1
Opinion
Obama's Second-Term Options on the Environment
What Obama can do to cut climate risk and improve the environment in his second term.
2
World
In China, Widening Discontent Among the Communist Party Faithful
The Communist Party’s new leaders are being confronted by challenges from a constituency that has generally been the party’s most ardent supporter: the middle class and well-off.
3
Business Day
A Sister Act, Leaping Into E-Commerce
Two sisters with experience in the film and toy industries — but not in the fashion or tech fields — started an online company that lets customers design their own shoes.
4
U.S.
Medicaid Expansion Is Delicate Maneuver for Arizona’s Republican Governor
Gov. Jan Brewer’s decision to support the Medicaid expansion under President Obama’s health care law drew fire from conservative groups.
"It could be simply a case of math trumping ideology: In 2014, the first
full year of the expansion, Arizona stands to gain $1.6 billion in
federal matching funds, Ms. Brewer said. (The federal government would
cover the full cost of the new beneficiaries in the early years and 90
percent of the cost after 2020.)
Her fellow Republican governors in the Southwest, Susana Martinez of New
Mexico and Brian Sandoval of Nevada, used a similar argument to justify
their decisions to do the same thing. But it was Ms. Brewer whom
National Review Online, the conservative publication, singled out for
criticism in an editorial,
saying she exemplified “that unfortunately common strain of Republican
leadership that is uncompromising in rhetoric but opportunistic in
reality.” Americans for Prosperity, the conservative advocacy group, also circulated a paragraph-by-paragraph rebuttal of the arguments she used to support her choice."
5
Opinion
Inequality Is Holding Back The Recovery
Our economy won't come back strong unless it also becomes more fair.Inequality and Recovery
Joe Stiglitz has an Opinionator piece
arguing that inequality is a big factor in our slow recovery. Joe is an
insanely great economist, so everything he says should be taken
seriously. And given my political views and general concerns about
inequality, I’d like to agree.
But — you knew there was a “but” coming — I’ve thought about these issues a lot, and haven’t been able to persuade myself that this particular morality tale is right.
It’s worth noting that two of Joe’s four points aren’t really about the current recovery. He argues that high inequality is causing huge waste of human talent, because the poor and increasingly the middle class lack access to good education; and I agree. He also argues that inequality fosters financial crisis, and I agree with that too.
But we’re talking about the financial crisis aftermath, not the crisis itself. What role does inequality play?
First, Joe offers a version of the “underconsumption” hypothesis, basically that the rich spend too little of their income. This hypothesis has a long history — but it also has well-known theoretical and empirical problems.
It’s true that at any given point in time the rich have much higher savings rates than the poor. Since Milton Friedman, however, we’ve know that this fact is to an important degree a sort of statistical illusion. Consumer spending tends to reflect expected income over an extended period. If you take a sample of people with high incomes, you will disproportionally include people who are having an especially good year, and will therefore be saving a lot; correspondingly, a sample of people with low incomes will include many having a particularly bad year, and hence living off savings. So the cross-sectional evidence on saving doesn’t tell you that a sustained higher concentration of incomes at the top will lead to higher savings; it really tells you nothing at all about what will happen.
So you turn to the data. We all know that personal saving dropped as inequality rose; but maybe the rich were in effect having corporations save on their behalf. So look at overall private saving as a share of GDP:
The trend before the crisis was down, not up — and that surge with the crisis clearly wasn’t driven by a surge in inequality.
So am I saying that you can have full employment based on purchases of yachts, luxury cars, and the services of personal trainers and celebrity chefs? Well, yes. You don’t have to like it, but economics is not a morality play, and I’ve yet to see a macroeconomic argument about why it isn’t possible.
Joe also argues that high income inequality depresses tax receipts, fueling fiscal fears. Again, I have trouble with this point: our tax system isn’t as progressive as it should be, but it is at least mildly progressive even when you take state and local taxes into account. So I don’t know where this is coming from.
I wish I could sign on to this thesis, and I’d be politically very comfortable if I could. But I can’t see how this works."
Very possibly I disagree with Krugman on this.
I think Stiglitz is thinking about the liquidity trap which is forcing money out of productive investment. Money sits in safe locations waiting for the net deflation to increase its value.
But — you knew there was a “but” coming — I’ve thought about these issues a lot, and haven’t been able to persuade myself that this particular morality tale is right.
It’s worth noting that two of Joe’s four points aren’t really about the current recovery. He argues that high inequality is causing huge waste of human talent, because the poor and increasingly the middle class lack access to good education; and I agree. He also argues that inequality fosters financial crisis, and I agree with that too.
