It is a standard and really awful journalistic practice to make assertions about what politicians really believe or what is important to them. Reporters do not know what are in the heads of politicians. This is why they should just stick to reporting what they say and what they do.
Going in the opposite direction, they often neglect to report very relevant things that they say and do. Coverage of the Republicans’ policies on retirement income very much falls in this category. Politico has a piece today that reports on the failure of the Obama administration’s myRA accounts. These were designed as small dollar savings accounts (capped at $15,000) that would be investing exclusively in government bonds. Few people signed up for the program and the Trump administration canceled it.
The piece then turns to a discussion of state-run 401(k) type accounts which are being created by Oregon, Illinois, California, and a number of other states controlled by Democrats. The article then points out Republican opposition to these plans, ostensibly because they lack necessary consumer protections.
“These plans have triggered significant pushback from Republicans and the financial industry, however, which argue that the state plans lack important consumer protections and could funnel workers into costly products that don’t fit their savings needs. The biggest argument has centered on a 1974 law, the Employment Retirement Income Security Act (ERISA), which was created after a series of scandals around private-sector pensions in the 1950s and ’60s. ERISA imposed a fiduciary duty on employers that manage their workers’ retirement plans, requiring them to act in the best interest of their employees, and also set standards around financial disclosures. These rules are designed to protect workers, but they also discourage small businesses from offering 401(k)s and other, similar savings plans.”
This is where it would have been appropriate for the article to note that Republicans in Congress and the Trump administration, with few exceptions, have been doing everything they can to gut the Consumer Financial Protection Bureau. They also have sought to block the Fiduciary Rule put in place by the Obama administration, which would require that investment advisers act in the interest of their clients.
While we may not be able to know the state of mind of the Republicans who are working to undermine state-run retirement plans, it is worth pointing out that in other contexts they have been doing everything possible to undermine consumer protections. That makes the notion that they are actually concerned about the safety of workers’ retirement accounts rather dubious.
It seems much more likely that they are doing the bidding of the financial industry in trying to prevent competition that will take away business and drive down fees. But we would not want reporters to attribute motives.
It is a standard and really awful journalistic practice to make assertions about what politicians really believe or what is important to them. Reporters do not know what are in the heads of politicians. This is why they should just stick to reporting what they say and what they do.
Going in the opposite direction, they often neglect to report very relevant things that they say and do. Coverage of the Republicans’ policies on retirement income very much falls in this category. Politico has a piece today that reports on the failure of the Obama administration’s myRA accounts. These were designed as small dollar savings accounts (capped at $15,000) that would be investing exclusively in government bonds. Few people signed up for the program and the Trump administration canceled it.
The piece then turns to a discussion of state-run 401(k) type accounts which are being created by Oregon, Illinois, California, and a number of other states controlled by Democrats. The article then points out Republican opposition to these plans, ostensibly because they lack necessary consumer protections.
“These plans have triggered significant pushback from Republicans and the financial industry, however, which argue that the state plans lack important consumer protections and could funnel workers into costly products that don’t fit their savings needs. The biggest argument has centered on a 1974 law, the Employment Retirement Income Security Act (ERISA), which was created after a series of scandals around private-sector pensions in the 1950s and ’60s. ERISA imposed a fiduciary duty on employers that manage their workers’ retirement plans, requiring them to act in the best interest of their employees, and also set standards around financial disclosures. These rules are designed to protect workers, but they also discourage small businesses from offering 401(k)s and other, similar savings plans.”
This is where it would have been appropriate for the article to note that Republicans in Congress and the Trump administration, with few exceptions, have been doing everything they can to gut the Consumer Financial Protection Bureau. They also have sought to block the Fiduciary Rule put in place by the Obama administration, which would require that investment advisers act in the interest of their clients.
While we may not be able to know the state of mind of the Republicans who are working to undermine state-run retirement plans, it is worth pointing out that in other contexts they have been doing everything possible to undermine consumer protections. That makes the notion that they are actually concerned about the safety of workers’ retirement accounts rather dubious.
