• Economist\'s View: James Galbraith: Clueless in China


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    • Abstract: economists: Clueless in China, by James K Galbraith, Commentary, The Guardian. Speaking as I rarely feel entitled to do, on behalf of all my fellow. professional economists, I felt true, true sympathy last week for Ben. Bernanke, as he trailed after Henry Paulson in China. ...

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Economist's View: James Galbraith: Clueless in China
Economist's View
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December 18, 2006
James Galbraith: Clueless in China
James Galbraith expresses sympathy for Ben Bernanke on behalf of all
economists:
Clueless in China, by James K Galbraith, Commentary, The Guardian:
Speaking as I rarely feel entitled to do, on behalf of all my fellow
professional economists, I felt true, true sympathy last week for Ben
Bernanke, as he trailed after Henry Paulson in China.
Paulson's China policy is easily understood. In the United States
government the Treasury represents the interests of Wall Street, as Joe
Stiglitz has written eloquently... An alumnus of Goldman Sachs, Secretary
Paulson is ideally suited to his job.
And what Wall Street wants from China is what Wall Street always wants:
the freedom to speculate (excuse me, invest) in currency, corporate
stocks and bonds, and real estate. Wall Street loves risk, uncertainty and
volatility. The Chinese don't. This is a conflict. It is not in any sense a
complicated question.
Paulson made a power play, based on a threat: open up or we'll shoot ...
based on a bluff. Since the bluff was transparent, the Chinese called it.
And when they did, the US side folded. The Chinese then completed the
hand by giving back a few symbolic concessions, so that Paulson's team
would not have to admit ... that the trip had accomplished nothing at
all....
Bernanke is an economist..., he is at heart an academic. In other words,
he has standards, and a certain amount of professional dignity to
maintain.
And last week he had the sorry job of putting economic lipstick on
Paulson's pig. More than that: Bernanke had to argue that it was in
China's economic interests to go along with Paulson's plan. Worst of all,
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Economist's View: James Galbraith: Clueless in China
he had to talk past the Chinese officials, who somehow seemed to feel
that they have a better understanding of their own interests. It must
have been dreadfully embarrassing.
Bernanke gave it a good college try, with an impressively wonkish
speech... On no evidence at all, he argued that a higher RMB would help
China maintain its economic growth. The trouble with this that current
policy has given China world-beating economic growth for three decades.
Bernanke knows this (and said so), so he couldn't press this argument very
far.
Next, having credited Chinese growth partly to its high savings, Bernanke
made his second argument: China should now bring its savings rate down.
This he said should be achieved by improving China's social safety net, so
that Chinese families would feel less need to squirrel away funds to cover
health care and old age. Apart from the direct benefits, Bernanke argued
that this would reduce China's trade surplus by increasing Chinese
household consumption.
Finally, as the US delegation left town, Paulson rather gratuitously
promised to try to increase private savings rates in the United States,
which Paulson wants to do, of course, by cutting Social Security and
Medicaid.
So here's the Bernanke-Paulson position in brief summary:
1) China's currency strategy has helped produce rapid growth for 30
years; therefore it should be abandoned.
2) China's high savings rates have been a key to this success; therefore
they should be reduced.
3) China, a country emerging from communism, should spend more on
public health and social security, so that ordinary Chinese can save less.
(This is actually a good point, as far as it goes.)
4) The United States, a capitalist country, should spend less on social
security and public health, so that ordinary Americans will be forced to
save more.
5) Somehow, all this will reduce the deficit in the US-China balance of
trade, a goal whose importance everyone agrees on but that no one can
actually explain.
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Economist's View: James Galbraith: Clueless in China
Adam Smith wrote it; I only quote it:
Such as they were, however, those arguments convinced
the people to whom they were addressed. They were
addressed by merchants to parliaments and to the councils
of princes, to nobles and to country gentlemen, by those
who were supposed to understand trade to those who were
conscious to themselves that they knew nothing about the
matter ... Those arguments therefore produced the wished-
for effect ... The attention of government was turned from
guarding against the exportation of gold and silver to watch
over the balance of trade... From one fruitless care it was
turned away to another care much more intricate, much
more embarrassing, and just equally fruitless.
