Grasping Reality on TypePad, by Brad DeLong

[argued] average wage growth should be at least 3.5 percent a year.... Wen does wage growth cross above this threshold?... Not until the employment rate for workers ages 25 to 54 crosses 79 percent.... As of January 2015, this prime-age employment to population ratio was 77.2 percent. The ratio has been on the rise, but it still has a ways to go before it hits 79 percent. Growing at its current rate, that rate won’t hit 79 percent until 2017 at the earliest.... With inflation below its target, worries about stalled or slowing economic growth abroad, a strengthening dollar, and an incomplete labor market recovery, the Federal Open Markets Committee should consider the consequences of raising interest rates too soon. Perhaps the best move is to do nothing and simply wait...

...pushes against Fed tightening.... 2) In their just released minutes, the Fed board clearly identified with the asymmetric risk.... 3) Some recent reports suggest a tension among FOMC members as to whether they should be data driven or just basically assume that inflationary pressures lurk around the next corner.... 4) Remember, nobody knows what the “natural rate of unemployment” is.... There you have four factors pointing towards holding rates steady at zero for the near term. Which factors point the other way? There’s the tightening job market, for sure, but see #4...

... from a ‘normal’ capitalist recession, of the type that is overcome through a wage squeeze which helps restore profitability. This secular, long-term slide toward asymmetrical depression and monetary disintegration puts radicals in a terrible dilemma: Should we use this once-in-a-century capitalist crisis as an opportunity to campaign for the dismantling of the European Union, given the latter’s enthusiastic acquiescence to the neoliberal policies and creed? Or should we accept that the Left is not ready for radical change and campaign instead for stabilising European capitalism? This paper argues that, however unappetising the latter proposition may sound in the ears of the radical thinker, it is the Left’s historical duty, at this particular juncture, to stabilise capitalism; to save European capitalism from itself and from the inane handlers of the Eurozone’s inevitable crisis. Drawing on personal experiences and his own intellectual journey, the author explains why Marx must remain central to our analysis of capitalism but also why we should remain ‘erratic’ in our Marxism. Furthermore, the paper explains why a Marxist analysis of both European capitalism and of the Left’s current condition compels us to work towards a broad coalition, even with right-wingers, the purpose of which ought to be the resolution of the Eurozone crisis and the stabilisation of the European Union. In short, the paper suggests that radicals should, in the context of Europe’s unfolding calamity, work toward minimising the human toil, reinforcing Europe’s public institutions and, therefore, buying time and space in which to develop a genuinely humanist alternative.

...[had] government deficits [that] were too high, and... economies [that] had become uncompetitive.... The deficits needed to be reduced. Under flexible exchange rates this could have been done with relatively little cost.... In a monetary union, this cannot happen, so a period of unemployment is inevitable to restore competitiveness. The key macroeconomic question is how quick adjustment should be.... Slow is much more efficient. So it makes sense for some institution like the IMF to provide loans to the government to allow it to eliminate deficits gradually.... When it came to Greece, the Eurozone made three key mistakes. 1) Too much austerity too quickly, violating the logic.... 2) There was only partial (and delayed) default on Greek government debt.... 3) Adjustment... required in an environment of Eurozone recession and deflation, caused by needless fiscal austerity in the non-periphery countries.... This Vox piece [by Lars P Feld, Christoph M Schmidt, Isabel Schnabel, Benjamin Weigert, Volker Wieland]... displays so much that is wrong with macro arguments coming out of the Eurozone at the moment... ignores the basic macro... denial of the importance of wage and price rigidities... the speed of adjustment matters, and... the article makes no attempt to address this central issue... a complete collapse in GDP, where over half of young people are unemployed... [was not] just par for the course, [but] rather than a function of the amount of austerity imposed... lenders are demanding Greece run significant primary surpluses now, and they need not make this demand. I could go on and on..."

...hysteria surrounding the idea is that a huge wave of automation, technology and skills have lead to a huge structural change in the economy since 2010. The implicit argument here is that robots and machines have both made traditional demand-side policies irrelevant or naïve, and been a major driver of wage stagnation and inequality. Though not the most pernicious story that gained prominence as the recovery remained sluggish in 2010 to 2011, it gained important foothold among elite discussion.

