Shorter Workweeks Are Likely in New Year

Casey B. Mulligan is an economics professor at the University of Chicago. He is the author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.”

Three economic forces are pushing toward shorter workweeks for employees during the new year.

The red line in the chart below is a monthly index of the employment-to-population ratio, normalized to a value of 100 in December 2007, when the recession began. In this series, each employed person counts the same, regardless of how many hours she or he works.

Federal Reserve Bank of St. Louis Average weekly hours of private employees (blue line) have returned to the level last seen before the recession of 2008-9, shown as gray area. But the percentage of Americans with jobs (red line) plummeted in the two years after the recession began and has remained steady since then.

By that measure, there has been hardly any labor market recovery because, as indicated by an index value of 93, employment per capita still remains 7 percent below what it was before the recession began.

Average weekly hours of private-sector employees (the blue line) returned comparatively quickly to near their prerecession level and have maintained that level over the last two years.

I predict that average weekly work hours will decline again over the next year because fiscal policy is now switching from penalizing part-time work to rewarding it.

Since 2008, government benefits for the long-term unemployed have served as a penalty for part-time work, because unemployment benefits are largely - if not entirely - withheld when an unemployed person accepts a part-time position. Moreover, people moving to part-time work from either full-time work or unemployment will find that the move renders them eligible for fewer benefits the next time they are laid off from a job.

Many of the part-time-work penalties disappear this week when the federal government stops paying long-term unemployment benefits (short-term unemployment benefits will continue, and they embody some of the same incentives), although the penalties would reappear should Congress resurrect the program.

Full-time work has traditionally offered health and other benefits that part-time jobs rarely do, and those benefits have kept a number of workers in full-time positions. The Affordable Care Act aims to end that advantage, by giving workers opportunities to obtain insurance outside the workplace.

In addition, in some cases the new insurance opportunities can be so inexpensive compared with employer insurance that people stand to, paradoxically, have more disposable income from working part time than they do from working full time.

The third economic force is that in January 2015 the Affordable Care Act begins to penalize employers that do not offer affordable health insurance, except that part-time employees (working less than 30 hours or four days a week) are exempt for the purposes of determining the penalty. This is another reason that part-time work - especially positions with 29-hour weekly work schedules - would increase at the expense of full-time work, at least if the mandate goes ahead as planned.

All together, it looks like many of the jobs in the new year will involve less work.

Monetary Policy in Japan: Finally on Track

Issei Kato/Reuters Haruhiko Kuroda, governor of the Bank of Japan, at a news conference in November.

Phillip Swagel is a professor at the School of Public Policy at the University of Maryland and was assistant secretary for economic policy at the Treasury Department from 2006 to 2009.

Japan’s central bank, the Bank of Japan, is finally taking the action long suggested by outside economists as a remedy for two decades of stagnation: a prolonged period of substantial monetary expansion to end deflation and reverse the drag on business and consumer spending induced by deeply embedded deflationary expectations.  Under the leadership of its governor, Haruhiko Kuroda, the bank increased its purchases of Japanese government bonds in April, with a stated aim of lifting inflation to 2 percent.

There are signs of initial success, as core inflation (consumer prices without volatile food and energy components) rose in November to 0.6 percent over the past year â€" still low, but the largest gain in 15 years. The idea is that sustained price gains will eventually feed through into higher wages, then into stronger spending by consumers who no longer wait for prices to fall, and ultimately into more vigorous investment and hiring by Japanese businesses.

Among those suggesting to the Bank of Japan that monetary policy could reverse deflation if applied in a consistent and determined fashion was the Federal Reserve chairman, Ben S. Bernanke, who as a Princeton professor in 1999 wrote that the reasoning the Japanese central bank provided for not acting was “confused” and “inconsistent,” among other criticisms.

Mr. Bernanke gave a more polite version of his advice in 2003 while serving as a Fed governor (again, before he became chairman), noting that a healthy Japanese economy would contribute to “a stronger, more balanced and more durable” global recovery and urging the bank to be open to “fresh ideas and approaches,” such as more active monetary policy to reverse deflation.

The criticism is understated but striking, since students in Econ 101 learn early on that creating money with the electronic equivalent of the printing press, and handing it to the government to spend, will eventually lead to higher prices (though it could take a long time, as we have seen in the United States).  Yet the Bank of Japan dug in with its opposition while outsiders urged action â€" perhaps, as Paul Krugman hypothesized, because the bank feared that it would not succeed and then lose face.

Central banks in the United States, Europe, Japan and other advanced economies are independent of the government to insulate them from political pressures to juice economies on an electoral cycle, which might give rise to undesirably high inflation. It was not foreseen, however, that the Bank of Japan would be stubbornly independent and incompetent in allowing for 15 years of deflation.  This history highlights the importance of the direction taken by Mr. Kuroda.

A Japanese turnaround would be good for the United States in both economic and national security dimensions.  The economic benefits would include increased American exports and better returns for American investors. These gains will be amplified if Japan follows through on Prime Minister Shinzo Abe’s promises of wide-ranging structural reforms that include opening the economy more broadly to competition, including competition from foreign companies. One mechanism for such liberalization would be the conclusion of a Trans-Pacific Partnership agreement that would reduce barriers to trade and investment in Japan, the United States and many other nations.

On the security side, a more vigorous economy would support a revitalized Japanese defense presence that would reinforce American efforts to counter China’s military expansion.  Even while Prime Minister Abe clumsily revives World War II memories, it remains the case that “irresponsible” Chinese behavior threatens a range of United States allies in the region, including not just Japan but also the Philippines and Vietnam. A more confident (and better armed) Japan would contribute to regional stability and in that way further a fundamental American interet.

It is somewhat perverse, then, that Japan’s efforts to revive its economy have been faulted by 60 senators and hundreds of members of the House of Representatives, who have signed letters calling for “strong and enforceable currency manipulation disciplines” in the Trans-Pacific Partnership talks.

A possible source of confusion is that many of the signers most likely have in mind that they are calling on President Obama to be mindful of Chinese currency policy, even though China is not among the nations involved with the Trans-Pacific Partnership negotiations. The weakness of the Japanese yen instead appears to have been an important factor behind the generation of these letters, with Ford Motor Company’s chief, Alan Mulally, especially outspoken in complaining that the value of the yen provides an unfair advantage to his Japanese competitors (though this would not be the case for the considerable production of cars by Japanese companies in United States factories, since these are largely made with American-sourced parts and assembled by American workers).

The yen has indeed reached a five-year weak point against the dollar and euro, with the depreciation beginning in October 2012 when the Bank of Japan announced that it would expand its asset purchases (a policy that was expanded further by Mr. Kuroda in April).  It is not surprising that more expansive Japanese monetary policy leads to a weak yen â€" this is textbook economics (see, for example, Chapters 14 to 17 of the textbook I use at the University of Maryland:  InternationalEconomics, Ninth Edition, by Paul Krugman, Maurice Obstfeld, and Marc Melitz).  In addition to Japanese monetary policy, a strengthening United States economy and a move toward gradual monetary tightening by the Federal Reserve would be expected to contribute to a weaker yen against the dollar.

