As we all know, driving west in New Jersey is unsustainable. After all, if you keep going west, you will eventually end up in the Pacific Ocean. That’s pretty damn unsustainable. It would have been helpful if the Washington Post had clarified for readers that when the Republican health care experts cited in this piece called Medicaid “unsustainable” they meant it in the same way.
The Republicans were celebrating the prospect of the Senate’s health care reform bill which includes large tax cuts for rich people, which are coupled with large cuts to Medicaid. The economists justified these cuts by proclaiming Medicaid to be unsustainable.
This is true in the sense that spending is growing faster than the economy. Of course the same would be true of any category of spending that grows faster than the economy, like federal payments for various types of social media and any other category that might be seeing rapid growth for a period of time. If we projected out a rapid rate of growth for the indefinite future, it will eventually cost more than the whole economy. It’s just like driving into the Pacific Ocean.
As a practical matter there is no problem with covering the cost of Medicaid for moderate-income people, the elderly, and the disabled far into the future, if we don’t give big tax cuts to Donald Trump and his rich friends. We can and should look to get the costs of the program down by bringing what we pay for drugs, medical equipment, and doctors in line with other wealthy countries. Of course, this is a route that Donald Trump and his rich friends probably do not want us to take, nor does the Washington Post.
As we all know, driving west in New Jersey is unsustainable. After all, if you keep going west, you will eventually end up in the Pacific Ocean. That’s pretty damn unsustainable. It would have been helpful if the Washington Post had clarified for readers that when the Republican health care experts cited in this piece called Medicaid “unsustainable” they meant it in the same way.
The Republicans were celebrating the prospect of the Senate’s health care reform bill which includes large tax cuts for rich people, which are coupled with large cuts to Medicaid. The economists justified these cuts by proclaiming Medicaid to be unsustainable.
This is true in the sense that spending is growing faster than the economy. Of course the same would be true of any category of spending that grows faster than the economy, like federal payments for various types of social media and any other category that might be seeing rapid growth for a period of time. If we projected out a rapid rate of growth for the indefinite future, it will eventually cost more than the whole economy. It’s just like driving into the Pacific Ocean.
As a practical matter there is no problem with covering the cost of Medicaid for moderate-income people, the elderly, and the disabled far into the future, if we don’t give big tax cuts to Donald Trump and his rich friends. We can and should look to get the costs of the program down by bringing what we pay for drugs, medical equipment, and doctors in line with other wealthy countries. Of course, this is a route that Donald Trump and his rich friends probably do not want us to take, nor does the Washington Post.
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The Senate health care plan hugely increases the cost of insurance for older pre-Medicare age people compared to young people, and it eliminates the penalty for not buying insurance, so naturally the NYT tells us:
“That could inadvertently discourage the youngest and healthiest people from buying insurance, leaving a higher percentage of sicker people with expensive treatments on the exchanges, driving up insurers’ costs.”
If you raise the cost of insurance for older people relative to younger people, then we expect it to disproportionately reduce the number of older healthy people who buy insurance, not young healthy people.
The Senate health care plan hugely increases the cost of insurance for older pre-Medicare age people compared to young people, and it eliminates the penalty for not buying insurance, so naturally the NYT tells us:
“That could inadvertently discourage the youngest and healthiest people from buying insurance, leaving a higher percentage of sicker people with expensive treatments on the exchanges, driving up insurers’ costs.”
If you raise the cost of insurance for older people relative to younger people, then we expect it to disproportionately reduce the number of older healthy people who buy insurance, not young healthy people.
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The financial sector is chock full of people with no useful skills. This is why the government has to devise make-work projects like collecting back taxes owed to the I.R.S. for these people to do. As the NYT reports, this practice consistently leads to abuses by the collectors and often ends up losing the government money. But hey, at least it creates some good-paying jobs in these companies and a nice return to their shareholders.
The financial sector is chock full of people with no useful skills. This is why the government has to devise make-work projects like collecting back taxes owed to the I.R.S. for these people to do. As the NYT reports, this practice consistently leads to abuses by the collectors and often ends up losing the government money. But hey, at least it creates some good-paying jobs in these companies and a nice return to their shareholders.
