June 08, 2003

Fighting Deflation as Job #1

Alan Greenspan says that fighting deflation is job #1 now:


Greenspan No 'Major Evidence' of Growth (washingtonpost.com): ...Federal Reserve Chairman Alan Greenspan said today there is no "major evidence" that U.S. economic growth is accelerating and hinted again that the central bank may soon cut interest rates to boost growth and guard against a dangerous period of deflation.

Speaking via satellite to a meeting in Berlin of the world's leading private bankers, Greenspan said the Fed has no concerns that a pickup in growth would cause inflation to get worse. Instead, "we would be far more inclined, as we have been over the last couple of years, to be taking out insurance against economic weakness" that could cause what he termed a "corrosive deflation."

The Fed is concerned not about "the issue of deflation in the sense of falling prices per se, but the issue of corrosive deflation, that is, a deflation that essentially feeds on itself, creates falling asset prices, which in turn brings down levels of economic activity," the Fed chairman said...

Posted by DeLong at June 8, 2003 08:49 AM | TrackBack

Comments

I think this is an accurate representation of what Greenspan thinks, but it leaves out an important aspect. If we have an asset bubble, say in real estate, and we aren't going to allow asset prices to fall, how exactly do we get back towards equilibrium? The only way I can see is a general inflation, not caused by an economic pickup, but by inflationary monetary policy.

I can understand why he didn't mention that part.

Posted by: matt wilbert on June 8, 2003 09:06 AM

What long term consequences might there be when a central bank targets asset prices? We need to think carefully about this.

Posted by: anne on June 8, 2003 09:37 AM

The message from the Fed since the fall has been buy stocks! The stock market is the latest asset target.

Posted by: bill on June 8, 2003 10:01 AM

So far the rise in real estate, bonds, and even stocks when considered over the last 20 years has not translated into inflationary pressure. It has the potential to cause prices to rise, it's just not happening now. If in the future people try to spend this wealth I trust Greenspan enough to raise rates and take back this stimulus and then he will be talking about how falling asset prices are helping him restrain the too strong economy. I guess it depends on how much you trust the Fed whether you think this will lead to inflation in the future as opposed to higher interest rates only.

Posted by: snsterling on June 8, 2003 10:25 AM

Thanks. Inflation is not a concern. The Fed can always limit inflation by raising interest rates, rather the problem "may" come from keeping asset prices on the rise when they might otherwise level off or decline. I am not arguing against the Fed bias, simply thinking about and possible problems.

The only argument I have with Alan Greenspan is over the absurd worry about the "surplus" in 2000. Alan Greenspan helped set the stage for both tax cuts and I am convinced the long term effects of these cuts are going to be awful for middle class Americans.

Posted by: anne on June 8, 2003 10:48 AM

Jim Cramer has claimed for 8 months that the Fed was determined to boost stock prices. I agree, and these months have proved terrific for traders.

We were critical of Hing Kong for protecting and boosting stock prices in the wake of the crisis of '98, but we are doing the same. Whether gains are temporary or lasting is less important than the boost we are now getting. I always always bet with the Fed.

Posted by: bill on June 8, 2003 01:40 PM

I love that comment about not worrying about deflation per se, but 'corrosive deflation.' It reminds me of doctors that aren't worried about the virus per se, but they just don't want it to kill the patient.

Anne-

Read Greenspan's comments carefully from 2000. He reminds me of the Oracle at Delphi in the way that he presents things, but if you were to make policy based on his comments it's unlikely that a tax cut would have been your first impulse. Republicans have been desperate for a tax cut for years, and were attempting them long before 2000. Greenspan was outlining a bizarre hypothetical case in which surpluses wiped out the bonds market. He probably should not have said this, as the idea right now is laughable.

Posted by: Saam Barrager on June 8, 2003 03:17 PM

BUBBLICIOUS TRANSNATIONAL CORPORATE FUNDAMENTALISM--FOR TROGLODYTES

In the great politicaleconomic juggling "act" (known to us "little people" as "monetary and fiscal policy") Prince Alan (Greenspan) knows perfectly well WHOSE balls REALLY need to be kept in the air at ALL times AND whose balls can ALWAYS stand a little more bruising...

Keeping Wall Street P/E ratios (and commissions) incredibly high by inflating "asset prices":

"GOOOD. Ugh!"

"...The Fed is concerned not about "the issue of deflation in the sense of falling prices per se, but the issue of corrosive deflation, that is, a deflation that essentially feeds on itself, creates falling asset prices..."

[ "Greenspan No 'Major Evidence' of Growth (washingtonpost.com):" http://www.j-bradford-delong.net/movable_type/2003_archives/001602.html ]

Tamin "guvmint"--and SIMULTANEOUSLY the hoi polloi--by grossly inflating long-term govenment debt through reckless tax cuts for the LEAST needy AND/OR deserving 0.1% of U.S. citizens NOW and slashing the "safety net" to shreds LATER:

"GOOOOD. Ugh!"

["Ronald Reagan and the Commitment of the Mentally Ill: Capital, Interest Groups, and the Eclipse of Social Policy", Alexandar R Thomas: http://www.sociology.org/content/vol003.004/thomas.html ]

Forfeiting "local control" of US economic assets AND destiny by hocking "private" US "assets" (stocks) AND "public" US "assets" (T-bills and Bonds)) to "foreigners":

"GOOOOOOOD. Ugh!"

["Notes on the U.S. Trade and Balance of Payments Deficits, Wynne Godley http://www.levy.org/docs/stratan/stratan.html ]

* Working definition of "Transnational Corporate Fundamentalism" in progress HERE: http://www.j-bradford-delong.net/movable_type/2003_archives/001570.html

Posted by: Mike on June 8, 2003 03:50 PM

Okay, Mike. I understand that you think Alan Greenspan has done a bad job at being Federal Reserve chairman. Really, you've been saying it ever since you've graced the comments section of the comments section of this blog with your presence.

What I *never* got out of you is what he should have been doing that he wasn't. Should he have been running a more expansionary monetary policy, or a less expansionary monetary policy? I can't tell from your posts, because you actually seem to want both.

I do understand one coherent thing: you don't like his political views. Fine: neither do I, to be honest. However, his political views may effect his job in some limited respects, but they are not the basic core of it. What should he be doing, and what should he have been doing over the past 15 years?

