Paul Krugman: Hard-Money Men, Suddenly Going Soft: "I have been insufficiently cynical about modern conservative economics.... While I yield to nobody in my appreciation of the right's fiscal fraudulence, I took its monetary hawkishness seriously. I thought that all those dire warnings about the inflationary consequences of the Federal Reserve's efforts to fight high unemployment, the constant harping on the evils of printing money, were grounded in genuine—stupid, but genuine—concern. Silly me. It's no surprise that Individual-1, who lambasted the Fed for keeping interest rates low while Barack Obama was president, is demanding that it keep rates low now that he's in the White House. After all, nobody has ever accused Donald Trump of having consistent, principled views about monetary policy (or anything else). But it is a shock to see so many conservative voices—including, incredibly, the editorial page of The Wall Street Journal—echoing Trump's demands...
...It's hard to overstate just how consistent and intense The Journal and others of like mind used to be in their attacks on easy money.... Now, you might say that the explanation for the right's about-face on monetary policy is the same as the explanation of its about-face on deficits. That is, Republicans want pain and suffering when there's a Democratic president, but a nonstop party when one of their own sits in the White House.... I used to think there was something more to the story.... The right's emotional response to Fed policy—its hatred for using the printing press to boost the economy, no matter what the circumstances—always seemed real to me. I never believed that Paul Ryan really cared about the deficit, but I did believe his assertion that his views on monetary policy were derived from the denunciation of paper money as a form of looting in Ayn Rand's "Atlas Shrugged."...
By CLARISSA COTTRILL
and JOSH KELLEY
RANSON — Since July, concerned citizens from Jefferson County and beyond have spoken out at local government meetings against the impending Rockwool facility and its potential impacts on residents' health and the environment, but one state expert has weighed in on the issue.
According to the West Virginia Department of Environmental Protection Air Quality Report, the chemicals to potentially be emitted from the two 21-story tall smoke stacks include formaldehyde, sulfur-dioxide, lead, carbon monoxide, soot, large and small particulate matter and sulfuric acid.
While there has been public outcry, the actual effects of these emissions are up in the air, according to West Virginia University Clinical Associate Professor Dr. Michael McCawley.
"In toxicology we are fully aware that it is the dose that truly makes the poison. In this case we do not know the dose yet," McCawley said. "Therefore, we cannot say with any certainty what the level of alarm should be."
The exact health effects of these emissions cannot be determined without knowledge about the interaction between the emissions, weather and terrain, which according to McCawley, highlights an issue with the Air Quality Permit process.
"The air permit does a poor job of answering the issue," he said. "So there is no wonder that citizens are in an uproar."
Those protesting the Rockwool facility that will produce stone wool used in building insulation for housing and other industrial projects have voiced concerns about the risk of cancer from the emissions and the impact on children's health because of its proximity to North Jefferson Elementary School.
"This is an issue of not only public safety, but environmental safety," said Regina Hendrix of the Eastern Panhandle Chapter of The Sierra Club at a Jefferson County Commission meeting this month. "You're either going to have hundreds of families staying, or hundreds of families leaving. I am not the first one to say it tonight, but I certainly won't be the last."
Expert opinion
Knowing what chemicals are among pollutants and how they are regulated can help the public understand the emissions coming from Rockwool and how people, animals and the environment will be affected, according to McCawley.
McCawley spent more than 27 years as a Public Health Service Officer with the Centers for Disease Control and Prevention and at the National Institute for Occupational Safety and Health, studying miners' health, occupational respiratory disease, aerosol measurement and ultrafine particles, according to WVU's website. He has experience working with wood dust, volcanic ash, diesel, coal mine dust, silica and beryllium.
"With the majority of these chemicals, these companies must tread carefully with how much of these pollutants they emit," he said. "Some, like formaldehyde, are not regulated by the WVDEP, but are regulated by the federal government."
The chemicals Rockwool will emit are slated to comply with federal regulations, according to a statement the company release earlier this month.
"Once up and running, we will continuously monitor and report on our operations to ensure ongoing compliance with all regulatory requirements," the statement said.
