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Donald Trump was apparently angry about the value of the Russian ruble and the Chinese yuan against the dollar. He complained in a tweet that both are playing the "Currency Devaluation game" in a tweet yesterday.

Neil Irwin rightly points out that the complaint against Russia is bizarre, both because we don't have much trade with Russia, but also because the most obvious reason its currency is falling is sanctions pushed by the United States and other western countries. The story with China is a bit more complicated.

China's currency has actually been rising against the dollar over the last year, with the yuan going from 14.5 cents to 15.9 cents. So the claim that China is devaluing its currency is pretty obviously wrong.

There is, however, an issue of whether China is still deliberately depressing its currency against the dollar. As Irwin notes, China is no longer buying large amounts of dollars and other reserves, as it did in the last decade. This buying raised the value of the dollar and kept down the value of the yuan.

However, China still holds a massive stock of foreign reserves, with its central bank holding more than $3 trillion in reserves and its sovereign wealth fund holding another $1.5 trillion in foreign assets. These huge stocks of assets have the effect of holding down the value of the yuan in the same way that the Fed's holdings of assets keep down interest rates.

The vast majority of economists accept that the Fed's holdings of more than $4 trillion in assets have lowered long-term rates. It is inconsistent to argue that the Fed's holdings of assets keep interest rates down, but China's holdings of excessive amounts of foreign exchange don't have a comparable effect on the value of the yuan.

In short, Trump is clearly wrong in claiming that China is currently devaluing its currency. However, he does have a case that China is still keeping down the value of its currency. Interestingly, he never made this complaint in the context of his threatened tariffs. This is the sort of well-specified policy goal that might warrant the threat of tariffs.

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The Associated Press had a fact check on Donald Trump's promise of a simplified tax form. The piece noted that the IRS has had a simplified "1040EZ" form for decades and it is not clear that the form will be any shorter or simpler with the new tax law. It did correctly point out that many fewer people will itemize their deductions, which will make filing simpler for them.

It would have been worth pointing out that the Trump administration could have made the filing process much simpler but chose not to. It could have had the IRS fill out people's tax forms for them. For the vast majority of people who take the standard deduction, the IRS already has the information necessary to determine their tax liability.

This means the IRS could fill out their forms and then send them to taxpayers for their review. If the person feels the IRS made a mistake, they correct the form with the necessary documentation. Otherwise, they accept the refund calculated by the IRS or pay the additional tax being assessed. This has been the practice in several European countries for decades.

The likely reason that Trump and the Republicans in Congress chose not to go this route is that it would wipe out H&R Block and other tax services and software companies who get tens of billions of dollars in revenue each year from people for doing their taxes. This seems the only plausible explanation since Trump and his team couldn't be that much more incompetent than the folks running tax agencies in other countries.  

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One of the main reasons that I and others have given for leaning on the Fed to keep interest rates down is that low unemployment disproportionately benefits those at the bottom. While we can and should try to help the disadvantaged through increased education, training, child care and other programs necessary to give them a foothold in the labor market, the easiest thing is allow them to get jobs.

When the Fed raises rates it is deliberately slowing the economy and thereby reducing the number of jobs available. The people who are then denied jobs are disproportionately the most disadvantaged groups, such as blacks, Hispanics, and less educated workers. These workers are hurt not only because fewer have jobs, but also because the bargaining position of those employed weakens when there is higher unemployment. In this telling of the story, wage gains for those at the bottom should be strongest during periods of low unemployment, as we have been seeing in the last few years.

For this reason, the latest data on median wages for black workers is somewhat surprising. The Bureau of Labor Statistics Usual Weekly Earnings series showed real median weekly earnings for full-time black workers in the first quarter of 2018 were up just 0.6 percent from the first quarter of 2017. Furthermore, taking the last three years together, it showed real weekly earnings for blacks were up by a meager 1.1, trailing the 2.8 percent rise in real earnings for the median white worker. The racial gap seems to be increasing even in this period of relatively low unemployment.

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Yes, we know how hard it is for rich people like Jeff Bezos to get by in a free market. That is why George Will argues that taxpayers must subsidize Internet sellers by exempting them from having to collect sales taxes on out of state sales.

While Will argues that the market should decide which retailers win or lose, in fact, he is pushing a position that is 180 degrees opposite the free market one he claims. He is arguing that the state should require brick and mortar stores to collect taxes, but allow Internet sellers to avoid taxes — apparently, because George Will likes Internet sellers. So family-owned book and clothing stores have to collect taxes, but Internet retailers that could be one thousand times their size, do not.

