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America's Unemployment Crisis

Did The Government Cause Our Long-Term Unemployment Problem?

Generous unemployment benefits. Excessive taxes and regulation. Are we voters to blame for the current job market?

On Monday, I wrote about long-term unemployment, and why it's a large enough problem that the federal government should be trying to do something about it.  I got pushback along two lines:  

1.  Extended unemployment benefits probably caused the unemployment, by giving people an incentive to stay home instead of finding a job.  

2.  Regulations and taxes are making it too hard to hire people.  

I am sympathetic to the basics of each argument.  Regulations and taxes do make it hard to grow a business and create new jobs, a point I made in my last post.  And extended unemployment benefits do give people an incentive to stay home instead of finding a job.  Indeed, I know people who have done just that.  One of them wrote a novel that sold for a bunch of money and earned back all the benefits they'd collected, and then some.  The rest of them basically sat around and did nothing until their benefits ran out, and then found another job.

It’s too burdensome on businesses we want to expand.

For years, states have been trying to collect sales taxes from Internet retailers, particularly Amazon. They’ve been stymied by a 1992 Supreme Court ruling, Quill v. North Dakota, which held that under current law, companies could not be forced to collect sales tax unless they had a physical nexus in the state: a warehouse, a production facility, or a sales representative.

Amazon Warehouse

Teri Antognazzi, a safety administrator, oversees book stockings in the Amazon warehouse in Fernley, Nevada, in 2004. (Candice Towell/AP)

(Fun fact: the defendant in Quill v. North Dakota was ... Heidi Heitkamp, then a state official, now the woman that Maureen Dowd thinks should have voted for tougher gun control because, er, she’s a mother.)

Now Congress is riding to the rescue, with a bill that will force Internet companies to collect sales tax on their transactions. My colleague Dan Gross is enthusiastically in favor. I’m ... less so.  

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Capital on Ice

Cypriot bank accounts are frozen. Can the markets unfreeze them?

Efforts are underway to build a parallel market in Cypriot euros, currently frozen in Cypriot bank accounts (hat tip to Tyler Cowen):  

Is your cash stuck in a Cypriot bank? Someone might be willing to take it off your hands.

Distressed-debt investors and brokers are circling Cyprus, the Mediterranean island that last month plunged its two main banks into an emergency restructuring and blocked thousands of depositors from touching all their money.

The idea: investors buy frozen bank deposits, at a discount. Depositors who need access to their money get a payoff immediately, instead of waiting months or years for the bank restructuring to be completed. Investors get a shot at a big payoff down the line.

The West Wing is not real, and other political insights.

Last week I wrote that many political commentators seem to have internalized the movie version of negotation as an actual model of how the world works, rather than a dramatic convenience.  That is, they think that the way you get what you want is to make an extreme demand so that you can be "bargained down" to what you actually want.  In real life, this tactic frequently misfires--not least because if it worked, your counterparty would start making equally outrageous demands, and you'd be right back where you started.  Nonetheless, it's an extremely common delusion among activists, and arguably, the president himself fell prey to it during the gun control debate.

This weekend, Maureen Dowd proved that the armchair activists are not the only ones who have begun confusing entertaining fictions with real life.    

The White House had a defeatist mantra: This is tough. We need to do it. But we’re probably going to lose.

When you go into a fight saying you’re probably going to lose, you’re probably going to lose.

Even easy forecasts occasionally go astray

DC is having a special election for City Council today, which has once again aggravated the long-running wounds of DC racial politics.  I was reading the stories about the candidates, clicking from link to link, when suddenly I stopped at this arresting graphic:  

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Why is this so interesting?  Because as DC residents know, that graphic was way off.  Census data indicate that DC lost its black majority sometime in 2011, not 2014.  If current trends continue, the city will become majority white sometime in the next decade.  

Whatever happened to second chances?

A young kid getting his first try as a TV anchor opened up his very first broadcast by whispering "fucking shit" into a live mic.  Presumably, he didn't know he was live.  But the television station, KFYR in North Dakota, has fired him anyway.  

For shame, KFYR.  Yes, obviously he got nervous and made a mistake.  And I know that he thereby exposed children to profanity which they otherwise would have had to wait until recess to hear.

But there's no evidence that this was deliberate.  Whatever happened to the groveling apology and the second chance . . . the kind of forgiving spirit that made America great?  Many of the people in North Dakota are there because some ancestors screwed up not once, but multiple times, flubbing life so bad back East (or in Europe) that they had to get in a covered wagon and head out to somewhere where they could start over.  

