On the Minimum Wage

Bill

As far as the net effect of minimum wage upon job growth and opportunity, opinions seem to differ widely both for  and against. I don't find the job loss arguments convincing in the way that you do.

In general we are talking about a very small group of people. I can’t find figures for CT but nationwide the estimate for minimum wage workers is around 2%. Poorer states have greater numbers of folks working in these jobs As you point out, most are younger and less well educated. But significant number of  minimum wage workers are heads of households dependent of their wages (often from two or more jobs) to support families, something conservatives constantly argue they want to strengthen.

Eli 

Obama: "It's Not My Fault"

 Eli,

You state, "by any measure" the economy does very well when the Dems are running the show, but provide no evidence that that is the case. You paste one graph that shows GDP per capita in 2008 dollars, which if my math is right is one measure, not any, and organizes it by the party of the Presidency ignoring the House and Senate. Plus, it classifies Clinton as a Democrat, when both Rachel Maddow and I agree Clinton is one of the more successful Republican presidents of our generation. The graph does not show growth, so we can't easily determine if the growth during a Republican administration is better, worse or equal to other administrations. Finally, you ignore the Great Depression, which if my history is correct, was a Democratic president and Congress.

Your second graph is equally flawed, and irrelevant to boot. The graph shows total debt outstanding relative to current year GDP. What it suggests, and what I believe you are trying to suggest is deficits only became significant since Reagan. This is simply not true. Look at the CBO's Budget and Economic Outlook: Fiscal Years 2012 to 2022, Chapter One, page 3, figure 1-1, which shows Deficits or Surpluses Since 1946. Clearly, without question, deficits under Reagan, as a percent of GDP grew substantially particularly relative to the post War period. But the post war period was far from deficit free. Secondly, Reagan was widely criticized for his deficits, and still is by many. (And before I forget, please don't mistake me for a Republican). Next, let's say the estimates for the numerator are correct. According to classic Keynesian theory the reason for the robust growth during the Regan era were the large debts, which would imply GDP without the deficits would be lower and then it's not exactly clear what the trajectory of the Total debt to GDP ratio would be. Then we come to fiscal 2009, when deficits as a percent of GDP increased to 10%, greater than the any period, by far, since the end of WWII. If you are really trying to argue the last three/four years of government spending is normal or an inevitable consequence of prior administrations, then you are on very shaky ground.

(As an aside, don't you think "Things are bad but it's not my fault, so re-elect me," is a relatively weak argument?)

Reagan was a spendthrift, so was Bush I. Clinton finally restored Republican principles to Washington. Bush II was a spendthrift and Obama was either powerless to change anything or spent like a drunken sailor. Fine. Now what? My goal in bringing up the CBO automatic stabilizer report was to point out spending levels are elevated, and elevated not because of stimulus and not because of automatic stabilizers. They are elevated because Congress approved a bloated budget and the President signed it. Just like Reagan and the Bushes. 

We both know spending is elevated. But if we think it is a natural consequences of the economy then that could suggest one path to reduce spending and if current spending were a function of conscious decision to spend more money, then that could suggest a different path. 

Bill 

 

Not a Sin, but a mistake.

 Eli,

 

You do not interpret the second graph correctly. You say it shows a dramatic increase in spending for 2 years. That is correct. But then you say it is followed by a decrese to "levels well below the Bush years." Absolutely incorrect. The levels are much much higher and you can see this in the first graph which shows the levels of spending. The second graph shows the rate of spending, not the levels. You avoid the point most Obama apologists avoid: Spending under Obama has spiked to very high levels, and stayed there, and it's not due to stimulus and its not due to automatic stabilizers. 

 

As far as what would have happened without your Keynesian savior? Look at a timeline. Obama inaugurated January 2009. Stimulus bill signed into law February 17, 2009. Now here is the important part. The National Bureau of Economic Research (NBER), (www.nber.gov) the official dater of recessions, dates the end of the recession at June 2009. So riddle me this, How is it the stimulus was so powerful that it was able to end the recession 4 months after being signed into law? Yet this is the same stimulus that wasn't big enough, per Krugman and all other big spenders? This tale that we avoided another Great Depression is totally unsubstantiated. The evidence we do have, that is, the recession ended in June 2009, long before any Obama stimulative affect could have been felt, other than a change in expectations, or confidence, is that there was little danger of another Great Depression.