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That’s not exactly what Edsall said in his NYT column, but it is pretty damn close. The theme of Edsall’s piece is that in the United States, as in other wealthy countries, the main political divide is between those who support and those who oppose globalization:
“…if we define globalization as receptivity to open borders, the expansion of local and nationalistic perspectives and support for a less rigid social order and for liberal cultural, immigration and trade policies.”
The elites in the United States who claim support of globalization actually do not favor open borders and liberal trade policies, although they dishonestly claim this position. The “globalizers” strongly support protectionist measures that benefit people like them.
First and foremost, they favor longer and stronger patent and copyright protection. These forms of protection (sorry folks, they are still protectionism even if you like them) are enormously costly. They often raise the price of the protected items by hundreds or even thousands of times the free market price.
This is why prescription drugs are expensive. New cancer drugs, which often sell for hundreds of thousands of dollars for a year’s treatment, would typically sell for a few hundred dollars in the absence of patent and related protections. The United States will spend more than $440 billion this year on prescription drugs. These drugs would likely cost less than $80 billion in a free market. The difference of $360 billion is roughly 1.9 percent of GDP. If we add in the cost of protectionism in medical equipment, software, and other areas it would likely be more than twice as much.
In addition, while trade policy has been deliberately designed to put manufacturing workers in direct competition with low-paid workers throughout the developing world, which puts downward pressure on the wages of less-educated workers more generally (this is the theory, not an accidental outcome), it has largely left in place the protectionist barriers which benefit doctors, dentists and other highly paid professionals. (Foreign-trained doctors cannot practice in the United States unless they complete a U.S. residency program. Dentists must graduate from a U.S. [or Canadian] dental school. As a result, these professionals get paid roughly twice as much as their counterparts in other wealthy countries.)
When one party openly supports policies that are designed to redistribute upward and lies about the redistributive features of its policies, it is not surprising that most working people will not be inclined to vote for them. (Yep, this is the point of my book Rigged: How Globalization and the Rules of the Modern Economy Have Been Structured to Make the Rich Richer [it’s free.])
That’s not exactly what Edsall said in his NYT column, but it is pretty damn close. The theme of Edsall’s piece is that in the United States, as in other wealthy countries, the main political divide is between those who support and those who oppose globalization:
“…if we define globalization as receptivity to open borders, the expansion of local and nationalistic perspectives and support for a less rigid social order and for liberal cultural, immigration and trade policies.”
The elites in the United States who claim support of globalization actually do not favor open borders and liberal trade policies, although they dishonestly claim this position. The “globalizers” strongly support protectionist measures that benefit people like them.
First and foremost, they favor longer and stronger patent and copyright protection. These forms of protection (sorry folks, they are still protectionism even if you like them) are enormously costly. They often raise the price of the protected items by hundreds or even thousands of times the free market price.
This is why prescription drugs are expensive. New cancer drugs, which often sell for hundreds of thousands of dollars for a year’s treatment, would typically sell for a few hundred dollars in the absence of patent and related protections. The United States will spend more than $440 billion this year on prescription drugs. These drugs would likely cost less than $80 billion in a free market. The difference of $360 billion is roughly 1.9 percent of GDP. If we add in the cost of protectionism in medical equipment, software, and other areas it would likely be more than twice as much.
In addition, while trade policy has been deliberately designed to put manufacturing workers in direct competition with low-paid workers throughout the developing world, which puts downward pressure on the wages of less-educated workers more generally (this is the theory, not an accidental outcome), it has largely left in place the protectionist barriers which benefit doctors, dentists and other highly paid professionals. (Foreign-trained doctors cannot practice in the United States unless they complete a U.S. residency program. Dentists must graduate from a U.S. [or Canadian] dental school. As a result, these professionals get paid roughly twice as much as their counterparts in other wealthy countries.)
