Lunchtime Must-Read: Paul Krugman: The Skills Zombie
Noted for Your Lunchtime Procrastination for March 29, 2014

Things to Read at Lunchtime on March 29, 2014


  1. Paul Krugman: The Skills Zombie - "One of the most frustrating aspects of economic debate... has been the preference of influential people for stories about our troubles that sound serious as opposed to those that actually are serious. The reality... our economy is depressed because there isn’t enough spending... we need... something, almost anything, that increases total spending. But policymakers and pundits want to hear about tough decisions and hard choices, and they just recoil from any suggestion that terrible problems might have easy answers. The most destructive example is, of course, the deficit obsession.... Rhe same kind of policy machismo was an important reason so many people who really, really should have known better supported the Iraq war.... This new EPI report is a useful reminder of the extent to which another doctrine that sounds serious retains a grip on discourse — namely, the notion that we have big problems because our work force lacks essential skills. This is very much a zombie doctrine.... The Boston Consulting Group... the only hints of a skills shortage it found were in unglamorous skilled blue-collar work... [in] only five of the nation’s 50 largest manufacturing centers (Baton Rouge, Charlotte, Miami, San Antonio, and Wichita) appear to have significant or severe skills gaps. Occupations in shortest supply are welders, machinists, and industrial-machinery mechanics. Some readers may recall that when we finally had a really clear-cut example of a skill so much in demand that wages were soaring, the skill was … operating a sewing machine.... Yet the skills story just keeps showing up in supposedly informed discussion. Again, I think that this is because it sounds like the kind of thing serious people should say..."

  2. David Beckworth: Ad Hoc Monetary Policy: "One of the defining features of U.S. monetary policy over the past five years has been its incredibly ad hoc nature... QE1, QE2, Operation Twist, QE3, and the Evans Rule.... This stop-go approach to monetary policy was politically costly and prevented the Fed from fully utilizing its ability to manage expectations of future nominal growth... the Fed failed to clearly spell out how it would systematically respond to differing states of the future economy.... Now imagine the Fed's monetary stimulus programs during this time had be done in a more systematic and predictable manner... assume the Fed had announced a NGDP level target from the start and said asset purchases will continue until a certain level target was hit.... FOMC meetings would have been more predictable and consequently less important. We would not be hanging on the every word of our Fed chairs. Fed watchers and bloggers would be far fewer. It is true that implementing something like a NGDP level target would have used up a lot of the Fed's political capital.... My reply is that it may have politically cheaper for the Fed to do a NGDP level target than it was to do all the impromptu programs it adopted over the past five years..."


  1. Melissa Kearney: A New Approach to Making Work Pay: "Senate Budget Committee Chairwoman Patty Murray introduced the '21st Century Worker Tax Cut Act' to establish a new deduction for married couples who are both employed and have young children, and to increase the earned income tax credit (EITC) for childless workers. The Act would implement the policies introduced by two Hamilton Project proposals designed to help 'make work pay' by allowing low- and middle-income families keep more of what they earn.... Thirty years ago, the majority of families with children had only one parent working outside the home.  Today, roughly two-thirds of married couples with children rely on the earnings from two workers to make ends meet. However, the so-called 'marriage penalties' in the tax code, along with income phase-outs for the EITC and spending programs, and additional costs incurred when both spouses work (such as child care) can result in extremely high tax rates on additional earnings by many low- and middle-income American families..."

  2. Henry Blodget: Companies Need To Pay People More: "These days, if you suggest that great companies should serve all of their constituencies (customers, employees, and shareholders) and that American companies should share more of their wealth with the people who generate it (employees), you get called a 'socialist'... a 'liberal'... get told that you 'don't understand economics'... get accused of promoting 'wealth confiscation'.... In other words, you get told that anyone who suggests that great companies should share the value they create with their employees instead of just lining the pockets of shareholders is an idiot..."

Should Be Aware of:

  1. Josh Marshall: The Christie Way?: "I'm a little confused.... Generally speaking when you throw someone under the bus and you want them to play along, you add as much padding to the process as possible. That doesn't appear to be the Chris Chrisitie way. The main fallperson turns out to be former deputy chief of staff Bridget Kelly. And the 'report' prepared by Christie's lawyer not only places all the criminal liability on her (along with David Wildstein). It also goes out of its way to say that she is, to put it bluntly, emotionally unstable and loose.... Her lawyer thinks the attacks on Kelly's character are a warning shot that they'll tear her apart if she agrees to testify against Christie or his still protected associates. And that does seem like the most likely explanation. But which would you prefer, public character assassination or multiple years sitting in federal prison?"

  2. Kevin Drum: John Boehner vs. the Tea Party, Part XVII: "The House Republican leadership needed to pass the annual Medicare doc fix, but they didn't want to raise taxes or cut other spending to pay for it. Nor did they want anyone to be forced to go on record voting for a bill that wasn't paid for. What to do? Answer: * Call a recess. * Huddle up with Democratic leaders and get their buy-in for a quick voice vote. * Do not—repeat: do not—tell tea party types about this. * Get back out on the floor pronto and call up a bill that doesn't pay for the doc fix at all. Just put it on the ol' deficit spending credit card. * Pass it fast before conservative Republicans realize what's going on and demand a roll-call vote. * Hightail it out of Dodge. Martin Longman has the whole story here. It's pretty hilarious. UPDATE: Just to make this even better, the C-SPAN video of the proceedings makes it pretty clear that the voice vote didn't even go in favor of the bill. At least, not by the two-thirds margin required to suspend the rules and pass the bill pronto. Truly banana republic territory."

  3. Dean Baker: Krugman and DeLong on Avoiding Secular Stagnation: "I thought I would weigh in quickly since I have a better track record on this stuff than either of them.... We had an economy that was being driven by the housing bubble... directly through residential construction and indirectly through the consumption that followed from $8 trillion of bubble=generated housing equity.... Construction hit record lows following the crash.... Consumption also predictably plummeted.... It was necessary to replace close to 8 percent of GDP..."