In other words, the weak yen is the natural consequence of the appropriate policy response that Japan has finally put into place after years of urging by American policy makers and economists alike â€" a response that is fundamentally in the best interest of both Japan and the United States. This is no more an instance of currency manipulation than the assertion that the Federal Reserve under Mr. Bernanke in undertaking three rounds of quantitative easing sought to weaken the dollar to create a trade advantage for the United States.

For sure, the Fed’s aggressive monetary expansion would be expected to affect the value of the dollar, but the intent was to strengthen the United States economy.  Mr. Bernanke told the House Financial Services Committee in July that he viewed Japan’s actions similarly, even while expressing more sympathy for the idea that China has sought a weak currency.

Congressional efforts to include currency manipulation in future trade agreements are a political problem for President Obama, for whom a completed Trans-Pacific Partnership agreement eventually could be seen as one of his few second-term economic accomplishments.

Beyond the politics, however, there could be unintended consequences for the United States economy. Imagine the future situation in which enforceable currency manipulation provisions in a United States trade agreement are used by Brazil â€" which complained about the impact of the Fed’s quantitative easing in leading to a stronger Brazilian currency â€" as leverage to get the Fed to raise interest rates to the detriment of the United States economy.

In undertaking a sustained and aggressive monetary expansion, Japan is finally filling an economic prescription written nearly 15 years ago â€" with the prescribing doctor no less than Ben Bernanke in his pre-Fed role. The weak yen that results from the Japanese policy actions will pose a challenge for some American companies that compete with Japanese exporters. But a revival of growth in Japan ultimately will contribute to increased prosperity and security for the United States.

The Size of State Legislatures

Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform â€" Why We Need It and What It Will Take.”

On Dec. 27, The Wall Street Journal reported that businessman John H. Cox has a ballot initiative in the state of California cleared for circulation (No. 1615) that would increase the size of the state legislature about a hundredfold. The idea is to shrink the size of each legislative district so that a smaller number of people will be represented, which will improve democracy in the state, according to Mr. Cox.

At first glance, the idea seems outlandish. But a bit of analysis shows that there is nothing radical about it at all. In fact, there are good arguments for increasing the size of many state legislatures and perhaps the House of Representatives as well.

According to the National Conference of State Legislatures, the number of seats in the lower house of state legislatures varies from a high of 400 in New Hampshire to a low of 40 in Alaska. But what really matters is how much population each legislator represents. The table lists the 10 states with the highest and lowest populations and the population per legislator. California has by far the largest population per district, New Hampshire the lowest.

National Conference of State Legislatures and Census Bureau

The Cox proposal would reduce the population of each California Assembly district to approximately 5,000 and each state Senate district to 10,000. This would be on the very low side of the states and may be impractical, given California’s size. Those states with the lowest population/legislator ratios are very small states in terms of geography or population. But increasing the California State Assembly by a multiple of five, so that each assemblyman represents about 100,000 people, seems reasonable, based on how other large states operate.

The National Conference of State Legislatures lists the following arguments in favor of legislative districts with smaller and larger populations:

Smaller Populations
- The more the members, the fewer the constituents. With fewer constituents, a legislator is more likely to have face-to face dealings with them.
- One political party can more easily dominate a small legislature. A smaller-sized legislature also may increase regional rivalries, particular between rural and urban areas.
- Relatively few political positions are well known by the general population. Reducing the number of legislators probably will not change this fact.
- The legislative process was not intended to be neat and efficient. The legislature is designed to provide a cross-section of all points of view. Legislators are to study, debate and argue, and finally reach a compromise position that is acceptable to a majority of members.
- A large number of members allows for a more effective division of labor and specialization. The oversight of administrative agencies is greater among larger legislatures.
- There is a greater correlation between a state’s population and legislative costs than between legislative size and cost.

Larger Populations
- Fewer legislators does not mean less responsive legislators. Using modern communication mechanisms, a legislator can easily reach, and be reached by, many more constituents.
- Legislative elections will be more competitive.
- In a smaller body, the role of a legislator will be more prestigious and more satisfying. A smaller legislature increases the responsibility of each member. Individual legislators have more opportunity to influence decisions. Each legislator should be more visible and therefore more responsive to the voting public.
- With a smaller legislature, there will be better discussion and clearer debate. There is more opportunity for each member to make his or her views known, to have his or her voice heard.
- Larger legislatures tend to have more committees. Too many committees result in overlapping and fragmentation of work â€" making it more difficult for a legislature to formulate coherent, comprehensive policies on broad public questions.
- Large legislative bodies cost more.

Looking at the academic literature, there appear to be both liberal and conservative arguments for reducing the population in each legislative seat. A 1999 study by the economists Mark Thornton and Marc Ulrich found that government size is positively correlated with the size of legislative districts. That is, the more population per district, the bigger the size of government. A 2006 study by Mr. Thornton, Mr. Ulrich and George S. Ford, which examined Britain, confirmed this result.

However, a 2010 study by the political scientist Karen L. Remmer came to the opposite conclusion. “Politicians elected in smaller political units face greater incentives and/or opportunities to expand the public sector,” she found.

It is undoubtedly the case that historical, demographic and geographical factors are critical in determining the impact of a legislature’s size on public policy, from either a liberal or conservative point of view. For example, academic research has shown that the more homogeneous a population is the more likely voters are to support redistribution, because they view the benefits as going to people like themselves. This suggests that more heterogeneous states will be less supportive of redistribution.

Geographically small states are more likely to be homogeneous, large states more heterogeneous. California is the largest state in population and third largest in area, and probably the most heterogeneous state as a consequence. Yet big government policies have long been popular there.

One thing is clear, however: California is an outlier among states in having extremely large populations in its State Senate and Assembly districts. Its districts are three times as large as those in the state with the second largest number of people per district, Texas. Only a couple of states have as many as 100,000 people per legislative district, and the bulk have fewer than 50,000.

The resolution of this debate in California may have national implications. In a future post I will discuss the case for enlarging the United States House of Representatives.

Narrowing the Income Gap, Without Another Bust

Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities in Washington and a former chief economist to Vice President Joseph R. Biden Jr.

There are two opposing views out there right now regarding the economic prospects for 2014.  There are those making the case that this will be the year the economy finally escapes the residual gravitation pull of the great recession and hits escape velocity, i.e., gross domestic product and job growth accelerate, households â€" with their balance sheets back in the black, and with home prices rising â€" pick up their consumption, and businesses respond to this newfound activity by bringing more of their investment capital off the sidelines and into the game.

The other view is embodied in a recent CNN/ORC poll result that finds that nearly 70 percent said the economy “is generally in poor shape,” while “just over half expected the economy to remain in poor shape a year from now.”

Most readers of this blog will have no problem aligning these two disparate viewpoints.  There is no single United States economy that’s either doing well or poorly.  When someone asks “how’s the economy doing?” the correct response is (preferably with a Jersey accent), “Whose economy you talkin’ about?”

Comparative Indicators for the Recovery

Sources: Real gross domestic product and corporate profits, Bureau of Economic Analysis (Q2 2009 to Q3 2013); Standard & Poor’s 500-stock index, S.&P. Dow Jones Indices (June 2009 to November 2013); median household income, Sentier Research (June 2009 to October 2013).

