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Jacob Strauss
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The minutes from the meeting noted that the "Fed is beginning to believe that they are near the end of their rope," which is interesting considering that the unemployment rate has been stuck just below 8% and that inflation is rising below the targeted rate. Perhaps the Fed is under pressure from politicians or people in the business sector, and is looking to scale back its efforts even if inflation is not a problem. It is also possible though that the Fed sees that it cannot do much more to lower the unemployment rate, especially when the Federal government's fiscal policy is pushing us in the opposite direction. In addition, banks have been storing much of the money from Fed purchases in their reserves, which means that continued expansion of the monetary base may not translate into a larger money supply or create a large multiplier effect. Overall, though, I think that the Fed should not ease its policies when the economy is still struggling and inflation is not a problem, because it is difficult to make a case for beginning a taper when the labor market is stagnant.
That the US Federal Government is going to invest $550 billion on physical capital, R&D, and human capital this year initially sounds impressive, but when Barlett points out that we are still running a net deficit in maintaining our public infrastructure the reality sets in that these numbers are entirely relative. It is unfortunate that because of deficit hawks in congress that any reduction in public spending, whether it be to education or infrastructure, is seen as victory because it addresses the deficit problem in the US, even though it actually makes our country less economically competitive in the long run. Bartlett makes a good point that separating investment spending from consumer spending could solve this problem by showing that spending in the first category will produce growth and a return in the long run, which should exempt it from budget cuts. In this way, the government could then increase spending on infrastructure to lower unemployment and make the US economy more efficient without being criticized for increasing the debt.
The article makes a valid point in that the effectiveness of a stimulus package largely depends on how consumers react to the additional stimulus, and through facts and figures it also shows the logical statement that lower income households will more effectively use the stimulus funds because they have a higher MPC than wealthier households. It also shows that whether it is financed through a government transfer to increase the disposable income of the poor or uses redistribution policies does not alter the fact that more money will be pumped into the economy, but the article stops short of saying which policy it advocates. Certainly taxes on the rich to give money to the poor are a very controversial topic,and the article does not address the negative concerns of this policy, such as limiting incentives for work. I think, though, that while both methods would make a fiscal stimulus more effective, the public support for increasing taxes on the wealthy will gradually grow as it has become clear that the gains of the economic recovery have almost all gone to those already at the top.
Katie is correct in that people with education level of less than a high school degree make up a (relatively) small portion of the population, but I do not believe that means the article should have spent less time on the demographic. The change in unemployment in this group reveals changes in our society as a whole. More and more people are attaining a high school diploma or more, but this development is of course occurring among the younger part of the population. The large reduction in the unemployment for this demographic could indicate that older, less educated workers are being phased out of the work force. The author's hypothesis for explaining the drop makes the decrease less positive, but is also optimistic because it shows the US workforce is slowly becoming more educated. Syed's point is intriguing, but workers returning to school cannot explain the drop in the EPOP, as he stated, since the EPOP did not change during the month of September. Instead, "it remained unchanged at 58.6%" The increase in students could explain the drop in unemployment for those without a high school degree, but it seems to me that it is more likely that older workers are being phased out of the workforce. Only time will show what ultimately caused the drop. Some students alluded to other statistics, such as the number of workers who are underemployed, and it is interesting that these were not mentioned. This issue has been gaining media attention lately because Republicans are asserting that the Affordable Care Act will increase the number of part time workers. The Bureau of Labor report shows that the number of part time workers who wish to be full time remains unchanged at 7.9 million, and that 9 out of the last 10 jobs added to the economy were full time. This is positive news, and hopefully over the coming months as businesses adjust to the ACA it will not change.
Jean raises an intriguing point about whether the wealthy people identified in the article were born into that money, or if they actually made the money themselves. If someone inherited the money that is completely different from someone who started out poor or middle class and made the money on their own, and we should be careful about lumping them into the same group. The latter group I would think would not care any less than those that are not rich since they have had similar experiences and understand the difficulties faced by the lower classes. It seems illogical that the acquisition of money through hard work would cause them to be less empathetic. Indeed, it would be fascinating to see if the newly rich were more supportive of liberal economic and welfare policies than those of "old money" because of the experiences they have had. On the other hand, it seems logical that those who inherit their wealth would be less empathetic because they have likely had a relatively easier life than the lower classes and would be less understanding of the difficulties of others. It would be enlightening to see if the policies of the Republicans stem more from a lack of empathy or from actual belief in the soundness of their economic and welfare policies, though I will be the first to admit determining the answer to that is not easily done. The article ends on a rather negative note because of the rising gap in inequality and the rising gap in empathy, but if the study is correct than it should also be possible to teach empathy. If it became feasible to reduce social distances and foster more relationships across the cleavages in society, then more empathy and understanding should follow, as Syed pointed out. As with many things, though, that is easier said than done.
While the article certainly had many positive signs, the title was too optimistic. The number of households below extreme poverty has been expanding for decades, but one of every two people in sub-Saharan is still in poverty. We should expect global economic growth to gradually pull people out of poverty, even if a higher GDP does not mean a higher standard of living. As Sachs points out, cell phones have been key in poverty reduction in Africa, and one of the many benefit of cell phone introduction is increased banking among those that live in rural areas. Future technological advances should continue to reduce poverty, but that does not mean poverty is going to end soon. Sachs is correct in that there is no magic bullet and that those in poverty need help from the public and private sector. Cooperation between these two sectors will be critical in the coming years as the effects of climate change will be felt most by those in developing countries, which could send more back into poverty.
The author made valid points on the origins of market and the "myth of the 'free market.'" I also agree with him on the problem of wealth inequality, especially as recent news has shown 95% of the income gains from 2009 to 2012 went to the top 1%. That said, it is much easier to criticize the system and call for change than it is to develop a solution. The author stops just short of actually proposing what changes ought to be made, and as a result the end of the article is lacking in some respects. It has some mighty rhetoric but needs more in substance, because even those that agree that wealth inequality is a problem can disagree on how to fix it. He ends with the standard "us versus them" discussion that arises when criticizing the economic and political elite.
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