Brad DeLong's Semi-Daily Journal: A Weblog

This thing that crossed my desk yesterday is not a tremendously constructive contribution to the economic debate.... Martin Feldstein praises George W. Bush's Social Security plan, which he says involves (a) no increase in Social Security taxes, (b) no cut in expected Social Security benefits, and (c) voluntary accounts for everybody; and Feldstein criticizes John Kerry for trying to face up to the gap between projected Social Security revenues and projected expenditures WSJ.com - Fact vs. Fancy: The Skinny On Social Security: George Bush laid out an approach to maintaining Social Security retirement income without raising taxes. He repeated that proposal in his State of the Union address and in a speech just last week. The basic Bush strategy is to permit individuals to augment their traditional tax-financed Social Security benefits with funds accumulated in an investment-based personal retirement account (PRA). In adopting such a mixed plan, the U.S. would follow investment-based strategies of several countries including Australia, Britain and Sweden. The PRA assets would be invested in a mixture of broad-based stock and bond mutual funds. When the individual retires, the PRA assets could be used to purchase an annuity. The combination of those annuity payments and the traditional...

WSJ.com - Free-Trade Worriers: By DOUGLAS A. IRWIN August 9, 2004; Page A12 If there is one truth about the public debate over trade policy, it is that free trade is always under fire.... But recent free trade critics* are content to beat up on the idea of free trade and stop there, seemingly afraid to go the next step and embrace protectionism. Messrs. Schumer and Roberts state that "old-fashioned protectionist measures are not the answer," and Mr. Cassidy concedes that "economists are right when they say that protectionism isn't the answer to outsourcing."... So why are the recent critics so hostile to free trade while ruling out protectionist solutions? To hide the fact that they have no solutions to offer. The poverty of free-trade critics is that they fail to bring anything constructive to the table.... Many of the free-trade critics raise legitimate and important issues about wages and job creation in the United States. One would think the debate would focus on strengthening the economy or empowering workers in a difficult labor market. Workers can be empowered by allowing them to have portable retirement accounts rather than pensions tied to a particular employer. The portability of health-care benefits should be examined,...

A bad employment report for July. It is worth noting that the administration's forecast, made last winter, was that by this time payroll employment would be at 132.8 million--not the 131.3 million that it is actually at. Somebody should ask Bush todaywhat has gone so unexpectedly wrong to put employment 1.5 million lower than expectations in just half a year. And somebody else should ask Bush today why he adopted a "jobs and growth" program of shifting taxes from the present into the future that got us only about half the bang per buck of deficit that we would have received from a normal Keynesian fiscal stimulus program. He didn't make the lousy labor market. But he and his team sure did pass up a lot of chances to buy insurance against the bizarrely weak job market we now find ourselves in. Job growth weaker than expected - Aug. 6, 2004: Hiring by U.S. employers slowed significantly in July, according to a government report Friday, as the number of new jobs added to payrolls came in far below Wall Street expectations. The Labor Department report showed only 32,000 new net jobs added to payrolls during the month, down from a...

A correspondent tells me to look again at Henry Blodget's advice about how to think about the Google IPO, because Blodget gets it wrong. And indeed he does. Blodget writes: Gambling on Google - Slate bids on Wall Street's hottest IPO. By Henry Blodget: In formulating our own bids, we need to think through several issues: 1) what price the market will place on Google shares (which may or may not bear a resemblance to the company's "intrinsic value"); 2) what price other IPO-bidders will conclude the market will place on Google shares (a function of others' perceptions of others' perceptions); and, 3) what price other IPO-bidders will bid in light of the foregoing (how others will "play" their perceptions of others' perceptions) Blodget's (2) and (3) are completely irrelevant to the problem of figuring out what someone should bid for Google's shares. The right strategy is to estimate the market value of Google in the following way: you need (a) to estimate the intrinsic value of Google's shares--what they would be worth to a buy-and-hold investor, (b) bump up that value by an allowance for the possibility that the market will become irrationally exuberant about Google and the stock...

Robert Waldmann writes from the untroubled paradise on the shore of the wine-dark sea that is northwestern Sardinia: The thing that shocked me most [about the 911 Commission Report] is that the suicide terrorists had lives (like al Mihdhar, who left the US without permission to see his newborn child). I assumed that suicide terrorists were people who might otherwise have killed themselves without killing others. Instead it seems that many had something to live for... As Thomas Hobbes wrote long ago, Religion with a capital R and Belief with a capital B in what priests tell you are a terrible things. The promise of Eternal Paradise in Heaven, if believed, upsets the rational calculus by which a man scared of violent death and desirous of commodious living signs the Social Contract and bends his neck to the Sovereign Leviathan. Thus religious fanaticism--in Hobbes's case the Roundheads who shot out the stained-glass windows of Canterbury Cathedral for target practice, or the followers of Archbishop Laud who were willing to kill to move the communion table up to the back of the church--breeds large-scale death and destruction. The more I think about it, the more terrifying the parallels become between our...

When Joshua Bolten, George W. Bush's budget director, tells New York Times reporter David Rosenbaum that: The New York Times: "the improved budget outlook [from last January's forecast] is the direct result of the strong economic growth the president's tax relief has fueled." The natural follow-up question for David Rosenbaum to ask is: But your forecast last January already included the effects on the economy of George W. Bush's tax relief. How can a change in your forecast between then and now be attributed to a factor--tax relief--that was in the forecast then, is in the forecast now, and has not changed? Don't changes in the forecast have to be the result of things that have changed, and not of things that have stayed the same? But David Rosenbaum doesn't ask this natural question--he takes Josh Bolten's quote and leads with it. Why not? David Rosenbaum is clueless about forecasts and the budget, has never bothered to educate himself, and is unqualified to write this story. David Rosenbaum knows that if he does anything other than parrot what Josh Bolten wishes him to parrot he will lose his ability to get administration-quotes-on-deadline, and his editors will be mad at him....