Washington, Wall Street and Everything in Between

As you travel from Wall Street to Pennsylvania Avenue, economic rationality stops and political rationality takes over just as you hit the Beltway. This site is your ticket across that gap, analyzing what makes political sense, what makes economic sense, and rarely what just makes sense.
Posted by Stan Collender're our economics-of-the-airline-industry maven so this question is for you.

I just returned from three of the toughest travel days I can remember: every flight was delayed.  One, from LA to San Francisco, was delayed for more than three hours.

Some of the delays were weather related and, as much as I'd like to blame the industry, I know that responsibility lies elsewhere. 

Most of the delays seemed to be the result of air traffic, especially jammed schedules that had too many plans scheduled to depart at the same time from the same airport.

That's what prompts this question.  Is there a silver lining to the reduced schedules the airlines seem to puuting in place for economic reasons?  Is it possible that (putting weather problems aside) flights will leave and arrive on time more often if there are fewer of them?  Or should we assume that the FAA will reduce the number of controllers to match the schedule leaving us all right where we started?

Posted by Andrew Samwick

The May employment report is another disappointment.  Nonfarm employment fell another 49,000, marking a 324,000 decline (0.23%) since the peak in December.  That headline will likely be overshadowed by the large increase in the unemployment rate, from 5.0% in April to 5.5% in May.  Note that these two statistics come from different surveys--nonfarm employement is from a survey of establishments and the unemployment rate is from a survey of households.

What's behind the unemployment rate increase?  The unemployment rate is the ratio of those unemployed to the civilian labor force (the sum of those employed plus those unemployed).  Recall that you can be out of work but not counted as unemployed--to be unemployed, you have to be looking for work.  When interpreting the numbers, we also have to be careful to acknowledge that these are net flows from the survey.  For example, in May, according to the household survey:

Posted by Andrew Samwick

Paul Krugman begins his column today, "Bits, Bands and Books," with an interesting question:

Do you remember what it was like back in the old days when we had a New Economy? In the 1990s, jobs were abundant, oil was cheap and information technology was about to change everything.

Sure I remember the 1990s.  In addition to the things listed above, we had Paul Krugman writing insightful and witty books and articles about economics.  I don't know if it will last, but we have that Paul Krugman back today.  I particularly liked these paragraphs near the end:

Indeed, if e-books become the norm, the publishing industry as we know it may wither away. Books may end up serving mainly as promotional material for authors’ other activities, such as live readings with paid admission. Well, if it was good enough for Charles Dickens, I guess it’s good enough for me.

Posted by Andrew Samwick

As I've noted from time to time, I don't consider myself a Democrat, but I wouldn't mind voting for one.  I don't know if I am the swing voter that Senator Obama needs most in the general election.  But I can say that he does himself no favors in my estimation by appeasing Senator Clinton after her performance last evening.  Some reactions from those well to the Left of me:

Dana Milbank: "In Defeat, Clinton Gracioiusly Pretends to Win"

Ezra Klein: "She Doesn't Accept"

Matthew Yglesias: "Clintons Speech"

As often happens, I think Brendan Nyhan sums it up pretty well in "Hillary: For Hillary:"

Posted by Pete Davis

The climate change debate began in ernest in the Senate yesterday afternoon.  Few are questioning the science anymore; the earth is warming.  The question is how best to control carbon emissions to reduce future global warming?

We economists usually recommend a carbon tax as the best way to go as Andrew eloquently explained on NPR last night.  We like that fact that the tax is explicit, not hidden, that it is efficient, minimizing collateral damage to the economy, and that it is effective, raising the price of greenhouse gas emissions and encouraging alternatives.

I kid my friends that "I formulated three carbon taxes for Bob Dole back in the early 1980's that are still in his filing cabinet."  I'd be very surprised if the former Senate Finance Chair really kept them, but the fact that they were formulated at all shows that Senate leaders, then as now, were fully aware of of the advantages of a carbon tax.  That none of those proposals saw the light of day is conclusive evidence that:

Political leaders don't want

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