December 31, 2003

The Conference Board Turns Way Optimistic

The Conference Board shifts its forecast and turns way optimistic. Productivity growth of 3.6% forecast for 2004, trend labor force growth of 1.1%, an extra 0.5% growth in the labor force as discouraged workers start looking for jobs, and an 0.5% decline in the unemployment rate together add up to a forecast growth rate of 5.7%.

They could very well be right. I can see it all on the supply side. I cannot quite see where all the demand will come from yet:

2004 Economic Forecast Best in 20 Years, Conference Board Reports: ...Revising its year-end economic forecast sharply upward, The Conference Board today projected that real GDP growth will hit 5.7% next year, making 2004 the best year economically in the last 20 years. The forecast, by Conference Board Chief Economist Gail Fosler, expects worker productivity, which set a 20-year record in the third quarter, to rise at a healthy 3.6% next year. That would follow a gain of 4.3% this year. The economic forecast is prepared for more than 2,500 corporate members of The Conference Board's global business network, based in 66 nations. "Growing business spending and continued strength in consumer spending are generating growth throughout the U.S. economy," says Fosler. "This burgeoning strength is reflected in The Conference Board's widely-watched Leading Economic Indicators, the Consumer Confidence Index and the Help-Wanted Advertising Index. While the labor market, a critical factor in sustaining growth, is growing slowly, a pick-up in hiring may already have begun."...

Posted by DeLong at December 31, 2003 08:55 AM | TrackBack

Comments

This means George W will be re-elected in a landslide in Nov. 2004.

Posted by: Patrick R. Sullivan on December 31, 2003 09:36 AM

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http://www.nytimes.com/2003/12/30/opinion/30KRUG.html

Our So-Called Boom
By PAUL KRUGMAN

It was a merry Christmas for Sharper Image and Neiman Marcus, which reported big sales increases over last year's holiday season. It was considerably less cheery at Wal-Mart and other low-priced chains. We don't know the final sales figures yet, but it's clear that high-end stores did very well, while stores catering to middle- and low-income families achieved only modest gains.

Based on these reports, you may be tempted to speculate that the economic recovery is an exclusive party, and most people weren't invited. You'd be right.

Commerce Department figures reveal a startling disconnect between overall economic growth, which has been impressive since last spring, and the incomes of a great majority of Americans. In the third quarter of 2003, as everyone knows, real G.D.P. rose at an annual rate of 8.2 percent. But wage and salary income, adjusted for inflation, rose at an annual rate of only 0.8 percent. More recent data don't change the picture: in the six months that ended in November, income from wages rose only 0.65 percent after inflation.

Why aren't workers sharing in the so-called boom? Start with jobs.

Payroll employment began rising in August, but the pace of job growth remains modest, averaging less than 90,000 per month. That's well short of the 225,000 jobs added per month during the Clinton years; it's even below the roughly 150,000 jobs needed to keep up with a growing working-age population.

But if the number of jobs isn't rising much, aren't workers at least earning more? You may have thought so. After all, companies have been able to increase output without hiring more workers, thanks to the rapidly rising output per worker. (Yes, that's a tautology.) Historically, higher productivity has translated into rising wages. But not this time: thanks to a weak labor market, employers have felt no pressure to share productivity gains. Calculations by the Economic Policy Institute show real wages for most workers flat or falling even as the economy expands....

Posted by: anne on December 31, 2003 09:52 AM

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"This means George W will be re-elected in a landslide in Nov. 2004."

D-oh! I wanted to be first with that zinger. (Though I was going to put it even more provocatively, e.g. "Thanks, G.W. Bush!")

;-)

"Calculations by the Economic Policy Institute show real wages for most workers flat or falling even as the economy expands...."

That's because those "real wage" calculations can't keep up with falling prices.

"Potatoes are cheaper, tomatoes are cheaper, now's the time to fall in looove. The butcher, the baker, the candlestick maker, gave the price a downward shooove..."

:-)


Posted by: Mark Bahner on December 31, 2003 09:59 AM

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Maybe we'll get enough of an increase in net exports and investment demand so that aggregate demand will rise 5.7%. Hopefully, maybe, but is it likely?

Posted by: Harold McClure on December 31, 2003 10:04 AM

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Maybe we'll get enough of an increase in net exports and investment demand so that aggregate demand will rise 5.7%. Hopefully, maybe, but is it likely?

Posted by: Harold McClure on December 31, 2003 10:07 AM

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How can net exports not respond, given what has happened to the dollar?

Regarding this:

"This means George W will be re-elected in a landslide in Nov. 2004."

You wouldn't be saying this if Dick Gephardt and John Kerry were still alive.

Posted by: Jim Harris on December 31, 2003 10:18 AM

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You said: "I cannot quite see where all the demand will come from yet."

No damn kidding.

I still think the conventional wisdom amounts to a collective psychosis. The dollar has been eviscerated by debt. Sooner or later the house of cards will come tumbling down.

I also still maintain that people with something to lose, i.e. alleged "equity," alleged "retirement" portfolios, etc. will twist themselves into human pretzels to avoid facing this reality. I know I would. :-)

Posted by: John H. Farr on December 31, 2003 10:19 AM

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Jim - the question is not whether net exports will rise but whether they will rise enough (along with hopefully an increase in investment and maybe consumption and government purchases) in order for aggregate demand to rise some $600 billion. Then again - foreigners might react to our trade protectionist stance with their own trade protectionism.

Posted by: Harold McClure on December 31, 2003 10:40 AM

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Being the son of depression era parents, I was conditioned to expect “the Big One” to reoccur—someday. And indeed many people seem trapped in this mentality because whenever there is a downturn in the economy, I frequently hear or read something to the effect: “the Big One” is either coming soon, or in the not-distant future. I see it again as we pull out the 2000 recession where every bit of good economic news is met with a “yes but” reaction. And every silver lining has a cloud. I think some people here would rather have the recession linger on because a recovery might help re-elect George Bush. Others are just plain hostile to the market system. They really want Socialism and would just as soon have a rip-roaring depression so that rotten system will finally get overthrown. This is the “things must get worse before they get better” philosophy which has caused much suffering in this world. Be careful.

Posted by: A. Zarkov on December 31, 2003 11:13 AM

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Then, there are many people who are quite successful in business, and have had a terrific year, but think we have a perfectly awful Administration and awful radical Republican Congress.

