Had great fun co-hosting the Larry Kudlow show last night—yes, it was fun and interesting (though way, way too much of the Republican talking point: it’s Obama’s sequester! That part was pure nonsense). Anyway, check out this segment on the pay of finance CEO’s. There you learn that as penance for his lack of oversight during the London Whale incident, Jamie Dimon of JPM lost half his take home pay last year, taking him down to…wait for it…$11.5 million.
If that’s penance, please punish me. And like I said, if that’s what’s going on at the tippy top of the job market at a time when the economy has remained weak, I don’t think $9 an hour at the other end of the market is going to crash the show.
Anyway, the conversation that ensued was about whether these folks are overpaid. It’s a great topic and one worthy of more time than we were able to give it, but note Larry’s surprising position, which intimated that their inflated (my word) salaries do send distortionary signals.
Also, check out this segment with John Kilduff, energy expert from Again Capital, on the recent gas price spike. His theme was that following some permanent shut downs along the east coast, we’re in danger of simply having too few refineries to produce the gas we need. The conversation, inevitably, went to the regulatory place, but there’s been no ratcheting up of production regulations over this period, and John notes.
So what gives? From what John said, it sounds like refining oil to gas is still highly profitable, yet such market signals don’t seem to be getting through. There’s more to this, I’m sure, and I’m going to look into it. We may need to start thinking about refineries more the way we think of public/private utilities.
BTW, in reading this piece from today’s NYT I was reminded of another argument we had on the show—the impact of the sequester on the economy. I don’t understand how my fellow hosts were pro-growth and pro-austerity, but whatever. The point that occurred to me on reading the Times piece (which noted, as I did on the Kudlow show, that the sequester is predicted to shave 0.5% off of 2013 GDP), and reflecting on the gas price segment is that this recent price spike is another drag on the 2013 economy, one that’s of a similar magnitude to the outlay losses associated with the sequester ($44 billion).
So, pressures on this year’s economy include: a $0.45+/gallon gas spike (with the rule of thumb that a penny aggregates up to $1 billion higher spending on gas*), an $85 billion sequester with $44 billion in lower outlays this year (with the rest coming later), and the loss of over $100 billion in the expiration of the payroll tax cut. As the NYT article notes just re the policy changes (not the fuel costs), that’s the different between below trend and well-above trend growth…which is to say, between stagnant and falling unemployment.
*Pushing the other way is the miles-driven chart I link to here.