As usual Krugman nails it. Even those who disagree with him from an economic policy point of view should, if they were honest to themselves, see little to debate in that piece.
Off on a ferry ride to Manly, on the other side of the harbor. Thanks. Enjoy.
Shutdown’s Economic Damage Starts to Pile Up, Threatening an End to Growth
"Donald Trump and His Team of Morons"
Federal workers, contractors and supporters demanding the reopening of the government last week. The White House estimated on Tuesday that the shutdown was causing twice as much economic damage as previously projected.CreditCreditLeigh Vogel for The New York Times
By Jim Tankersley
Jan. 15, 2019
WASHINGTON — The partial government shutdown is inflicting far greater damage on the United States economy than previously estimated, the White House acknowledged on Tuesday, as President Trump’s economists doubled projections of how much economic growth is being lost each week the standoff with Democrats continues.
The revised estimates from the Council of Economic Advisers show that the shutdown, now in its fourth week, is beginning to have real economic consequences. The analysis, and other projections from outside the White House, suggests that the shutdown has already weighed significantly on growth and could ultimately push the United States economy into a contraction.
To blunt the shutdown’s effects, the administration on Tuesday called tens of thousands of employees back to work, without pay, to process tax returns, ensure flight safety and inspect food and drugs. But some people involved in the shutdown discussions in the White House have privately said they anticipate that Mr. Trump will grow anxious .. https://www.nytimes.com/2019/01/14/us/politics/white-house-government-shutdown.html?module=inline .. about the economic impact in the coming days, accelerating an end to the stalemate. Others close to the president believe Mr. Trump has leverage and are encouraging him to stand by his demands.
For now, the White House shows no signs of being ready to relent, and Kevin Hassett, the chairman of the Council of Economic Advisers, continued to blame Democrats for the economic damage.
“Congress needs to look at the harms that we’re talking about,” Mr. Hassett said, “and address them.”
Mr. Hassett said on Tuesday that the administration now calculates that the shutdown reduces quarterly economic growth by 0.13 percentage points for every week that it lasts — the cumulative effect of lost work from contractors and furloughed federal employees who are not getting paid and who are investing and spending less as a result. That means that the economy has already lost nearly half a percentage point of growth from the four-week shutdown. (Last year, economic growth for the first quarter totaled 2.2 percent.)
Kevin Hassett, the chairman of the Council of Economic Advisers, said on Tuesday that one of his furloughed staff members had begun driving for Uber to make ends meet.CreditSamuel Corum for The New York Times
Mr. Hassett, attempting to illustrate the pain caused by the shutdown, said on Tuesday that one of his furloughed staff members had begun driving for Uber to make ends meet.
Mr. Trump has demanded that Democrats, who control the House of Representatives, include $5.7 billion for a border wall in any measure to fund the government. Democrats have refused and, along with some Republicans, have tried to persuade the president to reopen the government and negotiate border security afterward .. https://www.nytimes.com/2019/01/14/us/politics/trump-shutdown-border-wall.html?module=inline . The House has passed several bills to fund parts of the government, including the Internal Revenue Service, that are not related to border security. Senate Republicans have declined to schedule votes on those bills.
The impasse has left 800,000 federal employees furloughed or working without pay, along with throwing thousands of government contractors at least temporarily off the job.
Mr. Hassett said it was possible that the damage could grow. He also said much of the damage should be repaired once the shutdown ends and workers get back pay. But he acknowledged that the shutdown could permanently reduce growth expectations if businesses and markets begin to expect that Congress and the president will repeat the experience again and again.
Some economists have begun to warn that such a situation is likely and that economic confidence could be undermined as businesses, consumers and investors lose faith in the ability of political leaders to find agreement on issues like raising the federal debt limit and approving trade deals.
That lack of confidence could snowball into a self-inflicted economic contraction on the heels of what appears to have been the nation’s strongest year of growth since the 2008 financial crisis. Financial markets are already highly volatile amid concerns about the trade fight with China, slowing global growth and signs of weakness in American housing and manufacturing sectors.
