Tag: Economics

A Response to Charles Murray —Majestyk


I want to start this post out by trying to establish my bona fides regarding the subject that I am about to talk about. I have seen a reasonably broad swath of socioeconomic status in my life. My parents started out as fairly typical, middle-class people. My mother’s family (from rural Green Bay, Wisconsin) were almost uniformly blue-collar (my grandfather failed to finish high school) while my father’s family (mostly college-educated) were landowners and timber barons in Idaho … but they ultimately lost it all.

Thus I certainly didn’t come from money, despite the fact that improvements in my father’s employment allowed him to purchase many nicer things for my younger sister than I had when I was her age. This is the nature of things. There was a little bit of Fishtown and a little bit of Belmont in my upbringing. But there was never a hint of the negative stereotypes of Fishtown.


Why 2 Percent Inflation? Why Not Zero? — King Banaian


As Jim notes, inflation figures have come out and, depending on which data you use, you might say inflation was 1.5%, 1.7% or something in between. We are told that this is below the Fed’s target of 2%.

Question: Why is a central bank that is told to maintain price stability choosing 2% as its goal? Why wouldn’t price stability mean stable prices, or zero inflation?


How to Think About Inflation and Deflation — James Pethokoukis


041514inflation-600x400The March consumer inflation numbers showed prices rising faster than expected and up from last month. In the 12 months through March, consumer prices increased 1.5% versus 1.1% in February. The core CPI, which strips out the volatile energy and food bits, rose 1.7% versus 1.6% in February.

Analysis from IHS Global Insight:


The Millennial Predicament — Maura Pennington


Some may say our nation’s youth are entitled, but when it comes to millennials and state entitlement programs there’s another worry: what will happen when benefits can’t be paid out?

I spoke with Bloomberg analyst Neil Grossman about his recent study on Generation Y and the lopsided nature of Social Security, Medicare, and Medicaid. Here is part of our conversation for Forbes.com:


The Dangers of the “Equal Pay” Canard


In the newest installment of my weekly column for the Hoover Institution’s Defining Ideas, I take issue with the White House’s relentless insistence that there is a crisis in America of institutionalized employment discrimination against women, a claim that can’t stand up to even basic scrutiny:

Labor markets are intensely competitive, so the claim about systematic pay gaps has to assume both that women managers are hostile to women’s economic welfare, and that competitive markets are massively inefficient in matching people with positions. Competition for labor tends to lead to efficient outcomes. Indeed, by the standard account, price discrimination cannot survive in competitive markets, which means that the differentials in wages track differences in performance. Put simply, one danger of the Equal Pay Act is that it could mandate equal wages for unequal work, i.e. for two workers with different productivity.


Do Liberals Really Think An 80% Tax Rate Wouldn’t Hurt the U.S. Economy? — James Pethokoukis


Federal income taxes went up last year, a financial reality becoming ever clearer to many higher-earning Americans as tax day looms. But how much higher can Washington clip wealthier Americans before rising tax rates really weigh on US economic growth?

041414taxesQuite a bit, some would argue. Despite those tax hikes, the American economy actually grew faster in 2013 than in 2012. Real GDP — measured fourth quarter over fourth quarter — accelerated to 2.6% from 2.0%. Another point: while the current top tax rate of 39.6% is the highest since the 1990s, the economy has done just fine with top rates double that level. Real GDP grew by 3.6% annually in the 1950s even with a 91% top rate. Going forward, progressive economist and inequality researcher Thomas Piketty recommends a top rate of 80% in his new book Capital in the Twenty-First Century, a work much praised on the left. Clearly, then, tax rates could go a lot higher both to reduce income inequality and raise more dough for government spending programs, right?


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How Much Do You Really Know About the “Paycheck Fairness Act”?


This week, the Senate has been considering legislation dubbed “The Paycheck Fairness Act.” Proponents argue that it will help women and advance equal pay, but few give any details about how it would accomplish this or explain what the bill actually does. That’s probably because the bill’s actual provisions have little to do with helping women, but much more to do with lining the pockets of lawyers. Indeed, women overall — and certainly those who own small businesses — would probably be more harmed than helped by this law.

Test your knowledge of what’s really in “The Paycheck Fairness Act” by taking this short quiz created by the Independent Women’s Forum. Encourage your friends to do the same. As is often the case, the rhetoric surrounding this bill is very different than its actual substance.


Wall Street Should Stop Complaining About New Bank Capital Rules


Wall Street is kvetching up a storm over modest toughening of megabank capital requirements by federal regulators. “This rule puts American financial institutions at a clear disadvantage against overseas competitors,” Tim Pawlenty, chief executive of The Financial Services Roundtable and former GOP presidential candidate, told Reuters.

The new rule increases the required leverage ratio – the amount of equity capital a bank holds as a share of assets — to 5% versus the 3% ratio in the international Basel III agreement. Under the new rule, megabanks could borrow only 95% of money they lend versus 97% under Basel. By 2018, they would have to rely more on selling stock or retained earnings.


Are You a Yummy?


Just when we thought it was safe, marketers have come up with another repellent target market. From the London Evening Standard:

Meet the new saviour of the global economy. He has made a ton of cash from the emerging markets and he is not ashamed to spend it… on himself. He spends an inordinate amount of time browsing Mr Porter and Matches.com on his iPad. He never leaves the house without being Instagram-ready in JW Anderson, McQ and Louboutin footwear. He keeps his eyebrows well plucked, his nails well polished and he is most likely on a juice cleanse.


The Fictitious Holiday Based on a Faux Statistic — Sabrina Schaeffer


PFA_graphicTuesday, April 8th, marks “Equal Pay Day,” the fictitious “holiday” liberal women’s groups have manufactured to expose the so-called “wage gap.”

