Day: November 3, 2008

Participate in MIT Global Crisis Class (Webcast)

Hopefully (technology permitting), Tuesday at 4pm (Boston time) you will be able to watch class #2 of our special seminar on the global crisis, through this link:

http://amps-web.mit.edu/public/sloan/2008/simon_johnson/live/04nov2008/

The goal is to give you a sense of the discussion at MIT, and also to let you participate – you can post questions here either in advance or during the class (we’ll monitor the webpage); or you can send by email (baselinescenario at gmail dot com).

The topics will be:

1. Where do we stand in the overall crisis at this moment?  (Including what central banks have been doing, particularly since last week)

2. What is the case for a fiscal stimulus in the U.S.?  Here we’ll discuss my testimony to the Joint Economic Committee of Congress, posted here.  If you can read one thing in advance of class, please look at this.

3. What will be (and should be) the agenda for the G20 meeting in Washington on November 14-15? On this, we will talk with Arvind Subramanian, a leading strategist on emerging markets’ economic diplomacy.

4. And there will plenty of time for an open discussion based on topics that students want to air.

Continue reading “Participate in MIT Global Crisis Class (Webcast)” →

Is an Even Bigger Health Crisis Next?

If there is a doctor in the house, or someone who knows where to track these kinds of statistics, please confirm or deny the following (which I got from two doctors, but the plural of anecdotes is not necessarily data…): visits to hospital emergency rooms in the U.S. are down sharply since mid-September?!

This strikes me as odd for the following reasons.

1. You would expect health (both actual and perceived) to worsen with the kind of stress that comes in economic crisis.  This was definitely the experience in parts of East-Central Europe in the 1990s, and arguably it has happened elsewhere during similarly intense episodes.

2. Visits to the emergency room obviously can be expensive if you don’t have insurance, but the stories I hear sugggest that visits are down also for people with insurance.

Could it be that the fall in consumption, picked up in the 3rd quarter GDP numbers that came out last week, is not just about going out less, buying fewer clothes, and staying away from imported goods?  Is it possible that we are actually taking less good care of ourselves and – quite likely – storing up more health problems for the not-too-distant future?

Comments on this important issue would most welcome.

Update (November 4): Laura Conoway, of Planet Money, has dug into this more – what she hears through the American College of Emergency Room Physicians is that visits are not down, but people are really struggling to afford insurance and medication.

Help the Doggies!

Massachusetts ballot question 3, the Greyhound Protection Act, will end greyhound racing, a “sport” that rests on systematic cruelty to animals. Greyhounds are confined in tiny cages for 20 or more hours per day, and over 800 dogs have been injured in the last six years. We can do better.

If you live in Massachusetts, please vote yes on 3. If you care about animal cruelty and know people who live in Massachusetts, please ask them to vote yes on 3. For more information, see the Yes on 3 website.

Thanks,

James

Financial Crises and Democracy, Part Two

We have several times emphasized the need for a large economic stimulus package to limit the extent and damage of the recession that we are almost certainly in already – a need recognized by economists from Nouriel Roubini to Larry Summers to Martin Feldstein. More recently, I speculated on the relationship between democratic politics and economic policy in a time of crisis. Well, as just about everyone in the world knows, things are coming to a head.

Whether we get a large economic stimulus package in the US – the economy whose health affects, for better or worse, just about everyone in the world – could very well depend on who is elected on Tuesday. For a summary of their short-term economic proposals, see here.

If Barack Obama is elected, we are likely to see a large stimulus package. It would probably include the measures that many economists are favoring, including extended unemployment benefits (and suspension of tax on those benefits), immediate cash aid to state governments, increased home heating cost aid, and infrastructure spending. These measures will have a direct impact on the economy by increasing spending now, while increasing it in ways that are necessary (keeping poor people alive) or that are productive long-term investments (infrastructure). Some of his other suggestions will have a more limited impact on the economy, such as a cash tax rebate, or are more or less irrelevant to the economy, such as relaxing the minimum distribution requirements for retirees.

With John McCain, we are not likely to see a stimulus package – or, more accurately, the package we see will be built around tax cuts that are not likely to have a direct economic impact. His proposals include: reducing taxes on retirement account withdrawals; increasing capital loss write-offs; reducing long-term capital gains tax rates; exempting unemployment benefits from taxes; also relaxing minimum distribution requirements; extending all of the Bush tax cuts; and reducing corporate tax rates. Except for the tax cut on unemployment benefits, these proposals suffer from the basic problem that undermined the last stimulus package this spring: in tough economic times, people take their tax rebates (or tax cuts, or cash you give them in any form) and stuff it under their mattresses, or pay down debt. McCain’s plan also includes the famous (or infamous) proposal for the government to buy up and refinance mortgages directly. (Obama favors increased loan modifications and legislation to eliminate some of the legal barriers to modifications.) But while that could potentially help homeowners and lenders, it doesn’t increase economic activity any.

(For an explanation of why different programs have different marginal impacts on GDP, see Menzie Chinn’s post.)

That said, given the way legislation is passed in Washington, the final package is likely to differ from either person’s proposals, whoever is elected. But the next major step that our government takes to combat the financial and economic crisis will depend directly on the outcome of Tuesday’s election.