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

Your Tax Dollars at Work

Generating talking points for the Bush Campaign, via the WSJ (subscription required):

WASHINGTON — The Treasury tapped civil servants to calculate the cost of Sen. John Kerry’s tax plan and then posted the analysis on the Treasury Web site. A federal law bars career government officials from working on political campaigns.

The Treasury analysis doesn’t mention Mr. Kerry by name. Rather it sketches out the potential cost of a tax plan that rolls back tax reductions for taxpayers with incomes above $200,000 — the nub of the Democratic presidential candidate’s plan. The result, the Treasury said in the analysis posted March 22, would be a tax increase of as much as $477 billion over 10 years on “hardworking individuals and married couples.” The same day, the Republican National Committee issued a press release in which it unveiled what it called its “John Kerry $pendometer,” and cited the same $477 billion figure as the cost of “raising taxes on the top income bracket.”

AB

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Yet More Outsourcing Fuel

Here’s one more recent piece of data and analysis about offshore outsourcing, to add to the analysis discussed in the post below.

Jason Kirkegaard of the Institute for International Economics (a nonpartisan think tank devoted to careful research on current issues in international economics) made an extremely detailed examination of the BLS’s labor statistics by industry, occupation, and state to try to identify an impact of offshore outsourcing on those occupations said to be most vulnerable. One could spend hours poring over the detailed cross-tabulations showing exactly which types of jobs have been lost in recent years. In general, the report does not turn up any evidence the offshore outsourcing is responsible for significant job losses in any particular industry or occupation.

Some of the most interesting results can be summarized as follows:

  • “The vast majority of the jobs lost in the post-bubble US economy from 2000 to 2002 in occupational categories threatened by offshore outsourcing has occurred in the manufacturing sector. This indicates that discussions of white-collar job losses cannot be separated from economic problems in the manufacturing sector.” In other words, the problems of the manufacturing sector affect not just blue collar workers in those firms, but white collar workers as well.
  • “Most jobs lost have been in high-paying management positions, a different occupational category from the projections most frequently cited.” Since there seems to be little evidence that management jobs are being moved offshore, the cause of these job losses is likely something other than offshore outsourcing.
  • “Jobs have been lost non-uniformly across different states, with some gaining and others losing jobs, suggesting that no singular nationwide trend other than the regular business cycle is occurring.” For example, in administrative support occupations New York has lost more than 30,000 jobs while California has gained over 30,000 jobs. Thus there seems to be significant relocation and movement of jobs even within the US.
  • “The US economy every quarter generates many more jobs than are projected to be lost to offshore outsourcing over the next decades.”
  • “The majority of US jobs projected… to be lost in occupational categories threatened by offshore outsourcing pay less than the US average, suggesting that many of these jobs may face medium-term elimination through technological change, regardless of whether they are outsourced to offshore locations or not.”
  • “Some IT occupations have declined, but the declines are concentrated in low-skilled IT occupations, and in occupations where economy-wide trends dominate (managers and manufacturing).”
  • “More than 70,000 computer programmers have lost their jobs since 1999. But more than 115,000 higher paid computer software engineers have gotten jobs since 1999.”

As I’ve said many times before, I’m convinced that the lousy state of the job market in the US is due to the slow economy, plain and simple. Slow economies have always caused sluggish job markets, and this time is no different. In fact, offshore outsourcing was happening in the 1990s, but the job market still did fine because lots of good new jobs were being generated by the strong economy. And despite outsourcing, the job market will improve when the economy finally regains strength and substantial numbers of good new jobs are created once again.

Put another way, even if we imposed a moratorium on offshore outsourcing, the job market would still remain weak because of the weak economy. We won’t stop losing jobs, or gain new ones, until demand picks up in the economy, no matter how much or how little international trade the US engages in. So if you’re worried about the job market (which I am), then focus your attention on the pitiful economic management that the Bush administration has shown, and the weak economy that has persisted as a result.

Kash

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Adding Fuel to the Outsourcing Fire

The Information Technology Association Of America has just released the results of a study they commissioned from an economic consulting firm called Global Insights. The punch line of the analysis:

This major study conclusively demonstrat[es] that worldwide sourcing of computer software and services increases the number of U.S. jobs, improves real wages for American workers, and by pushing the U.S. economy to perform at a higher level, has many other economic benefits.

Of course, keep in mind that this was the result that the ITAA had hoped for when they commissioned the study, so one must look very carefully at the assumptions made and models used by Global Insight to arrive at their estimates. Unfortunately, it’s a little hard for me to form an opinion about them without having the full report to read, which costs $350. (Though if someone wants to send me a copy, I’d be happy to take a whack at it!) However, from the executive summary it seems that their results are driven by pretty standard and uncontroversial economic effects — namely, higher productivity and lower prices in the US that are the result of offshore outsourcing.

My initial conclusion? This report by no means provides us with a final or definitive answer — but it does provide some ammunition for those who point out that there are benefits as well as costs to offshore outsourcing, and that, on an economy-wide basis, those benefits may even outweigh the costs.

Kash

UPDATE: Last sentence modified slightly in response to a reader’s comments. Thanks for the input.

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Yen/Dollar Update

FYI:

TOKYO (CBS.MW) – The dollar fell to the lowest level in almost four years in Asia Wednesday as market participants tested Japan’s resolve for its dollar-buying intervention policy ahead of Japan’s “tankan” business sentiment survey to be released Thursday.

The dollar traded at 104.29 yen after briefly falling to 103.98. The dollar traded at 105.91 yen late Tuesday in New York. It fell below 104 yen for the first time since June 2000.

For a bit of context, see this post.

