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David Leonhardt has a good column in today's New York Times about the roots of economic anxiety: falling median wages.
Posted by dan at 10:50 AM
In July, Toyota sold more cars in the U.S. than Ford did.
Toyota sold 20,298 hybrids, accounting for 8.4 percent of sales.
Posted by dan at 10:46 AM
So Henry Paulson gave his first major speech as Treasury Secretary yesterday. It was generally hailed as a bracingly realistic and honest presentation of the challenges facing the U.S. economy.
Writing in the New York Times, Steven Weisman led with the apparently astonishing news that the Treasury Secretary recognizes that median wages haven't been rising.
Treasury Secretary Henry M. Paulson Jr., delivering his first public remarks since taking office last month, said yesterday that he recognized that the economy was not benefiting all Americans.“Amid this country’s strong economic expansion, many Americans simply aren’t feeling the benefits,” Mr. Paulson said in a speech at Columbia Business School on the Upper West Side of Manhattan. “Many aren’t seeing significant increases in their take-home pay. Their increases in wages are being eaten up by high energy prices and rising health care costs, among others.”
It was an unusual concession from a high-ranking official in an administration that has spoken only glowingly of recent economic gains and has generally joined with Republicans in Congress by dismissing Democratic concerns about growing economic inequality in the United States as “class warfare.”
Of course, praising the Treasury Secretary for noticing that wages haven't grown is a little like praising the Energy Secretary for noting that oil prices have risen. It's only noteworthy because Paulson's predecessor and his colleagues in the White House generally refused to notice the facts nestled in the data published by the government. I suppose this is progress.
On the other hand, there was plenty of garbage in Paulson's speech.
Such as:
The U.S. economy is on a more solid footing, and is stronger than most of us would have predicted. The unemployment rate has held below 5 percent for seven straight months, and we have seen 5.4 million new jobs created since August 2003. I witnessed this recovery on a first-hand basis -- one day at a time -- through the lens of our resilient, broad, deep capital markets, and through the dozens of institutional investors and American corporations who were the clients with whom I worked
Translation: Goldman, Sachs's corporate clients have been increasing their profits mightily, in part at the expense of workers. Therefore, the economy is great.
And this:
The biggest economic issue facing our country is the growth in spending on the major entitlement programs: Medicare, Medicaid, and Social Security. The cost to the federal government of these three programs, without fundamental reform, is projected to more than double, from the current level, 8 percent of GDP, to nearly 17 percent by 2060. If left unchecked these programs would significantly impair our economic flexibility and erode our competitiveness.Demographics don't lie and demographics aren't partisan. Social Security was created in 1935. Today, people are living longer than they did in 1935, yet Social Security's basic structure has barely changed. Just 3.3 workers are paying into the system to support each beneficiary, while 16 workers did so in 1950. The President put forward a plan last year to strengthen and modernize Social Security. The longer we wait to fix this problem the more limited will be the options available to us, the greater the cost and the more severe the economic impact on our nation.
The financial burdens associated with Medicare and Medicaid are larger and even more complex. Like Social Security, they are linked to the aging of America, and the good news of our increased life expectancy. But they are complicated further by the rapidly rising cost of health care and the structure of our health-care system, which is riddled with inefficiencies and poorly-aligned incentives.
No mention of the fact that Republicans, generally without the help of Democrats, have spent about $1 trillion in excess Social Security funds (which could have been used to finance private accounts), or that the Republicans exacerbated the entitlement funding problem by creating an enormously expensive, open-ended prescription drug entitlement in Medicare--without even attempting to pay for it.
And finally this:
But we still have challenges, and amid this country's strong economic expansion, many Americans simply aren't feeling the benefits. Many aren't seeing significant increases in their take-home pay. Their increases in wages are being eaten up by high energy prices and rising health-care costs, among others.But we must also recognize that, as our economy grows, market forces work to provide the greatest rewards to those with the needed skills in the growth areas. This means that those workers with less education and fewer skills will realize fewer rewards and have fewer opportunities to advance. In 2004, workers with a bachelor's degree earned almost $23,000 more per year, on average, than workers with a high school degree only. This gap has grown more than 60 percent since 1975.