In our era of historically high levels of income inequality, growth is of course necessary, but it’s not sufficient to lift the living standards of the bottom half.  The chart above gives a rough look at the problem, showing the growth over the expansion thus far in G.D.P. (up 10 percent), corporate profits (up 50 percent), the Standard & Poor’s 500-stock index (up 77 percent), and median household income (down 4 percent), all adjusted for inflation.

A more detailed look at the problem of growth’s failure to reach most households comes from comprehensive Congressional Budget Office data on household income.  Compared to the chart above, these data are less up to date â€" the last data point is 2010 â€" but they not only track income across the full income scale, they also include the impact of taxes, government benefits, and capital gains and losses.

The latter is an essential driver of inequality, as large gains and losses in the asset values of the wealthiest households have been a fixture of the bubble/boom/bust cycle that has characterized the nation’s last few business cycles.  This makes inequality “procyclical” â€" it goes down when the economy does, and vice versa â€" around a rising trend.

According to the Congressional Budget Office data, the downturn solidly whacked the incomes of all income classes, including that of the top 1 percent.  It would be a mistake to conclude that their wealth insulates them from impact of financial-market-driven recessions (though, of course, their wealth insulates them from the associated hardships experienced by those with few resources).

It is also the case that in the worst of the downturn, the safety net helped low- and middle-income families much more than wealthy families.  Our system of taxes and transfers (like unemployment insurance and nutritional assistance) is still progressive, though it’s becoming less so over time.

But now that the downturn’s behind us and the economy is steadily, if moderately, expanding, we have the tale of two economies I introduced above.  The Congressional Budget Office data show, for example, that in 2010, the real after-tax-and-transfer income of middle-income families was unchanged over the previous year, sticking at about $58,000.  The income of the top 1 percent, on the other hand, went up 15 percent, or $133,000, to about $1 million.  The 2010 increase in the income of the top 1 percent was more than twice that of the average income of the middle class.

That’s just one year, but it’s indicative of the pattern that’s prevailed after each of the last two recessions.  Inequality takes a big hit when asset bubbles burst and the safety net kicks in to offset some of the damage.  Then, as the recovery gets underway and the safety net fades â€" both SNAP (food stamps) and unemployment benefits were recently cut â€" asset values start to appreciate again, and inequality is back on the rise.

Which of course raises the question: What can be done to break this pattern?  Here are a few ideas:

-Don’t reduce safety net supports too soon.  The expiration of long-term unemployment benefits was precipitous given the still-elevated levels of overall unemployment and especially long-term unemployment.  Congress will return to a bill to extend the program for three months.  That would help … a little.

-A small financial transaction tax. A very small tax on financial transactions â€" a few basis points (hundredths of a percent) â€" would both dampen noisy trading and raise some needed revenue to pursue measures like the ones suggested here.  There’s a bill in Congress for a financial transaction tax of three measly basis points (meaning three cents on a $100 trade) that has been scored as raising $350 billion over 10 years.  There’s also some research suggesting that such a tax would help to reduce some financial-sector activities associated with the economic shampoo cycle (bubble, bust, repeat).

-A higher minimum wage. Think of this policy as a mechanism that would at least partly connect the pay of low-wage workers to the broader recovery.  An expanded earned-income tax credit would help here as well, especially for childless adults.

-Full employment: I’ve discussed this one many time in past columns recently suggesting five ways to get there.  The point is that the last three recoveries have started out “jobless,” meaning G.D.P. growth got going well before jobs.  Yes, the unemployment rate has been coming down lately, but part of that is because former job seekers are giving up the search.  An aggressive full-employment program, including direct job creation â€" I’d scale up a subsidized jobs program that proved quite effective during the last downturn â€" would help in many important ways.  By tightening the labor market, it would provide workers with some of the bargaining power they lack to claim their fair share of th growth they’re helping to create.  On the macro level, as I warned about in my last post, full employment would offset and reverse the part of the labor-force decline unrelated to retirement, thus helping to increase the economy’s eroding potential growth rate.

And dig this: of the two ideas above that invoke budgetary costs, my back-of-the-envelope estimate finds that they could be handily financed by the proceeds from the financial transaction tax.

Is it just me, or is there something particularly just about that arrangement?

High Finance and Financial Education

Nancy Folbre is professor emerita of economics at the University of Massachusetts, Amherst.

Web-based financial education sites are eager to tell you how to assess your own credit reports and scores. But it’s not easy to find a credibility report on the sites themselves, some of which are sponsored by major players in the game they promise to explain.

Bank of America recently teamed up with Salman Khan of Khan Academy, a highly respected on-line educator, to promote a website, Better Money Habits (a phrase they have officially trademarked). Huffington Post has a new collaborative financial education section.

Better Money Habits conveys useful information in a friendly and effective way. But, at least to date, it omits some of the most important information ordinary people need. Long on advice about how to qualify for more credit, it remains short on advice on how to shop effectively for lower interest rates.

Warnings are not entirely missing â€" viewers are urged not to sign up for credit cards just because they look pretty or offer store discounts. But the group of videos entitled “Understanding Credit” urges viewers not to pay off their entire balance immediately in order to develop a better credit record history - rather unseemly advice coming from the third largest issuer of credit cards in the United States, which profits from the resulting interest payments.

The video that best showcases Mr. Khan’s winning style of presentation compares the total interest paid over the life of a $1,000 credit-card loan to buy a computer in two different scenarios, both at an annual percentage rate of 22.9 percent. In the first scenario, the borrower pays only the required monthly minimum payment; in the second, the borrower pays an additional $10 per month.

The comparison makes the second option look attractive by comparison, making it clear that the first option leads to a form of costly debt peonage. Yet the second option is hardly a good choice either, adding up to $443.29 in interest over the life of the loan. You don’t need a computer to figure out that’s not a great way to finance the purchase.

A comparable personal loan at my local credit union charges a far lower annual percentage rate of 9.9 percent. Paying off such a loan would also help establish a good credit record.

In general, university credit unions offer students better and more cost-effective services than commercial banks, but Bank of America is unlikely to point that out. Nor does it have much incentive to link to consumer-directed websites such as Credit Card Forum, which publishes detailed ratings of credit cards (including those issued by Bank of America) along several dimensions.

Those who worry about the devilish features of Better Money Habits can consult Dave Ramsey’s Financial Peace University, which purports to teach “God’s way of handling money” and urges young people to avoid going into debt if at all possible. Ironically, the actual courses offered charge a hefty fee, and the site promotes a number of specific businesses, as well as its own.

Some excellent noncommercial financial education materials are available online, including many offered by the National Endowment for Financial Education. These include a feature entitled “Life without credit cards - it can be done.”

The new federal Consumer Financial Protection Agency also offers reliable materials intended to help consumers understand their credit card agreements, as well as a fact sheet documenting the results of new regulations imposed in 2010 under the Credit Card Accountability, Responsibility and Disclosure Act. These regulations have reduced interest rates and penalty payments, as well as enforcing greater clarity in the explanation of credit card costs.