Will seems to think that the prospect of collecting taxes that differ across 12,000 state and local jurisdictions pose an insurmountable problem. Actually, since we have had spreadsheets for four decades, most sellers should be able to easily deal with this issue, and if they can't, they probably should not be in business. (As a practical matter, no one gives a damn if a seller occasionally makes a mistake in assessing taxes.  Getting 99-plus percent right should be easily doable.)

Will also wrongly claims that Amazon collects sales taxes in all 45 states which have them. While Amazon collects taxes on its direct sales, it does not collect taxes on the sales of its "affiliates," which account for more than 40 percent of its total sales.

As is noted in this piece, Amazon's founder Jeff Bezos owns the Washington Post. It would be interesting to see if a similarly misleading statement that reflected badly on Amazon would be allowed to stand uncorrected in the paper.

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Dalton Cooney argues in a Washington Post column that capping the deduction for state and local income taxes (SALT) is a good thing in a Washington Post column today. He makes the valid point that if wealthy suburbs want to tax themselves to have better schools than lower income inner city areas, there is no reason the federal government should subsidize this decision with a deduction on federal income taxes.

However, this misses the fact that the tax that is most likely to be affected by the loss of deductibility is the state income tax. In more liberal states like New York and California, this tax runs to more than 8 percent for high-end earners. (California has a top bracket of 13.3 percent.) These taxes are not paying for better schools for the children of the wealthy, but for redistributive policies that benefit lower-income people.

With the near-term prospect for federal measures in areas like extending health care coverage, quality child care, or free college very poor, if such measures are to advance anywhere it will be at the state level. By capping the deduction for SALT, the new tax bill will make it more difficult politically to pay for such initiatives. For this reason, the workarounds recently passed by New York, including replacing a portion of the income tax with a full deductible employer-side payroll tax, are a good thing.

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There has been an ongoing battle in major media outlets against public sector pensions. Papers like The New York Times and The Washington Post have regularly featured pieces telling readers that these pensions are unaffordable.

This crusade, carried on mostly in the news pages, has often taken bizarre twists. Back in 2011 the Washington Post had a front page article complaining about generous pensions that highlighted the story of former employer who was getting a pension of $520,000 a year. People who read through the article discovered that this former employee was a former administrator who was under indictment for fraud at the time, not the typical California employee.

In this vein, The New York Times had a piece on pensions in Oregon that highlighted the pension of an eye surgeon who had formerly been employed by the government who receives a pension of $76,000 a month. It then goes on to discuss the $46,000 a month pension of a former University of Oregon football coach.

While these pensions do sound exorbitant, there are two important points to keep in mind. First, pensions are part of worker's pay, just like their health care insurance and the money they get in their paycheck every month. The second is that these pensions are far from typical for either Oregon or public sector employees in general.

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We get that the Washington Post likes policies that redistribute income upward, but they should be able to argue the case for making the rich richer without turning logic on its head. Apparently, the paper lacks confidence in its position.

This piece also tells readers about a new initiative to promote women's businesses in Latin America:

"Among the members of the US delegation was Trump’s daughter and adviser, Ivanka, who on Friday morning announced a new $150 million US initiative to help women in Latin America access credit for businesses."

It would be useful if the piece explained something about this initiative. For example, is this $150 million (0.004 percent of annual federal spending) a grant that will have to be appropriated by Congress? Is it a loan fund, which would also require legislation? Is it a commitment from the Trump Foundation?

If the paper was not prepared to provide any information about this initiative, it should have explained why.

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I see my friend Jared Bernstein beat me to the punch in writing up the new data from Usual Weekly Earnings series. As he points out, the story for the median worker — those right at the middle of the income distribution — has not been good over the last year. Donald Trump doesn't seem to be making American great again for these folks.

Fortunately, there is a bit better story lower down on the income ladder, as we can see in the figure below.

Book3 17971 image002

Source: Bureau of Labor Statistics.

While real weekly earnings for the median worker have not gone anywhere in the last year, earnings for those at the 25th percentile and the 10th percentile are still headed up. Over the last three years, usual weekly earnings for the 10th percentile worker have risen by 4.8 percent and for 25th percentile worker by 6.5 percent. That's a pretty good story by almost any standard, although it doesn't make up for the weakness in the immediate aftermath of the housing crash, much less the three decades of wage stagnation that preceded the Great Recession.