...‘Critical investments’ and ‘shared prosperity’ are ‘in.’  Deficits are down to an economically sustainable range.... Our policymakers are no doubt relieved to take a break from having to talk about the hard stuff (spending cuts and tax increases) and getting to focus on the nice-sounding stuff (spending increases and tax cuts).... Dismissing fiscal responsibility as a socially irresponsible idea is irresponsible.... READ MOAR

• The fact that former Cato interns wanted no part of the troofer lawsuit;
• The title implying that Politico hacked into Cannon’s email, rather than the massively more likely possibility that the email was provided by one of the recipients, or *Cannon complaining about the Cato institute being described as ‘right-leaning.’

...issues with both the growth rate of productivity and the supply of labor... John Fernald... on the lack of new advancements in information technology... Stephen G. Cecchetti... and Enisse Kharroubi... [on the] over-bloated financial sector... Equitable Growth’s Robert Lynch... [on] educational inequality.... Supply and demand aren’t... easily untangled.... With the lack of acceleration of wage growth, the labor market appears to still have some slack.... Short-term considerations can help alleviate our long-run problems.... We can’t forget about the supply-side problems that lurk further downstream. Our future prosperity depends on it.

...There are many Americans who love their country in pretty much the way the president does... special, often an enormous force for good in the world, but also fallible.... You don’t have to be black to see things that way.... There’s the guy who described one of our foreign wars as ‘the most unjust ever waged by a stronger against a weaker nation’... Ulysses S. Grant... [on] the Mexican-American War.... We are becoming... more sophisticated... people do understand that... [those] shouting ‘USA! USA!’... are often less patriotic than the people they’re trying to shout down.... We really are an exceptional country... that has played a special role... [and] always stood for some of humanity’s highest ideals. We are not... about tribalism--which is what makes all the shouting about American exceptionalism so ironic, because it is... an attempt to tribalize...

...surrounding the idea is that a huge wave of automation, technology and skills have lead to a huge structural change in the economy since 2010. The implicit argument here is that robots and machines have both made traditional demand-side policies irrelevant or naïve, and been a major driver of wage stagnation and inequality. Though not the most pernicious story that gained prominence as the recovery remained sluggish in 2010 to 2011, it gained important foothold among elite discussion...

...to voluntarily announce a raise for all of its lowest-paid employees.... Aetna raised all of its employees’ wages to at least $16 an hour.... It is possible to profit from paying your employees well.... For decades, labour economists have gathered evidence on... [how] higher wages can motivate employees to work harder, to treat customers better, make them more reluctant to leave their jobs and help them to bring fewer worries and distractions to work. That can increase productivity and reduce an employer’s costs.... All jobs can be done better or worse, and that lower-paid workers respond to incentives other than just fear of losing their job. This is not just a relative wage story.... This is also not just a minimum wage story.... Efficiency wage increases will not solve all current economic problems. Fordist fantasies that paying a higher wage would meaningfully stimulate increased purchases, for example, have to be left aside.... Nor will such initiatives take the place of needed training to make sure workers have the proficiencies.... The shortfall of long-term investment in the US, public and private, cannot be made up for with low-skilled labour...

Breslau, the beleaguered German city in the east, now declared by Hitler to be Festung Breslau, Fortress Breslau, was completely surrounded by Soviet troops, some only two miles from the city centre. Nazi propaganda would make much of a Hitler Youth Battle Group counter-attack carried out the city’s southern park, in which 120 boys beat back the Red Army and supposedly left 170 Soviet soldiers dead. The most severe penalties were being imposed on any comments that might be interpreted as defeatism or subversion, so there was no mercy for any act of desertion:

These death sentences should serve as a warning to every soldier and at the same time give decent soldiers — and the entire fortress as well — the satisfaction that cowardly traitors face a merciless, shameful end. The summary execution of cowards and shirkers not only eradicates them, it also brings down shame upon their families by wiping out their honour and condemns them to poverty, depriving them of all benefits.

...could currently be at output levels that are above current estimates of potential or natural output.... But are these estimates of potential output really independent of the path of actual output?... We know that stylised view is wrong for a variety of reasons. Labour that has been unemployed may become deskilled. Firms that are forced to cut back on investment in a recession may take time to rebuild their productive capacity. However there may be other ways it is wrong for reasons that are much more difficult to quantity. In particular, if investment falls in a recession, new technology that has to be embodied in new machines may fail to emerge, so the rate of technological progress may appear to decline. These processes may not matter too much in normal (mild and short lived) booms and busts. However following a large recession they may become more important.... After a severe recession which appears to result in a loss of capacity, you use policy to explore the boundaries of just how much capacity has really been lost, and run the risk that inflation may rise as you do so. You do not sit back, tell yourself that below target inflation is probably temporary, and do nothing. And, of course, you do not plan for more fiscal austerity.