“The economy could easily stall in the first quarter, and then the question is what happens in the second” if the shutdown persists, said Ian Shepherdson, the chief economist at Pantheon Macroeconomics. “The longer it goes on, the longer it takes to recover.”
If the shutdown continues through the end of March, Mr. Shepherdson said in a research note, he would expect the economy to shrink in the first quarter. While federal workers are likely to receive back pay once the furlough ends, most government contractors will not, and the longer spending is depressed, the higher the risk that the businesses they run or patronize will fail, Mr. Shepherdson said.
The shutdown “is threatening to derail this economic expansion,” Bernard Baumohl, the chief global economist for the Economic Outlook Group, said in a research note on Tuesday. Its effect on federal workers’ spending plans is particularly worrisome for the automotive and housing markets, which were already showing signs of trouble before the shutdown, he said.
On Tuesday, a Federal Reserve Bank of New York survey showed weakening manufacturing activity in the United States, the latest in a line of similar warnings. Economists at JPMorgan Chase called the data an early indication of additional slowing in the sector, adding that the shutdown was probably hurting business sentiment.
Volunteers handing out food to federal workers in Alexandria, Va., on Saturday.CreditLexey Swall for The New York Times
With no end in sight, federal workers appear ready to seek alternate employment before things get worse.
The online jobs site Indeed analyzed job search behavior from mid-December through mid-January for workers at some affected federal agencies, including the I.R.S. and Transportation Security Administration. It found clicks on job listings rose at least 17 percent for each of those worker groups over that period, a sign that employees affected by the shutdown “are searching for jobs more right now than they usually do at this time of year,” said Martha Gimbel, Indeed’s director of economic research.
“With the shutdown occurring in a tight labor market, many workers have other options, and they seem to be trying to take advantage of them,” Ms. Gimbel said. “If the shutdown leads to a loss of talent for the federal government, it could be harder for it to compete for new hires in a labor market this tight.”
That might already be happening inside the White House. Mr. Hassett said on Tuesday that a prospective new hire had told the council that he might turn down the job he had been offered out of graduate school because the government is unable to bring him onto the payroll.
Maggie Haberman and Julie Hirschfeld Davis contributed reporting.
Paul Krugman: Alexandria Ocasio-Cortez exposes average congressional Republican as "dumb as a rock"
"Donald Trump and His Team of Morons"
"Constant attempts to dismiss her as stupid are helping to highlight the casual racism and sexism," Krugman writes
Cody Fenwick January 17, 2019 9:39PM (UTC)
[...]
Krugman’s tweet storm was sparked by Ocasio-Cortez’s back-and-forth with former Wisconsin Gov. Scott Walker, who embarrassingly attacked her proposal for a 70 percent marginal tax on high incomes (which Krugman has previously defended).
“Explaining tax rates before Reagan to 5th graders: ‘Imagine if you did chores for your grandma and she gave you $10. When you got home, your parents took $7 from you.’ The students said: ‘That’s not fair!” Walker said on Twitter.’ “Even 5th graders get it.”
Of course, this is a wild misrepresentation of the proposal. Perhaps, more accurately, it’s a lie. Even billionaires under Ocasio-Cortez’s preferred scheme wouldn’t pay 70 percent of their income in taxes — only 70 percent of their income above $10 million. Walker just admitted to tricking fifth graders about basic finances.
Ocasio-Cortez clapped back to Walker’s tweet, explaining why the failed governor was wrong. In doing so, her tweet received many times more engagement from Twitter users, exposing the GOP’s bogus talking points and a more accurate view about marginal tax rates to a broader audience.
[...]
As Krugman noted, this kind of interaction reveals the value in her elevated profile.
“So [Ocasio-Cortez] is both a real political talent and very useful as someone who flushes the ignorant prejudice of the right into the open,” he said. “So in the end it’s all good. A party that only had people like her to present its case might have problems, but there are plenty of experienced veterans and deep thinkers too. Not to slight the many other good people, but just compare the lineup of Pelosi, Warren, and Ocasio-Cortez with anything on the other side.”
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