Hey, Can We All Agree on Ending Protectionism for Doctors and Dentists?

February 01, 2017

01 Febrero 2017

The response to Donald Trump’s ban on Muslim immigrants has been reassuring. Millions of people have acted in various ways to express their opposition to this blatant act of bigotry. But as part of this story, we are being told that immigrants everywhere and always benefit all workers.

Far be it from me to criticize this great wisdom, which we can find in this Wonkblog post by Christopher Ingraham. So let’s pretend that the people making this assertion have a shred of integrity. How about getting rid of the restrictions that make it extremely difficult for foreign doctors and dentists to practice in the United States?

Currently, foreign doctors are banned from practicing unless they complete a U.S. residency program. Foreign dentists are prohibiting from practicing in the United States unless they graduate a U.S. dental school. (We have allowed graduates of Canadian schools since 2011.) As a result of these protectionist measures our doctors earn on average more than twice as much as doctors in other wealthy countries, netting more than $250,000 a year. Our dentists also get paid twice as much, averaging close to $200,000 a year. This protectionism costs us close to $100 billion a year in higher health care costs.

So we all agree that protectionism is bad and that we want more immigrants, so how about it? Will we tear down the walls barring qualified doctors and dentists, or are all of our open border types not really sincere?

The response to Donald Trump’s ban on Muslim immigrants has been reassuring. Millions of people have acted in various ways to express their opposition to this blatant act of bigotry. But as part of this story, we are being told that immigrants everywhere and always benefit all workers.

Far be it from me to criticize this great wisdom, which we can find in this Wonkblog post by Christopher Ingraham. So let’s pretend that the people making this assertion have a shred of integrity. How about getting rid of the restrictions that make it extremely difficult for foreign doctors and dentists to practice in the United States?

Currently, foreign doctors are banned from practicing unless they complete a U.S. residency program. Foreign dentists are prohibiting from practicing in the United States unless they graduate a U.S. dental school. (We have allowed graduates of Canadian schools since 2011.) As a result of these protectionist measures our doctors earn on average more than twice as much as doctors in other wealthy countries, netting more than $250,000 a year. Our dentists also get paid twice as much, averaging close to $200,000 a year. This protectionism costs us close to $100 billion a year in higher health care costs.

So we all agree that protectionism is bad and that we want more immigrants, so how about it? Will we tear down the walls barring qualified doctors and dentists, or are all of our open border types not really sincere?

David Leonhardt Says the Future of the Free World Depends on Longer Copyrights for Mickey Mouse

By CEPRCEPR

January 31, 2017

31 Enero 2017

That’s not exactly what he said but pretty damn close. Since you get thrown out of elite circles if you question the merits of the Trans-Pacific Partnership (TPP), the members are doubling down. They are insisting that terrible things will happen now that the TPP is dead.

David Leonhardt picked up the mantle in his NYT column today telling readers to counteract China, the countries of the region supported the TPP. He says they were:

“…willing to adopt American-style rules on intellectual property, pollution and labor unions, even though those rules created some political tensions in those countries.”

Among the rules on intellectual property was the retroactive extension of copyrights, requiring that countries protect works created in the past for at least 75 years. The retroactive extension of copyrights makes virtually no sense. Copyright monopolies are supposed to provide an incentive to produce creative work. While longer copyrights can in principle provide more incentive going forward they can’t provide incentive for past behavior.

Retroactive copyright extension has been a practice in the United States in large part to keep Mickey Mouse under copyright protection. The length of copyright has twice been extended retroactively in the United States as a result of Disney’s ability to lobby Congress.

This sort of protectionism is very costly. The Obama administration, at the request of the entertainment industry, the software industry, and pharmaceutical industry, insisted on stronger and longer patent and copyright related protections in the TPP. Unfortunately, the projections of the economic impact of the TPP do not take account of the costs of these protections.

Anyhow, it is worth noting these handouts to politically powerful corporations. If the future of the free world depends on the TPP, as Leonhardt argues here, then maybe it shouldn’t have included measures that will hugely raise the cost of everything from prescription drugs to software to Mickey Mouse memorabilia.

That’s not exactly what he said but pretty damn close. Since you get thrown out of elite circles if you question the merits of the Trans-Pacific Partnership (TPP), the members are doubling down. They are insisting that terrible things will happen now that the TPP is dead.

David Leonhardt picked up the mantle in his NYT column today telling readers to counteract China, the countries of the region supported the TPP. He says they were:

“…willing to adopt American-style rules on intellectual property, pollution and labor unions, even though those rules created some political tensions in those countries.”

