“...you might argue that even if the current minimum wage seems low, raising it would cost jobs. But there’s evidence on that question — lots and lots of evidence, because the minimum wage is one of the most studied issues in all of economics. U.S. experience, it turns out, offers many “natural experiments” here, in which one state raises its minimum wage while others do not. And while there are dissenters, as there always are, the great preponderance of the evidence from these natural experiments points to little if any negative effect of minimum wage increases on employment. Why is this true? That’s a subject of continuing research, but one theme in all the explanations is that workers aren’t bushels of wheat or even Manhattan apartments; they’re human beings, and the human relationships involved in hiring and firing are inevitably more complex than markets for mere commodities. And one byproduct of this human complexity seems to be that modest increases in wages for the least-paid don’t necessarily reduce the number of jobs. What this means, in turn, is that the main effect of a rise in minimum wages is a rise in the incomes of hard-working but low-paid Americans — which is, of course, what we’re trying to accomplish. Finally, it’s important to understand how the minimum wage interacts with other policies aimed at helping lower-paid workers, in particular the earned-income tax credit, which helps low-income families who help themselves. The tax credit — which has traditionally had bipartisan support, although that may be ending — is also good policy. But it has a well-known defect: Some of its benefits end up flowing not to workers but to employers, in the form of lower wages. And guess what? An increase in the minimum wage helps correct this defect. It turns out that the tax credit and the minimum wage aren’t competing policies, they’re complementary policies that work best in tandem. So Mr. Obama’s wage proposal is good economics. It’s also good politics: a wage increase is supported by an overwhelming majority of voters, including a strong majority of self-identified Republican women (but not men). Yet G.O.P. leaders in Congress are opposed to any rise. Why? They say that they’re concerned about the people who might lose their jobs, never mind the evidence that this won’t actually happen. But this isn’t credible. For today’s Republican leaders clearly feel disdain for low-wage workers. Bear in mind that such workers, even if they work full time, by and large don’t pay income taxes (although they pay plenty in payroll and sales taxes), while they may receive benefits like Medicaid and food stamps. And you know what this makes them, in the eyes of the G.O.P.: “takers,” members of the contemptible 47 percent who, as Mitt Romney said to nods of approval, won’t take responsibility for their own lives. Eric Cantor, the House majority leader, offered a perfect illustration of this disdain last Labor Day: He chose to commemorate a holiday dedicated to workers by sending out a message that said nothing at all about workers, but praised the efforts of business owners instead. The good news is that not many Americans share that disdain; just about everyone except Republican men believes that the lowest-paid workers deserve a raise. And they’re right. We should raise the minimum wage, now.”
—PAUL KRUGMAN, writing in the New York Times, “Raise That Wage”“Romney is scamming voters, claiming not only that he can make up the lost revenue by closing unspecified loopholes, but that he can do so in a way that doesn’t shift the tax burden away from the rich onto the middle class. He can’t, as a matter of sheer arithmetic — which is the point of that Tax Policy Center study... The Romney campaign isn’t even trying to make a substantive argument in response — they’re just calling names.”
—Paul Krugman on Romney’s tax policies.“In fact, almost everyone following the situation now realizes that Germany’s austerity obsession has brought Europe to the edge of catastrophe — almost everyone, that is, except the Germans themselves and, it turns out, the Romney economic team. Needless to say, this bodes ill if Mr. Romney wins in November. For all indications are that his idea of smart policy is to double down on the very spending cuts that have hobbled recovery here and sent Europe into an economic and political tailspin.”
—Paul Krugman, We Don’t Need No Education
Economics Joke
Keynes and Krugman are walking. Keynes says, “I’ll pay you $5,000 to eat a dog turd.” Krugman does it. Keynes doesn’t have any evil savings and didn’t think Krugman would do it: The next day he begs for the money back. Krugman says, “I’ll give it back if you eat a turd.” Keynes does it. Krugman says, “That was stupid: No one made money and we’ve both eaten sh*t.” Keynes says: “But we boosted GDP by $10,000.”
Ryan in Two Numbers
krugman.blogs.nytimes.com[Y]ou can learn everything you need to know [about Ryan’s budget] by understanding two numbers: $4.6 trillion and 14 million.
Of these, $4.6 trillion is the size of the mystery meat in the budget. Ryan proposes tax cuts that would cost $4.6 trillion over the next decade relative to current policy — that is, relative even to making the Bush tax cuts permanent — but claims that his plan is revenue neutral, because he would make up the revenue loss by closing loopholes. For example, he would … well, actually, he refuses to name a single example of a loophole he wants to close.
So the budget is a fraud. No, it’s not “imperfect”, it’s not a bit shaky on the numbers; it’s completely based on almost $5 trillion dollars of alleged revenue that are pure fabrication.
On the other side, 14 million is the minimum number of people who would lose health insurance due to Medicaid cuts — the Urban Institute, working off the very similar plan Ryan unveiled last year, puts it at between 14 and 27 million people losing Medicaid.
That’s a lot of people — and a lot of suffering. And again, bear in mind that none of this would be done to reduce the deficit — it would be done to make room for those $4.6 trillion in tax cuts, and in particular a tax cut of $240,000 a year to the average member of the one percent.
Moore's Law on Solar
For decades the story of technology has been dominated, in the popular mind and to a large extent in reality, by computing and the things you can do with it. Moore’s Law — in which the price of computing power falls roughly 50 percent every 18 months — has powered an ever-expanding range of applications, from faxes to Facebook.
Our mastery of the material world, on the other hand, has advanced much more slowly. The sources of energy, the way we move stuff around, are much the same as they were a generation ago.
But that may be about to change. We are, or at least we should be, on the cusp of an energy transformation, driven by the rapidly falling cost of solar power. That’s right, solar power.