This trend dates back many years, and was evident in the recovery of the 1990s. It is simply an economic reality, and it is neither fair nor useful to blame any political party. It stems from a number of factors, including technology and U.S. integration with the global economy. Rather than playing the blame game, we must focus on helping workers move up the economic ladder.
This part of the speech--the last part--was regarded as the most noteworthy. But Paulson is blowing smoke. He wants to chalk up declining incomes to the education gap. People are losing ground and earning less because they're not going on to college. But as Jared Bernstein has pointed out, the administration's own data show that annual earnings of college graduates have fallen 5 percent in real terms since 2000. I guess Paulson hasn't gotten around to reading the 2006 Economic Report of the President.
All in all, a pretty inauspicious beginning. If, unlike pretty much other member of the Bush economic team, Paulson wants to leave Washington with a reputation that has improved, rather than diminished, he's going to have to do a heck of a lot better.
Posted by dan at 10:28 AM
A strange article from yesterday’s Washington Post by Peter Baker about President Bush’s newfound focus on a domestic agenda.
With crucial midterm congressional elections just three months away, President Bush tried Sunday to return to his domestic agenda even while the latest eruption in the Middle East continued to dominate his administration's attention.Bush flew here after going for a Sunday bicycle ride and hosting a children's T-ball game on the South Lawn of the White House to have dinner with Miami community leaders.
He plans a day of activities Monday in the Miami area, visiting the National Hurricane Center, delivering an economic speech, touring the Port of Miami and headlining a Republican fundraiser.
What's missing in this article? How about some discussion or mention of what President Bush's domestic agenda is. Judging from this account, it consists of raising funds and public relations stunts.
And clearly Baker doesn’t read the paper’s business section. Toward the end he writes:
With his brother at his side, the president will focus his Miami trip on a series of issues of regional and national concern: hurricane preparedness a year after Katrina devastated New Orleans and the Mississippi Gulf Coast; the economy at a time when growth appears to be slowing; and port security after the Republican revolt over plans to allow an Arab company to take over management of several U.S. ports.
Growth appears to be slowing. I’d say that last week’s GDP report, which noted that the economy’s rate of growth in the second quarter was less than half the rate of growth in the first quarter, is a sign that, in fact, the economy is slowing.
Posted by dan at 09:41 AM
The price of protein may be falling, but the prices of some specialty metals are on the rise. The result, reports Paul Glader in the Wall Street Journal, is higher prices for high-end bikes.
Cycling enthusiasts can expect to see prices head uphill for bikes made of in-demand specialty materials such as titanium and carbon fiber.Driving the increase is a sharp rise in orders for airplanes made of the same materials, meaning that bike makers -- along with makers of sailboats, lacrosse sticks, tennis rackets, jewelry and bone screws -- are paying 25% more for raw materials and passing along some of the costs to consumers.
Prices for high-end bikes from makers such as Trek Bicycle Corp., Cannondale Bicycle Corp., and Serotta Competition Bicycles, some of which already cost more than $10,000, could rise 5% to 25%. A custom-made La Corsa titanium frame from Serotta, for instance, would sell for up to $7,000 with top components by the end of this year, up from $6,000 in January.
Amid rising demand, titanium and carbon-fiber makers are largely catering to their bigger customers: the aerospace industry. Zsolt Rumy, chief executive of St. Louis-based Carbon Fiber maker Zoltek Companies Inc., says he is trying to keep prices lower for bigger customers by raising prices for smaller ones, such as bike and golf-club makers, who constitute 15% of his company's business. "We really jack up the price" for smaller customers, he says. He's passed on more of the 60% to 100% increases to sporting-goods customers.
Posted by dan at 09:24 AM
Tyson Foods reports another poor quarter. The problem: too much pork, chicken and beef out there. The volume of sales were up decently, but the prices Tyson was able to command have plummeted.
