APPENDIX A Business Feature of “Economic Viewpoint” by Gary S. BeckerBY GARY S. BECKER How the Skeptics Missed The Powero luctivity During most of 2002 and early 2003, many pessimists among business and academic economists, Democratic politicians, and media pundits worried about the slowdown in the U.S. In retrospect, it is amusing how many comparisons were drawn between the U.S. reco and Japan’s long stagnation. But the general concern was that the world’s largest economy ‘woul tagnatefor yeas dragging down the global exonomy. ‘ rAroetican price indetesbrely decline, there wer far even among some Federal Reser oficas that (phos deflation would further depres the economy. Also Agha, (hepaton Last bute fom east mere arcoundng as tien ad otescomparics tha shook rod “Sndence tn American tunes Neveremde reccnon that began a March, 2001, tied yg met. To bar ey ‘nslom although ot unl an {ing th ene coe The wor danuing etre waa {healarp dane in employment sen in the Buea of aloe Sadar pyrll dan Acorn ee buren'sbowehols uty ts tnemployacr nr peal ee well nde peat ‘ached ia most por US. recessions. “The psamists Went wrong because they oveooked an ocoraging tat the continu Grin bad es rapid {provement in product Measured preducy usualy ‘ly geno ade rages nee ete of wioed capacity of euorent pa, worker Yet even hough 1995-2000 had usualy ‘igh prety grow, product accelerated rahe an ‘led daring mos ofthe rceson and recover Labor rouse ti quar of 2003 prewar at imofo.4% the highest quarry ateindeade, “Tis product growths he Key measure and refeeson the enormous underage ofthe U.S eon. is 16 Danian | rary 2, 2004 ‘rime movers are the entrepreneurial spc work Bexbiliy J dynamism and reat fee and open mashes that ‘Mlowed the econoary to benef om the technologie ‘revolt brought abot by Ue compute, Inter wires ‘emmniatong, biotech, end lke eont major grovatons ‘Return uh cin deta pe ‘conomy grow more rapidly in thelonger un, but dey ‘roby payed wemallrole during ths eoorary. erecting short moverbents inthe exonomy is camel ut eades expect cya bulging om eS eae See eres nopyNew Sea Happy New Sauces Your ora: joband Samsbemtase Ses ‘thranage of the great economic ptntal ered by modern technologies nd nowlege- ” Gary S. Back, the 1992 Nobel eres, eaches at the Unive Hoyef Chea and ea Plow ofthe Hoover tation. Figure 6 How the skeptics missed the power of productivity. Note. From “How the Skeptics Missed the Power of Productivity,” by G. S. Becker, 2004, January 12, Business Week, p. 16.115 EM CTS BY GARY S. BECKER What India Can Do To Catch Up With China Many are predicting that China will be the dominant economic force in the 20th century, at least in Asia, but I would not sell India short. That giant nation began to turn around its economy a little more than a decade ago—and with further free-market reforms, it can give China a run for being the most dynamic big developing country. India became brant democracy ae independence ‘rm Beinn 047, Smt 1s mae lnguager and sharp Confiew among casts a relight en groupe But {treconomy gt wy forfour decades, and aged Iminor roll the word econo Tins economic polices wets infenced by Iaders sch ac vata Nts Pre Mus, who aired ‘een democratic socialism and cea! planning This be to 8 etree coon wap ree {Scever the snes ccmome ops high nf and ther {nip amir andi nee n expres Foreign et {veut wa negligible, we govertmentonned ‘Sterproe poileene aes fndian perp income grew aronly atc over 1 per yea nil the mi 9805 ‘TWODEVELOPMENTS CREATED a much more fsvorable imate foe radical economic reform. n 191, 4 balance f payments fd feel cess erupted. And India teearne concerned bout ‘he ceonnmlc sven of i gla elghbor and val, China “That county’ per capita income began to excned India's ‘en tough 40 years earlier India was above that Of Cina India had sroided the economle diser ofthe Great Leap Forward and te Cultural Harold. Bat once China change polices abandoning collective farming 1978 in {ior of private pots and epening the economy to free invesumene ts growth accelerated rapidly Tn 1991 the Indian goverment til eonrolled by Nehr's socialise Congress Paty, changed rection under the Teederhip of bold france minister, Manmohan Singh, and ‘began wo dismante the ld sytem. tain mowed towards ‘arketofented economy by allowing private Indian ‘Sompanien to enter mom ndatis without prior goverment ‘pyro, eae the high tars and quotas Ut pe out {breign goods, and looened the ight curbs on direct eign investment The resule was an acceleration of gros dome {reser growtho about a en ne 1991 aman he est of any nation, tut consserahly lower than Chinas 83 {0% pace: The preset government nde the leadership of ‘he Hinds nasonalis: Bharatiya Janata Paty, tended these ‘forme by printzing several major governent companies 121 BacnaseWek Feary 16.2008 snd racing tariff boris further Taking advantage of Indi's excelent arte of engineering an sien stools Sd ts wadicon of using English in business and in ach of Aigher education, US. companies began outsourcing jabs (0 the county aching software backofer Seria tks, ‘hamoacetia testing, and other white collar job. This {making India nto o pebalhigh-tch powerhouse ‘Sulla anno eine its rex ower simply hy developing ta high-tech sears ince the rst monty of Indians has no move than sit eight years of schooling, India mut erlate China by aking advantage of ts cheap, ‘hard-working and fowkiled workers compete beter in ‘world market in labor intensive products suchas ext ad ‘learonle goes This requles Direct emus va foreign = ieeieeaewiriaine Se Investment below China’s, so india must make inIndiais “Sze ereonmnse farbelow Schaar ene China's ody soa education Fao ‘ries. There abundant