Go Pack Go! (Song by Garbage)

Oh, this is going to be nice

Paul Krugman brings to my attention that FRED has added international data - lots of it! For example:



This is great for me, and especially for my students. Unfortunately there's no interest rate data here, or indicators of fiscal and monetary policy.

Pretty Girl's Brett Favre Farewell Tribute Song!

Green Bay Packers - Fight Song

I Love My Green Bay Packers

Go Pack

Understanding basic arithmetic

The New York Times reports that jobless claims rose unexpectedly in December:

In addition, the Labor Department said that new claims for unemployment benefits in the United States rose more than expected last week as harsh weather conditions in some parts of the country kept workers at home and caused a backlog in the processing of claims, a government report showed on Thursday.

Initial claims for state unemployment benefits jumped 51,000 to a seasonally adjusted 454,000, the highest since late October, the Labor Department said. That was the largest weekly increase since September 2005...

Still, the four-week moving average of unemployment claims -- a better measure of underlying trends, rose 15,750 to 428,750 last week, implying a gradual labor market recovery that could compel the Federal Reserve to complete its $600 billion bond buying program aimed at bolstering the economy.

Attention NY Times business journalists: a four-week moving average is not a separate piece of data that provides additional information on top of the information contained in the weekly data. If initial claims are higher this week than in the previous four weeks, the four-week moving average will rise. It is an arithmetical fact, not a separate indicator of underlying trends.

Exports and the exchange rate

In today's WSJ Judy Shelton writes that depreciation of the dollar is not the way to meet President Obama's goal of doubling US exports. Obama should take his cue from Ronald Reagan instead, says she:

"We can outproduce, outcompete, and outsell anybody, anywhere in the world," President Ronald Reagan affirmed in his own State of the Union speech on Feb. 4, 1986. But unlike our current president, Reagan linked that pronouncement to an unassailable declaration: "The constant expansion of our economy and exports requires a sound and stable dollar at home and reliable exchange rates around the world."

Ahem: just because Ronald Reagan believed something doesn't make it true. Let me pause for a moment for you regular readers of the Wall Street Journal to let that statement sink in.... Just because Ronald Reagan believed something doesn't make it true.

Look at the data: there was no change in real exports from the US from 1981 to 1985. Reagan announced his commitment to boosting exports in 1986, at precisely the time that the dollar experienced one of its biggest depreciations in history. And exports responded magnificently, almost doubling over the next five years.

To top off the irony, the reason that the dollar depreciated so much after 1985 was that the US, Japan, France, the UK and Germany committed to do exactly this when they signed the Plaza Accord in September 1985. That is, Ronald Reagan was pledging to maintain a strong dollar four months after he explicitly committed to a giant devaluation!

Curricular matters

From APPC minutes, December 7, 2010: "The revised Cultural Diversity form was approved expeditiously. The Integrative Thinking form was the focus for thirty minutes of discussion about the meaning of interdisciplinary and about differences among multidisciplinary, cross-disciplinary, and interdisciplinary. The discussion will resume in January."

Please God, keep this off the agenda for the next faculty meeting!

Packers fans need a union

Chicago Tribune:

Packers necktie gets car salesman fired

The good people at Wikipedia are falling behind on their fact checking

From Wikipedia's entry on AFDC:

"Early in the program, there were concerns about whether this program encouraged unwed motherhood.^[3] In the 1960s through 1980s, Nobel Prize winning physicist William Shockley argued that AFDC and other similar programs tended to encourage childbirth, especially among less productive members of society (particularly blacks, whom he considered to be genetically inferior to whites^[5]), causing a reverse evolution (dysgenic effect), founded on the premises that: there is a correlation between financial success and intelligence; and that intelligence is hereditary.^[6] Shockley ^[7] along with George H. W. Bush^[6] and others were influential in bringing recognition to this hypothesis among the public and Congress.^[6]"

Surely the Bushes demonstrated the correlation between financial success and intelligence by counterexample!

Smack!

1) Q: Did Devin Hester play yesterday? A: Devin Hester? Never heard of her.

2) Last night on the postgame wrapups people were talking ad nauseum about the "adversity" the Pittsburgh Steelers had to go through to get to the Superbowl. Um, isn't the source of this adversity the fact that their quarterback is a rapist?

3) I hope Jerry Jones gave the Dallas Cowboys players complementary tickets to the Superbowl. They deserve it.

