"Trickle Down Economy Bin" by LauraFries.com on flickr
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Trickle down economics is the phrase that has often been supplied to describe whatever current flavor of economics theory being propounded that says cutting taxes for the well-to-do is the quickest path to an economic nirvana. Supply-side is just one of the variants of this from over the years.
While what I just described is the most commonly used version of “trickle-down,” we are now seeing examples of true trickle-down, i.e., the trickle-down of pain through the economy from all the various budget cuts at all levels of government. The past two days the Tampa Tribune has had articles showing the affects of cuts. First up is this one from yesterday on cuts for caregivers of the disabled:
The state Agency for Persons with Disabilities needs to slash about $90 million in services this year to meet its budget. The cuts not only affect contract workers like Davison, but employees in group homes who coordinate training programs, community outings and other activities for the disabled.
About 33,000 people in Florida with developmental disabilities like Cherta go through the agency to find companions who will not only care for them but also find ways to make them a part of their communities.
The agency serves about 50,000 people with autism, cerebral palsy, spina bifida and intellectual disabilities.
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Code of Ethics: A code of ethics is a set of guidelines which are designed to set out acceptable behaviors for members of a particular group, association, or profession. Many organizations govern themselves with a code of ethics, especially when they handle sensitive issues like investments, health care, or interactions with other cultures. In addition to setting a professional standard, a code of ethics can also increase confidence in an organization by showing outsiders that members of the organization are committed to following basic ethical guidelines in the course of doing their work.
I am not currently a member of the American Society for Quality (ASQ) but since I do consider myself a Quality Assurance professional, I have no problem adhering to the ASQ Code of Ethics. When I got my first QA position back in the early ’80s, ASQ was known as the American Society for Quality control (ASQC) but the Code of Ethics was then as it is now. One of the many technical books I have read and used to help me in business is Ethics in Quality, which I found an interesting read, if only because the case studies used were not all black and white but showed the nuance of everyday life where sometimes there is no right or wrong answer nor are there always good choices available to folks.
But professional economists do not have a Code of Ethics.
Until now.
Back at the end of December 2010 and early January 2011, there a few articles and blog posts on the subject (here from the NY Times, via Slate, plus here and here. On Friday (July 8), Reuters had this article on the lack of response to a proposed code by professional economists:
The world’s largest association of economists is considering ethics guidelines after outrage about undisclosed conflicts of interest, but only a handful of its 18,000 members have bothered to offer any input.
The American Economic Association earlier this year charged a five-person panel with looking into ethics and economics — in part a response to the 2010 documentary “Inside Job” that vilified a number of big-name economists for arguing in favor of deregulation while on Wall Street’s payroll.
…snip…
The AEA has already taken a small step: As of July 1 it requires that anybody reviewing a journal article be told the name of the author, which they hope will help the journal referee spot potential conflicts of interest.
George DeMartino, who recently published a book on ethics and economics, said he is worried the committee might take too narrow an approach.
…snip…
The NBER code stipulates that the source of funding for the research must be noted at the start of any research paper.
It also states that researchers should disclose any “relevant and material” financial ties that bear on their work, such as consulting or ownership relationships with firms that may be affected by the research. A reasonable guideline, it says, is that a relationship is material if its value exceeds $10,000 per year.
Card said it is possible the AEA’s conflict of interest guidelines will be written along similar lines but said any code would be difficult to enforce.
My bold. Here we have the cop out “…any code would be difficult to enforce.”
I know that a Code of Ethics for economists would in no way operate as some sort of magic wand, forcing the economists to disclose the embarrassing facts about who and how they are being paid off funded no more than campaign finance disclosure laws have forced politicians to be embarrassed by the groups paying them off providing funding. I’ve read articles on psychologists participating in the torture programs. I’m sure a little extra time would allow me to find all sorts of Investment Advisers who have run Ponzi schemes or other investment rip-offs. Pick a profession and I’d wager we can find corrupt members of said profession who have violated any associated Code of Ethics.
