The Washington Post and other major news outlets are strong supporters of the trade policy pursued by administrations of both political parties. They routinely allow their position on this issue to spill over into their news reporting, touting the policy as “free trade.” We got yet another example of this in the Washington Post today.
Of course the policy is very far from free trade. We have largely left in place the protectionist barriers that keep doctors and dentists from other countries from competing with our own doctors. (Doctors have to complete a U.S. residency program before they can practice in the United States and dentists must graduate from a U.S. dental school. The lone exception is for Canadian doctors and dentists, although even here we have left unnecessary barriers in place.)
As a result of this protectionism, average pay for doctors is over $250,000 a year and more than $200,000 a year for dentists, putting the vast majority of both groups in the top 2.0 percent of wage earners. Their pay is roughly twice the average received by their counterparts in other wealthy countries, adding close to $100 billion a year ($700 per family per year) to our medical bill.
While trade negotiators may feel this protectionism is justified, since these professionals lack the skills to compete in the global economy, it is nonetheless protectionism, not free trade.
We also have actively been pushing for longer and stronger patent and copyright protections. While these protections, like all forms of protectionism, serve a purpose, they are 180 degrees at odds with free trade. And, they are very costly. Patent protection in prescription drugs will lead to us pay more than $440 billion this year for drugs that would likely sell for less than $80 billion in a free market. The difference of $360 billion comes to almost $3,000 a year for every family in the country.
It is also worth noting patent protection results in exactly the sort of corruption that would be expected from a huge government imposed tariff. (When patents raise the price of a drug by a factor of 100 or more, as is often the case, it is equivalent to a tariff of 10,000 percent.) The result is that pharmaceutical companies often make payoffs to doctors to promote their drugs or conceal evidence that their drugs are less effective than claimed or even harmful.
The Washington Post and other major news outlets are strong supporters of the trade policy pursued by administrations of both political parties. They routinely allow their position on this issue to spill over into their news reporting, touting the policy as “free trade.” We got yet another example of this in the Washington Post today.
Of course the policy is very far from free trade. We have largely left in place the protectionist barriers that keep doctors and dentists from other countries from competing with our own doctors. (Doctors have to complete a U.S. residency program before they can practice in the United States and dentists must graduate from a U.S. dental school. The lone exception is for Canadian doctors and dentists, although even here we have left unnecessary barriers in place.)
As a result of this protectionism, average pay for doctors is over $250,000 a year and more than $200,000 a year for dentists, putting the vast majority of both groups in the top 2.0 percent of wage earners. Their pay is roughly twice the average received by their counterparts in other wealthy countries, adding close to $100 billion a year ($700 per family per year) to our medical bill.
While trade negotiators may feel this protectionism is justified, since these professionals lack the skills to compete in the global economy, it is nonetheless protectionism, not free trade.
We also have actively been pushing for longer and stronger patent and copyright protections. While these protections, like all forms of protectionism, serve a purpose, they are 180 degrees at odds with free trade. And, they are very costly. Patent protection in prescription drugs will lead to us pay more than $440 billion this year for drugs that would likely sell for less than $80 billion in a free market. The difference of $360 billion comes to almost $3,000 a year for every family in the country.
It is also worth noting patent protection results in exactly the sort of corruption that would be expected from a huge government imposed tariff. (When patents raise the price of a drug by a factor of 100 or more, as is often the case, it is equivalent to a tariff of 10,000 percent.) The result is that pharmaceutical companies often make payoffs to doctors to promote their drugs or conceal evidence that their drugs are less effective than claimed or even harmful.
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The Republicans have been working hard to find a way to repeal the Affordable Care Act (ACA) that doesn’t leave most of their members of Congress unemployed. The basic problem is that their campaign against the ACA for the last seven years was a complete lie. They claimed that people were paying too much money for policies that were inadequate, leading people to believe that they had a way to provide better coverage for less money. They don’t.