The upcoming Rockwool facility will have to demonstrate compliance to the federal limits for phenol, formaldehyde and menthol within 180 days of being operational, according to a press release from the company.
Rockwool Group North America President Trent Ogilvie said his team has been working with local authorities on establishing the Ranson facility between a series of closed meetings with city, county and state officials Aug. 8.
"We have followed all regulations to ensure that we are well below the regulation standard," he said. "We see the regulation standards and we try to go below those to make sure we have a bugger in case something should happen. With (Volatile Organic Compounds) like formaldehyde, we will only allow 0.23 micrograms per meter cubed. This is 10 times lower than Virginia's standard."
According to information supplied from Rockwool, the company uses "Best Achievable Control Technologies," which are used to keep emissions below federal and state limits.
Other information from the company said although the state of West Virginia does not require "air modeling" – a mathematical simulation of how pollutants are dispersed in the atmosphere – the U.S. Environmental Protection Agency passed the MACT, or Maximum Achievable Control Technology, standards in 2015. These standards placed federal limits on all mineral wool insulation manufacturers, including Rockwool, a company factsheet said.
The response the human body has to these regulated chemicals can come in the form of inflammation and the severity varies based on exposure levels, McCawley said.
"The body produces chemicals in response to irritations, like a bug bite, and in doing so can cause inflammation to occur," he said. "The problem with inflammation is that it is the basis of almost all chronic diseases like heart and lung disease, but it can also greatly affect those that suffer from asthma and other problems."
In addition to the issue of inflammation, McCawley said VOCs provide support for the public's concerns about cancer risks.
"The VOCs are one of the primary sources of cancer risk, especially benzene," he said. "The VOCs, however, are not usually counted among the National Ambient Air Quality Standard criteria air pollutants. Among the NAAQS pollutants, the particulate matter would pose the highest cancer risk, all things being equal, though possibly not have as high a potential as VOCs for potency as a carcinogen."
A carcinogen is defined by the CDC as a cancer-causing agent often either in the environment or in the workplace.
Public concern of cancer risk is coupled with those who have issue with the facility being so close to North Jefferson Elementary School, Wildwood Middle School and T.A. Lowery causing many to protest at Jefferson County Schools Board of Education meetings.
"How (the emissions) affect kids will depend on weather and terrain," McCawley said. "It is fairly complicated to predict. Children's risk of exposure is similar to the risk of cancer … it all depends on the amount of exposure. Too much means they'll get sick fast. A little exposure means they just got exposed to some chemicals … it is still bad regardless."
Protests continue
While the risks of these exact levels of emissions remain questionable, the public outcry to Rockwool in recent weeks has been continuous. Crowds between 30 and 300 showed up at several Jefferson County Commission, Charles Town City Council and JCBOE meetings to voice their concerns. The Sierra Club, Citizens Concerned With Rockwool, Eastern Panhandle Protectors Group and other organizations have come out against the project.
"I speak for many when we say that there will be a lot of families moving out if Rockwool moves in," resident and online group member Leigh Smith said at an Aug. 8 Charles Town City Council meeting. "I am not going to have my kids growing up and going a school 2 miles away from that facility."
Rockwool's plans to open its Ranson location was announced in July 2017, according to Journal reports. This will be Rockwool's second facility in the U.S. The first is located in Byhalia, Mississippi.
Government officials and bodies have also joined the conversation. The JCBOE has asked the facility to conduct a Human Health Risk assessment to learn more facts in order to support or reject the project.
Jefferson County Commissioner Jane Tabb has also come out in opposition to the project.
"After listening to concerned citizens, doing my own research and much soul searching, I can no longer support the Rockwool project due to air quality issues," she said in a statement. "The Rockwool plant location has the potential to impact a large number of school age children and others with health issues. I do not feel that the Clean Air standards are adequate to avoid negative impacts to our citizens and visitors. I acknowledge that Rockwool has met all the legal requirements to proceed with the project. However, the air quality issues are a game changer for me and I will work to turn this around."
While the exact effects of pollution from Rockwool remain unknown, McCawley said this highlights an issue in the permit process and he feels the public is justified in its reaction.
