The Washington Post repeated a standard theme in reporting on Trump’s trade war with China, that our main concern is not the trade deficit but rather China’s alleged theft of our intellectual property. I have written about this issue before, but there is an important aspect that seems to have gone largely unmentioned, China is likely to have more at risk in this story than the United States.
Using the purchasing power parity measure (clearly the appropriate one for this issue), China’s economy is already 20 percent larger than the US economy. In a decade, it will be twice the size of the US economy. Given these facts, it is almost certain that China will be spending far more on research and creative work than the United States. This means that it will have far more to lose than the United States if there is no internationally agreed upon mechanism for sharing the cost.
This doesn’t mean stronger and longer copyright protection as our policymakers would insist. That is a great way to redistribute income upward, which has been a major goal of economic policy over the last four decades, but not a very efficient way to support innovation and creative work in the 21st century.
We can and should be looking to more modern mechanisms than these relics from the feudal guild system. (I have some ideas in chapter 5 of my [free] book Rigged.) However, the point is that China actually has more interest in a workable mechanism for sharing costs than the United States does. Anyone looking to benefit the US economy as a whole would be noting this point and the enormous leverage it gives us. On the other hand, if the goal is simpler to make Microsoft, Pfizer, and Disney richer, and then wring our hands over inequality, the current focus of policy makes sense.
The Washington Post repeated a standard theme in reporting on Trump’s trade war with China, that our main concern is not the trade deficit but rather China’s alleged theft of our intellectual property. I have written about this issue before, but there is an important aspect that seems to have gone largely unmentioned, China is likely to have more at risk in this story than the United States.
Using the purchasing power parity measure (clearly the appropriate one for this issue), China’s economy is already 20 percent larger than the US economy. In a decade, it will be twice the size of the US economy. Given these facts, it is almost certain that China will be spending far more on research and creative work than the United States. This means that it will have far more to lose than the United States if there is no internationally agreed upon mechanism for sharing the cost.
This doesn’t mean stronger and longer copyright protection as our policymakers would insist. That is a great way to redistribute income upward, which has been a major goal of economic policy over the last four decades, but not a very efficient way to support innovation and creative work in the 21st century.
We can and should be looking to more modern mechanisms than these relics from the feudal guild system. (I have some ideas in chapter 5 of my [free] book Rigged.) However, the point is that China actually has more interest in a workable mechanism for sharing costs than the United States does. Anyone looking to benefit the US economy as a whole would be noting this point and the enormous leverage it gives us. On the other hand, if the goal is simpler to make Microsoft, Pfizer, and Disney richer, and then wring our hands over inequality, the current focus of policy makes sense.
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We know that the folks who run major corporations are not terribly competent, but are they really less able to defend their companies’ interest in signing contracts than an ordinary worker who may not even have a high school degree? That apparently is the view of our elites as indicated by this Washington Post article.
The piece tells us that the Trump administration is demanding an end to Chinese “policies that force foreign companies to surrender trade secrets in return for access to the Chinese market.”
The Post apparently couldn’t find anyone who would point out that this push by the Trump administration is rather pathetic. No one forces US corporations to do business in China. If they share technology as a condition of doing business, it is apparently because they consider the arrangement to be in their interest. There is no obvious reason why the US government should hold their hands and tell them not to sign deals they consider profitable.
By contrast, the Supreme Court ruled that such hand-holding was not necessary for workers under current law. It said nothing prevents workers from signing away their right to class-action lawsuits as part of an employment contract. So the accepted wisdom among our elites is that our largest corporations need a type of protection that ordinary workers do not get.
And we really have to wonder why we see so much income inequality?
Note: This corrects an earlier version that mischaracterized the Supreme Court ruling. Thanks to Robert Salzberg for bringing this to my attention.
We know that the folks who run major corporations are not terribly competent, but are they really less able to defend their companies’ interest in signing contracts than an ordinary worker who may not even have a high school degree? That apparently is the view of our elites as indicated by this Washington Post article.
The piece tells us that the Trump administration is demanding an end to Chinese “policies that force foreign companies to surrender trade secrets in return for access to the Chinese market.”