I've been thinking about the proper role of the Fed chair in this situation, i.e.
the extent to which Bernanke should speak out on matters such as this. I don't
have the answer (your thoughts?). The Fed chair is partly a political
appointment that brings the Executive branch's interests to Fed policy table, but
the Fed has a larger responsibility to protect the overall public interest, not the
interests of any particular sector (as the Fed has argued many times when
speaking out against targeting asset-price bubbles).
On that basis one thing is clear, the Fed chair should not take public positions
that undermine the credibility of the Fed as protector of the larger public
interest rather than the interests of Wall Street of any other group. I think there
is already some belief that the Fed has moved in this direction with its adoption
of inflation targeting (which some view as holding down wages to benefit
business), and other actions haven't helped to insulate the Fed from criticism for
taking political positions, e.g. Greenspan's remarks on taxes and deficits.
I think Bernanke's position can be justified on an economic basis, i.e. there is
theoretical support for the position that the policies he advocates for China will
raise economic well-being generally. And though the speech wasn't directed at
the implications for U.S. monetary policy, there is a connection to U.S.
monetary policy and it did give advice on China's monetary policy, so in that
sense it is within the Fed's purview.
But as the Galbraith commentary above makes clear, I'm not sure it passes the
political test of not appearing to represent a narrower set of interests. Given
the importance of Fed credibility, from my perspective an abundance of caution
is in order when the Fed chair speaks, and I would prefer that the Fed limit
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Economist's View: James Galbraith: Clueless in China
itself to comments that relate directly to the conduct of U.S. monetary policy.
Posted by Mark Thoma on December 18, 2006 at 12:06 PM in Economics, Monetary Policy,
Politics | Permalink | Comments (87)
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Mark Thoma pegs the China trip of Paulson and Bernanke. I'm all for sending high
level delegations to important countries, but I believe our "marketing" of this
one has come off to the Chinese as a bizarre mix of pathetic begging and
arrogant condesce... [Read More]
Tracked on Dec 18, 2006 11:51:42 PM
Comments
A remarkable post and commentary.
Posted by: anne | Dec 18, 2006 12:27:54 PM
mark:
are you saying the forex is not a fed matter but a treasury matter ??
i know jamie is saying that
but are u too???
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Economist's View: James Galbraith: Clueless in China
btw
jamie has no use for deval dollaring
he quotes his father
to the effect
deval to blance trade is like
whiskey
to the mohawks
my take
tell this to the swedes
not jumping into the euro
wage compacter
saved their system
Posted by: slink | Dec 18, 2006 12:43:32 PM
"In the United States government the Treasury represents the interests of Wall
Street, as Joe Stiglitz has written eloquently... An alumnus of Goldman Sachs,
Secretary Paulson is ideally suited to his job."
I;m glad a really smart person said what I have been saying for months - Paulson
is going to pump up China aand Wall Street for two years and then beat it back
to the Street.
Posted by: save_the_rustbelt | Dec 18, 2006 12:43:38 PM
There's a comment on this over at the Guardian site which expresses my
thoughts. He makes an interesting point. Much is made (esp by 'maria') that the
U.S. is a debt junkie, financing growth and consumption with debt. This quote
makes the point that China is a 'U.S. growth' junkie, by the same analysis. This is
'Barny':
There is near constant commentary these days about which of these two
countries has an advantage over the other. Economic and financial ties
between China and the US are more incestuous than this article suggests.
