Well at least Catherine Rampell, one of its columnists, has made this discovery. She carefully explains why the run-up in the stock market over the last year is not something that Donald Trump really should be boasting about, at least to the 90 percent of the country that own little or no stock.
Most importantly Rampell makes the point that stocks are supposed to represent the future value of after-tax corporate profits. This means that if we have a corporate tax break which results in a redistribution of income from everyone who doesn’t much stock to those who do, then we should expect stock prices to rise. This is not good news for the economy, it just means shareholders have more and everyone else has less.
For some reason, very few people in the media seem to understand this basic economic point. They routinely refer to a rise in the stock market as good news.
It would be closer to the mark to think of stock prices as being like corn prices. Higher corn prices are great news if you grow a lot of corn. For everyone else, they just mean they will pay more for food.
Similarly, higher stock prices are great for the relatively small share of the population with large stock holdings. For everyone else, the main impact is likely to be higher house prices and rents, as the now richer stockholders bid up prices. There will be comparable stories in other areas where supply faces serious restrictions (e.g. tables at upscale restaurants, tickets to popular concerts or plays).
Anyhow, it would be good if the media stopped acting like high corn and stock prices were an economic barometer indicating the well-being of the country as a whole. And yes, I did also say this endlessly when Democrats were in the White House.
Well at least Catherine Rampell, one of its columnists, has made this discovery. She carefully explains why the run-up in the stock market over the last year is not something that Donald Trump really should be boasting about, at least to the 90 percent of the country that own little or no stock.
Most importantly Rampell makes the point that stocks are supposed to represent the future value of after-tax corporate profits. This means that if we have a corporate tax break which results in a redistribution of income from everyone who doesn’t much stock to those who do, then we should expect stock prices to rise. This is not good news for the economy, it just means shareholders have more and everyone else has less.
For some reason, very few people in the media seem to understand this basic economic point. They routinely refer to a rise in the stock market as good news.
It would be closer to the mark to think of stock prices as being like corn prices. Higher corn prices are great news if you grow a lot of corn. For everyone else, they just mean they will pay more for food.
Similarly, higher stock prices are great for the relatively small share of the population with large stock holdings. For everyone else, the main impact is likely to be higher house prices and rents, as the now richer stockholders bid up prices. There will be comparable stories in other areas where supply faces serious restrictions (e.g. tables at upscale restaurants, tickets to popular concerts or plays).
Anyhow, it would be good if the media stopped acting like high corn and stock prices were an economic barometer indicating the well-being of the country as a whole. And yes, I did also say this endlessly when Democrats were in the White House.
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New Yorker magazine had a very good piece on the history of Purdue Pharma and its successful marketing of OxyContin. It is worth noting that if the company had not had a government-granted patent monopoly on OxyContin, it would have had little incentive to mislead doctors and the general public about the extent to which the drug was addictive. Misrepresentations of this sort are a predictable and extremely harmful outcome of patent monopolies.
New Yorker magazine had a very good piece on the history of Purdue Pharma and its successful marketing of OxyContin. It is worth noting that if the company had not had a government-granted patent monopoly on OxyContin, it would have had little incentive to mislead doctors and the general public about the extent to which the drug was addictive. Misrepresentations of this sort are a predictable and extremely harmful outcome of patent monopolies.
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The NYT had an interesting piece comparing the situation of a truck driver who lives in Mexico and gets paid to carry goods just over the border into Texas and a driver in Texas who transports goods across the country. The US-based driver (who was born in Mexico) earns far more than his Mexican counterpart.
The piece highlights restrictions that severely limit the ability of Mexican truck drivers to transport goods beyond the immediate border area. It reports that Mexico has been pushing to ease these restrictions, while the Teamsters have pushed to leave them in place or even tightened.
It suggests that there is not much at stake in this battle since the Mexican drivers are not allowed to carry goods back from their destination. The prospect of returning with an empty truck would make it uneconomical for most trips even if the Mexican drivers were paid far less than their U.S. counterparts.
This discussion misses the point. If the restrictions on Mexican drivers transporting goods in the United States were eased, then it is virtually inevitable that the NYT and other major news outlets would soon be running pieces on the fact that it is wasteful to prohibit them from picking up goods in the U.S. and instead come back with empty trucks. The likely result would be that this restriction would be removed as well.
The Teamsters understand this logic, which is why they are opposed to a relaxation of restrictions on Mexican drivers transporting goods into the United States. For some reason, the NYT and other major news outlets are far more concerned about the restrictions that protect truck drivers than the far more costly barriers that protect doctors, dentists, and other highly paid professionals from foreign competition.
The NYT had an interesting piece comparing the situation of a truck driver who lives in Mexico and gets paid to carry goods just over the border into Texas and a driver in Texas who transports goods across the country. The US-based driver (who was born in Mexico) earns far more than his Mexican counterpart.
The piece highlights restrictions that severely limit the ability of Mexican truck drivers to transport goods beyond the immediate border area. It reports that Mexico has been pushing to ease these restrictions, while the Teamsters have pushed to leave them in place or even tightened.
