That Shortage of Skilled Manufacturing Workers is Really a Shortage of Employers Willing to Pay the Market Wage by Dean Baker

HOW TO GOVERN AMERICA IN 2013 II: MORTGAGES, HOUSING, AND THE RECOVERY by DeLong

The claim that cuts in state and local (and federal!) spending are dragging down the economy are well-founded. The claim that mortgage debt overhang and depressed consumption are not dragging down the economy is not well-founded.

Baker says that right now: 

The claim is the dropoff in consumption due to the debt burden of these homeowners explains the weakness of the recovery.

Some simple arithmetic shows the absurdity of this view. The amount of underwater equity is estimated at between $700 billion (Core Logic) and $1.1 trillion (Zilliow). Suppose that we can disappear this debt through some decree, how much additional consumption would we see? If we assume that these households spend an incredibly large share of this increase in their net wealth, say 15 cents on the dollar, this would imply additional consumption of between $105 billion (Core Logic estimate) and $165 billion a year (Zillow estimate).

However we would have also destroyed the wealth of the mortgage holders. Let's assume that they just spend 2 cents on the dollar of their wealth. This would imply a net boost to demand of $91 billion to $143 billion. While this would be a helpful boost to the economy, equivalent to a government stimulus program of this size, this would hardly be sufficent to make up a shortfall in annual output that the Congressional Budget Office puts at close to $1 trillion.

I'm confused.

Underwater Homeowners Cannot Explain the Weak Recovery by Dean Baker

The claim is the dropoff in consumption due to the debt burden of these homeowners explains the weakness of the recovery.

Some simple arithmetic shows the absurdity of this view. The amount of underwater equity is estimated at between $700 billion (Core Logic) and $1.1 trillion (Zilliow). Suppose that we can disappear this debt through some decree, how much additional consumption would we see? If we assume that these households spend an incredibly large share of this increase in their net wealth, say 15 cents on the dollar, this would imply additional consumption of between $105 billion (Core Logic estimate) and $165 billion a year (Zillow estimate).

However we would have also destroyed the wealth of the mortgage holders. Let's assume that they just spend 2 cents on the dollar of their wealth. This would imply a net boost to demand of $91 billion to $143 billion. While this would be a helpful boost to the economy, equivalent to a government stimulus program of this size, this would hardly be sufficent to make up a shortfall in annual output that the Congressional Budget Office puts at close to $1 trillion.

Calculated Risk:

Next Thursday, the BEA will release the second estimate of Q3 GDP. The consensus is GDP will be revised up to 2.8% annualized growth, from the advance estimate of 2.0%. This would be a pretty sharp upward revision.

Five economic trends to be thankful for by Neil Irwin

To look on the bright side, I'm also grateful that Nate Silver was right.

Interview with Bill McBride of Calculated Risk by Joe Weisenthal

But the state and local gov’t drag is pretty much over, and getting rid of that is really going to help and then of course, housing is a big plus.

...

A lot of it is simple. I read a lot of different economists to try to understand theory, because I’m not an economist – I have an MBA – I kind of understand business, I’ve always been good with numbers, but I read economic theory and I’m glad to read…when we were going into this crisis, I was reading Krugman all the time because it was clear to me that he had a handle on what was going on, from what was going to happen to interest rates….I’d read what he would write and read what other people would write and go, this makes a lot more sense to me. And all that has worked out.

(via DeLong and Krugman)

AV Club reviews the Walking Dead, "Hounded"