The Post apparently couldn’t find anyone who would point out that this push by the Trump administration is rather pathetic. No one forces US corporations to do business in China. If they share technology as a condition of doing business, it is apparently because they consider the arrangement to be in their interest. There is no obvious reason why the US government should hold their hands and tell them not to sign deals they consider profitable.
By contrast, the Supreme Court ruled that such hand-holding was not necessary for workers under current law. It said nothing prevents workers from signing away their right to class-action lawsuits as part of an employment contract. So the accepted wisdom among our elites is that our largest corporations need a type of protection that ordinary workers do not get.
And we really have to wonder why we see so much income inequality?
Note: This corrects an earlier version that mischaracterized the Supreme Court ruling. Thanks to Robert Salzberg for bringing this to my attention.
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Donald Trump may not be very good at running the government for the benefit of the people who live in the country (or the world), but he sure knows how to use it to enrich himself and his friends. The NYT apparently forgot to mention this fact in a piece on companies applying for exemptions to tariffs.
When countries impose tariffs or other import restrictions they usually allow for some exemptions in special cases. One of the reasons that economists generally are opposed to tariffs is that these exemptions create enormous opportunities for corruption.
Imagine that someone importing $50 million in steel faced a 25 percent tariff. She would save $12.5 million if she could get an exemption. Many businesspeople would be happy to share a portion, perhaps a very substantial proportion, of this $12.5 million in savings with the politician(s) who made it possible. This could mean campaign contributions, sweetheart contracts with their businesses, or even outright cash payments.
It is very plausible that the Trump family and/or others in his administration, who have shown an open contempt for ethics norms, plan to profit personally from granting these tariff exemptions. It would have been worth mentioning this possibility in this piece.
Donald Trump may not be very good at running the government for the benefit of the people who live in the country (or the world), but he sure knows how to use it to enrich himself and his friends. The NYT apparently forgot to mention this fact in a piece on companies applying for exemptions to tariffs.
When countries impose tariffs or other import restrictions they usually allow for some exemptions in special cases. One of the reasons that economists generally are opposed to tariffs is that these exemptions create enormous opportunities for corruption.
Imagine that someone importing $50 million in steel faced a 25 percent tariff. She would save $12.5 million if she could get an exemption. Many businesspeople would be happy to share a portion, perhaps a very substantial proportion, of this $12.5 million in savings with the politician(s) who made it possible. This could mean campaign contributions, sweetheart contracts with their businesses, or even outright cash payments.
It is very plausible that the Trump family and/or others in his administration, who have shown an open contempt for ethics norms, plan to profit personally from granting these tariff exemptions. It would have been worth mentioning this possibility in this piece.
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That was the claim in the headline of a New York Times editorial. It is clearly wrong for the simple reason that we are not currently giving hungry kids anywhere near enough money to pay for the tax cuts.
The budget for food stamps, the program being targeted for cuts, is $73 billion a year or 1.7 percent of total spending. The tax cuts are projected to cost roughly $150 billion a year, an amount equal to 3.4 percent of current spending. Even if we cut the food stamp budget by a quarter, it would cover less than 15 percent of the cost of the tax cut.
The reality is that the amount of money at stake in the food stamp debate is relatively small in terms of the federal budget. The Republicans like to beat up on the program for political purposes. They want people to believe that all of their tax dollars are going to pay for food stamps, with the idea that the people who receive these benefits are all African American, Hispanics, or immigrants from various “shithole countries.”
The New York Times is helping the Republicans in this effort by implying that real money for the federal government is at stake. While these benefits may make a huge difference in the well-being of tens of millions of low- and moderate-income people, they make very little difference in the federal budget. It is unfortunate that the NYT is so intent on obscuring this simple fact.
That was the claim in the headline of a New York Times editorial. It is clearly wrong for the simple reason that we are not currently giving hungry kids anywhere near enough money to pay for the tax cuts.
The budget for food stamps, the program being targeted for cuts, is $73 billion a year or 1.7 percent of total spending. The tax cuts are projected to cost roughly $150 billion a year, an amount equal to 3.4 percent of current spending. Even if we cut the food stamp budget by a quarter, it would cover less than 15 percent of the cost of the tax cut.
The reality is that the amount of money at stake in the food stamp debate is relatively small in terms of the federal budget. The Republicans like to beat up on the program for political purposes. They want people to believe that all of their tax dollars are going to pay for food stamps, with the idea that the people who receive these benefits are all African American, Hispanics, or immigrants from various “shithole countries.”
