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GOP Wants More Money From the Middle Class

by coldwarrior ( 115 Comments › )
Filed under Economy, Open thread, taxation at July 29th, 2015 - 7:00 am

Yes, the GOP raising taxes. I have problems with that from both an economics level and from a moral level. First the Moral Level, the GOP should never be for raising taxes, period. But, they just love big government like the Democrats.

“The billions of dollars in lost sales tax is revenue badly needed by cash-strapped state and local governments to pay the salaries of essential workers such as police officers, firefighters, ambulance crews, and schoolteachers,” the NRF states.

Ummm….BULL! Cut spending! Failing that, try to raise taxes on the citizens in the state or local government. GO ahead, put THAT to a vote with your names on it state and local coward politicians.

Now for the economic reason against this tax:

The National Retail Federation (NRF) claims that states could collect an additional $25 billion in sales taxes annually if the legislation is passed, and argues that imposing the tax would help to promote business at traditional stores, create jobs, and provide tax revenue.

On-line purchases are already taxed at the same or higher level than those bought at a brick and mortar store. Here is how that works: A product is purchased by a person in PA from an on-line merchant in, let’s say, KY. (I just got an amazon package from Lexington so I will use that as an example). This retailer has a huge brick and mortar warehouse in KY that pays taxes on wages, energy, telecom/data, property, et cetera. Fine and dandy for KY but what about PA? They want taxes too.

Well, since this package is not part the tractor trailer load going from Walmart-distro to Walmart store, it is handled far more often by more people and creates taxes at a higher level. First, the package and goods are loaded into a box at Amazon, that act is taxed on the existence of the brick and mortar warehouse and workers involved. Then, it is handed off to a FedEx line haul driver in an 18-wheeler (gas/wage/tire/vehicle taxed) who drives it to the Hub in Louisville.

The Hub is enormous and generates a ton of tax revenue for KY/local. There the package is sorted and it goes to Columbus OH Hub where it is taxed en-route by deisel/truck/tire/wage taxes of the line-haul driver and his big rig. The sort Hub in Columbus generates a ton of tax revenue as well.

It then goes to PA, to the mini-hub in Pittsburgh where it is taxed again through wages/energy/ et cetera of the sort workers who place it on a delivery truck in that brick and mortar building. There it raises more tax revenue through gas/wages/vehicle et cetera taxes to get to my door. The delivery driver works and is paid to deliver, he then spends his money and is taxed on that. Without on-line sales his job does not exist. Without on-line sales, that mini-Hub has far fewer employees and PA/local gets far less tax money, so does everyone else down the line. When taxes are raised, the taxed action is penalized and occurs less often.

So, the jobs that the NRF and GOP want are part time retail jobs instead of full time transportation careers. That line-haul guy makes well over 50k a year not counting benefits, The mangers and support staff make pretty good coin too. The package-handlers range from 14-24 an hour and at UPS they get a great benefit package. A couple more clerks at Walmart gets you what in tax revenue?

Again the GOP tries to strangle the middle class. See, the thing is, they can’t send the transport jobs over to China….I suppose they could offer H1B visas to Pakistani taxi drivers to do line haul and package delivery….

Double-digit inflation rate prevails in much of the US – here are the real stats!

by 1389AD ( 111 Comments › )
Filed under Inflation at July 28th, 2015 - 8:54 pm

Writes economics aficionada yenta-fada:

An interesting alternative to the CPI (Consumer Price Index). It measures the costs of 500 essential things that people need, and concludes that there is inflation.

http://www.chapwoodindex.com/

From the site:

The Chapwood Index reflects the true cost-of-living increase in America. Updated and released twice a year, it reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation.

It exposes why middle-class Americans — salaried workers who are given routine pay hikes and retirees who depend on annual increases in their corporate pension and Social Security payments — can’t maintain their standard of living. Plainly and simply, the Index shows that their income can’t keep up with their expenses, and it explains why they increasingly have to turn to the government for entitlements to bail them out.