Posted by: lise on December 31, 2003 11:28 AM

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A. Zarkov - The "TMGWBTGB" philosophy has caused "much suffering"? Although I don't personally espouse to this particular philosophy, I can't think of any concrete examples where the philosophy itself, when held by those out of power, has actually caused "much suffering." Can you?

Posted by: joe on December 31, 2003 11:30 AM

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A Zarkov wrote:

"I think some people here would rather have the recession linger on because a recovery might help re-elect George Bush. Others are just plain hostile to the market system. They really want Socialism and would just as soon have a rip-roaring depression so that rotten system will finally get overthrown. This is the 'things must get worse before they get better' philosophy which has caused much suffering in this world. Be careful."

How do you explain the CONSERVATIVE analysts who fear disaster from the collapse of the credit bubble? Do they just hate America too?

http://www.thestreet.com/pf/markets/detox/10134346.html

Posted by: Kosh on December 31, 2003 11:43 AM

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" You wouldn't be saying this if Dick Gephardt and John Kerry were still alive."

It doesn't matter who the Dem nominee is, according to Yale's Ray Fair. His model predicts very nicely 20 of the last 21 presidential elections (he came within 1/2 of 1 percent of Gore's actual two party vote share in 2000). The only thing that could derail Bush is a recession in 2004. And that ain't gonna happen.

Read it and weep, Usual Suspects:

http://fairmodel.econ.yale.edu/

" The best possible incumbency situation is for a Republican President to run for reelection when the Republicans have only been in power for one term (no duration effect). There are 4 cases in the table in which this has been true. In 1984 President Reagan beat Mondale with 59.2 percent of the vote; in 1972 President Nixon beat McGovern with 61.8 percent of the vote; in 1956 President Eisenhower beat Stevenson with 57.8 percent of the vote; and in 1924 President Coolidge beat Davis with 58.2 percent of the vote. These are very large victories, larger than would be predicted solely on the basis of the economic variables.

" If President Bush runs for reelection in 2004, he is in this best possible incumbency situation. The bottom of the table shows that if the economy is so-so (a growth rate of 2.5 percent, an inflation rate of 2.5 percent, and no good news quarters), President Bush is predicted to get 55.2 percent of the vote. The economy has to be quite bad before President Bush is predicted to lose."

The above was written in 2001. The last update to his model (in the fall of 2002) shows Bush winning 58% of the two party vote. And the news has only gotten better for Bush since then.

Posted by: Patrick R. Sullivan on December 31, 2003 11:50 AM

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Well, I will vote against George Bush no matter how well the economy is doing. And, I too am doing superbly. I can not imagine a poorer President.

Posted by: jd on December 31, 2003 12:05 PM

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the Fair model's track record would be impressive indeed if it weren't a moving target. after every election, Fair tweaks the model so it's less wrong given the new data -- good for its predictive power, but destroying any semblance of forward-looking recordkeeping. there are models out there I distrust less, but why much around with them when the Iowa market will tell you what it thinks?

cf http://128.255.244.60/graphs/Pres04_VS.gif

looks like that one's leaning Bush, too -- but hardly by a landslide.

oh, and Zarkov? you're a putz. there are maybe three Spartacists with bad teeth who fit your description. the plural of anecdote is not data. in case you were actually posting in good faith, I would note that there is nothing contradictory in preferring some form of socialism to what passes for capitalism in the US, and still liking markets. markets are tools first (awfully useful ones, too), an ideology second.

Posted by: wcw on December 31, 2003 12:28 PM

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If any of you'all remember the dot.com / IPO / juniored junk bond hyperbole of the Clinton era, if you really REMEMBER it, stocks ticking upward moment by moment, brokers rapeing insane profits, $1,000 bottles of wine for lunch, $6M Hampton bungalows, then you will realize we're once again in fizz mode, pure froth, Happy New Year gonzo, Y2K a second time around. All part of the happy camper, Bush bandwagon, onward and upward medium.

In Roman days, it was bread and circuses. In the 20's, bathtub gin. What happened to P/E 11? Zhuup!

http://www.thedesertsun.com/news/stories2003/business/20031230222511.shtml

It's going to be a belly, belly good 2004 for lawyers, doctors, politicians and bankers. The rest of us are going to take it in the shorts, and God help our boys in Iraq and Afghanistan.

Posted by: Harry Possue on December 31, 2003 01:36 PM

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"This is the “things must get worse before they get better” philosophy which has caused much suffering in this world."

When people believe this with respect to the economy, I don't think it is as much that they want it to happen because they are Commies as it is they fear that it is inevitable. You are right, people are afraid the Great Depression will repeat, but they don't see that event as a monetary policy error which was made by leaders holding this very same mistaken view. Instead they perceive liquidation to be a cure and act like they can not be optimistic until there is a disaster. Still, there is also greed behind this type of thinking. When I hear the stock market forecasts by some of this type I am amazed that they are setting their entry point so low that making a good short term return would be nearly guaranteed. Dow 5000? Sounds like a great deal to me.... except I would not wait.

" I can't think of any concrete examples where the philosophy itself, when held by those out of power, has actually caused "much suffering." Can you? " (Joe)

Nader wasn't in power, basically ran a campaign around the 'things must get worse' thing, and according to the views of some who contribute here (not really mine though), has caused much suffering.

Posted by: snsterling on December 31, 2003 02:50 PM

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Patrick,

For George Bush to be re-elected he has to be elected first. So far he's only been appointed.

Posted by: David Lloyd-Jones on December 31, 2003 02:51 PM

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" the Fair model's track record would be impressive indeed if it weren't a moving target. after every election, Fair tweaks the model so it's less wrong given the new data -- good for its predictive power, but destroying any semblance of forward-looking recordkeeping."

I suggest you acquaint yourself with what Roy Fair's actually did. It's in "Predicting Presidential Elections and Other Things" Stanford Univ. Press, 2002.

Posted by: Patrick R. Sullivan on December 31, 2003 03:21 PM

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David Lloyd-Jones writes: "For George Bush to be re-elected he has to be elected first. So far he's only been appointed."

If he gets elected in 2004, watch the GOP use this as a reason why he should be eligible for a third term...

Posted by: Jon H on December 31, 2003 03:29 PM

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In the strict sense, voters don't vote on the economy, they vote based on employment. No amount of stock value will help if the independent voters can't find work. This is in part why Bush41 lost in 92. A recovery had started but employment was still a problem.

In the US, you are nothing without a good job. The job gives access to health care for the family and pays the other bills. No job, no good, no vote. Bottom line.