Do you think that Alan Greenspan should have been more expansionary, as implied by your contention that he has an irrational fear of inflation? Do you think he should have been more contractionary, as implied by your contention that he was negligent in inflating asset prices during the late 1990s bubble?

And since you seem to be a big fan of quotes, a bonus: "brevity is the soul of wit."

Posted by: Julian Elson on June 8, 2003 04:59 PM

Dean Baker (of CEPR, formerly of EPI) points out that Greenspan didn't see the stock market bubble for what it was.

Posted by: Stephen J Fromm on June 8, 2003 05:45 PM

If you don't "get" anything else "out of me" Julian, "get" THIS:

I think Greenspanology and/or parsing his technocratese with a Greenspanish accent is a HUGE waste of time and energy.

If you want to know the truth, I think Prince Alan is an "co-conspirator" in a gigantic fraud against the United States AND against the world. I "think" he's a "little fish" really, in short--a "tool": A tool in the hands of a TINY "unexceptional" at best, "irrational" almost ALWAYS, and "psychotic" at its worst, deceitful, destructive bunch of WAY over-pampered, over-rated, "clique" of essentially unaccountable "sons (and daughters) of privilege"--here at home AND abroad.

And BEFORE you go getting "Straussian" on me, I'm NOT talking about "the jews" or "the rich".

I AM talking about "TRANSNATIONIONAL CORPORATE FUNDAMENTALISTS" (see: http://www.j-bradford-delong.net/movable_type/2003_archives/001570.html for a rather detailed exploration of THAT sociological "phenomenon" and/or put on some "new" eyes and read the message AND the "links" in the message you just responded to AGAIN.

OR, if think you already know everything you think you need to know about what I think about this matter, feel free to use Bill Gates Sr.'s "short-hand" for the free-loaders (AND their "enablers") I have in mind. He calls them AND their "machine" "organized money":

A Tax Break's Unfortunate Legacy
Washington Post May 25, 2001
By William H. Gates Sr.

The power of organized money has won another round, as the Senate's vote to repeal the estate tax has demonstrated.

The proponents of wholesale repeal were able to wage a campaign based largely on symbolism and distortion of fact. They cited the plight of farmers, but when a reporter asked for living examples of real small farmers who had lost their farms, they couldn't be found. The deliberative tradition of the Senate caved under the pressure of ideology over reality.

Missing has been a debate about the potential dangers of eliminating our estate tax. What will it cost in lost federal revenue? How will state treasuries manage without their revenue linked to the federal estate tax? What effect will it have on charitable giving and the nonprofit civic sector? What happens to democracy and equality of opportunity in a society with such great inequities of wealth and power?

And more technical questions: Are there ways to reform the tax to address concerns about family enterprises? How would a repeal of the "stepped up basis," which exempts estates from capital gains taxes, be administered? Instead of discerning these vital questions, our elected leaders have punted. By structuring full repeal to take effect 10 years down the road, they have obscured the cost and downside of repeal and shifted the burden onto future generations.

A hundred years ago, we did have a rigorous debate about the need to tax large accumulations of wealth. Then, as now, wealthy people took a stand in favor of inheritance taxes. Andrew Carnegie personally testified before Congress in favor of the estate tax.

The petition effort that I launched with Responsible Wealth is a similar effort. More than a thousand prominent investors and business leaders -- from families that have paid or will pay estate taxes -- have called for reform but not repeal of the tax. Many of the signers are owners of small businesses who understand that concentrations of wealth and power are not friendly to small enterprise.

The fate of the estate tax goes to the heart of the American experiment. What has made America distinct from Europe is our effort not to create hereditary aristocracies and our suspicion of concentrated wealth and power weakening our democracy. It was understood a century ago that the estate tax was an attempt to balance conflicting American values: on the one hand, our respect for private enterprise and personal wealth, and on the other, our concern for democracy and equality of opportunity.

Today's debate is missing this historical concern. In its place, we have come to worship a myth of individual merit and success. But the unspoken little secret is that great wealth is never entirely the result of individual achievement. We underestimate the role of luck, privilege and God's grace in our good fortune. And we dismiss the incredible contribution our society makes to creating the fertile soil for successful private enterprise through public investment...

http://www.ufenet.org/press/ufenews/2001/Estate_Tax_Gates.html

In "brief" Julian, when YOU'RE ready to talk about the subject which I've been talking about, instead of the subject YOU apparently WANT me to have been talking about, I'M (reasonably) confident that YOUR capacity to apprehend the "coherence" of my comments will improve--remarkably AND rapidly....

P.S. "Briefly", Julian.

As for Prince Alan's "last 15 years": ONE thing he MIGHT have been doing all that time is telling Wall Street, Congress AND the American People the unpleasant TRUTH--about the "long-term" economic effects of "ballooning" budget deficits (in Republican times AS WELL AS Democratic times. He might have "dwelled" at greater length too on the REAL economic effects of "targeted" tax cuts for "the few, 'filthy'" rich AS WELL AS the economic insanity inherent in the "free-trade/strong dollar" policies he's been promoting ALL those years...

Buffett Blames Dollar Weakness on Account

Wed May 21, 5:25 PM ET

REDMOND, Wash. (Reuters) - Billionaire investor Warren Buffett put the blame for the dollar's weakness squarely on the wide U.S. current account deficit on Wednesday.

"I think what is happening with the dollar is not a product of administration policy. It is a product of what has been happening with our balance of payments," Buffet said, when asked by reporters about his opinion of the Bush administration's apparent abandonment of the strong dollar policy...

..."When a country starts running a 4 or 5 percent current account deficit (as a share of GDP (news - web sites)), its currency is not going to appreciate, that's for sure," Buffett said...

"...We are a country that is buying more from the rest of the world than we are selling and we are doing it on a big scale. Any other country in the world that did it on that scale would have had a much greater currency depreciation already, but (the dollar) is such a strong currency historically that there is a delayed effect," Buffett said...

...Unless the underlying conditions change that have been hurting the dollar, it will continue to decline, Buffett said."

http://story.news.yahoo.com/news?tmpl=story&u=/nm/20030521/bs_nm/economy_dollar_buffet_dc_1


...[ONE thing he MIGHT have been doing all that time is telling Wall Street, Congress AND the American People the unpleasant TRUTH]...INSTEAD, (that is) OF peddling that Transnational Corporate Fundamentalist bubblicious "globalized", "strong dollar", "free-trade" snake oil of his "over the last 15 years".