Nevertheless, a Code of Ethics for Economics professionals would be one small step forward in helping people to have insight into biases and vested interests. The so-called “Free Market” economists seem to be the economists of choice for TradMed; it seems like it would be nice to know who is paying the freight for so many of these economists who are wrong so often yet keep being presented as the experts. While a Bernie Madoff rips off millionaires and billionaires, there is still a limited effect on the vast majority of people in the economy. While corrupt judges and lawyers have a larger impact, it still is somewhat confined to set area. But when corrupt economists are wrong about the US and global economy, the end effect is of a national and global impact. The economists who missed the tech bubble, the economists, who missed the housing bubble, the economists who missed the banking and over all financial frauds are still the same economists who are consulted by government at all levels. Maybe we should know that the people Paul Ryan was sharing $350 bottle of wine with are (via TPMMuckraker):
When TPM asked Ryan who he was dining with Wednesday night, he declined to identify them, saying only that they were economists, not lobbyists. But TPM has confirmed that the two other men with Ryan were Cliff Asness and John Cochrane. Both men have doctorate degrees in economics and are well-known in the conservative media world as die-hard proponents of the free market’s ability to right itself without government bailouts when the crisis hit in late 2008.
Asness, who ordered the wine and who, according to Feinberg was the one who said “Fuck her,” is better known as a high-profile hedge fund manager. Asness founded and runs AQR Capital, which manages an estimated $26 billion in a variety of traditional products and hedge funds, and his life story has been the subject of numerous books and articles about the rise and fall of Wall Street. He’s also grabbed headlines for being one of the most voluble opponents of President Obama’s economic policies.
…snip…
Cochrane, the other, more tempered dinner companion, is the AQR Capital Management Distinguished Service Professor of Finance at the University of Chicago, an apparent tip of the hat to the contributions Asness’ AQR Capital Management has made to the Booth School of Business there.
Surely, this information should be available to folks when Rep. Ryan as quoting economists who support his perspectives. Surely, this information should be available so that when opinion pieces show up in TradMed from Mr. Asness or Mr Cochrane, we can have an informed perspective of any biases they might be harboring?
After all, I’m sure Rep Ryan and Messrs. Asness and Cochrane would absolutely demand to know (and would use freely) any knowledge they could find to discredit the views of folks who disagree with them. Maybe an Economists’ Code of Ethics would not be enough to get all this information out to folks, but I’m sure it wouldn’t hurt the effort to try.
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Talk about getting it from all sides. Economists want Americans to cut down on debt and boost spending all at once, even as home values tumble and gasoline prices soar.
It may all be a bit too much for the average U.S. household, particularly with an already sluggish labor market stuttering again.
From the second Reuters piece:
The big mystery in the United States today is why the job crisis is not at the center of the political and economic debate. After all, the numbers — and the human tragedies they reflect — could not be bleaker. Read the rest of this entry →
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The economic reports are starting to come out for May and while there are those economists and Beltway Village Idiots Pundits who are making “gee, everything is just fine” predictions, the verifiable numbers easily refute this attitude.
First up is the monthly report from payroll processor ADP on the private sector jobs creation for May (via Reuters):
The ADP report showed private employers added a scant 38,000 jobs last month, falling from a downwardly revised 177,000 in April and well short of expectations for 175,000. It was the lowest level since September 2010.
The report boded poorly for the key U.S. non-farm payrolls report at the end of the week. Credit Suisse lowered its estimate for Friday’s employment number to 120,000 from its previous forecast of 185,000 and its private payroll estimate to 135,000 from 200,000.
ADP’s number has been weaker than the government’s private payrolls figure for 12 of the last 14 months, making Friday’s government numbers likely to come in above ADP’s report, Credit Suisse said.
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I’m not going to act like an economist and claim to be “surprised” that folks are spinning various education pieces today. No, I am not at all surprised that it is happening, but I am a little frustrated when I see something like this from today’s (Sunday May 22) NY Times where the headline uses “grassroots” and “Bill Gates” together. The idea of anything funded from the coffers of a billionaire being considered “grass roots” is beyond ludicrous. But then, we are talking about a TradMed that willfully overlooks the funding of folks like the Koch Brothers and Dick Armey to proclaim various astro-turf organizations as “grass roots.”