 

Bill

 

 

Democrats, Party of Prosperity

Bill

By any measure, the economy does very well when the Dems are running the show.  

And while I’m venting, here is the unassailable historical record on who is really to blame for the rise in Federal debt.

This trouble began with the patron saint of Republicans, Ronald Reagan, who was happy to cut taxes but knew the American electorate would never stand for a reduction in services. After a course correction during the Clinton years, the Bushites once again set the nation on the same disastrous course, cutting taxes, while starting starting two wars and funding the singe largest entitlement, the Medicare drug benefit, since the Great Society.

Eli

A Mortal Sin or a Venial One?

Bill,

If I am allowed the above expression….

If I interpret it correctly, the second graph you display shows a dramatic increase in pending for 2 years followed by a decrease to levels well below the Bush years. And this spending occurred during the worst economic crisis of our middle aged lifetimes. Many of the most hated (by some) interventions, such as TARP, began in late 2008, before the current administration assumed office.

The reasonable question is to ask whether the money was well spent and where the economy would be if it hadn’t been spent. I’m no economist but the current experience with austerity and the economic debacle 

it is producing in large parts of Europe makes a powerful  argument that contracting public spending in a recessionary period produces nothing but harm and inevitably leads to more debt as revenues shrink

We agree that spending should be reduced. The question is when, and how.

 Eli

Lunacy

Eli,

According to the Hartford Courant, Democratic lawmakers are proposing an increase of the minimum wage in Connecticut, and then indexing it to inflation.

I'm guessing you support this, maybe an unfair assumption. So I'm asking you to defend it. What possible good comes from this? I can only see bad consequences. Those that need experience and skills get priced out of the market. It makes it more difficult for the market to clear, increasing the length of unemployment, and it predominantly hurts those at the bottom end of the wage scale. A trifecta of bad consequences.

Bill

Hey Big Spender

Eli,

CBO released its annual budget outlook yesterday. Always fascinating reading. I was diverted to Appendix C, Automatic Stabilizers, because Krugman has stated a couple of times and Goolsbee has repeated that there really hasn't been much of an increase in government spending since Obama became President. Rather, they claim, the increase is mostly due to automatic stabilizers. I've been skeptical of the claim and the modest work I've done on the issue supports that skepticism. The CBO report demonstrates the increase in spending over the past few years is far in excess of automatic stabilizers.

Automatic stabilizers are things like unemployment insurance, which increases automatically, without special legislation, when the economy declines. Spending from stabilizers decline when the economy strengthens. The ideas is to keep the economy, like Baby Bear's porridge, just right. Krugman and Goolsbee and their Amen Chorus try to argue Obama has not been fiscally profligate, blaming Bush, the economy, millionaires and billionaires and/or the Koch Brothers.

This chart, from the Historical Budget Data, shows total outlays from fiscal 2000 through fiscal 2011. The spike in spending is pretty clear in fiscal 2009. The dollar increase is impressive, growing from $2.7 trillion in fiscal 2007 to $3.0 trillion in fiscal 2008 and $3.5 trillion in fiscal 2009. The $800 billion change is a 29% increase from fiscal 2007 to fiscal 2009.

This chart shows the data from above, but looks at the year-over-year change in spending. The Bush years weren't a model of fiscal restraint, but increases were generally 5% to 7% per year. In fiscal 2008 spending increased almost 10% and then spiked 18% in fiscal 2009.

But what about the automatic stabilizers? Krugman, Goolsbee et. al. claim this increased spending is a natural condition of a weak economy. Not really.

Appendix C of the CBO report presents the CBO's estimate of spending without automatic stabilizers. The estimated spending, without automatic stabilizers, grew from $2.7 trillion in fiscal 2007 to $3.0 trillion in fiscal 2008 to $3.5 trillion in fiscal 2009. That's right. Increased spending from automatic stabilizers were a rounding error. Automatic stabilizers accounted for about $60 billion in increased spending in fiscal 2008 and fiscal 2009.

Well its the stimulus you may say. Sorry. Oddly enough, an easy summary of stimulus spending was difficult to find. The $800 billion, or so, stimulus had three parts: tax relief, payments and projects.  As best I can tell about $170 billion was spent in fiscal 2009 and another $170 billion in fiscal 2010.

From my perspective, the reason spending increased so dramatically under Obama's first two years in office was because he spent a lot of money. A lot of money not associated with automatic stabilizers and not associated with stimulus.

Bill