Monthly Archives: February 2015

The one thing that could cut the economic recovery short

By Matt O’Brien

4Q2014 GDP

Sometimes bad news isn’t much news. Take, for example, the latest GDP report. It revised the economy’s growth in the fourth quarter of 2014 down from an already disappointing 2.6 percent to an even more disappointing 2.2 percent. But beneath the headlines, the recovery is still chugging along at its slightly-faster-than-before pace. If anything, growth looks a little better than it did before.

Well, maybe. That depends on how strong the dollar gets.

Now let’s back up a minute. The economy’s 2.2 percent growth isn’t as bad as it looks, because the things that got revised down are temporary, and the things that got revised up aren’t. Inventory spending, which is notoriously volatile, actually made up more than all the decline. It was revised down 0.7 percentage points, while GDP as a whole was only revised down 0.4 percentage points. Net exports are another noisy number—although, as we’ll see in a minute, that might not be the case right now—that subtracted 0.1 percentage points in revisions. Nonresidential investment, meanwhile, added 0.4 percentage points more in revisions, so that the economy’s underlying strength, believe it or not, actually increased.

The best way to tell that is to strip out the up-and-down inventory and net export numbers, and to only look at consumer spending, government spending, and private investment—and over a year, not a quarter, to smooth out any weird weather effects, like last year’s polar vortex-induced slump. That’s called final sales to domestic purchasers, and, as you can see above, it just ticked up to 2.9 percent annual growth. That’s the best it’s been the whole recovery. That should mean that a lot of today’s growth will continue tomorrow, that the economy is finally getting a little bit of momentum that might not be a boom, but is …read more

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Can bankruptcy save Puerto Rico’s state-run corporations?

By Michael A. Fletcher

Policymakers in Puerto Rico’s capital, San Juan, have struggled to deal with the country’s massive debt. (AP Photo/Ricardo Arduengo)

Puerto Rico is buried under at least $73 billion in debt that has left its economy in a near perpetual recession and caused a significant number of its residents to relocate to the mainland. Worse, the island’s status as a U.S. territory leaves it legally unable to reorganize its staggering debt in bankruptcy.

But a bill before Congress would change that—somewhat. The measure would give Puerto Rico’s state-run corporations, which provide crucial services such as water and electricity and are responsible for a sizable chunk of the government’s overall debt, the same bankruptcy protections enjoyed by cities throughout the United States.

Melba Acosta Febo, president of Puerto Rico’s Government Development Bank, told a House subcommittee Thursday that granting the island’s public corporations bankruptcy protection would be best for everyone involved. The corporations would not necessarily exercise the option, she cautioned, but if they did, debtors would face a clearer path than if the corporations simply run out of money. The island’s residents would not have to deal with a possible spike in already sky-high utility rates and possible interruptions of service that could result from the corporations toppling into receivership. Also, the future growth of the territory could be ensured by freeing up financing so the island could invest in more efficient power plants and other infrastructure.

Absent a way to reorganize its debt, the island is left in “an environment of uncertainty that makes it more difficult to address Puerto Rico’s fiscal challenges and threatens Puerto Rico’s economic future,” Acosta said.

Earlier this month, a federal judge threw out a local law that would have allowed Puerto Rico’s highway, water and power companies to restructure about $20 billion in debt. …read more

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Why the number of people identifying as both white and black doubled in a decade

By Ana Swanson

William H. Frey, Brookings Institution

This post comes via Know More, Wonkblog’s social media site.

The number of people identifying as both white and black in the U.S. Census doubled between 2000 and 2010, to 1.8 million. According to Bill Frey, a senior fellow at the Brookings Institution who studies demographics, the rapid change is a sign that historically stark ideas about race are softening.

It wasn’t until the 2000 Census that federal statistics even allowed people to identify themselves as multiracial. Today, the fastest growing racial group in the country is those who identify themselves as “two or more” races, says Frey. Those who identify as both black and white are now the largest biracial population in America.

William H. Frey, Brookings Institution

This group looks likely to continue to grow, since Census stats show that far more kids than adults have both black and white heritage (or are identified as having it). The chart above, from Frey’s book “Diversity Explosion,” shows the percentage of African Americans who identified as both white and black, broken down by age. For every 100 black kids under five, 15 were identified as both white and black, compared with fewer than 1 in 100 African Americans over 40.

Most significant, according to Frey, is that the growth in this category is highest in the South, where social norms discouraged and penalized biracial identification. In many states in the South (and some in the North), racial identity was determined through a “one-drop rule,” where even those with a single black ancestor could not identify as white.

Only about one-third of 1 percent of Americans now identify as both white and black, but the growth in their numbers in recent years suggests our ideas about race are gradually changing. Says Frey, “these shifts – incremental as …read more

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