Unfortunately, all of today’s data releases have reported bad news:

The Consumer Price Index increased by .4% in August, seasonally adjusted. That’s double the expectation. On an annualized basis, the index has increased by 3.8%.

Last week there were 428,000 initial unemployment claims. That’s up from last week’s figure of 417,000.

The Philadelphia Federal Reserve reports that manufacturing is continuing to contract and their index is weaker than expected, coming in at -17.5 rather than -15.0.

The New York Federal Reserve’s Empire State Manufacturing Survey showed continued contraction with the general business conditions index dropping by a whole point to -8.8.

We’re not alone. The Euro Area’s Harmonized Index of Consumer Prices (HICP) rose by 1.1% in August over the previous month.

I’ve come across another possibility for an entire blog or, at least, a recurring feature: examples of how economists are out of touch with what’s going on in the world. What inspires is that I just ran across a post from a major, big-time econblogger in which he characterized something that’s been the case for something like a decade as a a proposed change. The change that’s being proposed is the reverse of what he’s saying—it’s going back to the status quo ante.

I was going to post that, apparently, Ford was to be this year’s strike target for the UAW in its triennial contract renegotiations but it’s beginning to look as though that’s been postponed for a while:

The United Auto Workers has backed away from a potential strike at the Ford Motor Co. by approving an indefinite contract extension with the automaker.

The current UAW contract was scheduled to expire at 11:59 p.m. Wednesday and the union could have automatically called a strike. Union members approved a strike at Ford earlier this month.

“I can confirm that Ford and the UAW have agreed to continue bargaining past the expiration of the current contract in an effort to reach a tentative agreement that is in the best interest of both parties,” said Ford spokeswoman Marcey Evans.

The negotiations are characterized as having “lacked intensity”. I would think so. This isn’t exactly the greatest year for tough bargaining. Picking the only U. S. auto company that hasn’t received a bailout from the federal government and pounding on it doesn’t sound like that great a strategy to me.

In his brief critique of President Obama’s infrastructure spending proposals Keith Hennessey asks questions that I’ve been asking around here:

What does China’s infrastructure investment have to do with ours? Our economies are quite different: China is in the Industrial Age, we’re moving into the Information Age. Should we build a bullet train in California because the Chinese are building bullet trains (that derail)? Should we build spiffy new airports because the Chinese are doing so? Or should we instead determine U.S. public infrastructure spending priorities based on the needs of the national and regional economies here in the U.S.? And should we prioritize infrastructure spending relative to other

What’s the allusion here?

We first heard this case from the President in his January State of the Union address. Derived from a line of argument popularized by Tom Friedman, the claim is that because China’s economy is growing faster than America’s, the U.S. should mimic Chinese economic policies and specifically Chinese government investment spending.

But China is growing from a much lower base than the U.S. China’s economy, economic policy, and infrastructure needs are quite different from ours in the U.S. It’s easy to see why a country that still relies heavily on bicycles for transportation would prioritize infrastructure spending, while a more advanced economy might have other economic policy priorities (like paying down government debt).

In principle I have no opposition to government infrastructure spending. It’s the detail that are the problem. Perhaps my thinking is colored by Chicago’s airport experience.

For roughly the last generation here in the Chicago area we’ve been arguing about expanding air service for Chicago. The contours of the discussion have largely centered on whether a new airport should be built and where. The Chicago mayor’s office has persistently demanded that the city maintain control over any new major airport. The airlines have persistently resisted higher fees to pay for a new airport. Those two factors doomed the “green field” Peotone site that was under discussion for a while.

Ironically, an extant major airport in the Chicago area was bulldozed while the discussion was going on: Glenview Naval Air Station. The residents in the surrounding communities didn’t want a major airport near them and developers were slavering over the possibility of prime residential real estate (during the heart of the housing bubble). NIMBY and financial interest prevailed.

The discussion finally turned to expanding O’Hare, the least bad solution. It solved Chicago’s complaints and the Bensenville residents who’ve been displaced by the expansion are too poor and too small in number for their voices to count for much. That the economy downturn has decreased air traffic has removed some of the urgency for the discussion.

The key points that I’m making are that local politics and local needs are dispositive in discussions of infrastructure and there’s simply no way those determinations can be made from Washington, DC. If federal money accelerates road or airport building that’s already scheduled it could be stimulative; federal money replacing local money in the same timeframe as the local money would have been spent is a heckuva lot less effective as stimulus and that’s a lot of what we’ve gotten.