"Until there is political pressure to change how permitting is done, nothing is going to change," he said. "People should; therefore, protest loud and long, throw up roadblocks every change they get and exact a political price from the regulators who allow any new sources of pollution."
Another step forward to McCawley would be to practice transparency and have more sampling sites for projects like this set up, including some run by the WVDEP, Rockwool and oversight groups.
"If the plant is interested in being a good neighbor it should be interested in doing so transparently and openly with the community," he said. "There is no perform solution but there may be, for the time being, ones that are better than what we've got
A global economy that until recently was humming has broken down, a sharp contrast to the picture just a year ago when the world was experiencing its best growth since 2010 and seemed poised to do even better.
Already, builders in the United States are erecting fewer single-family homes. German factories are sputtering, and in China, retail sales are growing at their slowest pace in 15 years.
The sudden slowing has fed into a global financial sell-off that has driven several U.S. stock indexes into or near "bear market" territory with losses of more than 20 percent. Stocks fell sharply Monday near the end of what is shaping up to be Wall Street's worst December since 1931.
The economic turmoil was on President Trump's mind even on Christmas Day, when during an Oval Office appearance, he cast fresh doubt on the record of Federal Reserve Board Chairman Jerome H. Powell, whom he has increasingly blamed for the market weakness.
"Well, we'll see," the president said when a journalist asked whether he had confidence in Powell. "They're raising interest rates too fast; that's my opinion. But I certainly have confidence. . . . I think that they will get it pretty soon. I really do."
The selling has caused a frenzy of unusual activity in the Trump administration, where efforts by Trump and Treasury Secretary Steven Mnuchin to allay fears seem only to have inflamed them. Political turmoil at the highest level in the United States and other advanced economies — epitomized by the partial shutdown of the U.S. government and street protests in France — is further feeding investor anxiety.
Additional forces threaten to turn what had been a gradual global slowing into something more serious. Central banks that went to extraordinary lengths to boost growth after the global financial crisis have become less supportive — with the Fed announcing another increase in its benchmark interest rate last week. And tensions over Trump's "America First" trade offensive are sapping business confidence on multiple continents.
"The theme coming into this year was, everything was synchronized; everything was good everywhere," said Torsten Slok, chief international economist for Deutsche Bank Securities. "Now everything is not good everywhere."
That is only a slight exaggeration. Outside of the United States, which had estimated economic growth of 2.7 percent in the fourth quarter, according to the Atlanta Federal Reserve Bank's "nowcast," the picture is increasingly gloomy — and most economists say the U.S. economy will slow in 2019.
For the past month, economic data in the United States, Japan and the euro zone consistently has failed to meet analysts' expectations, according to a Citigroup Global Markets index of economic surprises. Chinese results also began disappointing on Dec. 10 amid signs that the economy is slowing more sharply than policymakers had anticipated.
The adverse signs are enough for economists such as Megan Greene of Manulife Mutual Funds to warn of a "synchronized slowdown." Few economists expect an outright recession in the United States or a "hard landing" in China, where the authorities are trying to manage a gradual deceleration.
But anemic performances by the global economy's main engines could shake already stressed political systems in several countries, including the United States, where Trump will be preparing to rev up his reelection campaign.
"The political risk in a slowdown or even recession in 2019 is of stirring up already worrisome levels of nationalism," George Magnus, author of "Red Flags: Why Xi's China Is In Jeopardy," said via email. "Quite aside from resolving the issue about what macro tools to use in such circumstances, the political temptation to raise barriers, including trade, might get still stronger. China could be especially volatile."
In the United States, despite nearly a decade of uninterrupted economic growth, nearly 55 percent of Americans say the country is on the wrong track, according to the RealClearPolitics polling average. A sharp economic slowdown could short-circuit belated rewards for workers who are receiving average annual wage increases of 3.1 percent, the highest mark in nine years, according to the Bureau of Labor Statistics.
"If that doesn't continue, you'll see continued domestic political polarization," said Peter Harrell, a senior fellow at the Center for a New American Security. "Clearly, a slowing economy is a huge concern to the Trump administration."
