the Saddle

The Economists Voice has some interesting articles/columns on the economic impact of Katrina.
If you’ve never perused the sight there are other decent journals there. I think of the above Edward Glaesers’ Should the Government Rebuild New Orleans, Or Just Give Residents Checks? is worth some thought. Normally I just default to checks, but in this case I’m not so certain – mainly because just the other day I was trying to make a point that Afghanistan really should pay attention to its cultual history before its all lost. Parallels can be made to US cities -but that is a tangent – and not one I plan on picking up now.

Finally some intelligent insight into jobs and the economy.

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CAPITAL
By DAVID WESSEL

Better Answer to Tough Question on Jobs
Wall Street Journal, October 21, 2004; Page A2

In the final Bush-Kerry debate, moderator Bob Schieffer asked, “What do you say to someone … who has lost his job to someone overseas who’s being paid a fraction of what that job paid here?”

President Bush promised “policies to continue to grow our economy and create the jobs of the 21st century,” and then talked about improving public schools. Sen. John Kerry pledged “a fair trade playing field” and a tax code that doesn’t have “workers subsidizing the loss of their own job.” Neither looked into the camera and connected with that worker as Ronald Reagan or Bill Clinton might have.

A better answer would have gone like this:

“All over America, there are people who played by the rules yet are losing their jobs — some because workers elsewhere do the same work for less, others because computers do things that once only humans did.

“It is small comfort to tell them, though it’s true, that we’re richer today than our grandparents imagined because we haven’t walled ourselves off from the rest of the world nor sought to restrain the advance of technology. It is small comfort, though true, that today’s puzzle isn’t that we’re losing jobs — we’re always losing jobs — but that for reasons even experts can’t explain we aren’t creating enough new ones.

“Those of us who benefit from low-cost imports — or who have well-paid export jobs that wouldn’t exist if we didn’t allow imports and outsourcing — must not ask those who lose jobs to go it alone. But Bill Clinton had it right 10 years ago: ‘The resentment of people who keep working harder and falling further behind, and feel like they’ve played by the rules and have gotten the shaft, will play out in different and unpredictable ways. But our responsibility is to do what is right for those people over the long run. And the only way to do that is to open other markets to American products and services even as we open our markets to them.’”

What does this mean in practice?

Candidates need to confront those who offer slogans, not solutions. Protectionists would block imports of factory goods or outsourcing of service jobs, ignoring the likelihood that interfering with the forces of trade and technology will prevent the creation of more jobs than it will save. Free traders with secure jobs proclaim that the only way to get the benefits from open markets is to tolerate the pain of people they’ll never meet. Gene Sperling, a former Clinton adviser, offers this pithy put-down: “Protectionists have nothing to say to the future. Free traders have nothing to say to the present.”

If trade and technology make us richer, then we can afford to help pay for health insurance and protect pensions forced to bear the cost. The hodge-podge of tax credits and “adjustment assistance” for workers who can link their job loss to imports isn’t working; it needs an overhaul. And there is merit in what wonks call “wage insurance” that temporarily makes up some, though not all, of the gap between the wages of a lost job and those of a new one.

This will be expensive, and needs to be designed to avoid turning healthy workers into taxpayer-supported couch potatoes. But the alternatives are costly too — able-bodied but unskilled workers finagling their way onto disability rolls, families falling out of the middle class, cheering audiences for misguided politicians who shout that the only way for Americans to prosper is to keep Indians and Chinese in poverty.

Such programs are derided as “Band-Aids,” and they are. The U.S. government also has to get the big things right. That means pushing China and others to stop bending trade rules or manipulating currencies and pressing Europe and Japan to get their people spending so the U.S. isn’t always the consumer of last resort. It means setting U.S. taxes so they cover government spending at least in good times, rewriting perverse tax laws that encourage companies to invest elsewhere and managing the unquenchable American thirst for health care without giving employers new excuses not to hire.

And, finally, comes education. Americans will earn more than foreign workers only if they’re more productive, and they can be more productive only with ever-better education and skills. Education can be oversold: A college degree isn’t a guarantee against losing a job to trade or technology.

But education remains, as Mr. Sperling puts it, “the best insurance policy for succeeding in the existing and future economy.” That means streamlining the creaky system for getting vulnerable workers the skills still in demand in the U.S. and doing better at fixing public schools so the next generation of Americans can compete with what surely will be better-educated workers elsewhere in the world.

Write to David Wessel at capital@wsj.com4

David Wessel aptly (subscription) points to the difference b/n politics and economics.

CAPITAL
By DAVID WESSEL

Bush, Kerry Are Both
Right on the Economy
July 1, 2004; Page A2

President George W. Bush says the economy is “strong and getting stronger.” Challenger John Kerry says, “We can do better.” The Bush campaign says cruise lines are carrying 74% more passengers than in 1996, half of them folks earning less than $60,000 a year. The Kerry campaign says health-insurance premiums rose 40% between 2000 and 2003. The Bush campaign says that Americans’ after-tax incomes are rising faster than inflation. The Kerry campaign says hourly wages aren’t.

Tweet! Time out for perspective from the sidelines. Each campaign’s assertion is factually defensible. Here are four more meaningful ones.

The economy is doing better. But it’s not yet good.
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John Makin at the American Enterprise Institute believes the economy couldn’t be in better shape.

“Old habits die hard. Often, criticism leveled at policymakers is well founded. I certainly have offered up my share. But as 2003 ends and 2004 begins, we find ourselves at a point where the performance of the U.S. economy is about as good as it gets. The stock market is up 20 percent this year, inflation and interest rates are low, productivity growth is high, and U.S. exports are rising strongly. The biggest danger going forward arises from ill-founded criticism aimed at policy measures employed to achieve this excellent outcome and the (fortunately low) chance that policymakers will heed such criticism.”
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John Irons of ArgMax thinks this is not good. I would have to agree…

Washington Post
U.S. Consumer Debt Grows at Alarming Rate
Debt Burden Will Intensify When Interest Rates Rise

By William Branigin
Washington Post Staff Writer
Monday, January 12, 2004; 12:46 PM

Feeling besieged by all those post-holiday credit card bills? Struggling to dig out from an avalanche of debt?

You are not alone.

According to the latest figures from the Federal Reserve, America’s consumer debt has topped $2 trillion for the first time, continuing what debt experts view as an alarming surge in recent years.
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Economists at Morgan Stanley give their thoughts on the U.S. recovery . Overall arching opinion is the economy is healing in an unsustainable manner.

On one hand the markets have had excellent performance for 2003. However they might not be accurately reflecting the risk of running low federal interest rates and an ever expanding fiscal deficit.

“The Great American Job Machine has long powered the US business cycle. It drives the income growth that fuels personal consumption. That internally generated fuel is all but absent in the current upturn. The US economy is mired in a jobless recovery the likes of which it has never seen. This has profound implications for the economic outlook, the political climate, trade policies, and the global business cycle.

Contrary to popular spin, the US labor market is not on the mend. In the final five months of 2003, a total of only 278,000 new jobs were added by nonfarm businesses — a gain that is easily matched in a single month of a typical hiring-led recovery. Moreover, literally all of the job growth that has occurred over this period has been concentrated in three industry segments — temporary staffing, education, and healthcare — which collectively added 286,000 positions in the final five months of last year. The “animal spirits” of a broad-based hiring-led revival by US businesses are all but absent. Jobs may be rising in America’s low-cost contingent workforce (temps) and in high-cost-areas that are shielded from international competition (health and education), but positions continue to be eliminated in manufacturing, retail trade, and financial and information services. ”
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