I’d really like to see the enthusiasts for roads, bridges, and airports produce some per capita and need-related statistics when they compare China and the U. S. rather than just noting how nice the Admiral’s Club is in Beijing.

Are roads, bridges, and airports really the infrastructure that most need our attention for the economy of the 21st century? I sure don’t see it that way. I think that energy and information infrastructure are a lot more important. Unfortunately, building the infrastructure of the 21st century won’t employ massive gangs of the unemployed. Neither will building roads, bridges, and airports but that’s a different discussion.

I’ve already pointed out that Chicago’s student enrollment has declined over the last decade. And that, as in other major cities in the U. S., the on time graduation rate has hovered around 50% for the last century. Will refurbishing schools to warehouse bored students do much to change that? Is building new schools really the smart solution for the 21st century? Or is economizing and adaptivizing by making use of pre-fabricated structures a better one? Sometimes smart solutions and smart politics are at cross-purposes.

by our puzzled looks. I see that former Clinton Secretary of Labor Robert Reich is just as puzzled as I am by the president’s un-State of the Union speech last Thursday:

On Monday the President will offer ways to pay for his $467 billion American Jobs Act mostly by increasing taxes on the wealthy.

I’m all in favor, but it’s an odd strategy. If any Republican was prepared to vote for the jobs bill, this will send him or her scurrying.

So if the President was never really serious about getting Republican votes in the first place — if his jobs bill and the tax increase on the wealthy were always going to be part of his 2012 election year pitch — why didn’t he make his jobs bill big enough to do the job?

I don’t think the political argument holds water, either. That’s the explanation that the president’s intention is to run against the do-nothing Republicans in Congress.

The problem with that line of attack is two-fold. First, it opens you up to complaints about your own lack of action which are manifest. Second and more importantly, I think that President Obama is peculiarly vulnerable if he is seen as just another conniving politician. The question seems obvious: were you just making a cynical bid for votes when you ran in 2008, too?

until it’s been officially denied. Here are a few of today’s denials.

U. S. Treasury Secretary Timothy Geithner

U.S. Treasury Secretary Timothy F. Geithner said “there is no chance that the major countries of Europe will let their institutions be at risk in the eyes of the market.”

French President Nicolas Sarkozy

Hours before the teleconference, Sarkozy and his prime minister “with a single voice reaffirmed France’s determination to put everything in place to save Greece,” French government spokeswoman Valerie Pecresse said of a Cabinet meeting in Paris.

White House spokesman Jay Carney

“What the emails make clear is there was urgency to make a decision on a scheduling matter. It is a big proposition to move the president or to put on an event and that sort of thing so people were simply looking for answers about whether or not people could move forward,” Carney told reporters at the White House.

“It had nothing to — and there is no evidence to the contrary — nothing to do with anything besides the need to get an answer to make a scheduling decision,” he said.

Homeland Security Secretary Janet Napolitano

Homeland Security Secretary Janet Napolitano on Tuesday denied knowing about the existence of the controversial gun-tracking Operation Fast and Furious while it was ongoing.

Napolitano told a Senate panel she didn’t find out about the operation until around the time of a U.S. Border Patrol agent’s murder in December in Arizona.

“Given the high level of information-sharing between departments, were you made aware of the operation while it was underway?” said Sen. John McCain, R-Ariz.

“No,” said Napolitano, who was testifying under oath before the Senate Homeland Security and Governmental Affairs Committee.

This is so much fun I may make it a regular feature. Good to have for future reference, too.

Following up on this post (see especially the excellent comments), let’s take a look at why the Social Security program exists. As I said in the post cited, in part it’s aspirational (in part, of course, political): we want a society in which people who are too old to work can maintain a reasonable lifestyle and that produces an acceptable level of economic growth. Let’s think about the implications of the Social Security program ceasing to exist and people living solely on what they’re able to save over the course of a lifetime.

