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Reconciliation

By Dylan Matthews

Today, Mike graphed too-big-to-fail banks, looked at the problem historically and looked at the state of the financial-reform debate. Suzy explained what health-care reform will mean for immigrants and how pro-reform attorneys general are going on the offensive to defend the health law. And I called for a progressive consumption tax and a more assertive Supreme Court shortlist. Here's what we missed:

1) Paul Krugman cites research suggesting that the gap between U.S. and European growth is due to Europeans working less and taking longer vacations.

2) The Atlantic's Nicole Allan looks at the dimming prospects for Abu Dhabi's proposed carbon-neutral planned city.

3) Getting laid off doesn't just hurt workers; it hurts their kids, and their kids' chances of going to college.

4) Jeff Frankel, a member of the National Bureau of Economic Research committee that determines when recessions start and end, says the current one is over. Mark Thoma is skeptical.

5) Dean Baker, who warned about the housing bubble as it was happening, and Kevin Hassett, who co-wrote "Dow 36,000," nevertheless agree that the federal government should promote work-sharing.

-- Dylan Matthews is a student at Harvard and a researcher at The Washington Post

By Washington Post editor  |  April 5, 2010; 6:00 PM ET
 
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Comments

I think its fairly safe to say the 2007-2009 recession is over. Output has been expanding for nearly a year, and recent indicators suggest that the expansion is broadening. Thoma may be right that the labor market might fail to take off, but we should recall the first year and a half of the last expansion was largely devoid of job creation.

Also, Scott Sumner has a thoughtful reply to Paul Krugman on the effects of high marginal taxes on work effort:

http://www.themoneyillusion.com/?p=4692

A sample of his comments:

"I once lived in England, and was shocked at how casually young Englishmen I knew would accept long term unemployment. Now all of this might seem very unChicago-like. But I am not saying that tax rates don’t affect labor supply, rather I am saying that the effects are probably mediated through quite complex mechanisms, some of which involve collective choice. Go back to the unearned income example. If a factory worker at GM inherits money from his aunt, and starts earning interest income, how easily can he go to GM and ask to be shifted from a 40 hour work week to a 35 hour work week? And yet if every factory worker at GM had such good fortune, perhaps they’d ask their union to negotiate shorter hours.

If societal norms change slowly (partly because of “first-mover” problems), then I could imagine that countries with more collective bargaining might be able to more quickly move to the regulatory structure that is now optimal in light of higher tax rates. This might involve changes in the standard retirement age, the number of official holidays, and/or the number of weekly hours worked at which overtime pay kicks in. This doesn’t mean taxes are not ultimately responsible for these collective decisions, just that an econometric study might not identify taxes as the proximate cause of changes in labor supply."

Posted by: justin84 | April 6, 2010 12:17 AM | Report abuse

The research Krugman cites explains differences in GDP, not differences in growth. Elsewhere he has approvingly cited Dean Baker's research that shows that there was never any productivity gap between the US and Europe--any gap was due to bubbles in the financial services industry which have since burst.

Posted by: daniellstevens | April 6, 2010 6:03 AM | Report abuse

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