Kash

UPDATE: Karsten reports on the just-released data describing Japan’s interventions in the currency markets over the past month. Japan was apparently still buying lots and lots of dollars in March…

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Via the AP

Headline: A look at Bush’s reversals

(AP) — President Bush’s decision Tuesday to allow his national security adviser, Condoleezza Rice, to testify publicly before the commission investigating the September 11, 2001, terrorist attacks reversed earlier White House insistence that she would only appear privately.

Some previous Bush reversals in the face of criticism:

# He argued a federal Department of Homeland Security wasn’t needed, then devised a plan to create one.

# He resisted a commission to investigate Iraq intelligence failures, but then relented.

# He also initially opposed the creation of the independent commission to examine if the 2001 attacks could have been prevented, before getting behind the idea under pressure from victims’ families.

# He opposed, and then supported, a two-month extension of the commission’s work, after the panel said protracted disputes over access to White House documents left too little time.

# He at first said any access to the president by the commission would be limited to just one hour but relaxed the limit earlier this month.

And speaking of Bush reversals, he’s apparently going to testify before the full 9/11 Commission, but only if Dick Cheney is with him. Seems like some enterprising young Photoshopper could get some mileage from a few pictures of ventriloquists, their dummies, Bush, and Cheney.

AB

UPDATE: TBogg found this CNN story before I did, and he also has the better take:

His supporters will say he is just “evolving”. Or, in his case, “creationing”…..

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Child Care Support for Welfare Recipients

From the NYTimes:

In a direct rebuff to the White House, the Senate voted today to increase the amount of money available to provide child care to welfare recipients, who would be subject to stricter work requirements under sweeping welfare legislation favored by President Bush and Congressional leaders.

The vote, 78 to 20, expressed broad bipartisan support for a proposal to add a total of $6 billion to child care programs over the next five years, beyond the additional $1 billion already included in the bill. The federal government now earmarks $4.8 billion a year for such child care assistance.

The vote came one day after the Bush administration expressed its objections to increasing the child care grant, saying in a written statement that it was not needed.

Why does the Bush administration go out of its way to make life more difficult for the most disadvantaged in this country? The cost of providing extra child care support is minimal – just over $1bn per year – and the benefit can be enormous to individuals on welfare, who are told to return to work even if their child care bills exceed the potential income they would earn from working. It may even be the case that increased support for child care will largely pay for itself by moving more people from the welfare rolls and onto private payrolls. So in addition to being mean-spirited, the White House position on this issue makes no economic sense.

Kash

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Consumer Confidence

Here is the headline from today’s edition of CNN/Money:

Confidence hits 5-month low : Job worries push closely watched measure of sentiment lower in March, though it is above forecasts.

NEW YORK (CNN/Money) – Worries about the job market pushed consumer confidence to its lowest level in five months in March, a research group said Tuesday — although its index came in above Wall Street forecasts.

We’ve seen indicators that consumer confidence was low for over a month now, so this is completely unsurprising. But given how low consumer confidence has been for the past year or so, I’ve started wondering about whether consumer confidence readings actually tell us anything useful about where the economy is headed.

The Conference Board’s consumer confidence index comes from tallying the results of a survey of 5,000 randomly selected individuals. A description from their web site follows.

The questions asked to compute the indexes have remained constant throughout the history of the series. The Index is based on responses to 5 questions:

  • Respondents appraisal of current business conditions.
  • Respondents expectations regarding business conditions six months hence.
  • Respondents appraisal of the current employment conditions.
  • Respondents expectations regarding employment conditions six months hence.
  • Respondents expectations regarding their total family income six months hence.

For each of the 5 questions, there are three response options: POSITIVE, NEGATIVE and NEUTRAL.

Do these questions actually do a good job of predicting consumer spending? The graph below shows the plot of consumer spending (the orange line, measured in percent shown on the right axis) superimposed on the graph of the consumer confidence rating (the blue line, measured as an index shown on the left axis).

Other than both series being unusually high in the late 1990s, it’s hard to see much of a relationship between the two. Formal econometrics may tease out more of a relationship than casual observation suggests (something that I will leave as an exercise for the reader), but it’s not obvious to me that consumer confidence really does a good job at predicting consumer spending.

Kash

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That Liberal Media

Next time your conservative friends whine about the liberal media, tell them they’re right, and try to make them listen:

Rumor has it that Atrios will be on Janeane Garofalo and Sam Seder’s show tonight tomorrow night.

AB

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Rice to Testify

She’ll probably get points now just for testifying, regardless of what she actually says. In an odd twist, the administration is trying to borrow a page from Bush v. Gore:

In a letter to the commission, White House counsel Alberto Gonzales said the commission must agree in writing that Rice’s appearance would not set a precedent for testimony by White House staff.

In Bush v. Gore, the majority knew they were writing a bad ruling, and so decided to simply declare that the case would not serve as a precedent for future cases:

Our consideration is limited to the present circumstances, for the problem of equal protection in election processes generally presents many complexities.

Of course, things become precedents by virtue of happening, not by virtue of beind declared a precedent. On the other hand, I supposed Gonzales is technically correct that Rice’s appearance won’t be a precedent since previous National Security Advisors Zbigniew Brzezinski and Sandy Berger have testified before Congress. So what Gonzales must mean is that Rice’s testimony could not serve as a precedent for National Security Advisors testifying before “independent, bipartisan commission created by congressional legislation and the signature [of the President].”

I now present to you, without further ado, Rice’s upcoming testimony:

  1. Saddam Hussein was a dangerous man in the world’s most dangerous region.
  2. No one could have predicted that terrorist would use planes as weapons. But had we known that terrorists were going to attack with planes on September 11th, 2001, in the a.m., we would have done everything in our power to prevent it.
  3. When we went to Camp David to plan our response to the al Qaeda attack, it was a map of Afghanistan that was rolled out on the table.

AB

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