trtene that reeums on such ‘vestments in India’s human capital woul be high. During a ecent ip to Indi Found litle erst in cue tthe ol peter and nearing song younger [Persons foe further reforms to propel Lada forward faster. ‘Ther’ growing conlene nthe county that with the ight ‘conomic and heman capita policen, hs complicaed ‘emocracy ena the ereible burden of poverty and disease ‘Gom is masses: Indians have ben highly succesful is ‘people and profesional allover he globe. The pth of {efor chosen in 1991 may sean tha tented Las mo Tonger have topo abroad to find economic micces Gary 5. Becker the 1992 Nobel aareate, teaches a the Univer eyof Cheng and ist Fell of the Hove Intaton Figure 7 What India can do to catch up with China. Note. From “What India Can Do to Catch Up with China,” by G. S. Becker, 2004, February 16, Business Week, p. 12.116 erm eave reyils New Drugs Cut Costs, And Medicare Can Help Spending on medical care is forecast to keep growing fast during the next several decades. Health-care costs as a share of gross domestic product jumped from 5% in 1980 to more than 15% in 2003. They are projected to rise to almost a quarter of GDP by 2030. But through greater reliance on new drugs, it may be possible to slow the hike while greatly improving health if Medicare and other heakcare plans are aructored correct ‘Since Western Europea nations and Japan ave so ‘experienced lage and condnuing growth medic spending, ‘SSoaumoa belt i tet moet of ts ump tema foc he ‘ging ofthe population. Howevee a recent are by David i eal heh woot Fara Urey own drag cope an lp and peed Ikes ut heltiveare oo in all Organization fo perton & Development eoosses Caer coche tat ‘bout third of the fare growth mesial spear y the US ed be dus eo an ang ith here reling {fom acontnuaton of he ond tom preter eis spending at each age on new equipment and procedures [BUT HIS AND OTHER FORECASTS may overstate fure spending ‘cate they do nt take into euler account heat of ‘ew drags to cut etal radical ents and improve the qoaligy fit, Ro camp yn onan Foch pore i enedepa increased fom about $400 per depressed person in 1290,t0 $1300 abt bmp ey eine by mocha Seay tere elo mice ic nox opi whe wet slag om tenou deposi cre now ineon rasonaiy mel work td ome. rank Lictesbeng of Columba Universi Graduate Sadon ef Busnes has hown tha new Sage made import conaribuson tothe decine of ad more in {he U.S and sore han S0 oer madons she p62 Thor ‘doc ipeovement ie gay of ee ‘belive tha the courbution of nore ace drugs will become even mare portant wing the net several decades “The share of drugrin fate madical spending ly to tenatenk | Men 22,2008 Increase sharply. Bot even without ful une, drug hat {ntegrated into the Medicare system. Unfortunately te aw [assed atthe end of last year fo inclade druge he defete {hat should be eatected before goes ino fal effect n 2006, Medicare mil hen pay all pet spending on dors {Up to $250 pet yer for eligi persons who cect thie overage. It wil pay 75% of drug expenditures fom $2539 $2,250 but then pats nothing ust spending reaches "$5100 thes-eed onccin Raise the eperwage toate Lecce pepsin deductible, “iieriang ra butcover ” siniw tiie smth city drug outlays Besssareorsee er that are now rent of pn tree he pero of ross tn pgs tad iaaient see Gary S. Bach, the 1992 Nobel laren eache tthe Univer- Faye Chicago and ia Plow ofthe Hoover Inttion. immigration. Note. From “The Wise Way to Stem Illegal Immigration,” by G. S. Becker, 2004, April 26, Business Week, p. 14.118 BY GARY S. BECKER Let’s Make Gasoline Prices Even Higher ies in Saudi Arabia and Iraq are fresh evidence that terrorist destruction of oil output poses a huge threat to the world’s recovery from its 2001-03 slowdown. But it is not too late to implement policies that would greatly reduce the world’s economic i inerability to disruption of 0 The sharp rise nol prices during the past yes, to more shan $40 a barrel, has ren arly caused by ea of tors, tacks and poliea aseabiity is Saudi Arabia and other lenge prodasere The booming Chinese economy, sold groweh IntheU:S, and x slower han-expected risen ra [reduction algo contrinuted to Ute price jump. So far Indl atin are boobed hve ese without much damage becatse ever at $40; ols cheaper in real tema han twas during de price shocks ofthe 197s and ‘ays, Moreover mest counties ave since enon Snags throng igher ses om pine or eticient cars end planes, nd powerplant that ase natura {tat and con, and toa feser een shin emphass fuclear power Asa result spending ono rete to gross ‘Gomessi product inthe U'Syandespeillyin Brope and ‘span, ie moch esr than was 20.90 year gp. "et sicide bombings and oder terror arch against ol ‘acti if evoseeatal could temporal spike the pic to $7010 $80 of more. Thar would deal the word's economy. ‘Somajor consumers need w further reiuce ter dependent, (GASOLINE AND DIESEL FUEL account for about halfof lo! comme inhe US acter ran ont ne {onzumption could be eu immediney by imposing a eer “terror prosesion tx” on guanine of about 50¢# gallon. The current federal ga a sony 184, while sac axes. sverage about 23e a gllon. This ned tx would boost the ‘Amencan real rie of low-ocane gasoline, now about $24 tsllon to $250 8 gallon, el wel below prices in Barope and Sapam adios inden that each apres fake would et he Mount of gasoline wd by Americans by aboot 10%, “Instead going ito general wx revere, proceeds om this tervoram tx should be uaed fo expand grime al resaes thet Supplies wore dierepted. The process shold so help Sbsidiae a bukop of seca prively hed gaeoinc reserves ‘hat esl be wed ony hen an emergency se declared, ‘Other wayato reluce dependence ono ake mh longer ‘olmplement, buta long