It seems much more likely that they are doing the bidding of the financial industry in trying to prevent competition that will take away business and drive down fees. But we would not want reporters to attribute motives.
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In her Washington Post column Megan McArdle tells readers that we are making great progress in developing cures for cancer, but then she warns these cures can be very expensive:
“But immune-based therapies are unlikely to ever be available for a few cents a dose, especially not the personalized ones. Of the immunotherapies we already have, Opdivo and Yervoy combination drug therapy can cost a quarter of a million dollars; CAR T-cell almost double that.”
The part missing from this story is that the reason these cures would be expensive is because of the government-granted patent monopolies that make them expensive. Without these monopolies, these therapies almost certainly would be cheap.
We do have to pay for the research, but at the point people are receiving these therapies the research has already been done. We are trying to recover these costs from people facing a potentially fatal disease. This situation is made even more perverse from an economic perspective since most often there are third-party payers, either insurers or the government. So we will expect these people and/or their families to be spending time lobbying insurers or the government to pay for incredibly expensive treatments, which may or may not be helpful.
What a brilliant system!
The alternative is to pay for the research upfront. The government currently spends more than $30 billion a year on biomedical research through the National Institutes of Health. We could triple this amount to replace the research that is now patent-supported. It can still be done through the private sector, even by the same companies. They would just be working under long-term contracts — think of defense contractors. (See Rigged [it’s free], Chapter 5, where this is discussed in more detail.)
In addition to having the benefit of all new therapies available at their free market price, which would almost always be cheap, this system would have the advantage that all the research results would be immediately available to other researchers (a requirement of funding) so that research could progress more quickly. In addition, this system would remove the incentive that patent monopolies give companies to lie about the safety and effectiveness of their drugs.
In her Washington Post column Megan McArdle tells readers that we are making great progress in developing cures for cancer, but then she warns these cures can be very expensive:
“But immune-based therapies are unlikely to ever be available for a few cents a dose, especially not the personalized ones. Of the immunotherapies we already have, Opdivo and Yervoy combination drug therapy can cost a quarter of a million dollars; CAR T-cell almost double that.”
The part missing from this story is that the reason these cures would be expensive is because of the government-granted patent monopolies that make them expensive. Without these monopolies, these therapies almost certainly would be cheap.
We do have to pay for the research, but at the point people are receiving these therapies the research has already been done. We are trying to recover these costs from people facing a potentially fatal disease. This situation is made even more perverse from an economic perspective since most often there are third-party payers, either insurers or the government. So we will expect these people and/or their families to be spending time lobbying insurers or the government to pay for incredibly expensive treatments, which may or may not be helpful.
What a brilliant system!
The alternative is to pay for the research upfront. The government currently spends more than $30 billion a year on biomedical research through the National Institutes of Health. We could triple this amount to replace the research that is now patent-supported. It can still be done through the private sector, even by the same companies. They would just be working under long-term contracts — think of defense contractors. (See Rigged [it’s free], Chapter 5, where this is discussed in more detail.)
In addition to having the benefit of all new therapies available at their free market price, which would almost always be cheap, this system would have the advantage that all the research results would be immediately available to other researchers (a requirement of funding) so that research could progress more quickly. In addition, this system would remove the incentive that patent monopolies give companies to lie about the safety and effectiveness of their drugs.
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The NYT had a piece documenting the drop in inflation-adjusted spending per student nationally and in many of the states that have been seeing strikes and protests by teachers. The analysis is very useful, but a figure at the top of the piece may have given readers a misleading impression.
The figure shows nationwide inflation-adjusted spending per pupil since 1970. It shows a steady rise until the Great Recession, then a fall with the downturn and a partial recovery in the last few years. It notes that we are not yet back to the pre-recession level of spending.
This may lead people to believe that a proper baseline is a constant real level of spending. This is not the case.
