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

Advice without consequences

Barry Ritholz offers this observation:

One of my biggest complaints about the media is the lack of accountability. People say things on TV in print an on radio, and then . . .  Poof!  No consequences. They influence public perception of issues, affect policy debates, drive legislation.

This is a perfect example of a stern warning of currency debasement and inflation due to QE. Let me point out this was made 3 years ago today — hence, it has been terribly wrong.

I won’t give you advice — but I keep track of who is consistently wrong, whose histrionic forecasts are both silly and wrong. Their future comments are valued accordingly.

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Subsidy insanity in western Missouri

I have written before about the gross waste of taxpayer monies on retail in the St. Louis region. According to the East-West Gateway Council of Governments (p. 18), governments in the bi-state metropolitan area pumped about $2 billion worth of subsidies into retail projects from 1990 to 2007, but only saw a net increase of 5400 jobs, meaning that each low-wage, low-benefit retail job cost the cities of the region $370,000 apiece. The price is only this low on the generous assumption that the subsidies were solely responsible for this job creation. However, given the growth of incomes in the metro area during that time period, it is likely that most if not all the jobs would have been created without the incentives provided.

It turns out something similar has been happening in the Kansas City region. As regular readers of this blog know, the border job piracy in the Kansas City metro area is probably the second-worst in the country, after metro New York City. As it turns out, there has recently been data released on the scope of job piracy there.

Less than a year after Governors Jay Nixon (D-Missouri) and Sam Brownback (R-Kansas) told New York Times reporter Louise Story, on camera, that there was no way they would back off of their wasteful poaching, a new Times story reveals that Nixon is now calling for an end to their futile battle.

Part of the reason for his change of heart probably lies with a recent study by the Hall Family Foundation showing that since 2009 alone, Missouri and Kansas City have spent $212 million on relocation subsidies to drag existing operations across the border, sometimes more than once as in the case of Applebee’s. The net effect, however, has been virtually nil: 3200 jobs moved to Kansas, while 2800 move to Missouri, for a net movement of 400 jobs.

The math of course is simple: $212 million/400 equals $530,000 per net moved job. And remember, these aren’t net new jobs, merely net moved jobs. As I’ve written on numerous occasions, job piracy is the least defensible use of development incentives, precisely because it creates no new jobs. Good Jobs First had a detailed analysis of the issue overall and the Kansas-Missouri border war in particular in January 2013.

However, if the most recent Times article is to be believed, we could be on the verge of ending this particular border war. Mind you, don’t hold your breath. The two states tried before, according to Good Jobs First, and failed miserably. Indeed, there has yet to be a successful voluntary no-raiding agreement between states, even though there have been at least three attempts. But in this case, there has been a strong push for a cease-fire from a number of prominent Kansas City businesses, so there is a better-than-usual chance that this could be successful.

Really, though, there oughta be a law. A federal one.

Cross-posted at Middle Class Political Economist.

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Krugman and Waldmann (wonkish) part two

Lifted from Robert’s Stochastic Thoughts

New Keynesian Good Two Keynesian Better

Oddly, Paul Krugman seems to have perceived my observation that he is a two Keynesian rather than a new Keynesian as a criticism. In fact I much prefer simplest new Keynesian models to standard obscure new Keynesian models. Oh hell, my damn comment was waaay too long.

Here it is. I understand that hoping to read my name two times on your blog in one day is too optimistic. But really, I much prefer two Keynesian models to new Keynesian models. As you mention from time to time some people think the main purpose of models is to clarify thought. I am another one of those people. More to the point simple models make clear which assumptions are key.

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Wall Street executive compensation

Robert Schiller began a look at executive compensation:

Last Wednesday, we presented our findings, “The Squam Lake Report: Fixing the Financial System” (Princeton University Press). Ben S. Bernanke, the chairman of theFederal Reserve, helped introduce the book at a conference at Columbia University. He said he agreed with the principle that “the stakeholders in financial firms — including shareholders, managers, creditors, and counterparties — must bear the costs of excessive risk-taking or poor business decisions, not the public.”

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Tracking profits with Kalecki

I saw this graph tweeted on twitter by Jesse Livermore, but I do not see who actually made the graph and how. It is a graph showing Kalecki’s profit equation.

FRED Graph

The thing that struck me is how similar it is to my own graph of aggregate profit rates based on an analysis of the NIPA accounts and effective labor share. Even the values of the y-axis are close.

profit rate 5

 

 

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TPP summary

Via Alternet Jim Hightower offers a simplified look at the possible consequences of this trade deal:

Twenty years later, the gang that gave us NAFTA is back with the TPP, a “trade deal” that mostly does not deal with trade. Of the 29 chapters in this document, only five cover traditional trade matters! The other chapters amount to a devilish “partnership” for corporate protectionism:

—Food safety. Any of our government’s food safety regulations (on pesticide levels, bacterial contamination, fecal exposure, toxic additives, etc.) and food labeling laws (organic, country-of-origin, animal-welfare approved, GMO-free, etc.) that are stricter than “international standards” could be ruled as “illegal trade barriers.” Our government would then have to revise our consumer protections to comply with weaker standards.

—Fracking. Our Department of Energy would lose its authority to regulate exports of natural gas to any TPP nation. This would create an explosion of the destructive fracking process across our land, for both foreign and U.S. corporations could export fracked gas from America to member nations without any DOE review of the environmental and economic impacts on local communities — or on our national interests.

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