Posted by: Mike on June 8, 2003 07:14 PM

Off topic somewhat but check Morgan Stanley's Andy Xie (Hong Kong) for an interesting read, stylewise that is.

Posted by: Dilbert Dogbert on June 8, 2003 07:33 PM

Mike - Of all the players in D.C., Alan G did once try to jawbone down the market, with his "irrational exuberance" remarks. It would seem to me that Rubin and Clinton have some responsibility in the matter, since they didn't add any jawbone when Alan G was taken apart by Congress for his so-called interference in the market.

Posted by: Andrew Boucher on June 8, 2003 09:50 PM

President Clinton NEVER jawboned the market either up or down. One of his cardinal rules was to never appear in front of the stock market, unlike Mr. Bush who showed up there last summer to watch it plummet. In addition, Mr. Bush is trying to game the market with a dividend tax cut to push the market up around 15%. This has all been stated publicly. It is bad policy. It was atrocious policy for AG to raise interest rates in the late nineties because of his worries about the market. Why kill the economy in order to chase fools out of the market? Yet that is what AG did. Now the fools are still in the market and the economy is still in the tank. I never heard Clinton calling for higher interest rates nor Rubin. In fact, Clinton always wanted to keep rates as low as possible.

The market and fortunes to be made so that all US retirees can vacation in their condo in Cancun is a GOP fantasy perpetrated upon the American public. Their buddies have already looted the retirement accounts. How many greeters does Walmart need in 2015?

Posted by: bakho on June 8, 2003 10:34 PM

Bakho-

1.4 million.

"Clinton always wanted to keep rates as low as possible."

One bonus being that paying down the debt became much easier. Many billions were saved in interest payments for this reason.

Posted by: Saam Barrager on June 9, 2003 01:45 AM

Mike, we'll never know what you think, unless you feel free to express yourself. Try to open up, man. Repressing your opinions will only make you ill.

Posted by: Barry on June 9, 2003 05:37 AM

It's very hard to accept the assertion that the Fed is targeting asset prices when we have had one rate cut in 18 months and none since last October. While it is true that the broad market rallied after the October cut, it gave back all these gains, only to surge again once events began to remove geopolitical risk from the equation. The Fed had nothing to do with this last rally.

Posted by: Jim Harris on June 9, 2003 06:04 AM

So few tools, so many targets. Why do we think that Greenspan can target inflation, jobs, output, productivity, stock values, the dollar - sometimes the claim seems to be that he can target them simultaneously - when he and his fellow Board members manipulate only overnight rates? Yes, he says many things, but those many things don't make him able to select his target. Stock values are rising (again) in a manner that one would expect if one were looking only at financial side data. Monetary policy has been expansionary, liquidity very high, for some time. It is not a miracle that the dollar is soft, nor that stocks are firming, nor that coupon yields are low, under such cicumstances. To claim that the Fed is targeting any of those results, beyond anticipating all of them as the normal outcome of lax monetary policy, requires a good bit more evidence than we have in hand.

Posted by: K Harris on June 9, 2003 07:59 AM

The Fed is considering a fee on liquid assets
like money markets etc. when inflation dips below ZERO. 1%tax on cash to force people to spend or buy equities. Very SCARY!!!!!!!!!!!!!!

Posted by: GJ Etchason on June 9, 2003 08:30 AM

The FT has an interesting opinion piece on the Fed's supposed ability to fight deflation through purchasing treasuries. "For a central banker with as much respect for market forces as Mr Greenspan, the mere thought of tampering with the treasury market in this way must be a sacrilegious act. It is either testimony to how far the challenges facing the US economy have changed, or it is confirmation of a post-bubble monetary policy careering out of control." Hmm, let's hope it's the former!

When Fed Governor Ben Bernanke delivered his famous deflation address in November of last year, tipping the Fed's hand for the first time that they actually thought deflation might be something to worry at least a teensy-weensy bit about, all were quick to point out that manipulating short-term interest rates was not the only policy tool at the Fed's disposal.

Moderate measures included "lowering rates further out along the Treasury term structure -- that is, rates on government bonds of longer maturities." That's precisely what the FT piece calls into question. "for this to be effective for more than a short period, the market has to be convinced the Fed stands to see the capping process through the maturity of the long-term bonds it wishes to target. Barring such a commitment, the Fed will inevitably become a victim of its own success. This is because the more credible this unorthodox reflationary policy, the more it tends to place upward pressure on long-term yields. It would then be a case of policy-makers succeeding in the technicalities only to fail in the broader objective."

A bit more aggressive move was "attempting to influence directly the yields on privately issued securities" by offering ultra-cheap (even 0% interest) loans to banks while accepting just about anything as collateral. The FT piece doesn't consider this direct lever over medium- and long-term interest rates. The real question here is, of course, what if private business doesn't want to borrow? At the end of the day, the Fed can't force anybody to take out a loan; it can only encourage them to do so. Overaccumulation-induced deflation is likely to dampen anybody's enthusiasm for more loans for more production for lower prices and more glut.

Even more provocative step as far as the global economy goes is to "buy foreign government debt". This smacks a bit of competitive currency devaluation to my ears and could be either totally ineffective or quite nasty in its repurcussions if not done in a cooperative international atmosphere. Bernanke mentions exchange rate policy here, too, another extremely dangerous ploy if not used wisely.

The old reliable is of course printing money like a madman. But Bernanke is careful to point out that "the U.S. government is not going to print money and distribute it willy-nilly". No matter how bad things get, finance capital will fight this kind of cheap money policy tooth and nail with everything it's got.

Inflation and deflation are not simply monetary phenomena; they are first and foremost political. Debating Fed anti-deflation policy in a political vacuum isn't going to tell us squat about what the Fed might actually do if and when forced to face the ugly facts of overproduction.

Posted by: General Glut on June 9, 2003 12:36 PM

Barry:

Conan the Barbarian (MY macroeconomic guru) NEVER used to say,

"Loose stones rolling through glass houses don't float NOBODY'S boat."