Unfortunately, NPR might have led listeners to believe otherwise in an interview with Mike Johnson, a Republican representative from Louisiana. Johnson explained that they would get premiums down by allowing insurers to exclude people with health conditions from their pool. This is more or less the situation we had before the ACA.
Most people are healthy and have few medical bills. Insurers are very happy to insure these people, since they essentially are just sending the companies money. The problem has always been the the roughly 10 percent of the population with substantial medical bills. Insurers don’t want to insure these people, since their health care costs serious money. Of course, these are the people who most need insurance.
Johnson acknowledged that these people will face higher premiums under his plan, but then said that they had set aside $15 billion in their bill for subsidies for these people. Was this information helpful to you?
It didn’t do much for me, since he didn’t even tell us the time frame for this $15 billion. Budget numbers are often expressed over ten year periods reflecting the Congressional Budget Office’s 10-year planning horizon. Was this a ten year number or a one year number? My guess is the former, but I really don’t know. Hey, so we’re off by a factor of ten, what’s the big deal?
But it gets worse. What’s the need here? Anyone know how far $15 billion will go over either a one year or ten year horizon?
To fill in the perspective a serious reporter would have given, the average annual health care costs for the 10 percent most costly patients is more than $50,000 a year. We’re talking about 32 million people, so that comes to more than $1.5 trillion a year.
Many of these people are on Medicare, and some are covered by employer provided insurance, so many will not end up in these high risk pools and need subsidies. But, let’s say that one third of them do end up in these pools. That means the cost would be $500 billion a year for these folks’ health care. Mr. Johnson is proposing a subsidy of between $1.5 billion and $15 billion to help these people cover their insurance.
Got the picture now?
The Republicans have been working hard to find a way to repeal the Affordable Care Act (ACA) that doesn’t leave most of their members of Congress unemployed. The basic problem is that their campaign against the ACA for the last seven years was a complete lie. They claimed that people were paying too much money for policies that were inadequate, leading people to believe that they had a way to provide better coverage for less money. They don’t.
Unfortunately, NPR might have led listeners to believe otherwise in an interview with Mike Johnson, a Republican representative from Louisiana. Johnson explained that they would get premiums down by allowing insurers to exclude people with health conditions from their pool. This is more or less the situation we had before the ACA.
Most people are healthy and have few medical bills. Insurers are very happy to insure these people, since they essentially are just sending the companies money. The problem has always been the the roughly 10 percent of the population with substantial medical bills. Insurers don’t want to insure these people, since their health care costs serious money. Of course, these are the people who most need insurance.
Johnson acknowledged that these people will face higher premiums under his plan, but then said that they had set aside $15 billion in their bill for subsidies for these people. Was this information helpful to you?
It didn’t do much for me, since he didn’t even tell us the time frame for this $15 billion. Budget numbers are often expressed over ten year periods reflecting the Congressional Budget Office’s 10-year planning horizon. Was this a ten year number or a one year number? My guess is the former, but I really don’t know. Hey, so we’re off by a factor of ten, what’s the big deal?
But it gets worse. What’s the need here? Anyone know how far $15 billion will go over either a one year or ten year horizon?
To fill in the perspective a serious reporter would have given, the average annual health care costs for the 10 percent most costly patients is more than $50,000 a year. We’re talking about 32 million people, so that comes to more than $1.5 trillion a year.
Many of these people are on Medicare, and some are covered by employer provided insurance, so many will not end up in these high risk pools and need subsidies. But, let’s say that one third of them do end up in these pools. That means the cost would be $500 billion a year for these folks’ health care. Mr. Johnson is proposing a subsidy of between $1.5 billion and $15 billion to help these people cover their insurance.
Got the picture now?
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The Washington Post editorial page is of course famous for absurdly claiming that Mexico’s GDP had quadrupled between 1987 and 2007 in an editorial defending NAFTA. (According to the I.M.F, Mexico’s GDP increased by 83 percent over this period.) Incredibly, the paper still has not corrected this egregious error in its online version.