Taking the longer three year period even the earnings for the median worker don't look bad, rising by 2.9 percent over this period. That's not great, but in context of 1.0 percent annual productivity growth, at least the median worker is getting her share of the gains. That contrasts with the period from the first quarter of 2007 to the first quarter of 2015 when median earnings rose by a total of just 1.2 percent.

It looks like tight labor markets are acting as expected towards the bottom end of the income ladder. The picture at the median has not been good over the last year or so, but these numbers are erratic. I expect better news in the second quarter at the median, but we'll see.

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In a Washington Post column, Fareed Zakaria gave us yet another of the sermon about how Republicans supported "free trade" before Trump. This is of course not true.

Republicans have done little or nothing to remove the barriers that protect doctors and other highly paid professionals from foreign competition. As a result, our doctors are paid roughly twice as much on average as their counterparts in other wealthy countries, costing us roughly $90 billion a year in higher medical expenses. This swamps the cost of the steel and aluminum tariffs that have gotten "free traders" so upset.

The trade deals have also been quite explicit about increasing protectionism in the form of longer and stronger patent and copyright protections. These protections (as in protectionism) quite explicitly redistribute money from the rest of us to folks like Bill Gates. They are incredibly costly in the sense that they are equivalent to extremely large tariffs, often raising the price of the affected product by a factors of ten or a hundred, the equivalent of tariffs of 1000 or 10,000 percent.

And, there is a huge amount of money involved. In the case of prescription drugs alone, patent and related protections cost us more than $370 billion a year, nearly 2.0 percent of GDP. Real free traders don't support this protectionism.

It is, of course, convenient for those pushing this agenda of upward redistribution to pretend that it is all just free trade and the free market, but this is nonsense. Unfortunately, you won't see this point made in the Washington Post. You can read about it in my (free) book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.

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We all know about the skills shortage where Harvard has to pay investment managers millions to lose the school a fortune on its endowment, Facebook can't find a CEO who can avoid compromising its customers' privacy, and restaurant managers apparently don't understand that the way to get more workers is to offer higher pay. The NYT gives us yet another article complaining about labor shortages.

The complaint is that restaurants have small profit margins and therefore can't afford to offer higher pay to their workers. The way markets are supposed to work is that businesses that can't afford to pay the market wage go out of business. This is why we don't still have half of our workforce employed in agriculture. Factories and other urban businesses offered workers better paying opportunities. Most farms could not afford to match the pay and therefore folded often with the farm owner themselves moving to new employment.

This is the story that we should expect to see with restaurants if there really is a labor shortage. We should start to see more rapidly rising wages. The restaurants that can't pay the market wage go under. That may not be pretty, but that's capitalism. We tell that to unemployed and low paid workers all the time.

For the record, we aren't seeing too much by way of rapidly rising wages to date. Over the last year, the pay of production and non-supervisory workers rose 3.2 percent. That's a bit better than the average of all workers of 2.7 percent, but not the sort of increase that we would expect if there is a serious shortage of labor. It is also worth mentioning that profit margins in business as a whole are near post-war highs as a result of the weak labor market created by the Great Recession, so we should expect some shift back to labor as the labor market tightens.

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The Post asserted that:

"[...]entering into a new TPP could unify Trump with other trading partners and put new pressure on Beijing to either allow more imports into China or risk being alienated by other Asian countries, that would now received new trade benefits as part of the deal."

Actually, the countries in the TPP will receive relatively few "new trade benefits" as a result of the TPP. Six of the other eleven countries in the pact already have trade deals with the United States, which means there are very few remaining barriers to be reduced. (One of the other five countries is Brunei, whose trade patterns will probably not cause China's government to lose much sleep.)

If the pact was intended to hurt China, its designers did not do a very good job. It has lax rules of origins requirements. In some cases, for example most car parts, an item with as little as 35 percent value added from TPP countries could qualify for preferential treatment.

This means, for example, that car parts produced in China, with Vietnam adding 35 percent of the value (possibly in a Chinese owned firm) would get preferential treatment under the TPP. Since these requirements are difficult to enforce rigorously, it is likely that some items with as much as 70 percent value-added coming from China will get preferential treatment under the TPP. That does not sound like an effective way to exclude Chinese products. (NAFTA's rules of origins for car parts required 62.5 percent of the value-added to come from the countries in the pact.) 