Posted by: bakho on December 31, 2003 03:47 PM

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The unemployment rate is not very high, though.

If Howard Dean can't come up with a good "vision thing", Dubya will have another term.

Posted by: Bulent on December 31, 2003 05:14 PM

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2004 has always been the most likely time for a recovery - simply because Bush MUST have one. A lot of money is slopping around from that massive deficit and there has been plenty of monetary stimulus. But don't fool yourself - the structural problems in the US economy - the damage it has taken over the last few years - and Bush's deliberate long term economic policies mean that even if you get a recovery from the stimulus and from cyclical factors - it isn't going to be the 90's all over again.

If Bush gets reelected, bet on the economic numbers in late 2005 being very very bad.

Posted by: Ian Welsh on December 31, 2003 05:15 PM

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Just for perspective, the jobless rate will end this year down 0.1% from the level it ended 2002, and higher than any prior year end reading since 1993. So it isn't low, but it is improving a bit. At least some of that better-than-end-2002 showing is due to a steady fall in the employment participation rate through 2003. The participation rate has, in fact, fallen pretty steadily since mid-2000. The jobless rate would be a good bit higher now if participation in the labor market were not at the lowest level since the early 1990s. That said, labor market particpation in the 1990s was very high.

I remember seeing a nifty rule of thumb about the relationship between changes in the dollar's trade weighted value and changes in GDP, but I don't remember what it is. Probably doesn't work anymore (what economic rule of thumb does?), but I'd like to be reminded of it. I think I recall that a whopping change in the exchange rate is needed to make much of a difference to GDP. Anybody?

Posted by: K Harris on December 31, 2003 05:30 PM

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a merry Christmas for Sharper Image and Neiman Marcus

America the way it ought to be, I suppose to some

Personally, the economy is Enron in spades. The fed, first, killed off the Clinton recovery. How can one justify cutting the money supply when the federal government is running a surplus? Then, as soon as Bush is appointed it starts printing money and dropping interest rates. If we didn't have some bounce then Keynes would have rolled over in his grave.

My two cents is that the best economic writing in the last 50 years is the first 100 pages or so of Hamel's Leading the Revolution. He spells out, chapter and verse, why the lack of demand is the issue, the only issue.

The fundamental paradox remains. What is good for the firm is absolutely horrible for the economy. Surely it will sink in this time that distribution of income, as always, is a political question (and not a market one) and that question has to be answered with distribution to the middle and lower classes, not to the wealthy.