This is why it is difficult to share the concern of Fred Hiatt, the editorial page editor, that we will see increasingly dishonest public debates. Hiatt and his team at the editorial page have no qualms at all about making up nonsense when pushing their positions. While I’m a big fan of facts and data in public debate, the Post’s editorial page editor is about the last person in the world who should be complaining about dishonest arguments.
Just to pick a trivial point in this piece, Hiatt wants us to be concerned about automation displacing workers. As fans of data know, automation is actually advancing at a record slow pace, with productivity growth averaging just 1.0 percent over the last decade. (This compares to 3.0 percent in the 1947 to 1973 Golden Age and the pick-up from 1995 to 2005.)
If Hiatt is predicting an imminent pick-up, as do some techno-optimists, then he was being dishonest in citing projections from the Congressional Budget Office showing larger budget deficits. If productivity picks up, so will growth and tax revenue, making the budget picture much brighter than what CBO is projecting.
It is also striking to see Hiatt warning about automation, the day after the Post editorial page complained that too many people have stopped working because of an overly generous disability program. That piece told readers:
“…at a time of declining workforce participation, especially among so-called prime-age males (those between 25 and 54 years old), the nation’s long-term economic potential depends on making sure work pays for all those willing to work. And from that point of view, the Social Security disability program needs reform.”
Okay, so yesterday we had too few workers and today we have too many because of automation. These arguments are complete opposites. The one unifying theme is that the Post is worried that we are being too generous to the poor and middle class.
The Washington Post editorial page is of course famous for absurdly claiming that Mexico’s GDP had quadrupled between 1987 and 2007 in an editorial defending NAFTA. (According to the I.M.F, Mexico’s GDP increased by 83 percent over this period.) Incredibly, the paper still has not corrected this egregious error in its online version.
This is why it is difficult to share the concern of Fred Hiatt, the editorial page editor, that we will see increasingly dishonest public debates. Hiatt and his team at the editorial page have no qualms at all about making up nonsense when pushing their positions. While I’m a big fan of facts and data in public debate, the Post’s editorial page editor is about the last person in the world who should be complaining about dishonest arguments.
Just to pick a trivial point in this piece, Hiatt wants us to be concerned about automation displacing workers. As fans of data know, automation is actually advancing at a record slow pace, with productivity growth averaging just 1.0 percent over the last decade. (This compares to 3.0 percent in the 1947 to 1973 Golden Age and the pick-up from 1995 to 2005.)
If Hiatt is predicting an imminent pick-up, as do some techno-optimists, then he was being dishonest in citing projections from the Congressional Budget Office showing larger budget deficits. If productivity picks up, so will growth and tax revenue, making the budget picture much brighter than what CBO is projecting.
It is also striking to see Hiatt warning about automation, the day after the Post editorial page complained that too many people have stopped working because of an overly generous disability program. That piece told readers:
“…at a time of declining workforce participation, especially among so-called prime-age males (those between 25 and 54 years old), the nation’s long-term economic potential depends on making sure work pays for all those willing to work. And from that point of view, the Social Security disability program needs reform.”
Okay, so yesterday we had too few workers and today we have too many because of automation. These arguments are complete opposites. The one unifying theme is that the Post is worried that we are being too generous to the poor and middle class.
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At a time of unprecedented inequality, the Washington Post is quick to seize on the country’s real problems: a Social Security disability program that is too generous. The editorial was good enough not to get bogged down in phony arguments. It tells readers explicitly that rampant fraud is not a problem:
“Nor is the program’s growth the result of rampant fraud, as sometimes alleged; structural factors such as population aging explain much recent growth. Nevertheless, at a time of declining workforce participation, especially among so-called prime-age males (those between 25 and 54 years old), the nation’s long-term economic potential depends on making sure work pays for all those willing to work. And from that point of view, the Social Security disability program needs reform.”
So the problem is that the program is too generous for people who might still be able to work in spite of a disability.
Just to get some orientation, the benefit that the Post considers to be too generous averages $1,170 a month. This was roughly six minutes of pay for our current Secretary of State, in his former job as the head of Exxon-Mobil.