It’s because salary and benefit increases are pegged to the Consumer Price Index (CPI), which for more than a century has purported to reflect the fluctuation in prices for a typical “basket of goods” in American cities — but which actually hasn’t done that for more than 30 years.

The middle class has seen its purchasing power decline dramatically in the last three decades, forcing more and more people to seek entitlements when their savings are gone. And as long as pay raises and benefit increases are tied to a false CPI, this trend will continue.

The myth that the CPI represents the increase in our cost of living is why the Chapwood Index was created. What differentiates it from the CPI is simple, but critically important…

Continue reading…

Of course the US government is lying to you. What do you expect?

Trump-a-palooza In Phoenix!

by The Osprey ( 84 Comments › )
Filed under Business, Elections 2016, Free Speech, immigration, Immigration, Media, Patriotism, Politics, Racism, Republican Party, RINOcracy at July 12th, 2015 - 3:39 pm

In the wake of his controversial, some say “RAAAAACIST™” comments decrying illegal immigration, Donald Trump has become a lightening rod in the Republican Party, who has RINOS everywhere scurrying for cover. Nowhere was that more apparent than here in Arizona, where the staunchly conservative Maricopa County Republican Committee, against the wishes of the RINOfied State GOP leadership, invited Trump to speak. The usual suspect RINOs such as John “My Friends” McCain rushed to disavow any connection with Trump, while the popular and controversial Sheriff Joe Arpaio made clear his support for Trump’s opposition to illegal immigration, although he has not endorsed him as a candidate.

I got a text from PHXGirl on Friday that Trump was coming to AZ, and as of noon on Saturday, when he was due to appear in the Phoenix Convention Center at 2:00PM, over 9000 invites had been given out via EventBrite. Due to some personal commitments I got to the convention center late, at around 2:21, but the line of people waiting to get in to hear “The Donald” speak stretched around the south, east and north side of the Phoenix Convention Center North complex.

And of course, the opposition was there as well, on the Southwest corner of the building there was a small knot of Anglo Leftist hipster teenagers and LaRazanistas, including an odd looking hipster chick who was selling “Joe Arpaio Voodoo Dolls”. At that point I was figuring out how to get into the event so I hurriedly transited through the south end of the building to the southeast corner outside patio, and missed the opportunity to snap a pic of hipster chick.

As the line of people moved along the east side of the building, a security guard with a walkie-talkie informed us that the ballroom where Trump was speaking was full, that the fire marshall and decided not to allow any more people in for safety reasons. As we turned the corner to the north side of the building, there were the largest group of the protestors, again a mixed crew of Anglo Leftists and LaRaza types. The protestors were on the North side of Monroe street, making a racket with the typical stale old Lefty “hey hey, ho ho, (fill in the blank here – in this case Trump and Arpaio) has got to go!” chant and blasting noisy freon horns. A police street barricade fence was down the middle on the closed street, and on the south side of Monroe in the shade of the portico of the building were those of us who were still trying to get in to the event and a line of Phoenix PD with riot gear at the ready. The crowd of protestors was small compared to the amount of people wanting to hear Trump, maybe a few hundred at the most but they were noisy and aggressive. Several people from the Trump side tried to engage in polite dialog with them but were shouted down.

The pro-Trump crowd was predominantly White and middle-class looking, but there were at least as many non-Whites mixed in among the pro-Trump crowd as there were protestors, but they were more varied. There were Hispanics, Blacks and Asians among the pro-Trump crowd, while the protestors were exclusively Anglo and Hispanic.

As it became clear to me that I was not going to be able to get into the event, I decided to “Zombie” style, take pics of the “rojos”, as I had not seen this many Leftists out on the streets of Phoenix since the AB1070 protests a few years ago.

