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

Chris Christie Says We Should Not Treat Ebola Patients, Because No One Wants Their Kids to Get Ebola, and Anyway We’re Trying to Develop an Ebola Vaccine.

Okay, here’s what Christie actually said:

I’m tired of hearing about the minimum wage. I really am. I don’t think there’s a mother or father sitting around the kitchen table tonight in America saying, ‘You know, honey, if our son or daughter could just make a higher minimum wage, my God all of our dreams would be realized.’ Is that what parents aspire to?

That’s from a transcript posted yesterday on the New York Times website in a Taking Note blog post by Eleanor Randolph.  Christie said this during his already infamous luncheon speech to the Chamber of Commerce in Washington on Wednesday.  (Thanks, Governor!)  Randolph reported that “[e]ven that crowd had the decency not to applaud” Christie’s Marie Antoinette impersonation.

My guess is that the absence of applause was partly in reaction to the jarring non sequitur—and to the realization that this guy, who’s apparently planning to run for the Republican nomination for president, thinks we need to choose between addressing a current situation and trying to prevent the situation from reoccurring, or continuing to occur, in the years and decades to come.  Or maybe it occurred to them that Christie promises that there will be no such thing as low-paying jobs in America once the Republicans gain full control of the government.*

Ms. Randolph writes that there are nearly half a million people in New Jersey who earn less than $10.10 an hour, the rate that Democrats in New Jersey and elsewhere are proposing as the minimum wage.  There also are many thousands of Ebola cases in West Africa right now, and the possibility that the disease will spread at some point in this country beyond the three cases diagnosed here.  But there’s the potential to develop an Ebola vaccine—if the NIH receives sufficient funding to proceed—so there’s no reason to try to treat anyone who has the disease.

And anyway, I’m tired of hearing about Ebola.  I really am.

Christie for President!

*Paragraph typo-corrected and edited slightly for clarity. 10/24 at 10:11 p.m.

____

UPDATE: Ah.  I knew the Comments thread on this post would be fun.  Here’s the thread as of 6:14 p.m.:

Axt113/ October 24, 2014 3:10 pm

It’s not about the final aspiration, it’s about having enough to not only live on, but also to achieve said aspirations.

College ain’t cheap fatass.

—-

Mark Jamison/ October 24, 2014 3:19 pm

There are more than a few people sitting around the kitchen table wondering about how they are going to make it on their minimum wage jobs. I wonder what the impact is on their kids as they sit and listen to Mom and Dad worry about making the rent or putting food on the table.

Christie and his ilk live in a fantasy land where everyone just magically pulls on their bootstraps and dreams come true.

—-

Urban Legend/ October 24, 2014 3:26 pm

If he would stop fighting it and just listened to the American people — who by a strong majority want it — he wouldn’t hear as much about it. What a jerk!

—-

 ME/ October 24, 2014 5:57 pm

Normally, I would say that all three of your comments are spot-on, guys. But on second thought, I think you all just have no foresight. Once Republicans control all branches of all levels of government, and we start taxing only people who make less than $10.10 an hour, we’ll be able to fund development of a vaccine for Ebola AND replace all those jobs at Walmart and McDonald’s with management positions at Koch Industries or entry-level trader positions on Wall Street.

Trickle-up economics is awesome.

Yup.  This is fun.

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Productivity, Recessions & New Levels of Productive Capacity

Noah Smith provoked a conversation here at Angry Bear by wondering what causes recessions. Recessions are not such a mystery when you see the interaction between effective demand and such things as productivity.

The conversation took place in the comments section of a previous post on Productivity’s role as a cause of recession. The issue is whether increasing productivity causes recessions, as opposed to tight money policy or something else.

Truly, a recession is caused by a blend of factors, including monetary policy, effective demand, vulnerable profits and pressures in the economy from an urge to increase productivity. Yet, here I want to show a graph of productivity gains since 1967. I will use a graph previously posted. (link) The graph shows real GDP on y-axis, and utilization of labor and capital on x-axis to represent expansions and contractions of the business cycle.

attractor PC shifts beyond

In this graph, we see how real GDP jumps to a new attractor level after a recession. (Recessions are seen when the plot goes to the left.) Each new attractor level points toward a higher and identifiable productive capacity. Surely, productivity needs to increase in order for the economy to jump to new levels, right? Well, we can visualize when productivity jumps in this process of jumping up to higher and higher levels of productive capacity.