Posted by: John L Davidson on December 31, 2003 05:31 PM

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U of Michigan economists are predicting surging growth in the coming year, much as the Conference Board and Ray Fair do...
~~~

Economic forecast

Growth of 5 million jobs in next two years predicted

Riding the wave of recent job gains and robust economic growth, the American economy should remain strong throughout 2004, according to a new economic forecast by the University.

Economists predict 5.1 percent growth in national economic output, as measured by real Gross Domestic Product (GDP), next year—the strongest annual growth rate since 1984.

"The economy starts the year 2004 with substantial momentum, propelled by real GDP advancing at a 5.8 percent rate in the second half of 2003," says Saul Hymans, professor of economics. "The pace of output expansion remains vigorous next year, and employment responds to the strong economic growth."

In their annual forecast of the U.S. economy, Hymans and colleagues Joan Crary and Janet Wolfe predict employment growth of 2.1 million jobs in 2004 and 3.1 million in 2005. Unemployment is expected to fall from 6 percent this year to 5.4 percent next year and to 4.8 percent in 2005.

"The past three months have produced 286,000 new payroll jobs—the best three-month performance since January 2001, back before the recession," Hymans says. "And in response to three straight quarters of really sparkling economic growth, job gains move into high gear to generate more than 800,000 jobs in the first quarter of 2004 and remain strong over the next two years."...

The forecast is based on the Michigan Quarterly Econometric Model of the U.S. Economy and compiled by the U-M Research Seminar in Quantitative Economics.

http://www.umich.edu/~urecord/0304/Nov24_03/18.shtml

Posted by: Jim Glass on December 31, 2003 06:09 PM

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Ian Welsh / K Harris

Bush policies are intended to enhance interests of capital at the expense of labor and if that means "bad economy", it is going to be "bad economy" even in 2004, as it is now.

But Democrats can't win merely by pointing out that Bush policies favor capital and not labor.

The Bush administration is going for a zero-sum game, which means they go for policies that take away from labor and give to capital. They are not interested in any thing like win-win policies vis-a-vis capital and labor -- they want to "starve the beast", turn back the clock, defer chances of expanded social safety net and other forms of equal rights for all.

I don't think the Democrats can win this election with a win-win strategy; they too have to play zero-sum game.

So the Democrats need to come up with "a New-New Deal with a global framework of reference".

If they fail that, someone will take it up, eventually, and the American two-party system will take a serious blow.

Posted by: Bulent on December 31, 2003 06:21 PM

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"I cannot quite see where all the demand will come from yet". Military spending, I think, might do it--it's half of the demand already.

Posted by: Randolph Fritz on December 31, 2003 06:45 PM

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Obviously there will be increased demand from overseas, because of the falling dollar. On the other hand, its not clear to me where the money will come to finance the growth that the increased demand might create. America's growth is now dependent on foreign investment, and why would foreigners want to invest while the dollar is in rapid retreat? Why should they buy today if the dollar is expected to be lower tomorrow? But then, when tomorrow comes, why should they buy then, when the dollar is likely to be still lower the next day?

Posted by: Lawrence Krubner on December 31, 2003 07:35 PM

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Joe. In the 1970s the Italian Red Brigades assumed they could induce repression through a campaign of kidnapping, murder and terror. According to their twisted logic, the people of Italy would then overthrow the government as a response to this repression. A clear example of the philosophy of “things must get worse before they get better.” And they made good on their philosophy causing much suffering. Now they’re back in action with a fresh set of murders.

Unlike Italy, the Tupamaros in Uruguay did succeed in bringing about repression. In the 1960s Uruguay was a liberal democracy, but became a military dictatorship by the end of the decade when the government ceded control to the military to defeat the guerillas. It took until 1985 to restore democracy.

Posted by: A. Zarkov on December 31, 2003 07:41 PM

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Perhaps the most famous case of "Things have to get worse before they can get better" doing harm is the "Nach im commen wir" (after him we come) strategy adopted by the German Communist Party during the period in which Hitler was coming to power. They regarded the right as doomed by historical inevitability; it was other parties on the left they worried about. Partly as a result the German Left spent resources fighting each other rather than the Nazis.
It even worked, in a way. After all, there was a communist regime in part of Germany, for a while...

Posted by: Jonathan Goldberg on December 31, 2003 07:59 PM

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> It was a merry Christmas for Sharper Image and Neiman Marcus

Why does everybody mention Neiman Marcus? They only have 37 stores, total!

p.s. Why won't the HTML stripper even tolerate <b>bold</b>?

Posted by: Noumenon on December 31, 2003 08:14 PM

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Wcw. When I use the term “Socialism” I mean what Lenin meant-- State Capitalism where a central authority makes capital allocation decisions. But you’re right there is such a thing as “Market Socialism” as described by Stiglitz in his book “Whither Socialism.” Nevertheless there are people who are congenitally hostile to Capitalism, both as practiced in the US, and as a theory of capital allocation or wage determination. For example many feminists want wages determined (at least for women) by a somewhat vague theory of “comparative worth.” They don’t like the fact that (say) tree trimmers earn more than librarians. Their attitude is: “if that be the market, then the market is an ass.” So they want a political authority of some kind to determine who makes what. This is what I mean by a “congenital hostility” to markets or Capitalism.

Thanks Jonathan Goldberg, your example is much better than mine.

Posted by: A. Zarkov on December 31, 2003 08:43 PM

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There are some who figure Japan's MOF move to increase the amount it could borrow for currency intervention was the action that assured Bush another term.
http://www.prudentbear.com/archive_comm_article.asp?category=Guest+Commentary&content_idx=29204
This strikes me as a more powerful argument than the Conference Board forcasts. (The dollar may fall but it won't collapse.) Were they good on their forcasts in the past few years?
Last but not least of my worries: With a sinking dollar how is it that we have such a stable and low price of gasoline? It seems to me that a rise in the price of crude would take care of any strength in the demand side. Maybe Bush's (re)election is not a sure thing after all.

Posted by: calmo on December 31, 2003 11:31 PM

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Another thing puzzles me is that dollar is sinking while productivity is making jumps. This is not usually expected. Is it that budget deficit more than negates any positive impact of productivity increase on dollar's strength?

Posted by: Bulent on January 1, 2004 12:45 AM

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Bulent - a budget deficit in Keynesian macro is supposed to lead to a stronger currency, as government spending crowds out private investment, increasing interest rates. This hasn't happened in the past year. It's the gigantic hole in the balance of payments, together with negative real interest rates, which may be weakening the dollar, together with vague signs of life in the European and Japanese economies (never forget that currency rates are influenced by developments on both sides).

But projecting or analysing currency movements is a mug's game - even more ridiculous than "knowing" the winner of a Presidential election a year out.

Posted by: PJ on January 1, 2004 04:40 AM

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I don't think it is wise to bet on deficient demand. Maybe demand falls marginally short of aggregate supply at today's level of bond yields, dollar, etc. But if that is the case, then we should expect those influences to change. The feedback loops in this system, be they market- or policy-driven, seem to be mostly stabilizing.

The last couple years provide a good example of how this usually works. Ex-ante demand was much weaker in 2002 and 2003 than the consensus expected, so the dollar fell and bond yields fell relative to forwards. Ex-post, the economy was fine.