Posted by dan at 09:17 AM
David Cay Johnston writes in the New York Times about a Senate report on tax evasion by billionaires. Note that the investigation was run by the staff of Carl Levin. Norm Coleman, the Republican senator who chairs the relevant subcommittee, simply watched.
Posted by dan at 09:15 AM
I think the FT op-ed page needs some new editorial talent, if only to save the usually intelligent Christopher Caldwell from himself. On Saturday, in a column on African-Americans and the Republican party Caldwell wrote the following ($ required):
Polls show that black Americans are more conservative than their fellow citizens on such matters as gay marriage, school vouchers and religious involvement in public life – but far less inclined to support conservative Republicans. So there have always been Republican strategists who think the party could profit from courting them. Bill Brock, the Republican National Committee chairman in the late 1970s, tried to get the party to focus on the safety of urban neighbourhoods. Lee Atwater, the blues-playing RNC chairman under Bush père, held similar views. Their successor at the RNC, Ken Mehlman, has been travelling the country, speaking to dozens of black groups. He has even apologised for the way his party made use of whites’ fears in the first decades of racial desegregation. This autumn, Republicans will run black candidates for high-profile offices including the Ohio and Pennsylvania governorships.
So Lee Atwater thought the Republican party could profit by appealing to black voters? It's difficult to square that with, um, the truth and the historical record. In fact, Atwater was a highly successful race-baiter. There's this gem from a Bob Herbert column last year:
Listen to the late Lee Atwater in a 1981 interview explaining the evolution of the G.O.P.'s Southern strategy:"You start out in 1954 by saying, 'Nigger, nigger, nigger.' By 1968 you can't say 'nigger' - that hurts you. Backfires. So you say stuff like forced busing, states' rights and all that stuff. You're getting so abstract now [that] you're talking about cutting taxes, and all these things you're talking about are totally economic things and a byproduct of them is [that] blacks get hurt worse than whites.
"And subconsciously maybe that is part of it. I'm not saying that. But I'm saying that if it is getting that abstract, and that coded, that we are doing away with the racial problem one way or the other. You follow me - because obviously sitting around saying, 'We want to cut this,' is much more abstract than even the busing thing, and a hell of a lot more abstract than 'Nigger, nigger.' "
Atwater, who would manage George H. W. Bush's successful run for the presidency in 1988 (the Willie Horton campaign) and then serve as national party chairman, was talking with Alexander P. Lamis, a political-science professor at Case Western Reserve University. Mr. Lamis quoted Atwater in the book "Southern Politics in the 1990's."
Is it possible that Caldwell really believes that Lee Atwater spent his political career trying to convince black voters to vote for the GOP? Or could it be that Caldwell is entirely ignorant of the way in which the Republican party, with Atwater's assistance, managed to capture the hearts and minds of white southern voters by repeatedly and relentlessly playing racial politics?
I look forward to Caldwell's next column, in which he cites Joe McCarthy as one of many in a long line of Republican politicians who labored to convince Socialists to vote for the GOP.
Posted by dan at 10:04 AM
Can they really be this stupid? Andrew Edgecliff-Johnson reports in the Financial TImes
Christoph Mohn, heir to the Bertelsmann media empire, has called for Europe to create an Airbus of the internet to compete with US giants such as Google and Ebay. . . ."So far, we have not built up a sizeable internet company in Europe," he said. "It's not good for the European Union.
"Nano-technology, biotechnology and the internet are the growth industries but in most of these the position is not good for Europe."
Although Airbus now goes head to head with Boeing of the US, it has not been without political and operational difficulties.
However, Mr Mohn endorsed the controversial Franco-German plan to build a state-funded European search engine called Quaero, saying: "It's a little bit like Airbus Industries. I don't think it requires consolidation [of Europe's internet industry] but it needs co-ordination." Quaero was launched this year with initial funding of €1.7bn (£1.2bn) to develop voice-based and picture-based search technologies. "[Quaero] is not just about 'let's beat Google'," Mr Mohn said. "It's 'let's build up a competitive internet industry'."