An economic slowdown — coupled with tumbling stock prices — could also make the president more amenable to a quick deal with China in the months-long tariff war, Harrell said.
"They are getting nervous about the markets and nervous about the slowing in the economy, and there's a similar reaction in Beijing," he added.
The souring economic outlook can be seen on the bottom lines of multinationals such as FedEx. The global package-delivery company saw its share price sink last week as investors were spooked by executives' downbeat forecast.
"Internationally, economic strength seen earlier this year has given way to a slowdown," Rajesh Subramaniam, a FedEx executive vice president, said on a conference call for analysts. "The peak for global economic growth now appears to be behind us."
Though company officials said the shipping business remains good in the United States, sluggish orders in Europe and China forced FedEx to lower its earnings guidance for next year and launch a voluntary employee buyout designed to save up to $275 million annually.
FedEx illustrates how economic weakness outside the United States is rippling through the corporate world.
In Europe, German auto production has been disrupted by the introduction of revised emissions testing regulations that took effect Sept. 1. Third-quarter profits at BMW were down nearly 24 percent. Overall industrial production has declined in seven of the past 11 months.
Italy's new populist government, meanwhile, is locked in a budget dispute with the European Union, even as its economy sinks into recession. In Britain, protracted negotiations over the country's divorce from the European Union., known as "Brexit," is prompting banks such as JPMorgan Chase to shift some jobs to countries that use the euro, which Britain never adopted.
In China, authorities have been trying to wean the economy off a reliance on ever-higher debt totals. That was expected to lead to slower economic growth, but the U.S. imposition of tariffs on more than $250 billion in Chinese imports has worsened the downturn.
[China may have more staying power in trade war]
"Historically, the global business cycle is not entirely synchronized," said Andrew Kenningham, chief global economist at Capital Economics in London. "But the world might be becoming a bit more synchronized."
One major economic shift — the 41 percent decline in oil prices since early October — will produce winners and losers. Every penny of decline in the pump price of a gallon of gas leaves American consumers with an additional $1 billion to spend on other goods and services, according to Slok.
But lower prices will sap investment spending by oil and gas companies in the United States and elsewhere. The loss of income for major oil-producing nations that carry heavy foreign-debt loads will outweigh the consumer gain, Carl Weinberg, chief international economist at High Frequency Economics, wrote in a research note.
"The global economy — its financial and economic stability and its growth path — will be riskier on this redistribution of income," he wrote, citing upheaval in Venezuela and Nigeria and Saudi Arabia's growing debt burden.
The Trump administration's goal of 3 percent annual U.S. economic growth for several years appears to be fading, with the Federal Reserve lowering its 2019 forecast to a 2.3 percent annual rate, down from this year's expected 3 percent figure. The Fed also has backed away from plans to raise interest rates three times next year.
"The economy isn't running hot. It is cooling, and this is making the Federal Reserve more cautious about raising interest rates too high," said Christopher Rupkey, chief financial economist at MUFG Union Bank.
Though almost all economists expect the economy to continue growing through 2019, there is now a roughly 1-in-6 chance of a recession over the next 12 months, the highest likelihood since the recovery began in mid-2009, according to the New York Fed.
Kevin Hassett, the head of the White House Council of Economic Advisers, disputed the consensus view that the U.S. economy has peaked. In a briefing for reporters in mid-December, he said computer manufacturers are having a hard time keeping up with orders, suggesting that they would soon invest in additional factory equipment.
"The people who said we couldn't have 3 percent growth last year are saying it about next year, and I [think] that they're as incorrect now as they were last year," he said.
In raising interest rates last week by a quarter of a percentage point, the Fed took note of shifting global conditions. The Federal Open Market Committee, the Fed's rate-setting body, added a sentence to its post-meeting statement, pledging to "monitor global economic and financial developments and assess their implications" for the United States.
"When we add a sentence like that, that's not just — that has meaning, it's indicating to everybody that we're very focused on that and very attuned to the possibility that this outlook may change in coming months and we're going to be very focused on studying that and open to reassessing our views," New York Federal Reserve Bank President John Williams told CNBC.