This fellow says Trump is a “Tyrannical Racist Unscrupulous Monster Pig!” and a Confederate Flag fan to boot! OMG! And here I thought he was a damnyankee from New York City!

Trump confed

These two vatos locos in the bandanas were screaming obscenities at the pro-Trump crowd…”Trump you can suck my…” well, you get the picture. Curious about the red and blue bandanas…Sureños y Norteños unidad contra “El Donald”?

Vatos 1

Vatos 2

Mexico? It’s about 200 miles south, sweetie.

Mexican flag

Hipsters against Trump!

IMG_1577

Phoenix’s finest keep a watchful eye on los rojos.

IMG_1592

Trump owns Dell Computers now?

IMG_1590

The ginger-haired guy with the glasses in the blue shirt with his back to the camera was trying to dialogue with the protestor blond haired woman in front of him. He was so soft-spoken I could not hear what he was saying, I’m guessing it had something to do with the military since the woman kept shouting that she was Mexican and her son was in the USMC. And your point is? If you are here legally and your son is serving in the Marines, then you are not the problem Trump is talking about!

ginger guy

Trump supporters hoping to get in and Phoenix PD
trump supporters and phx pd

Devo fans for Trump!

devo

Donald Trump: Bringing more cowbell to the GOP!

cowbell

Saturday Lecture Series: “The Formula”

by coldwarrior ( 17 Comments › )
Filed under Academia, Economy, Open thread at July 11th, 2015 - 9:00 am

Good Morning all! Welcome to the Blogmocracy’s Econometrics Lab and Casino. Today we are going to look at “The Formula” . This formula is one of my favorites, it’s boring, stuffy, old-school, and it works.

It was only a matter of time until someone went to “The Formula”

The formula is:  where Dt is the debt to GDP ratio and Bt is the primary budget balance. r is the nominal interest rate and g is the nominal growth rate.

 Get used to this formula. It will be applied here.

 

Greece Will Live or Die by This Formula

What Greece needs is growth

On Greece, do the math, and the math is blindingly simple.

Paul De Grauwe, a giant of fiscal European economics, says that Greece is solvent. His essay and his optimism are founded on The Formula.

 De Grauwe’s essay is a controversial and clear summary of one belief on Greece: Things are not nearly as bad as the creditors make them out to be; with courage and understanding, the haves of Europe can help Greece help itself. All that is needed, as with Iceland and Ireland and Cyprus — three other countries that went through their own debt crises — is top-line growth and, again, courage.

The Formula is timeless and in each and every basic economics text. (It gets less respect because it is a dry-as-dust fiscal equation compared with the steamy romance of monetary math.) In fiscal crises, the best-and-brightest always trot The Formula out. The truth is the dynamic simplicity of The Formula’s core— the (r-g) in the above — always bears repeating.

The relationship is: A nation’s debt-to-GDP ratio is equal to the critical dynamic of its nominal interest rate (the “r” in the above formula) minus its nominal growth rate (the “g”), applied to the previous debt-to-GDP ratio and then all of that compared to the nation’s overall growth rate. Then take that movable feast and subtract the massive weight of its primary budget surplus. It is a deceptive and simple relationship but, in crisis, there is one key moving part. The key moving part, again, is (r-g). The “g” must equal or be higher than the “r” in The Formula. If the nominal interest rate (“r”) is higher than the nominal growth rate (“g”) then the government will face an ever-increasing debt-to-GDP ratio.

De Grauwe emphasizes that the key need for Greece is to see growth.

He is not alone on that, but with great clarity he suggests that far and away the most effective “help” Europe can give Greece is to implement a constructive growth path for Athens.

You can see how Greece’s current growth (“g”) stacks up against that of Portugal, Cyprus, Ireland, and Iceland in the below chart.

Greece’s nominal GDP growth rate cratered in 2011 and is still negative. From the bottom: Portugal displays modest growth and then Cyprus does better. Ireland, in green, has vastly improved while Iceland, in white, is rockin’ the Reykjavik world.

