Tag Archives: economy

Economy Grows Fairly Decently in Q4

by Teofilnpc Posted on January 30, 2014

Mother Jones

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Economic growth slowed down a bit in Q4, but remained fairly healthy. The BEA announced today that real GDP increased 3.2 percent last quarter, due almost entirely to private sector growth. Slowdowns in federal spending actually cut GDP growth by 0.98 percent—about two-thirds due to cuts in defense spending and one-third due to cuts in domestic spending. This is the price of austerity: if federal spending were growing at a normal rate at this point in a recovery, GDP growth last quarter probably would have stood at around 4.5 percent or so.

Everything else was pretty positive:

The increase in real GDP in the fourth quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, nonresidential fixed investment, private inventory investment, and state and local government spending that were partly offset by negative contributions from federal government spending and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.

Consumer spending increased decently, and inflation was extremely subdued at 1.2 percent. All in all, a decent report, if not a spectacular one. Now we all get to wait and see if it’s good enough to offset all the turmoil in emerging markets that’s got everyone so jittery.

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Economy Grows Fairly Decently in Q4

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Thomas Piketty Has a Grim View of Our Plutocratic Future

by BobMoowattin Posted on January 29, 2014

Mother Jones

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A while back I mentioned Thomas Piketty’s new book, Capital in the 21st Century, which hasn’t yet made a big splash in the United States because the English translation won’t be out until March. But Thomas Edsall takes a look at reaction so far to Piketty’s thesis about the roots of rising income inequality and summarizes it this way:

Piketty proposes [] that the rise in inequality reflects markets working precisely as they should: “This has nothing to do with a market imperfection: the more perfect the capital market, the higher” the rate of return on capital is in comparison to the rate of growth of the economy. The higher this ratio is, the greater inequality is.

….There are a number of key arguments in Piketty’s book. One is that the six-decade period of growing equality in western nations — starting roughly with the onset of World War I and extending into the early 1970s — was unique and highly unlikely to be repeated. That period, Piketty suggests, represented an exception to the more deeply rooted pattern of growing inequality.

The chart on the right shows this graphically. For most of history, returns to capital were higher than the growth rate of the global economy, and this meant higher returns to owners of capital than to workers at large. And this means rising inequality. As a reviewer writes, “if capital incomes are more concentrated than incomes from labor (a rather uncontroversial fact), personal income distribution will also get more unequal — which indeed is what we have witnessed in the past 30 years.” The mid-20th century reversal of this trend was temporary and unlikely to be repeated.

One thing to be clear about, however, is that the right side of Piketty’s chart is a forecast. I’ve redrawn it with dashed red lines to make that clear. Piketty is predicting that returns to capital will exceed growth modestly over the next half century, and will gap out wildly in the half century after that. Edsall doesn’t really explain why Piketty believes this, so I guess we’ll have to wait for further reviews on that score. Speaking for myself, I’ll need some convincing. My view is that the second half of the 21st century—assuming we manage not to blow each other up or fry the planet to a cinder—is likely to be an era of fantastically high growth thanks to robotics and artificial intelligence. That also produces problems related to the distribution of income, but they’re rather different from Piketty’s.

But in one sense it doesn’t matter. Piketty’s solution to the problem of this mismatch between growth and capital returns—which he considers an inevitable consequence of capitalism—is redistribution and plenty of it: “The only way to halt this process, he argues, is to impose a global progressive tax on wealth….an annual graduated tax on stocks and bonds, property and other assets that are customarily not taxed until they are sold.” That’s probably the eventual answer to the robotics revolution too. So regardless of which fork we take in the future, higher taxes on the rich seem pretty likely.

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Thomas Piketty Has a Grim View of Our Plutocratic Future

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Why Did Obama Go to Costco? Our Wage Calculator Explains

by zdtadaqod1 Posted on January 29, 2014

Mother Jones

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This morning, President Obama visited a Costco in suburban Maryland to reemphasize the theme of income inequality he sounded in the State of the Union speech last night. Our calculator shows why Obama chose the home of the giant pickle jar and behemoth TP package: Even at the relatively low wages paid by big-box retailers, slightly better pay can mean the difference between inescapable poverty and a modest living.