view i nesessay sine hetero ‘heat list nt the foescenbe fare, Ta federal production in the Middle East. goveramenthas been tying w develop acleane substitute {or gasoline by subsidizing production of ethanch ade ‘pdmarly fom corn This program has ezenially been op: Ethanol sil too expense snd ethanol factories create pollution consisting of nitrogen dioxdes and other gases: The ‘Ethanol seid of about S0¢ salon ijt another way to Subsidize com growers, nota serous attempt to decent ‘ays to rece dependence on gasoline ‘A good subsite for de internal combustion engine would be of enormous value. The most promising eppretch Sze to be the hyrogen fel els that power ars and uses Landon hasan experimental Drecof buses powered by these calls, but they are much to expensive frase ona larme sale “Wile any major transition 0 We must cut 2icnstant consumption eae memes and expand Motors Corp und others believe Oilreserves. “Rca rine Anew gas tax ffrmciuemn ie wouldhelp Siicmronada’™ ee fd or pone ‘Other technologies are alo worth parsing, jet ‘more se of wind power for energy td renewed conection ‘touclent power plans. Neither a panscen, bt both ee pollution and cut demand forell and other fos See ndlstal etlons have good reson tobe concerned bout terrorism nthe Mideast The long run pony 0 fd fulsuut forthe gasoline engine Higher ga toner ox [rmmeditely cut ol consumpaon, andthe tx proceed could ‘usin ager gasoline invenvories obese nan ergency. This would elimionte a porenially damaging SNenve for eror srkesavindusal exynoaes Gary S. Becker, 1992 Nobel nares, aches a the Unieityof Chisago and ia Fellow ofthe Hoover tas, Figure 10 Let’s make gasoline prices even higher. Note, From “Let’s Make Gasoline Prices Even Higher,” by G. S, Becker, 2004, May 31, Business Week, p. 16.19 Economic Viewpoint BY GARY S. BECKER A19-Year Dialogue on Nm [The Power of Incentives When I was first asked to write Economie Viewpoint columns in 1985, I expected to do this for a year or two. I did not want to take too much time away from my research agenda. But I discovered that I immensely enjoyed the opportunity to use economic reasoning to discuss important issues of the day in simple and nontechnical language. The years have gone by, and have been doing this about once a month for 19 years. That islong enough, co his wil be my lst regular Viewpoint. {BEGAN WRTTING THESE COLUMNS on ae th elon of President Ronald Reagan. Most economists in hove days who In his controversial remarks about the underrepresentation of women in engineering and science, Lawrence H. Summers, president of Harvard University, argued that top leadership positions in academia, business, and law require a time commitment that many women are unwilling to make. In both the U.S. and Europe several high-profile cases of successful women Summers quitting thei js stem to confi his view that womnen are ‘choosing ro opt out of high-powered jobs. The opt-out Inypthess cou explain why according fo aecene US. ‘vey, in women wih an Mina wnat working fll me, ‘Tin 20 men with the sime degree. Today many companies ‘rereeruling male MIM gradostes in ner equal numbers ‘Oo male tna grads but theyre ving dat a sbstariial [percentage of ter female eerlta dropout within three Fe years The vexing problem for businesses ot fang female alent but reining HOW LARGE 1S THE OPT-OUT PHEMOMENOK, wha ares causes, snd whatean companies dow retain lentod worsen? A ‘Rocsatingartle by Sytia Ann Heit and Carolyn Beck [Le nthe Mare nce f Harnad Bess Rei provides sc tare te uns Te wg oma suk of rearefl survey of igh quai) women seine don eis paddle Sonal degre, ora high honors undergraduate degree, Individuals with sac educational aaaments sy have outstanding ares opportunites and to ave consider. tbiecalent offer employers But asthe survey reveal age [ereentage of euch highly qualified worsen done choot {Sime o fom thelr carer, and they pay «huge pice in {ens olfacure job opportunities and nell rast do so, ‘Some 37%afthe woren surveyed and 42%of hase with Jads—vountanly et work at some point nthe carers wit themverage break lasing bout two gears tn conus only 249% a he men tok imo rom tr carers th 0 ‘Satstea diference beween thowe who were tr and hove ‘wo were not. Some 44% ofthe women cand amy ‘pons athe aon for hr leving crpared with ‘aly 2 of tre men, Among men, who averaged about one ear ofthe pracy reason was earcereaanecrnent The 5urvey results lo confim the pervasiveness of th edtona Avision of abo wid fxn Dept he that he “ducation gap between women amen ha all bat ‘Seappenres, women n moat facies sre ll expected Shouse the ons share caring for lier dety pens and fer spouses "Buc 3% ofthe women who tok dime of rom wk wanted 121 Bannan rch 28.2008 ‘tw res tothe carers, despite the painful work if tad fs requlzed. Untortunaily, oly 4% of thase were able op 12, with 40% reaming to fle profesional job and 24% ‘aha par-ime positon. And even Ouse whe return othe ‘workforce ot scberanil earning power, with the penalties rzoming more severe the longer the break Overall women ‘oto ime oe fom carers ot an average of 3% ftir ‘arlog power ia business carers, he average oss wae 3896 ten though the average break lated lie more than soar ‘Sochreluctions ineemings potential rea primary reason, the ernings gap beneeen men and women of compare ‘seaton frets increases during eile bexsng and rearing Years The survey also found tat many wamne cope with f= Tamuly wade-ofoby working par ‘Yes, many Pi hey witli bs, wornen opt ‘idziin poms out ofthe — sanhghiyqaitedsonent workplace, enmaurrnsc ior Whatcan Ssonmaisiuewon arrangements Women ae ess ikelyto opt aut of work thei employers ofr exible carer athe tht allow them fo ramp ap fd