Suppose that we have one teacher for every twenty students. If we keep this ratio, and the teacher’s inflation-adjusted pay rises in step with overall productivity growth, then spending per student would rise in step with overall productivity growth. In that case, we would expect to see inflation-adjusted spending per student rise in step with the economy’s productivity growth, not just inflation.
The full story on spending is somewhat more complicated. Growing productivity can lead to savings in some areas of education, but insofar as a major expense is for teachers, and we don’t have rising student to teacher ratios, the baseline should be that inflation-adjusted per pupil spending rises roughly in step with productivity growth, not that it stays flat.
The NYT had a piece documenting the drop in inflation-adjusted spending per student nationally and in many of the states that have been seeing strikes and protests by teachers. The analysis is very useful, but a figure at the top of the piece may have given readers a misleading impression.
The figure shows nationwide inflation-adjusted spending per pupil since 1970. It shows a steady rise until the Great Recession, then a fall with the downturn and a partial recovery in the last few years. It notes that we are not yet back to the pre-recession level of spending.
This may lead people to believe that a proper baseline is a constant real level of spending. This is not the case.
Suppose that we have one teacher for every twenty students. If we keep this ratio, and the teacher’s inflation-adjusted pay rises in step with overall productivity growth, then spending per student would rise in step with overall productivity growth. In that case, we would expect to see inflation-adjusted spending per student rise in step with the economy’s productivity growth, not just inflation.
The full story on spending is somewhat more complicated. Growing productivity can lead to savings in some areas of education, but insofar as a major expense is for teachers, and we don’t have rising student to teacher ratios, the baseline should be that inflation-adjusted per pupil spending rises roughly in step with productivity growth, not that it stays flat.
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With the release of the Social Security and Medicare Trustees Report AP tweeted out:
“BREAKING: Government: Medicare will become insolvent in 2026, three years earlier than expected, Social Security to follow in 2034.”
What AP meant to say was that the programs would first face a shortfall. The programs would still be able to afford the vast majority of scheduled benefits. In the case of Medicare, the projections show that if nothing were done the program, it would be paying out more than 90 percent of scheduled benefits.
In the case of Social Security, the program would be paying out more than 75 percent of scheduled benefits in the years after 2034, assuming no changes are ever made. In the case of Social Security, since the average inflation-adjusted benefit is projected to be roughly 20 percent higher in 2034 than it is today, the payable benefit would still be roughly the same as what retirees get today.
Of course, it would unacceptable for the program not to pay promised benefits, but it is wrong to imply that people face a prospect of not collecting Social Security 16 years down the road. There is no scenario under current law where that is possible.
With the release of the Social Security and Medicare Trustees Report AP tweeted out:
“BREAKING: Government: Medicare will become insolvent in 2026, three years earlier than expected, Social Security to follow in 2034.”
What AP meant to say was that the programs would first face a shortfall. The programs would still be able to afford the vast majority of scheduled benefits. In the case of Medicare, the projections show that if nothing were done the program, it would be paying out more than 90 percent of scheduled benefits.
In the case of Social Security, the program would be paying out more than 75 percent of scheduled benefits in the years after 2034, assuming no changes are ever made. In the case of Social Security, since the average inflation-adjusted benefit is projected to be roughly 20 percent higher in 2034 than it is today, the payable benefit would still be roughly the same as what retirees get today.
Of course, it would unacceptable for the program not to pay promised benefits, but it is wrong to imply that people face a prospect of not collecting Social Security 16 years down the road. There is no scenario under current law where that is possible.
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I was going to ignore Robert Samuelson’s column this week, but then I realized he said the economy was “roaring,” not “snoring.” GDP growth for the second quarter was 2.2 percent. That’s okay, but given our long-term average is close to 3.0 percent, that hardly fits the definition of “roaring.”
We did create a lot of jobs last month, as we have for the last several years, but strong job growth in the face of mediocre GDP growth means that productivity growth is weak. That’s not exactly a positive for the economy.