How many people are in your household? One Adult No Children
One Adult One Child
One Adult Two Children
One Adult Three Children
Two Adults No Children
Two Adults One Child
Two Adults Two Children
Two Adults Three ChildrenWhich state do you live in? Which area do you live in? (Area data not available for households without children.)

Where you live, a Costco worker needs to work __ hours each week to make a secure yet modest living to support a family as big as yours (as a sole breadwinner). A WalMart worker would need to work __ hours a week to achieve the same.

Sources: CNN Money, The National Employment Law Project, Bureau of Labor Statistics, and Economic Policy Institute’s Family Budget Calculator. The annual costs of living for adults without children use state-wide averages from MIT’s Living Wage Calculator. Front page image: Ruaridh Stewart/ZUMA Press.

var first_state = ‘AK’;
var first_locale = ‘Anchorage, AK HUD Metro FMR Area’;
var state_abbr =
‘AL’ : ‘Alabama’,
‘AK’ : ‘Alaska’,
‘AS’ : ‘America Samoa’,
‘AZ’ : ‘Arizona’,
‘AR’ : ‘Arkansas’,
‘CA’ : ‘California’,
‘CO’ : ‘Colorado’,
‘CT’ : ‘Connecticut’,
‘DE’ : ‘Delaware’,
‘DC’ : ‘District of Columbia’,
‘FM’ : ‘Micronesia1’,
‘FL’ : ‘Florida’,
‘GA’ : ‘Georgia’,
‘GU’ : ‘Guam’,
‘HI’ : ‘Hawaii’,
‘ID’ : ‘Idaho’,
‘IL’ : ‘Illinois’,
‘IN’ : ‘Indiana’,
‘IA’ : ‘Iowa’,
‘KS’ : ‘Kansas’,
‘KY’ : ‘Kentucky’,
‘LA’ : ‘Louisiana’,
‘ME’ : ‘Maine’,
‘MH’ : ‘Islands1’,
‘MD’ : ‘Maryland’,
‘MA’ : ‘Massachusetts’,
‘MI’ : ‘Michigan’,
‘MN’ : ‘Minnesota’,
‘MS’ : ‘Mississippi’,
‘MO’ : ‘Missouri’,
‘MT’ : ‘Montana’,
‘NE’ : ‘Nebraska’,
‘NV’ : ‘Nevada’,
‘NH’ : ‘New Hampshire’,
‘NJ’ : ‘New Jersey’,
‘NM’ : ‘New Mexico’,
‘NY’ : ‘New York’,
‘NC’ : ‘North Carolina’,
‘ND’ : ‘North Dakota’,
‘OH’ : ‘Ohio’,
‘OK’ : ‘Oklahoma’,
‘OR’ : ‘Oregon’,
‘PW’ : ‘Palau’,
‘PA’ : ‘Pennsylvania’,
‘PR’ : ‘Puerto Rico’,
‘RI’ : ‘Rhode Island’,
‘SC’ : ‘South Carolina’,
‘SD’ : ‘South Dakota’,
‘TN’ : ‘Tennessee’,
‘TX’ : ‘Texas’,
‘UT’ : ‘Utah’,
‘VT’ : ‘Vermont’,
‘VI’ : ‘Virgin Island’,
‘VA’ : ‘Virginia’,
‘WA’ : ‘Washington’,
‘WV’ : ‘West Virginia’,
‘WI’ : ‘Wisconsin’,
‘WY’ : ‘Wyoming’

var selected_state = jQuery(“#selected_state”);
var selected_locale = jQuery(“#selected_locale”);
var selected_household = jQuery(“#selected_household”);

for (var state in bfjo)
var option = jQuery(” + state_abbrstate + ”);
selected_state.append(option);

var fill_locale_selector = function(state_object)

selected_locale.html(“”);

for (var locale in state_object)
var option = jQuery(” + locale.replace(/,.*$/, ”) + ”);
selected_locale.append(option);

}

fill_locale_selector(bfjofirst_state)

selected_state.bind(“change”,
function()
var state = $(“#selected_state option:selected”).val();
var state_object = bfjostate;

fill_locale_selector(state_object);