And I say that in admiration.  They were the people who had the caliber not to take failure lying down: to pick up and try again.  And they were aided by a society that helped them do just that, offering them land and the opportunity to bring something out of the earth.  North Dakotans are the descendants of the ones who took that chance and made it work.  Why are they now denying that same second chance to a kid who made one bad mistake?  

Unemployment in America

America's Jobless Crisis

It's the most important issue facing America today. What can we do?

Paul Krugman takes to the New York Times op-ed page today to discuss America's greatest crisis: the long-term unemployed.  It's a topic that yours truly has been banging on about for quite a while.  But it's gotten a bit of new urgency from the paper that Paul Krugman cites in his column.  

But first, a little background. Basically, the normal relationship between unemployment and job vacancies seems to have broken down for the long-term unemployed.  As hiring has ticked up, the short-term unemployed are doing fine, but the long-term unemployed are not re-entering the labor force at the rates that we'd like to see.  They are suffering from what economists call "unemployment scarring": their time out of work has made them less employable.  

You know why unemployment is under 8% today?  Because a whole bunch of people have just given up and dropped out of the labor force.  They've decided that it's no use looking because no one will hire them.

But is this because employers are discriminating, or because they're somehow different from those who have only been out of work a short time?  Economist Rand Gayad decided to do a test.  He sent out 4800 fictitious resumes, which differed by length of unemployment, experience, and number of times they'd switched jobs.  What he found was that the long-term unemployed were less likely to get called for an interview than people with less experience, but a shorter duration of unemployment.  

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The Cost of Boston

How much did we lose when we shut the city down?

How much did it cost to shut Boston down?  People have been throwing around some large numbers, arrived at by multiplying the number of people who stayed home by their wage, or some variant on this method.  

But of course, this isn't right.  Most of the stuff that wasn't done on Friday will instead be done on Monday, or sometime in the next week.  The salaried employees who stay home will work harder than usual.  The hourly workers will, in many cases, pick up extra shifts.  

Of course, not all the activity will be restored.  Many events like banquets and charity balls that were cancelled will not be rescheduled, because planning those sorts of events takes months.  Ancillary vendors from caterers to dry cleaners have lost revenue that will not be made up.  Tourists who couldn't go out will go home with their money unspent.  Restaurants and airlines permanently lost the opportunity to sell a spot in those seats.  So there has been some real loss of "truck barter and exchange" that is simply lost, not delayed.  

But those losses are likely to have been small relative to Boston's overall economy.  The real loss was the fear, and the lost enjoyment.  That is, people who would rather have spent their Friday day at the office and their evening socializing with friends had instead to spend it cowering in their homes--and some people very close to the action had to leave their homes and go somewhere else.  But the economic impact of this is hard to calculate.  Not least because some people might have been happier having an unexpected day off and making up the work later.  

Virtual Vigilantes

Amateur Hour

Amateurs went hunting for the Boston bombers, and ended up hurting innocent people.

Crowdsourcing triumphalists are feeling pretty glum today.  Reddit's attempt at sleuthing seems to have fallen very, very flat.  Actually, that's too weak; they ended up quasi-harassing innocent people by broadcasting their pictures on the web.

There's been some justifiable worry about web vigilanteism.  But I want to push back just a leetle bit.  Let's not forget law-and-order disasters like Richard Jewell and Steven Hatfill, whose lives were ruined by overzealous government investigators.  The problem is not with inviduals taking on government responsibility.  The real problem is when anyone--civilian or law enforcement--jumps the gun with insufficient information.

Common, cheap, and deadly, ammonium nitrate is a necessary evil

As of this afternoon, the confirmed death toll in the West Texas fertilizer plant explosion is 12.  60 people are still missing, and while some of them will undoubtedly turn out to simply have been out of touch with friends or relatives, I think we have to assume that a lot of those people are dead.  

This isn't the first time that a fertilizer plant has exploded.  

Sgt. William Patrick Swanton, a Waco police spokesman who is helping out the city's smaller neighbor, said Thursday there was no indication the blast was anything other than an industrial accident. The Texas Department of Public Safety said it could take as many as six months to determine the cause of the fire.

The worst ever industrial accident in the U.S. was also caused by an explosion of ammonium nitrate, as was possibly the case here, and also took place in Texas. In that blast, in 1947, some 581 people died aboard a ship docked near Texas City.

Overreaction? Or a life-saver?

Shutting down a whole city to search for one man arguably sends the message that the terrorists have won: they have succeeded in closing a major metropolis. I don't know how much this will cost in lost productivity, but millions and millions would be a conservative guess.

On the other hand, it also sends another message: if you set off bombs in a public space, we will shut down the city and hunt you like vermin until we find you.  