But he warned: "You will not beat Google in two years with the Quaero project. Airbus took 25 years to build up into a meaningful company."
Why is this really stupid?
1. The notion that European governments could will into being a competitor to E-Bay or Google conflicts with pretty much everything we know about how consumer-driven internet businesses grow.
2. Airbus is a disaster just now. Literally speaking, an Airbus of the internet would mean a company that loses ground to its U.S. competitor, is plagued by product delays, and has an untenable ownership structure. Yep, that's exactly what Europe needs.
Posted by dan at 09:04 AM
Excellent article by Vanessa Fuhrmans on the front page of today's Wall Street Journal on how health insurance companies may have killed their future business by continually jacking up prices for insurance.
Last year, the top seven U.S. health insurers earned a combined $10 billion -- nearly triple their profits of five years earlier. The windfall came as insurers raised their prices faster than underlying health costs.Now the good times may be rolling to a halt. Health insurance has become so expensive that many smaller employers are dumping insurance altogether. If insurers don't do something, they may find their business shriveling. Yet if they restrain price increases, or appear to, they get hammered by Wall Street. . . .
Earlier this month UnitedHealth Group Inc. reported a 26% increase in second-quarter net income but said it expects to add only 850,000 new members this year instead of the one million to 1.2 million it originally forecast. WellPoint Inc., which had projected around one million new members, now expects about 700,000, with many coming from Medicaid and other public contracts.
With insurers trying to protect their profit margins, some consumers -- especially those who work for small or midsize businesses -- could be losers as employers trim health benefits or cancel them altogether. Insurers' resolve to price every account at a profitable level means a smaller company with several chronically ill employees or a few premature births can quickly be priced out of the market.
Robert Laszewski, a Washington-based health-care consultant and former insurance executive, says the insurers' strategy can work for only so long before their employer customer base dwindles dangerously. "Where is this industry in four, five years if it can't control health-care costs?" he asks. "It's on a long walk off of a short pier." . . .
The industry's price rises outpaced the increase in health-care costs, especially after 2001 as the rise of cheap generic drugs and higher co-payments for employees curbed spending. Mr. Laszewski, the consultant, says employers tended to accept the increases because they didn't realize health-care inflation was decelerating. "Every year the insurer charges what the benefits manager thought was last year's trend," he says.
Randy Perkinson, chief executive of Advertising Props Inc. in Atlanta, felt the blow from the industry's tougher pricing. His 30-employee company makes packaging prototypes for advertising. For several years insurers told Mr. Perkinson he would have to pay double-digit increases in health-insurance premiums unless he introduced additional plans that spread more costs to employees. His medical costs were roughly half of the premiums he paid between 2002 and 2004, according to his insurance data. But last year, after an employee was severely injured in a highway accident, WellPoint's Blue Cross Blue Shield of Georgia boosted premiums by 30%. It had asked for a 41% increase but came down after Mr. Perkinson agreed to make employees pay even more of their bills out of pocket.
"I'm paying a lot more than I did three years ago and getting a lot less insurance for it," says Mr. Perkinson, who shopped around for a better deal but couldn't find one. "How can they come back to you year after year with 10%, 20%, 30%? The system is broken." The WellPoint unit says it had to increase AdProp's premiums so much to cover the big claims it incurred after the employee's accident. . . .
Nonetheless, high health costs have forced many smaller employers to drop coverage. Today only 59% of employers with fewer than 200 workers provide health benefits, compared with 68% in 2000, according to the Kaiser Family Foundation, a policy-research group in Menlo Park, Calif. Last year, premiums at small firms rose more than 11% while the increase at larger firms averaged 8.9%, according to the foundation.
Posted by dan at 09:00 AM
Eduardo Kaplan reports in the Wall Street Journal on the latest reduction in IMF debt.
NEW YORK -- Uruguay will make an early debt payment of $900 million to the International Monetary Fund due in 2007, canceling about half of its entire debt with the Washington-based multilateral lender, the government said.As was the case with another early repayment of $630 million to the fund in March, Friday's move is designed to alleviate the country's interest payments. . .