When one party openly supports policies that are designed to redistribute upward and lies about the redistributive features of its policies, it is not surprising that most working people will not be inclined to vote for them. (Yep, this is the point of my book Rigged: How Globalization and the Rules of the Modern Economy Have Been Structured to Make the Rich Richer [it’s free.])
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The NYT ran yet another piece highlighting the “crisis” in public pensions. This time the story is that pensions are in worse shape in New York City than they were in 1975 when the city faced bankruptcy. The way it gets this conclusion is by showing that pension payments and liabilities are larger, even after adjusting for inflation, than they were in the mid-1970s.
While this is true, it ignores the fact that New York’s gross domestic product is close to three times as large today as it was in the mid-1970s. This means that the $5 billion contribution to pensions that the article shows was made in the mid-1970s (in 2017 dollars) was a considerably larger burden on the city’s economy at the time than the projected payment of $10 billion in 2020.
The article points out that the unfunded liability of the city’s pensions, as conventionally measured, is $65 billion. While this sounds ominous, the discounted value of the city’s GDP over the next three decades will be more than $20 trillion, making the liability equal to roughly 0.3 percent of projected GDP. That is far from trivial, but also not an unbearable burden if the city’s economy remains healthy.
There is one very important point in this article. It notes a big expansion of pensions in 2000 at the peak of the stock bubble. Many other public pension funds also raised their commitments as a result of this bubble, with the expectation that markets would give their historic rates of return even though price-to-earnings ratios were at unprecedented highs.
Other governments stopped contributing to their pensions during this period with the idea that the market would contribute for them. This led to a situation where they suddenly were forced to ramp up contributions sharply when the bubble burst and threw the economy into recession in 2001. Some, like Chicago under Mayor Richard Daley, found this shift too difficult to manage and simply allowed the unfunded liability to grow.
In short, the stock bubble created serious problems for public pension funds. It also created problems for tens of millions of workers planning for retirement. This is worth noting because the conventional view among economists of the stock bubble is that it was just a lot of good fun with no major economic consequences.
This is close to mind-boggling. Many of the same economists who see the growing and bursting of a huge bubble as no big deal think all hell would break loose if the inflation rate were 3.0 percent instead of the 2.0 percent rate currently targeted by the Fed. There may be a world where this inconsistency makes sense, but it’s not the one we live in.
The NYT ran yet another piece highlighting the “crisis” in public pensions. This time the story is that pensions are in worse shape in New York City than they were in 1975 when the city faced bankruptcy. The way it gets this conclusion is by showing that pension payments and liabilities are larger, even after adjusting for inflation, than they were in the mid-1970s.
While this is true, it ignores the fact that New York’s gross domestic product is close to three times as large today as it was in the mid-1970s. This means that the $5 billion contribution to pensions that the article shows was made in the mid-1970s (in 2017 dollars) was a considerably larger burden on the city’s economy at the time than the projected payment of $10 billion in 2020.
The article points out that the unfunded liability of the city’s pensions, as conventionally measured, is $65 billion. While this sounds ominous, the discounted value of the city’s GDP over the next three decades will be more than $20 trillion, making the liability equal to roughly 0.3 percent of projected GDP. That is far from trivial, but also not an unbearable burden if the city’s economy remains healthy.
There is one very important point in this article. It notes a big expansion of pensions in 2000 at the peak of the stock bubble. Many other public pension funds also raised their commitments as a result of this bubble, with the expectation that markets would give their historic rates of return even though price-to-earnings ratios were at unprecedented highs.
Other governments stopped contributing to their pensions during this period with the idea that the market would contribute for them. This led to a situation where they suddenly were forced to ramp up contributions sharply when the bubble burst and threw the economy into recession in 2001. Some, like Chicago under Mayor Richard Daley, found this shift too difficult to manage and simply allowed the unfunded liability to grow.
In short, the stock bubble created serious problems for public pension funds. It also created problems for tens of millions of workers planning for retirement. This is worth noting because the conventional view among economists of the stock bubble is that it was just a lot of good fun with no major economic consequences.