The TPP also includes provisions that will make member countries pay more money for prescription drugs due to longer and stronger patent and related monopolies. It also includes provisions on e-commerce that would likely make it more difficult to crack down on the sorts of abuses we are now hearing about from Facebook. These features, which are major parts of the pact, are not likely to help the United States build an effective coalition against China on trade or anything else.

The piece also tells readers that Trump has:

"[...]shown a general reluctance to enter into multilateral trade deals because he believes these allow the United States to be ripped off."

It is not clear how the Post knows what Trump "believes." It can tell readers what he says, but given the frequency with which he reverses his positions, it seems unlikely he believes anything.

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I'm not kidding, that's what a column by Isaac Stone Fish in The Washington Post told us. We all know the list of complaints against China. They subsidize their exports of many products, costing US workers their jobs. They deliberately prop up the dollar against the yuan, making US goods and services less competitive. Our companies complain that China takes their intellectual property (doesn't bother me).

But Fish's Post column tells us the real problem is that Starbucks and other companies looking to profit from the Chinese consumer market may be hit by a government promoted boycott. I suppose if I had a million dollars of Starbuck's stock, I would be concerned. After all, their profits could fall by 5–10 percent, lowering the stock price proportionately. (Actually, most non-stockholders gain in this story, as big fans of free trade already know. If China pays less to Starbucks in profits, the dollar will be lower, which means that we will have a lower trade deficit, other things equal.)

For the other 99.99 percent of the American people who don't own large amounts of stock in Starbucks or similarly situated companies, it doesn't look like a big deal. Of course, it is interesting to see what sort of arguments The Washington Post takes seriously enough to feature on its opinion page.

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The Washington Post is trying to scare people about budget deficits. Okay, that is not exactly news, it has been trying to scare people about deficits to justify cuts to Social Security and Medicare benefits and other programs for decades, but they are redoubling their efforts now. (In fairness, the Republican tax cut gave them more material.)

Heather Long gives us the classic story:

"The United States is able to run such high deficits because the U.S. Treasury turns around and sells U.S. debt to investors around the world. Right now, a lot of people want to buy U.S. government bonds, even though America already has $15 trillion in debt owned by the public. But the problem is no one knows when people might say enough is enough and stop buying U.S. debt — or demand much higher rates of return.

"Even if the nightmare scenario doesn’t materialize, deficits are a drag on the economy. Investors opt to buy government debt instead of making the type of private investments that create jobs or raise wages, economists warn."

Okay, so the bad story is that the large amount of bonds issued to finance the deficit will lead to high interest rates. (This actually skips a step. The Fed could buy these bonds, ensuring rates don't rise, as it did in its quantitative easing days. Its ability to buy bonds is limited by inflation concerns.) But Long tells us that even if interest rates don't rise, government borrowing is still crowding out investment. Really?

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Many more of us are food consumers than farmers, yet somehow the prospect that a trade war with China will lead to lower prices for soybeans and other agricultural products is never reported as a positive development. Undoubtedly, the pain to farmers is much more important to them than the small benefit that many of us may see in the form of lower food prices, but reporters have felt it important to tell us about the small cost that many of us might see as a result of higher steel and aluminum prices as a result of Trump's tariffs on these products.

This seems like a serious asymmetry in reporting on this topic.

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Once again Robert Samuelson takes a big swing and misses in his Washington Post column today. He argues that schools in states like West Virginia, Kentucky, and Oklahoma are underfunded and unable to pay their teachers a decent wage because of the cost for caring for the elderly.

This is wrong for two obvious reasons. First, these are all low-tax states. They could try something like raising taxes on higher income households. This is one way to get money.

The other problem is that a main reason why it costs so much to care for our elderly is that we pay our doctors and drug companies twice as much for their services and products as people in other wealthy countries. If we paid the same prices for our health care as people in Canada or Germany, it would free up more than $1 trillion annually for schools and other worthwhile items.

But The Washington Post doesn't like to call attention to the incomes of the affluent, they would rather beat up on senior citizens.

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I see that five former Democratic chairs of the Council of Economic Advisers warned of an impending debt crisis in a column in the Washington Post. They tell us that current and projected future levels of deficits and debts will soon send interest rates soaring, crashing the economy. While I am skeptical about the basic proposition for a number of reasons, perhaps most importantly Japan's persistently low interest and inflation rates in spite of a debt-to-GDP ratio that is two and a half times ours, but let me offer a solution: selling off patent monopolies.