)

selected_locale.bind(“change”,
function()
var state = $(“#selected_state option:selected”).val();
var locale = $(“#selected_locale option:selected”).val();
var locale_object = bfjostatelocale;

)

enable_disable_locale = function()
var household = $(“#selected_household option:selected”).val();

if (household === ‘1P0C’ else
selected_locale.removeAttr(‘disabled’);

}
selected_household.bind(“change”,
function()
enable_disable_locale();

);
enable_disable_locale();

jQuery(“#calculate_this”).bind(“submit”,
function()

var state = $(“#selected_state option:selected”).val();
var locale = $(“#selected_locale option:selected”).val();
var household = $(“#selected_household option:selected”).val();

var hours_worked_per_year = 2080;
var walmart_hourly_salary = 9.4;
var walmart_annual_salary = walmart_hourly_salary * hours_worked_per_year;
var costco_hourly_salary = 22.8;
var costco_annual_salary = costco_hourly_salary * hours_worked_per_year;

var annual_living_wage_for_household = bfjostatelocalehousehold;

var walmart_hours_needed_per_year = annual_living_wage_for_household / walmart_hourly_salary;
var costco_hours_needed_per_year = annual_living_wage_for_household / costco_hourly_salary;

var walmart_hours_needed_per_week = walmart_hours_needed_per_year / 52;
var costco_hours_needed_per_week = costco_hours_needed_per_year / 52;

console.log(‘Walmart hours per week: ‘, walmart_hours_needed_per_week)
console.log(‘Costco hours per week: ‘, costco_hours_needed_per_week)

var commify = function(number)
while (/(d+)(d3)/.test(number.toString()))
number = number.toString().replace(/(d+)(d3)/, ‘$1’+’,’+’$2′);
}
return number;
}

jQuery(“#calculated”).show();
jQuery(“#costco_hours_needed_per_week”).text(Math.round(costco_hours_needed_per_week));
jQuery(“#walmart_hours_needed_per_week”).text(Math.round(walmart_hours_needed_per_week));

//var salary_string = commify(salary);
//var yearly_living_wage_string = commify(annual_living_wage);
/*
while (/(d+)(d3)/.test(salary_string.toString()))
salary_string = salary_string.toString().replace(/(d+)(d3)/, ‘$1’+’,’+’$2′);

while (/(d+)(d3)/.test(yearly_living_wage_string.toString()))
yearly_living_wage_string = yearly_living_wage_string.toString().replace(/(d+)(d3)/, ‘$1’+’,’+’$2′);

*/

/*console.log(hourly_for_living);
var hourly_for_living_clean = Math.round(hourly_for_living * 100)
.toString().replace(/(d+)(d2)/, ‘$1’+’.’+’$2′);

jQuery(“#living_wage_hourly”).text(hourly_for_living_clean);*/

return false;

}

)

Excerpt from – 

Why Did Obama Go to Costco? Our Wage Calculator Explains

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Net Neutrality Drifts Ever Closer to Oblivion

by ArielO42brir Posted on January 28, 2014

Mother Jones

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In the wake of a circuit court ruling that the FCC doesn’t have the authority to mandate net neutrality, Brian Fung reports on the likely next step from federal regulators:

FCC chairman Tom Wheeler appears to be leaning increasingly toward using the FCC’s existing legal authority to regulate broadband providers. Industry watchers say this approach would likely turn on a part of the Communications Act known as Section 706, which gives the FCC authority to promote broadband deployment.

….Over the past week, some insiders, including industry representatives and public advocates, have said that Section 706 actually gives the FCC much more power than we thought….While the agency can’t lay down a blanket rule prohibiting ISPs from abusing their power, it could go after offending companies on a case-by-case basis. This is exactly what Wheeler has in mind.

“We are not reticent to say, ‘Excuse me, that’s anti-competitive. Excuse me, that’s self dealing. Excuse me, this is consumer abuse,'” said Wheeler on Tuesday. “I’m not smart enough to know what comes next in innovation. But I do think we are capable of saying, ‘That’s not right.’ And there’s no hesitation to do that.”

So long as the FCC can argue that a company is hindering the rollout of broadband or broadband competition (a pretty vague definition), the agency may be able to regulate ISPs, content intermediaries, and possibly Web services like Google and Netflix themselves.