To De Grauwe, the sole path to a better Greece is economic growth, and growth that equals or exceeds the key interest rate.

In all cases of fiscal crisis recovery, this is what must happen. It happened in Iceland and Ireland, it is happening in Cyprus, and it somewhat happened in fragile Portugal. It is not happening in Greece.

Again, the chart just shows the “g” part of The Formula. It goes without saying that “r” must cooperate, too.

Read Paul De Grauwe’s essay. Then reread it. Here is an outstanding treatise on the many important difference equations that lie beneath The Formula.

Discuss at time t-1, t, t+1, t+2 …

Trump Is Right

by coldwarrior ( 11 Comments › )
Filed under Economy, Immigration, Special Report at July 10th, 2015 - 8:55 am

I can’t seem to find anything in error in Trump’s statement below.

All he left out is that the elites in Latin America love to see the poor leave for America, it prevents a revolution and provides dollars coming back into their countries as remittances.

When we control immigration, we pick who gets into America, when we don’t control immigration, other countries decide who gets into America. Wanna play a game with those rules? I get to pick your team.

And do note, because just about everyone else can’t seem to get it, he is making a distinction between legals and illegals. The main stream GOP is after him big now, he just threatened to take away their cheap labor for their buddies in the so called “Chamber of Commerce”, a once capitalist organization. The Democrats are after him because he is threatening to take away the immigration bat that they smack Republicans with.

I wonder what legal immigrants have to say about illegals? I’ll bet I can’t print it here. (I know that Mrs Coldwarrior despises illegal immigration as she had to go through all of the hoops to get here legally and become a productive citizen.)

Trump: I Have Lost a Lot, But I’m Right About Mexico

Image: Trump: I Have Lost a Lot, But I'm Right About Mexico (Reuters/Dominic Reuter)

By Donald J. Trump   |   Monday, 06 Jul 2015 06:09 PM

I don’t see how there is any room for misunderstanding or misinterpretation of the statement I made on June 16th during my Presidential announcement speech.Here is what I said, and yet this statement is deliberately distorted by the media:”When Mexico [meaning the Mexican government] sends its people, they’re not sending their best. They’re not sending you [pointing to the audience]. They’re not sending you [pointing again]. They’re sending people that have lots of problems, and they’re bringing those problems to us. They’re bringing drugs. They’re bringing crime. They’re rapists. And some, I assume, are good people! But I speak to border guards and they tell us what we’re getting. And it only makes common sense. They’re sending us not the right people. It’s coming from more than Mexico. It’s coming from all over South and Latin America, and it’s coming probably from the Middle East. But we don’t know. Because we have no protection and we have no competence, we don’t know what’s happening. And it’s got to stop and it’s got to stop fast.”

What can be simpler or more accurately stated? The Mexican Government is forcing their most unwanted people into the United States. They are, in many cases, criminals, drug dealers, rapists, etc.

This was evident just this week when, as an example, a young woman in San Francisco was viciously killed by a 5 time deported Mexican with a long criminal record, who was forced back into the United States because they didn’t want him in Mexico. This is merely one of thousands of similar incidents throughout the United States. In other words, the worst elements in Mexico are being pushed into the United States by the Mexican government.

The largest suppliers of heroin, cocaine and other illicit drugs are Mexican cartels that arrange to have Mexican immigrants trying to cross the borders and smuggle in the drugs. The Border Patrol knows this. Likewise, tremendous infectious disease is pouring across the border.

The United States has become a dumping ground for Mexico and, in fact, for many other parts of the world. On the other hand, many fabulous people come in from Mexico and our country is better for it. But these people are here legally, and are severely hurt by those coming in illegally. I am proud to say that I know many hard working Mexicans — many of them are working for and with me…and, just like our country, my organization is better for it.