(Or even anything REMOTELY like that ;-) Here's three well-rounded rocks, Barry:

(Keep them under your hat: where they belong ;-)

"The Economic Consequences of the Peace"; John Maynard Keynes: 1919 http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/keynes/peace.htm

"Main Causes of the Great Depression"; Paul Alexander Gusmorino 3rd: May 13, 1996 http://www.gusmorino.com/pag3/greatdepression/index.html

"Interim Report: Notes on the U.S. Trade and Balance of Payments Deficits"; Wynne Godley: 2000 http://www.levy.org/docs/stratan/stratan.html

Don't look now, but there's a paper tiger over there [-:>

"Ronald Reagan and the Commitment of the Mentally Ill: Capital, Interest Groups, and the Eclipse of Social Policy"; Alexandar R Thomas: 1998 http://www.sociology.org/content/vol003.004/thomas.html

Hmmmmmmm....All you need now is a sling shot...


"on Global Keynesianism

James K. Galbraith

The decline of Keynesianism that began a quarter-century ago was an ambiguous event, since the Keynesians, helped along by the economic effects of the Vietnam War, had reduced unemployment to below 4% in 1969, at an inflation cost that was both predicted and quite moderate by later standards. But during the 1970s, economists came to see economic problems that might have passed into history as mistakes of policy and external shocks, as, instead, the result of fundamental errors of theory.

They retreated from any the idea that the government's economic policies should aim at achieving full employment, adopting the view that efforts to reduce unemployment were not only futile but also likely to be inflationary -- that you would get only a temporary decrease of unemployment in return for a permanent and intractable increase of inflation. This put macro-economic policy, the manipulation of budget deficits and interest rates to achieve grand goals of employment and growth, on the sidelines. Economic policy moved from the macro to the micro, from the demand side to the supply side, from a focus on accounting aggregates to focus on individual incentives.


Full employment is the hoariest phrase in our lexicon, the true mark of a Keynesian relic. Full employment was an objective well suited to a world of unionised industrial workers, a time when fewer women worked, when there were no migrants to speak of and little competition from Third World manufactures.

Today is very different: it is full of people who work, of overworked people, of people who work desperately, all the time, in bad conditions, at the expense of their children and their social and cultural and political lives, and for whom work provides little relief from the desperation of their position. Full employment at high wages appears an impossibly remote objective to most people under these conditions, because it would mean not merely "finding a job," but finding a job radically different from those known actually to exist. For this reason, full employment has largely lost its value as a political objective.


The Left should stop recycling Keynesian employment policies, New Deal public works and welfare programs and the Civil Rights movements. As social forces these are spent, in some cases corrupted, and as economic programs they have been outflanked. We have been losing in part because we are viewed, rightly, as the guardians of "old ideas." As such, we have lost our moral standing, our voice.

Our critique no longer penetrates very far, nor seems terribly relevant. We have said little about the inequality crisis, and what we have said generally focuses on the very rich, the truly poor, and the unemployed. We are mobilised to the worthy defence of food and housing programs, but we have had little to offer the employed worker. For these reasons, we have been bypassed on the right by the neo-liberal advocates of "education, training infrastructure and R&D," alongside "welfare reform," migration "reform" and get-tough-on-crime.


The global economy is a fact. Globalised business has the technological and competitive edge and won't give it up. Nations which export jet aircraft cannot take the national or protectionist view. The national position has been outflanked, and the day of autarchy (if it ever existed) will not come again.

"Global unionism" intoned a California AFL-CIO leader recently, "is the only answer to global capitalism." I think this is correct. Global Keynesianism, one might very well add, is the only answer to global monetarism.


But how to put Global Keynesianism into practice in the real world?

We must confront the global inequality crisis. For this, we must, in the final analysis, raise real wages in the countries with which our workers compete, expand their markets for our goods, and reduce their pressure on our wage structure. You cannot have this without free trade unions in those countries.

You cannot have free trade unions in the long run without democracy (nor democracy without the freedom to form unions). You cannot have democracy without human rights. And therefore, our economic agenda should really begin a long way from economic policy itself, with the campaign for human rights, democracy, and free unionism around the world.


John Maynard Keynes the economist was, above all, an optimist. And if we consider the objective global situation without succumbing to the dismal gloom of current U.S. politics, we must concede that the grounds for optimism are exceedingly strong.

First, with the arms race at an end, we could sharply reduce the military budget. Second, we have the opportunity to greatly expand our trade with 40 per cent of humanity with whom, because of the Cold War, trade was previously seriously limited. Third, and perhaps most important, there has been a burst of new technologies that are extraordinarily cheap.

The information technologies do not require enormous amounts of capital (their prices have been falling at 15 per cent per year for several decades), and have greatly increased our reach and efficiency, improving everyone's living standards. Transportation, materials science and many manufacturing processes are also all improving rapidly. Indeed, the extraordinary cheapness of new productive technology is perhaps the single defining feature of our age.


The term "global Keynesianism" means only some system - a mechanism that has not yet been worked out - for managing interdependence to achieve high economic growth and employment, a common rising standard of living, and a minimum of financial instabilities attendant to higher growth.

The great economic powers -- the United States, Germany, Japan -- must stop thinking in purely national terms and start thinking of the larger community of which they are a part. They must understand that the growth of income in the countries to which they sell eventually determines the growth of income in their own countries.

We have not faced the responsibilities of interdependence since the end of the earlier Keynesian period and breakdown of the Bretton Woods system in the 1970s, perhaps not since promulgation of the Marshall Plan. We have abandoned governmental power to market forces, particularly to the global capital markets and the large financial institutions that play in them. However, market forces cannot replace governments in the functions of governance -- neither within national boundaries nor in relations between nations.


We can harbour no illusions about the difficulty of rebuilding a multinational structure dedicated to growth and employment, and of controlling the powerful private forces whose interests would be threatened by our doing so. However, this very difficulty is in one way a virtue. We have suffered because of the short shelf life of the various economic theories put forth over the last 25 years. We try one thing, if it fails to work in a few years, we throw it out.

But if our current difficulties force us to think our problem through to the end and to adopt a set of ideas that contain a vision to which the public can respond -- a vision that holds out neither pointless sacrifice nor immediate gratification but the serious possibility of positive results in a medium and long terms-- we may be able to free ourselves of the cycle of short-lived economic theories, with their false promises and perceived failures."

http://www.jobsletter.org.nz/art/artg0002.htm

Whoa, Dewd! NICE shot!

