South By North Strategies, Ltd.

No Luck For The Irish

A recent video discussion produced by the Institute for New Economic thinking explains the economic mess facing Ireland and how the recovery is unfolding.

Around The Dial – June 15, 2011

Economic policy reports, blog postings, and media stories of interest:

• Annie Lowery reports on “the 12-cent victory.”
• Paul Krugman points out that “Medicare saves money.”
• Lawrence Summers chimes in on “the lost decade” debate.
• Naked Capitalism says the “new road to neoserfdom is an asset grab.”
• E.J. Dionne points out the gridlock facing the jobless.

Heading The Wrong Way

The American Prospect reports on moves to cut unemployment insurance payments despite disturbingly high levels of unemployment.

Unemployment benefits are on the chopping block, at both the state and federal levels. They’re certainly not cheap: With 14 million people officially unemployed as of May, the price tag for unemployment benefits is projected at $129 billion for 2011, according to a report from the Pew Fiscal Analysis Initiative. Since the recession, benefits have been extended to a maximum of 99 weeks, thanks to both federal and state add-ons.
…
Now, as the Huffingon Post’s Arthur Delaney has extensively tracked, many states are cutting back. Michigan, Missouri, and Arkansas have shrunk the number of weeks people can receive state aid. A similar bill in Florida awaits the governor’s signature, and more states are likely to follow. And the federal bills creating the 99 weeks max all expire at the end of 2011, so people still unemployed come January will be abruptly bumped down to their state limits.
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“If we withdraw these unemployment benefits that families need and rely on and that are pumped back into local economies, that might do more harm than good,” says Christine Owens, executive director of the National Employment Law Project. For every dollar spent on unemployment benefits, two dollars in economic growth are generated, Owens says, citing Department of Labor research. …

So Simple, Yet So Hard

James Surowiecki of The New Yorker explains the basic regulatory philosophy of Elizabeth Warren.

The core principle of Warren’s work is also a cornerstone of economic theory: well-informed consumers make for vigorous competition and efficient markets. That idea is embodied in the design of the new agency, which focusses on improving the information that consumers get from banks and other financial institutions, so that they can do the kind of comparison shopping that makes the markets for other consumer products work so well. As things stand, many Americans are ill informed about financial products. The typical mortgage or credit-card agreement features page after page of legalese—what bankers call “mice type”—in which the numbers that really matter are obscured by a welter of irrelevant data. There’s plenty of misinformation, too: surveys find that a sizable percentage of mortgage borrowers believe that their lenders are legally obliged to offer them the best possible rate. Since borrowers are often unaware of how much they’re actually paying and why, the market for financial products doesn’t work as well as most markets do. And the consequences of this are not trivial. The housing bubble was a collective frenzy, but it was made much worse by the fact that millions of borrowers were making poorly informed decisions about the debt they were taking on. If people had known more, they might well have borrowed less.

Around The Dial – June 14, 2011

Economic policy reports, blog postings, and media stories of interest:

• The NY Times reports on firm spending on “equipment, not workers.”
• Naked Capitalism is yet again underwhelmed by the Treasury Department.
• Simon Johnson explains how higher capital requirements won’t slow growth.
• Paul Krugman describes “rule by rentiers.”
• The Huffington Post reports on the increasing length of job searches.