Irwin M. Stelzer Articles

The Puzzle that is the U.S. Economy

12:01 AM, Feb 06, 2016
Investors and traders here were hoping that a spurt in job creation would dispel some of the gloom that has stock markets in turmoil, investors watching a decline in the value of their savings and pensions, and Federal Reserve Board chairwoman Janet Yellen and her monetary policy committee scrambling to back off an implied promise to raise interest rates four times this year. The latest jobs report provided a bit of cheer, but not enough to lift the weight of bad news from the shoulders of economy watchers. The economy added 151,000 non-farm jobs in January, the unemployment rate dropped to 4.9 percent, and average hourly earnings rose a non-trivial 0.5 percent, bringing earnings growth for 2015 to 2.5 percent, not bad in the absence of significant inflation, and showing signs of picking up as the labor market tightens. But add workers too discouraged to look for jobs and part-timers hoping for full-time work, and the so-called U-6 unemployment rate remains stuck at a tick below 10 percent. Chris Williamson, chief economist at Markit, a provider of financial information, summarizes the report as containing, "Signs of a slowdown in hiring, still-weak annual pay growth and disappointing survey data…". Read more

A Recession on the Way?

12:01 AM, Jan 30, 2016

There will certainly be a recession this year. Unless there won’t. That is the consensus view of economists. The bad news is that even the optimists are having difficulty explaining away the reams of incoming data, and that even the cheeriest of the bunch are predicting a no-to-low-growth outlook for the rest of this year.

Earlier this week the Federal Reserve chair Janet Yellen, speaking for the bank's monetary policy committee, gave some not-very subtle hints that the policymakers view of things is gloomier than it was in mid-December when Yellen announced the committee's "confidence that the economy will continue to strengthen." Now, that confidence, which stirred the Fed to raise interest rates, has been shaken by

 Read more

Remembering the 'White-Shoe Firm'

Present at the destruction.
Feb 08, 2016

Asign of what might be called “progress" jogged some memories of battles fought. In reporting Governor Andrew Cuomo's nomination of a new chief to a state regulatory agency, the New York Times identified the appointee as being a litigator in "the white-shoe law firm Paul, Weiss, Rifkind," et al. The reporter seemingly did not know that the designation "white-shoe law firm" was invented to describe firms at the pinnacle of the WASP establishment, no Jews allowed, named apparently for the shoes these WASPs favored in the summer at their restricted country clubs.

In the 1960s, my partners and I were attempting to establish an economic consulting firm that marketed its services to law firms and public utilities. The

 Read more

The Presidential Race: One Year Out

12:01 AM, Jan 23, 2016
Many Americans are watching the gains racked up in their pension accounts in the last five years wiped out in the past few weeks. And fretting that no one seems to know what to do about it. The president says that economy is just fine. The Congress says the president is detached from reality in this as in other matters, and retreats to a posh hotel to come up with a plan. Donald Trump says he knows what to do, and if given the chance, will make America great again, which he and fellow Republican wannabees propose to do by cutting taxes. Democrat Hillary Clinton says give me another lease on the White House and I will fix things by raising taxes – a piker, by the standards of her Socialist challenger, Bernie Sanders, with whom she agreed on over 90 percent of the issues that came before the Senate for votes when their service there overlapped. Republicans propose to repeal regulations they claim are stifling banks and making it difficult for small businesses to get credit, Clinton to tighten those regulations and tax risky banks to prevent "Wall Street", the district that is home to many of her supporters, from causing another financial meltdown, and to let banks fail rather than bail them out. Sanders would take an axe to the banks, and chop the big ones into smaller pieces. Capitalist buccaneer Trump supports government subsidies of ethanol, an Iowa product, while attacking government intervention in markets. Little wonder that Americans are confused as their savings shrivel because oil prices are plummeting, which economists chortled would be a good thing for them. Read more

Our Uncertain Economic Future

And what that means for the presidential election.
12:01 AM, Jan 16, 2016

The final State of the Union address of any president evokes thoughts that vary with his success while in office. For the successful, such as Dwight Eisenhower, Ronald Reagan and Bill Clinton, it is a moment on which to look back with some satisfaction. For President Obama, with only 27 percent of his countrymen believing he leaves a nation that is on the right track, last week’s must evoke in his supporters thoughts of what might have been, if only….

For both the successful and less so it is goodbye to the walk down the aisle to the podium, shaking hands and air kissing admirers, hello to irrelevance as the lame duck president lays out his vision of a future about which he will have little to say.

