What does Dr. Sachs propose as an alternative?Following a Keynesian approach, the Obama administration has focused on restoring consumer spending. They have gone about this with a combination of near-zero interest rates, massive Fed financing of mortgages and various consumption incentives, such as rebates for new homebuyers and cash for clunkers.
During the previous bubble, the US consumer was encouraged to over-borrow. Recreating a new bubble is like offering just one more drink, on the government’s account, to overcome a mass hangover. ...
The Republican alternative is equally fatuous. For every problem there is a single Republican answer: tax cuts.
There are three parts of a long-term solution. The first is to promote greater exports, partly through dollar depreciation and partly through expanded government support for export financing, for example extended to credit-constrained low-income countries that want to purchase US-produced technology. ...I'll let readers decide, but it seems to me that one of the most respected economists in the world agrees with me that education and infrastructure spending make for good economic stimulus, while the home buyer tax credit and cash for clunkers do not.
A second component is a massive expansion of education spending and job training. The unemployment rate among college graduates is only 4.7 per cent, while it is 15.5 per cent among those without a high-school diploma. The US woefully under-invests in education outlays for the poor, who drop out of school and then cannot find gainful employment.
A massive expansion of education and training would address the current unemployment crisis in three ways: by shrinking the numbers of young people searching for work, by building job skills for the future, and by increasing total spending in the economy through education outlays.
The third component is to spur an investment boom in areas of high social return that are currently blocked by the lack of clear policies. The conversion to a low-carbon economy would create jobs in the short run, a more productive economy in the medium run, and US technological leadership in the longer run.
The same is true with the overhaul of America’s ageing infrastructure at a time when cutting-edge technologies can dramatically improve the efficiency of resource use, the safety of the built environment, and the sustainability of our ecosystems.
Again, education and infrastructure spending stimulate the economy in the short run and promote long-term economic growth because they add to our country's stock of capital (both human and physical). On the other hand, the home buyer tax credit and cash for clunkers may stimulate the economy in the short run, but they subtract from long-term economic growth.
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There is no intention of saving the US republic, as it stands in the way of the creation of the New World Order. Read the details at --
ReplyDeletehttp://www.green-agenda.com
First, the US economy (specifically, our middle class wealth) needs to collapse. This will happen via US dollar hyperinflation. This in turn will cause a global depression. UN legislation is already in place to take over when that happens.
Is this not clear as day?
This is all based on the assumption that the government spends money more wisely than you do. Count me out.
ReplyDeleteZ is correct.
ReplyDeleteI disagree that the government should subsidize "conversion to a low carbon economy." Even accepting the dubious premise that anthropogenic carbon emissions are damaging to anything except Al Gore's psyche, government subsidies will certainly cause malinvestment, as subsidies always do.
For example, how is the bureaucrat handing out grants supposed to know if solar, wind, hydroelectric, or biofuels is the way of the future? Maybe investment should be made in transmission technology, nuclear waste storage, battery improvements, etc. Maybe a combination of the above, but in what proportion? The government has no way of knowing what the most efficient way to invest in research is, and even if it did, it would not invest accordingly because government grants are determined primarily by political considerations. Investment in new technology should be made by those who have their own money on the line.
As for education, does government really need to subsidze that more? It's already too expensive as it is.
Two major areas of government subsidy are housing and education. What do they have in common? They used to be affordable, but the government decided that they are SO imporant that they must be made available to everyone through cheap loans. As a result, they are now so f**king expensive that they are turning everyone who tries to buy them into life long debt slaves.
The LAST thing we need is more education subsidies.
Anyway, who says we need more college educated people? Maybe we need more skilled laborers who have gone to vocational school to learn a useful trade or how to operate highly complicated machinery. This might be more beneficial to the economy than a whole bunch of attorneys and "consultants" and "marketers." Once again, how does the government know where this money can best be spent?
Jeffery Sachs appears to be one more Ivy League elitist who thinks he knows how to centrally plan an economy.
I agree with Sach's three points, especially the first two.
ReplyDeleteRegarding stimulating exports (devaluing the dollar), I think there should be a little more protectionism. China manipulates its currency. How is that free/fair trade?
Look at all the H1B/L1B visa workers in this country. Especially during an economy like this.
