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Science
New Research May Solve a Puzzle in Sea Level’s Rise
Researchers have reported that the ocean did not rise quite as much as previously believed in the 20th century, possibly explaining a discrepancy in climate research.U.S.
Virginia: McDonnell’s Request to Stay Free Is Refused
Former Gov. Bob McDonnell will not remain free while he appeals his corruption convictions, which means he could begin his two-year prison sentence by Feb. 9, a federal judge ruled Tuesday.U.S.
Washington Governor Seeks New Taxes as a Court Order Looms
In an effort to meet a State Supreme Court order, Gov. Jay Inslee of Washington has proposed $1.4 billion in new tax revenue, with much of it going to schools.World
At Gaza Border Crossing, a Symbol of Palestinians’ Internal Tensions
When Hamas temporarily set up an outpost at a border checkpoint maintained by the Palestinian Authority, it illustrated the unraveling of the reconciliation agreement the two sides reached last year.Business Day
The Costs of Stinginess in Medicaid
With a Republican majority in Congress looking to cut taxes and spend less, it is easy to forget that tightfisted government imposes real costs.Selective Voodoo
House
Republicans have passed a measure demanding that the Congressional
Budget Office use “dynamic scoring” in its revenue projections — taking
into account the supposed positive growth effects of tax cuts. It
remains to be seen how much damage this rule will actually cause. The
reality is that there is no evidence for the large effects that are
central to right-wing ideology, so the question is whether CBO will be
forced to accept supply-side fantasies.
Meanwhile, one thing
is fairly certain: CBO won’t be applying dynamic scoring to the positive
effects of government spending, even though there’s a lot of evidence
for such effects.
A good piece
in yesterday’s Upshot reports on a recent study of the effects of
Medicaid for children; it shows that children who received the aid were
not just healthier but more productive as adults, and as a result paid
more taxes. So Medicaid for kids may largely if not completely pay for
itself. It’s a good guess that the Affordable Care Act, by expanding
Medicaid and in general by ensuring that more families have adequate
health care, will similarly generate significant extra growth and
revenue in the long run. Do you think the GOP will be interested in
revising down estimates of the cost of Obamacare to reflect these
effects?
And what about the
damage to potential output caused by cutting spending in a depressed
economy? The evidence that austerity reduces output and raises
unemployment is overwhelming — and there’s now pretty good evidence that
sustained high unemployment inflicts long-term damage on the economy’s potential. So will CBO now be instructed to include these effects in its estimates?
The point is that
we’re not just looking at a possible mandate for using voodoo in budget
estimates, we’re talking about selective voodoo, which incorporates some
supposed dynamic effects while ignoring others for which there is if
anything stronger evidence. Tax cuts for the rich: good! Spending that
makes ordinary workers more productive? Bad!"
N.Y. / Region
New Bronx Senior Center Aims to Provide a More Welcoming Atmosphere
The space, which will offer programs and hot lunches, is part of a $1.5 million expansion of services for older lesbian, gay, bisexual and transgender people.U.S.
At 78, McCain Savors a New Dream Job in the Senate
John McCain, who is certain that he would have made a better commander in chief than President Obama, takes the reins of the Senate Armed Services Committee.U.S.
Obama Is Planning New Rules on Oil and Gas Industry’s Methane Emissions
The president will use his executive authority to issue the first federal regulations to target emissions of the powerful greenhouse gas, according to a person familiar with the plans.U.S.
Volkswagen and Ford Take Top Awards at the Detroit Auto Show
The VW Golf is named North American Car of the Year, and the Ford F-150 takes the truck award.
The Upshot
Cash Is Piling Up for Ben Carson, With a Tea Party Tilt
People who want the retired pediatric neurosurgeon to run for president have already donated $12 million.
World
Iraq: Suicide Attacks Leave at Least 23 People Dead
Suicide attacks against security checkpoints and Shiite worshipers killed at least 23 people in Iraq on Thursday, officials said.Business Day
Inflation in Britain Falls to Lowest Rate in 15 Years
The decline to 0.5 percent, attributed partly to cheaper gas and stable food prices, is far below the Bank of England’s 2 percent target.Being Bad Europeans
The
U.S. economy finally seems to be climbing out of the deep hole it
entered during the global financial crisis. Unfortunately, Europe, the
other epicenter of crisis, can’t say the same. Unemployment in the euro area is stalled at almost twice the U.S. level, while inflation is far below both the official target and outright deflation has become a looming risk.
Investors have taken notice: European interest rates
have plunged, with German long-term bonds yielding just 0.7 percent.
