If You Can’t Find Qualified Workers, You’re Not Paying Enough

Job retraining programs and career-focused education are cool, but skills mismatch just isn’t a big problem with the economy. Business owners who say they can’t find qualified workers are either terrible at business, or are pulling your leg. If they can’t find qualified workers, it’s because they’re not offering high enough wages.

Business types like higher unemployment because it means they have more leverage to lowball employees on wages. Right now the wages they’re offering are too low to clear the market. This is why people need to be hollering not just for some good-enough response to the unemployment crisis from Congress and the Fed,but specifically for full employment policies. We want a tight tight tight labor market that gives workers lots of bargaining power over employers, lots of leverage to  quit, demand raises and all the good stuff.

Obama Can Replace Ed DeMarco

Blaming the Obama administration’s unforced errors on housing policy* on Bush holdover Ed DeMarco wouldn’t be entirely right, since Treasury has had pretty wide latitude to act without Congress and they haven’t. But in the case of principal reduction, it really is a Bush holdover messing things up. There have been some questions about whether Obama can replace DeMarco, and Adam Levitin explains that he can, via Dylan Matthews:

The FHFA statute provides that the FHFA Director is only removable “for cause”. 12 U.S. Code sec. 4512. That sort of provision usually means that the President can only remove the officer for malfeasance or misconduct, not just a policy disagreement. (See In re Humphrey’s Executor.).
DeMarco, however, is an Acting Director…This means he can be removed at any time simply by the Presidential appointment of a Director. That would require Senate confirmation (not happening before 2013 under political realities and the ridiculous Strom Thurmond rule) or a recess appointment (possible). Given the way Obama has interpreted the recess appointment power for the CFPB Director and NLRB appointments earlier this year, the ability to do a recess appointment means he can replace DeMarco pretty much whenever he wants.

*Since the Obama administration has erred on the side of not being aggressive enough with banks, and the Republican Party’s position is that the Administration has been too hard on the banks, there is no option to improve housing policy by electing Republicans.

Tight Money Hurts Young People

If they dare to come out in the open field and defend the gold standard as a good thing, we shall fight them to the uttermost, having behind us the producing masses of the nation and the world. Having behind us the commercial interests and the laboring interests and all the toiling masses, we shall answer their demands for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.” – William Jennings Bryan

I don’t get the sense that many young people read this blog, but if you are a young person you need to hurry up and get radicalized on the issue of money politics.

The main “radical” message you’ve probably been hearing on monetary policy is from the Ron Paul people, arguing for a gold standard. If you are a relatively young, working-age person, this idea is fucking evil. It is a bazooka pointed straight at the heart of your lifetime earnings potential. Any debts you have – which, if you are a typical Millenial, are probably enormous – would be extremely hard to pay off under a gold standard.

This is because most debts are in nominal terms. If the value of the dollar goes down, and your nominal wages go up, the value of your debt goes down. Inflation is good for debtors, and bad for creditors.

But because inflation is bad for certain kinds of old people on fixed incomes, politicians tend to favor tight money (which hurts you) over loose money (which helps you.)

As the US population ages, inflation is going to become more unpopular, even as the older generation relies on us to pay for their entitlements. Not only are we going to have to pay more in taxes to cover their benefits, we are also likely to be hurt by their hard money politics.

It is critical that you understand the political trade-off here so that you can help pressure Presidential candidates and Senators to confirm loose money advocates to the Federal Reserve Open Markets Committee.

Here is a good primer on the topic.

State Study Finds Slate Belt Regional Police Dept Would Cost 24% Less Than Separate Forces

Andrew George reports on a new state study strongly recommending a regional police department for 5 Slate Belt municipalities. He finds no officials to say anything bad about this, and Bangor and Wind Gap officials are supportive, despite Bangor paying the most under the proposed plan:

The study addresses advantages of a regional force such as improved training for officers, improved management and supervision and lower operating costs. Pointing to a separate study conducted by the Pennsylvania Department of Community Affairs, the new study claims that in nine out of 10 situations with proper management, regional departments cost on average 24 percent less than single-municipality departments.