The concern about the low employment rates (EPOP) in the United States is reasonable, but it bears no obvious relationship to the Social Security disability insurance program. The EPOP for prime-age workers (ages 25–54) has fallen by almost four percentage points since 2000, with no increase in the generosity of the disability program. In fact, if we combine the number of workers receiving disability and workers compensation, there has been little change in the share of the working-age population receiving benefits over this period.
In fact, the United States ranks near the bottom of OECD countries in the generosity of its benefits, yet it also ranks near the bottom in the employment rate for prime-age workers. In its most recent data, the OECD put the EPOP for prime-age workers in the United States at 78.2 percent. This compares 83.3 percent for the Netherlands, 84.2 percent for Germany, and 86.0 percent for Sweden, all countries that spend considerably more money on disability benefits than the United States.
The most obvious way to increase employment for prime-age workers is to deal with the demand side of the story. For example, it might be a good idea if the Fed stopped trying to slow the economy by raising interest rates. It would also be good if the pay of ordinary workers were increased by measures that reduce the pay of those at the top. Free trade in prescription drugs and free trade for doctors are near the top of my list. (Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer gives more of the story. [It’s free].) We can also follow the path of other countries and have more work supports, like access to low cost quality child care.
But in Donald Trump’s America, the priority is to take away as much as possible from those at the middle and bottom so the rich can have more. And the Washington Post is determined to do its part.
Addendum: Where are the Robots?
I forgot to ask this important question. Just last week the Post ran a column that had us terrified that the robots were going to take all the jobs. Now they want us to worry that we don’t have enough workers because they are all living on their $1170 a month disability benefit. In economics this is known as the “which way is up problem?” Ostensibly intelligent people don’t have the slightest clue what they are talking about when it comes to the economy.
Correction: An earlier version put the monthly benefit at one hour of pay for Secretary of State Rex Tillerson. That would imply annual pay in the range of $2 million a year. In fact, his pay came to more than $20 million a year.
At a time of unprecedented inequality, the Washington Post is quick to seize on the country’s real problems: a Social Security disability program that is too generous. The editorial was good enough not to get bogged down in phony arguments. It tells readers explicitly that rampant fraud is not a problem:
“Nor is the program’s growth the result of rampant fraud, as sometimes alleged; structural factors such as population aging explain much recent growth. Nevertheless, at a time of declining workforce participation, especially among so-called prime-age males (those between 25 and 54 years old), the nation’s long-term economic potential depends on making sure work pays for all those willing to work. And from that point of view, the Social Security disability program needs reform.”
So the problem is that the program is too generous for people who might still be able to work in spite of a disability.
Just to get some orientation, the benefit that the Post considers to be too generous averages $1,170 a month. This was roughly six minutes of pay for our current Secretary of State, in his former job as the head of Exxon-Mobil.
The concern about the low employment rates (EPOP) in the United States is reasonable, but it bears no obvious relationship to the Social Security disability insurance program. The EPOP for prime-age workers (ages 25–54) has fallen by almost four percentage points since 2000, with no increase in the generosity of the disability program. In fact, if we combine the number of workers receiving disability and workers compensation, there has been little change in the share of the working-age population receiving benefits over this period.
In fact, the United States ranks near the bottom of OECD countries in the generosity of its benefits, yet it also ranks near the bottom in the employment rate for prime-age workers. In its most recent data, the OECD put the EPOP for prime-age workers in the United States at 78.2 percent. This compares 83.3 percent for the Netherlands, 84.2 percent for Germany, and 86.0 percent for Sweden, all countries that spend considerably more money on disability benefits than the United States.
The most obvious way to increase employment for prime-age workers is to deal with the demand side of the story. For example, it might be a good idea if the Fed stopped trying to slow the economy by raising interest rates. It would also be good if the pay of ordinary workers were increased by measures that reduce the pay of those at the top. Free trade in prescription drugs and free trade for doctors are near the top of my list. (Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer gives more of the story. [It’s free].) We can also follow the path of other countries and have more work supports, like access to low cost quality child care.