 Read more

Do As I Say, Not As I Do

Gleanings and observations.
11:40 AM, Jan 11, 2016

The Chinese are wrong to overlook North Korea’s broken promise not to test nuclear weapons, in the interests of "trying to warm long-strained relations." So they are told by John Kerry. But I, the Secretary of State of the United States of America, am right to overlook Iran's repeated provocations in the interests of, er, of trying to warm long-strained relations. China is wrong to continue providing Kim Jong-un with vital oil and other supplies worth billions even though the Supreme Leader ordered the testing of a nuclear weapon.

 Read more

Split-Personality America

12:01 AM, Jan 09, 2016
Americans are convinced that things are not going well, and are not likely to improve soon. Read more

The Horror in Cologne

Gleanings and observations.
1:30 PM, Jan 06, 2016
The BBC reports that organized gangs of young men assaulted, groped “between their legs", in at least one case raped, and robbed some 100 women in Cologne and Hamburg. Similar attacks were reported in Stuttgart. Read more

Of Invalid Historical Analogies

Gleanings and observations.
11:07 AM, Jan 04, 2016
Historical analogies are the last refuge of politicians seeking to justify a policy indefensible on its own merits. Such is the case when it comes to determining policies towards prospective Muslim immigrants. Proponents of allowing these refugees into the country are in difficulty. It seems (1) that the FBI says they cannot be vetted properly because of the destruction of records in Syria and other war-torn countries, (2) terrorists have infiltrated the ranks of refugees in other countries and may well do so here, (3) if even a small number of such terrorists pass through our imperfect filter, they can kill and maim thousands before being apprehended, and recruit others to their cause. Read more

The Biggest Losers of 2015

How will they fare in 2016?
12:01 AM, Jan 02, 2016
2015 was a bad year for Warren Buffett, oil and natural gas producers, U.S. coal companies, taxicab companies and their lenders, currency traders who thought the yuan could only go up, the New York Giants, Marissa Mayer, university administrators, and Trump haters. Here are some guesses as to how these 2015 losers will fare in this New Year. Read more

Gleanings & Observations

December 29, 2015, edition.
9:52 AM, Dec 29, 2015

Ntokozo Qwabe, the student at Oriel College, Oxford, co-founder of Rhodes Must Fall, wants the statue of Cecil Rhodes removed from the campus because Rhodes was a "racist, genocidal maniac … as bad as Hitler." Mr. Qwabe is attending Oxford on a Rhodes scholarship.


Politicians, or at least some, can't imagine life without the trappings of office. A former Labour MP in the UK, after losing his seat, says "All I could see was darkness," as he could not imagine how he would support his family. And a former Liberal Democrat minister in David Cameron's coalition government had to learn how to send e-mails when he left office and no longer had an "army of people" to do things for him.

 Read more

What to Expect in the Year Ahead

An economist's notes.
12:01 AM, Dec 26, 2015

Guilty as charged. That's my response to anyone who accuses me of having spilled too much ink writing about what Janet Yellen might do, has done, and will do now that she has raised the Fed funds rate for the first time in a decade. By way of expiation, here is a look at some less-heralded developments in the American economy that may well determine its performance in 2016 and beyond.

Top of the list for immediate impact is the end of austerity. One effect of political stalemate was a "sequester", something of a freeze on the growth of government spending, a consequence of which was a decline in the federal deficit as a portion of GDP.

 Read more

The New York Times: The Gift That Keeps On Giving

Gleanings and Observations
10:10 AM, Dec 22, 2015

Monday's editorial would be hilarious if it were not that so many liberals fail to see the humor. The Old Grey Lady is concerned about "A New Cuban Exodus," driven by "hopelessness at home …and fear that the unique treatment Cuban immigrants receive from Washington could end, now that diplomatic relations have been restored." Under existing law, Cubans who reach our shores have an automatic right to settle here and in short order to apply for citizenship.

Bad policy, and should be reversed, say the editors. First, the Castros don't like it, so it is "hindering the normalization of relations" with Cuba.