ramp down thei professtns responsibildes at diferent carer point terry Summers ns on to something wer he ypu tami women raring make the ine ‘ommigment required atin adership postions in ‘demanding professions, But asthe presidente of Stanford, ‘etn and Masao aie of Treolony rant business do? Summers commen the statu qu a nether ine nor Adsrale. Employers can and should develop cultures and ‘pele plicis cstrike bever alance betwsen the ‘femands of work andthe demande offi. Be Laura Andrea Tyson i cea of London Basins Schoo son @tontonsts) Figure 26 What Larry Summers got right. Note. From “What Larry Summers Got Right,” by L. D. Tyson, 2005, March 28, Business Week, p. 12.138 Stop Scaj —Before [BY LAURA D'ANDREA TYSON ating China S Too Late Protectionist sentiment is on the rise in Washington, fueled by employment growth, real wage sta; oor tion, and a record trade deficit, Job growth in 2004 was nearly 40% below the level consistent with previous economic recoveries. Most of the “missing jobs” are in the trade-exposed manufacturing sector. Meanwhile, real average hourly earnings in 2004 ‘wove no higher than they wee in Noverber, 2001, the ough ‘ofthe mot recent reeesion Economie re bury debating {he umes of ts obese and wagelese recovery Meanie, ‘many pelisoans workers and burinen leaders lead hae [amped tothe conchsion that the javning U.S. re defies {bland China has become te focus of here But ‘laming China for the plight of American workers, whe Dreditable i wrongheade And adopting protons Police agains Cha a downright dangers. Tes em to see why the public has fagered Chin asthe ‘up Chine, which sends one-third of ts expres to SSmcrica,accoonts for 2636 ofthe US. trade gp, Mose fits ‘xpures tothe US. are manafnerred rade! ‘Soriers eaming only 4% af the erage US factory wage. [Asmere Ameriean companies ty to ct costs, Chinese ‘rorters are increasingly competing for US. manufacuring “Tra, China, lng with Japan and afew others has enable cour miggaided cheesy fnancing the US curent account {tap va hage purchase of dollar denominated sarae at ‘leet ew intrest at If China were lash purchaser ‘ritalreadysutanl holdings af ich secures ‘Smething t might be terpted to don raat punitive ‘tae legulation™ longterm el rate oul ise sbrpy ed ‘Sify. The reel end be a sdordown that damages the {lobaleconony and leaves American workers easily ‘orci ego bn wage andere paren o8 {hts mortgages So tea of China bashing, Congres should take ough polteal chokes on revenuas and spenaing © ‘Sinean te fecal def and astute household saving. "Tohead ofa possi trade war, ; cniiteraernem, Tails wort Geeta ills: _and explicit export subsidies, trade ills and {tong vale hed bts leadto. Sorter, a Wertgaimears acceding slowdown Morgen Suney, eliminating ay anne to 16% appreciation rece ted This approach would avid some ris of adjusting Goa’ exchange ten the presence of tuft spear ows into Chas ‘urteney New Chita should ntoduce ether temporary ‘quotas or tas on apparel an texte exports Final st he US mas increase housthold sings, Chins tous ter ‘more consumpon tore reliance on expo for growth. “The US. and China have benefeed enormously form thelr conomic es, Now both masse to make sure ade ction ‘oes nec underine ther mutually beneficial relagonahip and ‘Dosh the world economy int a dowmward srl of Drotectoulm and meson Laura Dances Tyson i clean ef London Busines School Gsong@iondonata) Figure 27 Stop scapegoating China—before it’s too late. Note. From “Stop Scapegoating China—Before It’s Too Late,” by L. D. Tyson, 2005, May 2, Business Week, p. 14.Economic View; BY LAURA D'ANDREA TYSON Retirement Savings: A Boost for the N eedy 139 joint There is a mounting retirement savings crisis in America. Too many middle- and low-income Americans are saving too little. The plunge in the U.S. household savings rate over the past decade has occurred just as baby boomers should be saving in earnest for their looming retirement. Even worse, personal savings have dipped just as employers have dropped yall ts beefs, om 2029 to 2042 In her words in even years the sjter as gained 13 years cf beat, eanly tent te economy has grown much faster than Atipeted. And the Congressional Budge Oe, wth more ‘ease economic assumptions puts the date at 2082, ‘Sohow wil all dhs play out? Busi'skea oindv.dua sscount ratvactie All Americans wan est egesand they 12] atmos | Fett 7.2008 iverts payroll taxes to ‘should have ther, but ot atthe expense of Social Secu, ‘which isthe one pact ofthe retirement syste absolutely against mache sks “Fixing Socal Securit’s actual shordal, whichis about at ais domant puro the at Se cording to the CBO, actually prety eas. One Plicaly sky way would bey rising the cap onthe paola, fom §590,000 of oore, to about $140,000, a fated by the AARP tad accepted in principle by Senator Lindsey Gra ‘3C)and Reprecentacre Jim McCrary (La), who heads the House Soci Secu subcommuee "The worker shast ofthe Social Security taxis 6.2% of wage and slay incor I we rae the cap, a person ‘curing $140,000 woul face atax Restore the — [Sars¢ofmore han $3,000, If pre-Bush —— proposing s major tx hike onthe Eppermiie cue, tax rate "Phere much bawr way onthe ‘abut 60 an in richest US. Sein etnies ‘Storing the re Bus income taxpayers qelconjusthe rp of exper rable, spplemental pension kcoune by restoring the pre Bush Income ax code onthe scondweathles 1. That eld generate oughly en adional Sasbilion in caren dlls. ‘hls money could be used asa government match, onasiding Seales entourage ll Americas to et up private iccounts Rerncnber, 90% of Americans would fet ho tinerease ‘Bach party would gan something, The Democrats Would serengchen te existing system. The Republican could