4) Michael Wilbon suggests Bears fans refrain from mentioning the name "Jay Cutler" for the remainder of the winter. He blasts Cutler using words like "failure," "incompetence," "infuriating," "arrogant," "pouting," "a guy with a big arm, an overrated sense of himself, and little if any heart." He says that Cutler is "not worthy of the Bears." Sorry Michael, Jay Cutler is precisely worthy of the Bears. He is the epitome of Bear-dom.

5) My seven year old is learning to talk smack. He says the Packers made the Eagles and Falcons lay an egg, made the Bears run and hide like they were being chased by a hunter, and now the Steelers are going to rust like the Tin Man. I tried to sell him on "the Packers are going to ship their jobs to South Korea" but it didn't take.

6) Like everyone else I'm looking forward to the big Matt Ryan - Tom Brady matchup. Two questions: whose basement will they be playing in, and will it be Madden 2010 or 2011?

Doh!

Jared Diamond (via Brad DeLong) makes the case that humans' adoption of agriculture was the worst mistake we've ever made:

"The Worst Mistake in the History of the Human Race": By Jared Diamond, UCLA Medical School, Discover Magazine, May 1987, Pages 64-66.

To science we owe dramatic changes in our smug self-image. Astronomy taught us that our earth isn’t the center of the universe but merely one of billions of heavenly bodies. From biology we learned that we weren’t specially created by God but evolved along with millions of other species. Now archaeology is demolishing another sacred belief: that human history over the past million years has been a long tale of progress. In particular, recent discoveries suggest that the adoption of agriculture, supposedly our most decisive step toward a better life, was in many ways a catastrophe from which we have never recovered. With agriculture came the gross social and sexual inequality, the disease and despotism, that curse our existence.

Read on...

But then if we'd remained nomadic hunter-gatherers, we'd all look like this:

The origin of the expression, "After further review - the Bears still suck"

Ahh, Majik Man.

The Ice Bowl, 1967

And here's the play-by-play on the final drive:

Happy MLK Day

Martin Luther King's last speech:



King was assassinated the next day. He was in Memphis, where he had gone to lend his support to striking sanitation workers. This morning we had trash pickup as usual. Short memories.

[Listen to the entire speech:

Reagan the mastermind

From SNL, almost as long ago.

Ask President Carter

From Saturday Night Live, many many years ago.

Stagflation

Recent increases in food, energy and now steel prices have raised concerns about a burst of inflation around the world, including the US. Is this evidence that the Fed has gone too far in its efforts to generate a recovery by increasing bank reserves? In my judgment the answer is definitely, no. What's happening with input prices is clearly a relative price phenomenon: flooding in Australia and crop failures elsewhere have made food scarce (and, interestingly, the flooding has also hit the steel market), and the boom in China and other emerging economies has increased demand for energy. This requires an increase in prices of those products (and goods and services that use them intensively as inputs) relative to other products. The easiest way to accomplish this is for the Fed to allow a one-time jump in the US price level, which means several months or a couple of years of somewhat higher inflation than usual. A monetary contraction would not solve anything. The increase in food, energy and steel prices is a result of events in the economy outside the US, so slower growth in the US would have very little effect. A major contraction in the US might put downward pressure on inflation (presumably if the US economy shut down entirely that would diminish demand for food and oil), but the costs of another recession would seem to me to be far too great to pay.

There may be some regulatory changes that could provide temporary relief. First thing I would do would be to suspend or repeal requirements that gasoline require a certain amount of ethanol and eliminating ethanol subsidies. Ethanol seems to be a dead end anyway, and this would free up corn supplies for use as food.

I did not know this

From Wikipedia:

In the 1980 presidential election, PATCO (along with the Teamsters and the Air Line Pilots Association) refused to back President Jimmy Carter, instead endorsing Republican Party candidate Ronald Reagan. PATCO's refusal to endorse the Democratic Party stemmed in large part from poor labor relations with the FAA (the employer of PATCO members) under the Carter administration and Ronald Reagan's endorsement of the union and its struggle for better conditions during the 1980 election campaign.^[4][5]

That has to be one of the biggest blunders in the history of the labor union movement.

Tax reform

I'm a big proponent of tax reform: Obama should take the lead in reforming the current tax code to eliminate inefficiencies, maintain progressivity, implement a carbon tax, and raise revenues we need to finance the government's operations.

