Feb 20, 2013 at 5:10 pm
Random observations re political economy from the broadsheets:
–Steve Mufson provides a useful account of what’s going on with gas prices. Sometimes gas price spikes have obvious causes—like a geo-politically driven supply disruption—and sometimes, like now, it’s a bit harder to nail down what’s driving the spike. Mufson reports that the current spike is a:
…result of refinery closures and maintenance, lower oil production by Saudi Arabia, market anxiety about tensions in Iran and Iraq, and guarded optimism about the prospects for economic recovery in the United States, Europe and China.
Importantly, I don’t think demand pressures from end-use consumers is playing a big role. This chart—one of my favorites—showing a uniquely weak trend in distance-travelled by drivers since the recession took hold (see chart 1 here; it’s only through Nov 2012, and it’s a moving average but the unsmoothed data show the same pattern).
The thing to remember is that the oil and gas markets are what I call butterfly markets. They’re a lot tighter than other commodity markets, meaning that prices are a lot more elastic to disruptions than other markets (as in a butterfly flaps its wings in Dubai, etc…). And yes, there’s a cartel at work here too (OPEC), which can also move prices in ways the textbooks don’t always talk about.
–Simpson/Bowles II: Lots of reporting on their new framework, and very little of it would lead you to believe its going anywhere. Ezra Klein and I had a good discussion of the issues last night on The Last Word with Lawrence O’Donnell. In a nutshell, while these two have been vilified, ignored, and falsely praised by people with no idea what’s in their plans, they’ve actually made some useful contributions to the debate.
True, I and others have been justly critical of the deep cuts to Social Security and the plethora of magic asterisks throughout their work. They’ve been way too focused on budget deficits versus jobs deficits. But until now, they’ve always pushed balance between tax increases and spending cuts, more so, in fact, than the President’s plans—e.g., their prior plan had a cuts/revenues ratio of close to 1/1, while the White House has typically been at 2/1. They solidly established the principle that deficit reduction should not raise poverty or inequality, a principle that is actually embedded, at least to some extent, in the sequester, which protects social insurance and anti-poverty programs like Medicaid, SNAP, and the EITC.
But, as both Ez and I stress, this new plan appears to abandon these principles. It’s much more tilted to cuts versus revenues, and the magnitude of the cuts is such that they won’t be able to protect the economically vulnerable. From what they’ve said, they appear to be trying to parse out some strategic position in the debate, somewhere between the President and Boehner, though as Ezra points out, they’re about where the President is on revenues and to Boehner’s right on cuts. So they’ve punted on both the balance in their earlier plan and their fundamental principles of protection.
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