The output gap moves around enough to interest economists and politicians and perhaps affect inflation. But that is really just the residual. In the bigger picture, US GDP rises pretty much in line with its potential. We can imagine horror stories where it does not. Debt implosion, dollar collapse, asteroids striking, Steve Roach getting something right, etc. But betting on such outcomes seems like a losing proposition.

I agree with Krugman and Delong on the damaging distributional effects of Bush's economic strategy. I agree too that the current fiscal policy is unsustainable and irresponsible. But I think the good doctors lose some credibility when they appear to deny the macro economy's natural tendency -- even under Bush -- to emerge from recession.

More importantly, by focusing on the macro indicators they shift the debate away from what liberals care about and towards an issue on which the Bush side will almost certainly win.

High growth this year: Bush good? Low growth this year: Bush bad? As a liberal, I don't like the odds.

Posted by: Gerard MacDonell on January 1, 2004 07:56 AM

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I must say it is nice to have my 401k back to where it was three years ago when I retired, and I hope the Conference Board is right and is not just getting carried away with their wishes.

But the economy can still be a potent issue for Democrats along the lines described by Krugman; that is, it is the plutocracy/overclass that is getting all the benefits while average people get little, if anything. The Democrats have just to get into class warfare, as Clinton advises. The United States is turning into a Social Darwinist hellhole under Bush: how do you build up a pension when jobs are scarce to begin with and job turnover is so high, how do you educate your children if you are middle class, what do you do about retirement when corporate benefits won't be there, and Bush will have taken steps to weaken the existing safety net of Social Security and Medicare?

Posted by: BobNJ on January 1, 2004 09:36 AM

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" In the strict sense, voters don't vote on the economy, they vote based on employment."

Roy Fair's model does not use "employment" at all. It does use real per capita GDP growth for the 3 quarters prior to the election. Which, does capture employment indirectly, but bakho seems guilty of wishful thinking.

Posted by: Patrick R. Sullivan on January 1, 2004 09:46 AM

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"This is the “things must get worse before they get better” philosophy which has caused much suffering in this world."

Isn't this Bush's philosophy with respect to the deficit?

Posted by: Draeton on January 1, 2004 10:35 AM

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Having read Roy Fair's criteria and perused his website, I must congratulate him on a spectacularly successfull endeavor, as judged by past performance. It appears the only time he was off a lot was in 1992 where he judged that George Bush Sr. would get elected by a small margin, so he was off about 6 points in his total.

I think that his variables of economic good news and growth, along with the incubent effect are important parts of the equation to consider, and obviously serve him to great effect.

However, the equation is a bit of skullduggery, in that one of the fundamental tenets that he has had to incorporate (and continually change during the course of his analysis) is that he weights voters with an inherent republican bias which has been more (or less) the case since 1916. In other words it only works if he starts out with a biased situation. Obviously, this was not very successfull in 1992, so I suspect that this bit of fine tuning is just a way to get his data to look better, and doesn't represent any kind of fundamental insight into american voting patterns.

My final take- He has been wrong on a Bush before, so there is no fundamental reason why he shouldn't be wrong again on another one. It is obvious that his initial condition bias is not something "hardwired".

Posted by: non economist on January 1, 2004 10:45 AM

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I just read something about Carl Rowe(spell?) wanting a "realignment" of New Deal.

In a way, that's the Rebublican's choice of battle ground for the upcoming elections.

Democrats just can't move around that and still win the election.

Democrats must accept the Republican challenge about realignment of New Deal, and put up their own model of realignment, in a direction 180 degrees opposite to Republican direction.

It is a zero-sum game. Republicans know it and they act accordingly. Democrats don't seem to have woken up to the fact yet.

Democrats must demonstrate to the American people that unless a New-New Deal (with a global reference) is intalled to redistribute the fruits of productivity accumulation since the original New Deal, America will end up going backwards economically, socially, and militarily just so that the upper five or ten percent income group may keep their privileges for another decade or two.

If America takes that backwards route, however, serious risks of global instability will emerge during the course of that backward process and there will be considerable uncertainity as to what may follow that backward process.

The Republicans and the current bunch of old fashioned capitalists seem not to care what happens to America and to the world unless they get to keep their privileges in terms of controlling vast amounts of capital.

That's a dangerously irresponsible attitude and that attitude must not be allowed to rule America much longer.

Posted by: Bulent on January 1, 2004 10:54 AM

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Not that all this political ramification stuff isn't interesting, but as for the economy itself: it is unimaginable to me that the economy could grow 5.7% in 2004 without both the inflationary trend rate and long interest rates jumping (say inflation to 3.5%, long rates to 5.5 - 6.0%), which would make 5.7% GDP growth unsustainable.

Personally, i expect 3.5 - 4.0% GDP growth, a modest improvement in job creation, and long rates jumping over 5% (with unknown consequences for the housing market, but surely not favorable).

As for the election, i'll let the voters make their own decisions, despite the "models" we've heard about in this thread.

Posted by: howard on January 1, 2004 12:02 PM

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“The Republicans and the current bunch of old fashioned capitalists seem not to care what happens to America and to the world unless they get to keep their privileges in terms of controlling vast amounts of capital.

That's a dangerously irresponsible attitude and that attitude must not be allowed to rule America much longer.”

Are you insulting Brad DeLong? The irony is that our host is a Bill Clinton New Democrat. This means that he advocates free trade policies and agrees far more with mainstream conservative economists than he does with the far left spectrum of the Democrat Party. The Bill Clinton of 1992 wouldn’t stand a chance to be selected in 2004.

Brad Delong is not exactly thrilled with George W. Bush. But how comfortable will he be with the probable Democrat standard bearer this time around? Will DeLong have to suffer a dark night of the soul? We are indeed entering interesting times. Gosh, I wouldn’t miss this for the world. Might our Berkeley professor be committing hari-kari on election day?

Posted by: David Thomson on January 1, 2004 12:43 PM

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"...our host is a Bill Clinton New Democrat. This means that he advocates free trade policies and agrees far more with mainstream conservative economists than he does with the far left spectrum of the Democrat Party...."

Apart from that I don't know exacty what New Democrat means, that description would fit me too. However, the Republicans at this time are neither advocating free trade policies nor mainstream conservative economics. Observe steel tarriffs; observe budget deficit. The current administration is savagely axing every single chance of expanding equal rights for all as it would be permitted and required by increased productivity.

The main thing I don't understand about our host is that he once said he was among the few Democrats who favored, along with Secretary Rubin, the budget surplus. But I'm sure there is an explanation for that, which would not change the following basic fact:

Bill Clinton as well as Bradford Delong advocate the state doing more for the less advantaged people as productivity, jobs and national income grow through the market economy and free enterprise.

Me too.

Me also looks a little bit further into the future and envisions (a) collective ownership of capital (via pension funds etc, and shareholder activism type of trends), (b) direct democracy and (c)universal coverage of social safety net and higher education, all on top of market economy and free enterprise system.


Posted by: Bulent on January 1, 2004 01:07 PM

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Hopefully the economy will grow at 4% or so this year, but I will vote against every Republican no matter how fast we grow. The Concressional and White House leadership are dreadful on every issue.