And, all the offshoring of jobs? How is that a "free market?" We force our labor to pay for a standard of living, such as water and waste treatment, trash pickup, air quality, building codes, zoning laws, and animal welfare.
Then we say "ok, now go compete on the global market." How is that a "free market" when they can't opt out of those things, and are forced to compete with people who use their gutters as sewers, use their backyard as a smelting plant, and pimp their 14-year old daughters to supplement the family income?
I'm not opposed to global trade and the benefits of rising global standards of living. But, it shouldn't be done on the backs of some Americans (maybe social investment in education is the answer). And, it shouldn't be done so quickly that it destroys our economy (i.e., China's small, cautious step to let its currency float to a limited degree, which it stopped doing a few months ago for self-protection.).
Sorry for the rant. Sachs's two points are essentially how we have a collective interest in the well being of ever member of society. And how "free market" ideology is often selectively employed by one part of society against the other.
Looks like you riled up the anti-government loonies with this one. First you lure them in with all the government can't effectively manage the economy with tax policy rhetoric and then you hit them over the head with the "liberal elitist" view that if we were more educated it might be a good long-term investment and short-term stimulus proposal. Very crafty.
ReplyDeleteI don't have time to watch Fox News and the Daily Show anymore for my dose of humorous quasi-news...can't some tell me what the "New World Order" entails THESE days?
Better education of all is a laudable concept. Yes, high school dropouts earn less than high school or college graduates, but after many years of effort to increase the high school graduation rate and after spending a lot of money, we do not know how to increase high school students educational performance (other than by small amounts that are barely statistically significant) and graduation rates. By the way, college dropout rates are increasing and are very high.
ReplyDeleteUnemployment is high among high school dropouts. If market forces were allowed to work, this oversupply would be a cheap labor force and employed, but minimum wage laws keep these uneducated workers out of the workforce.
Simply removing minimum wage laws would enable many of them to get the experience of going to work everyday and learning simple, important skills, such as reliability, punctuality, self worth of earning their own money, and many would learn skills to move up the economic ladder.
Instead of government spending more money for education, which just raises teacher salaries without any improvement in graduation rates or student education levels, and has a zero return on investment to the students, we should just lower the minimum wage laws for high school dropouts so they can get jobs and become working members of society. It is the minimum wage laws that create their high unemployment rates. What good is a minimum wage law to someone if it makes the person unemployed?
Yo Tuskenrayder...
ReplyDeletelooks like I riled up the pro-socialists/communists/fascists, responding to my pro-Constitution post.
I'm not anti-government, you mental slob. I'm pro-Constitution.
More money for education? Kids in China and India can do calculus on a slate tablet with chalk in 3rd grade with no money in the system while our 3rd graders are just starting to twitter.
ReplyDeleteMilton Recht said...
ReplyDelete>>>but after many years of effort to increase the high school graduation rate and after spending a lot of money<<<
Maybe the lack of interest in educational achievement (even after years of effort to improve it) is due to a perception that the system is "rigged?"
I recently read that the average CEO earns about 300x the average employee, up from 33x a few decades ago, and far more than Europe (where 100x would be considered obscene.).
I don't remember the exact numbers, but it was pretty close to what I've provided.
Also, I was recently reading "The Two Trillion Dollar Meltdown," by Morris. It has a pretty good chapter (7, Winners and Losers) about how the distribution of income has increasingly gone to the top 1% of the population, doubling their share gains from 9% to 19%. Even within that top centile, the distribution of gains was radically skewed with nearly 60% going to the top tenth of 1% of the population.
I don't suggest that everything should be equal. But, when our social institutions seem to favor a select segment of society, it's easy for the lowest segment to feel there's no point trying.
I used to go to Chile frequently. The apathy I describe is palpable. There's very little opportunity to move from the worker to management class. Managers get their jobs because of who they know, what part of town they live in, etc. Workers know they have virtually no chance of promotion to management (because they come from the wrong part of town, etc.). Managers sit in their offices every day, isolated from the workers. Nothing they can do can cause them to be demoted to the working class. There's no incentive to coach and mentor the workers, because they can never have his office.
The lack of enthusiasm and hope is palpable. Workers do the very bare minimum. The incentive they have to "get ahead" is to give as little value for the money they receive. That's where their opportunity lies.
Consumers get bad service and don't complain, because they know the average floor worker is just going through the motions. It's expected behavior, and therefore tolerable.