Nine years, five months and one day as of Christmas: That's how long it's been since the federal minimum wage was raised. If we make it to June without a wage hike — a safe bet, given the fractious state of federal policymaking — we'll officially be in the longest stretch of time without a minimum-wage increase since the policy was first established in 1938.
This is a problem for workers at the low end of the wage scale, because inflation — the tendency of the price of just about everything to rise over time — steadily gnaws away at the value of the minimum wage as time passes. The federal minimum was last increased in July 2009, when it was set to $7.25 an hour. It remains nominally at that level today, but in real terms inflation has chipped more than a dollar away from its value: $7.25 in 2009 works out to about $6.19 today. In the past year alone, the minimum wage has lost 14 cents of value, relative to 2009.
While that's bad news for low-end workers, it's good news for the companies that employ them: an hour of minimum wage labor now costs less, relative to the price of everything else, than it did back in 2009. Employers get to decide what to do with that $1.06 in savings. They could pass it on to consumers, for instance, or they could simply pocket it as profit for themselves and their shareholders. Given that corporate profits are near record levels, it's safe to assume there's a considerable amount of the latter going on.
Zooming out, all the way back to the inception of the federal minimum wage in 1938, we can see that there's been a steady decline in the inflation-adjusted value of the wage going back to about 1968, when it peaked at about $11.39 in 2018 dollars.
Since then, federal policymakers have slowed the pace of minimum wage increases relative to inflation. But that's not because voters are demanding a stingy minimum: They've been clamoring for higher minimum wages for quite some time, but policymakers aren't responding to public demand. In some cases, in fact, lawmakers are deliberately working to thwart the will of the public when it comes to the minimum wage by doing things such as slow-walking voter-initiated minimum wage hikes (Michigan) or simply overturning them completely (D.C.).
Recent research shows that the reason politicians — Democrats and Republicans alike — are dragging their feet on popular policies such as the minimum wage is that they pay a lot more attention to the needs and desires of deep-pocketed business groups than they do to regular voters. Those groups tend to oppose minimum wage increases for the simple reason that they eat into their profit margins. (Reminder: Corporate profits are near record levels).
Corporate pushback aside, the latest research on the minimum wage shows that there's little reason for policymakers to fear raising it. The best available data suggests that minimum wage hikes increase pay for workers at the bottom of the income spectrum but otherwise have little effect on overall employment.
Beyond mere dollars and cents, the minimum wage stands as a baseline for the amount of value a society places on an hour's worth of human labor. A strong minimum wage sends a signal that there is dignity in labor, even for the jobs that require the least amount of skill. It indicates that society values its workers and the contributions they make to the economy.
A weak minimum wage, on the other hand, says the opposite: that human labor is cheap, that workers are expendable and that the dignity of work is for sale to the lowest bidder.
On the 40th anniversary of China's great "opening up" under Deng Xiaoping, its leaders deserve praise for lifting hundreds of millions of people out of poverty and surpassing the United States as the world's largest economy. But China's experience has also dispelled three myths about the impact of economic growth.
Éloi Laurent is a senior research fellow at the Sciences Po Centre for Economic Research (OFCE), Professor at the School of Management and Innovation at Sciences Po, and Visiting Professor at Stanford University. He is the author of the newly released Measuring Tomorrow: Accounting for Well-being, Resilience, and Sustainability in the Twenty-First Century
PARIS – Forty years ago, on December 29, 1978, the 11th Central Committee of the Communist Party of China released the official communiqué from its third plenary session, launching the greatest economic-growth experiment in human history. In newspeak understandable to CPC insiders, the country's leaders, channeling the wishes of Deng Xiaoping, announced a series of unprecedented "modernizations" that would transform one of the world's least developed countries into a leading economic power
In 2014, China overtook the United States as the world's largest economy (based on purchasing power parity). Its per capita GDP, 40 times lower than that of the United States in 1980, has grown by a factor of 58, and is now just 3.4 times lower (according to IMF data). In effect, around 15% of humanity has experienced 10% average income growth every year for four decades.