Among the rules on intellectual property was the retroactive extension of copyrights, requiring that countries protect works created in the past for at least 75 years. The retroactive extension of copyrights makes virtually no sense. Copyright monopolies are supposed to provide an incentive to produce creative work. While longer copyrights can in principle provide more incentive going forward they can’t provide incentive for past behavior.

Retroactive copyright extension has been a practice in the United States in large part to keep Mickey Mouse under copyright protection. The length of copyright has twice been extended retroactively in the United States as a result of Disney’s ability to lobby Congress.

This sort of protectionism is very costly. The Obama administration, at the request of the entertainment industry, the software industry, and pharmaceutical industry, insisted on stronger and longer patent and copyright related protections in the TPP. Unfortunately, the projections of the economic impact of the TPP do not take account of the costs of these protections.

Anyhow, it is worth noting these handouts to politically powerful corporations. If the future of the free world depends on the TPP, as Leonhardt argues here, then maybe it shouldn’t have included measures that will hugely raise the cost of everything from prescription drugs to software to Mickey Mouse memorabilia.

Repealing Dodd-Frank and Flat Earthism in the Republican Party

By CEPRCEPR

January 31, 2017

31 Enero 2017

The New York Times ran a piece discussing in detail Republican efforts to repeal the financial reform bill passed under President Obama. The piece includes a quote from Representative Jeb Hensarling, the chairman of the House Financial Services Committee:

“Republicans on the Financial Services Committee are eager to work with the president and his administration to unclog the arteries of our financial system so the lifeblood of capital can flow more freely and create jobs.”

It would have been worth noting that the claim businesses are unable to get capital in the current environment has nothing to do with reality. The National Federation of Independent Businesses has been conducting surveys of its members for more than forty years. Their survey finds that access to credit today is less of a problem now than at almost any previous time.

It would have been useful to point this fact out to readers so that they would know that Mr. Hensarling either has no idea what he is talking about or is deliberately lying to advance his agenda for repealing Dodd-Frank.

The New York Times ran a piece discussing in detail Republican efforts to repeal the financial reform bill passed under President Obama. The piece includes a quote from Representative Jeb Hensarling, the chairman of the House Financial Services Committee:

“Republicans on the Financial Services Committee are eager to work with the president and his administration to unclog the arteries of our financial system so the lifeblood of capital can flow more freely and create jobs.”

It would have been worth noting that the claim businesses are unable to get capital in the current environment has nothing to do with reality. The National Federation of Independent Businesses has been conducting surveys of its members for more than forty years. Their survey finds that access to credit today is less of a problem now than at almost any previous time.

It would have been useful to point this fact out to readers so that they would know that Mr. Hensarling either has no idea what he is talking about or is deliberately lying to advance his agenda for repealing Dodd-Frank.

Unemployment Is Low and Wages are Soaring (not quite)

By CEPRCEPR

January 31, 2017

31 Enero 2017

The Fed raised interest rates last month because they said the economy was getting close to full employment and they were worried about accelerating inflation. The data do not provide much support for this concern.

Last week the Commerce Department reported that the core personal consumption expenditure deflator rose at just a 1.3 percent annual rate in the fourth quarter. This is well below the 2.0 percent average rate targeted by the Fed.

This morning the Bureau of Labor Statistics reported that the Employment Cost Index, which includes benefits and not just wages, rose at 2.0 percent annual rate in the fourth quarter and has risen just 2.2 percent over the last year.

The latest data suggest that inflation might even slowing rather than rising, indicating that there is no reason whatsoever for the Fed to weaken the labor market and slow job growth with further rate hikes. In other words, the Fed is shooting at phantom inflation.

The Fed raised interest rates last month because they said the economy was getting close to full employment and they were worried about accelerating inflation. The data do not provide much support for this concern.

Last week the Commerce Department reported that the core personal consumption expenditure deflator rose at just a 1.3 percent annual rate in the fourth quarter. This is well below the 2.0 percent average rate targeted by the Fed.

This morning the Bureau of Labor Statistics reported that the Employment Cost Index, which includes benefits and not just wages, rose at 2.0 percent annual rate in the fourth quarter and has risen just 2.2 percent over the last year.

The latest data suggest that inflation might even slowing rather than rising, indicating that there is no reason whatsoever for the Fed to weaken the labor market and slow job growth with further rate hikes. In other words, the Fed is shooting at phantom inflation.

