January 6, 2017 (Jobs Byte)

January 6, 2016

I see from the Twitterverse that this NYT column by Robert Leonard, on why rural voters don't like Democrats, touched some nerves. The main complaint stems from Leonard's comment that rural voters see themselves as subsidizing the big cities:

"In this view, blue counties are where most of our tax dollars are spent, and that’s where all of our laws are written and passed. To rural Americans, sometimes it seems our taxes mostly go to making city residents live better. We recognize that the truth is more complex, particularly when it comes to social programs, but it’s the perception that matters — certainly to the way most people vote."

The gist of the angry Twitter comments was effectively "who cares about the hicks' perceptions, the reality is that the tax subsidies go the other way."

Well, this might a good teaching moment. Only the ignorati would focus exclusively on tax and spending flows. As everyone who has read the good book (Rigged — it's free) knows, the government directs income flows in a wide variety of ways that go beyond normal tax and spending flows.

UPDATE 1/6/2017: The federal indictment against Philippe has been unsealed. It is available here. 

Guy Philippe, a paramilitary coup leader and DEA most-wanted fugitive who was elected to Haiti’s Senate late last year, was arrested on Thursday, just days before he would have been sworn into office and obtained immunity. Philippe has been wanted under a sealed drug indictment in the United States for years, but previous attempts at arresting him failed. Last year, the DEA confirmed to me that they maintained “apprehension authority” for Philippe, but would not confirm if any active efforts were underway to do so. He will now be extradited to the United States to face charges, though no indictment has been unsealed as of Thursday night.

Although Philippe has spent most of the past decade in Haiti’s rural Grand Anse department where he maintains strict control, he became more active in the country’s politics over the past year as he campaigned for senator. President-elect Jovenel Moise, from the PHTK party, openly campaigned with Philippe and his party allied with Philippe’s early in 2016. A PHTK adviser, Renald Luberice, tweeted shortly after the arrest that it was “illegal and arbitrary.” Fires and roadblocks almost immediately went up in Phillipe’s hometown and surrounding areas, according to local news reports.

After last year’s elections were scrapped due to fraud and Michel Martelly left office without an elected successor, Philippe became one of the most outspoken critics of the new interim government that took over. In February 2016, he threatened "civil war" if elections were not held by that April. In May, with elections still yet to occur, Philippe was alleged to be the ringleader of an armed raid on a police station in Les Cayes, in southern Haiti. Elections were eventually held in November 2016 and Philippe won a seat in the Senate, representing the Grand Anse department. Parties allied with PHTK and Philippe will make up the majority of the incoming parliament to be sworn in next week.

Over the summer, a source close to the Haitian government, who requested anonymity, suggested that the US would move against Philippe before he became Senator to “send a message” to the incoming parliament, which includes other figures accused of corruption and drug trafficking. Now that appears to have happened, but not before he helped his allies secure an electoral victory this past November.

Philippe, however, is widely believed to have been involved in murders, atrocities and other human rights abuses over the past 20 years, while serving a political agenda backed by Haiti’s elite and their international allies. He received training by the US military while a cadet in Ecuador in the early 90s before returning to Haiti in 1995. However former president Jean Bertrand Aristide had disbanded the military that same year, due its long history of involvement in atrocities, human rights abuses and coup d’etats. Philippe, who has, in his own words, “always dreamed of becoming a soldier,” instead became police chief in the Delmas neighborhood of Haiti’s capital Port-au-Prince. During his tenure, according to Human Rights Watch, “dozens of suspected gang members were summarily executed, mainly by police under the command of Inspector Berthony Bazile, Philippe’s deputy.”

In 2000, Philippe was accused of orchestrating an attempted coup d’etat against president Rene Preval, but before he could be apprehended he fled to the neighboring Dominican Republic. At first, the Dominican authorities told the Haitian government they would help arrest the fugitive police officer and his allies. According to a former Haitian government official, who requested anonymity, Dominican police apprehended Philippe and were set to hand him over to Haitian authorities, but later reversed themselves. Philippe would remain free until this Thursday.

From his safe-haven in the Dominican Republic, Philippe was accused of leading attacks on Haitian police stations and supporters of president Aristide, who had just been elected for a second time. In an interview with author Peter Hallward, Philippe denied his involvement but added, “don’t worry, when the time is right people will learn what really happened.” At the time, the Aristide administration was under attack both internally and externally. A “civil society” group calling itself the Group of 184, led by Evans Paul, Andy Apaid and Reginald Boulos among others (all now political allies or financiers of PHTK), advocated for Aristide’s ouster. Philippe, when asked about the role of the Group of 184 in the various police station assaults, responded, “I know that certain political leaders and representatives of civil society can help you with this, since they know everything about what happened … Since they’re cowards, however, they’ll just tell you that they know nothing about it.”

Dean Baker
Truthout, January 2, 2017

Dean Baker
The Hankyoreh, January 1, 2017

It is really amazing how the political and economic establishment types feel the need to deny that trade can actually have a negative impact on manufacturing jobs and total employment in their arguments against Donald Trump's trade policies. George Will gave us a great lesson in this silliness in his column today.

