Brad DeLong catches Donald Luskin in a doozy.
Luskin calls out Paul Krugman for saying in 2000 that the Dow Jones was overvalued but that the Nasdaq was not. Only that’s not really what Krugman said. Here’s Luskin:
In late February 2000, two weeks before the peak of the dot-com stock bubble at Nasdaq 5,000, Krugman wrote in his Times column that the Dow Jones Industrial Average was overvalued, saying, “Let the blue chips fall where they may.” As for the Nasdaq — which at that point had almost doubled over the prior year, and more than tripled over the prior three years — Krugman said soothingly, “I’m not sure that the current value of the Nasdaq is justified, but I’m not sure that it isn’t.”
Uhhh. If you listened to Krugman on the Dow, you would have saved money over the next decade. But it’s not right to say, even if he didn’t call the Nasdaq bubble, that Krugman talked about it “soothingly.” He’s giving an ambivalent “I don’t know” there.
Luskin, you should know, is the prophet who told us, one day before the very-obviously-about-to-happen Lehman bankruptcy sent the economy and market into a tailspin, that we should “Quit Doling Out That Bad-Economy Line.”
— Here’s an excellent close to a column from Bloomberg’s Jonathan Weil on some context on what Treasury won’t tell you about its supposed bailout profits:
We’ve been down this path before. A great example can be found in a 1998 case study by the Federal Deposit Insurance Corp. of the government’s 1984 bailout of Continental Illinois National Bank & Trust Co.
When the agency finally sold the last of its ownership stake in 1991, it “produced a net gain to the FDIC of $200 million in excess of the $1 billion capital investment originally provided to Continental,” the study’s authors wrote. Dividend income amounted to an additional $202 million. There also was a downside: “The Continental open bank assistance transaction affirmed for many the notion that certain banks were simply ‘too big to fail.”’
Although that deal showed a profit, the gain excluded the future costs to society that come with moral hazard. We’re still paying the bill.
— Here’s Harold Meyerson in the Washington Post on inequality and the minimum wage:
Had the minimum wage increased in line with productivity since 1968, when the wage reached its highest level as a percentage of the median wage, it would be $21.72, by the calculations of John Schmitt of the Center for Economic and Policy Research. But since the 1970s, all additional income from productivity increases has gone to the nation’s wealthiest 10 percent, according to economists Robert Gordon and Ian Dew-Becker.
Harkin’s bill would raise the wage to $9.80 over a three-year period and index future wage increases to the cost of living. It would also, over five years, raise the minimum wage for tipped workers from $2.13, where it has languished since 1991, to $6.85 and then index its value to 70 percent of the minimum wage.
Critics of the minimum wage argue that it’s really just a subsidy for teenagers, but Schmitt and his colleague Janelle Jones have documented that the average age of workers making $10 or less per hour is 35 years old and that the share of those workers who are teens dropped from 26 percent in 1979 to 12 percent in 2011.