But in Donald Trump’s America, the priority is to take away as much as possible from those at the middle and bottom so the rich can have more. And the Washington Post is determined to do its part.
Addendum: Where are the Robots?
I forgot to ask this important question. Just last week the Post ran a column that had us terrified that the robots were going to take all the jobs. Now they want us to worry that we don’t have enough workers because they are all living on their $1170 a month disability benefit. In economics this is known as the “which way is up problem?” Ostensibly intelligent people don’t have the slightest clue what they are talking about when it comes to the economy.
Correction: An earlier version put the monthly benefit at one hour of pay for Secretary of State Rex Tillerson. That would imply annual pay in the range of $2 million a year. In fact, his pay came to more than $20 million a year.
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There was probably too much made out of the slowing in payroll employment growth in the March jobs numbers reported yesterday. This was likely driven in large part by the unusually good weather in January and February that brought a lot of spring hiring forward. However, there were a couple of items that did not get the attention they deserve.
First, there is some limited evidence that wage growth is slowing. Typically, the year-over-year change in the average hourly wage is reported. While the growth in this measure slowed slightly last month, a problem with the year-over-year rate is that it reflects wage growth over the last year, not just recent months. I prefer taking the annualized rate of growth for the average of the last three months compared with the average of the prior three months. This measure can be sensitive to erratic month-to-month changes, but at least it focuses on a more recent period, rather than telling us about the wage growth from nine or ten months ago.
Here’s the picture using this series since the start of 2013.
Source: Bureau of Labor Statistics.
As the figure shows, there was some very modest increase in the rate of wage growth in early 2016, with a peak of 3.1 percent in May of 2016. Since then, the general direction has been downward, with the rate over the last three months being less than 2.5 percent. This matters hugely for the Fed’s interest rate policy, since a main issue for those looking to raise rates is that inflation could start rising above target levels. That seems unlikely if the rate of wage growth is stable or slowing.
In this respect it is also worth noting that the Employment Cost Index (ECI), a broader measure of compensation that includes non-wage benefits like health care, shows zero evidence of acceleration over this period. Over the last twelve months the ECI has risen 2.2 percent. That is the same rate of increase as we saw in this index three years earlier.
In short, you really can’t find any evidence of accelerating wage growth in the data. The evidence of deceleration is too weak to say anything conclusive, but if anything, wage growth is going in the wrong direction to make the case for the inflation hawks.
The other item that deserved more attention in the jobs report was the rise in the employment rate (EPOP) of prime-age workers. This rose by 0.2 percentage points to 78.5 percent. This number is 0.5 percentage points above its year-ago level, although still 1.8 percentage points below the pre-recession peak and almost 4.0 percentage points below the 2000 peak. This suggests that the EPOP could still rise much further before we can say that we have reached full employment.
There was also an interesting gender split to the rise in the EPOP. While the EPOP for prime-age women is up a full percentage point from its year, the EPOP for prime-age men is unchanged. This could begin to look like the widely hyped problem with men story, if the trend continues.
However, there are two important caveats. First, the monthly data are erratic. If we take three month averages, the year over year increase in EPOPs for men would be 0.2 percentage points and for women it would be 0.8 percentage points. This is still a substantial difference, but at least the rate for men is moving in the right direction.
The other issue is that, at least from the summary data, it does not appear to be an issue with less-educated men. Over the last year, the EPOP for people with college degrees is actually down by 0.3 percentage points in the first three months of 2017 compared to 2016. By contrast, the EPOP for people with just a high school degree is up by 0.3 percentage points. It is possible that a further analysis would show large gender differences, but it seems unlikely that the weakness in EPOPs could be concentrated among less educated men, given these numbers. This seems especially unlikely given that the retirement of baby boomers would be primarily affecting the EPOPs of people with just a high school degree.