 Read more

After the Rise

12:01 AM, Dec 19, 2015

If it were done when 'tis done, then 'twere well it were done slowly. That is official Federal Reserve Board going-forward policy. The announcement of the Fed's first interest rate increase in almost a decade, an upward move of 0.25 percent from near zero, says, and twice, that future increases will be "gradual". That was chairwoman Janet Yellen's main message – abrupt is bad, "gradual adjustment in the stance of monetary policy" is the way to go to avoid past central bank errors by waiting so long that it has to jack rates up abruptly, throwing the economy back into recession. The mid-range forecast of Fed policymakers is that the federal funds rate – an important tool in the Fed's policy kit – will rise to

 Read more

High-Tech Chutzpah

Silicon Valley seeks to suppress wages.
Oct 27, 2014

At minimum it is unseemly, at maximum an example of chutzpah as practiced in Silicon Valley. Having shot themselves in the foot, some prominent tech billionaires want the president to bypass Congress and minister to their wound. They have poured cash into his campaign coffers, and now is payback time. They want him to increase the number of H-1B visas that allow them to hire high-skilled foreign tech workers. Which he has promised to do, never mind that Microsoft has just laid off thousands of workers.

 Read more

The Economic Consequences of COP21

8:00 AM, Dec 14, 2015

The international conference on climate change attracted thousands of delegates from almost 200 nations. The Conference of the Parties21, so named for the parties that signed the UN Framework Convention on Climate Change in 1992 and had come to Paris for what was their 21st conference, came to an end with the obligatory self-congratulatory photo op, linked arms raised in victory, cheers from some, tears of joy from others, applause for Al Gore, and a promise by Secretary of State John Kerry that we have seen the end of the age of fossil fuels.

 Read more

Here Comes the Interest Rates Rise

12:01 AM, Dec 12, 2015

"I'll build a stairway to Paradise," promised songwriter George Gershwin decades ago. Fed chairwoman Janet Yellen is about to try to do the same, taking interest rates up that stairway, from the zero level set during the hellish days of the financial crisis to the Paradise of normality or near-normality. There is almost unanimous agreement – an 85 percent probability according to markets -- that next week the Federal Reserve Board's monetary policy committee will raise interest rates by 0.25 percent, bringing the era of zero interest rates to an end. Unless, of course, Yellen & Co. belie the hints its chair has been dropping and double-cross the markets.

Yawn if you will, and with reason: There is unlikely to be

 Read more

No Good for Americans Seeking Assurance

Gleanings and observations.
8:05 AM, Dec 07, 2015

To understand Donald Trump's surprising ability to remain at the top of the polls, it is necessary to understand why the attacks of his critics misfire. The best place to start is with the continually uncomprehending New York Times. A story on page 1 et seq. levels what its authors must consider devastating criticism of Trump's "95,000 Words, Many of Them Ominous, From Trump's Tongue." Trump, says the NYT, has a "particular habit" of using ominous words that include the "divisive … harsh … violent … 'you' and 'we' as he inveighs against a dangerous 'them.

 Read more

Christmas Time for the Fed

12:01 AM, Dec 05, 2015

Christmas came early this year for Janet Yellen and those of her monetary policy committee colleagues eager to begin raising interest rates. Just a tiny bit, but enough to show that they remember how to do that after eight years of holding rates to just about zero. First gift: Santa, disguised as a European Central Banker with a decidedly Italian accent, misjudged the markets. His plan to drive down the euro and thereby drive up European exports fell so short of expectations that the euro actually rose, to the wailing of traders who shorted it in anticipation of Mario Draghi's announcement. That allowed the dollar, already at a 12-year high and by Fed estimates knocking 0.

 Read more

A Tax that Mainly Adds Complexity

The pitfalls of a VAT.
Dec 14, 2015

There are lots of good reasons for conservatives to cheer when various Republican candidates propose a consumption tax, or a tax on spending as some call it, or, in one of its most used forms, a value-added tax (VAT).

Such a tax would, or potentially could, replace some of the taxes now borne by work and risk-taking. Exports could be exempt, providing them with the same subsidy European and other nations provide their exports. Some consumption taxes are cost-effective for society, such as those that reduce health care costs by inhibiting smoking or reduce costly regulations by taxing pollutants. And it can produce real money for the Treasury (not a virtue say some, who would reduce in tandem taxes now levied on incomes).