To be fair, the Times article does point out a few of the problems:
INDIANAPOLIS — A handful of outspoken teachers helped persuade state lawmakers this spring to eliminate seniority-based layoff policies. They testified before the legislature, wrote briefing papers and published an op-ed article in The Indianapolis Star.
They described themselves simply as local teachers who favored school reform — one sympathetic state representative, Mary Ann Sullivan, said, “They seemed like genuine, real people versus the teachers’ union lobbyists.” They were, but they were also recruits in a national organization, Teach Plus, financed significantly by the Bill and Melinda Gates Foundation.
There are times that I begin to despair a bit about all the crap going on all over. I can’t do anything about earthquakes, tsunamis, and nuclear disasters (all in one) but I can address some of the reporting I’ve seen in the TradMed the last couple of days.
Apparently the Beltway Village Idiots Pundits are anxious to stop writing all those bummer articles about the un and underemployed and the destruction of the global economy. I guess it’s just too Debbie Downer for them. So they’ve started the “Everything’s Getting Better” articles. The NY Times and Floyd Norris started with this headline:
Crisis Is Over, but Where’s the Fix?
Of course, without anything being fixed, it’s rather difficult for the “crisis” to be over. And to be fair, Norris does address some of this in the article:
When the financial system began to crumble more than three years ago, the world rushed to rescue it. Country after country went deeply into debt to keep banks afloat and prevent a deep recession from turning into something worse.
…snip…
But the world has changed since then. The economic recovery in most developed countries is stuttering at best, and governments are struggling with their own finances. It is time for remorse and second-guessing.
A surprising citadel of that second-guessing is at the International Monetary Fund, where researchers this week concluded that the rescues “only treated the symptoms of the global financial meltdown.”
The researchers, Stijn Claessens and Ceyla Pazarbasioglu, warned that “a rare opportunity is being thrown away to tackle the underlying causes. Without restructuring financial institutions’ balance sheets and their operations, as well as their assets — loans to over-indebted households and enterprises — the economic recovery will suffer, and the seeds will be sown for the next crisis.”
…snip…
In retrospect, it is clear that the bailouts came with too little pain for those responsible. Bondholders who financed banks that failed largely escaped pain. That was true even in Ireland, where the bailout would have led to a default of government debt had Europe not stepped in. It is still not clear how Ireland will pay its national debt, but the bank bondholders did fine.
Norris goes on to point out that one of the problems is the lack of accountability. Imagine that?
The economy has been growing for 18 months after the longest recession since the Great Depression – but public opinion has yet to fully reflect what economists generally agree are incipient signs of hope. One truism of presidential politics that actually happens to be true is that voters’ perception of the economy trumps just about any other issue, so Obama, acutely aware of both the need to present a successful economic record and the dangers of prematurely declaring victory, is treading very, very carefully.
…snip…
Yet despite several quarters of real — if uninspiring — growth, the pessimism remains deep. A Bloomberg National Poll conducted in early March found that more than a third of Americans continue to believe that the U.S. is in a recession, more than a year after it ended, and 63 percent of Americans say the nation is on the “wrong track.”
Structural unemployment – unemployment stemming from a mismatch of workers’ skills and job requirements – has been cited in mainstream media as the main cause of current, high unemployment. Data from the National Federation of Independent Business (NFIB), however, suggest that structural unemployment is not what is ailing the economy. The graph below draws on data from the NFIB’s monthly survey from December 2007 (the official start of the recession) to January 2011. Each month, the NFIB asks its sample of small businesses to state the single most important problem facing their business today. Since the recession began, respondents overwhelmingly have cited “poor sales,” suggesting that today’s unemployment is primarily due to a lack of demand. “Quality of labor,” the factor most consistent with structural unemployment, barely made the list.