A recent survey financed by Bank of America found that 78 percent of adults in the United States believe it is difficult to learn about personal finance, and 43 percent worry they have missed good financial opportunities as a result.

The survey also found that the problem is not lack of information: Forty-two percent of adults say they are overwhelmed by the amount of information available. A related problem is uncertainty about whom to turn to for advice; 28 percent say they don’t know where or whom to turn to.

In general, it’s a good idea to turn to a source that doesn’t stand to gain from its own advice.

Preventing Civil War in South Sudan

James Akena/Reuters Displaced families waited this week at a United Nations base near the international airport in Juba, South Sudan.

Simon Johnson, former chief economist of the International Monetary Fund, is the Ronald A. Kurtz Professor of Entrepreneurship at the M.I.T. Sloan School of Management and co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.”

The news from Juba is very bad. South Sudan is in the throes of political conflict and serious fighting that has the potential to become civil war. Several hundred people have been reported dead and more injured. Unless cooler heads prevail, the situation could spiral out of control in places including Juba, the capital; Bor, the capital of Jonglei state, about 125 miles to the north of Juba; and Bentiu, the capital of Unity state, which has a lot of oil.

The outside world needs to get serious about preventing the escalation of this conflict. We can do this by applying appropriate economic pressure to all the military forces involved and by assuring that oil revenues are not used to fuel the conflict. This will require China, India, France and the United States to cooperate closely and in ways that may not come naturally.

This week Ban Ki-moon, secretary general of the United Nations, called for an increase in the peacekeeping force on the ground, while about 45,000 people have already sought protection at United Nations compounds around the ground. It is obviously imperative for the United Nations to safeguard their lives.

Two or three peacekeepers were killed last week trying to protect their base in Akobo, in Jonglei state; the shadow of the 1995 massacre of Bosnian Muslims at Srebrenica, who were supposedly under United Nations protection, looms large.

There are currently 7,600 United Nations security personnel in South Sudan (counting both police and military); the Security Council is discussing raising this number to 13,000. (You can follow the United Nations peacekeeping Twitter account and consult this useful map for tracking events or this map for tracking aid to South Sudan.)

Scaling up the peacekeeping force makes sense. But no one wants to charge in with a very large military force; this can go wrong in many ways (even a small United States evacuation mission came under fire and suffered casualties on Saturday). The emphasis is on persuading the key players to stand down and work out how to cooperate in a peaceful manner. Samantha Power, the United States ambassador to the United Nations and author of a book on genocide, put it well:

They can return to the political dialogue and spirit of cooperation that helped establish South Sudan, or they can destroy those hard-fought gains and tear apart their newborn nation.

But there is another card that should now be played: economic pressure from the outside, particularly in terms of how South Sudan’s oil revenues are handled. In the short term, a willingness to limit access to these revenues could signal less money available to finance conflict. The bigger goal should be to communicate that there must be greater transparency on exactly how this money is spent within South Sudan.

As the China National Petroleum Company is a major investor in South Sudan, and the oil is transported by pipeline across Sudan to the coast, there is a real opportunity - and pressing need - for international cooperation on this situation. (Petronas, the Malaysian state oil company, is also involved, as is ONGC of India and Total of France.)

After a long struggle, South Sudan became independent from Sudan in 2011. Unfortunately, civil conflict in newly formed countries is not unusual - think, for example, about the versions experienced in Russia after 1917, Ireland after 1922, or Mozambique and Angola after 1975. The nature of the internal divisions differed, but in all these cases there was a brutal struggle to determine who exactly would be in charge.

Details from the ground are not entirely clear, but a rift appears to be deepening between President Salva Kiir and his former vice president, Riek Machar. Last week Mr. Kiir accused Mr. Machar of organizing a coup. Mr. Machar has denied this, but he definitely has a military force in the field that has had some recent success (as this timeline shows).

Mr. Kiir and Mr. Machar belong to the same party, but Mr. Kiir is from the Dinka ethnic group, which is the largest in South Sudan, while Mr. Machar is from the Nuer ethnic group. The fear is that the split between these individuals will now morph into a broader ethnic conflict (the BBC reports that this is already happening; see the map in that article for the main locations of some of South Sudan’s many ethnic groups; other maps on that page include the location of oil fields and pipelines).

South Sudan’s population is estimated at just over 11 million, with one of the highest population growth rates and an average age of just 16.6 years. The size of its army was estimated in January to be 80,000 to 200,000, although presumably some of these people are now “rebels.” (More background information is available from the Central Intelligence Agency’s World Factbook.)

The international situation today should be quite different from what it was during previous civil wars. The Cold War is over and is no longer an excuse for propping up unpleasant regimes or fueling conflict. We have learned in many countries that once civil conflict takes hold, the human cost is terrible - and it takes a long time to get back to any kind of reasonable living conditions. And there are many ways in which instability can spread - look again at the map of South Sudan, with its neighbors â€" including the problems now manifest in the Central African Republic and the potential for conflict elsewhere in the region.

This is not a conflict that can be fueled by dispersed and easy-to-grab resources such as so-called “conflict diamonds” (from alluvial deposits that are easy to mine and that have contributed to civil wars in a number of places). South Sudan is poor but its foreign income is based almost entirely on a single capital-intensive sector operated by foreign companies: oil.

If outsiders wanted to make a difference, they would make clear that the oil revenues from South Sudan would be fully accounted for - both as a revenue source (i.e., total dollars earned) and in terms of how they were spent.

South Sudan funds almost its entire government budget from oil revenues, which amount to $2 billion to $3 billion (with production previously running around 250,000 barrels per day).

Background material from Global Witness emphasizes,

In South Sudan - the world’s newest and most oil-dependent country - it is vital that the government follows through on commitments to managing its natural resources transparently and in the best interests of the wider population.

South Sudan should join the Extractive Industries Transparency Initiative, although ideally only after proper preparation as suggested in October by Global Witness. (You can follow Emma Vickers of Global Witness on Twitter.)

Given the latest developments, the United States, China, India, France and other responsible governments should step up the pressure for exactly this kind of transparency - and for making it clear that oil revenues will not be allowed to fund the fighting. This message must get through to both the government and its opponents.

This will not be easy, but South Sudan must and can be prevented from descending into a brutal conflict for control over its oil revenues.

Welfare Benefits for Big Business

Casey B. Mulligan is an economics professor at the University of Chicago. He is the author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.”

News reports have emerged this year that some of the nation’s largest and best-known corporations - like Walmart and McDonald’s - may have disproportionate numbers of their employees taking part in public assistance programs like Medicaid and food stamps. A video that went viral on YouTube criticized McDonald’s for offering its employees assistance with navigating the complex web of federal government assistance programs.

Most public assistance programs are aimed at poor people and limit participants’ incomes to a maximum somewhere around the poverty line (about $20,000 a year for a family of three). Because jobs generate incomes, it’s difficult for a worker to be admitted into antipoverty programs unless he or she works part time or earns near the minimum wage. Thus, it is no surprise that employers like McDonald’s and Walmart offering part-time or minimum-wage positions would have a disproportionate number of their employees in such programs.