Hmmm. Maybe Wheeler has no hesitation to do that, but this basically puts net neutrality at the whim of the president. All it takes is a few FCC members who think net neutrality is a crock, and enforcement would end instantly. This is a pretty thin reed for supporters of net neutrality.

Excerpt from – 

Net Neutrality Drifts Ever Closer to Oblivion

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No, the Decline of Cinderella Marriages Probably Hasn’t Played a Big Role in Rising Income Inequality

by arielbangkok Posted on January 27, 2014

Mother Jones

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Tyler Cowen points me to a paper today about the rise in assortative mating. Basically, this means that we increasingly marry people who are similar to ourselves. High school grads tend to marry other high school grads, and college grads tend to marry other college grads. The authors of the paper conclude that this has implications for rising income inequality:

If matching in 2005 between husbands and wives had been random, instead of the pattern observed in the data, then the Gini coefficient would have fallen from the observed 0.43 to 0.34, so that income inequality would be smaller. Thus, assortative mating is important for income inequality. The high level of married female labor-force participation in 2005 is important for this result.

The table on the right is a standardized contingency table that compares 1960 to 2005. The diagonal numbers show the percentage of each educational class who are married to others of the same educational class, and in every case the numbers are higher in 2005. This does indeed suggest that assortative mating has contributed to increasing income inequality. However, I’d offer a few caveats:

Comparing observed GINI with a hypothetical world in which marriage patterns are completely random is a bit misleading. Marriage patterns weren’t random in 1960 either, and the past popularity of “Cinderella marriages” is more myth than reality. In fact, if you look at the red diagonals, you’ll notice that assortative mating has actually increased only modestly since 1960.
So why bother with a comparison to a random counterfactual? That’s a little complicated, but the authors mainly use it to figure out why 1960 is so different from 2005. As it turns out, they conclude that rising income inequality isn’t really due to a rise in assortative mating per se. It’s mostly due to the simple fact that more women work outside the home today. After all, who a man marries doesn’t affect his household income much if his wife doesn’t have an outside job. But when women with college degrees all start working, it causes a big increase in upper class household incomes regardless of whether assortative mating has increased.
This can get to sound like a broken record, but whenever you think about rising income inequality, you always need to keep in mind that over the past three decades it’s mostly been a phenomenon of the top one percent. It’s unlikely that either assortative mating or the rise of working women has had a huge impact at those income levels, and therefore it probably hasn’t had a huge impact on increasing income inequality either. (However, that’s an empirical question. I might be wrong about it.)

This is interesting data, which is why I’m presenting it here. And it almost certainly has an impact on changes of income distribution between, say, the top fifth and the middle fifth. But the real drivers of rising income inequality, which have driven up the incomes of the top one percent so stratospherically, almost certainly lie elsewhere.

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No, the Decline of Cinderella Marriages Probably Hasn’t Played a Big Role in Rising Income Inequality

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JPMorgan Paid $20 Billion in Fines Last Year—So Its Board Is Giving Jamie Dimon a Raise

by TerryQnhtwe Posted on January 24, 2014

Mother Jones

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The New York Times reported Friday that Jamie Dimon, the silver-haired CEO of JPMorgan Chase, the nation’s largest bank by assets, is getting a raise. Dimon is poised to add a few million to the $11.5 million compensation package he took home in 2013.

If you so much as glanced at the news last year, this bit of news may puzzle you. JPMorgan, in many ways, had a miserable 2013. JPMorgan paid $1 billion in fines in the wake of the “London Whale” scandal, in which the bank lost $6 billion on a market-rattling blunder by a trader named Bruno Iksil. The bank also paid $13 billion to settle charges that it’d peddled risky mortgage-backed securities. And it forked over another $2 billion to settle charges for failing to spot Bernie Madoff’s ponzi scheme, which Madoff perpetrated largely using JPMorgan accounts. All told, the bank paid out roughly $20 billion in penalties to federal regulators over a slew of screw-ups and failures.