Why the shortage? Many of the people who were laid off from factory jobs and are looking for work don’t have the specialized skills companies are looking for, manufacturing execs say. And they’re not eager to acquire them, because, having been laid off from one manufacturing job, they’re convinced that the whole sector is on the decline. So they don’t want to spend time retraining for jobs that they fear could soon be shipped overseas.
Some say those fears are misplaced, arguing that skilled manufacturing jobs are difficult to outsource. But the numbers tell a different story. As we’ve reported, middle-wage, middle-skill jobs — a category that includes both skilled manufacturing jobs and white-collar clerical work — are shrinking rapidly as a percentage of total U.S. jobs, thanks to the effects of offshoring and mechanization. So it may make sense for a worker to decide against spending a year retraining himself to learn these skills.
My bold. Today’s (Saturday, March 11) Hartford Courant had three articles that reflect the reality of things today.
Links to the articles are embedded in the titles but there we have it. UTC is laying off workers and moving the jobs elsewhere. They are doing it because they can (profitable but want more profits) and they reward the CEO with $24M in compensation to oversee these cuts and outsourcing. And the CEO likes to brag about it (from prepared remarks delivered in Mumbai to NASSCOM):
…snip…
Today, we have almost 5,000 employees in India. Our Otis factory in Bangalore has produced more than 30,000 elevators since the 1990s. Our Carrier factory in Gurgaon produces 200,000 air conditioning systems per year. In addition, Pratt & Whitney engines power the aircraft of many Indian airlines, including Air India, Kingfisher, and Indigo – as well as more than 225 turboprop aircraft, business jets and helicopters in India.
From our perspective, this is really just the beginning of our relationship with India. Before talking about some of the big macro forces that will shape the global economy over the next decade, I’d like to share just a little data that highlights the size of the opportunities in both the infrastructure and aerospace markets. Last year, UTC’s sales in India were $500M. We expect this to grow to $2.5B by 2015. I’m confident in this level of growth based, in part, on the current per-capita consumption rates. As countries like India become more urban, consumption levels for air conditioners, security systems and air travel will increase toward the levels seen in more mature markets.
…snip…
But surely there are folks in the US working to see US workers employed, building things useful to all citizens, right? Just today there were two more articles on Republican governors attempting to justify killing rail projects within their states. First up is John Kasich in Ohio refusing to put up $52M for a project estimated to cost $128M for streetcars in Cincinnati:
Gov. John Kasich said he can’t justify spending $52 million in state money for Cincinnati’s streetcar – the new governor’s most emphatic statement on what Cincinnati leaders consider a major economic development project.
…snip…
Without the state money, the project could be up to $30 million short of the $128 million needed to build a streetcar route from Downtown’s central riverfront to the Uptown communities near the University of Cincinnati. The city could seek that money from Washington or other sources, say backers.
The federal government had agreed to pay $2.4 billion of its estimated $2.6 billion in construction costs, railroad companies were vying to build and operate it, and state transportation planners had even dummied up proposed timetables: Train 7092 would depart Tampa at 8:10 a.m. and arrive in Orlando at 9:04 a.m.
The fast train was sought, and won, by Florida’s former Republican governor, Charlie Crist. But it was killed last month by his successor, Rick Scott, who joined several other Republican governors in spurning federally financed train projects over fears that their states could be on the hook for future costs. The final nail in its coffin came last week when a Florida court ruled that the new governor could not be forced to accept the federal money and start building it.
Of course, buried w-a-y down in the Times article is this little nugget that negates the article’s premise (and Scott’s justification for canceling):
Last month, Mr. Scott decided to scuttle the project after reading a report by the Reason Foundation that questioned its ridership estimates. The foundation is a prominent libertarian policy research organization that employs several respected transportation analysts, but it gets some of its funding from donors with ties to the oil industry, including foundations related to Koch Industries, which owns oil refineries.
“The truth is that this project would be far too costly to taxpayers, and I believe the risk far outweighs the benefits,” Mr. Scott said.
