The Matrix: The Intersection of War, Economic Theory, and the Economy

Vincent Portillo and I are working on a new book, The Matrix: The Intersection of War, Economic Theory, and the Economy.  So far it is still remains an exploration rather than a finished research project.  We intend to post our progress from time to time, hoping to initiate some comments and conversation.

Thank you in advance.

Here is the link.

http://michaelperelman.files.wordpress.com/2012/08/matrix2.pdf

Romney-Ryan v. Obama Long-term Fiscal Policy – More Mankiw Endorsed Spin

Greg Mankiw plays for Team Romney by sending us to Keith Hennessey:

Here is your tax levels cheat sheet. • Over the past 50 years federal taxes have averaged 18% of GDP. • Governor Romney proposes taxes “between 18 and 19 percent” of GDP. • The House-passed (“Ryan”) budget proposes long-term taxes of 19% of GDP. • President Obama’s budget proposes long-term taxes at 20% of GDP.* • The Bowles-Simpson plan proposes long-term taxes at 21% of GDP. I put an asterisk after the Obama line. The Ryan and Bowles-Simpson plans would stabilize debt/GDP in the long run, while President Obama’s would not. Since President Obama has not proposed a long-term fiscal policy solution, we don’t know whether his long-term fiscal solution, if he had one, would raise taxes above 20% of GDP.

Maybe it is fair to put an asterisk after the Obama line but to claim that Paul Ryan’s “budget” would eventually stabilizes the debt/GDP ratio strikes me as a very ill informed statement. The spending path that Ryan asked CBO to simulate pretended we could reduce everything the Federal government spends outside of Social Security, Medicare, and Medicaid to less than what Mitt Romney wants to spend on defense spending along. And we have all seen lots of discussions on how both Obama and Ryan want to curb the growth of Medicare spending in ways Romney has rejected. In other words, we need magic asterisks to make Ryan’s spending path come to something that can be financed with taxes = 19% of GDP. As far as either Romney or Ryan getting taxes to be anything close to 19% of GDP requires an exercise in high order fuzzy math as they are proposing substantial tax cuts without specifying the tax offset spelled out in Bowles-Simpson. I know Chris Christie said something last night about shared sacrifices and tough choices in terms of “respect”, which to me says that Romney-Ryan is not respecting American voters. But to just flat out lie about Romney-Ryan being fiscally responsibly is the height of disrespect.

Governor Romney’s Employment Record

Team Romney is boosting that as governor of Massachusetts (January 2003 to January 2007), he lowered the state’s unemployment rate to 4.7%. He fails to put this in perspective in several ways. When he became governor, the state unemployment rate was only 5.6% as compared to the national unemployment rate, which was 5.8%. And when he was leaving office, the national unemployment rate had declined to 4.6%. In other words, he presided during a period when the overall economy was finally recovering from the 2001 recession.

Our graph shows another important qualification to Romney’s boost. The state’s labor force (LF) grew by a meager 0.4% during his tenure so employment (EM) only had to rise by 1.5% to lower the unemployment rate. Nationwide, employment growth (per the payroll survey) grew by 5.25%. In other words, there is not much to really brag about as far as employment in Massachusetts during Mitt Romney’s tenure as governor.