessions under discussion:

Gosh; quite a difference! I wonder if Leonhardt is aware of it.

A finger exercise below the fold.

Just for fun, let’s look at the wage changes over those periods. Now, unlike Leonhardt, I’m not going to use real wages. Let’s see if we can figure out what the nominal change in wages is for each of those periods.*

1973-1975 Average Inflation Rate: 10.75. Real wage loss: 7% Wage increase in period: 3.75% (including the residual effects of wage and price controls)

1980-1982: Average Inflation Rate: 7.5% Real wage loss: 4% Wage increase in period: 3.5%

2007-present: Average Inflation Rate: 1.8% Real wage gain: 1% Wage increase in period: 2.8%

I don’t know about anyone else, but I wouldn’t be celebrating the wage “gains” of the current era. (And let’s not even talk about actual wages received, since Barry Ritholz has that territory well-covered and then some).

*If you want to make the case that I should be using real wages, as Leonhardt does, please demonstrate (a) that all wages are renegotiated during a period of inflation, (b) that all parties are able to estimate inflation—even when at relatively unprecedented levels—accurately, and (c) that such negotiations were legally and commercially allowed during the period.

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D-Squared Provokes a Call to Action

The close:

[W]hen the New York Times came and offered [Ross Douhat] a column, he did not turn it down saying “no, I clearly do not deserve this honour, others are far more qualified for it that me”.

The NYT thinks Douhat’s important because people link to him. They neither realize—nor care—that you’re laughing at him. They just count the links and think he’s Valuable.

Stop linking. Please. Even the thorough destructions (e.g., Dave Noon) include the trackback.

Don’t include a link to Douhat. Think of the children.

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