Firstly, China is about the supply side. It is receiving massive capital
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Economist's View: James Galbraith: Clueless in China
inflow and manufacturing capacity from post industrialised economies
with affluent, consuming middle classes living off service industries. Of
all the consumers in the world, Americans remain the most optimistic,
and affluent. If the US consumer trips, the world's main engine of growth
shuts down. China will slow. Its trade surplus is considerable with the US,
but not with other trading partners. China is a US growth junkie, ever
eager to produce all that will dull the senses of the consumer of last
resort with cheap product...billig und schlect at that. But China knows
the limits of ballooning US trade and fiscal deficits. Potential US
protectionism. A steep decline in the USD, wiping out the worth of the
trillion dollars or so in US Treasury bonds it owns. Less capital and
technological transfers. No more consumer of last resort. And do not be
overly dazzled by the stellar rates of growth of the Chinese economy.
Growth spurts cause pain. They test society's capacity to adapt. It is in
China's interest to bring the steam down because high pressure means
high risk. For everybody.
Posted by: dissent | Dec 18, 2006 12:52:41 PM
slink - That's why I said there is a connection to monetary policy.
What I am saying is that I would prefer that the speech be directed at the
monetary policy implications, that it tell us about how the Fed will conduct
monetary policy in response to China's policy. How does the Fed view these
matters and how will policy react? I don't think we learned anything about what
to expect from the Fed from the speech.
If there's a connection to forex, etc., tell us what it is and how it affects the
policy outlook.
Posted by: Mark Thoma | Dec 18, 2006 12:55:32 PM
how much of what went on in china was just being able to say "i care" by
republicans before the power shift in january and basically letting the chinese
know that it is important enough that they too should pay attention to a more
protectionist congress.
Posted by: adam | Dec 18, 2006 1:11:01 PM
mark
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Economist's View: James Galbraith: Clueless in China
righto
i assumed u felt gentle ben
was leaving out hamlet in this production
of the danish tragedy
ie
---"If there's a connection to forex, etc., tell us what it is and how it affects the
policy outlook"----
i'd guess
his silence on the to be or not to be here
implies no action will be taken
To counter the forex fiddle
behind
THE GREAT TRINKET DUMP
"I don't think we learned anything about what to expect from the Fed from the
speech "
indeed we didn't
because i fear ben will do.... nada
Posted by: slink | Dec 18, 2006 1:18:39 PM
Well I think Galbraith's analysis is spot on. Does anything think that this
administration has any use for anyone but toadies and liars? I mean, why the
surprise? These guys are just doing what they were hired to do. If they didn't,
they'd be fired. Bush does fire people you know. The competent ones, the
independent ones. He keeps the incomptents and the flunkies, and if by some
terrible develpment, is forced to fire them, like Rummy, he then says they were
the best ever. Makes sense, doesn't it?
PS Does Bernanke have tenure, or can he be fired like Paulson, at will? If he has
tenure, then he was a pathetic wimp to go along with this charade.
Posted by: maria | Dec 18, 2006 1:24:01 PM
The Federal Reserve governors have been clear for years in saying the exchange
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Economist's View: James Galbraith: Clueless in China
rates or the relative value of the dollar will not be a significant factor in
adjusting short term interest rates. There is no reason to change such a stance,
and there was surely no reason for Ben Bernanke to comment on this in China.
Posted by: anne | Dec 18, 2006 1:25:02 PM
I think the Fed is watching closely - e.g. if China changes its policy on foreign
reserves, i-rates could start upward in the U.S. It's not exchange rates directly
that matter, but what happens to inflation, output, and i-rates as a
consequence does, i.e. the implications for the domestic economy.
Posted by: Mark Thoma | Dec 18, 2006 1:45:52 PM
anne
are u in agreement
with the fed's folded hands on forex ??
if so i'm surprised
u know how the pieces fit together
on alll this
are there hidden objectives
like "lets not get a protectionist wave underway ....if it starts the globe will
suffer
better a few uaw stiffs take a bump ..."