Sometimes I wonder if we're not moving more toward that model as income/wealth disparity grows in the US.
>>>It is the minimum wage laws that create their high unemployment rates.<<<
That's one of those libertarian "non-coercion" arguments that's so absolutely true that it misses the point.
We could say it's food quality laws which cause people to go hungry. Who are we, as a society, to force people to buy food (and drugs) of a quality that they might not negotiate for themselves, if left to the consensualism of willing buyers and sellers? If someone's willing to eat pancakes made from 20% cardboard, why shouldn't they be allowed to? It's better than going hungry, right?
Obviously there is a collective, social imperative concerning how "we" expect to live. "We" don't want kids working in sweat shops (just because "market forces" lead to that result).
"We" don't want your neighbor to convert their property into a late-night biker bar (just because they have a "perfect" right to dispose of their property any way they wish.).
"We" don't want people wandering through intersections pandering trinkets or windshield washes (just because it's better than doing nothing at all.).
Social imperatives such as these lead to negative consequences, such as preventing the willing buyer/seller from negotiating an employment arrangement for "one mere penny below the lawful limit."
If we aren't prepared to undo social standards in other areas, I think the reasons why should be applied to minimum wage.
Getting back to my opening point, I think we need a maximum wage law.
getyourselfconnected said...
ReplyDelete>>>More money for education? Kids in China and India can do calculus on a slate tablet with chalk in 3rd grade with no money in the system<<<
I just did a quick Google. In 2002, US expenditure on public education was 5.7% of GDP. For China it was 5.29%. There is no data in that document for India in 2002, but in 2001 it was 4.02% when China was 4.84%.
I don't know if those are accurate numbers. I just took the first references I could find.
The difference in educational outcome between China/India and the US may be related to my earlier suggestion concerning opportunity. I know that in India, there's tremendous opportunity to move up from something like a $500 a year income to $4k entry-level IT employee (which becomes a $6k job after 2-3 years of experience).
Our average income is $40k. Imagine if literally anyone could obtain training requiring marginal intelligence (IT isn't that challenging) and be guaranteed to land a job for $500k? A job that's imported from another country where it pays $5 million!
That's the kind of scale of opportunity they're looking at.
But, in the US, you go to public university and mortgage your future to student loans (which, recently, were as fraught with Agency problems as subprime mortgages were), get a job that might be only 2x the average income.
And then your job's offshored to someone who doesn't bear the costs of your standard of living (which you can't opt out of), and you're told in dismissive tones, "it's just a free market. Quit complaining. Do you expect handouts?"
I don't blame anyone for being demotivated, and for their "aiming low" to be imparted to their children.
> The conversion to a low-carbon
ReplyDelete> economy would create jobs
For every "low carbon" job created, a "high carbon" job has to be destroyed unless U.S. energy consumption goes up.
Coal, oil and gas and all those "bad" energy sources employ millions of Americans today (and more when we had domestic drilling). Since the U.S. energy consumption is relatively flat (and the dems want it to go lower), the amount of energy delivered to the masses won't be increasing by a whoe lot over time. So unless green energy is actually *less* efficient, the number of people needed to deliver energy will remain steady or even go down over time - job shifting, not job creation.
The best that could be argued is that the trade deficit would improve, but that is not a "jobs creation" issue.
I just start igornoring anyone who says "green energy" will create jobs - the statement is wrong on its face.
"I'm not anti-government, you mental slob. I'm pro-Constitution."
ReplyDeleteMy apologies. It was not my intention to identify specific categories of loonies, just the general class of right-wing nuts.
A maximum wage law? You would disincentivize when you say you want to encourage - specifically entrepreneurs.
ReplyDeleteGates. Hmm. Created thousands of jobs. But you want to punish him.
Jobs. Him too. Bad man. Made too much money.
You talk about workers, but not the people who actually create the companies they work at - and the people who put their capital at risk to fund them. If I capped, why create the new company? Why risk my money?
Companies that aren't "created" - banks and such - sure, and the govt is doing that. But the next Google? You want to destroy the engine that creates jobs.
You are about envy - not helping workers. The engine of employment will be started when small, new companies start to hire - not when you start capping salaries.
Anonymous said...