Posted by: Emma on January 1, 2004 01:31 PM

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Wait and see what happens over the next 60 days. Housing sales are falling...in the face of free money. When free money isn't enough and when the current stock market bubble is based on unprecedented amounts of leverage, anything can happen.

In addition, I don't see where consumer spending goes up 5% and prices stay at 2%. Wishful thinking?

Posted by: John Gage on January 1, 2004 02:01 PM

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Fair's model, as was pointed out, was wrong the last time there was a jobless recovery. While that's only data point it does make the argument that the employment situation is what matters one that can be credibly made.

Calmo: thank you for that Prudent Bull article.

As an aside - plot the S&P with Euro adjustment in. What stock market recovery?

Posted by: Ian Welsh on January 1, 2004 02:37 PM

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Ian Welsh

The key to this year was currency currency currency. Look closely at the Morgan Stanley MSCI data. We did not need gold stocks, foreign stocks were safer and returned more.

Posted by: anne on January 1, 2004 02:40 PM

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In domestic stock terms certain tech stocks were the place to be (this is mostly a hindsight observation alas.) But you're absolutely right Anne - the US was not the place to be last year - and it looks like it probably won't be the place to be this year, except in a few sectors (tech will not be one of them, I think).

Posted by: Ian Welsh on January 1, 2004 02:45 PM

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China, Japan, and the Asian tigers have defended the dollar, and will continuie to. There may well be a continued fall in dollar value, but the fall will be orderly.

Remember oil as several commodities is priced in dollar terms. Still, oil and gas product prices have been quite gih for a year.

I am defensively bullish for the coming months.

Posted by: anne on January 1, 2004 02:50 PM

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Ian Welsh

My guess has been that we could use international drug companies as a fine hedge against the dollar. Also, the valuations were fine so we could be patient. I also liked Total, the French oil company. Mostly I liked the western European country indexes that had been weakest through the bear market. Well, they have caught up now with a vengence. No such obvious values now, but European stocks still seem defensive and the dollar is not likely to strengthen too much if at all against the Euro.

Posted by: anne on January 1, 2004 03:06 PM

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By the way, Brazil was up about 115%. A fair portion reflects the decline in value of the dollar, hopefully not a problem for Brazil in the coming year. I was widly bullish about Brazil, but am cautious now.

Posted by: anne on January 1, 2004 03:23 PM

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Mexico showed a significant weakening of the Peso against the dollar, and this is interesting.

Posted by: anne on January 1, 2004 03:30 PM

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Right now, I am still quite bullish. Productivity gains are going to management-ownership not labor, so earnings are fine. There is surely a middle class income and wealth problem, but such problems take years to become fully apparent. We have awful fiscal policy, but the effects will likely develop slowly. My guess is enough demand to keep earnings in fine shape for another year. Long term economic worries, near term market smiles.

Posted by: anne on January 1, 2004 03:33 PM

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I would add to all this that Tony Crescenzi who has been dead right for the last 12 months is forecasting a great 2004 for the economy. I'll take his view on it.

Posted by: William on January 1, 2004 04:05 PM

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Regarding an alternative view on productivity measurements, I recommend the following articles. There is some overlap, they are all a bit lengthy, and the first one is more dramatized as it's from a newspaper, but they are a worthwhile read.

http://www.usatoday.com/money/workplace/2003-12-16-hours-cover_x.htm
http://www.morganstanley.com/GEFdata/digests/20000209-wed.html
http://www.morganstanley.com/GEFdata/digests/20030730-wed.html
http://www.morganstanley.com/GEFdata/digests/20031202-tue.html

I know too little what the productivity numbes are actually measuring, but my gut feel is it is mostly bull. Productivity at least in my definition contains too many intangibles that cannot (and usually are not) expressed in money or other measurable quantities. For example, if two service firms provide services of the same category (cleaning, accounting, repair, etc.), but firm A does a quick one-size-fits-all job, processes more customers per day, and firm B does a more individualized or careful job, and presumably charges more. Then who is more productive? What is the productivity difference between a satisfactory and a superb cleaning job? Many customers may not even know the difference.

In software development, productivity may also be difficult to define -- you can spend 1 week to write a piece of program that requires lots of bug-fixing down the line, or do a more proper job in 2-3 weeks that requires no or much fewer bugfixes. When assuming that the programming and bugfixing are done by different people, then how do you define productivity? My shoddy job will be your chance to be productive (fixing bugs), I do my work well, and you have fewer bugs to fix. You may write a program that does its job quicker or slower, let's say 1 min versus 2 min. And let's say the quicker version takes more time to develop. There appears to be quite some leeway for productivity increases by lowering product quality (or developing new product with suboptimal quality) without it being blatantly visible.

Posted by: cm on January 1, 2004 05:13 PM

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Anne, I think the argument that this year will not be as good as the last for the market is not an economic one - it's a market one - most of the improved earnings may already be priced in. I'm not sure on this - but I don't think this year will be as good for the market as last year was.

I do agree that the problem of productivity gains going primarily to management and the investor/creditor class is an important one - but a slow acting one. Bush II has accelerated it extremely, but it's a long term problem that has been going on for about three decades now. It's a hell of a bad sign for the long term health of the US economy.

Posted by: Ian Welsh on January 1, 2004 05:41 PM

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Actually, a big increment in demand in the last half of '03 and for most of '04 will be mortage, mortgage mortgage.

The mortgage refi-boom of the first six months of 2003 was very, very big. Some refi's take principal out of their home for extra liquidity; while everybody generally gets a lower monthly payment which makes for more monthly discretionary spending going forward.

The biggest single impact of Fed policy is through homeowner mortgage refi, these days.

Posted by: Anarchus on January 1, 2004 05:49 PM

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cm:

"...I know too little what the productivity numbes are actually measuring, but my gut feel is it is mostly bull..."

When people talk about productivity, they don't always talk about the same animal. Most common meaning of productivity appears to be this:

"Investors pay attention to productivity because they know the Federal Reserve does: high productivity is the key to allowing the unemployment rate to drop to low levels without risking inflation."

Link:
http://www.moneychimp.com/glossary/productivity.htm

So when you hear anchorpersons "productivity up by dot dot dot..", it is labor productivity they are talking about, as computed and announced by BLS Bureau of Labor Statistics.

From BLS:

"
The data sources and methods used in the preparation of the manufacturing series differ from those used in preparing the business and nonfarm business series, and these measures are not directly comparable. Output measures for business and nonfarm business are based on measures of gross domestic product prepared by the Bureau of Economic Analysis of the U.S. Department of Commerce. Quarterly output measures for manufacturing reflect indexes of industrial production independently prepared by the Board of Governors of the Federal Reserve System...."

Link:

http://www.bls.gov/news.release/prod2.nr0.htm

Of course, such details of how productivity is measured don't make helluva difference to investors, in the context as stated in moneychimp.com above. So days with high productivity and high unemployment are golden days for stock market people -- ceteris paribus.