If you ever need anything else, I'll be over there in the bush--with the birds. Oh....And remember now, Barry: You DIDN'T "get it". (Hear ;?)

http://www.nytimes.com/2003/06/06/national/06LABO.html

The New York Times June 6, 2003

Unions Back Research Plan for Energy

By STEVEN GREENHOUSE

Ten labor unions, including the steelworkers and auto workers, urged presidential candidates yesterday to back a 10-year, $300 billion research plan that would promote energy efficiency, reduce dependence on foreign oil and preserve manufacturing jobs.

Labor leaders said the plan, called the Apollo Project, would foster energy independence by promoting hybrid and hydrogen cars and energy-efficient factories and appliances. Supporters said the project would help make the United States the leader in these areas and would help preserve factory jobs after the nation had lost more than two million manufacturing jobs in the past two years.

The plan's backers said they hoped it would improve ties between labor and the environmental movement, groups that have clashed in recent years on issues like emissions standards and energy exploration.

"We believe this plan can create good manufacturing jobs, good construction jobs, can improve the public infrastructure, can be good for the environment and can reduce our dependence on foreign energy," Leo Gerard, president of the United Steelworkers of America, said at a news conference...

Posted by: Mike on June 9, 2003 12:38 PM

Mike - Blogspot is free. Go to www.blogger.com and set up a weblog of your own. I'm on your side, but it's not polite to dominate someone else's weblog comments.

Posted by: IssuesGuy on June 9, 2003 01:02 PM

Mike -

You are simply be rude with your posts. This is not your blog.

Posted by: arthur on June 9, 2003 01:18 PM

WELL, now.

Paper tigers AND lions AND bears. Oh, My....

"...Go to www.blogger.com..."

"...This is not your blog."


(I musta' hit an economic nerve ;!)

This'll only hurt a neoliberal second, guys:

"The Divine Right Of Capital: Dethroning the Corporate Aristocracy"; Marjorie Kelly: 2001 http://www.divinerightofcapital.com/

(Trust me ;-)

Posted by: Mike on June 9, 2003 01:57 PM

Andrew Boucher:

"...It would seem to me that Rubin and Clinton have some responsibility in the matter..."

I concur--

--On the "Damn the trade torpedo! Strong dollar ahead" part.

--AND in the "historic opportunities squandered" catagory too: for the way they DIDN'T "spend" the peace dividend...

In their defense though, it OUGHT to be said, that THEY, at least, balanced the Federal budget.

AND they put THAT (tax) burden SQUARELY (for the most part) where it so RICHLY and RIGHTLY belongs....

Posted by: Mike on June 9, 2003 02:21 PM

Would someone who understands this drivel, please start doing "the shorter Mike" so that we can save bandwidth here for Prof. DeLong. In my opinion, the shorter Mike, like the shorter DT is just a blank space, but I may be missing the subtlety of their arguments and would gladly read the summary of someone smarter.

Posted by: achilles on June 9, 2003 05:29 PM

Getting back a little bit to the point, here is a recent JK Galbraith speech where he slams Greenspan's policies:

http://www.tompaine.com/feature2.cfm/ID/8019

"Full economic recovery is going to be hard. It is not only a matter of spending more. Excess capacity affects the future of business investment no matter what. The reputation of American financial markets has been damaged by fraud and abuse. American households know they are in financial trouble. If you give them more income they will use it, in large part, to reduce debt. This is not a bad thing, but it does not promote recovery right away. And quite a bit of what households do spend, with extra income, drains away to imports.

In the near term, it is true that new tax cuts and more military spending may bring another false dawn. Alan Greenspan -- does anyone remember him? -- will do his best to keep the housing bubble blown up. Mr. Greenspan knows about blowing bubbles, but not even he can forever prevent them from popping. These measures will not bring us back to full employment. "

Any comments about this seeming slight on AG....

Posted by: non economist on June 9, 2003 08:15 PM

Keeping It "Subtle" for Stupid

(EXCLUSIVELY for a perpetually pointless, characteristically caustic, utterly irrelevant, uncultured "culture" warrior/character assassin ;-)

Achilles? Simple: Heel.

Posted by: Mike on June 10, 2003 06:23 AM

>Keeping It "Subtle" for Stupid
>(EXCLUSIVELY for a perpetually pointless, >characteristically caustic, utterly irrelevant, >uncultured "culture" warrior/character >assassin ;-)
>Achilles? Simple: Heel.

That's better Mike. That made as much sense(zero) as any of your postings but had a few thousand words less.

The Culture Warrior (I have no idea where that came from but it sounds cool).

P.S.
Your criticisms of me will be much better founded if you can find a few people (or even one person) on this forum who have (has) any understanding of what the hell you rant and rave about. At least with David Thompson, I know he raves against culturally backward Germans, French, Arabs and his own ancestors.

Posted by: achilles on June 10, 2003 06:40 AM

Mike, the guys you are railing against do exist. "They" were intent upon destroying Communism and when it fell "they" turned their intention upon the Welfare State. "Their" influence is strong because they have a lot of resources at their disposal. "They" are not, however, as pervasive as you seem to believe and as far as most of the rest of us can tell "they" aren't even in complete agreement themselves.

Communism showed a lot of flaws in politically directed economic systems. Zero unemployment in the old Soviet Union meant that creating new start-up businesses was unlikely. In less extreme examples, the French and Japanese bureaucracies have proven very effective at stifling economic growth. I don't see Galbraith acknowledging these "lessons learned" as part of the change that has undermined the quest for zero unemployment.

Perhaps there are more effective ways of doing things? Perhaps having unions protect jobs making buggy whips is not a good idea for improving standards of living? Perhaps having minimum wage laws does result in increased unemployment? Perhaps the Earned Income Tax Credit is less distortionary than Welfare? You might actually try figuring it out. You aren't hitting the home runs that you think.

Posted by: Stan on June 10, 2003 02:14 PM

(Just a heads up - at the height of the dot.com boom here in Silicon Valley unemployment was 1.2%. Labor mobility has a lot to do with regulatory activity, but pushing unemployment towards 0% ought not preclude economic dynamism.)

Posted by: Saam Barrager on June 11, 2003 02:43 AM

Saam, even with large numbers of foreign immigrant visas being handed out to increase the pool of available workers, the dot.com boom was inflationary. I therefore believe the dot.com boom tended to reenforced our collective understanding of labor markets.