It suggests that there is not much at stake in this battle since the Mexican drivers are not allowed to carry goods back from their destination. The prospect of returning with an empty truck would make it uneconomical for most trips even if the Mexican drivers were paid far less than their U.S. counterparts.
This discussion misses the point. If the restrictions on Mexican drivers transporting goods in the United States were eased, then it is virtually inevitable that the NYT and other major news outlets would soon be running pieces on the fact that it is wasteful to prohibit them from picking up goods in the U.S. and instead come back with empty trucks. The likely result would be that this restriction would be removed as well.
The Teamsters understand this logic, which is why they are opposed to a relaxation of restrictions on Mexican drivers transporting goods into the United States. For some reason, the NYT and other major news outlets are far more concerned about the restrictions that protect truck drivers than the far more costly barriers that protect doctors, dentists, and other highly paid professionals from foreign competition.
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That probably would be have been helpful information to readers of a Washington Post article that told readers:
“Up to $2 billion in U.S. aid could be affected by President Donald Trump’s suspension of security assistance to Pakistan, which is accused of failing to crack down on Taliban militants targeting U.S. personnel in neighboring Afghanistan, a senior U.S. administration official said Friday.”
Almost none of the Post’s readers would have any idea of how much $2 billion means to the United States (or to Pakistan, it’s about 0.7 percent of its GDP). The paper could have saved space by just leaving the numbers out of the article since it wasn’t providing information by including them. Unfortunately, there is a reporter fraternity ritual that requires they use numbers that everyone, including them, know to be meaningless to their audience.
While we’re on the topic, the $2.4 billion in food aid the United States provides to the UN to combat famine in Africa comes to a bit less than 0.06 percent of the federal budget. Many people mistakenly believe that such aid is a major component of the U.S. budget. If newspapers focused on informing their readers, instead of fraternity rituals, perhaps the public would be better informed.
That probably would be have been helpful information to readers of a Washington Post article that told readers:
“Up to $2 billion in U.S. aid could be affected by President Donald Trump’s suspension of security assistance to Pakistan, which is accused of failing to crack down on Taliban militants targeting U.S. personnel in neighboring Afghanistan, a senior U.S. administration official said Friday.”
Almost none of the Post’s readers would have any idea of how much $2 billion means to the United States (or to Pakistan, it’s about 0.7 percent of its GDP). The paper could have saved space by just leaving the numbers out of the article since it wasn’t providing information by including them. Unfortunately, there is a reporter fraternity ritual that requires they use numbers that everyone, including them, know to be meaningless to their audience.
While we’re on the topic, the $2.4 billion in food aid the United States provides to the UN to combat famine in Africa comes to a bit less than 0.06 percent of the federal budget. Many people mistakenly believe that such aid is a major component of the U.S. budget. If newspapers focused on informing their readers, instead of fraternity rituals, perhaps the public would be better informed.
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The NYT had a piece discussing the views of members of the Federal Reserve Board’s Open Market Committee (FOMC), which sets monetary policy, on the course of interest rates over the next year. The piece notes that inflation has consistently been below both the Fed’s 2.0 percent target and the FOMC members projections, as they have consistently over-predicted the impact of tighter labor markets on the inflation rate.
It is worth noting that even the modest inflation we are seeing is largely due to rising rents. A measure of core inflation that excludes rent has risen just 0.6 percent over the last year.
Consumer Price Index, Excluding Food, Energy, and Shelter
Source: Bureau of Labor Statistics.
This matters because rents are driven by a qualitatively different dynamic than most other prices. They depend largely on the ease of building and shortages of land, rather than rising wages. By slowing new construction, higher interest rates are more likely to increase rather than decrease rents, unless the rise goes far enough to lead to a recession and thereby substantially reduce demand.
The NYT had a piece discussing the views of members of the Federal Reserve Board’s Open Market Committee (FOMC), which sets monetary policy, on the course of interest rates over the next year. The piece notes that inflation has consistently been below both the Fed’s 2.0 percent target and the FOMC members projections, as they have consistently over-predicted the impact of tighter labor markets on the inflation rate.
It is worth noting that even the modest inflation we are seeing is largely due to rising rents. A measure of core inflation that excludes rent has risen just 0.6 percent over the last year.
Consumer Price Index, Excluding Food, Energy, and Shelter
Source: Bureau of Labor Statistics.
This matters because rents are driven by a qualitatively different dynamic than most other prices. They depend largely on the ease of building and shortages of land, rather than rising wages. By slowing new construction, higher interest rates are more likely to increase rather than decrease rents, unless the rise goes far enough to lead to a recession and thereby substantially reduce demand.
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Austin Frakt and Aaron Carroll had an interesting Upshot piece in the NYT on why the U.S. spends twice as much per person as other wealthy countries for its health care. The piece cites research pointing out that people in the United States do not use more health care services than people in other countries. The reason that we pay more for health care is that actors in the industry, such as doctors, drug companies, insurers, and medical equipment manufacturers, get more money than their counterparts elsewhere.
