Mar 21, 2013 at 11:44 am
A few things that caught my sleepy eyes:
–Jim Tankersley reviews the work of the expansionary contraction crowd, which is almost exclusively the work of economist Alberto Alesina with co-authors. I’ve long held the view that tax increases and budget cuts in weak economies are analogous to leeching in medieval medicine: it’s not that it doesn’t help—it’s that it hurts. So this seemed like a good time to link to an earlier analysis of why this Alesina stuff is so wrong.
Or, better yet, you could just look at the economies that have applied these leeches—UK, Italy, Spain, Greece—and see for yourself. What you really shouldn’t do is what Alesina himself does in the WaPo piece: cite the “booming stock market” as evidence that budget cuts from the sequester work just as he predicted.
“Sure the budget cuts [had] not taken place yet but investors and companies look into the future when they hire. Given that the future implies budget cuts, it must mean that they welcome them.”
Life lesson: beware the analyst that cites the latest stock market trend to support his theory. He will almost always be wrong.
–Here’s a nice summary of what’s up down in Cyprus. One development is that in looking around for alternatives to their initial—and fundamentally flawed—idea of taxing bank deposits to partially pay for the bailout, the Cypriots are talking to Russian investors: “How ironic if the end result of euro-zone overstretch into Cyprus turned out to be an expansion of Russian influence over European Union turf.”
–OTE’ers know that I’ve been a long-time critic of the H1B guest visa program where skilled immigrants are allowed to temporarily work here for a sponsoring employer. I’m all for a welcoming policy stance towards immigrant workers of all skill levels but guest worker programs in general and especially the very flawed H1B program are not how to get there. They’ve become the purview of offshorers and employers looking for cheap, imported labor to replace an underutilized domestic workforce (though people think employers must look for domestic hires before turning to guest workers, that’s not the case with the H1B’s). Sen Durbin has good ideas on how to at least make the program work better, but it looks like he’s getting rolled.
–The housing market recovery rolls on. A few interesting dimensions to this development:
–inventories are way down, suggesting a big, long, painful correction is largely behind us;
–apparently, the turn in the market took builders by surprise and they’re having trouble staffing up to meet the new demand. If markets work at all, we should thus see wages rise in construction in coming months.
–many of the numbers you’ll read about here are a bit less impressive then they sound. Home prices are up 23% in Phoenix but that’s because they’re rising from the ashes.
–don’t forget that part of what you’re seeing here is government intervention at work, as both the Federal Reserve and Fannie/Freddie have helped keep mortgage rates historically low and almost single handedly boosted liquidity in the credit market.
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