But a state-sponsored ridership study, which was released this week, concluded that the proposed line would actually have been a money-maker from the start.
Regardless of the complaints that Tampa and Orlando are too close together and as cities are “virtually unnavigable without cars,” the line would have been a money maker. It would have eventually been extended south to Miami as well.
So here we sit. Private industry destroys jobs because they can. Governors destroy jobs because of ideology even though those jobs could eventually help people get around cities and states without buying gas, contributing to pollution and auto gridlock. Saving gasoline that has spiked in price once again, chewing up more financial resources that the long term un and underemployed could use on things like, oh food or medical care.
Let’s let the Village Idiots Pundits declare Victory Recovery and move on so they can cover such news as Newt Gingrich’s Patriotic Affairs.
I will admit that there are a legion of topics that I have no comprehension of. A lot of things in the hard sciences just escape me. Maybe I don’t have the proper brain connections to understand some topics. I also understand that a lot of things get presented to the public in ways designed to obfuscate a topic rather than to enlighten people. But regardless of how it is presented, for the life of me, I do not understand how Marriage Equality can be considered a zero sum effort yet it is seemingly constantly presented as such.
For the record, I am a hetero male. I love women. I will admit that the vestigial remnants of sexism sometimes manifest in my appreciation of smart, talented, beautiful women. But I do not understand how my love for women is impacted in any way shape or form by Marriage Equality. If I were to find and fall in love with a beautiful woman, a marriage between two men or two other women would have absolutely no impact on my love and possible marriage.
What some folks may have missed (or forgotten) over the past year is that the state of New Hampshire had legislatively passed a Marriage Equality bill that was signed into law in June of 2009 and effective January 1, 2010. This was after having previously enacted a Civil Unions law a couple of years earlier. After the initial law took effect last year, there were a couple of attempts to repeal the law that were defeated by the New Hampshire House of Representatives.
Oh what a difference an election makes. Republicans are once again a majority in both houses of the New Hampshire legislature and have promised to not only repeal the law but to inact a Constitutional Amendment so that it can not be brought back later. From Sunday’s (January 2, 2011) Concord Monitor:
Same-sex marriage was passed by a Democratic-led Legislature in 2009, mostly along party lines. Democratic Gov. John Lynch signed it into law that June, and the first couples were married Jan. 1, 2010. When the gay marriage bill was first introduced, few expected it to pass, and the stunning votes in the Legislature gave activists little time to prepare.
Now, however, the legislative calculus has flipped, with Republicans winning 19 seats in the Senate and 298 seats in the House. It seems likely that a gay marriage repeal will pass the House and Senate. The major question is whether opponents of same-sex marriage will have the two-thirds vote necessary in both chambers to override Lynch’s promised veto. This time, local and national advocates have ample time to prepare their strategies.
…snip…
For now, there are at least two proposed repeal bills in the Legislature and one constitutional amendment. Only the constitutional amendment has the potential to go on a statewide ballot, but not until 2012. Rep. David Bates, a Windham Republican who proposed two of the bills, said he anticipates moving forward with a repeal bill this session but perhaps not pursuing the constitutional amendment until 2012. A constitutional amendment would require a majority vote of 60 percent in the House and Senate, and a two-thirds’ majority of the state’s voters. The governor would not have a role.
As always, this type of fight is a marathon battle and not a sprint but I would like to request the folks who have friends and family in New Hampshire to talk to them about fighting these repeal efforts. We do not need to take away rights from people. According to the Monitor article linked above, there have been 975 same sex marriages in New Hampshire in the last year. The law establishing Marriage Equality also allowed for the previously established civil unions to convert to marriage on January 1, 2011 raising the total of marriages to roughly 1500 (per wiki). Let loving couples and established familes stay as loving couples and families without further interference.
Two articles from AmericaBlog here and here on the topic.