There was probably too much made out of the slowing in payroll employment growth in the March jobs numbers reported yesterday. This was likely driven in large part by the unusually good weather in January and February that brought a lot of spring hiring forward. However, there were a couple of items that did not get the attention they deserve.
First, there is some limited evidence that wage growth is slowing. Typically, the year-over-year change in the average hourly wage is reported. While the growth in this measure slowed slightly last month, a problem with the year-over-year rate is that it reflects wage growth over the last year, not just recent months. I prefer taking the annualized rate of growth for the average of the last three months compared with the average of the prior three months. This measure can be sensitive to erratic month-to-month changes, but at least it focuses on a more recent period, rather than telling us about the wage growth from nine or ten months ago.
Here’s the picture using this series since the start of 2013.
Source: Bureau of Labor Statistics.
As the figure shows, there was some very modest increase in the rate of wage growth in early 2016, with a peak of 3.1 percent in May of 2016. Since then, the general direction has been downward, with the rate over the last three months being less than 2.5 percent. This matters hugely for the Fed’s interest rate policy, since a main issue for those looking to raise rates is that inflation could start rising above target levels. That seems unlikely if the rate of wage growth is stable or slowing.
In this respect it is also worth noting that the Employment Cost Index (ECI), a broader measure of compensation that includes non-wage benefits like health care, shows zero evidence of acceleration over this period. Over the last twelve months the ECI has risen 2.2 percent. That is the same rate of increase as we saw in this index three years earlier.
In short, you really can’t find any evidence of accelerating wage growth in the data. The evidence of deceleration is too weak to say anything conclusive, but if anything, wage growth is going in the wrong direction to make the case for the inflation hawks.
The other item that deserved more attention in the jobs report was the rise in the employment rate (EPOP) of prime-age workers. This rose by 0.2 percentage points to 78.5 percent. This number is 0.5 percentage points above its year-ago level, although still 1.8 percentage points below the pre-recession peak and almost 4.0 percentage points below the 2000 peak. This suggests that the EPOP could still rise much further before we can say that we have reached full employment.
There was also an interesting gender split to the rise in the EPOP. While the EPOP for prime-age women is up a full percentage point from its year, the EPOP for prime-age men is unchanged. This could begin to look like the widely hyped problem with men story, if the trend continues.
However, there are two important caveats. First, the monthly data are erratic. If we take three month averages, the year over year increase in EPOPs for men would be 0.2 percentage points and for women it would be 0.8 percentage points. This is still a substantial difference, but at least the rate for men is moving in the right direction.
The other issue is that, at least from the summary data, it does not appear to be an issue with less-educated men. Over the last year, the EPOP for people with college degrees is actually down by 0.3 percentage points in the first three months of 2017 compared to 2016. By contrast, the EPOP for people with just a high school degree is up by 0.3 percentage points. It is possible that a further analysis would show large gender differences, but it seems unlikely that the weakness in EPOPs could be concentrated among less educated men, given these numbers. This seems especially unlikely given that the retirement of baby boomers would be primarily affecting the EPOPs of people with just a high school degree.
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It will be great when the NYT and other news outlets stop feeling the need to misrepresent the promoters of the standard trade agenda as “free traders” as they did in a news article discussing Donald Trump’s latest actions on trade. In fact, these people are selective protectionists.
While they are happy to reduce barriers that might protect manufacturing workers from competition with low-paid workers in the developing world, they are fine with the protectionist barriers that maintain the high pay of doctors, dentists, and other highly paid professionals. (For example, a foreign doctor cannot practice in the United States unless they complete a U.S. residency program.)
They also support longer and stronger patent and copyright protections. These protections are equivalent to tariffs of thousands of percent on the protected items, most importantly prescription drugs.
The predicted and actual effect of this policy of selective protectionism is to redistribute income upward. Calling it “free trade” gives it a justification it does not deserve.
It will be great when the NYT and other news outlets stop feeling the need to misrepresent the promoters of the standard trade agenda as “free traders” as they did in a news article discussing Donald Trump’s latest actions on trade. In fact, these people are selective protectionists.