With Friday's early repayment, plus other similar operations made this year with the IMF and other multilateral lenders, Uruguay has repaid $2 billion ahead of time, saving about $40 million in interest payments, Mr. Astori said. Uruguay's total debt with the IMF now stands at about $1 billion.
Uruguayan neighbors Argentina and Brazil paid the entirety of their debt with the fund earlier this year. Argentina's government celebrated the full repayment as a mark of its independence from the fund. . .
Because the interest rates on some of the loans disbursed by the fund and other multilateral lenders to help Uruguay through its own 2002 crisis carry higher rates than regular lending programs, the country has been trying to cancel the higher-interest loans.
Though the crisis squeezed its financial system to the brink, Uruguay was able to avoid defaulting on its debt obligations and its economy has been recovering steadily since 2004.
Posted by dan at 08:54 AM
Stop the presses. It's only in China. And, in the sort of global irony that would make Tom Friedman's moustache twirl, unions in the largest controlled by a massive Communist party are nothing for a multinational to worry about. David Lague reports in the New York Times:
Harley Shaiken, a labor economist at the University of California, Berkeley, said that China’s state-backed unions were known for supporting, rather than challenging, foreign corporations.The pressure on the American retailer to agree to a union is part of a concerted drive to establish branches of the official union in all foreign-financed companies in China.
“The union will likely be quite compliant with management,” Mr. Shaiken said. “There might be a nudge now and again, but the union structure is designed to encourage this investment, not to challenge it.”
Posted by dan at 08:45 AM
Jason DeParle has an unintentionally funny article in the New York Times today on young conservatives. The best bit is a quote from one of the lecturers at a conservative boot camp, Donald Devine.
Some conversation strayed from the canon. Dormitory banter cheered on Ann Coulter, the best-selling provocateur. Arguing for private property, Mr. Devine, the lecturer, noted “there are bums all over here” downtown, and “they sit on public property, not private property.” He lamented the prosecution of Kenneth Lay, the late Enron executive convicted of fraud, by asking, “Do you think it’s possible for a rich person to get justice in the U.S. today?”
Posted by dan at 08:42 AM
An interesting article in today's New York Times by Louis Uchitelle and David Leonhardt about middle-aged men who don't want to work. The amazing thing is that a substantial number of people seem to think that borrowing against your home is income to be spent, not debt that needs to be repaid.
Posted by dan at 08:40 AM
There's something almost pathetic about the self-delusion of Republican moderates. They think the nation and their constituents need them as a bulwark because they help moderate the radicals and conservatives with whom they form the majorities. They return to their districts, piously proclaiming their fiscal conservatism and commitment to social moderation. And yet when they return to Washington, they basically go along with the nutjobs. Nobody typifies this sad species more than Chris Shays, who represents a district covering Fairfield County, Connecticut.
Here is Shays in the Washington Post, lamenting bitter partisanship and blaming the Democrats for the inability of the House, Senate and White House -- all controlled by Republicans -- to pass meaningful legislation.
I think people care, and they should care," said Rep. Christopher Shays (Conn.), an embattled Republican who so far has failed to secure his top legislative priority -- strong controls on lobbying. "I just hope people understand that things have become so partisan around here that the best thing we can do is get this election out of the way and come back to work."
And here's Shays in today's Wall Street Journal
"We're in a very partisan contest in which Democrats want us to fail," said Rep. Christopher Shays. "So when I hear Democrats complaining about anything right now, I think I just don't care."
Democrats have been complaining about lots of things, of course. But the article was dealing in large parts with complaints about the House Republicans' obscene effort on Friday to couple an increase in the minimum wage with a budget-busting reduction of the estate tax. And how did Shays, who, after voting for pretty much every tax cut and every budget and every supplemental in the last several years somehow would like us to believe that he's a deficit hawk, vote on this measure? Why he proudly voted for it.
Posted by dan at 08:29 AM