 Read more

Israel Invests in Desalinization; California Builds High-Speed Rail

11:39 AM, Dec 01, 2015

California is reeling from a drought, rather like the one suffered by Israel in 1998-2002. California, with an 840-mile coastline on the world's largest ocean, has a water shortage; Israel, with a mere 170-mile coast line, does not. Israel invests in desalinization; California is building a high-speed train at a cost of somewhere between $68 billion and $90 billion, the most expensive public works project in the nation's history with no completion date in sight, but finds the $1 billion price tag on its first desalinization plant too high to bear, even though its 50 million gallon per day output would meet the daily requirements of something like 280,000 of the modest-income consumers now the hardest hit by the rationing system

 Read more

Black Friday in the Age of the Internet

8:21 AM, Nov 28, 2015

On the surface, little seems to have changed as the opening bell rang for the retailers’ battle that is the holiday shopping season. On Thanksgiving day we carved some 46 million turkeys and downed 50 million pumpkin pies despite a shortage of pecans created by Chinese consumers who imported the best quality nuts and bid the price too high for many bakers and American families to match. We watched some 12-15 hours of football, with 250-pound behemoths considered too light for many positions.

 Read more

An Economist's View of the Syrian Refugees

2:04 PM, Nov 21, 2015

It is not for an economist to adjudicate between the president of the United States, who feels he is appealing to our better angels by asking our blessing for his plan to grant 10,000 refugees from the Syrian wars entry into our country, and his critics who fear that the wave might include immigrants coming not for refuge but to do us harm, not here to assimilate but to retain the customs and laws that have brought their homelands chaos and penury. The dispute, in short, is between Barack Obama who contends he is following a long-standing, humane American tradition of accepting the world’s tired, poor, huddled masses, and equally well-intentioned congressmen and governors who respond that he is ignoring his first obligation – to keep America and its citizens safe from harm. They add that it is inappropriate to argue that America must not repeat the moral error of turning away Jews who sought to escape Hitler’s death camps by turning away Syrians, among them some pledged to destroy the values fleeing Jews were attempting to come here to enjoy.

 Read more

All They Want for Christmas

Which way retail sales?
12:01 AM, Nov 21, 2015

Retailers are having difficulty moving apparel these days. One analyst attributes the groaning shelves and racks to two successive years of warm weather. So retailers’ worries will soon be over: the world’s leaders are about to assemble in Paris to end the trend to global warming, a bigger threat than terror, says Barack Obama.

 Read more

Love Your Lawyer

Gleanings and observations.
1:28 PM, Nov 16, 2015

The Wall Street Journal reports that those assembled at the American Bar Association meeting are urging lawyers throughout the nation “to celebrate ‘Love Your Lawyer Day’ to help promote a positive and more respected image of lawyers and their contribution to society.” Alas, we missed the celebration – the first Friday in November – but note that it coincided with an uptick of those who think lawyers have very high or high ethical standards.

 Read more

Climate Politics

What happens in Paris won’t stay in Paris
Nov 16, 2015

At the end of this month representatives of some 200 nations will gather in Paris for the opening of a United Nations-sponsored conclave to prevent the cataclysm that President Barack Obama, backed by the moral authority of Pope Francis, believes will befall the world if we do not slow the pace of climate change. There will be no treaty to enshrine the deal, for the very good reason that such a treaty would not receive the consent of the U.S. Senate.

 Read more

Down With History!

Gleanings and observations.
8:51 AM, Nov 13, 2015

From Hong Kong to Harvard, erasing history has become a necessity. In the Chinese territory, it is the authorities in Beijing who want to eliminate any memory of the past; in Harvard Square, it is the Law School students.

 Read more

No Yellow Stars Here—Just a 'Label'

9:04 AM, Nov 12, 2015

The Germans are angry with the Greeks for retiring at age 50 and counting on Germans to keep working until they are 65 so as to have enough cash to lend to Greece. The French are angry with the Germans for demanding such harsh and humiliating terms from the Greeks in return for a few billion more euros. The Greeks are angry with the Germans for once again in effect telling them how to levy taxes and to organize their economy.

 Read more

The GOP Debates: An Economist's Notes

5:59 AM, Nov 11, 2015

At last, a debate that lived up to its billing. The Fox Business Network promised this would be about economic policy, and not about fantasy football, or personalities, and its panelists delivered. Despite an occasional barb, including a neat put-down of Donald Trump by Carly Fiorina, we actually learned where the candidates stand on important issues.

 Read more

Lots of Jobs, Except for the Young

12:00 AM, Nov 07, 2015

Lift-off. That’s the conclusion to which observers jumped when the government announced on Friday that the economy added 271,000 jobs in October. And that the August and September figures have been revised upward by 12,000. And that the unemployment rate fell to 5 percent. And that discouraged workers and those looking for fuller-time jobs fell to 9.8 percent of the work force, the lowest level since May 2008. And that average hourly earnings in the private sector were up by 2.5 percent from October of last year, the strongest reading since July 2009.

 Read more