The Mexican Government wants an open border as long as it’s a ONE WAY open border into the United States. Not only are they killing us at the border, but they are killing us on trade … and the country of Mexico is making billions of dollars in doing so.

I have great respect for Mexico and love their people and their peoples’ great spirit. The problem is, however, that their leaders are far smarter, more cunning, and better negotiators than ours.

To the citizens of the United States, who I will represent far better than anyone else as President, the Mexican government is not our friend…and why should they be when the relationship is totally one sided in their favor on both illegal immigration and trade. I have pointed this out during my speeches and it is something Mexico doesn’t want me to say. In actuality, it was only after my significant rise in the polls that Univision, previously my friend, went ballistic. I believe that my examples of bad trade deals for the United States was of even more concern to the Mexican government than my talk of border security.

I have lost a lot during this Presidential run defending the people of the United States. I have always heard that it is very hard for a successful person to run for President. Macy’s, NBC, Serta and NASCAR have all taken the weak and very sad position of being politically correct even though they are wrong in terms of what is good for our country. Univision, because 70% of their business comes from Mexico, in my opinion, is being dictated to by the Mexican Government. The last thing Mexico wants is Donald Trump as President in that I will make great trade deals for the United States and will have an impenetrable border — only legally approved people will come through easily.

Interestingly, Univision has just announced they are attempting to go public despite very poor and even negative earnings, which is not a good situation for a successful IPO or high stock price — not to mention that I am currently suing them for breach of contract. Remember, Univision is the one who began this charade in the first place, and they are owned by one of Hillary Clinton’s biggest backers.

After the speech was made, there were numerous compliments and indeed, many rave “reviews”— there was very little criticism. It wasn’t until a week after my announcement that people started to totally distort these very easy to understand words. If there was something stated incorrectly, it would have been brought up immediately and with great enthusiasm.

The issues I have addressed, and continue to address, are vital steps to Make America Great Again!

Additionally, I would be the best jobs President that God ever created.

Let’s get to work!

 

Fun With Satellites

by coldwarrior ( 45 Comments › )
Filed under Economy, Open thread at July 10th, 2015 - 8:49 am

Check this out.

 

Go to the article as it is too large to post here

Bubble Bubble Bubble

by coldwarrior ( 107 Comments › )
Filed under China, Economy, Open thread at July 8th, 2015 - 5:12 pm

3 Bubbles

China’s Three Bubbles

And Now….the Collapse of the Chinese Economy

by coldwarrior ( 148 Comments › )
Filed under China, Economy, Open thread at July 7th, 2015 - 6:00 am

Make some popcorn. This is gonna be a hell of a show. Keep in mind, central banking is war by other means.

 

This article is from Australia…more to come as I find it.

*EDIT* HERE is an excellent article for more info/background, please have a read

 

Chinese chaos worse than Greece

A stock market crash there has seen $3.2 trillion wiped from the value of Chinese shares in just three weeks, triggering an emergency response from the government and warnings of “monstrous” public disorder.

LATEST: CHINESE INVESTORS FLEE FOR SAFETY

And the effects for Australia could be serious, affecting our key commodity exports and sparking the beginning of a period of recession-like conditions.

“State-owned newspapers have used their strongest language yet, telling people ‘not to lose their minds’ and ‘not to bury themselves in horror and anxiety’. [Our] positive measures will take time to produce results,” writes IG Markets.

“If China does not find support today, the disorder could be monstrous.”

In an extraordinary move, the People’s Bank of China has begun lending money to investors to buy shares in the flailing market. The Wall Street Journal reports this “liquidity assistance” will be provided to the regulator-owned China Securities Finance Corp, which will lend the money to brokerages, which will in turn lend to investors.

The dramatic intervention marks the first time funds from the central bank have been directed anywhere other than the banks, signalling serious concern from authorities about the crisis.

At the same time, Chinese authorities are putting a halt to any new stock listings. The market regulator announced on Friday it would limit initial public offerings — which disrupt the rest of the market — in an attempt to curb plunging share prices.

