The Council of Economic Advisers has released the 2010 Economic Report of the President.  You can find a link to the full report, as well as a summary of the highlights, here. 


Quick summary: The economy was a mess when President Obama came into office, because of problems that were a long time in the making, including stagnating middle class incomes, rising health care costs, and flawed and under-regulated financial markets.  The economy is still not great, with a slow recovery and lagging job formation expected, but it is in better shape than it would have been if the stimulus bills had not been implemented.  We should still do more.  Pass jobs support and health care reform now!

According to NPR, this is the brainchild of Spike TV producer John Papola and libertarian economist Russel Roberts, together with rap duo Billy and Adam. 

I just came across this rather wacky article about how buying holiday gifts is bad for the economy: http://articles.moneycentral.msn.com/Investing/top-stocks/blog.aspx?post=1498404&_blg=1,1498404. Is this true? I will recap the main arguments, and tell you whether they are true or false. 


#1. Gift-giving is inefficient. 
True. The economic paper The Deadweight Loss of Christmas theorizes that when you buy someone a gift, it is likely that if they had had the money instead, they would have bought something different.  This means that your gift is less efficient than just giving them the money.  However, the paper also points out that gifts can actually be MORE efficient in some instances-- for example, because the item is a gift, it may have sentimental value beyond its purchase price. However, the main problem with this argument is that it confuses microeconomic efficiency with macroeconomic benefits.  If consumers spend more as a result of gift-giving than they would if they only bought items for themselves, then this is good for the macro economy, and good for creating jobs. 


#2. Consumption is less of the economy than we think, because the middle steps of production aren't counted.
Bizarre. I don't think the author understands the concept of GDP and how it relates to consumption at all. GDP is the total value of everything produced in the United States. You can't count the middle steps, because that would be double-counting. We count GDP by measuring the four things that we can do with what we produce: consume it, invest it, import it, or use it in the government. Those four things drive demand for our goods and services.  Yes, there are middle steps-- but no one would pay people to cut lumber for couches if someone wasn't eventually going to buy the couch.  So when economists say consumption is 70% of the economy, consumption really is 70% of the economy-- or at least it drives 70% of it. 


#3. Consumer confidence is misleading because the survey only asks 6 things.
False. Complain about how many questions there are all you want, but the consumer confidence indices that come out of those questions have shown themselves to be accurate reflections of how the economy is behaving. Next time you want to complain about an indicator, show me evidence that it contains no information. 


#4. The seasonal upward trend in the stock market isn't due to gift shopping.
Who cares? There is no reason to expect it would be.  Market participants know that consumption goes up in December, so that would already be built into prices.  Stock prices might rise if retail numbers were much stronger than market participants expected (or might fall if they were weaker.)  But none of that is a reason that gift shopping is bad, if gift shopping raises overall consumption.


There is a real reason gift-giving can be bad: we can't afford it.  If purchasing gifts drives consumers into debts they would not otherwise have, it is probably not good for individuals.  It may be bad for the United States as a whole as well, since low saving is a driver of the trade deficit.  However, if you can afford it, and you feel so moved, don't be a Scrooge-- go buy that gift and encourage job growth! 

The G20 summit meeting recently concluded in Pittsburg. The summit resulted in approval of a"Framework for Strong, Sustainable, and Balanced Growth".  The framework includes acknowledgement that stimulus spending is needed in the short run, but that countries need to develop exit strategies to withdraw fiscal and financial sector support.  The G20 also agreed to give developing economies more ownership in the International Monetary Fund.

Some G20 participants, as well as commentators, suggested that the G20 should replace the G7 as the most important forum for coordinating international economic policy.  What is with all these Gs, and what do they do? Here is my quick list of important G- summits, and their members:

G7: This is a meeting of the finance ministers of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.

G8: This is a meeting of the heads of state of the G7 countries, plus Russia.  Fun fact: after shirtless pictures of Sarkozy and Putin emerged a couple years ago, snarky journalists suggested a "G8 calendar".

G20: This is a meeting of finance ministers and central bank heads from 20 countries, including the G8 countries, Australia, whichever country is the current president of the EU (provided that country is not already included), and 10 large emerging market economies: Argentina, Brazil, China, India, Indonesia, Mexico, Saudi Arabia, South Africa, South Korea, and Turkey.

G2: Not really an official designation, this is sometimes used to refer to China and the United States.  The idea is that agreements between these two countries could become necessary and sufficient to drive international policies.

Besides generating fun photo ops, the G7, G8 and G20 meetings allow countries to meet to coordinate policy on security, economics, and the environment.  The efficacy of these meetings is limited by the fact that the members are sovereign nations, so any agreements that might be reached are only worth as much as each nation's commitment to hem (and domestic political realities!) While the G8 may retain importance on security, in part because of the difficulty in coordinating policy among 20 countries, it is very likely that G20 will indeed become the more important forum for economic policy-- it seems bizarre to discuss the global economy without China, and developing economies are becoming a larger share of the world economy.  The IMF projects that the G7 share of world GDP will drop below 50% in 2014, down from near 70% in the early 1990s.

Final fun fact: At summits such as the G7 or G20 summits, the person who in charge of the meeting for each country (who develops materials, schedules officials' participation, etc.) is called the "Sherpa". (They help you up the summit, haha, get it?) Borrowing from the culinary world, the Sherpa's deputy is known as the Sous-Sherpa.

A poll by Gallup and Healthways found that of all types of workers, those who own their own business tend to be happiest. Professionals were the next happiest. At the bottom, unsurprisingly, were those who worked in services, transportation, or manufacturing.

Interestingly, this same poll, which is collected on a monthly basis, shows that for the entire population, perceptions of well-being jumped considerably this spring particularly in April-- the same time that stimulus spending started. I'll admit this is likely a bit spurious, and improved optimism during this time probably reflected a generally improving economy. Still, I've heard shoddier arguments for and against the effectiveness of stimulus.