ake {aodiforeeting upa sytem of Univeral ndavtual secouns ‘Bush might not accepts bipartisan deal But he holds out Sr privatination financed bya radon the exiting Social Secure ytem, he could well face hi rst big delet. mk Robert Kune io ator of The American Prospect and ‘chor of rerything for Sale, Figure 37 The 2% solution to fix social security. Note. From “The 2% Solution to Fix Social Security,” by R. Kuttner, 2005, February 7, Business Week, p. 12.151 ay ROBERT KU Economic View; joint Bush's Worrisome Weak-Dollar Policy ‘The gap between the Bush Administration's expansive geopolitical goals and its relinquishing of financial stewardship is becoming unsustainable. On Feb. 22 one line in a report by the Bank of Korea referring to diversification of its curren¢ financial mar! iting remind fe mney ft dolar a ee ‘snout portion ofthe US. "The dlr f course, weak because he US. rons sch huge unde and budge defi The federal government bbomows meaty 82 ilo ay sbrond. Pre free Inweror are owing eed us that mach money St curest {nueert rats cent bass make up the dilercce Ine ‘ttre quarter of 2004, fll 49% aF tbe US cureat ‘trout debt es nance by Foreign central ask th Sepunand Cant eae, ee "epan and Chis wre buying dollars to keep thee currencies underaaed and heir rods underpiced. But this co- Aependeney eaten vious als with cheaper Alan ‘trencog and export cxacerbating the US. ade Imbalance and necessitting sil more homo (CONSIDER THEIRONY: The Administration views Amero ‘hese sanding superpower basa on ou ary might tnd our willingness fo uaelt But Buss alu o adress the {USvs growing reliance on frig cecal bans rests ‘ymca and economse dependence nconsiret with ‘iperpower statu The admiration comora sly Imaging tat the Gnaetlratonshp beoween the US nd {eres recproca and disconnected Gom gopaldcl Issue Supposedly non of tiered sation would dare ‘dump greenbecs because they would be cheapening the ‘aloe heir own dolar holdings, andemnning «key export ‘hart and deking alba depression. Drew on, "The U's. hes veal diplomatic macs with exch of creditor ‘ations. With China these range fom ams aes to currency “alu wo fr wade and dferences ver Tatwan and North Koren. China dcstorship that rlgna over 3 bln sous, mounting budget deft increase he need fe foreign borrowing apd advo pressre on the dalla Second, not ng serous energy policy intensies US, dependence bnimpored oi and wins the wade dec And tin the ‘Adminstration se even aterping to menage the les 22 Danmark | 16 2008 holdings away from the dollar created a brief panic in . While the markets have recovered—for now—it was a desing relying fstead on the whims of money aches This cotrasta markedly withthe enue of Roald ‘eagansTreanay Secretary, James A. Baker I Although + Sanch fee maser, Bako andrsead tat exchange {ats and treet rater ae too important tere 0 sor Foncumengy mading The Plata izord of 98s prodaced ‘Sood arrests cat abd gral dpeecation the dala Whea the pat fel apart 3987 he tok ‘saketermbed “Aranda accont should have ben on he agenda for Bushs Europe ip. Today, however, any atempe to merk th other cena bankers to manage an orden dol {Epredation wold requires commenent reduce Tage dice wis the Budget and ‘Administration not prepared 1 fuake. Under Bash, ermtonal trade deficits er se ay invitea send ee ang Sere dollar crash, sapere er he anterty tat ies followed PY sa ESI ‘but it need’c be calamitous. Bush's — fecal policy, however, virtually Siegen ‘duce ther dolar exposure~and OPEC to move stay mn Figg ign. Pe Fear noe wil ner ef xsng rats, ot bento inftion is worrisome bat {0 defend the dale. The Bunk of Balan did wach the tame {a he pat centuryata cot to Brat long tre ‘rosperty—beenuce imperial ambisoes oan the nason'y nancial onditen, "The worscae scenario ira dollar crash, followed by ‘step recession, The shame ttt sensible plies, SESEEC Airginendon wont purse, colg bead Robert Kutter co-etor The American Prospect and ‘uth of Everything fo Sale Utnen@ propos). Figure 38 Bush's worrisome weak-dollar policy. Note. From “Bush’s Worrisome Weak-Dollar Policy,” by R. Kuttner, 2005, March 14, Business Week, p. 12.152 Economic Viewpoint Dishonest Capitalism Won't Go Unpunished Here is a puzzle. The US. economy squandered trillions as a result of the 1990s stock market bubble and Wall Street conflict-of-interest scandals. In optical fiber alone, investors laid out tens of billions of dollars that will never return a penny, gulled by misleading corporate balance sheets and demand projections. Deeper systemic corruption, such as stock analysts feathering ‘heir own nest harmed both the ficient allocation of ep ‘nd investor confiene. "But in causing lasting damage, these fronts o honest capital sean be the dog ha dia'tbark Corporate ead domestic od th re ee ey, [nce 2002 ifthe economy i entering eyo downturn the Sunes are more ely weak dolar se gh ol rcs For ‘ee wo ble ln captaley seen more ‘ontbutons were threfld eet the New Economy grow ‘rch faster than many thought pradent, be served ao! Sable of Present George W Bansal defi snd he ‘leaned up market messes that would have ered groves “nde aca our dimes in the pa 20 yar he Ped bus ‘overden market ping vrs Inthe cri 19805 wen ‘Roney-enter banks were underwater Fom naperorming ‘Third Workd ast, the Fe loorened revere requirement {olet them stay afb Aft the ck eneh of 17 te al ‘ood the ape with gl: nthe ate 1990s che Fedlowered interes rates er the Lang'Term Cet ‘Management and Ear Asian spocolare chown Inded, {ey irene between the Roaring Sand the Innovation evbmigiiney” caritofiset Ses fomemne ober thedamage sich afta em and waste — Smem rom es excene andi caused by Regu! balenesy anda CORFUPHON os he he soe we jes ‘ofherec technological innovation, bt inventone rach ax television ‘could note commercialized because the economy wan {beelmed, Schumpeterian innovation i nots cure-all be ‘Seance ayrem sa mess. Juse ask a apanese banker. As for debe oven Keyes dd nt favor boring al seasons New borrowing can corspensate fr ttot of bad debt, baton wp to a potne. George Buss public dfs have tered an unsutainable re zone, and private det 50 Sling money markees Greeapen, fly having ‘ise ies in an economic slowdown: So he pricing icency (tAdam Smith may be somewhat overated, but dachonesty Increaes the soem’ vulnerability to bubbles and erahes. 