2013 was a rough year for JPMorgan. So why is Dimon getting a raise? The answer, in part, will make your blood boil. Here’s the money quote in the Times:

Mr. Dimon’s defenders point to his active role in negotiating a string of government settlements that helped JPMorgan move beyond some of its biggest legal problems. He has also solidified his support among board members, according to the people briefed on the matter, by acting as a chief negotiator as JPMorgan worked out a string of banner government settlements this year.

…

Mr. Dimon’s star has risen more recently as he took on a critical role in negotiating both the bank’s $13 billion settlement with government authorities over its sale of mortgage-backed securities in the years before the financial crisis and the $2 billion settlement over accusations that the bank turned a blind eye to signs of fraud surrounding Bernard L. Madoff.

Just hours before the Justice Department was planning to announce civil charges against JPMorgan over its sales of shaky mortgage investments in September, Mr. Dimon personally reached out to Attorney General Eric H. Holder Jr.—a move that averted a lawsuit and ultimately resulted in the brokered deal. Just a few months later, Mr. Dimon acted as an emissary again, this time, meeting with Preet Bharara, the United States attorney in Manhattan leading the investigation into the Madoff Ponzi scheme.

In other words, as big as those multibillion-dollar settlements were, JPMorgan board members believe the bank’s legal problems could’ve been worse. Blast-a-hole-in-our-balance-sheet worse. And so Dimon’s pay bump is a reward for locking horns with bank regulators and federal authorities and hashing out settlement deals that were favorable to the bank. He’s getting a raise because he beat the regulators, played them so well, JPMorgan board members seem to be saying, that he deserves to be rewarded for the deals he helped engineer.

There are other factors, too. Despite its legal headaches, JPMorgan’s stock price climbed 22 percent over the past year, and the bank recorded profits of $17.9 billion in 2013. But to read that Dimon’s savvy negotiating has won him a raise—and don’t forget that no top bank executives have gone to jail for actions related to the 2008 financial meltdown—brings to mind the old Dick Durbin quote about banks and Washington: “They frankly own the place.”

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JPMorgan Paid $20 Billion in Fines Last Year—So Its Board Is Giving Jamie Dimon a Raise

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Is Our Robot Future Really All That Speculative Anymore?

by NanceeDundalli Posted on January 23, 2014

Mother Jones

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James Pethokoukis points us to a new working paper about economic growth released by the San Francisco Fed this month. Here’s a piece:

Even more speculatively, artificial intelligence and machine learning could allow computers and robots to increasingly replace labor in the production function for goods….In standard growth models, it is quite easy to show that this can lead to a rising capital share — which we intriguingly already see in many countries since around 1980 (Karabarbounis and Neiman, 2013) — and to rising growth rates. In the limit, if capital can replace labor entirely, growth rates could explode, with incomes becoming inï¬&#129;nite in ï¬&#129;nite time.

Pethokoukis comments:

The Fed paper is particularly amazing when you consider that when outgoing Fed chairman Ben Bernanke mentioned “robotics” in a commencement address last spring, he was the first US central-bank boss to use the word in a speech since Alan Greenspan in 2000. Expect more mentions from Janet Yellen.

Technological progress in AI and robotics — even short of the singularity — raises huge questions about the future of work, mobility, and inequality….What do we make of all those long-range economic and fiscal forecasts from folks at the Fed, Congressional Budget Office, and other expert groups? How do we plan for a future that may be just as revolutionary, if not more so, as the Industrial Revolution?

My long-form take on this is here. The thing that gets me is that so many people continue to think of this as wild speculation. I don’t mean the infinite incomes stuff, which is obviously hyperbole since we’ll always need more than just capital to make the economy run. I just mean the general idea that robots and AI are pretty obviously going to have a huge economic impact in the medium term future. This is something that seems so obvious to me that I’m a little puzzled that there’s anyone left who still doesn’t see it. Nonetheless, an awful lot of people still think of this as science fiction. I put the doubters into four rough buckets:

  1. Moore’s Law is going to to break down sometime very soon, and we’ll never get the raw computing power we need for true AI.
  2. There is something mysterious about the human brain that we will never be able to emulate with silicon and software. Maybe something, um, quantum.
  3. Meh. We’ve been hearing about AI forever. It’s never happened before, it’s not going to happen this time either.
  4. La la la la la.

