From Calculated Risk --- Demographics and GDP: 2% is the new 4% (by Bill McBride):
For amusement, I checked out the WSJ opinion page comments on the Q4 GDP report. As usual, the WSJ opinion is pure politics — but it does bring up an excellent point (that the WSJ conveniently ignores). First, from the WSJ opinion page:
"The fourth quarter report means that growth for all of 2014 clocked in at 2.4%, which is the best since 2.5% in 2010. It also means another year, an astonishing ninth in a row, in which the economy did not grow by 3%."
This period of low growth isn't "astonishing". First, usually following a recession, there is a brief period of above average growth — but not this time, due to the financial crisis and need for households to deleverage. So we didn't see a strong bounce back (sluggish growth was predicted for the first years of the recovery) ... And overall, we should have been expecting slower growth this decade due to demographics — even without the housing bubble-bust and financial crisis (that the WSJ opinion page missed) ... The good news is, that will change going forward (prime working age population will grow faster next decade). The bad news is the political hacks will continue to ignore demographics ... Right now, due to demographics, 2% GDP growth is the new 4%.
Below are some reader comments at Mark Thoma's blog, some who disagree that "demographics" (code for an "aging work force"), is the reason for slow growth:
* We are so far below full employment, we need at least one year of high growth.
* Look to per capita GDP growth rather than to GDP growth, and ask why per capita growth should have slowed so significantly. Chinese population growth is significantly slower than that of the United States, but per capita GDP in China is growing more than 4 times as fast.
* Last quarter we grew 4%, so according the Charley [?], we all aged 5 years in one quarter! We would be better off shrinking, and getting younger.
* Even with last year's above 2% growth rate, the GDP gap is still almost 3%. So we would have to have 6 years of 2.5% per year growth to finally get back to full employment. Or better, a couple of years of 3.5% per year growth.
* That's it: the output gap. If there were demographic changes we'd see an uptick in inflation as the supply of workers shrinks. But we aren't. We're just seeing a drop in the unemployment rate as people drop out.
* I don't buy it. "Demographics", "technology" and "globalization" are all alibis and excuses for politicized policy-making, which is redistributing upwards and slowing growth ... As Wren-Lewis points out we've had fiscal austerity since 2010. We've had wage stagnation since before then. We have a trade deficit which is exporting demand and jobs. The only reason growth hasn't been slower is because of monetary policy ... It's oddly coincidental that these supposed "demographic" changes began to bite after a negative shock and piss-poor counter-cyclical demand management policy.
* As Wren-Lewis points out, we've had slow growth because of fiscal austerity.
* If there were such huge demographic changes we'd see inflation, but we're seeing none.
From Five Thirty Eight (posted September 5, 2014) Don’t Blame Boomers For Unemployed Workers Leaving The Labor Force
"The aging of the baby boom generation explains much — though certainly not all — of the steep decline in the labor-force participation rate ... While the aging population may be a contributing factor, it isn’t the primary explanation. A breakdown by age shows that most of the unemployed workers leaving the labor force aren’t boomers. In fact, only 5 percent are of retirement age (65 or older) ... Unemployment is concentrated among the young ... younger workers would make up an outsize share of those abandoning their job searches. Of course, these figures only look at people who were unemployed, meaning they were actively searching for work. If you look instead at people who left the labor force AFTER being employed, the numbers are much more skewed toward retiring boomers."
In one of my other posts, I referenced that Five Thirty Eight article — and I noted that 3 million young people a year are graduating from high school, while only 1 million a year were retiring. So if you only look at retirees, rather than at young people who never worked, that makes more sense. After high school and college graduates can't find jobs, they drop out of work force, and that drives down the labor force participation rate.
Making sure multinationals get theirs, he's busy.
@ Off The Charts (by Chad Stone, Chief Economist at the Center on Budget and Policy Priorities)
"The Unconvincing Claim That Unemployment Benefits Hurt Jobs"
President Obama urged fellow Democrats to "keep your powder a little dry" as he begins working with Republicans on securing fast-track trade authority. He also called on them to "get informed by NOT reading the Huffington Post" as Congress prepares to debate giving him the authority to complete work on the broad Trans-Pacific Partnership (TPP). Obama's knock against the liberal-leaning news organization came on the same day that the Web site published an op-ed by him defending his forthcoming budget proposal.
To me, they are a front group to sell really bad insurance, commonly through United Health and hoodwink seniors into some really bad insurance products which will of course devastate them financially. Glorified "privatization" of Medicare by allowing these "managed plans", the advantage "plans" and "HMOs" where benefits can be denied which Medicare covers.
You have to wonder how corrupt Wisconsin, Massachusetts and Minnesota are for these states do not allow Medigap policies, alternatively known as Medicare supplements. These are the good private policies which pick up the tab that Medicare doesn't pay, but they do not interfere with what is covered by Medicare.
Three states magically has disallowed them and Wisconsin is the worst offender. You're guaranteed to go broke if you are a senior and get major medical issues and also probably denied benefits to boot.
New York Times - JAN. 29, 2015
"Politicians from both parties have made a point of holding the group you might call the “merely affluent” harmless from tax increases. If you make $150,000 to $225,000, you make about two to three times the national median income for a married couple. The list of occupations that can get you into this income bracket — government official, academic, lobbyist, journalist — can sometimes make it hard for people in political circles to remember that 92 percent of American married couples make less than $200,000 a year . . . This specific controversy involves so-called 529 accounts, named after the section of the tax code establishing them, which allow parents to save for their children’s college tuition and earn tax-free investment returns. Like most tax-preferred accounts, 529s are most useful to affluent people."
AARP FINALLY mentioned the GOP rule change to defund disability in their newsletter today (1/29/2015) .... BUT ...they didn’t use that as their headline story ...AND.... they used the words “Congress” and “House” -- but they never mentioned “Republicans” or “GOP” by name.
