Economics @ ITT

What Might the US Government Crisis Cost?

Posted in economics, macroeconomics by ittecon on October 14, 2013

From the fiscal cliff to sequestration to the current shutdown debt ceiling debate: Whats the cost of the U.S. government careening from crisis to crisis?About 900,000 jobs lost … and the potential for another recession.

via Crisis cost? Lost jobs and maybe another recession – NBC News.com.

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Big Unemployment, the New Normal?

Posted in economics, employment, macroeconomics, Policy Issues, Regulation, Taxation by ittecon on July 9, 2013

I tried to respond to a post by Don Peppers responding to this article, but LinkedIn limits the character count. I quote Don’s post here for context.

It’s common knowledge that LESS government, LESS regulation, and LOWER marginal tax rates will all improve employment. Unfortunately, the politics of envy is irresistible to some, and there are very few politicians on either side of the aisle who will vote for less of anything related to the government.

It may be common knowledge that less of these things might increase employment, but this favours a local maxima at the expense of a global maxima. It is the typical short-term benefit with a long-term detriment. Still, this argument and its subarguments are specious. I won’t even give any more attention to the dubious official unemployment figure definition and methodology.

Less government is a vague term. What government? Fewer dog-catchers? Interesting how, ad reductio, this becomes an argument for anarchy.

As for regulations, business favours regulations that shield it from the public and markets; intellectual property “rights” come to the top of my mind. Government (or a quasi-government acting entity) are necessary so as not to devolve into a situation where warlords rule. Afghanistan comes to mind. I could imagine a football match with no rules or regulations. Even rugby and UFC have rules, as do wars.

In economic terms, the lower marginal taxes argument is patently false (without even delving into marginal verse effective territory). Laffer’s concept is not false in and of itself, but it fails on two accounts. First, we can agree that at some point lowering marginal tax rates will create positive incentives, but it doesn’t follow this is true at all levels. Empirically, we can easily determine that we are below that point. On a practical level, this not only means that a reduction with not have positive effects; there will be negative effects. Second, the primary driver to hiring is demand for products or services (or at least the prospect thereof). A marginal tax rate of zero has no impact if no one is purchasing what I am offering.

Surprise! Inflation is too low almost everywhere on earth

Posted in economics, macroeconomics, Policy Issues by ittecon on May 18, 2013

The leading economies of the industrialized nations may not have a lot in common, but they are all afflicted by this: Inflation is too low.

via Surprise! Inflation is too low almost everywhere on earth.

Whats Wrong With the U.S. Job Market?

Posted in economics, employment, macroeconomics by ittecon on May 10, 2013

The breakdown of the labor market can be blamed on either supply or demand. Those who argue that the supply of labor is the main problem say that many Americans simply aren’t qualified for the jobs available. On May 7, the BLS reported that there were more than 3.8 million job openings in the U.S. at the end of March—at a time when more than 11 million people were looking for work.

via Whats Wrong With the U.S. Job Market? – Businessweek.

Markets Are Not Stable, Efficient, or Self-Correcting

Posted in economics, macroeconomics, Policy Issues by ittecon on May 3, 2013

“In analyzing the most recent financial crisis, we can benefit somewhat from the misfortune of recent decades. The approximately 100 crises that have occurred during the last 30 years—as liberalization policies became  dominant—have given us a wealth of experience and mountains of data.  If we look over a 150 year period, we have an even richer data set.”

via The Lessons of the North Atlantic Crisis for Economic Theory and Policy | iMFdirect – The IMF Blog.

Does High Public Debt Stifle Economic Growth?

Posted in economics, macroeconomics by ittecon on April 18, 2013

In capitals, both political and economic, across Europe, across North America, really, across the world, theres been an assumption based on a study done by two eminent Harvard professors, economists Carmen Reinhart and Kenneth Rogoff, which presented in 2010 their conclusions that 90 percent debt-to-GDP ratio means a collapse in growth. Its that conclusion that leads to policies like austerity, which says even in times of recession, debts more dangerous than high unemployment.

Now joining us to talk about their conclusions, because theyve reached quite different conclusions about the same data, is, from the PERI institute, first of all, Thomas Herndon. Hes a doctoral student in economics at the University of Massachusetts Amherst. His research includes political economy and finance. And he coauthored a paper: Does High Public Debt Consistently Stifle Economic Growth?, which is a critique of Reinhart and Rogoff.

via Does High Public Debt Stifle Economic Growth?.

What you never knew about global wealth inequality

Posted in economics, Income Redistribution, International Economics, macroeconomics by ittecon on April 13, 2013

Do you think the United States is the only country that favours the affluent?

I though not. This short video infographic provides some insight.

Sundown in America

Posted in economics, macroeconomics, Policy Issues by ittecon on March 31, 2013

Whilst I agree with parts of Chicken Little’s David Stockman’s OpEd piece, it is quite reductionist and misses as many points as it hits.

Over the last 13 years, the stock market has twice crashed and touched off a recession: American households lost $5 trillion in the 2000 dot-com bust and more than $7 trillion in the 2007 housing crash. Sooner or later — within a few years, I predict — this latest Wall Street bubble, inflated by an egregious flood of phony money from the Federal Reserve rather than real economic gains, will explode, too.

via Sundown in America – NYTimes.com.

Let it Bleed?

Posted in economics, macroeconomics by ittecon on March 30, 2013

In the 12 years of the Great Depression – between the stock-market crash of 1929 and America’s mobilization for World War II – production in the United States averaged roughly 15% below the pre-depression trend, implying a total output shortfall equal to 1.8 years of GDP. Today, even if US production returns to its stable-inflation output potential by 2017 – a huge “if” – the US will have incurred an output shortfall equivalent to 60% of a year’s GDP.

via Let it Bleed? by J. Bradford DeLong – Project Syndicate.

Overshoot: Growth on a Finite Planet

Posted in economics, macroeconomics, Policy Issues by ittecon on March 19, 2013

Growth is good for everyone; right?

Ask any policy wonk, politician or pundit – Republican, Independent or Democrat – about the sine qua non of economic policy, and the chances are pretty good their answer will boil down to one word: growth.

via The Folly of Endless Growth on a Finite Planet | Common Dreams.