Despite disagreeing with your example, I do agree with you that pushing unemployment towards 0% does not necessarily preclude economic dynamism. I added the pieces about the Earned Income Tax Credit (EITC) and minimum wage because I think they are the keys to achieving that specific goal.

I think the economic evidence supports models showing that increasing the EITC (also slowing the phase out) and mothballing the minimum wage would combine as the best way to achieve zero unemployment. Doing so should increase overall U.S. production efficiency and make the economy more resilient in economic downturns.

I think that Welfare should be phased out for the able bodied since I am sure that the EITC is a much more efficient and socially less deruptive vehicle for addressing the minimum subsistence downside risk of unemployment and underemployment. In fact, I would rather use the EITC for virtually all monetary transfers to the able bodied. I think it is more conducive to personal choice and thus liberty than mandated programs. That, however, is another story...

Posted by: Stan on June 11, 2003 07:39 AM

Stan:

Before you go trying to sell the idea that you've "tried to figure it [or me] out", you've got to convince me that you can even SEE "it".

Perhaps you're trying to steal first base...

Senate OKs Plan to Revive Nuclear Power

Wed Jun 11, 2:22 AM ET

By H. JOSEF HEBERT, Associated Press Writer

WASHINGTON - U.S. taxpayers may underwrite a new generation of nuclear power plants now that the Senate has endorsed the idea as part of a broad energy bill.

Under the measure, the government would provide loan guarantees for at least a half dozen advanced design commercial nuclear power plants expected to cost about $3 billion each. The government would guarantee half the cost.

An attempt to strip the loan guarantees from the Senate bill fell short Tuesday, 50-48. Critics called the government help a giveaway to a mature industry that should be left to succeed or fail on its own.

The guarantees are part of a broader package of pro-nuclear measures in the bill, which may be approved within weeks, including a plan for the government to build a $1.1 billion reactor to make hydrogen and $865 million for research into reducing nuclear waste.

The measure marks the most ambitious attempt to energize the nuclear industry in decades and goes much further to help nuclear power than House legislation passed in April.

Sen. Pete Domenici (news, bio, voting record), R-N.M., architect of a package of pro-nuclear provisions, said the government help is needed sustain the role of nuclear power in the country's energy picture.

No utility has tried to build a new power reactor since the 1979 nuclear accident at Three Mile Island....

http://story.news.yahoo.com/news?tmpl=story&u=/ap/20030611/ap_on_go_co/senate_energy_19

Senate panel approves US nuclear plant incentives

USA: April 14, 2003

"WASHINGTON - The Republican-led Senate Energy Committee approved an estimated $30 billion in federal loan guarantees for private firms to build new U.S. nuclear power plants, defeating a Democratic attempt to strike the measure from a wide-ranging energy bill.

The nuclear provision would provide government-backed financing to build six new nuclear power plants to produce up to 8,400 megawatts of electricity, roughly enough to power eight million U.S. homes. The exact amount of the loan guarantees was not specified in the bill. However, the loan guarantees would cover half the cost of each new plant, which some lawmakers peg at roughly $10 billion each...."

http://www.planetark.org/dailynewsstory.cfm/newsid/20460/story.htm

US Lawmakers bow to wishes of nuclear industry

December 7, 2001

"At a sitting in which only 15 of the 435 Members were present, the US House of Representatives voted on 27 November 2001 to reauthorize the Price-Anderson Act, which limits liability for nuclear operators in the event of a serious accident or terrorist attack and shifts much of the burden to taxpayers...

..Lawmakers passed the bill, H.R. 2983, by a voice vote despite opposition from a broad coalition of public interest and environmental groups. The legislation must now be considered by the Senate.

The Price-Anderson Act establishes a taxpayer-backed insurance regime for US nuclear power plants. It reduces the amount of insurance that nuclear operators are required to carry and caps their liability for damages. The sizable discrepancy between the Price-Anderson liability cap and the calculated economic consequences of a nuclear incident leaves the public unprotected and the industry unaccountable in the event of a serious accident...

...Although H.R. 2983 directs the US Nuclear Regulatory Commission to conduct a study of nuclear power plant vulnerabilities, the bill stops short of reassessing insurance requirements in light of the new terrorist threat or making Price-Anderson coverage contingent on compliance with increased security requirements. To the contrary, H.R. 2983 offers special concessions to proposed new Pebble Bed Modular Reactors, which lack a containment structure and would be particularly vulnerable targets.

Furthermore, by artificially limiting the liability of nuclear operators, the Price-Anderson Act serves as an indirect subsidy to the nuclear industry in terms of foregone insurance premiums. The amount of this subsidy has been estimated to range from US$3.45 million to US$33 million per reactor, per year, for an industry-wide total of between US$366 million and US$3.4 billion each year.

By masking the risk of nuclear power, the Price-Anderson Act distorts economic viability assessments and grants nuclear power a competitive advantage over other energy sources...."

http://www.antenna.nl/wise/559/5346.html


Posted by: Mike on June 11, 2003 06:42 PM

Mike, you've managed yet another swing and a miss. I know this may be a reach for you but perhaps nulcear power isn't viewed by others as a great evil? Being that the U.S. is a democracy, if enough people disagreed with you... in other words, you aren't as far ahead of the pack as you seem to think.

Posted by: Stan on June 12, 2003 07:02 AM

Stan, Mark Bahner has stated that the USA are no democracy. And the danger of nuclear residues is an objective fact. Would you take them in your backyard?

DSW

Posted by: Antoni Jaume on June 12, 2003 08:51 AM

Antoni, Mark may well be right if he was arguing against the U.S. being a perfectly representative democracy. There also certainly are risks to nuclear power. However, fossil fuel based energy is hardly without its faults and risks. The military subsidy required to maintain stability in our current energy supply is lost in Mike's awe inspiring piece.

Is the insurance risk subsidy Mike's article harps on greater than our current political risk subsidy of petroleum? Not likely. It all makes me think again of the simpleton political jingle "its your money" and the fantasy of property as a natural right. Of course Mike thinks he knows the "true orbit" of truth and justice and that we lesser mortals simply aren't clued into how the world works. I guess we'll just have live and labor beneath his comprehensive understanding?

Since you ask, I am ambivalent about nuclear power. I am also fairly certain that NIMBY and backlash at the polls will make any politician regret too close an association with the industry. I guess we will see.