Posted by: slink | Dec 18, 2006 1:50:05 PM
no doubt that bernanke knew what would make headlines in both china and here
but after reading the speech i'd point out a couple of lines at the start of two
succesive paragraphs:
"Although more flexibility in the exchange rate would be helpful, the most
direct and probably the most effective way to reduce the external surpluses and
increase the welfare of Chinese households is to take measures to reduce
domestic saving relative to domestic investment."
"A sustained program of expanding social services has the potential for reducing
saving and raising living standards in China and, at the same time, moderating
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Economist's View: James Galbraith: Clueless in China
China's external surpluses. In particular, increased government spending on
health, education, and other types of social services would raise both household
consumption and government consumption, and thus reduce national saving."
he doesn't even make the currency peg the top recommendation.
Posted by: adam | Dec 18, 2006 1:58:38 PM
Mark Thoma is correct, the Federal Reserve looks at how the domestic economy
is performing. Were long term interest rates to increase from the remarkably
low levels we find at present, the Fed could well act. But, there is at present no
reason to be concerned with long term interest rates.
Though I understand the reasons for concern about a combative protectionism, I
am little worried that protectionism will be more than a token political issue
these coming 2 years. My sense is that Congress can do much to improve labor
conditions in focusing on domestic policy, while I still do not expect a recession.
Alan Greenspan was often abroad offering analysis and advice, and I find nothing
wrong with this for Ben Bernanke.
Posted by: anne | Dec 18, 2006 2:04:20 PM
mark
i assume you think fed i rates
might go up
to draw in replacement funds
for any
china cb moves toward
leaving dollars( net
of necessary additional bop funding)
but is this strategic
shift-flight
likely ??
changing the reserve mix
will pop
the narrow forex band
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Economist's View: James Galbraith: Clueless in China
which is indeed the problem here
unfortunately
all evidence is
the chinese plan
to manitain the present dollar
support regime
there's this consolation
the ultimate insult
is impossible
to both manitain the dump mode
at full blast
and force up dollar interest rates
Posted by: slink | Dec 18, 2006 2:06:22 PM
anne:
"My sense is that Congress can do much to improve labor conditions in focusing
on domestic policy"
elaborate ???
i'm blind to this potential
Posted by: slink | Dec 18, 2006 2:09:24 PM
I second slink - dollar revaluation is the only way US rebalances without
completely nuking the working class... that includes mid-white collar working
class too... they are just working stiff wage slaves in dockers instead of factory
blue. After all, not much use for a manager who has nobody to manage... I think
the more appropriate term for those kinds of managers is 'unemployed'.
If you all read setser & I know many of you do... we are set to run a trillion
dollar CA/trade deficit next year. Explain to me how we do that without going a
trillion in hock?
The only other way to bring the about rebalancing is via a consumption snuffing
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recession. But we are being told *everywhere* that's not going to happen. Right?
So if not USD-RMB rebalancing, how does this end? And it does have to end - just
about everyone agrees our escalating imbalance has to reverse.
Posted by: dryfly | Dec 18, 2006 2:10:24 PM
adam
i agree ben was slipping in
a bow crosser here
but only to add dark side leverage
to paulson's cap market free up pitch
a real fine team player eh ???
Posted by: slink | Dec 18, 2006 2:16:40 PM
i'm blind to this potential
Me too.
I'd like to know how congress improves 'labor conditions' by mandate when the
companies compete directly with operations paying 25 cents an hour in Wuxi.
Is congress going to pay the health insurance, 401K contributions & the wage
differentials... so their employers can compete and offer products to WalMart &
Best Buy at the same prices China offers?
I think that is call 'protectionism' if I'm not mistaken... at least the wage
differential is... and a terrible faux pas from WTO perspective.
Whose going to pay? And from what 'earnings'? Are we going to tax all those
Vanguard millionaires so UAW workers can keep their health insurance? Who's in
line after the UAW?
I know ending the war in Iraq is offered up as the solution for every ill - and I'm
all for ending it & reallocating those resources - but this problem is bigger and
getting way bigger every year.