This is close to mind-boggling. Many of the same economists who see the growing and bursting of a huge bubble as no big deal think all hell would break loose if the inflation rate were 3.0 percent instead of the 2.0 percent rate currently targeted by the Fed. There may be a world where this inconsistency makes sense, but it’s not the one we live in.
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David Callahan had an interesting NYT column on the philanthropical efforts of the latest cohort of the newly rich. The piece makes the important point that people like Bill Gates, the Walton family, and Mark Zuckerberg often use their givings to push their specific political agenda. As Callahan points out, these contributions involve a large amount of taxpayer dollars, these very rich people are getting their taxes reduced by roughly 40 cents for every dollar they give. This means, in effect, that Gates, the Waltons, Zuckerberg and the rest are effectively getting taxpayers to put up a large amount of money to support their political agenda in important areas of public policy.
There are a couple of additional points worth adding on this issue. First, these charitable efforts likely have advanced these billionaires in their efforts to get ever richer. This is especially likely to be the case with Bill Gates where efforts to establish himself as a great humanitarian likely discouraged efforts to take more actions against his company’s near monopoly in the computer operating system market. (Also, a program officer in the Gates Foundation once once told me that they would not support any work questioning the usefulness of patent support for drug research because of Gates’ dependence on intellectual property protections.)
The other point is that the foundations themselves help to contribute to inequality with the outsized paychecks given to their top executives. It is common for these people to get salaries at or above $1 million a year. (This is discussed in chapter 6 of Riggged: How Globalization and the Rules of the Modern Economy Have Been Structured to Make the Rich Richer [it’s free.])
It would be possible to require that philanthropies limit pay in order to qualify for tax-deductible status. The president of the United States earns $400,000 a year. (This doesn’t count the special deals for his businesses that Donald Trump gets from those seeking favors.) Many highly talented people compete vigorously for this job. Charitable foundations should be able to find qualified people for the same pay. If not, then they are probably not the sort of organization that deserves the public’s support.
Limiting pay for the top executives at institutions receiving taxpayer subsidies, which would include presidents of universities and non-profit hospitals, should help put downward pressure for pay at the top more generally, leaving more money for everyone else.
David Callahan had an interesting NYT column on the philanthropical efforts of the latest cohort of the newly rich. The piece makes the important point that people like Bill Gates, the Walton family, and Mark Zuckerberg often use their givings to push their specific political agenda. As Callahan points out, these contributions involve a large amount of taxpayer dollars, these very rich people are getting their taxes reduced by roughly 40 cents for every dollar they give. This means, in effect, that Gates, the Waltons, Zuckerberg and the rest are effectively getting taxpayers to put up a large amount of money to support their political agenda in important areas of public policy.
There are a couple of additional points worth adding on this issue. First, these charitable efforts likely have advanced these billionaires in their efforts to get ever richer. This is especially likely to be the case with Bill Gates where efforts to establish himself as a great humanitarian likely discouraged efforts to take more actions against his company’s near monopoly in the computer operating system market. (Also, a program officer in the Gates Foundation once once told me that they would not support any work questioning the usefulness of patent support for drug research because of Gates’ dependence on intellectual property protections.)
The other point is that the foundations themselves help to contribute to inequality with the outsized paychecks given to their top executives. It is common for these people to get salaries at or above $1 million a year. (This is discussed in chapter 6 of Riggged: How Globalization and the Rules of the Modern Economy Have Been Structured to Make the Rich Richer [it’s free.])
It would be possible to require that philanthropies limit pay in order to qualify for tax-deductible status. The president of the United States earns $400,000 a year. (This doesn’t count the special deals for his businesses that Donald Trump gets from those seeking favors.) Many highly talented people compete vigorously for this job. Charitable foundations should be able to find qualified people for the same pay. If not, then they are probably not the sort of organization that deserves the public’s support.
Limiting pay for the top executives at institutions receiving taxpayer subsidies, which would include presidents of universities and non-profit hospitals, should help put downward pressure for pay at the top more generally, leaving more money for everyone else.