One point of view is that employers just want to be helpful, and some of them happen to be in a line of business where they can create job opportunities for low-skilled people, many of whom can also benefit from knowledge about antipoverty programs. But critics assert that low pay is a deliberate corporate strategy to use government program revenues to enhance their bottom line.

Economists have long cataloged the winners and losses from antipoverty programs - we call it the “economic incidence” - and the answer is more subtle than either side acknowledges.

First and foremost, antipoverty programs raise wages and reduce profits in the short run because they implicitly penalize work, especially the full-time work that is most likely to raise an employee above the poverty line. In effect, employers not only have to compete with each other for employees, but they have to compete with the welfare state, too (as a recruiter, Stacey G. Reece, explains in his congressional testimony).

But the welfare state may also give big employers an advantage over small employers. Big employers achieve a scale large enough to host a number of employee benefit programs from education assistance and retirement plans to advice and assistance with welfare programs that small employers cannot afford. Going forward, I expect that large employers will offer more help for employees to navigate the Affordable Care Act than small employers will.

Although the earned-income tax credit is an exception, many safety-net programs permit participation on a part-year basis, which conveys an advantage to seasonal businesses, large and small. Employees at seasonal businesses have two sources of income - an employer paycheck during the parts of the year that they’re on the payroll and government program benefits during the rest of the year - while employees at nonseasonal businesses just have one income source.

Government transfer payments move purchasing power from those who finance the programs - taxpayers and the buyers of government debt - to the transfer programs’ participants. The transfers hurt businesses that serve, or borrow from, the program financers but may help businesses who serve transfer program participants. Walmart and McDonald’s may be among the latter group, too.

On the whole, social safety-net programs make it more costly to do business but nonetheless may confer competitive advantages on particular types of businesses.

The Budget Deficit as Seen From 2009

Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform â€" Why We Need It and What It Will Take.”

On Dec. 20, the Brookings Institution economist Justin Wolfers sent out this provocative post on Twitter: “The decline in the budget deficit since 2009 is the largest four-year improvement since the demobilization from WWII.”

I was aware that the deficit was declining sharply, both in nominal terms and as a share of the gross domestic product, but hadn’t thought much about the magnitude. Mr. Wolfers, whose partner Betsey Stevenson is a member of President Obama’s Council of Economic Advisers, is correct, as the data show. Fiscal year 2014 began on Oct. 1.

Congressional Budget Office

The Congressional Budget Office further projects that the deficit will fall to just 2.1 percent of G.D.P. in fiscal year 2015, less than it was in fiscal year 2008, when it was 3.1 percent of G.D.P. Thus we will have seen a decline in the deficit of 7.7 percent of G.D.P. over seven years.

There is indeed no comparable period in which the deficit fell as much since the aftermath of World War II for the simple reason that the deficit never grew large enough to drop so much. The largest deficit recorded in the postwar era before 2009 was in 1983, when it reached 6 percent of G.D.P.
After the war, the deficit fell to 7.7 percent in 1946 from 22 percent of G.D.P. in 1945. A surplus of 1.2 percent of G.D.P. was achieved in 1947.

This got me thinking about President Obama’s budgetary record when viewed from 2009. I turned first to the last C.B.O. projection of the George W. Bush administration, which was made on Jan. 7, 2009, and thus includes no Obama policies. The decline in the deficit after 2010 is largely attributable to the assumed expiration of the Bush tax cuts, because the C.B.O. must assume current law and they were set to expire at the end of 2010.

Congressional Budget Office

What’s important to see is that the federal government was going to run the largest deficit since World War II in fiscal year 2009, which began on Oct. 1, 2008, regardless of who became president on Jan. 20, 2009. It was baked in the cake by policies put in place by the Bush administration and the natural rise in spending and fall in revenues resulting from a sharp drop in economic growth and rise in unemployment, which economists call “automatic stabilizers.”

This point was always known by anyone who bothered to look carefully at the data, regardless of how many hand-wringers on both sides of the aisle acted as if the deficit was solely a result of President Obama’s policies. Both because of myopia and because everyone tends to invest the president with far more power than he actually has, there is a tendency to assume that whatever happens on his watch is attributable solely to him.

Although the stimulus bill enacted in February 2009 did indeed add to the short-run deficit, President Obama’s decision to extend many Bush policies was more important, fiscally. As David Leonhardt of The New York Times wrote on June 9, 2009, “Mr. Obama’s main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000.”

According to the Council of Economic Advisers, $697 billion of the $783 billion stimulus package, or 90 percent, was spent by June 2011, adding very little to the deficit after that date.

Mr. Obama has always been reluctant to call attention to the bad budgetary hand he was dealt and the responsibility of his predecessor for much of the deficit. But he did on Dec. 8, 2009, when he said:

Despite what some have claimed, the cost of the Recovery Act is only a very small part of our current budget imbalance. In reality, the deficit had been building dramatically over the previous eight years. We have a structural gap between the money going out and the money coming in.
Folks passed tax cuts and expansive entitlement programs without paying for any of it - even as health care costs kept rising, year after year. As a result, the deficit had reached $1.3 trillion when we walked into the White House. And I’d note: These budget-busting tax cuts and spending programs were approved by many of the same people who are now waxing political about fiscal responsibility, while opposing our efforts to reduce deficits by getting health care costs under control. It’s a sight to see.

A September 2009 analysis by Alan J. Auerbach of the University of California, Berkeley, and William G. Gale of the Brookings Institution projected deficits based on Obama and Bush policies, taking account of such things as the state of the economy, the temporary nature of Mr. Obama’s stimulus and Mr. Bush’s oft-stated desire to see all his tax cuts made permanent. They then compared the two baselines.

Alan J. Auerbach and William G. Gale

On net, President Obama’s policies have added far less to the deficit than commonly believed, and much of that stemmed from extending the Bush tax cuts for two years past their original expiration date in 2010. Even after they were finally allowed to expire at the end of 2012, Mr. Obama allowed many of them to stay in place permanently, reducing revenues and raising the deficit.

Those who care about where the deficits came from need to look at the legacy of the Bush tax cuts, which are far more to blame than anything President Obama has done, as I have previously documented. A common trick in Republican budget analyses is to pretend that Mr. Obama is responsible for all of Mr. Bush’s policies.

The Budget Deficit as Seen From 2009

Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform â€" Why We Need It and What It Will Take.”

On Dec. 20, the Brookings Institution economist Justin Wolfers sent out this provocative post on Twitter: “The decline in the budget deficit since 2009 is the largest four-year improvement since the demobilization from WWII.”

I was aware that the deficit was declining sharply, both in nominal terms and as a share of the gross domestic product, but hadn’t thought much about the magnitude. Mr. Wolfers, whose partner Betsey Stevenson is a member of President Obama’s Council of Economic Advisers, is correct, as the data show. Fiscal year 2014 began on Oct. 1.

Congressional Budget Office

The Congressional Budget Office further projects that the deficit will fall to just 2.1 percent of G.D.P. in fiscal year 2015, less than it was in fiscal year 2008, when it was 3.1 percent of G.D.P. Thus we will have seen a decline in the deficit of 7.7 percent of G.D.P. over seven years.