We can sell off patent monopolies in all sorts of areas, auctioning off as many as are necessary to make our deficit hawks happy. For example, we can sell off a patent on the idea of turning left at a fork in the road. If people try to get around the patent by taking three rights, we can sell off the patent on turning right at the fork in the road. And of course, we can sell off a patent on turning around and going in the opposite direction to take care of these wise asses.

We can sell off patents on boiling water and making ice. We can make as long a list as we like, there are no shortage of items which we can turn into patent monopolies.

Is this horrible economic policy? Of course it is, but our deficit hawks never pay attention to the obligations we impose on future taxpayers by granting patent and copyright monopolies, they just look at the debt. So, if that s all they care about, let's solve the debt problem by issuing more patent and copyright monopolies and make many of our country's leading economists happy.

And, just to be clear, we are talking about enormous sums of money. In the case of prescription drugs alone, patent and related protections cost us around $370 billion a year. This is almost 2.0 percent of GDP or more than twice the burden of interest service on the debt, net of money refunded by the Fed. (This is discussed in my [free] book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.)

We could clearly raise enough money by selling off various patent and copyright monopolies to get our debt down to whatever size is needed to make our economists happy. It's stupid policy, but as the old saying goes, economists are not very good at economics.

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Seriously, the NYT ran a piece with the headline, "why Trump's tariffs could raise the cost of a hip replacement." The point of the piece is that we now import a substantial amount of medical equipment and devices from China. This means that if we have to pay 25 percent more, then the price of these items in the United States will be higher. This means that operations like hip replacements that might require some equipment now purchased from China will cost more.

Okay, let's try to use some numbers here. The piece tells us that we import $3 billion a year in medical equipment from China. According to the Commerce Department, we spent over $90 billion on medical equipment and devices last year (National Income and Product Accounts, Table 5.5.5U, Line 6). This means that the items imported from China came to a bit more than 3 percent of the total.

If the tariffs are passed on in full (a very questionable assumption, both because of the large market here and the fact that actual production costs are a small fraction of the price of these patent-protected items), then the price of medical equipment would rise on average about 0.8 percent. Most of the cost of major surgeries like hip replacements go to the doctor and hospital, not the artificial device, but let's say that half of the cost is the device itself.

This means that the cost of your hip replacement surgery will rise by a whopping 0.4 percent as a result of the Trump tariffs! The NYT should look for some better ammunition if it wants to seriously push its case.


Robert Salzberg points out to me that if the artificial hip itself were produced in China, then the price increase resulting from the tariff would be 25 percent on the implant, not 0.8 percent as I assume above. In this post, I assumed that implants are as likely to be produced in China as medical equipment more generally, but Robert's point is worth noting.

He also points me to an old NYT piece on medical travel, which gives the price of manufacturing an implant at $350 in the United States and $150 in Asia. This piece gives further evidence that any increases in the price of implants from China due to the tariff will be virtually invisible in the cost of the procedure.

It is also yet another reminder of the enormous potential gains from free trade in medical travel. If any of our politicians actually supported free trade, the gains from setting up an institutional structure (i.e. rules for insurers and malpractice) to facilitate medical travel would swamp the gains from trade deals like NAFTA and the TPP. Unfortunately, most politicians are staunchly protectionist when it comes to measures that might reduce the income of doctors, hospitals, and medical equipment manufacturers. They only are interested in reducing trade barriers when most of the losers are less-educated and less politically powerful workers.

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I guess "terrific" doesn't mean what it used to mean. According to the Washington Post, the average monthly before-subsidy premium for a plan purchased in the health care exchanges was $621, an increase of 30 percent from 2017. For some reason, this rise in premiums doesn't seem to be getting as much attention as the increase in premiums while President Obama was still in office.

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Last month New York Governor Andrew Cuomo signed into effect a law that created an optional employer-side payroll tax as a partial substitute for the state income tax. Since then the word in many news outlets is that the take-up is likely to be low since the new tax is complicated.

This complexity line is especially being pushed by conservatives, as in this Newsday article, since the point of the tax is to develop a workaround for the limit on deductions for state and local income taxes (SALT) in the new tax bill the Republicans pushed through Congress last year. This bill limited the SALT deduction to $10,000. This limit was quite explicitly put in place to hit more liberal high tax states like New York and California. Their plan was that if these states wanted to provide higher quality services to their residents and a stronger social safety net, they would pay a big price for it.