That’s the kind of yield we used to associate with Japanese deflation,
and markets are indeed signaling that they expect Europe to experience
its own lost decade.
Why
is Europe in such dire straits? The conventional wisdom among European
policy makers is that we’re looking at the price of irresponsibility:
Some governments have failed to behave with the prudence a shared
currency requires, choosing instead to pander to misguided voters and
cling to failed economic doctrines. And if you ask me (and a number of
other economists who have looked hard at the issue), this analysis is
essentially right, except for one thing: They’ve got the identity of the
bad actors wrong.
For
the bad behavior at the core of Europe’s slow-motion disaster isn’t
coming from Greece, or Italy, or France. It’s coming from Germany.
I’m
not denying that the Greek government behaved irresponsibly before the
crisis, or that Italy has a big problem with stagnating productivity.
But Greece is a small country whose fiscal mess is unique, while Italy’s
long-run problems aren’t the source of Europe’s deflationary downdraft.
If you try to identify countries whose policies were way out of line
before the crisis and have hurt Europe since the crisis, and that refuse
to learn from experience, everything points to Germany as the worst
actor.
Consider, in particular, the comparison between Germany and France.
France
gets a lot of bad press, with much talk in particular about its
supposed loss in competitiveness. Such talk greatly exaggerates the
reality; you’d never know from most media reports that France runs only a
small trade deficit. Still, to the extent that there is an issue here,
where does it come from? Has French competitiveness been eroded by
excessive growth in costs and prices?
No, not at all. Since the euro came into existence in 1999, France’s G.D.P. deflator
(the average price of French-produced goods and services) has risen 1.7
percent per year, while its unit labor costs have risen 1.9 percent
annually. Both numbers are right in line with the European Central
Bank’s target of slightly under 2 percent inflation, and similar to what
has happened in the United States. Germany, on the other hand, is way
out of line, with price and labor-cost growth of 1 and 0.5 percent,
respectively.
And it’s not just France whose costs are just about where they ought to be. Spain
saw rising costs and prices during the housing bubble, but at this
point all the excess has been eliminated through years of crushing
unemployment and wage restraint. Italian cost growth has arguably been a bit too high, but it’s not nearly as far out of line as Germany is on the low side.
In
other words, to the extent that there’s anything like a competitiveness
problem in Europe, it’s overwhelmingly caused by Germany’s
beggar-thy-neighbor policies, which are in effect exporting deflation to
its neighbors.
But
what about debt? Isn’t non-German Europe paying the price for past
fiscal irresponsibility? Actually, that’s a story about Greece and
nobody else. And it’s especially wrong in the case of France, which
isn’t facing a fiscal crisis at all; France can currently borrow
long-term at a record low interest rate of less than 1 percent, only
slightly above the German rate.
Yet
European policy makers seem determined to blame the wrong countries and
the wrong policies for their plight. True, the European Commission has
floated a plan
to stimulate the economy with public investment — but the public outlay
is so tiny compared with the problem that the plan is almost a joke.
And meanwhile, the commission is warning France, which has the lowest
borrowing costs in its history, that it may face fines for not cutting its budget deficit enough.
What
about resolving the problem of too little inflation in Germany? Very
aggressive monetary policy might do the trick (although I wouldn’t count
on it), but German monetary officials are warning against such policies because they might let debtors off the hook.
What
we’re seeing, then, is the immensely destructive power of bad ideas.
It’s not entirely Germany’s fault — Germany is a big player in Europe,
but it’s only able to impose deflationary policies because so much of
the European elite has bought into the same false narrative. And you
have to wonder what will cause reality to break in."
N.Y. / Region
Teenagers to See Counselor, Not Judge, for Minor Crimes
The project, to be tested in two police precincts in Brooklyn and Manhattan, will offer an intervention for first-time offenders, the Manhattan district attorney, Cyrus R. Vance Jr., said.World
Newspaper in Israel Scrubs Women From a Photo of Paris Unity Rally
The publication generally avoids running pictures of women for reasons of modesty, and its intended audience has been known to scratch female faces out of bus advertisements.World
Extremists Harming Islam, Leader of Hezbollah Says
Hassan Nasrallah said in a televised address that extremists’ beheadings and massacres hurt the Prophet Muhammad more than mocking him in books, films or drawings.U.S.
Michigan Governor Names Fourth New Manager for Detroit Schools
Detroit emerged late last year from emergency management and bankruptcy, but some officials worry that the woes of its public schools threaten to slow efforts to remake the city.Business Day
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