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Donald Trump’s economic team has been widely ridiculed for its projection that economic growth will average 3.0 percent annually over the next decade. However, a Washington Post article implies that Trump’s team may actually have been overly pessimistic. The article discusses the possibility that robots will be used to replace cashiers at Whole Foods, now that it has been purchased by Amazon.
The piece also raises the concern that automation will displace large numbers of workers throughout the economy over the next two decades.
“A 2013 study from Oxford University predicted that 47 percent of jobs in the United States could be performed by machines over the next two decades, and cashier roles carry an especially heightened risk.“
This pace of automation (losing 47 percent of jobs over two decades) is consistent with a 3.0 percent rate of productivity growth, roughly the same rate as the U.S. experienced in the long Golden Age from 1947 to 1973 and again from 1995 to 2005. By contrast, the Congressional Budget Office is projecting productivity growth of roughly 1.5 percent. If the Oxford study’s more optimistic assessment proves correct, with labor force growth in the range of 0.5 to 0.7 percent annually, GDP growth would be in the range of 3.5 to 3.7 percent. This far exceeds the Trump administration’s 3.0 percent projection.
Contrary to what is implied in this article, rapid productivity growth should lead to rapid wage growth and low unemployment, as was the case through most of the prior two periods. Of course, this assumes competent management of economic policy and there is a serious problem with being able to find qualified economists, which is why the people in charge of policy completely missed the housing bubble.
Donald Trump’s economic team has been widely ridiculed for its projection that economic growth will average 3.0 percent annually over the next decade. However, a Washington Post article implies that Trump’s team may actually have been overly pessimistic. The article discusses the possibility that robots will be used to replace cashiers at Whole Foods, now that it has been purchased by Amazon.
The piece also raises the concern that automation will displace large numbers of workers throughout the economy over the next two decades.
“A 2013 study from Oxford University predicted that 47 percent of jobs in the United States could be performed by machines over the next two decades, and cashier roles carry an especially heightened risk.“
This pace of automation (losing 47 percent of jobs over two decades) is consistent with a 3.0 percent rate of productivity growth, roughly the same rate as the U.S. experienced in the long Golden Age from 1947 to 1973 and again from 1995 to 2005. By contrast, the Congressional Budget Office is projecting productivity growth of roughly 1.5 percent. If the Oxford study’s more optimistic assessment proves correct, with labor force growth in the range of 0.5 to 0.7 percent annually, GDP growth would be in the range of 3.5 to 3.7 percent. This far exceeds the Trump administration’s 3.0 percent projection.
Contrary to what is implied in this article, rapid productivity growth should lead to rapid wage growth and low unemployment, as was the case through most of the prior two periods. Of course, this assumes competent management of economic policy and there is a serious problem with being able to find qualified economists, which is why the people in charge of policy completely missed the housing bubble.
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Apparently the dislike at the NYT is so intense that they couldn’t restrict it to the opinion pages. In an article on French President Emmanuel Macron’s plans for changing France’s labor market regulations, it referred to the current labor law as the, “rigid and job-killing labor code.”
It is not at all clear that France’s labor protections have a major impact on unemployment in the country. A cross-country analysis found no effect of employment regulations on unemployment. The more obvious cause of high French unemployment is the lack of demand in the economy which results from both Germany’s large trade surplus and its insistence on imposing austerity on France and other euro zone countries. The piece forgot to mention this major aspect of economic policy.
Apparently the dislike at the NYT is so intense that they couldn’t restrict it to the opinion pages. In an article on French President Emmanuel Macron’s plans for changing France’s labor market regulations, it referred to the current labor law as the, “rigid and job-killing labor code.”
It is not at all clear that France’s labor protections have a major impact on unemployment in the country. A cross-country analysis found no effect of employment regulations on unemployment. The more obvious cause of high French unemployment is the lack of demand in the economy which results from both Germany’s large trade surplus and its insistence on imposing austerity on France and other euro zone countries. The piece forgot to mention this major aspect of economic policy.
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