If that surprises you, if you still think of solar power as some kind of hippie fantasy, blame our fossilized political system, in which fossil fuel producers have both powerful political allies and a powerful propaganda machine that denigrates alternatives.
Speaking of propaganda: Before I get to solar, let’s talk briefly about hydraulic fracturing, a k a fracking.
Fracking — injecting high-pressure fluid into rocks deep underground, inducing the release of fossil fuels — is an impressive technology. But it’s also a technology that imposes large costs on the public. We know that it produces toxic (and radioactive) wastewater that contaminates drinking water; there is reason to suspect, despite industry denials, that it also contaminates groundwater; and the heavy trucking required for fracking inflicts major damage on roads.
Economics 101 tells us that an industry imposing large costs on third parties should be required to “internalize” those costs — that is, to pay for the damage it inflicts, treating that damage as a cost of production. Fracking might still be worth doing given those costs. But no industry should be held harmless from its impacts on the environment and the nation’s infrastructure.
Yet what the industry and its defenders demand is, of course, precisely that it be let off the hook for the damage it causes. Why? Because we need that energy! For example, the industry-backed organization energyfromshale.org declares that “there are only two sides in the debate: those who want our oil and natural resources developed in a safe and responsible way; and those who don’t want our oil and natural gas resources developed at all.”
So it’s worth pointing out that special treatment for fracking makes a mockery of free-market principles. Pro-fracking politicians claim to be against subsidies, yet letting an industry impose costs without paying compensation is in effect a huge subsidy. They say they oppose having the government “pick winners,” yet they demand special treatment for this industry precisely because they claim it will be a winner.
And now for something completely different: the success story you haven’t heard about.
These days, mention solar power and you’ll probably hear cries of “Solyndra!” Republicans have tried to make the failed solar panel company both a symbol of government waste — although claims of a major scandal are nonsense — and a stick with which to beat renewable energy.
But Solyndra’s failure was actually caused by technological success: the price of solar panels is dropping fast, and Solyndra couldn’t keep up with the competition. In fact, progress in solar panels has been so dramatic and sustained that, as a blog post at Scientific American put it, “there’s now frequent talk of a ‘Moore’s law’ in solar energy,” with prices adjusted for inflation falling around 7 percent a year.
This has already led to rapid growth in solar installations, but even more change may be just around the corner. If the downward trend continues — and if anything it seems to be accelerating — we’re just a few years from the point at which electricity from solar panels becomes cheaper than electricity generated by burning coal.
And if we priced coal-fired power right, taking into account the huge health and other costs it imposes, it’s likely that we would already have passed that tipping point.
But will our political system delay the energy transformation now within reach?
Let’s face it: a large part of our political class, including essentially the entire G.O.P., is deeply invested in an energy sector dominated by fossil fuels, and actively hostile to alternatives. This political class will do everything it can to ensure subsidies for the extraction and use of fossil fuels, directly with taxpayers’ money and indirectly by letting the industry off the hook for environmental costs, while ridiculing technologies like solar.
So what you need to know is that nothing you hear from these people is true. Fracking is not a dream come true; solar is now cost-effective. Here comes the sun, if we’re willing to let it in.
The Classic Krugman Pushback
CNBC’s Joe Kernen: “It goes back to our forefathers, who said limited government, low taxes,”
NYT’s Paul Krugman: “I don’t remember actually hearing about that. I don’t think that’s in there.”
Federal income tax was created in 1913.
Krugman added: “People getting their news from sources like that are probably getting terrible advice about any kind of investment that depends on macroeconomics.”
“All the evidence says that public systems like Medicare and Medicaid, which have less bureaucracy than private insurers and greater bargaining power, are better than the private sector at controlling costs. I know this flies in the face of free-market dogma, but it's just a fact. You can see this fact in the history of Medicare Advantage, which is run through private insurers and has consistently had higher costs than traditional Medicare. You can see it from comparisons between Medicaid and private insurance: Medicaid costs much less. And you can see it in international comparisons: The United States has the most privatized health system in the advanced world and, by far, the highest health costs.”
—Nobel Prize winning economist Paul Krugman
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Here Comes Solar Energy
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works quite like our sun.
“Republicans claim to be deeply worried by budget deficits. Indeed, Mr. Ryan has called the deficit an “existential threat” to America. Yet they are insisting that the wealthy — who presumably have as much of a stake as everyone else in the nation’s future — should not be called upon to play any role in warding off that existential threat. Well, that amounts to a demand that a small number of very lucky people be exempted from the social contract that applies to everyone else. And that, in case you’re wondering, is what real class warfare looks like.”
—Paul Krugman, The Social Contracthttp://www.nytimes.com/2011/09/23/opinion/krugman-the-social-contract.html?_r=1&ref=paulkrugman
“Old fashioned Keynesianism, as practiced by the likes of [Paul] Krugman, resembles a set of religious dogmas, not scientific propositions. Austrians view economics as a science, a body of theory and application that helps us understand the world. Keynesians see economics as a set of political tools useful to rationalize and justify an a priori faith in unlimited government. Krugman, like Keynes himself, dislikes businesspeople, consumers, and especially entrepreneurs and investors, and prefers a world in which an elite cadre of intellectuals and bureaucrats controls most investment, production, and consumption decisions. Fine, everyone has a right to his personal belief system. But let’s not pretend there’s anything scientific about the multiplier, the marginal propensity to consume, the liquidity trap, and the other relics and sacraments of the Keynesian religion.”
—Peter Klein“Such regulations may, no doubt, be considered as in some respect a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments; of the most free, as well as or the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty, exactly of the same kind with the regulations of the banking trade which are here proposed.”
—Adam Smith. The Wealth of Nations, 1776.
[via The Conscience of a Liberal]