While the exact amount of assistance hasn’t been revealed, the WSJ reports no upper limit has been set.

All short-selling — the practice of betting that stocks will fall — has been banned, and Chinese media has rushed to reassure citizens.

Yesterday, shares in big state companies soared in response to the but many others sank as jittery small investors tried to cut their losses, Associated Press reports. The market benchmark Shanghai Composite closed up 2.4 percent but still was down 27 percent from its June 12 peak.

Experts fear it could turn into a full-blown crash introducing even more uncertainty into global markets as Europe teeters on the edge of a potential eurozone exit by Greece, after Sunday’s controversial referendum.

WHAT DOES IT MEAN FOR AUSTRALIA?

For Australia, the market crash in China is likely to impact earnings on key exports iron ore and coal, further slashing government revenue, while also putting downward pressure on the Australian dollar.

Jordan Eliseo, chief economist with ABC Bullion, said it was important to remember that the amount of wealth Chinese citizens have tied up in the stock market is relatively minor compared with western investors.

Stocks only make up about 8 per cent of household wealth in China, compared with around 20 per cent in developed nations.

“The market crash there is generating headlines, but it’s not going to have the same impact as a comparable crash would in a developed market,” he said.

“What it means for Australia, though, is it’s very clear there are some serious imbalances in the Chinese economy, and the rate of growth they’ve enjoyed in the past is over. There’s no question our export earnings are going to take another hit.”

Mr Eliseo predicts Australia is likely to experience “recession-like” conditions such as negative wage growth for many years to come. “I believe that’s going to be the new norm,” he said.

WHAT ARE THEY DOING ABOUT IT?

On Saturday, China’s 21 largest brokerage firms announced that they would invest more than $25.35 billion in the country’s stock markets to curb the declines.

The brokers will spend at least 120 billion yuan ($25.75 billion) on so-called “blue chip” exchange traded funds, the Securities Association of China said in a statement after an emergency meeting in Beijing.

On Friday the Shanghai Composite Index closed down 5.77 per cent to end at 3,686.92 points. Since peaking on June 12 Shanghai has dropped nearly 29 per cent, which Bloomberg News said was its biggest three-week fall since November 1992.

The Shanghai market had swelled by 150 per cent in the last 12 months and experts had expected a sharp correction, though the rate at which it has occurred is unnerving many.

Middle-class Chinese investors, encouraged by the government, have been pumping money into the stock market. The WSJ quoted 51-year-old Li Ping, who sold her 7 million yuan ($1.5 million) Beijing apartment to plough 4 million yuan into stocks.

Ms Li said she thought the market would stabilise and rise again. “The fund that I have invested in is very mature and professional,” she said.

CRACKDOWN AS PANIC TRIGGERS ‘SUICIDE’ RUMOURS

Underscoring growing jitters amid the three-week sell-off, police in Beijing detained a man on Sunday for allegedly spreading a rumour online that a person jumped to their death in the city’s financial district due to China’s precarious stock markets.

The 29-year-old man detained was identified by the surname Tian, and is a manager at a technology and science company in Beijing, police said in a post on their official microblog.

Police said Tian’s alleged posting of the rumour took place Friday and called on internet users to obey laws and regulations, not to believe and spread rumours, and to cooperate with police.

The state-run Xinhua news agency reported that Tian allegedly posted the rumours with video clips and screenshots Friday afternoon.

The post, which is said to have gone viral, “provoked emotional responses among stock investors who suffered losses over the past weeks”, Xinhua said.

Xinhua added that a police investigation showed that the video in question had been shot on Friday morning in the eastern Chinese province of Jiangsu where a man had jumped to his death. Local police there were investigating that case, Xinhua said.

The original post was unavailable Sunday on China’s tightly controlled social media, where authorities are quick to delete controversial material.