But China's dizzying rise has also dispelled three leading myths about the impact of economic growth. The first is that growth reduces inequality and increases happiness. In 1955, the economist Simon Kuznets hypothesized that income inequality would increase sharply and then decline – in the pattern of an inverted "U" or a bell – as countries underwent economic development. Given the pace of China's economic growth since 1978, its experience refutes this claim more powerfully than any other case.
China, after all, is now one of the world's most unequal countries. For the last ten years, its Gini coefficient has hovered around 0.5, up from around 0.3 in 1980 (a coefficient of 1 means a single individual owns everything). In fact, the relationship between growth and inequality over time has followed a peculiar pattern: China's Gini coefficient has increased with growth, and decreased when growth has slowed.
Moreover, according to data from the World Inequality Database, the share of China's national income accruing to the richest 10% increased from 27% to 41% between 1978 and 2015, and doubled for the top 1%. At the same time, the share of national income going to the poorest 50% fell from 26% to 14%. These data are consistent with other sources showing that while per capitaGDP grew by a factor of 14 between 1990 and 2010, the top quintile's share of national income increased at the expense of the bottom four.
To be sure, these are relative inequalities, and China has undeniably reduced absolute poverty. Most Chinese once lived under conditions of high equality and high misery; today, they live in an unequal society where the income of the poorest 10% grew by almost 65% between 1980 and 2015.Given such progress, one might think the Chinese have also grown happier. But the opposite seems to be true. In a chapter for the 2017 World Happiness Report, Richard A. Easterlin, Fei Wang, and Shun Wang make a convincing case that while China's GDP has skyrocketed, its citizens' reported subjective wellbeing has declined, especially among poorer and older cohorts. Even more surprising, though Chinese subjective wellbeing remains below its 1990 level, it actually ticked up over the past decade, when growth was slower than in the 1990-2005 period.
The second myth dispelled by China's rapid growth is that economic liberalism eventually breeds political liberalism.Recall that in 1989, just months before Western liberal democracy appeared to have triumphed over Soviet communism, China crushed a student revolt in Tiananmen Square, killing some 10,000 of its own citizens. Since then, the country's political trajectory has not changed. If anything, the Chinese state's arbitrary and unfair exercise of power has become much more efficient.
Capitalism with Chinese characteristics implies the presence of a strong state in all areas of national life. While the technocracy facilitates economic expansion, the state's massive security apparatus muzzles civil liberties and political rights. Rather than becoming more democratic, China became a pioneer of the kind of authoritarian neoliberalism now seen in Turkey, Brazil, Hungary, India, and elsewhere.2
Lastly, economic growth can no longer be defended as the best environmental policy. In 2007, then-Premier Wen Jiabao famously described China's development model as "unstable, unbalanced, uncoordinated, and unsustainable," owing not least to its deleterious ecological impact. Still, the hope was always that economic growth would follow an "environmental Kuznets curve," thus preventing or at least mitigating a full-scale disaster. It has not.
Recent data show that China is now the largest extractor of natural resources in a global economy that is becoming ever more resource-intensive. In 2010, China represented 14% of global GDP, but consumed 17% of all biomass, 29% of fossil fuels, and 44% of metal ores. Its domestic consumption of all natural resources now accounts for one-third of the global total, compared to just one-quarter for all developed countries.
Moreover, China now contributes 28% of global carbon-dioxide emissions – twice as much as the US, three times more than the European Union, and four times more than India. Between 1978 and 2016, China's annual CO2 emissions grew from 1.5 billion tons to ten billion tons, and from 1.8 tons to 7.2 tons in per capita terms, compared to the world average of 4.2 tons.
As is well documented, water, groundwater, and air pollution in China has reached a crisis point. And that, incidentally, also poses a problem for those who believe that capitalism is the key driver of environmental destruction. After all, the most ecologically unsustainable country in history is nominally communist.
At the CPC's 19th National Congress in October 2017, Chinese President Xi Jinping spoke of a fundamental "contradiction between unbalanced and inadequate development and the people's ever-growing needs for a better life." China, he confirmed, was committed to the transition to "ecological civilization" begun by the 13th Five-Year Plan in 2016. Apparently, the greatest episode of economic growth in human history has ended.