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So I'd like to see some 'elaboration' too.
Posted by: dryfly | Dec 18, 2006 2:21:43 PM
dry fly
me ditto u on that
Posted by: slink | Dec 18, 2006 2:25:15 PM
mark anne
forgive the sweat stains in my posts
this is very very close
to the heart of my political soul
Posted by: slink | Dec 18, 2006 2:27:45 PM
but only to add dark side leverage
to paulson's cap market free up pitch
Retrain UAW machinists to be traders & stock brokers... that's the plan. Dad
selling securities... Mom selling real estate. Everyone rich and sassy.
Thank God we won't all have to flip burgers like the doom sayers predicted in
the 80s & 90s. But take comfort if we do 'cause we'll all have better workers
rights thanks to congress.
Posted by: dryfly | Dec 18, 2006 2:29:05 PM
slink - No problem at all. Please say what you think.
Posted by: Mark Thoma | Dec 18, 2006 2:30:51 PM
What I would push for: increase the minimum wage; subsidize employee health
insurance, especially for serious illnesses; increase funding for Medicaid; federal-
state revenue sharing to dramatically lower tuition at public colleges; federal-
state revenue sharing for infrastructure development, including public primary
and secondary school education; increase funding for HeadStart.
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Posted by: anne | Dec 18, 2006 2:32:35 PM
yeah slink i don't have near the problem with what was said that i do in him
going with the treasury secretary. independence of the fed is a big deal to me.
the fed is a separate "team"
Posted by: adam | Dec 18, 2006 2:34:31 PM
The Administration has lessened enforcement and oversight in every
employment related sector for which I know of responsibility, from mine safety
to fair labor practices. A Democratic Congress can pressure the Administration
on behalf of workers even with no changes in current law.
Posted by: anne | Dec 18, 2006 2:36:17 PM
What I would push for...
And anne - that laundry list makes the factory in my pretty well educated
Midwestern home town (largest employer of both blue & white collar workers)
more competitive with China... exactly how?
And who pays for this again? It won't be cheap.
Don't get me wrong - I'm for a lot of those things too - but the only way we
support a social system like that is if we keep the jobs here to support the taxes
to pay for that stuff. To do that we need to produce more tradables here and
import less consumption from over there.
Only three ways I see that happening (1) dollar revaluation (2) consumption
snuffing recession or (3) overt protectionism.
Option (1) looks like the best option for us though not so smurfy for those
holding dollar denominated assets. But maybe they should have thought of that
more carefully BEFORE they loaded up on them.
Posted by: dryfly | Dec 18, 2006 2:43:43 PM
Broadening the scope of federal-state revenue sharing for infrasturcture
development, I would surely include environment-protection research and
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development programs. A $3 billion current spending program on environment
protection could easily be $30 billion, and the economic benefits would be
profound.
Remember though, we are spending $10 billion a month on the tragic insanity of
occupying Iraq and this spending will be an explicit and implicit excuse to limit
every other possible social benefit program.
Posted by: anne | Dec 18, 2006 2:45:06 PM
The Administration has lessened enforcement and oversight in every
employment related sector for which I know of responsibility, from mine safety
to fair labor practices.
Again that is wrong - but how does fixing that make my small town factory more
competitive vis-a-vis China (more than half the production has left already - 50
cents an hour & no benies vs $12/hr & shitty benies).
Huh?
Posted by: dryfly | Dec 18, 2006 2:48:04 PM
$10 billion a month is a drop in the bucket compared to a trillion dollar a year
CA deficit. We got 9 more Iraqs to find to equal it up anne.
Not many of us here applaud Iraq - I don't - but this isn't about Iraq... It's about
trade & competitiveness & how we support all those noble things you propose
(and I agree with)... meanwhile we go deeper into hock buying trinkets from
China.