ReplyDelete>>>A maximum wage law? You would disincentivize when you say you want to encourage - specifically entrepreneurs.<<<
It's hard for me to believe that the top tenth of the population (who's share of all taxable income went from 34% to 46% between 1980 and 2005) would have sat around and watched reruns of Archie Bunker if their income could only go to 45%.
I was being a bit factious when I said "maximum wage law." I think it would be more practical to have a progressive maximum, implemented perhaps through greater progressiveness in income taxes. Not a binary (on/off) cap.
>>>Companies that aren't "created"<<<
Actually, they are. You go to your state's "corporation commission," and purchase a corporate charter. A legal, yet fictional "person" who stands as the fall guy for officers and investors, to protect them from personal responsibility (libertarian buzz-word) for their own actions and co-ownership of that business.
Without that bit of socialization of market forces, we wouldn't have a fraction of the economic activity we do today. And, no stock market (if investors could be held proportionally responsible for the actions/debts of companies they own shares of).
The idea that business is a stoic, self-made, noble and virtuous entity is a fairy tale. Business relies heavily upon society.
For example, you mentioned Bill Gates. He benefited from copyright law, a *completely* social alteration to property transfers.
Under common law, all property transfers are absolute unless limitations are stipulated by a contract (duly deliberated and consummated).
Since it's not feasible for purveyors of intellectual property to deliberate and consummate a private contract with every purchaser, society stepped in to create a universal, umbrella, social "contract" to limit the transfer of intellectual property.
By using copyright, purveyors of intellectual property can abandon the requirement to maintain a huge sales force (to properly consummate private contracts, initialing every paragraph, etc.) and sell their wares just like lamps, couches and kitty litter.
Indeed, Bill Gates benefited significantly from society. And, ironically, at the same time he benefited, copyright durations were extended from 26 years (with an optional 26-year renewal) to 100 years for corporations.
The idea of copyright durations is that, because society involved itself in this market, it should ultimately become the owner of the property via the "Public Domain."
However, society won't receive Windows 3.1 until sometime around 2080. If Windows 3.1 entered the Public Domain today it wouldn't benefit anyone. Imagine how useless it will be in the year 2080!
Indeed, Bill Gates is hardly a stoic, self-made success.
Anyway, getting back to my remark about a "maxium wage" law. If 1% of the population received 99% share of all income (with 99% of the population receiving 1% share), you'd think that's just? That the organic laws constituting such a society deserve the "consent of the governed?"
MarkF,
ReplyDeleteyes I know the figures, but results are what matters. If everyone is a rocket scientist, can the entire economy be rocket science?
The China and India numbers are just silly scaled because they spend 80% of the education budget on the top 5% of students. They select by ability, we select by enrollment, not applicable.
Good try though.
getyourselfconnected said...
ReplyDelete>>>If everyone is a rocket scientist, can the entire economy be rocket science?<<<
My realistic example was IT workers, not rocket scientists. And, yes. If you can pull in all the "rocket scientist" jobs from around the world because you'll work for 1/10th the salary, everyone can be a "rocket scientist."
To me, that's the difference between the US and India. The American dream is open to them, at the expense of Americans. Literally.
>>>They select by ability, we select by enrollment, not applicable.<<<
Do you think that would fly in the US? ("Mam, your son is slow. We require him to graduate from 6th grade and become a restroom cleaner.").
That sounds like the kind of central planning which we're told is objectionable. (wink)
It seems that Mark F misread "Companies that aren't 'created'" to mean "Companies aren't 'created'", and then spent twelve paragraphs responding to something that wasn't said.
ReplyDeleteAnonymous said...
ReplyDelete"There is no intention of saving the US republic, as it stands in the way of the creation of the New World Order."
Why do people who believe in a conspiracy to create a New World Order always assume the New World Order would be bad? Perhaps the New World Order is a good thing where countries don't have to fight wars and kill each other's populations anymore. Then, without military spending crowding out the free market, our taxes would be lower and we could all become rich working for Goldman Sachs.
Read the reference to a NY Times article about how GDP accounts for foreign goods production. So bullets made in China and purchased by the US Military would could as part of GDP? This is one reason why the trade deficit went up along with GDP recent. The cash-for-clunkers led to purchase of cars (i.e., Toyota's and Ford's) with parts made in Mexico, China, etc.