For each data point of real GDP, I change its size to represent the productivity growth over the preceding year.

attractor PC shifts beyond w bubbles

What do we need to see here? The larger bubbles show larger increases in productivity. You will notice that the larger bubbles primarily appear during those recessionary transition periods. (between the lines & to the left)

So are productivity gains “causing” recessions? Well, they are part of the dynamics that cause recessions.

Many people are concerned about low productivity at the moment. Yet, we can expect productivity to increase through the next economic contraction. Is that saying that pent up productivity will cause the next recession? Well, pent up productivity gains are part of the pressures that cause recessions, in combination with the changes of the effective demand limit. Pent up productivity gains are released through the recession process after effective demand expands. (see article below)

prod growth

When effective demand (blue line) increases during an economic contraction, productivity (red line) increases with a bit of a lag. The times when productivity growth is low or zero, coincide with a tightening of effective demand. Basically, effective demand can be seen as a leading indicator of productivity changes.

Related Articles

Lambert, Edward. Relax DeLong & Krugman… Productivity advances will appear when there is demand space. Effective Demand blog. December 3, 2013.

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Martin Wolf’s Warning

by Joseph Joyce

Martin Wolf’s Warning

It is time for the 2014 Globie—a (somewhat fictitious) prize I award once a year to a book that deserves recognition for its treatment of the consequences of globalization. (Previous winners can be found here.) The financial turmoil of the last week makes this year’s award-winner particularly appropriate: Martin Wolf for The Shifts and the Shocks: What We’ve Learned–and Have Still to Learn–from the Financial Crisis. Wolf, a distinguished writer for the Financial Times, once viewed globalization as a positive force that enhanced welfare. But the events of the last few years have changed his views of financial markets and institutions. He now views financial flows as inherently susceptible to the occurrence of crises. And Wolf’s intellectual evolution leaves him deeply concerned about the consequences of financial globalization.

Part I of the book deals with the “shocks” to the global economy. Wolf begins in the U.S. with the crisis of 2008-09 and the relatively weak recovery. He shares the view of Richard Koo of Nomura Research that this was a “balance sheet recession,” with the private sector seeking to shed the debt it had built up during the pre-crisis period. The cutback in private sector spending was initially matched by an increase in the government’s fiscal deficit, which arose as expenditures on unemployment benefits and other programs grew and revenues fell. The rise in the fiscal deficit was particularly appropriate as the “liquidity trap” limited the downward fall of interest rates and the expansionary effects of monetary policy. However, the political acceptance of deficits and debts ended prematurely in 2010, and the recovery has not been as robust as it needs to be.

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Both the rich and ordinary Americans misunderstand their economic interests

by Linda Beale

Both the rich and ordinary Americans misunderstand their economic interests

There is class warfare going on, right now, all across this country.  It’s highlighted by the election gimmicks and gambits of those on the right who claim to be supporting ordinary Americans but whose real intentions show in the results. And it is ultimately a sad statement about Americans’ understanding of what is required for a sustainable economy that supports decent lifestyles for all.

Let’s start by looking at the maps resulting from studies of well-being that identify the states where people are not at all well-off, such as the 2013 survey done by Gallup Healthways, available here.  Those poor states are the reddest of the red belt in Mississippi, Tennessee, Florida and elsewhere across the Deep South–places where I grew up in a decidedly Republican household that bought the GOP economic fallacies hook, line and sinker, and places where today’s populations are worse off in terms of the various measures of economic well-being and happiness than the more progressive northeast and west.

Isn’t it likely that the anti-government, low-tax and pro-wealthy/pro-big business policies of the GOP politicos that have run these states for several decades have something to do with these negative results, and that the more progressive policies in the northeast and northwest are reflected in the much more positive results in those areas?

Yet rural, southern populations continue to proudly proclaim their allegiance, against their own economic interest,  to ill-fated Reaganomics that favors tax cuts (for the wealthy and big business) coupled with  use of  old-time, regressive consumption taxes (toll roads, sales taxes and property taxes),  privatization of public functions (e.g., charter schools managed by for-profit, nontransparent corporations), socialization of losses, militarization, and de-regulation.

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Adding to Steve’s quest to define “money”. A couple short films.