The study proposes a total operating budget for the regional force of about $3.5 million with each municipality’s share based on factors such as population, calls for service, crimes, square miles and road miles.

Wind Gap council member Dave Hess said he expects his fellow council members to vote in support of the plan.
Under that proposed cost breakdown, Bangor would contribute the highest share with 23.26 percent of the total budget, a $7,784 increase from its current 2012 budget. Wind Gap would contribute the least at 10.56 percent of the total budget, a $37,597 decrease from its department’s current operating budget.

The plan calls for 35 full-time officers, including a chief of police, two lieutenants, four patrol sergeants, two detectives, two auxiliary services officers and uniformed patrol officers. Under a proposed four-squad schedule, there would be about six to nine officers on patrol at all times, according to the study.

Also proposed in the study is a five-member board of police commissioners to govern the force; its proposed headquarters would be at the Plainfield Township Municipal Building with a substation at Washington Township’s municipal complex.

Shut Er Down

Sahil Kapur says a government shutdown over the Labor-HHS-Education appropriations bill is still looming over the election. Maybe a reporter should ask Charlie Dent what he thinks about the bill, since he’s on the Appropriations Committee:

Just months ago, House Speaker John Boehner (R-OH) seemed to have accepted that accomplishing the basic functions of government required throwing some red meat to his conservative members. But less 100 days away from the election, he is trying to bury a spending bill that rank and file members want to use as a vehicle to gut ‘Obamacare’, end family planning funds, and slash spending on longstanding programs.

Taxpayers Could Benefit From GSE Principal Reduction

Jared Bernstein says Fannie and Freddie are moving closer to principal reduction:

According to hard-nosed-WSJ-housing-beat reporter Nick Timiraos, Fannie and Freddie’s regulator, the FHFA—which has heretofore argued that principal reduction wasnot something it wanted to add to the GSEs portfolio of loan mod programs, now finds that its benefits are considerably larger than they thought.

…a new analysis by the regulator suggests that taxpayers could actually benefit from the move, according to people briefed on the findings.

Fannie and Freddie could save about $3.6 billion more than current loss-mitigation approaches by reducing balances for some borrowers that owe much more than their homes are worth, these people said.

The Federal Housing Finance Agency is nearing a decision on whether to allow the companies to participate in the debt-forgiveness program that it consistently has resisted. Until now, the regulator has maintained that the current housing-rescue programs offered by the taxpayer-supported mortgage companies are less-expensive options.

Which Economists Have Been Getting it Right Since 2008?

Jonathan Portes:

[W]hen economists argue about the correct stance of policy, who should we (policymakers, commentators, and the general public) listen to? This question was prompted by a recent exchange I had with Ed Vaizey and Simon Hughes on the BBC’s Daily Politics: I pointed out that not only was the government’s decision in 2010 to cut the deficit too quickly doing considerable economic damage, but that this was both predictable and predicted by economists such as Paul Krugman and Martin Wolf. Their response was essentially “how were we to know which economists to listen to? Others were saying the opposite”….

[P]olicymakers and the public should listen to economists who… have made empirically testable predictions (conditional or unconditional – see Krugman here) that have proved, by and large, to be broadly consistent with the data; and, second, they base those predictions on an analytic framework (not necessarily a formal model) that is persuasive…. My shortlist… is something like the following: Krugman, Delong and Wren-Lewis on fiscal policy… Adam Posen on monetary policy… Paul de Grauwe on sovereign and eurozone debt; Martin Wolf on private sector savings and public sector deficits (the financial balance approach); Richard Koo on the implications of a “balance sheet recession”

Not all of these economists agree with each other on everything, nor do I necessarily agree with them about everything…. But they each have clear analytic frameworks for thinking about the economy, and have used them to make empirically testable claims; and have largely been vindicated….

I would also list Karl Smith and Scott Sumner among those who have been getting it right since 2009.