As I often do, yesterday afternoon I was lurking around during the Book Salon. As the son of an English teacher/librarian, and nephew and cousin of teachers on both sides of my family, I like book discussions even if I can’t afford to buy too many of them these days. I can still read the introduction by the host, ask an almost pertinent question then sit back and lurk as folks with active brains go into the full discussion.
David I think the key to most of the conversation this afternoon is the difference between the folks who are liberal on social issues (such as Pro-choice, marriage equality, the environment and so on) are not all the liberal on economic issues – or at least don’t appear to be so to those of us who are not worth millions.
Edit: At one time, folks who fit this description were often called “Liberal Republicans” but that breed of human seems to be mostly extinct nowadays
I think that is a very good analysis of what’s happening within the Democratic party.
And there we have it all, IMNSVHO. The battle for the soul of the Republican Party is pretty much at an end, with the social conservatives having won. The Republicans who at one time were identified as "liberal" or as Rockefeller Republicans have moved on (think Jim Jeffords of Vermont or Lincoln Chafee). Other examples of folks who left/were pushed out of the Republican Party over the years include Lowell Weicker of Connecticut, defeated in 1988 by Joe Lieberman and Jacob Javits of New York, defeated by Alfonse D’Amato in 1980.
While the more well known Rockefeller Republicans were concentrated in the northeast and New England, they were actually sprinkled all over the country, including states such as Kentucky (John Sherman Cooper). However, over the last fifty years, while the Republican Party has moved further and further away from many of the aspects of social liberals, those individuals who self identified in support of social liberal causes: pro-choice, civil rights, marriage equality, ERA, and so on, had to leave the party or modify their views to keep getting elected.
So where have these socially liberal people moved to in their political affiliations? The Democratic Party where they have been mostly welcomed.
However, by welcoming all these socially liberal former Republicans (or individuals who probably would have identified with the Republican Party in earlier times), the Democratic Party has welcomed people who, while socially liberal on many issues, are often economically conservative and who stand at odds with the historic Democratic Party commitment to those less fortunate and to economic justice. They seem to actively work against the unions and against laborers.
By embracing the economic conservative refugees from the Republican Party, the Democratic Party has lost it’s moorings and base. It leads to people calling economic liberals "fucking ret*rds." It leads to the President and Vice President proclaiming that the base just needs to forget all the giveaways to Big Pharma and Big Insurance and get over it and get excited because the other guys will be worse.
As I tend to do most morning after I’ve checked the jobs sites in my attempt to find full employment, I came across this piece of gibberish written by Arthur Laffer for the Wall St Journal (via Google). For those too young or too memory impaired, Laffer was the "author" of the "Laffer Curve" which was used by the Reaganauts and subsequent Republican politicians to justify massive tax cuts for the rich.
It’s hard to know where to begin in tackling the various strawman and out right fallacious arguments Laffer uses in this opinion piece.
On the face of it, the idea that higher unemployment benefits won’t lead to more unemployment doesn’t make much sense. Imagine what the unemployment rate would look like if unemployment benefits were universally $150,000 per year.
First off, few people are actually calling for higher Unemployment compensation, although with an average weekly payment of $293 per week, with only a few states maxing out their Unemployment payments over $500 per week, it surely would not be a bad thing to raise the compensation a bit.
One of the realities of life appears to be that economic bad times bring out the vultures, AKA, Debt Collectors. Now, the debt collectors are around, even in good times, but they multiply in bad.
Unfortunately, it appears that one of our previous Congresses decided to help things get that much worse. To no one’s surprise, it was a Republican controlled Congress, the 109th, that decided state level district attorney’s offices could out-source collections of bad checks. And with the extra fillip in some states (like Florida) that the collection firm can require the bad check writer to attend and pay for mandatory "money-management" classes.
Dead people are the newest frontier in debt collecting, and one of the healthiest parts of the industry. Those who dun the living say that people are so scared and so broke it is difficult to get them to cough up even token payments.
Collecting from the dead, however, is expanding. Improved database technology is making it easier to discover when estates are opened in the country’s 3,000 probate courts, giving collectors an opportunity Read the rest of this entry →
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