Posted by: dryfly | Dec 18, 2006 2:51:46 PM
Yes; I understand, we can do nothing nowhere for no one because there is no
money ever never, only money for Iraq. I know of the lunacy of what we do not
have, but suppose a lovely middle western city, especially a university city,
were to become a center for environment protection research and planning.
California and Massachusetts are spending on bio-medical programs, especially
research involving stem cell technology. Why should Minnesota, about university
campuses, not be a critically important center for environment protection?
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Posted by: anne | Dec 18, 2006 2:55:20 PM
anne i support all these moves but
their bottom wage earner
and health provision reform
at best your ed plansall very important are
collision
matts for those facing forex induiced jobicide
i suggest
with fairer exchange rates
we don't need to destroy
our industrial core
in the first place
sweden surely is not
sweden stayed out of the euro zone
and has lowered the kroner
several times to retain trade balance and control the "post industrial "
tranformation pathway
maybe we're headed toward zero factory labor
but pacing matters
if you're 35 to 55
when delco rolls over on you
which returns meto my point anne
these congressional moves
are not aimed at the 25 dollar an hour guys at delco
about to get blown out the factory gates
by chinese parts
that are cheap enough to submarine em
and if its not productivity diff or quality diff
but simply
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Economist's View: James Galbraith: Clueless in China
because the dollar is overvalued
against the yuan/rmb.....
Posted by: slink | Dec 18, 2006 2:57:24 PM
Yes; I understand and am thinking. Sweden's currency however has lost 1.2% in
value against the dollar in the 10 years since December 15, 1996.
Posted by: anne | Dec 18, 2006 3:02:15 PM
The Euro has gained a mere 4.0% against the dollar in 10 years. I do not find a
problem with dollar exchange rates, for the market reflects no such problem.
The Australian dollar has lost a mere 1.3% in 10 years against the American
dollar.
Posted by: anne | Dec 18, 2006 3:05:33 PM
The sense I have is look to the New Deal for domestic inspiration, and push for
an end to this terrible occupation of Iraq that diverts us so easily for social
benefit programs. I simply cannot imagine that we are going to run out of work,
because there is more work being done by others. For all the apples that are
brought abroad and in other states, Whole Foods is filled with local apple
products.
Posted by: anne | Dec 18, 2006 3:10:55 PM
anne you can't support any kind of new deal without value added tradables of
some kind... and our currency rates are part of the problem, a big part.
And in fairness it isn't all China - a big chunk goes to the Gulf oil states, Russia,
etc. Which is a separate issue...
But don't underestimate the effect currency plays. It is the only self correcting
mechanism that doesn't take it directly out of workers hide via job loss - it takes
it out of all of us via exchange purchasing parity... but that's the whole point...
buy more here & less there... keep jobs here.
The New Deal health care & environmental stuff is all great - I'm for it - but it
still doesn't answer the question... "How do programs like those help my factory
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Economist's View: James Galbraith: Clueless in China
stay open vs Chinese competition?" There needs to be more.
You keep making comparisons to 1996 currency levels... remember, China wasn't
on the scene then... they are on the scene now, big time.
A better comparison is Yen-USD say late 70s to late 80s to late 90s. Japan
ascended & became a force due to two factors (1) hard work & talent and (2) an
undervalued currency. That all changed at 'Plaza'.
Japan had some pretty harsh years right after that - mostly their own fault in
not effectively internalizing demand away from export-only growth.
Most of that is behind them now & we are all better off for them not being so
coupled to us.
China doesn't want to follow suit but I don't think they have a choice - just a
matter if they do it by choice or forced by ugly circumstance. If the latter it will
suck for all of us. It might suck for us anyway if we don't simultaneously enact
some of those New Deal programs to ease us into the new reality.
As far as New Deal or revaluation - it doesn't need to be one or the other.
Posted by: dryfly | Dec 18, 2006 3:45:24 PM
Yes; your points are all important and I am thinking. But, remembering Japan
which still has not been able to counter the artificial increase in value of the
Yen after September 1985, China will not be Japan. I still do not well
understand what has happened to Japan, however all the other currencies that
increased in relative value to the dollar from 1985, returned to 1985 levels in
1991 and 1992.