The employer-side payroll tax is a way to preserve deductibility. The expectation is that an employer-side payroll tax will come out of wages. To take a simple case, suppose a worker gets paid $200,000 a year. If her employer goes the payroll tax route then the employer will be a paying a 5 percent tax, or $10,000, on the worker's $200,000 salary. We would typically expect this to result in the worker seeing a pay cut of $10,000 so that she only earns $190,000.

While workers don't like pay cuts, in this case, it should not be an issue, since the payroll tax saves them $10,000 on her state income taxes. This means she has just as much money with $190,000 annual pay as she did before when she got paid $200,000 but owed the state $10,000 in state income taxes.

The big difference is that she now faces federal income taxes on just $190,000 of income, not her former $200,000 income. Since this worker is in the 32 percent federal tax bracket, this shift saved her $3,200 off her income taxes (32 percent of $10,000). And contrary to what is implied in the Newsday piece, she gets this savings whether or not she itemizes on her tax return.

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I am Dawn Niederhauser, CEPR’s Director of Development, and I am highjacking Beat the Press to make an important announcement. Many of you regular readers of Beat the Press may have received an email from me about this, but in case you missed the news, I am writing to let you know that there is a new way to support Dean and Beat the Press

As you may know, Dean stepped down as CEPR’s Co-Director in January so that he could devote more time to his writing. We are thrilled that he will continue to "beat the press" in his new position as a CEPR Senior Economist. And as CEPR’s Director of Development, I am particularly thrilled that he has agreed to provide additional commentary via the Beat the Press page on Patreon.

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Beat the Press will continue in its current format and will be free to all, as always. Dean has always made my job really difficult by insisting that all of CEPR’s content, even his books, be available for free. So we are mindful that offering any content that is only available to subscribers could be seen as going against precedent.

But honestly? Times are tough. CEPR has relied on foundation funding for the bulk of its operating costs since its inception. Foundation funding is becoming harder and harder to come by. We are looking to find ways to expand our funding base. After evaluating all the options, we decided that Patreon was the best avenue for creating a dedicated funding stream for Beat the Press. That seemed to us to be a “fair trade.”

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I would agree with pretty much all of Paul Krugman's criticisms of Donald Trump's trade war with China, but I would strongly disagree with one of his criticisms of China. He tells readers:

"In some ways, China really is a bad actor in the global economy. In particular, it has pretty much thumbed its nose at international rules on intellectual property rights, grabbing foreign technology without proper payment."

The issue here is who set the rules and what is proper payment.

The problem is that it was largely the United States that has set the rules in this story and it is demanding ever more money for items protected by its patent and copyright monopolies. We do this through our control of trade arrangements, most importantly the WTO where we had the TRIPS provisions inserted as a late entry to the Uruguay Round that was concluded in 1994. These rules were about forcing developing countries to pay more money to companies like Pfizer and Microsoft for everything from drugs and medical equipment to seeds and software. It shouldn't be surprising that developing countries like China might not like these rules.

The idea that developing countries would seek to get around rules established by their richer counterparts should not be alien to people in the United States. The United Kingdom had made it illegal to transfer blueprints for steam engines out of the country in order to preserve its competitive advantage. Francis Lowell famously memorized plans on a trip there in order to build the first steam-powered factory in the United States. The United States refused to recognize UK copyrights for much of the 19th century. So if China is not following the rules today, it has an important role model it can point to.

There is certainly a valid point that the cost of innovation must in some way be shared internationally. Certainly, the US shouldn't be expected to foot the bill for the whole world. But does Krugman really want to argue that patent and copyright monopolies are the most efficient mechanisms available? We should be looking for more modern mechanisms that focus on sharing rather than bottling up knowledge, with China and other developing countries having a serious voice in their construction.

On this topic, it is important to note that China may have fired a serious shot over the bow this week. It announced a major initiative to promote the manufacture and use of generic drugs. I have no idea if this has anything to do with Donald Trump's trade war, but this could be a very big deal if China is going to be aggressively pushing generic drugs both in its domestic market and internationally. The fact is, the "rules" in many areas are not very clear (it is much harder to get a patent on a drug in India than the United States) and if China is going to press the boundaries, look for a really big hit to Pfizer and Merck's stock prices.

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