The Party’s Over52:11

The Party's Over

 

Declining Middle Class Wages and Productivity

by coldwarrior ( 92 Comments › )
Filed under Academia, Economy, Open thread, Regulation, taxation at July 6th, 2015 - 6:00 am

Good Monday Morning. The High Priests of the Dismal Science have attempted to answer a nagging a question that I have had. Why are Middle Class wages wages stagnant or receding since 1995? They get a good portion of the equation that I had not thought of…Productivity. They do miss the gorilla in the room…ever increasing government regulations that stifle innovation and gains in productivity.

Have a read and chew on it for a while.

Whatever Happened To Those Middle Class Income Gains?

By Isabel Sawhill

This year’s Economic Report of the President has an interesting analysis of the sources of the slowdown in income gains among the middle class. Given all the attention given to the issue of growing inequality, especially between those at the top and the other 90 percent you might think that was the major economic problem facing the nation. But no, it turns out that the biggest source of the slowdown is the poor performance of productivity since 1995 compared to the earlier postwar period.

The question the President’s Council of Economic Advisers (CEA) asks is what if productivity growth from 1973 to 2013 had continued at the rate of the previous 25 years from 1948-1973? The answer is that the typical household would have had an additional $30,000 in income. (CEA report, p. 33)

The CEA goes on to ask parallel “what if” questions about income inequality and female labor force participation. How much better off would the typical middle class household be if income gains had been broadly shared after 1973 and female labor force participation had not levelled off after 1995? These changes produce smaller effects on middle class incomes of $9,000 and $3,000 respectively. However, all three factors combined can explain a whopping $50,000 in income foregone by our typical family. In other words, these families would have almost twice as much income if it hadn’t been for the decline in productivity growth, the rise in income inequality, and the levelling off of female participation rates.

The very large role of slower productivity growth is surprising. After all, we have seen an explosion in technology fed by the increasing power of computers. Smart phones, driverless cars, computer-assisted design and manufacturing, robots, drones, and the innovations they have made possible should have boosted productivity smartly. But as Nobel-prize winning economist Robert Solow once quipped, ” You can see the computer age everywhere but in the productivity statistics.” So what’s going on here?

According to the CEA, starting in 1973, labor productivity growth slowed dramatically to only 1.4 percent annually from its earlier pace of 2.8 percent from 1948-1973. (It has recovered somewhat over the last two decades but has not matched its earlier high levels.) They cite the exhaustion of pent-up innovations from World War II, reduced public investment, dislocations associated with a new international monetary system, and the oil shocks of the 1970s.

Other experts might add other factors to the list. Economist Robert Gordon believes that the technological breakthroughs of the late twentieth century cannot match earlier innovations such as those represented by electricity, cars, the telephone, and radio. It’s also possible that we have not yet seen the full effects of the computer revolution. My colleague, Barry Bosworth, has shown that a lot of productivity gains are occurring in the service sector and that it isn’t just capital deepening that is producing these gains. It is everything from better management to human capital investment and organizational innovation – all the things we cannot measure very well but which show up in the data as an unexplained residual.

In the meantime, the new technologies are contributing to growing income inequality. Because these technologies are replacing unskilled and even some medium-skilled jobs, we are left with the worst of both worlds – disappointing increases in productivity and declining opportunities for those without the education and skills to benefit from the new technologies.

The solution cannot be to slow down the pace of technology. It must be to encourage innovation, retrain workers, invest in the next generation, and help those dislocated by the changes. Yet we are not investing in research, in education, and in infrastructure in the same way we did in earlier decades. Taxes need to be reformed to provide greater simplicity, fairness, and growth. Policies such as paid leave, child care, and more flexible work places would encourage more second earners to join the labor force. Most innovation, to be sure, occurs in the private sector, but it has little incentive to invest as long as overall demand is constrained by policies that fail to mitigate financial instability or that are focused on short-term spending cuts in public investments combined with a longer-term explosion of consumption-oriented spending on the big entitlement programs. Until elected officials act to recreate these underpinnings of growth, any permanent improvements in middle class incomes are unlikely to be realized.