Posted by: anne | Dec 18, 2006 4:05:29 PM
"And who pays for this again? It won't be cheap."
dryfly is really going to hate this answer
Return to Clinton era marginal rates and tax capital gains as income.
Simple, proven.
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Economist's View: James Galbraith: Clueless in China
Now if tax cuts had actually produced the growth they promised then supply
siders might have a defense. But the official numbers show productivity sharply
down. The sharp downward revisions to reported GDP for 2002 to 2005 that
were released with the 2006 Q2 numbers are pretty devastating. Not only wasn't
growth after Bush II tax cuts particularly striking, at a stroke the BLS wiped
large fractions of it away back in July.
http://www.rgemonitor.com/blog/roubini/143953
Q3 was pretty dismal at 1.6% and some are predicting a flat Q4.
http://www.rgemonitor.com/blog/roubini/154353
If tax cuts do not in fact provide growth then what good are they? If they do
produce growth then explain away these numbers.
So the answer to who pays for Anne's New New Deal? Upper income earners and
holders of capital. Unless someone cares to make the argument that absent
those tax increases we would be in perma-recession. But by the same token that
made supply siders ecstatic when Q1 came in at 5.6% you have to deal with 1.6%
for Q3.
Why tax the rich? Because as Willie Sutton pointed out about banks: that is
where the money is. Supply side is a proven failure, either that or these
numbers are showing something very different from what they seem on the plain
surface.
(And please don't tell Don Marek. He will probably have a stroke at the thought
of it.)
Posted by: Bruce Webb | Dec 18, 2006 4:07:06 PM
Personally I don't trust the productivity/GDP numbers. I mean while I don't
believe that markets are always magically rational and efficient, it seems odd to
have the Dow at record nominal levels when (absent Q1 2006) growth has
practically flatlined.
But the numbers are what they officially are, and supply siders need to deal
with that, however inconvenient it may be.
Posted by: Bruce Webb | Dec 18, 2006 4:21:17 PM
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Economist's View: James Galbraith: Clueless in China
Anne,
All that welfare state stuff won't make the US competitive in world trade. Large
changes in currency valuations will. Check out the fall in the value of the dollar
after the Plaza/Louve accords. A useful chart can be found at http://research.
stlouisfed.org/fred2/series/TWEXMTHY?&cid=105. Note that the Current
Account (CA) deficit soared from 1981 to 1985 and then fell back to roughly zero
by 1990.
Medicaid won’t solve the problems of workers unemployed by “Exchange-Rate
Protectionism”. Jobs will. To create and sustain well-paid domestic employment
we need a competitive currency.
Right now America’s trade policies are designed to maximize the Goldman bonus
pool. Expanding the welfare state won’t solve that problem. Breaking the dollar
pegs (starting with, but not limited to the RMB) will.
Posted by: Peter Schaeffer | Dec 18, 2006 4:55:19 PM
It sounds like the only proven to be effective remedy anne is suggesting is the
rise in the minimum wage (as the wages of recent college grads have been
falling like a stone).
Following her proposals, we can avoid protectionism/tariffs and any moves with
teeth wrt China and the peg.
Yay!
But from the looks of it, more and more of us formerly middle class or working
class folks are going to be surviving on the minimum wage.
Boo. Hoo.
Just wondering anne: how would *you* survive on the minimum wage?