ReplyDelete"An article in this week's New York Times by veteran writer Louis Uchitelle confirmed a fact that I have been alleging for years. Uchitelle pointed out that foreign outsourcing of component manufacturing has led to consistent overstatement of U.S. GDP and productivity. The connection goes a long way to explain why we keep losing jobs even as GDP is apparently expanding."
http://www.europac.net/externalframeset.asp?id=17648&type=schiff
Anonymous said:
ReplyDelete>>>Read the reference to a NY Times article about how GDP accounts for foreign goods production.<<<
This is the link to the NY Times article that your article refers to.
It's not clear to me what's happening or how this affects GDP which is calculated as consumption + investment + government spending + (exports - imports).
The imported carburators would offset the value of exports. So, it seems like they're accounted for.
It seems like the complaint is that the auto manufacturer didn't reduce the price of the car, pocketed the profit of a foreign made component?
That seems like a legitimate contribution to GDP. It just doesn't reflect the transfer of productivity benefit from American labor to the auto manufacturer as a middelman?
I'm don't think I have enough twists in my brain to figure that out.
Right James - I should have used "founded" instead of "created". I was trying to differentiate between new companies that are started by enrepreneurs that provide new goods and services versus whatever our banking industry has morphed into (i.e. Goldman - no prob with caps there - they are not making profits by prodiving goods and services to the public. They are a giant casino with crooked dice)
ReplyDeleteSo if India is such a great place, why do so many immigrate here? I work in tech and work with plenty of them - and they don't want to go back.
> If 1% of the population received
> 99% share of all income (with 99%
> of the population receiving 1%
> share), you'd think that's just?
If everyone had the same chance and had to play by the same rules - and the results came out that way, then yes that is "just". I would not cry if a basketball score came out 99-1 if it were a fair game.
An economy and government is not there to guarantee equal results for everyone, and the ones that tried have always failed.
Anonymous said...
ReplyDelete>>>So if India is such a great place, why do so many immigrate here? <<<
We're talking about two things. Within India, the opportunity to move up from $500 a year to $6000 a year is tremendous. Anyone would love to increase their income 10 fold.
That opportunity is greater in India than it is here (due to their emergance from an undeveloped nation to a primarily services economy, performing the work that was done by developed nations).
Furthermore, anyone would love to transfer their earnings from one country to another where, from a
"Purchasing Power Parity" (PPP) it would be a 0 difference, but pick up all the improvements in standard of living which comes with a $6k salary becoming a $60k salary.
I don't fault Indians for seizing the opportunity. I only fault Americans for opening the gates wide open in the name of "free markets."
>>>If everyone had the same chance and had to play by the same rules - and the results came out that way, then yes that is "just".<<<
But, such a world has never existed. As soon as a group of people (living in a Lockean state of nature, where you could say everything is equal) join together for their "mutual benefit," the definition of "mutual" becomes more a game of who's ox will be gored.
- Social creation of corporate entities;
- the SEC,
- banking regulations;
- food- & drug-quality laws;
- socialized medicine, setting medical standards higher than willing buyers and sellers would negotiate, to the benefit of those who can afford the resulting artificial "market".
- Building codes (raising the costs of shelter, affecting those who can't afford the resulting socialized market).
The list of things which are dependent on society, and which create winners and losers (which wouldn't exist if left to a perfectly consensual, libertarian negotiation) goes on and on.
The bottom line was illustrated by the following early Presidents:
when the laws undertake... to make the rich richer and the potent more powerful, the humble members of society... have a right to complain of the injustice to their Government.
-- President Andrew Jackson, 1832
Or, President Harrison:
I believe and I say it is true Democratic feeling, that all the measures of the government are directed to the purpose of making the rich richer and the poor poorer.
-- President William Harrison, 1840
A society can only exist by the consent of the governed. There's absolutely no way that a society would win consent when 1% of the population receives 99% of the share of income (with 99% receiving the remaining 1%). Those who receive the most are always subject to the ongoing support of those who receive the least. They depend on the society which enabled their success.
That's the premise of "civic republicanism," which was the leading philosophy of the founders (and quite contrary to libertarianism.).
"...all the measures of the government are directed to the purpose of making the rich richer and the poor poorer."
ReplyDeleteAnd yet Mark F always seems to be arguing for more government.