I was going to ignore Robert Samuelson’s column this week, but then I realized he said the economy was “roaring,” not “snoring.” GDP growth for the second quarter was 2.2 percent. That’s okay, but given our long-term average is close to 3.0 percent, that hardly fits the definition of “roaring.”
We did create a lot of jobs last month, as we have for the last several years, but strong job growth in the face of mediocre GDP growth means that productivity growth is weak. That’s not exactly a positive for the economy.
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Charles Calomiris argued in an NYT column this morning that the Volcker rule needs to be fixed. The argument centers on the idea that it has raised the cost of trading and thereby discouraged arbitrage trades.
He cites the specific example of a breakdown in the relationship between currency spot and future prices and interest rate differentials. This means, in principle, that there are sure profit-making opportunities in the market that are going untaken.
While we are supposed to see this as a really bad thing, the question is why? The logic, of course, is that if an arbitrage possibility exists, then prices in the market are not exactly right. But what does it mean if the dollar is in some sense too high or too low by a tenth or two-tenths of a percent for a few hours or even a few days?
Do we think there will be mistaken trades of real goods and services (e.g. cars or wheat) because of the imperfections in the market? Even if there were, what’s the big deal if someone happened to pay 0.2 percent too much for a car or the seller got a price that was 0.2 percent less than they had expected?
There has been a tendency among economists to glorify liquidity like it is some sort of holy grail. Certainly, it is valuable for people to know they can sell a stock or bond when they want to. But if they have to wait a few minutes to complete the sale and they may be off by a fraction of a percent in terms of the price they get (in either direction), is this a real concern?
Charles Calomiris argued in an NYT column this morning that the Volcker rule needs to be fixed. The argument centers on the idea that it has raised the cost of trading and thereby discouraged arbitrage trades.
He cites the specific example of a breakdown in the relationship between currency spot and future prices and interest rate differentials. This means, in principle, that there are sure profit-making opportunities in the market that are going untaken.
While we are supposed to see this as a really bad thing, the question is why? The logic, of course, is that if an arbitrage possibility exists, then prices in the market are not exactly right. But what does it mean if the dollar is in some sense too high or too low by a tenth or two-tenths of a percent for a few hours or even a few days?
Do we think there will be mistaken trades of real goods and services (e.g. cars or wheat) because of the imperfections in the market? Even if there were, what’s the big deal if someone happened to pay 0.2 percent too much for a car or the seller got a price that was 0.2 percent less than they had expected?
There has been a tendency among economists to glorify liquidity like it is some sort of holy grail. Certainly, it is valuable for people to know they can sell a stock or bond when they want to. But if they have to wait a few minutes to complete the sale and they may be off by a fraction of a percent in terms of the price they get (in either direction), is this a real concern?
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Okay, that was not the actual Washington Post headline. Instead, the front page article was headlined “Trump thinks he’s saving trade. The rest of the world thinks he’s blowing it up.”
Yet again we have a newspaper telling us the innermost thoughts of a politician, in this case, Donald Trump. And yet again, I will assert that the Post has no idea what Trump actually thinks. Since his family businesses seem to be gaining from concessions at least from China, it is certainly as plausible that he “thinks” a trade war is a way to make himself and his family richer as opposed to a route to establishing greater justice for the United States in the world trading system. (The print edition of this piece had the much more reasonable headline, “Trump’s trade moves shake global trade system.”)
Okay, that was not the actual Washington Post headline. Instead, the front page article was headlined “Trump thinks he’s saving trade. The rest of the world thinks he’s blowing it up.”
Yet again we have a newspaper telling us the innermost thoughts of a politician, in this case, Donald Trump. And yet again, I will assert that the Post has no idea what Trump actually thinks. Since his family businesses seem to be gaining from concessions at least from China, it is certainly as plausible that he “thinks” a trade war is a way to make himself and his family richer as opposed to a route to establishing greater justice for the United States in the world trading system. (The print edition of this piece had the much more reasonable headline, “Trump’s trade moves shake global trade system.”)