While they are happy to reduce barriers that might protect manufacturing workers from competition with low-paid workers in the developing world, they are fine with the protectionist barriers that maintain the high pay of doctors, dentists, and other highly paid professionals. (For example, a foreign doctor cannot practice in the United States unless they complete a U.S. residency program.)
They also support longer and stronger patent and copyright protections. These protections are equivalent to tariffs of thousands of percent on the protected items, most importantly prescription drugs.
The predicted and actual effect of this policy of selective protectionism is to redistribute income upward. Calling it “free trade” gives it a justification it does not deserve.
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The Washington Post is always open to plans for taking money from ordinary workers and giving it to the rich. For this reason it was not surprising to see a piece by Robert Atkinson, the head of the industry funded Information Technology and Innovation Foundation, advocating for more protectionism in the form of stronger and longer patent and copyright monopolies.
These monopolies, legacies from the medieval guild system, can raise the price of the protected items by one or two orders of magnitudes making them equivalent to tariffs of several hundred or several thousand percent. They are especially important in the case of prescription drugs.
Life-saving drugs that would sell for $200 or $300 in a free market can sell for tens or even hundreds of thousands of dollars due to patent protection. The country will spend over $440 billion this year for drugs that would likely sell for less than $80 billion in a free market. The strengthening of these protections is an important cause of the upward redistribution of the last four decades. The difference comes to more than $2,700 a year for an average family. (This is discussed in chapter 5 of Rigged, where I also lay out alternative mechanisms for financing innovation and creative work.)
Atkinson makes this argument in the context of the U.S. relationship with China. He also is explicitly prepared to have ordinary workers pay the price for this protectionism. He warns that not following his recommendation for a new approach to dealing with China, including forcing them to impose more protection for U.S. patents and copyrights, would lead to a lower valued dollar.
Of course, a lower valued dollar will make U.S. goods and services more competitive internationally. That would mean a smaller trade deficit as we sell more manufactured goods elsewhere in the world and buy fewer imported goods in the United States. This could increase manufacturing employment by 1–2 million, putting upward pressure on the wages of non-college educated workers.
In short, not following Atkinson’s path is likely to mean more money for less-educated workers, less money for the rich, and more overall growth, as the economy benefits from the lessening of protectionist barriers.
The Washington Post is always open to plans for taking money from ordinary workers and giving it to the rich. For this reason it was not surprising to see a piece by Robert Atkinson, the head of the industry funded Information Technology and Innovation Foundation, advocating for more protectionism in the form of stronger and longer patent and copyright monopolies.
These monopolies, legacies from the medieval guild system, can raise the price of the protected items by one or two orders of magnitudes making them equivalent to tariffs of several hundred or several thousand percent. They are especially important in the case of prescription drugs.
Life-saving drugs that would sell for $200 or $300 in a free market can sell for tens or even hundreds of thousands of dollars due to patent protection. The country will spend over $440 billion this year for drugs that would likely sell for less than $80 billion in a free market. The strengthening of these protections is an important cause of the upward redistribution of the last four decades. The difference comes to more than $2,700 a year for an average family. (This is discussed in chapter 5 of Rigged, where I also lay out alternative mechanisms for financing innovation and creative work.)
Atkinson makes this argument in the context of the U.S. relationship with China. He also is explicitly prepared to have ordinary workers pay the price for this protectionism. He warns that not following his recommendation for a new approach to dealing with China, including forcing them to impose more protection for U.S. patents and copyrights, would lead to a lower valued dollar.
Of course, a lower valued dollar will make U.S. goods and services more competitive internationally. That would mean a smaller trade deficit as we sell more manufactured goods elsewhere in the world and buy fewer imported goods in the United States. This could increase manufacturing employment by 1–2 million, putting upward pressure on the wages of non-college educated workers.
In short, not following Atkinson’s path is likely to mean more money for less-educated workers, less money for the rich, and more overall growth, as the economy benefits from the lessening of protectionist barriers.
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