This is a funny thread. All the scary stories about the New World Order and Liberal Elitists make me think its still Halloween. The Black Helicopters are circling! Everyone to their survival shelter, they're gonna take your guns!
ReplyDelete[I]t seems to me that one of the most respected economists in the world agrees with me that education and infrastructure spending make for good economic stimulus, while the home buyer tax credit and cash for clunkers do not.
ReplyDeleteHey, I'm right there with you, buddy!
Of course, the choice was never "education & infrastructure" versus "home buyer tax credit & CFC". The choice was between the crappy stimulus we got and doing absolutely nothing.
That's becuase our political system is deeply, deeply damaged. And *that's* because our polity is both willfully uneducated, and spoiled to the very rotten core.
Politics is the Art of the Possible, and the 3-year-olds who pass for an electorate in this country get the government they so very richly deserve.
oboe said...
ReplyDelete>>>Politics is the Art of the Possible, and the 3-year-olds who pass for an electorate in this country get the government they so very richly deserve.<<<
I agree. Our system was based upon the (IMO) idealistic philosophy of Civic Republicanism. The belief that virtuous government can't exist without a virtuous citizenry, and a virtuous citizenry can't exist without a virtuous government.
It's government's role to coerce every individual into civic duty (jury, militia, serving in the legislature). A government which alleviates citizens of responsibilities such as this would be considered to be unvirtuous because it would be helping the citizenry to become "palsied" (in the words of the Founders). Likewise, a citizenry which allows a government to take too much power is unvirtuous.
It's this dichotomy and contradiction (personal rights are sacred, yet can't exist without a virtuous government to protect them, and thus a virtuous citizen would sacrifice his rights for the virtue of the collective) which makes it unrealistically idealistic.
Also, it's premised on the notion of an agrarian society with never-ending frontiers. The idea was, citizens would never be 100% dependent upon government. They could withdraw to their lands and be self-sufficient, and resist government. They could move further way from a tyrannical society, to new territories (who's inhabitants, such as Native Americans, had no property rights worth respecting).
200 years later, few Americans are self-sufficient farmers. They spend 1/2 their waking life working for someone else. To the Civic Republicans this would be equivalent to being a "sharecropper."
And, there's virtually nowhere to escape to.
Sadly, the result is as expected. A political system designed for an idea which never existed for very long. And, the deprecation of individual power at the expense of corporate/commercial expansion.
It's no wonder people are more interested in the latest Nintendo Wii, or 3G cell phone than they are the weightier issues affecting society. That's exactly the limited mindset you'd get from sharecroppers.
IMO, we should ditch our congressional form of government for a parliamentary one (which doesn't exist based upon an assumption that the electorate are virtuous).
Or, institute the goals of Civic Republicanism (to foster independence, and self-reliance while at the same time self-sacrificing for the stability of the collective). Perhaps things like "workplace democracy" to take the place of the self-interested influence of executives and unions, each trying to loot the corporation against the other. Something that could give employees more ownership and participation in the place they spend 1/2 their waking life.
Continuing on with a form of government that was based upon an impossible-to-achieve ideal doesn't seem fruitful to me. We either need to take ideal seriously and find ways to implement it. Or, ditch the political system for something that would better serve reality.
Well let's see. Housing pmts/prices has been either at a historical high relative to income or overpriced for the ENTIRE DECADE. YES for the last 10 YEARS. I REPEAT THE 3650 DAYS. If homes were AFFORDABLE, my monthly outlay towards housing would be less and thus I would be more apt and willing to spend more on consumer items across the board. So would many others. Until then I will hoard my money, not start a family and live frugally. It is incredibly frightening how stupid Baby Boomers really are (since they are the ones that set economic policy). They just don't get it- God help us.
ReplyDeleteCUTTING TAXES WORKS MR SACHS.
ReplyDeleteThis is a complete red herring by another central planner from COLUMBIA. Do they even teach free market principles there?
Cutting taxes lets people OWN MORE OF "THEIR" MONEY for investments and purchases.
Wow isn't that amazing.
But you see it fly's in the face of Socialist central planner theories so IT ISN'T allowed.
You know why they don't like Tax cuts? LOL. Because they don't like the private sector and don't want to see government cut at all.
They view government as the answer. They view FDR(Franklin Delanor Roosevelt as their god of socialist liberalism.