The New York Times is helping the Republicans in this effort by implying that real money for the federal government is at stake. While these benefits may make a huge difference in the well-being of tens of millions of low- and moderate-income people, they make very little difference in the federal budget. It is unfortunate that the NYT is so intent on obscuring this simple fact.
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While the NYT insists that its policy is to not read people’s minds and attribute motives (therefore it will never say Donald Trump “lied”), for some reason it keep reading minds and attributing motives. A piece in today’s paper on Trump’s plan to reorganize the government told readers:
“The core of Mr. Trump’s safety net policy is an expansion of work requirements to foster self-sufficiency among recipients of food assistance, Medicaid and housing subsidies to reduce dependence on the government.”
The next paragraph told readers that,
“Its real purpose, advocates for poor people claim, is to kick hundreds of thousands of the needy off the federal rolls, to cut taxes for the rich.”
It’s good that the paper gave the view of advocates for the poor, but it had just asserted that the policy is “to foster self-sufficiency among recipients of food assistance.” In fact, research shows that work requirements do not increase self-sufficiency among the poor. Since the Trump administration is pursuing a policy that research indicates will not actually lead to greater self-sufficiency, it is reasonable to conclude that this is not actually the goal of the policy.
But again, there is no need for the paper to attribute motives. It should just tell readers that the Trump administration claims its goal is to increase self-sufficiency, but the evidence is that the policy will most likely have the opposite effect.
While the NYT insists that its policy is to not read people’s minds and attribute motives (therefore it will never say Donald Trump “lied”), for some reason it keep reading minds and attributing motives. A piece in today’s paper on Trump’s plan to reorganize the government told readers:
“The core of Mr. Trump’s safety net policy is an expansion of work requirements to foster self-sufficiency among recipients of food assistance, Medicaid and housing subsidies to reduce dependence on the government.”
The next paragraph told readers that,
“Its real purpose, advocates for poor people claim, is to kick hundreds of thousands of the needy off the federal rolls, to cut taxes for the rich.”
It’s good that the paper gave the view of advocates for the poor, but it had just asserted that the policy is “to foster self-sufficiency among recipients of food assistance.” In fact, research shows that work requirements do not increase self-sufficiency among the poor. Since the Trump administration is pursuing a policy that research indicates will not actually lead to greater self-sufficiency, it is reasonable to conclude that this is not actually the goal of the policy.
But again, there is no need for the paper to attribute motives. It should just tell readers that the Trump administration claims its goal is to increase self-sufficiency, but the evidence is that the policy will most likely have the opposite effect.
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No, they would never attribute such motives to political actors, but for some reason, the paper feels it can tell us that they want to separate the food stamp program from agricultural appropriations “in hopes of cutting costs.” While it is certainly possible that the motives of the Koch-related entities referred to in this piece is really to save the government money, there are reasons for questioning this view.
The government is projected to spend $73 billion on the food stamp program this year, or 1.7 percent of total spending. Even large cuts to this program would have only limited effects on the federal budget. These Koch-related entities have mostly been little troubled by the $716 billion that the federal government will spend on the military this year. They also seem little troubled by privatizing public services like prisons, or student loan debt collection, which both have been shown to raise costs.
On the other hand, we know that many people get enraged over spending on programs like food stamps, with the idea that the beneficiaries are all African American and Hispanic, and that a large portion of there tax bill is going to them. Many Republican politicians have sought to highlight spending on such programs in election campaigns, so it is certainly plausible that the Koch-related entities want to make this process easier for their political allies.
The best solution here is to not ascribe motives, which the NYT reporters do not know. This is supposed to be the policy of the paper (it will not say that Donald Trump “lied,” but for some reason, it seems unable to practice it consistently).
The piece also refers to the “$3 billion Community Development Block Grant Program.” For those not very familiar with the federal budget (i.e. 99.9 percent of NYT readers) this program costs us a bit less than 0.07 percent of the federal budget.
No, they would never attribute such motives to political actors, but for some reason, the paper feels it can tell us that they want to separate the food stamp program from agricultural appropriations “in hopes of cutting costs.” While it is certainly possible that the motives of the Koch-related entities referred to in this piece is really to save the government money, there are reasons for questioning this view.
