Bernanke on Jobs

After a few months of strong job growth Chairman Ben Bernanke is calling for caution and maybe even signaling that that Federal Reserve will act in a bigger way to help support the economy. 

The real interesting portion of Bernanke's comments was his comments on why job growth may be accelerating. He talked a little bit about how job growth should be a little lower when the economy is growing at 2% or 3%, yet job growth is happening at a level ordinarily associated with higher growth levels. His rationale is that companies may be compensating for over cutting their workforce as the recession accelerated in the Fall of 2008 and early 2009.

If this is the case we can expect job growth to slow noticeably sometime in the next 3 to 6 months unless some outside factors help the economy along. Fed action would certainly help keep the economy moving, as would a substantial decline in oil prices which would be a quasi tax cut for American consumers. Additionally but far less likely, Congress could take action to reform corporate or personal income taxes. Congress could also halt government layoffs which numbered over 1 million lat year, or could fully fund infrastructure spending to get construction workers back on the job while rebuilding the circulatory system of the American economy. 

Here hoping that our economic luck this year is better than last, but everyone should listen closely to the Chairman's words because without action job growth could stall again. 

More to come on jobs....

I'm Back

Hello Friends,

At this point it is unlikely that anyway still reads this blog, but because I hope people do read in the future, this is my "I'm Back" post. After a long tenure at OFA as a part of President Obama's team, I am back in the real World.

My hope is that from here on out this will be a place where I talk mostly about economic, tax, and education policy, but with a little bit of everything else mixed in.

Here is to a free and open internet where ideas can be exchanged quickly and little cost for the betterment of society.

Thanks for reading,

Econowonk

Apple and The Fight for American Jobs

When famously asked "What kept them up at night?" President George Bush responded an attack on the homeland, and Chinese President Hu Jintao said creating 25 million jobs a year.

The answers of those two President's reflect the fundamental problem we face as a nation. That while we as a country and our policy makers are focused on 25 different issues and non-issues while China and many other nations have a laser focus on job creation.

The article that is the impetuous for this post is called, "How the US Lost Out on the iPhone Work."

I highly recommend the article. In the days to come I will highlight some of the potential policy solutions, but the bottom line for today is that at this moment any good ideas that could come of such a case study are two disparate to attract tenable political support in an election year.

CBO on Stimulus

I am not a huge fan of the stimulus. I think the range of programs is close, but that it should have been much larger. But, here is the CBO on the stimulus multiplier effects.

The output gap is still massive.

Weekend Round-up - Perception Gap

Interesting piece from the New York Times about the recession, and when growth will resume.

Also, WSJ Real Time Economics has some great commentary on Warren Buffett's shareholder meeting this weekend.

Also, Tyler Cowen has a great link to an article mainly about unconventional monetary policy, and Matt Y. debunks bad arguments from the right and the left pretty much on a daily basis.

My own personal take away from the weekend of television and blogs was a clear perception gap in our democracy. It is astounding to me how upper middle class and rich people talk to their audience.

As Matt pointed out David Gregory, Brian Williams and many hosts are talking about tax increases, when 95% of families will being getting tax cuts. I'm no expert, but my guess those 95% are most of their viewers.

Greg Mankiw talked about how difficult it is for economists who decide to do public service, maybe I'm overly sensitive but it does seem that if this idea is onerous - then unemployment must be Armageddon (maybe my lack of family skews this perspective).

It is quite striking to me this idea that despite quantitative knowledge people's perception of the world based on their own situation skews objectivity one way or another. This is the true legacy of the Second Gilded Age and the income inequality that it has left us.

State of the Nation - Final Thoughts

Generally, I thought that the speech hit just the right notes.  Many of these ideas are laid down in the books The Political Mind and The Political Brain, both are worth the time.

As the President executed his political tap dance, he articulated commonsensical policy prescriptions for the problems we face as a nation. Not an easy feat. Health care, Energy Independence, Education, Curing Cancer, and Financial Regulatory Reform; he truly had policy prescriptions that both citizens and policy wonks alike can identify with.

That said, as a nation all short, medium, and long-term challenges and goals are trivial if the financial system it not fixed. On this agenda item I think that the President's words and the Administrations rhetoric have been opaque, weak, and reactive. And the speech had nothing new to offer in that regard.

Honestly, if I had to write a playbook about the first 100 Days of a Presidency it would be pretty close to what the Obama team has done, but this competence to this point has been overshadowed by the incompetence on the banking system front. I hope this is soon to change.

Again, I won't really be around the next week or so, so please read all of these folks to get an idea of what financial system reform is looking like and what it should look like.

News Reports

Stress Test

Housing Sales

Bank Capital

Citigroup - Zombie or Government Entity?
Government - Which Has Not Looked Good

Joint Statement

State of the Nation Address

Bernanke Testimony

Blogosphere - Where The Debate Has Been Smart and Lively

Calculated Risk (read everything yesterday and today)

Krugman (read it all)

Yves Smith (is on top of the debate)

WSJ Real-Time Economics (they talk to more reputable economists than anyone)

State of The Nation Address - Live Blog (from last night)

9:31 - Pretty sure the President just proposed nationalization or private banking with public control

9:32 - CEO Bashing

9:33 - TARP has been run poorly. We need to solve the problem.

9:34 - We will do whatever it takes to fix the financial system. It is not about helping banks, its about helping people.

9:35 - We need to reform the financial system

9:36 - But lets look long-term .... health-care, energy, eduction....Budget is a Blue-print for the America I want to see.

9:37 - History says Reagan and Greenspan were wrong.

9:38 - G.I. Bill was a engine of growth.

9:40 - America needs to lead in battery and alternative technology.

9:41 - I want a climate change bill.

9:42 - We want and auto industry that is retooled and imagines the technology of tomorrow

9:43 - Health care is an economic problem for individuals, small businesses, and corporations

9:44 - (The Speaker was pumped) about SCHIP

9:45 - (I'm sorry but what doesn't this guy think he can do?) He just said we are going to cure cancer. And that we want preventive health care and coverage for all.