Potential Savings on Medicare Part D from Lower Drug Prices

By CEPRCEPR

January 31, 2017

31 Enero 2017

Four years ago, we calculated the potential savings to the federal and state governments, as well as beneficiaries, from lower drug prices. In the paper, Reducing Waste with an Efficient Medicare Drug Benefit, we compared how much people in the United States paid for drugs with payments in other wealthy countries. We then calculated how much the federal and state governments, as well as beneficiaries, would save on the Medicare prescription drug benefit if we paid the same amount for drugs as people in other countries. The calculation had low and high savings scenarios. In the low savings scenario, it was assumed people in the United States would pay as much for prescription drugs as in Canada, the highest country in the group. This involved savings of 27.8 percent on drugs, since Canadians pay on average 72.2 percent as much as people in the United States. The high savings scenario was based on drug payments in Denmark, which are on average 34.5 percent as high as in the United States, implying a savings of 65.5 percent.[1]

Painful Nonsense on Trade

By CEPRCEPR

January 30, 2017

30 Enero 2017

It really is amazing how much effort elite types expend denying that trade has cost us manufacturing jobs. The latest entry is from Robert Samuelson who tells us that it isn't true that manufacturing jobs have been lost to trade. Samuelson's main source on this is Brad DeLong, who is actually a very good economist and surely knows better. Samuelson tells readers: "Contrary to popular opinion, trade is not a major cause of job loss. It’s true that U.S. manufacturing has suffered a dramatic long-term employment erosion, sliding from roughly one-third of nonfarm jobs in 1950 to a quarter of jobs in the early 1970s to a little less than 9 percent now, according to economist J. Bradford DeLong of the University of California at Berkeley in an essay posted on Vox. But the main cause is automation." The cheap trick here is going back to 1950. Yes, we have lost lots of manufacturing jobs to automation and over a 70-year period that does swamp the impact of the jobs lost due to trade, but this is really a dishonest way to present the issue. Manufacturing was declining as a share of total employment even in the 1950s and 1960s, but the pace was modest enough and we were creating enough jobs in other sectors that the job loss still allowed for real wage growth in both manufacturing and the economy as a whole.

Washington Post Pushed Fear on Corporate Tax Reform

By CEPRCEPR

January 29, 2017

29 Enero 2017

The headline warned readers that the Republican's proposal for reforming the corporate income tax is coming for your toys, literally: "Trump-era tax reform could come for your toys." Okay, we get it. The Washington Post doesn't like the tax reform and is not content to keep its views to the opinion pages. (This article ran at the top of the Sunday business section.) The basic story is almost Trumpian in its unreality. The tax reform includes a border adjustment tax on imports. This is similar (not identical) to what countries with value-added taxes do, which is almost every other wealthy country. The conventional wisdom among economists is that currencies adjust so that the net effect on the price of imports, including toys, is minimal. While this piece notes this argument, it implies that consumers and retailers have great cause for concern over the tax. In this respect, it is worth pointing out that currencies fluctuate by large amounts all the time, in ways that are likely to have far more impact on the price of imported toys than this tax. The figure below shows the inflation-adjusted value of the dollar measured against the currencies of our major trading partners.

• WorkersSector del trabajo

What Happened to Automation and Robots: WaPo Tells of Labor Shortage in Japan

By CEPRCEPR

January 29, 2017

29 Enero 2017

Wow, things just keep getting worse. Automation is taking all the jobs, and the aging of the population means we won’t have any workers. Yes, these are completely contradictory concerns, but no one ever said that our policy elite had a clue. (No, I’m not talking about Donald Trump’s gang here.)

Anyhow, the Washington Post had a front page story telling us how older people are now working at retirement homes in Japan as a result of the aging of its population. The piece includes this great line:

“That means authorities need to think about ways to keep seniors healthy and active for longer, but also about how to augment the workforce to cope with labor shortages.”

You sort of have to love the first part, since folks might have thought authorities would have always been trying to think about ways to keep seniors healthy and active longer. After all, isn’t this a main focus of public health policy?

The part about labor shortages is also interesting. When there is a shortage of oil or wheat the price rises. If there were a labor shortage in Japan then we should be seeing rapidly rising wages. We aren’t. Wages have been virtually flat in recent years. That would seem to indicate that Japan doesn’t have a labor shortage — or alternatively, it has economically ignorant managers who don’t realize that the way to attract workers is to offer higher pay.

Wow, things just keep getting worse. Automation is taking all the jobs, and the aging of the population means we won’t have any workers. Yes, these are completely contradictory concerns, but no one ever said that our policy elite had a clue. (No, I’m not talking about Donald Trump’s gang here.)