But let's not get carried away. David Brooks says that we need a "bipartisan project like comprehensive tax reform to get people conversing again." We should keep in mind that comprehensive tax reform will have almost zero direct impact on most Americans. According to the Tax Policy Center, about 45 percent of Americans will owe no federal income tax in 2010 - half don't earn enough money and the other half make use of various credits and deductions that eliminate their tax liability. If anything, tax reform - which will involve removal of many of these deductions - will just piss a big segment of lower-income Americans off. Of those who pay taxes [I think this is the Tax Policy Center's meaning] two-thirds claim the standard deduction and don't itemize; 40 percent use the 1040A or 1040EZ forms which are already quite simple.

So tax reform is a game for corporations and the quarter or so of Americans who are well enough off that they have to spend a serious amount of time dealing with the federal income tax. If tax reform is where we embark on the next "national conversation," it's going to be a conversation that excludes or alienates three fourths of the American people. Perhaps a better place to focus our conversational attention is on how to get the economy growing faster so that all Americans can enjoy a bit more job security.

The cruelest tax

One often hears inflation referred to as "the cruelest tax," as in this piece by Len Oppenheim:

Inflation is the cruelest tax of all because it does the most damage to the middle class, retirees, and anyone living on a fixed income possibly supplemented by hard-earned savings.

Inflation, when it occurs, is certainly a macroeconomic problem. The argument that inflation hurts the poor most of all is an effective one, and there's a chance that it's true. Inflation is a tax on money holdings (you can insulate yourself from inflation by holding your wealth in nonmoney form such as bonds, stock, or real estate, whose rate of return tends to rise along with inflation). People with low incomes are likely to hold a larger fraction of their wealth in the form of money than people with high incomes, and so it's possible that inflation is a regressive tax.

But I'm interested in the origins of this expression, "the cruelest tax." We hear it everywhere - a Google search for "inflation" and "cruelest tax" comes up with over 10,000 hits. So who came up with this gem?

Back in 1982, in his letter to Congress introducing the Economic Report of the President, Ronald Reagan trumpeted the success of his economic policies of the past year:

The most significant result was the contribution these policies made to a substantial reduction in inflation, bringing badly needed relief from inflationary pressures to every American... This moderation in the rate of price increases meant that inflation, "the cruelest tax," was taking less away from individual savings and taking less out of every working American's paycheck.

But the quotes suggest that this isn't the first time the phrase was used. Blinder and Esaki (Review of Economics and Statistics, May 1994) quote Tobin (American Economic Review, March 1972):

Facile generalizations about the progressivity or equity of inflationary transfers are hazardous; certainly inflation does not merit the cliche that it is 'the cruelest tax'.

The quotes again: where is Tobin getting the phrase? Well, I can take it back to the 1964 Republican Party platform:

In furtherance of our faith in the individual, we also pledge prudent, responsible management of the government's fiscal affairs to protect the individual against the evils of spendthrift government—protecting most of all the needy and fixed-income families against the cruelest tax, inflation—and protecting every citizen against the high taxes forced by excessive spending, in order that each individual may keep more of his earnings for his own and his family's use.

And can go no further. Incidentally, there's a long tradition in economics beginning at least from Keynes' Economic Consequences of the Peace that inflation has a progressive effect on the income distribution, because it redistributes wealth from the passive accumulators of wealth to entrepreneurs, thereby stimulating economic activity. This is most likely to be true when inflation is unanticipated in advance (because then the interest rate on bonds that the wealthy have accumulated would not have risen in advance to compensate them for the loss). In fact, Blinder and Esaki found that inflation probably has a small progressive effect on the income distribution once macroeconomic effects are accounted for. Their results were confirmed by Markus Jantti (Review of Economics and Statistics, May 1994). He concludes that

The notion that inflation is the "cruellest tax" on the disadvantaged is not supported by empirical research on the distribution of income. The present evidence indicates that unemployment, not inflation, is the crueller tax.

Next up: when did we start spelling "cruellest" with two L's instead of one?

Sarah Palin has no idea what "blood libel" means

From the Financial Times:

“Especially within hours of a tragedy unfolding, journalists and pundits should not manufacture a blood libel that serves only to incite the very hatred and violence that they purport to condemn. That is reprehensible,” Ms Palin said.