Via Digby comes a couple short films talking about what is money.   They are part of an effort by a group/site called We The Economy that has 20 short films aimed:

 to drive awareness and establish a better understanding of the U.S. economy. Told through animation, comedy, musical, non-fiction, and scripted films, WE THE ECONOMY seeks to demystify a complicated topic while empowering the public to take control of their own economic futures.

I have to say I am a bit biased toward these two films as they promote the idea that I have presented here in various ways: trust.  It all comes down to trust.  All our wealth, power, security, prosperity and future.  Trust is the money.   And we have been doing our damnedest to destroy it in the quest for ever greater growth (financial or otherwise) via some concept referred to as freedom or more relatedly “free market”.

They are kind of humorous in parts too.

That Film about Money, part 1

The second part of That Film about Money

I’m going to go watch the rest of the films now.

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Is the Fed guilty of raising Inequality?

The Fed is an accomplice to the increase in inequality. An accomplice is an entity that helps another entity commit a crime.

The real change that led to increased inequality is the conspicuous drop in labor share after the crisis. Record profits by firms were not being transmitted to labor. That was not the fault of the Fed. However, the Fed fed the situation by putting excessive liquidity into the capital income stream. The transmission mechanism to direct that liquidity to labor had broken down. The Fed knew that, but the Fed kept supporting the guilty ones who soaked up the excessive liquidity into capital income. In the end, capital income grew tremendously, while labor income didn’t. Inequality increased.

So the Fed is an accomplice to the rise in inequality.

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Why do recessions occur?… One answer points to Productivity

http://images.pitchero.com/ui/10187/1321893969_0.jpg

Noah Smith made a thought-provoking statement on twitter, “Sometimes I wonder what actually causes recessions.” He received a slew of responses.

While one could point to many causes, including tight money and the beats of butterfly wings, I look primarily to the dynamics of productivity. Here is a graph of year-over-year productivity growth…

prod 34

You will see that productivity has a tendency to accelerate through the recessions. Productivity has a natural tendency to increase due to innovation. So why are recessions part of that process to higher productivity?

  • On the supply side… Some firms continue with lower productivity processes. They have contracts. They have market presence. They do not replace equipment that is less productive. So there is a force to push these firms to either increase productivity or get out of the way.
  • On the demand side… Effective demand constrains productivity. In the process of a business cycle, productivity gets limited by demand. In the sense that demand wears thin for increased production. Before many recessions, effective demand will expand allowing productivity to increase.

Recessions are a normal part of the cyclical growth process to push through the demand and supply constraints upon productivity. In the graph above, you will see productivity growth spurts after the recessions. Those are times when more productive firms can establish themselves more securely in the economy.

In China… Productivity has increased greatly there, right? Well, maybe… Productivity has slowed down greatly in China, and one could make a case that productivity is the most important problem in China. (link to WSJ article)

Eventually the less productive firms feel the increasing pressure from more productive firms.  There is a battle for market share and profits. Labor share normally rises, Inflation will rise. The economy will overheat in this battle for productivity. Nominal interest rates may rise to try to cool it down, but eventually the more productive firms gain advantage through the reshuffling process in a recession as profit rates become too vulnerable for the less productive firms.

Some recessions are better at supporting the advance of more productive firms. After the crisis, productivity had a nice quick growth spurt but then fell flat as less productive firms were protected within accommodative policies, most specifically monetary… and the stagnation of real wages.

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In the ‘Be careful what you wish for’ category …

Is it just me, or did Joni Ernst just effectively announce that she wants to kill farm subsidies?  Of course, how effectively she announced it will depend on whether her opponent, Bruce Braley, picks up this ball and runs with it.

Although maybe she’s talking about something else she thinks is pork.

Be careful what you wish for, Iowa voters.

This is the perfect opening for Braley to inform the public about the really dramatic reduction in federal spending in the last few years–and what, exactly, the effects are.  (Tuition at public universities; medical research; etc.  Y’know; all the stuff that Obama should point out, but doesn’t trouble himself to.)

And, speaking of out-of-the-mouths-of-babes admissions, this one is downright-comically jaw-dropping—and presumably will be mentioned in the soon-to-be-filed “cert” petitions to the Supreme Court in the slew of voter-ID/voter-access cases that have made headlines in the last month.

I mean … seriously … how dumb is Chris Christi?  I do suspect that by now most people know they shouldn’t buy the deed to that bridge he’s selling.  But just in case they didn’t know before ….

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