Posted by: dissent | Dec 18, 2006 4:56:07 PM
anne
sweden did its big devaql before 96
but more basically
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Economist's View: James Galbraith: Clueless in China
you are looking at the wrong currency
north south currency is where the tilt is
japan climbed for a decade before the mid 80's
try 370 yen to the dollar in the early 70's
what's it today
and yes the yen is over valued relative
to south currency too
al the better for the massive capital export of the last 17 years
but this is the tree count
its the forest that needs to be grasped
the dollar is seriously over valed against the currency of strong export
emergersouth nations
and your tenacity r4sisting this and the obvious long run consequences
now relected in our 200 billion no oil trade gap
about three years of frozen imports would perhaps balance this
but this be speaks greater conviction
on your part
then any one in the rust bowl has
from where comes your
pro trans nat corp
maginot line here
i hope you are confusing globalization tran nat style
with one world some day visions
because this road leads to iternational conflict
not harmony
Posted by: slink | Dec 18, 2006 4:59:40 PM
Slink, I may well change my mind on currency value. I am playing with the
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Economist's View: James Galbraith: Clueless in China
possibilities.
But, I am given another fine idea while I play:
"All that welfare state stuff won't make the US competitive in world trade."
Then why not say the heck with the welfare state and do things right; no social
security, no Medicare, no Medicaid, no employee health insurance, no free
public schooling for anyone ever, no more public colleges at any price, no
unions, no worker safeguards ever never.
"All that welfare state stuff won't make the US competitive in world trade."
Posted by: anne | Dec 18, 2006 5:24:25 PM
"All that welfare state stuff won't make the US competitive in world trade."
Blame Teddy Roosevelt for setting us down the welfare road in ending child
labor in America. Bad, Teddy, bad, Teddy. Blame China and end the American
welfare state before it gobbles us all up (the welfare state that is). First Iraq,
second China.
Posted by: anne | Dec 18, 2006 5:27:15 PM
Oh, and especially, no minimum wage at all; there is the answer. Say what? How
about unions, then? What is nice is belonging to a union that really does offer
balance. Or, is the point no minimum wage and no unions? I forget.
Posted by: anne | Dec 18, 2006 5:32:45 PM
http://www.nytimes.com/2006/11/21/us/21janitor.html?
ex=1321765200&en=f139e42d0ca84d0a&ei=5090&partner=rssuserland&emc=rss
November 21, 2006
Cleaning Companies in Accord With Striking Houston Janitors
By STEVEN GREENHOUSE
Houston's major cleaning companies and the union representing 5,300 janitors
there announced a tentative contract yesterday that ends a monthlong strike,
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Economist's View: James Galbraith: Clueless in China
raises the workers' hourly wages by nearly 50 percent over two years and
provides them health coverage.
Under the three-year deal, the first for the janitors since they unionized last
year, their pay, which now averages $5.25 an hour, will increase to $6.25 on
Jan. 1, 2007; to $7.25 on Jan. 1, 2008; and to $7.75 on Jan. 1, 2009.
Further, the employers agreed to increase a janitor's typical shift to six hours a
day, from four. Many of the janitors had said they were being given too few
hours of work to support their families.
As a result of the rise in both hourly pay and the hours in the workweek, the
employees expect to see their paychecks double over the next couple of years.
"It's a moment of great victory," said Mercedes Herrera, a janitor for five years
who earns $5.15 an hour. "We all came together, and the union gave us
strength. Many of us have never received a raise. I've earned the same ever
since I started, so the raise is great." ...
Posted by: anne | Dec 18, 2006 5:33:50 PM
http://www.nytimes.com/2006/11/03/us/03labor.html?
ex=1320210000&en=7e1de42c381db409&ei=5090&partner=rssuserland&emc=rss
November 3, 2006
Janitors' Union, Recently Organized, Strikes in Houston
By STEVEN GREENHOUSE
Last year, more than 5,000 janitors in Houston decided to form a union, giving
organized labor one of its biggest victories ever in the South.
But now the janitors are locked in a new struggle. They have gone on strike
because five Houston cleaning companies have rejected their proposal for a
salary increase to $8.50 an hour, up from the current average of $5.25 an hour.
The companies say the proposal for a 62 percent increase, along with health
insurance, is unrealistic.
The janitors, who generally work four hours a day, say they are merely asking
for enough to support their families.
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Economist's View: Jam


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