The piece concludes by noting a couple of mechanisms for containing costs, but then argues:
“If attempted nationally, or even in a state, either of these would be met with resistance from all those who directly benefit from high prices, including physicians, hospitals, pharmaceutical companies — and pretty much every other provider of health care in the United States.
“Higher prices aren’t all bad for consumers. They probably lead to some increased innovation, which confers benefits to patients globally. Though it’s reasonable to push back on high health care prices, there may be a limit to how far we should.”
It’s striking to see economists reluctant to use mechanisms that would bring payments in the health care in line with payments in the rest of the world because they “would be met with resistance from all those who directly benefit from high prices.”
Efforts to reduce trade barriers that had the effect of destroying jobs and cutting pay for autoworkers, textile workers, and other manufacturing workers were also met with resistance. Economists not only supported these efforts, they treated them as an almost holy cause. They insisted on “free trade,” as the ultimate good.
For some reason, Frakt and Carroll believe that comparable efforts (we can also use trade in the health care sector to reduce costs) to reduce excess payments in the health care sector are a bad idea because the people who would see their pay and income reduced will be unhappy. In this context, it is probably worth mentioning that there is hugely more money at stake in bringing our health care costs in line with the rest of the world than with reducing trade barriers with items like steel and cars. The latter can save us at most a few tens of billions a year. If we paid the same amount per person for health care as people in Canada or Germany, the savings would be more than $1.5 trillion annually, more than $4,000 per person per year.
Austin Frakt and Aaron Carroll had an interesting Upshot piece in the NYT on why the U.S. spends twice as much per person as other wealthy countries for its health care. The piece cites research pointing out that people in the United States do not use more health care services than people in other countries. The reason that we pay more for health care is that actors in the industry, such as doctors, drug companies, insurers, and medical equipment manufacturers, get more money than their counterparts elsewhere.
The piece concludes by noting a couple of mechanisms for containing costs, but then argues:
“If attempted nationally, or even in a state, either of these would be met with resistance from all those who directly benefit from high prices, including physicians, hospitals, pharmaceutical companies — and pretty much every other provider of health care in the United States.
“Higher prices aren’t all bad for consumers. They probably lead to some increased innovation, which confers benefits to patients globally. Though it’s reasonable to push back on high health care prices, there may be a limit to how far we should.”
It’s striking to see economists reluctant to use mechanisms that would bring payments in the health care in line with payments in the rest of the world because they “would be met with resistance from all those who directly benefit from high prices.”
Efforts to reduce trade barriers that had the effect of destroying jobs and cutting pay for autoworkers, textile workers, and other manufacturing workers were also met with resistance. Economists not only supported these efforts, they treated them as an almost holy cause. They insisted on “free trade,” as the ultimate good.
For some reason, Frakt and Carroll believe that comparable efforts (we can also use trade in the health care sector to reduce costs) to reduce excess payments in the health care sector are a bad idea because the people who would see their pay and income reduced will be unhappy. In this context, it is probably worth mentioning that there is hugely more money at stake in bringing our health care costs in line with the rest of the world than with reducing trade barriers with items like steel and cars. The latter can save us at most a few tens of billions a year. If we paid the same amount per person for health care as people in Canada or Germany, the savings would be more than $1.5 trillion annually, more than $4,000 per person per year.
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As of today, I am no longer co-director at CEPR. Eileen Appelbaum, who has been a Senior Economist at CEPR for the last decade, will be replacing me as co-director. Prior to that, she was Distinguished Professor and the director of the Center for Women and Work at Rutgers University in New Jersey, the research director at the Economic Policy Institute, and a Professor of Economics at Temple University in Pennsylvania. CEPR will be in good hands.
I am stepping down after 18 years largely because I want more time for doing the work I enjoy and for pursuing personal interests. When Mark Weisbrot and I started CEPR at the end of 1999 we had no idea what to expect. We were one of the last of the dot.com startups, and unlike many others, we have managed to survive for almost two decades now.
I will keep doing work; there is still plenty of room for critical voices in economic policy debates. But I will no longer have administrative responsibilities at CEPR. Hopefully, this will let me be more productive. I expect to continue Beat the Press in its current form long into the future.
As of today, I am no longer co-director at CEPR. Eileen Appelbaum, who has been a Senior Economist at CEPR for the last decade, will be replacing me as co-director. Prior to that, she was Distinguished Professor and the director of the Center for Women and Work at Rutgers University in New Jersey, the research director at the Economic Policy Institute, and a Professor of Economics at Temple University in Pennsylvania. CEPR will be in good hands.
I am stepping down after 18 years largely because I want more time for doing the work I enjoy and for pursuing personal interests. When Mark Weisbrot and I started CEPR at the end of 1999 we had no idea what to expect. We were one of the last of the dot.com startups, and unlike many others, we have managed to survive for almost two decades now.
I will keep doing work; there is still plenty of room for critical voices in economic policy debates. But I will no longer have administrative responsibilities at CEPR. Hopefully, this will let me be more productive. I expect to continue Beat the Press in its current form long into the future.
Read More Leer más Join the discussion Participa en la discusión
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