AARP's newsletter first mentioned this today but the ARRP story they link to (buried on their website and was never on their front page) was dated January 7th --- so why did AARP wait so long to mention this in their newsletter?
Also notice: In the “old AARP story” that the AARP newsletter links to, there’s also just the mention of “Congress” and the “House” -- but no blame was laid on the “Republicans” or the “GOP” -- so how would AARP members (and especially Republican voters) know who is undermining their disability?
Other organizations, such as The Alliance for Retired Americans, Social Security Works (and others) came out about this HEADLINE STORY the very next day in their newsletters (and mentioned “REPUBLICANS” or “GOP”).
And did AARP only belatedly and “casually” mention this in today’s newsletter because I emailed them last week to complain to them about not mentioning this before?
This makes me very suspicious of AARP – and it’s possibly because of AARP’s association with insurance companies that they REFUSE to squarely lay the blame on the GOP (aka "the Republicans".)
Everybody should call AARP out on this --- BECAUSE --- disabled Republican voters should know the truth as to who is really watching their back (HINT: It's not the Republicans or AARP)
On the Left: Professor Paul Krugman on CBO report -- "There’s a funny thing about that projected rise in the deficit: it’s not about rising entitlement spending or any of the usual things the [GOP] wants to cut. It’s based on an assumption that interest payments will rise ... CBO shows the ratio of debt to GDP barely rising; just about all the rise in payments comes from an assumption that interest rates will rise ... We don’t really know that; there’s a plausible case that it’s wrong ... But if you read someone trying to resurrect deficit panic, bear in mind that even the modest rise in the new projections is just an assumption, with nothing solid behind it. Oh, and in other news: It appears that Obamacare is coming in 20 percent cheaper than originally projected."
On the Right: Professor Timothy Taylor (The Conversable Economist) on CBO report -- "Federal budget issues are often debated at high volume. It seems like either the all-powerful liberals have been raising taxes and spending to unprecedented and unbearably high levels, or the all powerful conservatives have been slashing spending and taxes to unprecedented and unbearably low levels. Thus, I always smile a bit in looking at actual budget numbers over the last half-century ... In 2014, federal spending was 20.3% of GDP and tax revenue was 17.5% of GDP, almost bang-on their historical averages [from 1965-2014]."
I'm thinking there is a global slowdown and export orders are down. Without QE, there is a huge investment reduction in "emerging economies". Nothing in the manufacturing survey for this large of a drop but exports did go closer to the 50% mark, see here.
check out table 1.1 on page 9 of the actual CBO report: https://www.cbo.gov/sites/default/files/cbofiles/attachments/49892-Outlo...
clearly all the increase in the deficit projected over the next ten years is generated by the CBO's own projections of higher interest rates and hence higher interest on the debt..
there must be a conspiracy to blame it on old people..
according to the December industrial production report of a few weeks ago, we had warmer than normal December, which reduced utility production by a seasonally adjusted 7.3%...if anything, December's weather should have been a positive for durable orders..
everyone was surprised to see new orders and order backlogs both down even without aircraft; mostly on lower machinery and capital goods orders…what you’re seeing here is the effect of the pullback in the oil patch; none of the oil companies are ordering any new equipment…that it surprised the experts shows how little they actually pay attention to what’s going on in the economy…
A flat tax gives more to the rich and takes from the poor. The super rich came up with this absurdity to make sure the rich do not pay hardly any taxes and instead they are dumped onto the poor.
10% flat tax for everyone - no deductions (maybe $1500 exemption for person and dependents),EPer: chris snyder (not verified)
Via a newsletter today from Sentier Research:
"According to new estimates derived from the monthly Current Population Survey (CPS), median annual household income in December 2014 was $54,417, an increase of $738 that was statistically significant from the November median of $53,679. This increase in real median income was helped along by a 0.4 percent decline in consumer prices for December."
Number of U.S. Households: 124,320,334
Just who are you trying to kid? Read ALL of your populist literature and then rewrite this. When was the last time you bought a box of Wheat Thins?! Sure, the price is basically the same as years ago, but the SIZE OF the box has shrunk considerably. That is inflation, pure and simple. And the shrinkage phenomenon is evident on every grocery aisle. Get over yourself.EPer: Steven Beck (not verified)
Thank you rjs for the compliment. I've been struggling for six years to simplify the argument to a few sentences and it continues to be a work in progress. If we are to win this debate we have to make it "clear and concise". It is precisely muddle thinking that is destroying our economy. Thus critique is always welcome, because without critique we won't improve the clarity and logic of the message. As for energy and geographical limited goods, such as oil, it's a I've been avoiding, since it is considerably more complex than trying to build a simple foundation model (my main objective for now). best regardsEPer: Van Geldstone (not verified)
Thank you for emphasizing the link between increasing inequality and free trade. I agree fully. Wage structures can only form properly in a closed economy in my view. TTP will be another economic disaster as a result. My great hope is that we make clearer and stronger arguments, until perhaps all sides of the political isle wake up from their ideological slumber. I hope to tackle a new topic in the coming weeks: the myth of quantitative easing as a panacea. best regardsEPer: Van Geldstone (not verified)
There are three points that people should understand in assessing the impact of trade and the meaning of these trade deals:
1) Trade has been an important factor increasing inequality in the United States;
2) The trade deficit is the major reason that the economy has weak demand and remains far below full employment;
3) The TPP and TTIP are about imposing a corporate friendly regulation structure, not trade.
your first paragraph says it all, it should be self evident to anyone who gives it a moment's thought...the only thing that i would add is that the entire industrial revolution and what has sprung forth from it was & still is dependent on free energy from the sun which has been stored for millennia in the form of fossil fuels..