After the heavy losses incurred in the battle, the strategic value of the island became controversial. It was useless to the U.S. Army as a staging base and useless to the U.S. Navy as a fleet base. However, Navy Seabees rebuilt the landing strips, which were used as emergency landing strips for USAAF B-29s.

The Imperial Japanese Army positions on the island were heavily fortified, with a dense network of bunkers, hidden artillery positions, and 18 km (11 mi) of underground tunnels. The Americans on the ground were supported by extensive naval artillery and complete air supremacy over Iwo Jima from the beginning of the battle by U.S. Navy and Marine Corps aviators. Iwo Jima was... the only battle by the U.S. Marine Corps in which the American casualties exceeded the Japanese, although Japanese combat deaths numbered three times as many American deaths. Of the 22,000 Japanese soldiers on Iwo Jima at the beginning of the battle, only 216 were taken prisoner, some of whom were captured because they had been knocked unconscious or otherwise disabled. The majority of the remainder were killed in action, although it has been estimated that as many as 3,000 continued to resist within the various cave systems for many days afterwards....

...to more than 11 million, and the conservative response to the law’s demonstrable success at carrying out its goals has been fascinating to behold. Measured by volume, the right-wing backlash has diminished severely, as great roaring waves of furious anger have given way to irregular ripples of discontent. But measured by its content, very little has changed.... To take a typical example, here is Stephen Moore, "chief economist at the Heritage Foundation, making his case", such as it is, that Obamacare has failed to meet its cost targets. Perhaps the most revealing aspect of Moore’s column is the fact that, five years after its passage, the chief economist of the most influential conservative think tank in the United States lacks even a passing familiarity with it....

...Here's a chart showing the wealth of the rich. They don’t seem to be getting poorer....

@Adennisdillon: @BenDWalsh Other problem is picking a bubble year as a baseline.

...have important economic consequences. In a model where the costs of earnings management are endogenous, we show that in equilibrium, low productivity firms hire and invest too much in order to pool with high productivity firms. This behavior distorts the allocation of economic resources in the economy. We test the predictions of the model using firm-level data. We show that during periods of suspicious accounting, firms hire and invest excessively, while managers exercise options. When the misreporting is detected, firms shed labor and capital and productivity improves. Our firm-level results hold both before and after the market crash of 2000. In the aggregate, our model provides a novel explanation for periods of jobless and investment-less growth.

Guvenen... Karahan... Ozkan... and... Song.... Income growth--pretty much all of it--happens in the first decade of workers’ careers.... A worker at the median of the income spectrum will have a growth rate of about 38 percent, while a worker at the 99th percentile will see his income grow by 1,450 percent.... Variance decreases as a worker moves up the income ladder.... [until] worker starts earning over the 90th percentile... variance increases as incomes get close to the very top of the ladder.... The distribution of income growth is quite different from what is usually suspected. Instead of an anticipated smooth bell curve, the distribution has a very high peak and long tails, in addition to being negatively skewed...

...down around the same time that the financial sector’s share of economic activity started rising rapidly.... The interesting question, then, is whether this process can be put into reverse. Maybe there is a deeper wisdom behind financial regulations that appear to be (at best) pointless. Harassment that encourages an unproductive, resource-hoarding industry to get smaller might be exactly what’s needed in economies plagued by chronically slow growth.

...and Mr Putin is winning... the Kremlin’s undisputed master... a throttlehold on Ukraine.... His overarching aim is to divide and neuter [the western] alliance.... Only the wilfully blind would think his revanchism has been sated.... To him, Western institutions and values are more threatening than armies. He wants.... supplant them with his own model... [in which] nation-states trump alliances, states are dominated by elites, and those elites can be bought.... The biggest target is NATO’s commitment to mutual self-defence. Discredit that—by, for example, staging a pro-Russian uprising in Estonia or Latvia, which other NATO members decline to help quell--and the alliance crumbles....