6 Robert Kuttner is o-atorof The American Prospect her @ prospector). Figure 39 Dishonest capitalism won’t go unpunished. Note. From “Dishonest Capitalism Won’t Go Unpunished,” by R. Kuttner, 2005, May 23, Business Week, p. 13.153 BYROBERT KUTTNER IdeasViewpoint Cox’s SEC: Investors Beware It has been less than three years since the enactment of the Sarbanes- Oxley Act and the appointment of William H. Donaldson as Securities & Exchange Commission chairman combined to help restore investor confidence in U.S. financial markets. That’s why President George W. Bush’s choice of Representative Christopher Cox (R-Calif.) to replace Donaldson is such shocker. A conservative crite of aggresive market regulation, Cor seems ey t9 ‘indo Donalen's reform even a sll age fancil ‘markets struggle wth the debe ovesang, ring interest ‘ate « posse housing bubble, end the growing US. Aepenncoareirnenpia To ingot 3 ‘urtnly would make Wall eset insiders bap, but bow ‘an the White House beso recles abou something ind seeing cen feck ens tht broker-dealers give all buyers and sellers the best wvilable tock price requiring regstnton of hedge ‘nds; insisting motual funds heve nonmaenagemest Figure 40 Cox’s SEC: Investors beware. eee cramtct inte teerce coe sr bo Bear dima eetrom ema Eremdgeremecmetreetis, icine scan eset, Soncciere emer, fey oe erent eer faeces ar, ‘rae, Sty or Smeets tee oo See eS ae erence rear arth eh See ee Semin eget cperenacnmen esa, ei oie rau ee ieeeaeeeran eens, coresomnec azar, pease a aera eninterse cece eine Seatac rer Siieer merece denen Seam a na hinder gene ie Ferien aa Selec ce eraser Gerry e mari bron r Beard Seelcremrc tae ile ees a Romeewesgren ee eS iencather tre Fo == Robert Kutter is co-torof The American Prospect nd ‘thr of Breyhing for Sle (ener prospec). Note. From “Cox’s SEC: Investors Beware,” by R. Kuttner, 2005, June 27, Business Week, p. 66.154 BY ROBERTKUTTNER IdeasViewpoint An Economic Storm Surge ‘What will be the net impact of Hurricane Katrina on the economy? That question is trickier than it seems, The terror attacks of September 11 did less long-term economic damage than first predicted, in part because the Federal Reserve was induced to keep interest rates very low for nearly three years. But in Katrina’s case, the opposite could happen. Katrina’s direct and indirect economic costs are likely to be underestimated, ‘rode and het demand fom Chi and ina With of Fefneris runing at move than 90% of capacity didn take ‘uch damage to case gasoline price spies hat wil lst for ‘months: Bt consumers ls wil soon face home heating snd ‘less il at leat one-third higher tha at ear’ And that’s ontop of xubbornly high oe prices that tne just va sure bac rues, buss, ad atines, With three {burs fal goods moved by truck or plane higher fuel coms will eee int higher consumer prices sree the boar Addiioal adie cons wil cide lnsuraneeindusty losses and higher property insurance rts, arn ‘on vome bulling material and Nghe shipping ‘oss for agricultural products that poral we ‘The Fed, will ily risen coming months, as higher enesy, ‘tansportaton and borrowing costs work their way throogh {the economy Buthase price increases are signs o economic ‘weakness, not the typeof overheating that sometimes jasies higher ates. The esl of this misguided infaton vigtance: “The Fed i leaning against growth, just es growth i falecing due tothe hua’ big hit to purchasing power. “Ara deeper evel, Karine increases he Ses on the ore ‘weakness ofthe American economy™it ever greater eiance ‘on feign boring: The US. has dangerous and ‘Salting codependency with Asia, most nab Chin and Japan. They Wop lending us dallas to cover our huge made {imbalances end our absence of net domestic evngs, We keep ‘ing those dors wo kexp buying thir products. No serous observer thinks this game an goon freer I only question of what {he Miniipp Rerond the now anal orcet ik vee uiggrss beat and perhaps dlr Sctotettuietiteceg °°" hiking rates, esse er drtemecicy oe Fins tea on purchasing poe. underplays | yiivecers dc tical deity wien tino i ese Americ fo borow even mere UFORTUNATEDE THEFEDisnorbchavingss tH ECONOMIC om abreatntesies the san unyaanaidater september Teneextal oogt of "otonsof these problem ars shorema Tinka ened on tie sie afcheap money o ce, Tus energy independence iss longterm Kecpagstotreminerestaeceesoyarles Katrina Dj which he Bask Adminitsaton ag tad toeding the stem wih guy Bre 0, Gaateseouly Resoring oe balance nl femmngepret ditties ah om he — {tke rne and plea esdewhip ete esuling recovery. Ral median exings of ‘Why aren’ Greenepan & Co, cating he econoay some slack? Apparently dhe rush of new federal pending on Katrina rel td ecorery has lied te central bunker. So intend of cing an cn thelr recent tend of lens ate hikes, ad governors evidently reasoned tharall this aed ecal ‘Simtlusreqred an offetng rate ie. On Sept 20, with ‘New Orleans stl under wate de Open Market Comite ‘ordered yee another quarter pot rate hike=the 10s i837, ‘asing the federal nd xt 3.75%, ‘eters case where irdtion seats are entirely