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Around a decade ago, I was talking with a staffer of the Senate Commerce Committee about infrastructure. I gave a list of potential projects, including trains. He interrupted me and said that they don’t talk about trains there.
I asked if I was hearing him correctly. He explained that trains were a divisive issue among committee members, so there was an informal agreement that they simply wouldn’t bring them up. I wonder if there is the same situation with regards to the impact of currency values on trade at the Washington Post.
The Post had a major article reporting on how small farmers are facing serious problems in the economy today. The piece notes that low crop prices are making life very difficult for farmers. The focus is the potential for interest rate increases by the Federal Reserve Board to make their situation even worse. Since farmers are typically borrowers, if the rates they have to pay rises, many will find themselves unable to make ends meet.
It notes how high rates in the past have had a devastating impact on U.S. farms. In particular, the high interest rate policy pursued by the Fed under Paul Volcker puts hundreds of thousands of farmers out of business.
This is all very true, but there is another important dimension that is altogether missing. The value of the dollar has a very direct impact on farm prices.
There is a single world price of widely traded products like wheat and corn. If the dollar rises relative to the value of the currencies of US competitors, then the price of these products will typically fall in dollar terms. Since it doesn’t cost Argentina or Russia any more to produce wheat, they will be able to sell their farm products at lower prices, measured in dollars, even as they get the same price measured in their own currency.
A big part of the story of the hardship faced by farmers in the Volcker years was that the high dollar (largely caused by high interest rates) reduced the dollar price of wheat and other major farm products. Here’s the overall picture.
The relationship is not perfect (many other factors affect farm prices, and the overall value of the dollar may not be the same as the value against other commodity producers), but the sharp rise in the dollar from 1980 to 1985 is associated with a large decrease in the real price of wheat. The price of wheat partially recovered in the second half of the decade as the dollar fell sharply from 1985 to 1989. The run-up in the dollar in the late 1990s and early 2000s was also associated with a decline in the price of wheat. More recently, a rise in the dollar since 2015 has been associated with a sharp drop in the real price of wheat.
World demand, the efficiency of other producers, and other factors affect the price of wheat, but it is pretty much definitional that, other things equal, a higher-valued dollar means a lower dollar price of wheat and other farm commodities. It is very strange that this fact is not mentioned in the article.
Around a decade ago, I was talking with a staffer of the Senate Commerce Committee about infrastructure. I gave a list of potential projects, including trains. He interrupted me and said that they don’t talk about trains there.
I asked if I was hearing him correctly. He explained that trains were a divisive issue among committee members, so there was an informal agreement that they simply wouldn’t bring them up. I wonder if there is the same situation with regards to the impact of currency values on trade at the Washington Post.
The Post had a major article reporting on how small farmers are facing serious problems in the economy today. The piece notes that low crop prices are making life very difficult for farmers. The focus is the potential for interest rate increases by the Federal Reserve Board to make their situation even worse. Since farmers are typically borrowers, if the rates they have to pay rises, many will find themselves unable to make ends meet.
It notes how high rates in the past have had a devastating impact on U.S. farms. In particular, the high interest rate policy pursued by the Fed under Paul Volcker puts hundreds of thousands of farmers out of business.
This is all very true, but there is another important dimension that is altogether missing. The value of the dollar has a very direct impact on farm prices.
There is a single world price of widely traded products like wheat and corn. If the dollar rises relative to the value of the currencies of US competitors, then the price of these products will typically fall in dollar terms. Since it doesn’t cost Argentina or Russia any more to produce wheat, they will be able to sell their farm products at lower prices, measured in dollars, even as they get the same price measured in their own currency.
A big part of the story of the hardship faced by farmers in the Volcker years was that the high dollar (largely caused by high interest rates) reduced the dollar price of wheat and other major farm products. Here’s the overall picture.
