As you may recall, Smithianism1 is an economic forecasting model that suggests the economy will turn up this year because (a) So many cars have worn out over the past three years that sales pretty much have to go up at this point, and (b) So many people have been living in their parents' basement for so long that sheer desperation is going to drive them into the home and rental market. This, in turn, will get the economy back on track.
Okay, that's a little oversimplified. But basically true. As regular readers know, I've been striving to believe in Smithianism for the past six or nine months, and it's been hard. I've tried, but I end up backsliding a lot too. Today, though, Calculated Risk provides a strong endorsement:
The Housing Bottom is Here
There are two bottoms for housing. The first is for new home sales, housing starts and residential investment. The second bottom is for prices. Sometimes these bottoms can happen years apart…For new home sales and housing starts, it appears the bottom is in, and I expect an increase in both starts and sales in 2012.
…And it now appears we can look for the bottom in prices. My guess is that nominal house prices, using the national repeat sales indexes and not seasonally adjusted, will bottom in March 2012…There are several reasons I think that house prices are close to a bottom. First prices are close to normal looking at the price-to-rent ratio and real prices (especially if prices fall another 4% to 5% NSA between the November Case-Shiller report and the March report). Second the large decline in listed inventory means less downward pressure on house prices, and third, I think that several policy initiatives will lessen the pressure from distressed sales (the probable mortgage settlement, the HARP refinance program, and more).
If this is true—and the evidence in favor seems pretty strong to me—then the housing market will indeed recover in earnest this year and the economy will recover along with it. And cars? Well, yesterday Clint Eastwood told us it was halftime in America and Detroit is leading the way to recovery if we can all just pull together and quit sniping at each other for a little while. Works for me!
I think I'm about an 80 percent Smithian these days. Basically optimistic, but still wondering just how strong the recovery is going to be, and still worried that Europe or China or Wall Street 2.0 might still derail things. Your mileage, of course, may vary.
1Smithianism (smith’-ee-uhn-iz-uhm) n. [Fr. Smith + ISM < Karl Smith, American professor of Public Economics and Government at the School of Government at the University of North Carolina at Chapel Hill] economic doctrine that places considerable emphasis on rising pressure in the housing and automobile markets to drive an economic recovery.
Nearly half of likely voters think the United States should be willing to use military force to prevent Iran from obtaining a nuclear weapon, according to this week’s The Hill Poll. Forty-nine percent said military force should be used, while 31 percent said it should not and 20 percent were not sure.
So there you go. We've basically got a majority for military action against Iran already, and at this point the war drums have only barely begun to beat. Another few months of well-timed leaks and scary op-eds and we'll have two-thirds in favor easy. Even after ten years of Iraq and Afghanistan — not to mention Libya, Yemen, Somalia, and the endless drone strikes in Pakistan — it's still not very hard to get the American public lathered up into a good old-fashioned war frenzy.
Marriage rates are down in America, and they're down far more among the poor and working class than among those who are better off. That's old news. But why are marriage rates down? I don't know, and I gather that Michael Greenstone and Adam Looney of the Hamilton Project don't really know either. However, they suspect that there's a fairly straightforward relationship between income and marriage: as incomes go down, so do marriage rates.
Maybe. The income numbers in the chart below don't look very familiar to me (Median male earnings have declined 40% since 1970? Earnings in the top 5% have increased only 20%?), but if you take them at face value the relationship between earnings and marriage rates is indeed remarkably striking. The question is whether the correlation here is also causal, and if it is, which direction it runs. Have declining earnings provoked lower marriage rates, or have lower marriage rates affected men's earnings? This issue is much more a hobbyhorse among certain precincts on the right than on the left, but I think it's worth paying more attention to regardless of where you sit on the left-right axis. Family stability and community stability are important no matter what the causes of their decline may be, and figuring out those causes is worth some skull sweat.
UPDATE: On the other hand, some skull sweat isn't very worthwhile at all. Here is David Frum taking on Charles Murray's latest attempt to handwave away the fact that declining earnings among working-class men may have had a wee effect on their attachment to the labor market, the marriage market, and to various other social norms of the 50s.
Generally speaking, I try to avoid implying that liberal wonks are somehow fundamentally superior to conservative wonks. This includes suggestions that, for example, the former tend to be tolerably intellectually honest while the latter tend toward hackdom. Or that liberals mostly maintain consistent positions while conservatives cheerfully shift sides based on little more than who's in office and what the current party line is.
Yessiree. I try to avoid saying things like that. But good Lord, conservatives sure make it hard to maintain this pretense. For today's example, click here to see Stuart Butler of the Heritage Foundation explain why he's suddenly changed his mind on the individual mandate. Ezra Klein very kindly responds that he would "find this more persuasive if there were evidence that the shift predated President Obama’s embrace of the policy," but I will less kindly say that Butler's explanation is simply risible. Nobody with more than a fourth-grade education would take it even remotely seriously. The truth is that he thought the mandate was a fine idea until Barack Obama endorsed it, the entire conservative movement declared it the work of Satan, and he then needed to change his mind or be drummed out of polite society.
Maybe I'm blinkered, but I simply can't imagine a liberal wonk explaining a flip-flop with such transparently laughable arguments. But I'm open to examples that I might have forgotten.