But we’re talking about the financial crisis aftermath, not the crisis itself. What role does inequality play?
First, Joe offers a version of the “underconsumption” hypothesis, basically that the rich spend too little of their income. This hypothesis has a long history — but it also has well-known theoretical and empirical problems.
It’s true that at any given point in time the rich have much higher savings rates than the poor. Since Milton Friedman, however, we’ve know that this fact is to an important degree a sort of statistical illusion. Consumer spending tends to reflect expected income over an extended period. If you take a sample of people with high incomes, you will disproportionally include people who are having an especially good year, and will therefore be saving a lot; correspondingly, a sample of people with low incomes will include many having a particularly bad year, and hence living off savings. So the cross-sectional evidence on saving doesn’t tell you that a sustained higher concentration of incomes at the top will lead to higher savings; it really tells you nothing at all about what will happen.
So you turn to the data. We all know that personal saving dropped as inequality rose; but maybe the rich were in effect having corporations save on their behalf. So look at overall private saving as a share of GDP:
So am I saying that you can have full employment based on purchases of yachts, luxury cars, and the services of personal trainers and celebrity chefs? Well, yes. You don’t have to like it, but economics is not a morality play, and I’ve yet to see a macroeconomic argument about why it isn’t possible.
Joe also argues that high income inequality depresses tax receipts, fueling fiscal fears. Again, I have trouble with this point: our tax system isn’t as progressive as it should be, but it is at least mildly progressive even when you take state and local taxes into account. So I don’t know where this is coming from.
I wish I could sign on to this thesis, and I’d be politically very comfortable if I could. But I can’t see how this works."
Very possibly I disagree with Krugman on this.
I think Stiglitz is thinking about the liquidity trap which is forcing money out of productive investment. Money sits in safe locations waiting for the net deflation to increase its value.
6
7
Opinion
Should Therapists Play Cupid?
Temptation lurks for therapists to play matchmaker for patients.
8
Science
Drought Points Up Critical Role of Waterways
If the Mississippi River got so low that navigation had to stop, grain exports and the other commodities could get a lot more expensive very quickly.
9
Opinion
The Teacher Evaluation Fight
Failure to reach agreement might mean the loss of hundreds of millions of dollars in state and federal money for the city’s schools.
10
N.Y. / Region
With Bus Strike, Fragile Students Face Hard Trips
More than 110,000 children have had to find new ways to class since most New York City school bus drivers walked out, and none have been more profoundly affected than those with special needs.
11
World
Iraq: Attacks Kill at Least 26 People
Insurgents unleashed a series of attacks, mainly against Shiite Muslim pilgrims, across Iraq on Thursday, killing at least 26 people and extending a wave of bloodshed into a second day.
12
Opinion
The States Confront Gun Violence
Too many state lawmakers would rather bow before the gun lobby than promote public safety.
13
Opinion
Soldier, Husband, Father, Lost in War
A reader recalls her own experience, as the daughter of a British officer killed in World War II.
14
Health
Your Twitter Tips for Going Vegan
Readers sent in their favorite tips and tricks for adopting a vegan lifestyle.
15
U.S.
Rift Widens Over Mining of Uranium in Virginia
Bills introduced to the General Assembly would lift a moratorium on uranium mining at a site in southern Virginia, but the issue has divided the region.
16
Business Day
A Simpler Form for Home Office Deductions
The I.R.S. will offer a simpler option for taking the home office deduction on your tax return.
17
U.S.
Fiscal Footnote: Big Senate Gift to Drug Maker
A provision buried in the fiscal bill passed earlier this month gives Amgen, the world’s largest biotechnology firm, more time to sell a lucrative kidney dialysis drug without price restraints."After the House was sidelined late in the fiscal negotiations, the Senate gained control of the final bill-writing process, and the provision requested by Amgen was inserted into the legislation by Senate staff members.
Aides to Mr. Baucus and Mr. Hatch emphasized that the White House and
Senate leadership, including Mr. McConnell, had the final word on the
bill."
18
Opinion
Raised on Hatred
President Mohamed Morsi’s statements present an opportunity to acknowledge the breadth and depth of the attitude toward Jews in the Middle East.
19
20
Business
Gun Violence Is a Topic of Discussion at Sundance
A documentary being shown at Sundance, "Valentine Road,'' examines a school shooting in California in 2008. The director says she felt it was important to understand all sides of the event.|
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