misleading a economic indiestore. Te conmumer price dex Figure 41 An economic storm surge. ‘mins i ering with progr of taxuswoneing dfs. Reversing srt ase Itbelance and its age foreign borowing could be ly achieve by ber fca plies, party by more syed {eadrule, But ce progression ight rote our ces ‘om the esalcng kof patel wating snd sng wil 1 Sltin energy consmpon paises wel ‘alas for pbicinfaarecre Hee hain theses le Sarenas the White Howe, and send Fornomthesconomic cons of Keune are lo dip. sath get pice they hae reason tthe cote {ould smart. bert Kuttnris co-editor of The American Prospect and author of Bresying for Sale ‘Oeobe 2005 | atu ek 7 Note. From “An Economic Storm Surge,” by R. Kuttner, 2005, October 17, Business Week, p. 71.APPENDIX G Frequency of Word-formations156 FREQUENCY OF WORD-FORMATIONS ‘Type of Word- Formation Borrowing quid pro quo Frequency 2 status quo 2 Compounding quicksand shoreline skyrocketing Clipping(Shortening) B-Schools (Business school) Dems (Democrats) depts (departments) Fed (Federal Reverse Bank ) feds (federal agents) Telecom (telecommunication) Agiobs (the Agricultural job opportunity Benefits & Security Act) L. Acronyms AIDS (acquired immune deficiency syndrome) OPEC (Organization Petroleum Exporting Countries‘Type of Word- Formation Word SARS (mad cow disease) Frequency I biotech (biological + technology) Multiple processes hightech (high + technology) Medicare (Medical+care) medicaid (Medical+aid) Mideast (middle + east) Initialisms ACLU (American Civil Liberties Union) ADA (American with Disabilities Act) AMT (Alternative Minimum Tax) BLS ( Bureau of Labour Statistics) CBO (Congressional Budget Office) CEOs (Chief Executive Officers) CPI (Consumer Price Index) DNA (deoxyribonucleic acid) EU (European Union) FDA (Food and Drug Association) GDP (Gross Domestic Product)‘Type of Word- Formation Word Frequency |_| GoP (Grand Old Party: the Republican Initialisms | political party in the US. 3 : HIV (Human Immunodeficiency Virus) 1 _ HSAs (Health Saving Accounts) 1 © FARA individual Retirement Account) f 3] IT (information technology) 1 MBA (Master Business Administration) 2 R&D (rescarch and development) 1 SEC(Securities & Exchange Commision) I U.N.(United Nation) 1 | TOTAL loa160 FREQUENCY OF SPECIALIZED TERMS AND JARGONISTIC EXPRESSIONS Word 1 | baby bloomers | 2 baby-boom generation 1 [ 3 | back-office 1 4 | basket case 1 5 | blue chips 1 6 | bottom line 2 7| B-School 1 8 | bubbles and crashes 1 9 | diversity 1 10 | e-commerce 1 11 fetephant 2 12 | flat-rate 1 13 | free lunch 1 14 | hightech bubble I 15 | housing bubble 1 16 | labor force 7 17 | labor force growth 2 ~ 181 tabor intensive I 19 large-scale 4 _ _ INumber Frequency 21, market-oriented economy 1 22) margin 1 23 | nest egg 24 | offshoring Blaix 25 | outsourcing 26 outsourced jobs 27 | portfolio 1 28 | prospective returns 1 29 | prospects l 30 | quid pro quo I 31 | skyrocketing 1 32 | stock market bubble 1 33 | tax shelters 1 34 | terrorist protection tax 1 35 | the Bush Administration 1 36 | the Bush tax cut I 37 the Clinton year i 38 | the pre-Bush income tax 1 39 } the Reagan Administration 1 40 | think tanks 4 41 | trade w 42 | undercut 1 43 | white-collar jobs IFrequency | i Number 44 | white-collar workers. 1 Win-Win Case 46 | win-win returns 47) write off 1 TOTAL 80,APPENDIX I Frequency of Technical Terms164 FREQUENCY OF TECHNICAL TERMS Number Words Frequency 1 } account balance 2 account deficit 3 alternative minimum tax (AMT) 1 annual growth rate 1 annual household income 1 6 | assets 1 7 | average wage growth 1 8 | balance of trade and investment low | ; 8 banking 1 10 | finance I 11 | benefit and cost 1 | 12 bond index funds 1 13 | bond market 1 14 | boom 1 15 | boycott I brackets 1 broad index 2 18 | broad stock 2 oo — ~T- 19 | budget deficit 4i 165 Number Word Frequency — 21 | capacity 1 22 | capital 5| 23 | capital expense 1 24 | capital gains 2 25 } capital gains tax 1 [ 26 | capital income 6 27 | capital market 4 28 | central bank 4 29 | compensation 1 30 | compensation package 1 31 | competitive market 1 32 | consumer price index 5 33 | consumption 3 34 | consumption variant 1 35 | corporate reorganization 1 36 | corporate income tax 2 37| currency 2 38 | currency market 2 39 | currency trading 1 40 | current account 4Word Frequency 41 current account deficit | 42 | current account imbalance 2 43 | current account surplus 2 44 | current income tax 2 45 | current payroll tax debate 1 46 | debt-financed transition 1 47 | debt-service cost 1 48 | deficit 25 49 | deficit reduction 1 50 | deflation 1 51 | demand 1 52} deposit 1 53 | direct investment 1 54 | dividend 3 55 | dividend taxation 2 56 | domestic investment 2 57 | double taxation 2 58 | downturns 1 ~ ~ 59 | duty free 1 60 | dynamic economic 1167 Word Frequency caring 2 earning tax economic behavior economic concern economic force economic forecast 67 economic growth 68 economic potential 69 economic security 70 economic stability 7 economic tools 72 economy 73 economy performs 4 employment growth 75 equity value 77 76 | equity financed investment exchange rate 78 Fed 79 fed fund rate 80, federalNumber Word Frequency 8 federal budget 82 Federal debt 83 federal fund rate 84 federal revenue 85 Federal system 86 Fed's inflation 87 finance 88. financial crises 89 financial market 90 finance rate of return 9 financial capital 92 financial firm 93 financial incentive 94 95 financial market financial stake 96 fiscal deficit 7 fiscal excess 98 fiscal imbalance 99 fixed exchange rate 100 fixed rate mortgage169 | Number Word Frequency “iol flexible exchange rate 4 : 102 | flexible labour markets 2 103 | foreign capital 2 104 | foreign central bank 1 105 | foreign direct investment 2 106 | foreign exchange 1 107 } foreign investment 2 108 | free and open market 1 109 | free market 4 110 | free trade 2 111 | free trade agreement " 112 | fund 4 113 | fund rate 5 114 | fund's government bonds 1 115 | G-8 1 116 | GDP deflator 1 117| GDP growth 2 118 | global capital markets I 119 | global currency market 1 120 | global financial stability 1170 Number Word Frequency 12 global financial market 122 global industries shoreline 123 global trade 124 globalization 125 goods 126 government bond. 127 government incentive 128 gross domestic product 129 health insurance 130 Health Saving Account 1B high value add service 132 household consumption 133 household employment 134 household incomes. 