The productivity animal that Bradford DeLong talks about in his papers (several links in his homepage), however, is a completely different one, concerning very long term issues of growth and wealth and welfare at national / international levels. Check out this sentence, for example, from Mr. DeLong:

"... The government should jumpstart the industrialization process by transforming economic structure faster than private entrepreneurs would...."


Link:

http://www.j-bradford-delong.net/pdf_files/QJE_Equipment.pdf

What (or, one of the things) Mr. DeLong says in that article is that "..accumulation of machinery is a prime determinant of national rates of productivity growth.." and so the Government should do things to get that rolling where private sector left on its own is not anxious about it.

I know of some nations that had civil wars over economic, social and political implications of that kind of thing.

Posted by: Bulent Sayin on January 1, 2004 07:31 PM

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Bulent,

You've once again hit the nail on the head.

"(a) collective ownership of capital (via pension funds etc, and shareholder activism type of trends)"

The party that realizes that collective need not equal government will have the next long-term majority. The New-New Deal you speak of.

A majority favors more collective action.

A majority does not like coercive monopolies.

Put the chocolate and peanut butter together...

Posted by: Ged of Earthsea on January 2, 2004 01:10 AM

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Glad to hear that -- after all that "ouch! my finger!"

A majority does not like coercive monopolies because coercive monopolies act like coercive states in their own domain.

And now with all this Rummy Productions towards privatization of defense operations and growth of private security service providers and international move away conscription and closer to professional army concept... somebody on this blog (Camille Roy?) was already talking about IBM Oracle etc having their own armies and diplomatic corps... I mean, all of a sudden we are going to see people like the leading figures of Enron type corporate scandals commanding private armies and running diplomatic affairs?

God forbid!

Let me now check how well shareholders use the internet in their shareholder activism...

Posted by: bulent on January 2, 2004 01:34 AM

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Here is something on how shareholder activism can and does use internet:

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Internet Spurs Shareholder Activism
[March/April 2001]
By Patrick S. McGurn

Link:http://www.nareit.com/portfoliomag/marapr01/boardroom.shtml


The Internet companies can't live without it, but they must learn to live with it as well. That's clearly something that Boykin Lodging Co. was forced to confront last Fall.

On October 26, the hotel real estate investment trust announced plans to webcast its third-quarter analyst conference call on November 2 on its web site (www.boykin lodging.com). A not-so-funny thing happened on the way to this e-forum. The Hotel Employees and Restaurant Employees International Union (known as HERE) issued a November 1 press release urging Boykin shareholders and other interested parties to visit its alternative web site (www.BoykinInvestor.org). HERE's blunt message: the Boykin's board should "consider a sale or liquidation of the company, and, in the meantime, (to) reform the company's corporate governance policies." (HERE represents employees at three Boykin owned hotel properties.)

Welcome to shareholder activism in the Internet Age. While dissident challenges are nothing new for the REIT sector, the Internet is changing the rules of engagement. The web allows activists such as HERE (a very small shareholder in Boykin's stock) to reach out to investors 24 hours a day, seven days a week to push their agendas. It also allows them to communicate in real time for a very small price.

BOY, Oh Boy!

(More on the web page linked above)

-------------------------------
My comments:

Internet removes the need to discuss every thing during the physical shareholders' meeting once or a few times a year.

There is a lot of room and opportunity for direct democracy in corporate governance.

I think the the funds allocation process at NIH National Institute of Health provides a beautiful example of direct democracy in corporate governance. (It is not perfect -- Director still has the last word. But it is pretty good nevertheless as is.)

Link:

http://www.nih.gov/about/researchpriorities.htm

Posted by: bulent on January 2, 2004 01:50 AM

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Anarchus writes, "Actually, a big increment in demand in the last half of '03 and for most of '04 will be mortage, mortgage mortgage."

And...

"The biggest single impact of Fed policy is through homeowner mortgage refi, these days."

The negative trend I'm most certain of in 2004 is that mortgage interest rates will increase, and that the refinancing boom is over. I don't see any significant additional refinancing in 2004.

Did you mean that the demand in '04 would be due to the refinancing in '03, or do you think there will be additional refinancing in '04?

Posted by: Mark Bahner on January 2, 2004 05:04 AM

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"The negative trend I'm most certain of in 2004 is that mortgage interest rates will increase, and that the refinancing boom is over. I don't see any significant additional refinancing in 2004."

I rather think we have a ways to go. Mortgage rates can stay low even for another year. Home prices are still nicely rising. Re-financing can continue, though more slowly.

The guess is reasonably stable interest and mortgage rates this year.

Posted by: anne on January 2, 2004 05:37 AM

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"Long term economic worries, near term market smiles."

Well, I've looked all the way out to the year 2100. Things look fine to me. ;-)

http://markbahner.typepad.com/random_thoughts/

P.S. My predictions are for the whole world. But I think that U.S. per-capita GDP growth rates will be approximately the same (percent per year) as the average value for the world.

P.P.S. This doesn't really address what will happen to various groups/individuals in the U.S. My prediction is that the post-Baby-Boom generations will get completely hosed, in terms of the return on their "investment" in the Ponzi scheme known as Social Security. I also predict they will get hosed on Medicaire, in terms of a return on "investment." But I think they'll be very, very wealthy from other means (e.g. private investments, inheritances from the Baby Boomers).

Mark

P.S. The first commenter on my weblog will receive the prized First Commenter award. ;-)

Posted by: Mark Bahner on January 2, 2004 06:50 AM

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"I rather think we have a ways to go. Mortgage rates can stay low even for another year. Home prices are still nicely rising. Re-financing can continue, though more slowly. The guess is reasonably stable interest and mortgage rates this year."

The Economist (magazine) is getting more and more worried about a "housing bubble." It seems to me that the concern is legitimate. I don't see how housing prices can continue to appreciate too much longer.

I refinanced down from 6.625% to 5.625%. I think my mortgage lender (Chase, in both cases) is a chump. If I had $100,000 (approximate value of my mortgage) lying around, I wouldn't loan it out for 30 years at 5.625%. Especially not with the risk of the U.S. federal government potentially attempting to inflate away its debts (sometime in the 2010s-2020s).

But perhaps I'm missing something?

Mark

P.S. Contrary to what I wrote above ;-)...

It seems to me that there may be significant disincentives to the U.S. federal government (and other modern first world governments) trying to inflate away its debts, now that much of the federal spending is keyed to inflation (via cost of living adjustments). Such disincentives weren't around in, for example, the 1800s and early 1900s. I'd be interested in seeing an economist comment on this subject: i.e., are there modern disincentives to governments inflating away debt that didn't exist previously? (I'd be interested in seeing an economist comment on this subject, even if the comment is, "You don't have a clue what you're talking about." ;-).) Dr. DeLong?

Posted by: Mark Bahner on January 2, 2004 07:22 AM

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Alan Krueger of Princeton agrees that increasing federal debt could result in a future tendency to more inflation. The restraint or lack of retraint will be the Fed rather than cost of living adjustments. What does not seem possible is that we grow our way out of debt. The only other solution is tax changes to increase revenue.

There is just no reason to fret about inflation now. There is generally little price leverage. Supply chains are global, and price pressures tend to reduce quickly.

Posted by: anne on January 2, 2004 07:54 AM