Posted by: Stan on June 12, 2003 09:55 AM

Stan:

"Nuclear power" is just a 21st century word for "politically directed" TransNational Corporate Fundamentalist "buggy whip"--

(yer OUT ;!)

Posted by: Mike on June 12, 2003 12:00 PM

Sure, whatever you say slugger.

Posted by: Stan on June 12, 2003 12:08 PM

Don't go away mad, Stan...

After all, you did sneer at "politically directed economic systems" such as those which exist(ed) in "the Soviet Union", "France", and "Japan". And you DID then go on to SUGGEST that you knew of "more effective" ways of "improving standards of living" than "having unions protect jobs making buggy whips":

Posted by: Stan on June 10, 2003 02:14 PM

And THEN, when I presented you with evidence of MASSIVE "politically directed" subsidies for a PROFOUNDLY more problematic "modern" technological analog of "buggy whips":

Posted by: Mike on June 11, 2003 06:42 PM

YOU turned around and mumbled something about how THAT sort of political direction of massive subsidies to an anachronistic/uneconomic technology is okay because the US is a democracy:

Posted by: Stan on June 12, 2003 07:02 AM

Well, I'm for democracy too Stan. Remember this:

Unions Back Research Plan for Energy

By STEVEN GREENHOUSE

Ten labor unions, including the steelworkers and auto workers, urged presidential candidates yesterday to back a 10-year, $300 billion research plan that would promote energy efficiency, reduce dependence on foreign oil and preserve manufacturing jobs.

Labor leaders said the plan, called the Apollo Project, would foster energy independence by promoting hybrid and hydrogen cars and energy-efficient factories and appliances. Supporters said the project would help make the United States the leader in these areas and would help preserve factory jobs after the nation had lost more than two million manufacturing jobs in the past two years.

The plan's backers said they hoped it would improve ties between labor and the environmental movement, groups that have clashed in recent years on issues like emissions standards and energy exploration.

"We believe this plan can create good manufacturing jobs, good construction jobs, can improve the public infrastructure, can be good for the environment and can reduce our dependence on foreign energy," Leo Gerard, president of the United Steelworkers of America, said at a news conference...

Posted by: Mike on June 9, 2003 12:38 PM

SURE you remember, Stan. That's ONE of the things I posted here that set you off, isn't it?

Well, do you remember this? Stan:

"The Divine Right Of Capital: Dethroning the Corporate Aristocracy"; Marjorie Kelly: 2001 http://www.divinerightofcapital.com/

Posted by: Mike on June 9, 2003 01:57 PM

Check it out, if you didn't--you know, while you're sitting over there in the dug-out waiting for your next trip to the plate. It's about "trying to figure out" the up-coming, new and improved, democratic POST-Transnational Corporate Fundamentalism, non-Bubblistic Economy....

That's what you're REALLY interested in, Stan.

Isn't it?

Posted by: Mike on June 12, 2003 06:03 PM

I'm not mad sport. I know very well that technology hasn't made nuclear power economically non-viable. Regulatory changes could quickly make nuclear power much less expensive than other forms of energy. There is nothing about the perceived threat of nuclear power that specifically necessitates our current cost structures. Coal is much closer to being technologically defunct but even there the case isn't clear cut. We hardly want to further increase our dependence on petroleum. Also, technology is making it less hazardous to burn coal by the day. I am all for internalizing costs, but there are rational limits.

While you astutely see that politics picks winners and losers in every economy (something apparently lost on those who swallow "it's your money"), you are failing to understand the basic differences between market driven and politically driven economies. (Please know that in the real world they both occur in degrees.) Under a market economy, goods and services are apportioned by bids among prospective buyers. Under a politically driven economy, goods and services are apportioned solely by political decision-makers.

The lesson we have learned is that Adam Smith was basically right. In general, the more politically driven an economy the lower the long term growth of that economy. Industries that have higher returns can afford to bid more for necessary inputs thus assuring more efficient uses.

After its initial investment-led growth spurt, the Soviet Union slid into a long-term economic decline. By the time Gorbachev hit the scene the Soviet economy was approaching, if not already seeing, economic contraction. The Soviet Economy did a very poor job of assigning inputs to the best available use. In Japan, there is a very good chance that the long-term economic growth potential is now negative due to politically induced economic sclerosis. The inefficiency of its food processing sector is mammoth.

Your example does nothing to counter these lessons learned. Maybe you should take a couple of Brad's classes?

Posted by: Stan on June 13, 2003 08:39 AM

Keynes "was basically right" too, Stan....

See:

"The Economic Consequences of the Peace"; John Maynard Keynes: 1919 http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/keynes/peace.htm

AND

"on Global Keynesianism

James K. Galbraith

The decline of Keynesianism that began a quarter-century ago was an ambiguous event, since the Keynesians, helped along by the economic effects of the Vietnam War, had reduced unemployment to below 4% in 1969, at an inflation cost that was both predicted and quite moderate by later standards. But during the 1970s, economists came to see economic problems that might have passed into history as mistakes of policy and external shocks, as, instead, the result of fundamental errors of theory.

They retreated from any the idea that the government's economic policies should aim at achieving full employment, adopting the view that efforts to reduce unemployment were not only futile but also likely to be inflationary -- that you would get only a temporary decrease of unemployment in return for a permanent and intractable increase of inflation. This put macro-economic policy, the manipulation of budget deficits and interest rates to achieve grand goals of employment and growth, on the sidelines. Economic policy moved from the macro to the micro, from the demand side to the supply side, from a focus on accounting aggregates to focus on individual incentives.

AND

Unions Back Research Plan for Energy

By STEVEN GREENHOUSE

Ten labor unions, including the steelworkers and auto workers, urged presidential candidates yesterday to back a 10-year, $300 billion research plan that would promote energy efficiency, reduce dependence on foreign oil and preserve manufacturing jobs.

Labor leaders said the plan, called the Apollo Project, would foster energy independence by promoting hybrid and hydrogen cars and energy-efficient factories and appliances. Supporters said the project would help make the United States the leader in these areas and would help preserve factory jobs after the nation had lost more than two million manufacturing jobs in the past two years.

The plan's backers said they hoped it would improve ties between labor and the environmental movement, groups that have clashed in recent years on issues like emissions standards and energy exploration.