135 household survey 136 household saving 137 human capital 18 import barriers 139 income 140 income and class171 Number Word Frequency 141 | income tax 5 142 | income tax code 1 143 | indexed bonds ! 144 inflation 24 145 | inflation rate 2 146 | interest 1 147 | interest rate 23 148 | inventory 2 149 | investment 16 150 | joint venture 1 151 } labor compensation 2 152 | labor market 1 153 | labor productivity 1 154 | labour compensation 1 155 } labour cost 2 156 | labour income 1 157 | labour market 12 158 | labour productivity 2 159 | loan 2 160 | long-term rate 1172 Number Word Frequency 161 low forecast earning growth 162 low-cost investment fund 163 lower implicit debt 164 low-risk free rate 165 macroeconomic 166 marginal income 167 marginal income tax rate cuts B 16 marginal rate 169 marginal tax 170 marginal tax rates 171 market 172 market capitalization 173 market force 174 market incentive 175 market risks 176 market share 177 money market 178 modern market economy 179 mortgage 180 multinational companies| Number Word Frequency 181 | multinationals 1 182 | national saving 2 183 | non-performing loans 3 184 | off-balance-sheet 1 185 | open market 2 186 | open trade 1 187 | out of pocket costs 1 188 | outlet 2 189 | output 4 190 | outstanding stock 1 191 | payroll 6 192 | payroll employment 6 193 | payroll employment growth 3 194 | payroll tax 10 195 | payroll tax rate 2 196 | personal account 10 197 | personal consumer I 198 | personal tax cuts 1 199 | physical capital 1 200 | plant a|174 Number Word Frequency 201 | political economy 1 202 | population 2 [203 price index 2 204 } pricing power 1 205 | private economy 1 206 | private foreign investment 1 207 | private investment 2 208 | private retirement saving 1 209 | private-sector 1 210 | production capacity 1 211 | productivity 4 212 | productivity growth 12 213 | profits 1 214 | purchasing power 2 215 | quotas 3| 216 | retailer 1 217 | Retirement Saving Account VW 218 | revenue 6 219 | risk capital 1 220 | sales tax 2175 Number Word Frequency 221 saving account 222 savings incentives 223 self-employed 224 share holder value 225 shipping cost 226 short term interest rate 227 short-term rate 228 social capital 229 Social security 230 social security benefit v & social Security Personal Accounts 232 social surplus 233 solvency 234 standard flawed index 235 state-owned enterprise 236 stock 23 stock and bond market 238 stock and short term government bills 239 stock exchange 240 stock market176 Number 241 Word stock price Frequency 242 stocks 243, subsidize 244 surplus(budget surplus) 245 tariff 246 tax code 247 tax credits 248 tax cut 249 tax refund 250 tax-free 25 taxing consumption. 252 third world 253 tick 254 trade deficit 255 trade surplus 256 traders 257 transparency 258 treasury 259 treasury bills 260 ~—L treasury bondsi Number 177 Word Frequency 261 trust fund 262 U.S. labour union 263 U.S. treasury bills 264 U.S. treasury index bonds 265 U.S. treasury securities 266 unemployment insurance 267 unemployment insurance claim 268 unemployment rate 269 unemployment-compensation programs 270 unproductive time 271 upper-middle class 272 wage growth 273 wage-insurance 274 welfare world market TOTAL, 690APPENDIX J Frequency of Figurative Language179 FREQUENCY OF FIGURATIVE LANGUAGE ALLUSION Frol Words Frequency | I | snerock Holmes mystery | | toe ANALOGY | No. : Words : Frequency || The taw passed at the end of last year to include drugs has defects that should be corrected before it goes into | full effect in 2006. Medicare will then pay all patients | | spending on drugs up to $250 per year for eligible | persons elect this coverage. It will pay 75% of drug | |__| expenditures from $251 to $2,250 but then pays | nothing until spending reaches $5,100 -the so-called | | donut in drug coverage. (There is weak point of the |__| medicare. it was explained by comparing with a donut | | J which has a hole in the middle), —_ | 1 1 | TOTAL fy| No. 1) that they | can solve Inflation problem) 180 METAPHOR Words __ Freeney a Se _— A gold medal (the writer admire Federal for the success \ Club house (A powerful group of ceonomic ofthe world. Such as USA, Germany and Japan) 6 | environment) | | Japan's Chronic Cold (the situation that Japan lost | | | economic growth of the 1980s) Limb along( to move slowly or with difficulty after being damage from loosing economic growth) set aside for retirement) Old issues in "new clothing” (new situation or new181 PERSONIFICATION The price jump (the price increase a lot) “ ster has always loved music but finds she can indulge | her passion of a lifetime in anew and more gratifying 2 | way. (she refers to Social Security) | As with my friend, this milestone birthday offers an | opportunity for reflecting on how better to accomplish | 3 | goals we hold dear. (my friend refers to Social security) | 1 a a tt 4) Let the data speak for themselves (show the data) 1 -— eee | i TOTAL 4 SIMILE } No. Words | Frequency |