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Remember, banks package and sell mortgages. Also, there are hedges against mortgage packages that are systematically used. The main bank worry is that housing prices are sustainable, and my guess is they generally are. The Economist does not have to buy a home in New York. Who cares about a lone buyer. There are lots of buyers as long as payments can be made. That means population growth and decent jobs. A slowing rise in prices is far more reasonable. Commercial property markets are far more vulnerable.

Posted by: anne on January 2, 2004 08:04 AM

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Zarkov, thanks much for the cordial response. while I still disagree with your analysis, it's clear your initial comment was indeed made in good faith. still, as I said, the plural of anecdote is not data. if you have a link or reference to some good surveys on the subject, I'd appreciate them.

Sullivan, charmed, I'm sure. Fair's page at http://fairmodel.econ.yale.edu/RAYFAIR/PDF/2002DHTM.HTM is pretty explicit: the model is a moving target. check column 3 of Table 1 for what happens when you go out-of-sample. any comment on the Iowa vote market, or do you prefer not to think about evidence that contradicts your thesis?

Posted by: wcw on January 2, 2004 08:29 AM

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" It appears the only time he was off a lot was in 1992 where he judged that George Bush Sr. would get elected by a small margin...."

And in 1992 there was an abnormally strong 3rd party candidate, and a spirited challenge within the Republican party to Bush I. Neither is likely to be the case this year.

The fact stands that Fair's model was the best predictor of the 2000 race. Even better than Zogby's last poll before the election. Better than the Iowa Electronic Market.

Posted by: Patrick R. Sullivan on January 2, 2004 09:21 AM

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"There is just no reason to fret about inflation now. There is generally little price leverage. Supply chains are global, and price pressures tend to reduce quickly."

This is certainly true for manufactured goods, and indeed effective retail prices around here seem to have leveled or declined (in the form of more sales/promotions) over the last year -- stores are apparently reluctant to cut nominal prices (understandibly). For technology products it's harder to say, as you rarely can compare the same products even over one year's time.

But how often have I heard that we are living in a service economy? My medical/dental insurance costs are happily rising. (Much of it is borne by my employer, but I do get higher paycheck deductions and copayments, and my out-of-pocket amount also seems to be up.) Again, anecdotal evidence, but I heard many healthcare related complaints.

When I last got a Business Week (?) in my hands, sometime around Nov. 2003, it had an article about how businesses have started nickel-and-diming customers, and introduced small fees slapped onto many things, as this type of price increase is less visible than raising the product/service price. The author also suggested that these additional costs are not tracked in the CPI, so that the official cost-of-living number may undermeasure the effect.

For example, compare airline tickets today and a few years ago: the nominal prices are more or less stable, but airport taxes etc. are ever increasing. Also apparently due to "improved" electronic reservation systems and better capacity management, it has become harder to get good deals. Hotels have started to charge a few bucks a day extra to switch on the telephone, and slap on other fees and local taxes when you reserve, not in the advertised price. Governmental fees (permits, business license, ...) are increasing. Parents with kids in school are telling me how they are asked to pay for things that the school cannot afford. The usual oil change around here seems to become more basic as the previously included fill-up of other fluids (windshield cleaner ...) is disappearing from some ads as prices are cut, etc.

All of those are kind of "hidden" charges or reduction in product/service in the sense that they are not usually publicly reported or advertised. I'm wondering what data actually get into CPI. Some of the items I cited are probably covered, but I'm not sure.

And, to state the obvious, certainly the lack of price leverage is felt by workers. If your employer cannot raise price or market share of the product, but still has to grow 10% to meet somebody's expectations, then the result often will be pay/benefit/workforce cuts, or increased pressure on workers to deliver more or in less time.

Posted by: cm on January 2, 2004 02:40 PM

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Sullivan, if you and Fair are right, more power to you both. risk a few ducats at that selfsame Iowa market and you can make money by this fall. have you done so? I'll wager dollars to donuts you have not. will you? I'll be interested to hear.

best of luck, either way.

Posted by: wcw on January 2, 2004 02:57 PM

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Bulent,

"A majority does not like coercive monopolies because coercive monopolies act like coercive states in their own domain."

Well, that time you hit the finger.

;-)

Guess you missed the conclusion since I only explicitly listed two premises. I'm saying that the monopoly on coercion is held by the state. It's a monopoly; there can be only one.

Premise A: A majority sees the need for more collective action.

Premise B: A majority disfavors coercive monopolies.

Premise C: Only the state has legitimate authority to employ coercion under our system of government - thus it is a coercive monopoly and will remain so.

Conclusion: The next majority will promote non-state (more likely, state regulated but not administered) collective solutions. On the GOP side, the "ownership society" is closer than the "nuke anything collective" that preceeded it. Non-DLC Dems are spinning their wheels, and will continue as long as collective always equals state in their minds...

Posted by: Ged of Earthsea on January 2, 2004 06:22 PM

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""A majority does not like coercive monopolies because coercive monopolies act like coercive states in their own domain."

Well, that time you hit the finger."

He missed your point, but his point is valid nonetheless -- the outsourcing of the government function to be a coercive power to private organizations, or leaving coercive actions to non-government organizations is potentially dangerous. It may be a first step to fracturing a (somewhat) homogeneous society into something more akin to fiefdoms controlled by people that may be less subject to oversight by elected bodies and thus are less answerable to society.

Posted by: cm on January 2, 2004 08:46 PM

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Yes, cm, it is indeed dangerous.

Ged, I was subscribing to a general sense of the word coercion, using the qualifier "in their own domain". For example: With telephone monopoly, you don't have phone service unless you sign the legal contract THEY put in front of you, and that's a form of coercion.

Posted by: bulent on January 3, 2004 12:50 AM

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"... as collective always equals state in their minds..."

That any one in America would advocate that notion of collectivism is a surprise to me.

Posted by: bulent on January 3, 2004 12:57 AM

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>He missed your point, but his point is valid >nonetheless -- the outsourcing of the government >function to be a coercive power to private >organizations, or leaving coercive actions to >non-government organizations is potentially >dangerous.

Which was my point. Coercive power should be reserved for the state alone. Doing this, however, creates a monopoly, and monopolies have many drawbacks. I can list them if you like.

Therefore, it would make sense to seek non-coercive collective solutions through non-govermental organizations. The goverment can still play a strong regulatory role, but you don't send the umpire up to bat.

Posted by: Ged of Earthsea on January 3, 2004 01:04 AM

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"...it would make sense to seek non-coercive collective solutions..."


Yep. Direct democracy! :)

-Laws and regulations as simple as they can get, to the point that idiot computers can understand them.

-Decentralization.

-Computers execute routine transactions.

- Elected councils / stakeholder committees vote in matters that require human judgement.

**And thus bureaucracy w/O bureaucrats!** :)

- General public participates in politics on a perpetual basis, thanks to new info and comm tech.

- More frequent voting possible again thanks to new tech.

- Universal coverage of higher educaiton helps significantly to produce a population well informed and responsible.

- Universal coverage under social safety net and an increasingly more equitable society enhances moral and responsible attitude in all segments of society.

I think Dems ought to be thinking along those lines.

(If they won't, Republicans will, however, starting no earlier than 2008, and perhaps as late as 2020 -- assuming two party system prevails that long.)

Posted by: bulent on January 3, 2004 01:34 AM

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