Among the highlights were the claim that the loss of manufacturing jobs in the years after 2000 had little to do with the explosion of the trade deficit to almost 6 percent of GDP ($1.1 trillion in today's economy), but rather was almost all due to productivity. There are two points about this one that should immediately lead numerate types to tear up the column.

First, we always have productivity growth, that was not something that just happened in the decade of the 2000s. In spite of productivity growth, manufacturing employment changed little from 1973 to 1997, when our trade deficit first began to explode following the East Asian financial crisis and the surge in the value of the dollar. While manufacturing was declining as a share of total employment, the level remained roughly even (with cyclical ups and downs) at 17.5 million. Employment then plunged to around 12 million as the trade deficit soared. Productivity growth was not the new part of the story, the trade deficit was. (Susan Houseman has done excellent research showing that manufacturing productivity growth in the 2000s was almost entirely in the information technology sector, which means it will not explain a loss of jobs in sectors like steel and furniture.)

The other troubling item to numerate readers of Will's column is the implicit claim that if we had been producing an additional 6 percentage points of GDP worth of manufactured goods in the U.S. (e.g. another $1.1 trillion of manufacturing goods annually in today's economy) it wouldn't require any new workers. That sounds really cool. After all, it takes more than 12 million workers to produce the current $1.7 trillion in manufacturing output in the United States, so Will apparently thinks we can increase this output by 60 percent without hiring any new workers? That would be quite a surge in productivity growth, something our slow growing economy could badly use. Sounds like a great argument for protectionist measures if anyone really believed it.

Neil Irwin used an Upshot column to address the issue of whether Donald Trump can acheive the 4.0 percent annual growth rate he has promised over the next decade. He argues that insofar as it is possible it is likely to involve two items that Trump voters may not like: job displacing innovations and increased immigration. While Irwin is right in identifying these two factors in promoting growth, there are few additional points to add to his discussion.

In the case of job displacing innovation, Irwin points to the prospect of self-driving trucks destroying up to 1.7 million long-haul trucking jobs over the next decade. Irwin notes that these jobs pay an average of $42,500 a year to workers who generally do not have a college education. (Many truck drivers do earn considerably more than this amount, especially if they are in a union.)

While the spread of self-driving trucks is likely to cost a substantial number of jobs, the savings should in principle allow other workers to be paid more. For example, the remaining workers involved in loading and offloading trucks (who might be supervising robots), should be a position to get higher pay. This was the pattern among longshoreman, as pay increased as fewer workers were needed for the job. If there are strong unions and/or a tight labor market, this can be the outcome.

The tight labor market issue brings up a second point. The Federal Reserve Board has been actively working to limit the number of jobs. This was the purpose of its rate hike earlier this month. The point was to slow demand growth in the economy and thereby reduce the rate of job creation. The rationale for this move was the fear of inflation.

Whether or not the Fed is right to fear inflation, there is a simple point here that everyone should understand. The Fed is deliberately acting to limit the number of jobs in the economy. It is more than a bit bizarre that we have people worried that automation will destroy large numbers of jobs who are fine with the Fed raising interest rates to destroy jobs. If we think there are too few jobs in the economy, then we should be very upset that the Fed, an arm of the government, is trying to keep people from getting jobs.

Dean Baker
The International Economy, 2016

Dean Baker
Truthout, December 26, 2016

Don't worry, I'm not advocating mass murder; I want to put to death a silly myth about Obamacare that keeps getting spread by people who should know better. The basic story is that Obamacare is dependent on getting large numbers of young and healthy people into the system. The premiums these people pay will help to cover the costs incurred by older and less healthy people.

The latest repetition of this myth appears in a NYT editorial urging Republicans not to destroy the Affordable Care Act (ACA). The piece notes the sharp increases in premiums last year and then told readers:

"Still, the cost of insurance, deductibles and co-payments is too high for many people, especially middle-class families that earn too much to qualify for subsidies. But the solution is not to take away the benefits of the law but to strengthen it. Costs could be lowered if more young and healthy people were encouraged to sign up to spread costs over a larger pool of people."

This comment wrongly implies that the problem of the system is that not enough young people have signed up. This is not true, the age distribution of enrollees has little impact on the cost of the program. While the distribution of premiums works slightly against the young, it is not enough to have a substantial impact on the finances of the system.

The Kaiser Family Foundation showed that even an extreme age skewing of enrollees would raise costs by less than 2.0 percent. It matters much more whether there is a skewing based on health conditions.

To see this point, think of the premium people pay as a tax. Under the ACA, people in the oldest age bracket (ages 55 to 64) pay premiums that are three times as large as people in the youngest age bracket (ages 18 to 34). This means that each older person pays three times as much into the system as a younger enrollee. This would mean, other things equal, we should value getting an older enrollee into the exchanges three times as much as a younger enrollee.