Taken literally, I believe she's saying that liberal pundits and politicians accuse her and like-minded conservatives of murdering children and using their blood in religious rituals, and that this accusation may spark violence against her and her kind. Fortunately or unfortunately (I can't decide which), nothing Sarah Palin says can ever be taken literally. A phrase like "blood libel" means nothing to her, she just thinks it sounds good coming out of her mouth. Her message, like most of her political statements, is just a string of vacuous platitudes that are intended to soothe the soul while numbing the brain. The video is here, if you can stomach it. Note her reminder to us of our struggle after 9/11 to resist the temptation to sacrifice our liberties in order to preserve an illusive security. Um, which side of that struggle was she on?

Yikes, it's scary out there

The Coalition to Stop Gun Violence has a timeline of incidence of "insurrectionist" violence. I don't think we have enough information about Jared Loughner's motivations in the Arizona incident to make strong statements about the impact the "rhetorical climate" in Washington had on his motivations. However, you can't look at the CSGV's timeline and not be struck at how few degrees of separation there are between Fox News and the Republican Party on the one hand and the gun-toting crazies who have committed acts of violence in the past two years on the other. Particularly damning is the high profile given to health reform by many of the perpetrators of violence. There is no way health reform would have been such a defining issue for these people if Republicans and Fox had not gone out of their way to characterize it as an insidious plot by our Muslim president to take over the health care industry and put our grandparents before death panels.

Rocketman

Hardly anyone's been in the office lately. I feel like I'm floating out in space. High as a kite after the Packers' win yesterday. Hmm, where have I heard these themes expressed in spoken word?

Gavyn Davies on the jobs report

At the Financial Times, Gavyn Davies interprets the jobs report in a modestly upbeat light. He points out that with the upward revisions to October's and November's numbers, the BLS "discovered" 175,000 more private sector jobs in December (211,000 total). He also notes that reasonably strong GDP growth in 2010Q4 (3.5-4%) means reasonably strong employment growth in the months to come.

Jobs

I can't say I'm surprised by the employment numbers: payroll employment up 103,000 in December. Despite the strong ADP report on Wednesday, I couldn't get my statistical model to give me anything more than 130,000 or so. On the other hand, according to the household survey employment rose by 297,000, which is exactly the number that ADP had for private sector employment gains.

The big drop in the unemployment rate (from 9.8% to 9.4%) is not entirely good news - some of it is due to the increase in employment, but the labor force fell by 260,000 as well.

So we continue to wait for the breakout in employment while wondering how ADP could so overstate the BLS number after understating it all year. Clearly there's something goofy going on with the data right now and we may not have a good idea of where the economy really stands until we see the next couple of years' worth of revisions.

The amazing Republican message machine

Amazing: soon the House of Representatives will vote on the "Repealing the Job-Killing Health Care Law Act." Though the CBO reports that repealing the JKHCLA (I guess the official name - the PPACA - Patient Protection and Affordable Care Act - is out of fashion in the new Washington) would increase the deficit by $145 billion from 2012-2019, John Boehner is quoted saying "I do not believe that repealing the job-killing health care law will increase the deficit." They're crappy legislators, but great spinmeisters.

A modest proposal: let's start prefacing every piece of Republican legislation with "baby-torturing." Starting with the baby-torturing Repealing the Job-Killing Health Care Law Act.

Colbert on the gold standard

Indispensable lesson on the nature of money.

The Colbert Report	Mon - Thurs 11:30pm / 10:30c
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I'm a little confused about the December employment situation

My little statistical model of payroll employment, based on initial claims and ISM manufacturing and non-manufacturing employment indexes, says that payroll employment will grow by about 130,000 in December. The ADP employment survey, on the other hand, says private sector employment grew by 297,000. ADP has consistently underestimated private sector employment by about 50,000 this year, government employment has consistently fallen by a few tens of thousands per month. So I'm going to go out on a limb and say that payroll employment in December rose by somewhere between 100,000 and 300,000.

In judging the strength of the employment numbers, keep this in mind. At the pre-recession peak in December 2007 (hey, happy three-year anniversary!) payroll employment was 137.951 million. In November 2010 it was 130.539 million, so we're down 7.4 million jobs from the peak. However, population growth over the last three years means we needed an extra 4.68 million or so just to keep pace, so the actual shortfall in jobs now is about 12 million. We need 130,000 or so jobs per month to keep pace with population growth going forward; anything in excess of 130,000 jobs lets us eat into the 12 million job shortfall. So if employment growth is 300,000 per month (which is way above current forecasts), it will take us just over 70 months - that's almost 6 years - to get back to normal. We're in a very deep hole.