There is indeed no comparable period in which the deficit fell as much since the aftermath of World War II for the simple reason that the deficit never grew large enough to drop so much. The largest deficit recorded in the postwar era before 2009 was in 1983, when it reached 6 percent of G.D.P.
After the war, the deficit fell to 7.7 percent in 1946 from 22 percent of G.D.P. in 1945. A surplus of 1.2 percent of G.D.P. was achieved in 1947.

This got me thinking about President Obama’s budgetary record when viewed from 2009. I turned first to the last C.B.O. projection of the George W. Bush administration, which was made on Jan. 7, 2009, and thus includes no Obama policies. The decline in the deficit after 2010 is largely attributable to the assumed expiration of the Bush tax cuts, because the C.B.O. must assume current law and they were set to expire at the end of 2010.

Congressional Budget Office

What’s important to see is that the federal government was going to run the largest deficit since World War II in fiscal year 2009, which began on Oct. 1, 2008, regardless of who became president on Jan. 20, 2009. It was baked in the cake by policies put in place by the Bush administration and the natural rise in spending and fall in revenues resulting from a sharp drop in economic growth and rise in unemployment, which economists call “automatic stabilizers.”

This point was always known by anyone who bothered to look carefully at the data, regardless of how many hand-wringers on both sides of the aisle acted as if the deficit was solely a result of President Obama’s policies. Both because of myopia and because everyone tends to invest the president with far more power than he actually has, there is a tendency to assume that whatever happens on his watch is attributable solely to him.

Although the stimulus bill enacted in February 2009 did indeed add to the short-run deficit, President Obama’s decision to extend many Bush policies was more important, fiscally. As David Leonhardt of The New York Times wrote on June 9, 2009, “Mr. Obama’s main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000.”

According to the Council of Economic Advisers, $697 billion of the $783 billion stimulus package, or 90 percent, was spent by June 2011, adding very little to the deficit after that date.

Mr. Obama has always been reluctant to call attention to the bad budgetary hand he was dealt and the responsibility of his predecessor for much of the deficit. But he did on Dec. 8, 2009, when he said:

Despite what some have claimed, the cost of the Recovery Act is only a very small part of our current budget imbalance. In reality, the deficit had been building dramatically over the previous eight years. We have a structural gap between the money going out and the money coming in.
Folks passed tax cuts and expansive entitlement programs without paying for any of it - even as health care costs kept rising, year after year. As a result, the deficit had reached $1.3 trillion when we walked into the White House. And I’d note: These budget-busting tax cuts and spending programs were approved by many of the same people who are now waxing political about fiscal responsibility, while opposing our efforts to reduce deficits by getting health care costs under control. It’s a sight to see.

A September 2009 analysis by Alan J. Auerbach of the University of California, Berkeley, and William G. Gale of the Brookings Institution projected deficits based on Obama and Bush policies, taking account of such things as the state of the economy, the temporary nature of Mr. Obama’s stimulus and Mr. Bush’s oft-stated desire to see all his tax cuts made permanent. They then compared the two baselines.

Alan J. Auerbach and William G. Gale

On net, President Obama’s policies have added far less to the deficit than commonly believed, and much of that stemmed from extending the Bush tax cuts for two years past their original expiration date in 2010. Even after they were finally allowed to expire at the end of 2012, Mr. Obama allowed many of them to stay in place permanently, reducing revenues and raising the deficit.

Those who care about where the deficits came from need to look at the legacy of the Bush tax cuts, which are far more to blame than anything President Obama has done, as I have previously documented. A common trick in Republican budget analyses is to pretend that Mr. Obama is responsible for all of Mr. Bush’s policies.

Beware the New Normal

Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities in Washington and a former chief economist to Vice President Joseph R. Biden Jr.

As the year winds down, there’s some optimism about where the economy is heading.

-The Federal Reserve, while stressing labor market weakness, judged that the macroeconomy was on the mend to the point where it could begin to pull back slightly on its asset-buying program.

-The revised growth rate for gross domestic product for the third quarter came in with a “4” handle â€" 4.1 percent â€" something we haven’t seen for almost two years.

-The pace of job growth has picked up slightly in recent months.  The average monthly payroll gain over the past four months was 200,000 a month; over the prior four months, the comparable gain was 160,000.

President Obama tapped the optimism in his news conference at the end of last week: “We head into next year with an economy that’s stronger than it was when we started the year. … More Americans are finding work and experiencing the pride of a paycheck.  Our businesses are positioned for new growth and new jobs. And I firmly believe that 2014 can be a breakthrough year for America.”

As he often does, with good reason, the president stressed that we weren’t out of the woods â€" more moving down the path out of the woods with perhaps a bit more pep in our economic step.  And, importantly, all of those indicators cited above are aggregate ones.  In an economy with as much inequality as ours, growth is necessary for the broad middle and poor to get ahead.  But it is not sufficient.

That said, let’s stick with the macro but add what I and a growing body of econo-watchers worry may be a serious structural problem: We’re settling into a growth rate that’s too slow.

That may sound confusing.  Once we’re out of the downturn and into the bona fide expansion, isn’t the growth rate … um … the growth rate?  You might want it to be faster, but isn’t that like telling short people that if they just grew more they’d be taller?

In fact, an economy’s potential growth rate is both limited by real constraints and influenced by a bunch of factors, the same way height is influenced by both immutable genes and variable nutrition.  If the labor force contracts because of weak demand or investment is unusually weak because such resources are misallocated (say, oh, I don’t know … into derivative bets on bundles of funky mortgages) or each expansion is driven by a bubble that bursts and leaves lasting damage, these events diminish potential growth in ways that are not the natural workings of organic economic constraints.

The first chart below begins to get at the problem.   The blue line shows the actual path of real G.D.P. per person in today’s dollars.  The other two lines approximate the potential growth by extracting a smooth trend from the underlying G.D.P. series, controlling for cyclical movements.  The yellow line shows the trend if you stop that trend extraction process in 2007.  The red one shows what happens if you use the full series right through last week’s revision.

Clearly, the protracted recession has cost us dearly, both in terms of level (per capita G.D.P. is more than $5,000 below the pre-recession trend) and slope (more on that in a moment).  And these per capita results don’t account for increased inequality, wherein the average is increasingly less representative of what most people end up with.

Source: Bureau of Economic Analysis data and author’s analysis.

To confirm that these results are not just a function of my little exercise, note the chart below, from the Congressional Budget Office’s more rigorous work on potential G.D.P. growth.  The blue line shows the growth rates the office calculated in 2007, including those it thought would prevail now, based on consensus estimates of labor supply, productivity, investment and other relevant inputs.  The lower red line represents its 2013 update of where it thinks potential growth is headed.  This lower growth path provides evidence of the damaging effect of the protracted recession on the economy’s inputs; it also conforms to the movements in the per capita series plotted above.

Source: Congressional Budget Office.

Is it really such a bad thing to grow a more slowly?  And even if it is, can anything realistically be done about it?

On the first point, slower average growth obviously means less income on average.  A decade of per-person income growth at the endpoint of the blue line from the chart above leads to a $5,000 higher annual income (2013 dollars) than the red line endpoint.  But it also means more labor market slack, the absence of full employment and the income stagnation and unequal outcomes associated with those conditions.  Essentially, slower growth means more slack, which in turn implies less bargaining power for most workers and thus a lesser shot of claiming their fair share of what growth there is.