Isabel Sawhill is a senior fellow in Economic Studies at the Brookings Institution.  She co-directs the Budgeting for National Priorities Project as well as the Center on Children and Families.

The Latest on Greece.

by coldwarrior ( 202 Comments › )
Filed under Economy, Europe, Open thread at July 5th, 2015 - 6:00 am

Today is the big day in Greece. This article sums it up perfectly, do have a read and enjoy the show.

 

Whether Greece votes yes or no, the euro cannot survive in its current form

Best case scenario? The EU will undergo years of painful convulsions, precipitating a new treaty that imposes greater centralisation and restrictions on the fiscal independence of nation states

Whether Greece votes to back or reject austerity on Sunday, the euro in its current form is dead, and rightly so. The defective structures that underpin it have been shattered by the Greek nightmare, and trust within Europe is at a low ebb. Even a yes vote would not undo the damage, and a no vote would lead to an almost immediate Greek departure from the euro.

Germany’s best-selling newspaper, Bild, is a great barometer of opinion in the eurozone’s dominant power: it is staging its own, fake “referendum” among its readers, asking them whether they want to continue bailing out Greece or whether they should cut them off. There are no prizes for guessing which way the paper’s furious readership is inclined.

Meanwhile, in Athens, the levels of hatred towards the Euro-establishment from supporters of the “No” side are remarkable; it is hard to see how any meaningful negotiations will ever be possible if Syriza remains in power. For all of those deluded Europhiles who believed that enforcing an artificial, imperfect currency on 19 different, divergent nations was a good idea that would help bring about peace, friendship and prosperity, the events of the past few weeks have surely been devastating.

Greek PM Alexis Tsipras

The Eurosceptics were right; the problem now is that in the best case scenario the region will undergo years of painful convulsions, precipitating a new treaty that imposes greater centralisation and restrictions on the fiscal independence of nation states. Such a move would outrage Eurosceptics, needless to say, and could lead to a collapse of the whole project if it is rejected by voters, but it is the only hope for the single currency’s long-term survival. Reopening treaties properly would create a major opportunity for the UK, albeit one that may come too late for David Cameron’s renegotiation.

So what are the options after the Greek vote? If they vote No, it’s game over for Greece’s membership of the single currency. The country’s banks don’t have enough money to last for much longer, and there is little reason why the European Central Bank would wish to extend them billions more if it is snubbed by voters. Either the banks would have to stay shut, which means that the country will run out of food and essentials as it becomes impossible to pay for imports, or depositors would have to be bailed in, wiping out a large chunk of their wealth but recapitalising financial institutions.

The only other alternative would be for the Greek state to introduce IOUs and then a new physical currency, while re-denominating all Greek bank accounts into drachmas. The national debt, which is owed in euros, would explicitly be repudiated, triggering a major crisis and inflicting vast losses on the European Central Bank, IMF and other creditors. The new drachmas would, of course, plummet in value, and it would be hard to avoid widespread chaos and hyperinflation if the government is forced to crank up the printing presses to pay for its bills.

Long-term, however, a Grexit accompanied by a sound new currency could help transform the economy – but that would require a sensible, credible economic policy, rather than more of the same left-wing rabble-rousing.

If, on the other hand, Greece votes yes, the government will collapse and new elections called. The Europeans would pump money into the Greek banking system, allowing branches to reopen. But sensible Greeks would continue their run on the banks, draining the economy.

Worse, Greece would be unlikely to get the comprehensive debt write-off it needs, and bailout negotiations would drag on, with the country eventually plunging into another crisis. The Greeks may even elect another hard-left government, guaranteeing another showdown.

Sunday’s vote may be too close to call, but we already know that there will be no winners from the referendum, only losers.

allister.heath@telegraph.co.uk