#1 is at least plausible. I think we’re too far along for it to be taken very seriously anymore, but you never know. #2 is basically New Age nonsense dressed up as physics. #3 is understandable, but lazy. We heard about going to the moon for a long time too, but it didn’t happen until the technology curve caught up. We’re at the same point with AI. #4 is the group of people who kinda sorta accept that AI is coming, but for various reasons simply don’t want to grapple with what this means. Conservatives don’t like the idea that it almost inevitably will require a much more redistributive society. Liberals don’t like the idea that it might make a lot of standard lefty social programs obsolete.

As a liberal believer, I’ll put myself in the latter camp. I’m not willing to give up on the standard liberal social program because (a) I might be wrong about AI, (b) if I’m not, we’re still going to need variations on these programs, and (c) we still have to deal with the transition period anyway. I assume conservative believers might feel roughly the same way.

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Is Our Robot Future Really All That Speculative Anymore?

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Please Tell Me Republicans Aren’t Going to Touch Off Yet Another Idiotic Debt Ceiling Fight

by HaydenFornachon Posted on January 23, 2014

Mother Jones

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From Michael Steel, spokesman for House Speaker John Boehner:

The speaker has said that we should not default on our debt, or even get close to it, but a “clean” debt limit increase simply won’t pass in the House. We hope and expect the White House will work with us on a timely, fiscally responsible solution.

Somebody please tell me that this is just derpy boilerplate because Steel didn’t have anything better to say. Even Republicans have got to have better things to do than once again threaten default on US debt unless President Obama caves in to yet another list of hopeless right-wing pet rocks. Don’t they?

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Please Tell Me Republicans Aren’t Going to Touch Off Yet Another Idiotic Debt Ceiling Fight

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We Already Have a Lower Minimum Wage for Teenagers

by Katherined5a Posted on January 22, 2014

Mother Jones

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Responding to yesterday’s set of posts about the effect of the minimum wage on teen employment, Matt Yglesias is puzzled. Do we even want higher teen employment? It doesn’t really seem like it:

After all, policymakers from both parties are pushing longer school days and shorter summer vacations. We’ve done a lot to encourage more people to go to college. We seem to be pushing more extracurricular activities on high schoolers….Now perhaps this is a huge mistake. But if it’s a huge mistake, it’s much bigger than the minimum wage. And actually the minimum-wage angle could be patched pretty quickly. Jordan Weissmann recently wrote about Australia where the minimum wage is higher than in the United States, but there’s a special low teenage minimum wage.

That reminds me. A few days ago I ran across the following footnote on a Labor Department web page:

5A subminimum wage — $4.25 an hour — is established for employees under 20 years of age during their first 90 consecutive calendar days of employment with an employer.

Am I the only person in America who didn’t know this? Sure, it’s only for 90 days, but it still makes a difference. Summer jobs could certainly all be offered to teens at $4.25. And it significantly reduces the risk of hiring a teen, since they don’t cost very much during the period when you’re still deciding whether they’re any good.

In any case, this went into effect in 1997 and it hasn’t changed since. Surely this is germane to any discussion of the minimum wage and teen employment?

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We Already Have a Lower Minimum Wage for Teenagers

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Global Investors See Bubbles As Far As the Eye Can See

by HalinaFreitas Posted on January 22, 2014

Mother Jones

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Generally speaking, global investors are pretty optimistic. According to a new Bloomberg poll, they think China is a trouble spot, but they’re bullish on prospects in Europe and the US, and a large majority are more confident than they were at this time last year. But take a look at this:

After the great crash of 2008, investors sure are sensitive about bubbles. They think equity markets are close to being a bubble; fixed-income markets are close to being a bubble; and even US treasuries are inching toward bubblicious territory. That accounts for just about everything except real property, which investors are still sanguine about—in the US, anyway.

This is just raw data, and it might not mean anything. On the other hand, no matter what investors say about the economy, if they’re bearish on real-world ventures (factory expansions, etc.) and they’re getting cold feet about financial ventures, does this mean that more and more money is going to be sitting on the sidelines? Or does it mean that all this money is going to suddenly start pouring into the safe haven of US housing until everyone gets scared of that too? Or something else?

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Global Investors See Bubbles As Far As the Eye Can See

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