On the second point, there’s a lot we could do.  The ideas I offered in an earlier post would help, especially fiscal policy applied toward infrastructure investment, more balanced trade, and direct job creation, as that has the potential to bring labor force dropouts back in. (Work sharing could also help in that regard.)

Once again, of course, we smack head on into the biggest constraint against increasing potential G.D.P. growth: political will.  Though it’s naïve to imagine that some threatening graphics could move our more benighted political actors, it’s possible that a lot more of this type of analysis, by pointing out the highly significant costs at stake, could begin to underscore the danger of blithely accepting the new normal.

President Putin’s Patriarchal Games

Nancy Folbre is professor emerita of economics at the University of Massachusetts, Amherst.

The upcoming Winter Olympic Games in Sochi are shining a global spotlight on Russian domestic priorities, including a long history of efforts to enforce traditional gender roles.

More money has been spent preparing for the Winter Olympic Games in Sochi than for any Olympics in history. The project has been described as the single biggest infrastructure investment in the region since the Soviet Union collapsed in 1991, a statistic that dramatizes Russia’s failure to convert its rich oil and gas resources into significant sustainable improvements in living standards.

President Vladimir Putin, an avid skier, has made his personal commitment to the success of the games quite clear.

A recent Bloomberg News report described Mr. Putin on a visit to Sochi, watching a mixed-martial arts performance and pronouncing, “Here in Russia, we have always valued and respected men who know how to stand firm to the last.”

Hoping to pre-empt intensified public criticism from human rights activists, he officially pardoned thousands of prisoners last Thursday, including two members of the punk feminist group Pussy Riot jailed on charges of “hooliganism” for a disrespectful public performance in a Russian Orthodox cathedral a little over a year ago.

The gesture, magnanimous only in its slight relaxation of the repressive grip of the Russian head of state, was equally reminiscent of Peter the Great and Stalin.

Russian history reflects the deep legacy of a patriarchal system in which the public authority of a stern father figure both paralleled and perpetuated the private authority of a male head of household. (Russian male serfs - almost enslaved in other respects - had the right to beat their wives.)

In old Russia, class could trump gender, especially for women of the aristocracy, like Catherine the Great. But most women faced restrictions on their education and job opportunities that forced them to specialize in domestic work and motherhood. After the Bolshevik revolution of 1917, they gained new rights, and they, like all other adults, were expected to work outside the home. But such policies did little to reverse cultural norms that assigned them primary responsibility for family care, along with a subordinate role in the public sphere.

During Stalin’s era, in particular, government leaders presented themselves as paternal providers, exhorting Soviet women to bear more children for the fatherland and stigmatizing any deviance from the traditional heterosexual family model.

Similarly, Mr. Putin, currently ranked “the most powerful person of 2013” by Forbes, has vowed to increase Russian birth rates. He has allied himself with Patriarch Kirill, head of the Russian Orthodox Church, who labels feminism a dangerous phenomenon that could destroy Russia and explains that “woman must be focused inwards, where her children are, where her home is.”

The head of the government’s Committee on Family, Women and Children has publicly stated that procreation should be seen as the sole purpose of marriage, with a goal of three or more children per family, and that nontraditional families should be denied any legitimacy.

Earlier this year new Russian legislation dictated punishment for any “propaganda of non-traditional sexual relationships.” President Putin expressed concern that homosexuality may be lowering the country’s birth rate.

Russia currently has no explicit laws protecting women from domestic violence, and church officials have lobbied against such laws. As an old Russian proverb puts it, “He beats her, he loves her.”

After the collapse of the Soviet regime, sexual harassment became widespread, with some job listings for women listing prerequisites such as “without inhibitions.” In a 2008 legal ruling against a woman who had accused her employer of firing her because she refused his advances, the judge ruled that no offense had been committed, because “If we had no sexual harassment, we would have no children.”

In March Russian feminists and other activists applied for but were denied a permit to organize a rally celebrating the 100th anniversary of International Women’s Day. Still, online groups such as Pro-Feminism maintain a political presence. Women, too, can stand firm.

The Olympics, at least in theory, represent international competition carefully designed to bring out the best in participants, with strict rules, referees and respect for others. Patriarchal practices violate these principles, and it is not surprising that their flagrant display is associated with other flagrant corruptions, including bribery, coercion and environmental devastation - many of which are documented in “Putin’s Games,” a new documentary produced by Simone Baumann. She says she was offered 600,000 euros to bury it, but refused.

What Stronger Health Spending Growth Means for Obama

Gross domestic product growth was much faster than previously estimated in the third quarter, partly because health care spending was revised sharply upward. Consumer spending on health care services grew at an annual pace of 2.7 percent last quarter, instead of 0.9 percent, as the Commerce Department had previously reported.

Source: Commerce Department, via Haver Analytics. Data show quarter-over-quarter percentage changes, at a seasonally adjusted annual pace.

This news represents a double-edged sword for the White House.

On the one hand, the Obama administration has been promoting evidence that health care spending has been slowing, a fact it has attributed in part to the Affordable Care Act (which is, of course, debatable). Friday’s data release complicates that narrative a bit.

“It’s still the case that both nominal and real health care spending has generally been slowing, but the slowing isn’t quite as pronounced after today’s revision,” said Michael Feroli, chief United States economist for JPMorgan Chase.

But on the other hand, greater consumer spending of any kind can contribute to faster economic growth, which the United States desperately needs right now. The administration would probably prefer that consumers devote more spending to other goods and services (like clothing or restaurants) rather than health care, but perhaps it will take what it can get.

In its public statements, the White House has also emphasized the decline in growth of health care prices, not just health care spending. The chart below shows the latest trends in health care costs, as measured by the medical care component of the consumer price index, versus the overall consumer price index. As you can see, health care price inflation has indeed fallen over time.

How Turkey’s Troubles Could Spread in Emerging Markets

As Turkey struggles to contain its latest political crisis, fears of a run on its currency â€" dormant since the summer â€" have quickly re-emerged.

After arrests this week of Prime Minister Recep Tayyip Erdogan’s political and economic allies, the Turkish lira has plunged. The dollar reached a high of 2.092 against the lira, as foreign investors sold Turkish stocks and bonds and Turks shifted their savings into dollars.

For now, the financial uncertainty in Turkey seems to be largely localized, a consequence of ever- fickle Turkish politics. Nevertheless, markets in other large emerging markets like Brazil and India did experience a brief wobble this week, and with investors uncertain about the effect that a stingier Federal Reserve will have on the global economy, the prospect of other countries’ catching Turkey’s flu cannot be wholly discounted.

While the spate of arrests included top ministers in Mr. Erdogan’s Islamist government, the real cause for concern for investors was the crackdown on the heart of the celebrated Turkish growth story: the powerful nexus that connects Mr. Erdogan to construction magnates and the banks that finance them.

Among those taken for questioning was the chief executive of the government-owned Halk Bank, one of the country’s larger banks, and Ali Agaoglu, a billionaire real estate developer with close ties to the prime minister.