No doubt you’ve heard that women only make 77 cents for every dollar a man makes. The faux statistic is repeated so often it may as well be part of the morning weather report. Of course, unlike the weather report, which is only sometimes wrong, the wage gap statistic is always wrong.


The Wisdom of Crowds (Intelligence Analysis Division)


This should impress everyone, and surprise no one:

The morning I met Elaine Rich, she was sitting at the kitchen table of her small town home in suburban Maryland trying to estimate refugee flows in Syria.


The March Jobs Report: Is the Great Recession Finally Over?


Is the US job market back, finally? One interesting data point in the March employment report: the US economy added 192,000 private-sector jobs last month, pushing private payrolls to 116.09 million. That level surpasses the former high of 115.98 million reached in January 2008.

Hardly an insignificant milestone, and one that shows how far the labor market recovery has come. Although the American economy has been growing since summer 2009, a return to prerecession private-job totals is also an important marker. Perhaps, one could say, we’ve even returned to normal.


The New Paul Ryan Budget Plan: A Brief Review


The annual House of Representatives budget resolution – you may know it as the “Ryan plan” or perhaps as the “Path to Prosperity” — has turned into a weird Washington phenomenon, one that combines analysis fiscal, political, and psychological. Do the numbers really add up? Will it hurt or help GOP election odds? Does it signal that Roman Catholic Paul Ryan or Randian Paul Ryan is the fellow running the budget committee? And, of course: does the budget suggest Ryan will run for president 2016?

Of those questions, I’m confident only in answering the first. (Alert: CNBC and MSNBC bookers. Ignore that last sentence. I am supremely confident in answering any and all possible questions about the Ryan budget, as well as the 2016 presidential race, the Russian annexation of Crimea, the Yellowstone earthquakes, and the new Captain America film. I also know a thing or two about nanotech.)


Globalization, Competition and My Wet Basement


In New England, a dehumidifier is pretty much a required appliance in spring and summer. That goes double in my neighborhood, which was built on swampland in the 1950s.

Last spring, I received a notice that my dehumidifier – U.S.-branded, but manufactured in China – was subject to a safety recall. Apparently there were some instances of similar units catching fire. By shipping back certain parts, I was entitled to a gift card and discount coupon towards a new one. Grumbling, I removed the parts, sent them back, and waited for my coupon. After it came, I shlepped out to the store, shopped for a new dehumidifier, and shlepped the new unit home.


A Tax ‘Reform’ For The Worse — Andrew Stuttaford


Over at the Washington Examiner, Philip Klein argues in favor of phasing out the mortgage interest tax deduction, an idea that seems to be gaining some traction with the likes of Republicans, such as House Ways and Means Chairman Rep. David Camp. It shouldn’t have.

Phasing out this deduction may, at least to market fundamentalists, rest on sound economic logic, but politically there is very little to be said for it. Before we get to why, let’s remember a few things:


Why Philosophers Hate Economists


I can’t be the first person on Ricochet to have noticed that philosophers and economists don’t always get along. The tension between the two bears some resemblance to the tension between conservatives and liberals. As the old trope goes, conservatives believe that liberalism is wrong, while liberals believe that conservatism is evil. Similarly, when economists and philosophers disagree, the economists believe it’s because the philosophers aren’t making sense, while the philosophers believe it’s because the economists are morally bankrupt.

Do you have a theory about this? I do. Here goes:


Washington’s Unhelpful Efforts to Stop the Ivory Trade — Richard Epstein


Regular readers of my work are aware that I have had more than a few occasions to criticize the policy goals of the Obama Administration. In my column this week for the Hoover Institution’s Defining Ideas, however, I take on an issue of a different nature: one in which the Administration’s goals are laudable, but the means by which it aims to achieve them are hopeless.

The Department of the Interior announced last month that it is imposing a sweeping ban on the commercial trade of ivory — one that will cover both the sale of objects that contain any amount of ivory, however small, and the shipment across state lines by the owner of any object that contains ivory. This policy is part of a well-intentioned effort to protect animals like elephants and rhinos from poachers by strengthening enforcement mechanisms against the illicit markets in which products made from their horns and tusks are traded. It suffers, however, from a total disconnect between ends and means. As I write:


Janet Yellen and the Great Woman Theory of Monetary Policy — James Pethokoukis


A “market rattling” press-conference performance from Janet Yellen, and Wall Street is suddenly thick with Ben Bernanke nostalgia. “The more experienced Bernanke knew to avoid clarifying deliberately vague statement language,” wrote JPMorgan economist Michael Feroli in a research note. Feroli was referencing Yellen’s squishy, off-the-cuff remark that interest rate hikes might start earlier rather than later next year, or “about six months” after the end of the central bank’s bond buying program. A “rookie gaffe” is how economist Paul Edelstein of IHS Global Insight put it.

Judge the new Fed chair’s debut as you will, but the bottom line is that Fed policymakers now expect rates to be a bit higher in 2015 and 2016 than they did previously. Also of note: The Fed de facto downgraded the efficiency of the US economy, as seen in its projection of reduced GDP growth and unemployment. These changes suggest, from the Fed’s perspective, more structural weakness in labor markets and an economy that, the WSJ’s Justin Lahart explains, “generates more inflation at a lower rate of growth — a notion reinforced by the Fed’s stepped-up expectation of when it will be time to raise rates.” Despite the decline in labor force participation and the share of adults working, the Yellen Fed is suddenly concerned about the inflation risk of tight labor markets.


Timothy Egan’s St. Patrick’s Day Famine Pretzel — by Matthew Hennessey


It’s come to this.

The New York Times’ Timothy Egan used his weekend column to link America’s modern Republican Party—in the person of Congressman Paul Ryan—to the nineteenth century Irish famines that killed more than a million Irish people and led to the emigration of maybe a million more.