Comments on economics, mystery fiction, drama, and art.

Wednesday, June 29, 2011

The stalemate about the federal government's "debt limit"

I think I want to make this argument:

1) Congress passed a budget in which authorized expenditures exceed expected revenues.

2) That expected deficit would cause the federal government's debt to exceed the statutory "debt ceiling."

3) Congress has therefore (pretty much) explicitly authorized the Administration to exceed the statutory "debt ceiling," and to do so without limit.

Am I missing something?

Saturday, June 25, 2011

A Baseball Post

This week, Jim Riggleman, the now former manager of the Washington Nationals, resigned because the team refused even to discuss a contract extension. Over his managerial career, Riggleman's teams have had a combined .445 winning percentage (in 1,486 games). At the very least, this record does not leap out at me saying that this is a man who should have a long-term contract. [For comparison purposes, though, it's worth noting that at a similar point in his career, Joe Torre had managed his teams to a cumulative .466 winning percentage (in 1,574 games).]

Can we get any kind of a "handle" on how Riggleman has done as a manager, compared with what we might call our expectations? That is, how well has he done in his full seasons as a manager, compared to how we might expect a team with the talent available to him to have done? And how does he stack up is we compare him, on this scale, to Torre?

Bill James created a simple measure of a team's expected winning percentage, which he calls the "Pythagorean" winning percentage, equal to [(RS)^2]/[(RS)^2 + (RA)^2], where RS is a team's runs scored and RA is a team's runs allowed, and the operator (^2) indicates we are squaring that value. A team, then, scoring and allowing the same number of runs has an expected winning percentage of .500; a team scoring 600 and allowing 700 has an expected winning percentage of about .425. A team scoring 700 and allowing 600 has an expected wining percentage of about .575.

How did Riggleman do with his full-season teams? In six full-year managerial seasons, his teams exceeded expectations twice (by a total of 7.7 games) and were below expectations 4 times (by a total of 20.8 games; a lot of that came in his first full season, with San Diego, when the team finished 11.7 games below expectations). In those six full seasons, then, he managed four teams with an expected winning percentage of .458 to an actual performance of .423. In the two years his teams exceeded expectations, he got a .485 wining percentage out of teams whose RS and RA would have predicted a .461 record. Overall, his teams won at a .443 clip against an expected .459. This is, in fact, not a stellar record.

What about Torre, through the same part of his career? Torre managed 8 full seasons, and his teams finished below expectations 5 times (367-443, .453) and above expectations 3 times (253-233, .521). Overall, Torre's teams finished 620-676, .478 against an expected 630-666, .486. Riggleman's record was a little, but not a lot, worse than Torre's at that point in their managerial careers. Had his winning percentage been only .008 below expectations, his teams would have won 7 more games in 6 years. The real difference is that Torre managed teams with an (average) expected record of 79-83, while Riggleman's had an (average) expected record of 74-88, five games per year worse.

But there's an additional point. Really bad teams--teams with an expected winning percentage below .450--tend to underperform their expectations (between 2006 and 2010, 19 teams had expected records of 73-89 or worse; 15 of them won fewer games than their RS/RA nnumbers would lead us to expect). Two of Riggleman's full-season jobs were with teams expected to finish below .450 (two right at.450). With those two teams, one finished 2 wins worse than expected and the other finished 2.6 wins better than expected. Torre's first three teams (the Mets, 1978 - 1980) all had expected records worse than .450, and all under-performed that, by 11.5 games (3.8 per year).

Or maybe two additional points, With teams expected to have losing records, but to finish .450 or better (Rigglleman has had 3 such teams, Torre only 1), Riggleman's teams finished an average of 8 wins below expectations and Torre's 1 such team was 2 wins above expectations. Riggleman had only one team that more RS than RA, and he brought it home 5 games above expectations. Torre had 3 such teams; 2 did an average of nearly 3 games better than expectations and 1 did 5 games worse than expectations.

So Riggleman did better than expected, and Torre worse, with really bad teams. Riggleman did worse than expected with moderately bad teams, and, the one time he had a good team, considerably better than expected. Torre about met expectations, overall, when he had moderately bad or good teams. (All of this comes with very small samples and is almost certainly not statistically significant.)

Two managers, both of whom had not very good records with not very good teams through about 1,500 games. One is now almost a lock to make the Hall of Fame as a manager. The other? Getting another managerial job may be a really, really unlikely event.

Monday, June 06, 2011

How fast does employment growth need to be in order to simply maintain the current employment-population ratio?

In the "recovery" from the Great Recession (which began in December 2007 and reached its trough--the recovery officially began--in June 2009), the employment-population ratio more-or-less continuously declined from December 2007 (62.7%) to December 2009 (58.2%), and has stabilized since (at about 58.4%). If the current employment-population ratio had regained its pre-recession level, employment (as measured by the BLS househld survey) would have been 150,049,000 in March 2011, instead of 139,779,000; we are about 10 million jobs below where we would have been had we simply returned, over the past roughly two years since the recovery began.

If household employment had grown at its long-term trend (about 0.19% per month) since December 2007 (about 139,750,00), it would have reached about 158,250,000 by March 2011--about 18.5 million above the actual level.

Establishment employment--which was about 138 million in December 2007--had continued to grow at its long-term trent (about 0.21% per month), it would have reached about 150 million by March 2011. It was actually just about 131 million--a deficit of about 19 million jobs.

So the economy is currently somewhere between 10 million and 20 million jobs below where it would have been had we simply continued to grow at something approaching our historical rate.

What about going forward? Suppose we conclude that the old employment-population ratio was too high to be sustainable, that what is sustanable is the current--58.4% EPR (not the 62.7% EPR of December 2007, not the peak EPR of 63.4% of December 2006). How fast would employment have to grow in order to "keep up" with population growt, simply to maintain an employment population ratio of 58.4%?

The US working-age population (age 16 and over) has grown at an average (compound) monthly rate of 0.178% since 1976. So if population growth continued at that rate, employment as measured by the household survey would also have to grow at a monthly rate of 0.178%--or at about 250,000 jobs per month now, rising to about 260,000 jobs per monmh by the end of 2012. If we use the establishment measure of jobs instead, we would need to add about 235,000 jobs per month now (rising to about 240,000 by the end of 2012).

Since the official end of the recession--since the June 2009 trough--household employment growth has exceeded 250,00 only seven times (and has averaged only 107,000--less than half the employment growth we "need"). Establshment growth has exceeded 240,000 twice (and has exceeded 230,000 on two other occasions), averaging 101,000.

It is no wonder that the employment-population ratio has declined since the recovery began, and it is no wonder that the unemployment rate has declined only modestly (and that decline is, essentially, a result of much slower than normal growth in the labor force during a recession), from 9.% to 9.1%. [By contrast, in the year-and-a-half following the trough of the 1982 recession (November 1982), the unemployment rate fell from 10.8% to 7.4%.]

The real difficulty is that the economy seems unlikely to grow fast enough in the coming years to do much to move us back to our pre-recession employment picture. To get much in the way of rapid employment growth and rapid declines in the unemployment rate and even a modest increase in the emplopyment-population ratio will require annual GDP growth of around 5%. The current consensus forecasts are around 3%--or long-term-trend growth.

It looks like a bleak several years going forward.

(All data may be found on the BLS web site,