I doubt it's necessary to shut the city down in order to catch Tsarnaev.  Unless he's got a plastic surgeon stashed in his back pocket, the next time he goes out in public, someone will recognize him, and he'll be caught.  

On the other hand, the brothers seem to have had a lot of explosives with them.  How many more people are we willing to see blown up in order to keep normal life flowing in the city?  The incentives for the police and the government are pretty clear, and I'm not willing to second-guess them.  Boston lost one Friday.  But no one else lost their lives.

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Manhunt for Boston Terrorists

Two Chechnyan brothers have been fingered in the attack. One is dead, one still at large. Why did they do this terrible thing?

America has been attacked by a terrorist who seems to be named after Tamerlane.  That's not a sentence I expected to be typing on any Friday morning, ever.  

By now, you probably know the news; if not, you should read our story on it.  The Boston bombers have now been identified as two brothers, 19 and 26, asylum-seekers from Chechnya who have been in the United States for at least a decade.  It's not clear what motivated them, though the older brother, Tamerlan, seems to have had some sort of affinity for Al Qaeda.  We don't know whether they're part of a network, or freelancers.  We don't know why they did it.  We do know that last night they got into a lengthy police chase during which they apparently hurled explosives at the cops.  Tamerlan was shot during the chase and later died.  The younger brother, Dzhokar, is still at large.  Boston is effectively shut down--no trains, no busses, no schools--while police hunt for him.  

Should we call them terrorists?  There's as yet no public evidence that they're affiliated with a formal organization.  But bombing the Boston Marathon seems like as good a definition of terrorism as any.  So they're terrorists of some sort.

The worst possibility is that they are affiliated with Al Qaeda or some other terrorist network.  Of course, that doesn't really alter the havoc they've wrought.  But it means that Al Qaeda has decided to focus on soft targets that are hard to defend, rather than airplanes, symbolic buildings, or military targets.  That would be very, very bad news.  

Department of Awful Statistics

Fractions Are Hard

Is Our Administrators Learning?

It's not malevolent. But the results of data secrecy can be.

While we're on the subject of Reinhart and Rogoff, Tyler Cowen has a nice little post on "Who shares data". Basically, most economists don't share data, and the ones who do are more likely to be full professors with tenure and a clear personal committment to sharing.  

This seems to be pretty common in a lot of social sciences.  When I was reporting on the controversy over counting Iraqi civilian casualties, there was strong wall around the data.  Only a few researchers were allowed to see it, and being a strong critic of the study seemed to be an exclusion criteria for access.  I was shocked--until public health researchers assured me that no, this was pretty much normal.

Which caused me to think about who doesn't share data--and why.  

Before I go on, let me be clear that I'm not talking about Rogoff and Reinhart, who are in the middle of this controversy because they did share their sources. And kudos to them for that.  No, this is a general meditation on a broad problem in the social sciences. 

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Why the President Lost on Gun Control

He asked for too much, and got nothing.

Adam Winkler has a quietly devastating piece on the gun control process that places the blame squarely on the tactics of the gun controllers.  They waited too long, squandering the political opening afforded by Newtown. They appointed a commission to make recommendations that they could have gotten from the Violence Policy Center the day after the Sandy Hook shootings.  And they asked for too much, of the wrong things.  Winkler notes:

Focusing on assault weapons played right into the hands of the NRA, which has for years been saying that Obama wanted to ban guns. Gun control advocates ridiculed that idea—then proposed to ban the most popular rifle in America.

Gun control advocates have told me the assault weapons ban was intended to be a bargaining chip. Ask for the moon, settle for less—in this case, universal background checks. If that was the strategy, it backfired. For most of February and March, gun advocates focused their criticisms on the assault weapons ban. They correctly observed that it outlawed guns but did nothing to keep outlaws from having guns. And they used the time to organize their base, comprised largely of gun owners who love the AR-15 and its variations. Many gun owners might have supported background checks had they not been distracted by the assault weapons issue, which caused them to distrust gun control proponents even more than before.

I never understood why so much time was spent pushing an assault weapons ban.  It was bad politics--long before a bill was even proposed, it was clear to everyone that an assault weapons ban would never pass.  Moreover, the government's own research showed that the previous assault weapons ban (upon which the new one was modeled) had had little impact on shooting crime.  Connecticut's existing assault weapons ban (also modeled on the old federal ban) certainly had no impact on Adam Lanza.  

About the Author

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Megan McArdle

Megan McArdle is a special correspondent for Newsweek and The Daily Beast covering business, economics, and public policy. A former senior editor at The Atlantic and writer for The Economist, Megan has a diverse work history including three small startups and a disaster recovery firm at Ground Zero.

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