Anyhow, the Washington Post had a front page story telling us how older people are now working at retirement homes in Japan as a result of the aging of its population. The piece includes this great line:

“That means authorities need to think about ways to keep seniors healthy and active for longer, but also about how to augment the workforce to cope with labor shortages.”

You sort of have to love the first part, since folks might have thought authorities would have always been trying to think about ways to keep seniors healthy and active longer. After all, isn’t this a main focus of public health policy?

The part about labor shortages is also interesting. When there is a shortage of oil or wheat the price rises. If there were a labor shortage in Japan then we should be seeing rapidly rising wages. We aren’t. Wages have been virtually flat in recent years. That would seem to indicate that Japan doesn’t have a labor shortage — or alternatively, it has economically ignorant managers who don’t realize that the way to attract workers is to offer higher pay.

The Economic Efficiency Argument for the Consumer Financial Protection Bureau

By CEPRCEPR

January 28, 2017

28 Enero 2017

A Washington Post article on the future of the Consumer Financial Protection Bureau (CFPB) contrasted the arguments of supporters, that the CFPB has protected consumers from unethical practices from the industry, with arguments by opponents that it has hurt lending. (These arguments are false, small businesses report they have little trouble getting credit.) The discussion left out the economic efficiency story for the CFPB.

The basic story is that if it’s possible to make lots of money by using deceptive contracts to ripoff consumers, then many very talented and hard-working people will spend their time developing schemes to ripoff consumers. Instead of doing things that contribute to consumers’ well-being (e.g. developing better products), these people will be committing resources to redistributing from others to themselves. If the government makes it more difficult to profit from the ripoff route, then people who want to make lots of money will be forced to turn to productive routes instead.

By this logic, weakening the CFPB, and other measures designed to protect consumers, gives more incentives to businesses to design elaborate ripoff schemes. In addition to being bad for consumers, this is a waste from the standpoint of the economy as a whole and a drag on economic growth.

A Washington Post article on the future of the Consumer Financial Protection Bureau (CFPB) contrasted the arguments of supporters, that the CFPB has protected consumers from unethical practices from the industry, with arguments by opponents that it has hurt lending. (These arguments are false, small businesses report they have little trouble getting credit.) The discussion left out the economic efficiency story for the CFPB.

The basic story is that if it’s possible to make lots of money by using deceptive contracts to ripoff consumers, then many very talented and hard-working people will spend their time developing schemes to ripoff consumers. Instead of doing things that contribute to consumers’ well-being (e.g. developing better products), these people will be committing resources to redistributing from others to themselves. If the government makes it more difficult to profit from the ripoff route, then people who want to make lots of money will be forced to turn to productive routes instead.

By this logic, weakening the CFPB, and other measures designed to protect consumers, gives more incentives to businesses to design elaborate ripoff schemes. In addition to being bad for consumers, this is a waste from the standpoint of the economy as a whole and a drag on economic growth.

Paul Krugman and the Republican Corporate Income Tax Proposal

By CEPRCEPR

January 28, 2017

28 Enero 2017

The current corporate income tax is a massive cesspool. There are so many routes for avoidance that it is almost becoming voluntary. This matters not only because we don't get the revenue we should from the tax, but also because it has created a massive tax avoidance industry. The tax avoidance industry is a big deal. This is an industry that contributes nothing to the economy. It involves people designing clever tricks to allow corporations to avoid paying their share of taxes. The tax avoidance industry is also an important source of inequality since it is possible to get very rich designing clever ways to avoid taxes. My colleague Eileen Appelbaum (along with Rose Batt) show how the private equity industry is largely a tax avoidance industry in their recent book Private Equity at Work. Many of the very richest people in the country got their wealth as private equity fund partners. In his movie, Capitalism: A Love Story, Michael Moore highlighted "dead peasant" insurance policies. This is when a major company like Walmart buys life insurance policies on tens of thousands of front line workers, like checkout clerks. Usually the insuree doesn't even know of the existence of the policy, but if they die, the company collects. Moore emphasized the morbid nature of this game, but missed the real story. The point of these policies is to smooth profits, partly to manipulate share prices, but also for tax purposes. The real highlight of this story is that there is someone who likely got very rich by developing dead peasant insurance policies, rather than contributing anything productive to the economy. I mention this as background to the corporate income tax discussion since to my view a major goal of corporate tax reform is to eliminate the enormous opportunities for gaming that currently exist. These opportunities are making some people very rich and are a complete waste from an economic standpoint.