Using the retirement calculator here, I’ve been able to produce a baseline scenario, the results of which are in the graph above. My assumptions are a base income of $50,000 (median income for a family of four), the ability to realize 4% on savings for the whole term, paying principal down to zero over the term, working fulltime without hiatus from age 20 to age 67, realizing an income of $30,000 per year after retirement, inflation at 3% (its average for the last 300 years here), and wages incrfeasing slightly slower than inflation. I recognize that there are any number of ways in which these assumptions are unrealistically rosy, for example, a good part of the interest you’d realize on savings would be taxed away or eaten up in fees but you’ve got to start somewhere.

I also assume that Medicare continues to exist, at least for people age 67 or older.

As you can see in order to achieve the target retirement income you’d need to save 25% of your gross income. That alone should be enough to convince you that people with average or below average incomes just aren’t able to save enough for their retirements but we’ll continue with the experiment.

Note that the result isn’t robust: it is extremely dependent on the rate of return that can be realized. At a 3% rate of return:

the rate at which you’d need to save rises to 35% and at 2% return (much, much more realistic in my view):

the rate at which you’d need to save rises to a whopping 50%.

Is it practical for people of average (or below average) income to save 25% of their income? Saving 25% leaves 75% or $37,500. Let’s make some more assumptions and construct a budget:

Here in Chicago I think that’s pretty realistic. A decent two bedroom apartment in an okay neighborhood will run at least $1,200 per month. Two CTA passes every month will cost about $2,000 a year (you won’t be able to buy a car, pay its insurance, put gas in it, and maintain it for $2,000 a year). I suppose you could scrimp a bit on food and utilities. Maybe someone more knowledgeable on shopping for healthcare insurance than I could comment on what it costs to insure a family of four. Note that if you assume that the job includes healthcare insurance you’ve got to assume it for everybody which is not a realistic assumption.

But it’s extremely frugal. Clearly, a family earning the median income can’t save enough for retirement and that’s even more obvious at lower levels of return.

There’s another monkey wrench. Look at that “everything else” figure. That’s most of the economy. We can’t maintain a growing economy when people are saving at that ferocious rate. Another monkey wrench: at that low level of personal consumption state and local governments couldn’t fund themselves with sales taxes. Income taxes and property taxes would need to rise and that will lower the amount of money available for saving even farther. I submit that for people below the top quintile of income earners, 80% of the people, there is no realistic way for them to save for their retirements and doing so would be too injurious to the economy to contemplate doing.

We need the Social Security program. If it didn’t exist, we would need to invent it. If we dismantle it, it will only to replace it with another program that does much the same thing.

Let’s stop telling fables about eliminating Social Security and, instead, produce realistic strategies for salvaging it. We need it.

On reflection and in the light of the details of its financing beginning to emerge, Megan McArdle is upset that President Obama wasted all of our times on Thursday:

If the president were serious about providing stimulus, he would pay attention to the work of his old CEA chair, and pay for the jobs bill by decreasing the growth rate of something-or-other in the future by 0.2%. This is also what he would do if he were serious about getting any part of it through Congress. Instead he is apparently sending them a less-stimulative bill designed to be maximally embarrassing to the GOP–which by definition means minimally politically viable.

You can say that Obama has no choice, because the GOP is just so damn obstructive that they won’t pass anything anyway. As it happens, I disagree–I don’t think that he could have gotten the whole thing through, but the GOP would probably have given him a few pieces to avoid looking like total jerks, and while that might not have done too much for Obama’s re-election chances, it probably would have meant a lot to the schmoes trying to make their mortgage payments in a tough economy.

But say it’s true. If it is, I really wish that Obama hadn’t wasted my Thursday evening, and that of 31 million other Americans, listening to a jobs plan that was only designed to produce one job–a second term for Barack Obama. I mean, I don’t blame him, exactly. But I get a little pang when I realize that I could just as well have spent that time bleaching the grout in the master bath.

I think that this underscores my initial reaction: if you’re going to propose something that isn’t particularly efficient and, in particular, if you’re going to propose a plan that will be like a red cape before the eyes of the House Republican bull, wouldn’t it be not just more prudent but better politics to propose a plan that’s a lot bigger than the one that was proposed on Thursday?

According to this calculation the cost per job of the new stimulus package that the president announced in his speech last week is $312,500. I think that’s a bit of an exaggeration since not all of the $475 billion is targeted at job creation but it’s probably close enough for government work. I’d appreciate any critiques, amendments, etc.

As I said in my immediate reaction, that doesn’t sound efficient enough to me. We’d probably be better off with a WPA-style plan than what’s being proposed.