The government is projected to spend $73 billion on the food stamp program this year, or 1.7 percent of total spending. Even large cuts to this program would have only limited effects on the federal budget. These Koch-related entities have mostly been little troubled by the $716 billion that the federal government will spend on the military this year. They also seem little troubled by privatizing public services like prisons, or student loan debt collection, which both have been shown to raise costs.
On the other hand, we know that many people get enraged over spending on programs like food stamps, with the idea that the beneficiaries are all African American and Hispanic, and that a large portion of there tax bill is going to them. Many Republican politicians have sought to highlight spending on such programs in election campaigns, so it is certainly plausible that the Koch-related entities want to make this process easier for their political allies.
The best solution here is to not ascribe motives, which the NYT reporters do not know. This is supposed to be the policy of the paper (it will not say that Donald Trump “lied,” but for some reason, it seems unable to practice it consistently).
The piece also refers to the “$3 billion Community Development Block Grant Program.” For those not very familiar with the federal budget (i.e. 99.9 percent of NYT readers) this program costs us a bit less than 0.07 percent of the federal budget.
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An NYT article that touted the strength of the US economy as a defense against the negative effects of a trade war included an assertion from Spencer Dale, the chief economist at BP, that “trade wars won’t sharply curtail economic activity, unless they cause businesses to lose confidence.” Actually, the most immediate effect of the tariffs being touted by Donald Trump is to raise taxes, which would reduce consumption, other things equal.
For example, if Trump imposes a 20 percent tariff on $500 billion of imports from China, this would be a $100 billion annual tax increase (roughly $1 trillion over a 10-year budget horizon or 0.5 percent of GDP). This would be pulling a substantial amount of money out of consumers’ pockets. The lost demand would be offset insofar as it leads to a reduction in the trade deficit, however, there would be little gain if the result were to replace imports from China with imports from Vietnam or other countries. While the prospect of a trade war could have a dampening impact on investment in the longer term, the most immediate impact is likely on consumption.
An NYT article that touted the strength of the US economy as a defense against the negative effects of a trade war included an assertion from Spencer Dale, the chief economist at BP, that “trade wars won’t sharply curtail economic activity, unless they cause businesses to lose confidence.” Actually, the most immediate effect of the tariffs being touted by Donald Trump is to raise taxes, which would reduce consumption, other things equal.
For example, if Trump imposes a 20 percent tariff on $500 billion of imports from China, this would be a $100 billion annual tax increase (roughly $1 trillion over a 10-year budget horizon or 0.5 percent of GDP). This would be pulling a substantial amount of money out of consumers’ pockets. The lost demand would be offset insofar as it leads to a reduction in the trade deficit, however, there would be little gain if the result were to replace imports from China with imports from Vietnam or other countries. While the prospect of a trade war could have a dampening impact on investment in the longer term, the most immediate impact is likely on consumption.
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Well, the Journal did run a piece decrying generational inequality, but naturally, it went the other way. The issue is the projected rise in the cost of Social Security and retiree pensions, due to the aging of the population. Our population has always been aging due to tragic fact that better living standards and improved health care coverage allow people to live longer lives.
The Journal attempted to hide this simple fact from its readers by beginning its chart of old age dependency ratios in 1980 when all the baby boomers were in the workforce. If it had begun the chart in 1950, it would have shown a sharp rise in the old-age dependency ratio between 1950 and 1980 from 0.138 to 0.196. This was associated with (horrors) large increases in Social Security taxes over this period. These tax increases did not prevent workers in this period from seeing rapid gains in living standards because the benefits of growth were widely shared.
Real wages are projected to continue to rise in the decades ahead. Average wages are projected to be more than 35 percent higher in twenty years than they are today. The WSJ apparently did not have room to mention this fact in its piece on generational inequality.
It is true that most workers have not been sharing in wage gains in recent decades. This is due to the fact they have been concentrated at the top, with folks like corporate CEOs, Wall Street types, and doctors getting a disproportionate share of growth. This is a huge problem for today’s young, but it is a story of intra-generational inequality, not inter-generational inequality.
Well, the Journal did run a piece decrying generational inequality, but naturally, it went the other way. The issue is the projected rise in the cost of Social Security and retiree pensions, due to the aging of the population. Our population has always been aging due to tragic fact that better living standards and improved health care coverage allow people to live longer lives.