St. Louis Fed president James Bullard, who's been sort of hawkish and then sort of centrist, now seems to moving back toward hawkishness again. "Hawkish," of course, normally refers to the Fed's attitude toward inflation, but at this point it seems to have morphed into "the economy sucks and we'd all better just get used to it":
If the Federal Reserve doesn't change the way it takes stock of the economy and its relationship to monetary policy, the U.S. may be facing a "looming disaster," a top central bank official said Monday.
At issue is the commonly held view that the Fed must use its policy tools to help the economy regain the ground it lost over the financial crisis and ensuing recession, in turn closing what economists see as the gap between the economy's potential and its actual rates of growth, Federal Reserve Bank of St. Louis President James Bullard said. But the nature of the shock suffered over recent years is such that if this model continues to drive policy, "it may be very difficult for the U.S. to ever move off of the zero lower bound on nominal interest rates," Bullard said.
....Bullard said he worries that current preoccupation with closing the output gap "may be keeping us all prisoner" because it puts monetary policy makers in the impossible position of trying to get growth to converge back to pre-crisis levels, which were themselves a reflection of the housing market bubble.
So there you have it. We managed to make up the output gap after the Great Depression, but it's not going to happen this time because — well, just because. Bullard's view seems to be that we're stuck because the 2008 crash was caused by an asset bubble, but the world has seen lots of asset bubbles before. It's not clear why he thinks this one is so special that we're never going to make up the ground we lost when it burst.
So suck it up, America. And keep in mind that as these things go, Bullard is actually something of a moderate. As near as I can tell, about half of the FOMC thinks Bullard is just pandering to the hippies and we should end this nonsense of keeping interest rates low right now. Sure, it'll be a little painful, but eventually all you malingerers out there will get the message.
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Normally, drinking out of human glasses is Not Allowed. But last night I mentioned that I still needed photos for Friday catblogging, so this morning an exception was made as Marian urged me to get my camera and come record the moment. So I did. The camera captured some excellent tongue action from Domino, who is, I'm sure, obeying the universal law of cat-lapping:
That comes to 3.43 laps per second for an 11-pound (5-kilogram) cat. Inkblot, who has a more mathematical bent, keeps his weight at precisely 18.12572 pounds, thus clocking in at a more leisurely 3.14159 laps per second. And that, my friends, is science.
One of the things that's been niggling away at the back of mind lately is the (seemingly) increasing sameness of the blogs I read. More and more, as I plow through them in the morning, they're all filled with posts on the exact same four or five topics. I used to call them the "outrages of the day," though of course they're not all outrages. Some of them are just the ordinary news of the day.
This popped into my mind in a slightly different context today as I made my way through my RSS feeds and found post after post after post about the January jobs report. Some feeds had two or three or even four or five separate posts on the subject. It's gotten crazy.
Back in the day, blogs posted a bit here and there about monthly economic news, and of course specialty pubs like the Financial Times or the Wall Street Journal would dive a little deeper into them and provide a bit of commentary and reaction. No longer. Now, the various reports are greeted every month by an enormous hail of blog posts diving ever deeper and deeper into the details behind the headline numbers. I wonder if it's time to ease up on this.
I appreciate detail as much as the next guy — more than the next guy, actually — but you know what? It's a jobs report for one month. There's only so much it can tell you. Diving deeply into it is sort of like trying to squeeze more significant digits out of a result than went into the inputs. You're just kidding yourself if you think this level of detail on a single month's data is really telling us anything.
Apologies if this seems Andy Rooney-ish. But seriously folks. I know it's an election year, but it's still only one month of jobs data. Give it the attention it deserves, but no more.
We welcome the fact that jobs were created and unemployment declined. Unfortunately, these numbers cannot hide the fact that President Obama’s policies have prevented a true economic recovery. We can do better. Last week, we learned that the economy grew only 1.7% in 2011, the slowest growth in a non-recession year since the end of World War II. As a result.....blah blah blah.
Alas, poor Mitt. Now he knows what it feels like to be Barack Obama. For the past two years Obama has basically been forced to say that, sure, the economy is bad, but it would have been even worse without his policies in place. That might be true or it might not, but it's sure not a vote getter.
Now Romney's on the other end of that argument. Sure, the economy is getting better, but it would be even better still without Obama's policies. Again, maybe that's true and maybe it's not, but no one cares. If the economy is getting better, then people are happy and they're going to vote for the guy in the White House. Romney had better figure out something better than that if he wants to have any chance of victory in November.
When the Komen Foundation cut off its breast cancer screening grants to Planned Parenthood a few days ago, they said it was because of a new policy that bars grants to organizations under investigation. Then they backtracked, and said that it was actually because Planned Parenthood doesn't perform mammograms itself, but only provides referrals. Today, I guess we're back to excuse #1:
The Susan G. Komen Race for the Cure Foundation Friday announced it would revise a controversial new policy that barred the organization from funding Planned Parenthood....“Our original desire was to fulfill our fiduciary duty to our donors by not funding grant applications made by organizations under investigation,” a Friday statement said. “We will amend the criteria to make clear that disqualifying investigations must be criminal and conclusive in nature and not political. That is what is right and fair.”
Okey dokey. I guess the next step is to see if Komen actually continues their grants or not. More from Adam Serwer here.
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