The overcrowded Istanbul skyline that has resulted from this building boom was a factor behind the protests in Gezi Park in the spring. But Turkey’s creditors are more concerned that the bulk of these projects and others throughout the country were funded by cheap dollar loans.

Turkey is not the only emerging market to take advantage of rock-bottom dollar interest rates to finance its growth ambitions. Brazil, India, Indonesia and South Korea have followed a similar path. All these countries felt the pressure of weaker currencies even before the Fed’s decision to pull back from its bond-buying program.

None of these emerging markets, however, are as dependent as Turkey is on short-term dollar funding which, unlike longer-term loans, can be quickly pulled by jittery lenders.

According to economists at Barclays in London, Turkey must borrow over $200 billion next year from abroad â€" with the bulk of that figure coming from corporations and banks. If those credit lines are cut, Turkey will run out of cash and will need a bailout from the International Monetary Fund.

“The big risk is the rollover risk,” said Sebnem Kalemli-Ozcan, a Turkish economist at the University of Maryland who studies the impact of financial crises in emerging-market economies.

“This is what we call a balance-sheet crisis, with Turkish companies having their assets in Turkish lira and their liabilities in dollars,” she said. “It reminds me very much of the Asian crisis.”

For now, there has been no sign of the panic selling across continents that was a hallmark of the Asian collapse in 1997 and that forced the I.M.F. to bail out countries like Indonesia and South Korea.

But in an increasingly interconnected global financial system, one in which concerns about economic stagnation and high levels of private-sector debt in emerging markets have been paramount, analysts and policy makers will be keeping a close eye on how these countries respond to events in Turkey in the weeks and months ahead.

The Economics of Being Kinder and Gentler in Health Care

Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.

In his speech accepting his party’s nomination as presidential candidate on Aug. 18, 1988, George H.W. Bush proclaimed that he wanted a “kinder and gentler nation” - kinder and gentler, I suppose, than he thought it was in 1988.

In those days, my wife and I sent out our own customized holiday cards, commenting in some way on current issues in health policy. Thus, a year after Mr. Bush was elected president, we sent out the following card:

In the late 1980s, about 35 million respondents to large nationwide surveys declared that they lacked health insurance of any kind. The comparable number now is close to 50 million.

Then, as now, the endless “national conversation” went on and on, pondering ways to achieve truly universal health insurance coverage, a feat most other developed nations accomplished long ago.

Then, as now, news organizations and the health services research community reported on the financial and physical hardship that many low-income, uninsured Americans face when they fall ill.

And then, as now, the prices for identical health care goods and services were more than twice as high in the United States as they were - and still are - in the member nations of the Organization for Economic Cooperation and Development. It is why the supply curve of kind acts in the United States shown in the holiday card is far above the comparable curve in other countries.

The point I sought to make with that holiday card was this: Even if the desire to take care of one’s poorer or sicker fellow citizens were the same in the United States as elsewhere, a Martian might observe that fewer kind acts are bestowed on the (uninsured) poor in the United States because of the much higher price of American health care.

For all the wonderful things the United States health system has done for the American people, then, as now, it has also helped price some degree of kindness out of our souls, a side effect of their treatments that the leaders of American health care at some point must begin to contemplate (in this regard, see Table 3-1 on Page 102 in this report).

Does anyone sincerely believe that things have improved in that regard since the late 1980s?

As I showed in a recent post, “The Central Challenge in U.S. Health Policy,” the Milliman Medical Index of total health spending for a typical family of four covered by an employment-based preferred-provider health insurance policy, including the total insurance premium and the family’s out-of-pocket spending, now stands at $22,000.

Median family income in 2010 was about $60,000 and median household income about $50,000. (A “household” is defined in these statistics as a housing unit with one or more members. A “family” is defined as a household with two or more members.)

These numbers suggest that millions of American households or families have annual incomes of less than $30,000. Without help from other Americans - now typically through the community-rated premiums under employment-based health insurance - they cannot possibly afford the kind of health care the rest of the country enjoys.

(The harsh current critics of community rating rarely complain that the premium contributions by individuals under employment-based health insurance - usually even under the critics’ own employment-based insurance - are fully community rated.)

Given the now-staggering cost of buying kind acts in health care for America’s low-income families, it is something of a miracle that the Affordable Care Act, with its built-in redistribution of income toward low-income and sicker Americans, passed into law at all.

Nor is it a surprise that it took extraordinarily deft legislative maneuvering to get the law enacted, and that it just squeaked by on a purely partisan vote.

Finally, I am not surprised at the way the federal subsidies to low-income families that the law calls for, and the largely federally financed expansion of Medicaid, had to be scraped together â€" by an economically unseemly mélange of nuisance taxes here and there and sundry federal spending cuts of projected spending â€" for the bill to survive both Congress and the scoring process of the Congressional Budget Office.

A simple, earmarked value-added tax, for example, would have been better from an economic perspective, but it would have made the cost of buying kind acts in health care for other Americans more visible.

Now, it may be argued that opposition to the Affordable Care Act is not primarily driven by reluctance to share the blessings of our pricey health care system with low-income Americans who cannot afford it, but rather by misgivings over particular features of the law â€" for example, community rating and the mandate on individuals to be insured.

I am not persuaded by that thesis, because â€" as has been pointed out time and again in news coverage â€" the law largely embodies ideas and features that were quite popular during the 1990s among today’s most vocal critics of the law, including Mitt Romney, President Obama’s opponent in the 2012 presidential elections.

My interpretation is that opposition to the Affordable Care Act largely reflects the age-old reluctance among many of the nation’s haves and the healthy to help purchase for America’s lower-income families and the chronically ill the super-expensive health care that the haves enjoy themselves. That attitude is all the more striking because of the generous federal indirect subsidies enjoyed by many of the haves, especially high-income Americans. (I am thinking specifically of the generous tax preference accorded employment-based health insurance, the largest tax expenditure in the federal budget.)

Some people on both the extreme left and right seem to believe that the current travails of implementing the Affordable Care Act and the possibility of a so-called “death spiral” in the market for individual health insurance may usher in single-payer health insurance in the United States - say, Medicare for all. (But on the likelihood of the death spiral, see this commentary from the Kaiser Family Foundation.)

I do not find that a likely prospect. Rather than embracing a single-payer system, the United States is more likely to stumble, in fits and starts, toward something resembling officially sanctioned tiering of the American health care experience by income class, as follows:

For Medicaid beneficiaries and the uninsured, a budget-constrained system of public hospitals and public clinics. It would allow politicians to ration health care (through tight budgets) without ever having to acknowledge that they were doing so. In other words, it would reduce the price of being kind.

For the employed middle class, a mixed system with defined contributions by employers, private health insurance exchanges and reference pricing by insurers. Under a restructured Medicare program also based on a defined contribution model, reference pricing would be likely to apply to Medicare beneficiaries as well. Depending on how it is operated - e.g., if it were solely based on cost, in abstraction of quality - reference pricing also permits tiering of the health care experience by income class, without anyone having to say so openly.

For the upper-income groups, boutique medicine, which is already growing in the United States. Here the sky will be the limit.

And what do readers think?