The Journal attempted to hide this simple fact from its readers by beginning its chart of old age dependency ratios in 1980 when all the baby boomers were in the workforce. If it had begun the chart in 1950, it would have shown a sharp rise in the old-age dependency ratio between 1950 and 1980 from 0.138 to 0.196. This was associated with (horrors) large increases in Social Security taxes over this period. These tax increases did not prevent workers in this period from seeing rapid gains in living standards because the benefits of growth were widely shared.
Real wages are projected to continue to rise in the decades ahead. Average wages are projected to be more than 35 percent higher in twenty years than they are today. The WSJ apparently did not have room to mention this fact in its piece on generational inequality.
It is true that most workers have not been sharing in wage gains in recent decades. This is due to the fact they have been concentrated at the top, with folks like corporate CEOs, Wall Street types, and doctors getting a disproportionate share of growth. This is a huge problem for today’s young, but it is a story of intra-generational inequality, not inter-generational inequality.
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This is an important point left out of the Washington Post’s piece on the Supreme Court decision allowing states to require Internet sellers to collect sales taxes.The piece told readers that Amazon already collects state sales taxes. While this is true on its direct sales, it does not require its affiliates to collect sales taxes. Affiliates account for 30 to 40 percent of Amazon’s sales.
This is an important point left out of the Washington Post’s piece on the Supreme Court decision allowing states to require Internet sellers to collect sales taxes.The piece told readers that Amazon already collects state sales taxes. While this is true on its direct sales, it does not require its affiliates to collect sales taxes. Affiliates account for 30 to 40 percent of Amazon’s sales.
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In an interview with NPR reporter John Ydstie discussing President Trump’s latest round of tariffs on China, host Rachel Martin noted the decline in stock markets worldwide in response to tariffs and asserted that when the markets are down, everyone loses. This is not true.
If the market is down because participants accurately recognize there will be less economic growth, which also means less profits, then it is reasonable to assume that most people will lose. However, this is only one reason for the market to decline.
The market could fall because investors are less optimistic for no real reason. In that case, people like Bill Gates and Elon Musk have less money, but the bulk of the population who own little or no stock are not directly affected. If wealthy stockholders spend less money in response to their loss of stock wealth, then there is less demand in the economy.
If the Fed is concerned about excess demand, this reduction in demand will allow for it to put off interest rate hikes it might otherwise have made. That would mean people would be able to pay lower interest rates on mortgages and other loans. In effect, the lower stock prices are allowing more consumption for the bulk of the population by reducing the consumption or luxury spending (Elon Musk’s or Jeff Bezos’ space dreams) of the wealthy. Most people would not consider themselves hurt in this scenario.
Of course, the stock market may drop because income is shifting from profits to wages or from profit to taxes, both cases in which most people would fairly directly benefit. In the first case, they would get higher pay, in the second there would be more revenue for the government to spend on public goods.
In an interview with NPR reporter John Ydstie discussing President Trump’s latest round of tariffs on China, host Rachel Martin noted the decline in stock markets worldwide in response to tariffs and asserted that when the markets are down, everyone loses. This is not true.
If the market is down because participants accurately recognize there will be less economic growth, which also means less profits, then it is reasonable to assume that most people will lose. However, this is only one reason for the market to decline.
The market could fall because investors are less optimistic for no real reason. In that case, people like Bill Gates and Elon Musk have less money, but the bulk of the population who own little or no stock are not directly affected. If wealthy stockholders spend less money in response to their loss of stock wealth, then there is less demand in the economy.
If the Fed is concerned about excess demand, this reduction in demand will allow for it to put off interest rate hikes it might otherwise have made. That would mean people would be able to pay lower interest rates on mortgages and other loans. In effect, the lower stock prices are allowing more consumption for the bulk of the population by reducing the consumption or luxury spending (Elon Musk’s or Jeff Bezos’ space dreams) of the wealthy. Most people would not consider themselves hurt in this scenario.
Of course, the stock market may drop because income is shifting from profits to wages or from profit to taxes, both cases in which most people would fairly directly benefit. In the first case, they would get higher pay, in the second there would be more revenue for the government to spend on public goods.
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