"We believe this plan can create good manufacturing jobs, good construction jobs, can improve the public infrastructure, can be good for the environment and can reduce our dependence on foreign energy," Leo Gerard, president of the United Steelworkers of America, said at a news conference...

AGAIN.

[ALL @ : Posted by: Mike on June 9, 2003 12:38 PM ]

...Though it ought to be said that we OUGHT to have "figured out" by now that "growth", in and of itself, is most definitely NOT the "ball" in this "game"--see:

"Main Causes of the Great Depression"; Paul Alexander Gusmorino 3rd: May 13, 1996 http://www.gusmorino.com/pag3/greatdepression/index.html

[Originally @ Posted by: Mike on June 9, 2003 12:38 PM ]

The "thing" HERE though, Stan, is a whole lot simpler than THAT 'macro' stuff.

The thing is: You're just "all wet" about nukes being anything but an economic, techonological, AND environmental dinosaur, bubba.

Two words:

Price-Anderson

Chernobyl

Google 'em.

AND put the "economics" you will PRESUMABLY learn THERE...

US Lawmakers bow to wishes of nuclear industry

December 7, 2001

"At a sitting in which only 15 of the 435 Members were present, the US House of Representatives voted on 27 November 2001 to reauthorize the Price-Anderson Act, which limits liability for nuclear operators in the event of a serious accident or terrorist attack and shifts much of the burden to taxpayers...

...Although H.R. 2983 directs the US Nuclear Regulatory Commission to conduct a study of nuclear power plant vulnerabilities, the bill stops short of reassessing insurance requirements in light of the new terrorist threat or making Price-Anderson coverage contingent on compliance with increased security requirements. To the contrary, H.R. 2983 offers special concessions to proposed new Pebble Bed Modular Reactors, which lack a containment structure and would be particularly vulnerable targets.

Furthermore, by artificially limiting the liability of nuclear operators, the Price-Anderson Act serves as an indirect subsidy to the nuclear industry in terms of foregone insurance premiums. The amount of this subsidy has been estimated to range from US$3.45 million to US$33 million per reactor, per year, for an industry-wide total of between US$366 million and US$3.4 billion each year.

By masking the risk of nuclear power, the Price-Anderson Act distorts economic viability assessments and grants nuclear power a competitive advantage over other energy sources...."

http://www.antenna.nl/wise/559/5346.html

(I'm going to leave the "Chernobyl" part as an "exercise", Stan--on the theory that it's better allow a "know-it-all" to plumb the depths of his OWN arrogance privately than it is to try to teach him intellectual humility in a public forum like this one ;-)

...beside "yesterday's news"...

Senate OKs Plan to Revive Nuclear Power

WASHINGTON - U.S. taxpayers may underwrite a new generation of nuclear power plants now that the Senate has endorsed the idea as part of a broad energy bill.

Under the measure, the government would provide loan guarantees for at least a half dozen advanced design commercial nuclear power plants expected to cost about $3 billion each. The government would guarantee half the cost.

An attempt to strip the loan guarantees from the Senate bill fell short Tuesday, 50-48. Critics called the government help a giveaway to a mature industry that should be left to succeed or fail on its own.

The guarantees are part of a broader package of pro-nuclear measures in the bill, which may be approved within weeks, including a plan for the government to build a $1.1 billion reactor to make hydrogen and $865 million for research into reducing nuclear waste.

The measure marks the most ambitious attempt to energize the nuclear industry in decades and goes much further to help nuclear power than House legislation passed in April.

Sen. Pete Domenici (news, bio, voting record), R-N.M., architect of a package of pro-nuclear provisions, said the government help is needed sustain the role of nuclear power in the country's energy picture.

No utility has tried to build a new power reactor since the 1979 nuclear accident at Three Mile Island....

http://story.news.yahoo.com/news?tmpl=story&u=/ap/20030611/ap_on_go_co/senate_energy_19


[Those two were orginally--Posted by: Mike on June 11, 2003 06:42 PM]

...It doesn't take a degree in ANYTHING to "supply" the 'awful truth', Stan.

'Nuclear Power' is just another piece of bad economic/science fiction with a catchy title:

The Killer TransNational Corporate Fundamentalistic 'Buggywhip' from Hell that Wouldn't Die

Posted by: Mike on June 13, 2003 02:15 PM

This thread proves the adage:

"Arguing on the Internet is like running in the Special Olympics. Even if you win, you are still retarded".

Posted by: Dan on June 15, 2003 08:29 PM

Bravo, Dan :!)

"A stunning rejoinder if ever there was one! 5 stars out of 4."--Alfred E. Neuman

"Pithy, to the point and right 'on target'."--"Tail-Gunner Joe Isuzu

"Rebuttal, thy name is 'Dan'."--Anon.

(I bet you bought that bit about laughing last being "best" too. Didn't you, Dan ;?)

Posted by: Mike on June 16, 2003 01:56 AM

"Yahoo!"

--Jonathan Swift


"Rare is the sequel which is the equal of its prequel. This one is no exception. There must be a reason. Whoa! Something just went right over my head. Maybe that was it. Has that ever happened to you? I'm not surprised. Not really. That's just how these things usually go.

That's just, you know, how it is--Life, I mean. You start out thinking you know exactly where you're going. But by the time you figure out where you left the keys..."

--Rex Folly, STUMPED MAGAZINE (formerly TONGUES 'n CHEEKS QUARTERLY)

"Wait! Wait! Stop the presses! I MEANT to say, 'Rebuttal: Thy MIDDLE name is Dan.' But don't quote me."

--Anon.

"'Tour de force'! A Megahit!

Tragically for this fan, it always goes down hill from here..."

--Plummer Sassistant, JOURNAL DE SCATALOGIE

Posted by: Mike on June 16, 2003 08:58 AM

MIKE - step away from the computer and walk outside. Please.

Posted by: Dan on June 17, 2003 08:29 PM

Dan:

I'm just killing bytes waiting for you to come up with a 'critique' of my efforts more subtantial than those more commonly employed by the "inmates" of a nearby day care center.

True, today IS the 18th. And I did 'rest' MY case on the 13th. And you STILL haven't said anything that rises above the level of irrelevant and/or'infantile'...

BUT I'm a patient guy. So, please Dan, take your time. I wouldn't want you to strain yourself or anything. Think. But do it carefully. I can wait.

Noooo problem.....

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