The relationship is not perfect (many other factors affect farm prices, and the overall value of the dollar may not be the same as the value against other commodity producers), but the sharp rise in the dollar from 1980 to 1985 is associated with a large decrease in the real price of wheat. The price of wheat partially recovered in the second half of the decade as the dollar fell sharply from 1985 to 1989. The run-up in the dollar in the late 1990s and early 2000s was also associated with a decline in the price of wheat. More recently, a rise in the dollar since 2015 has been associated with a sharp drop in the real price of wheat.
World demand, the efficiency of other producers, and other factors affect the price of wheat, but it is pretty much definitional that, other things equal, a higher-valued dollar means a lower dollar price of wheat and other farm commodities. It is very strange that this fact is not mentioned in the article.
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There has been a repeated refrain in the media that Trump has been on the wrong track with China by worrying about our trade in manufactured goods. The argument is that he instead should be focused on China’s alleged taking of our intellectual property.
While most news coverage assumes this concern about China’s behavior makes sense, it’s worth asking if that is true. Specifically, what is the downside of China taking advantage of technologies developed in the United States without paying what our companies think they should?
The basic story in this analysis is that China gets the jump on the United States in producing a variety of goods and services. In other words, we will be able to get cheaper and/or better quality products than would be the case if we could keep China from “stealing” our intellectual property. (The reason for the quotes is that the boundaries of intellectual property are not well-defined. Unlike property in land and other physical objects, it is inherently non-exclusive. By England’s definition of intellectual property, the first steam mills in the United States also depended on theft.)
So if China doesn’t properly compensate us for our intellectual property (according to our definitions) then we will be able to get items like solar panels and electric cars much cheaper than would otherwise be the case. With solar panels, we lose some relatively good-paying jobs in manufacturing, but we are likely to get more jobs in the installation of the panels.
China is well ahead of the United States in the production of affordable electric cars. If they start exporting these cars to the United States should we be upset? There will be some loss of manufacturing jobs in the industry, but it’s entirely possible that they would end up building most of their cars here, just as many other foreign producers have.
Obviously, Elon Musk and Tesla would be big losers, but is there any reason we should care? Rising inequality is supposedly a big problem. Getting low-cost, high-tech items from China is both a gain for workers (lower prices raise real wages) and reduces inequality. What’s not to like?
There has been a repeated refrain in the media that Trump has been on the wrong track with China by worrying about our trade in manufactured goods. The argument is that he instead should be focused on China’s alleged taking of our intellectual property.
While most news coverage assumes this concern about China’s behavior makes sense, it’s worth asking if that is true. Specifically, what is the downside of China taking advantage of technologies developed in the United States without paying what our companies think they should?
The basic story in this analysis is that China gets the jump on the United States in producing a variety of goods and services. In other words, we will be able to get cheaper and/or better quality products than would be the case if we could keep China from “stealing” our intellectual property. (The reason for the quotes is that the boundaries of intellectual property are not well-defined. Unlike property in land and other physical objects, it is inherently non-exclusive. By England’s definition of intellectual property, the first steam mills in the United States also depended on theft.)
So if China doesn’t properly compensate us for our intellectual property (according to our definitions) then we will be able to get items like solar panels and electric cars much cheaper than would otherwise be the case. With solar panels, we lose some relatively good-paying jobs in manufacturing, but we are likely to get more jobs in the installation of the panels.
China is well ahead of the United States in the production of affordable electric cars. If they start exporting these cars to the United States should we be upset? There will be some loss of manufacturing jobs in the industry, but it’s entirely possible that they would end up building most of their cars here, just as many other foreign producers have.
Obviously, Elon Musk and Tesla would be big losers, but is there any reason we should care? Rising inequality is supposedly a big problem. Getting low-cost, high-tech items from China is both a gain for workers (lower prices raise real wages) and reduces inequality. What’s not to like?
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