Reporters always complain about not having enough space to give the full story, which makes it a mystery as to why they so frequently add the word “free” to references to trade policy. We got an example of this wasteful wordiness in a NYT article on Donald Trump’s decision to ignore nepotism and conflict-of-interest rules and appoint his son-in-law Jared Kushner as a top adviser.
The piece told readers that Kushner, along with other responsibilities, would work on “matters involving free trade.” The use of “free” in this context is misleading since much of the U.S. trade agenda is about increasing protectionism in the form of longer and stronger patent, copyright, and related protections. These protections are equivalent to tariffs of many thousand percent in the economic distortions they produce. They are 180 degrees at odds with free trade. There also has been little, if any, effort to remove protectionists barriers that benefit highly paid professionals, such as the ban on foreign doctors who have not completed a U.S. residency program.
For these reasons, it is inaccurate to include the word “free” in reference to U.S. trade policy. It is difficult to see why the NYT and other news outlets feel the need to do it.
Reporters always complain about not having enough space to give the full story, which makes it a mystery as to why they so frequently add the word “free” to references to trade policy. We got an example of this wasteful wordiness in a NYT article on Donald Trump’s decision to ignore nepotism and conflict-of-interest rules and appoint his son-in-law Jared Kushner as a top adviser.
The piece told readers that Kushner, along with other responsibilities, would work on “matters involving free trade.” The use of “free” in this context is misleading since much of the U.S. trade agenda is about increasing protectionism in the form of longer and stronger patent, copyright, and related protections. These protections are equivalent to tariffs of many thousand percent in the economic distortions they produce. They are 180 degrees at odds with free trade. There also has been little, if any, effort to remove protectionists barriers that benefit highly paid professionals, such as the ban on foreign doctors who have not completed a U.S. residency program.
For these reasons, it is inaccurate to include the word “free” in reference to U.S. trade policy. It is difficult to see why the NYT and other news outlets feel the need to do it.
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Politico badly misled readers this morning in an article that said Trump “can’t simply divest from his businesses.” The article cited a number of experts who explained how difficult and complicated it would be for Trump to sell off his various businesses, many of which have complex ownership arrangements, along with debts and other legal obligations.
While selling Trump’s business enterprises in short order would be complicated, as I explained shortly after the election, this is not what is necessary for Donald Trump to avoid conflicts of interest. The key to the process I outline in that piece is that Trump arrange to get independent teams of auditors to provide assessments of the property. I suggested he go with the middle assessment provided by three teams of auditors. This would limit the likelihood of a major error in the assessment.
Trump would then buy an insurance policy that would guarantee him the estimate from this middle audit. The enterprises would then be turned over to an executor who would run and offload the businesses with the goal of maximizing the value. When the businesses are sold off the proceeds would be placed in a blind trust. If the cumulative value from the sales exceeds the estimate, then the proceeds go to a charity of Trump’s choosing, but not under his control. If the proceeds from the sales are less than the value of the estimate he collects on the insurance policy.
This is a process that should be fair to Donald Trump and can be done quickly. It eliminates his conflicts of interest as soon he buys the insurance policy. Trump should have been going in this direction the day after the election, in which case he surely would have an insurance policy in force by now. However, if he were to take steps to come clean now, he should still be able to end his conflicts in the first weeks of his presidency.
Politico badly misled readers this morning in an article that said Trump “can’t simply divest from his businesses.” The article cited a number of experts who explained how difficult and complicated it would be for Trump to sell off his various businesses, many of which have complex ownership arrangements, along with debts and other legal obligations.
While selling Trump’s business enterprises in short order would be complicated, as I explained shortly after the election, this is not what is necessary for Donald Trump to avoid conflicts of interest. The key to the process I outline in that piece is that Trump arrange to get independent teams of auditors to provide assessments of the property. I suggested he go with the middle assessment provided by three teams of auditors. This would limit the likelihood of a major error in the assessment.
Trump would then buy an insurance policy that would guarantee him the estimate from this middle audit. The enterprises would then be turned over to an executor who would run and offload the businesses with the goal of maximizing the value. When the businesses are sold off the proceeds would be placed in a blind trust. If the cumulative value from the sales exceeds the estimate, then the proceeds go to a charity of Trump’s choosing, but not under his control. If the proceeds from the sales are less than the value of the estimate he collects on the insurance policy.
This is a process that should be fair to Donald Trump and can be done quickly. It eliminates his conflicts of interest as soon he buys the insurance policy. Trump should have been going in this direction the day after the election, in which case he surely would have an insurance policy in force by now. However, if he were to take steps to come clean now, he should still be able to end his conflicts in the first weeks of his presidency.
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December’s employment report showed that the average hourly wage has risen by 2.9 percent over the last year. This was widely reported as evidence that wage growth was accelerating. While the pace of wage growth may have picked up somewhat in recent months, it is not necessarily the case that the pace of compensation growth has risen to the same extent.
In recent years, the pace of benefit growth has been trailing the rate of wage growth, as employers cut back on the amount they pay for their workers’ health insurance. As a result, at least through the third quarter of the 2016 (4th quarter data are not yet available), the acceleration in compensation growth was less noticeable than the acceleration recently reported in wage growth. The year-over-year increase for the third quarter was 2.4 percent. This is up by roughly a percentage point from the lows hit in 2009, but down from 2.6 percent year-over-year pace in the fourth quarter of 2014.
December’s employment report showed that the average hourly wage has risen by 2.9 percent over the last year. This was widely reported as evidence that wage growth was accelerating. While the pace of wage growth may have picked up somewhat in recent months, it is not necessarily the case that the pace of compensation growth has risen to the same extent.
In recent years, the pace of benefit growth has been trailing the rate of wage growth, as employers cut back on the amount they pay for their workers’ health insurance. As a result, at least through the third quarter of the 2016 (4th quarter data are not yet available), the acceleration in compensation growth was less noticeable than the acceleration recently reported in wage growth. The year-over-year increase for the third quarter was 2.4 percent. This is up by roughly a percentage point from the lows hit in 2009, but down from 2.6 percent year-over-year pace in the fourth quarter of 2014.
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Neil Irwin gave a reasonable assessment of the Obama administration’s record on job creation and wage growth, but there is one item that could use clarification. He notes the decline in prime-age male labor force participation, but then dismisses it as part of a long-term trend.
There are two points here that are worth noting. The participation rate of prime-age women had been rising prior to the recessions in 2001 and 2008–09. In both cases it was projected to continue to rise. Economists are happy to now say that the lower current rate is simply due to more prime-age women choosing not to work, but it is not obvious to me that economists today are better able to determine the underlying rate of labor force participation for prime-age women than economists working in 2000 or 2006. In other words, I don’t buy that the drop in women’s labor force participation is not the result of weak demand.
The other point is that labor force participation is actually an imperfect measure since the decision of someone to look for work, and therefore be classified as part of the labor force, depends in part on the generosity of unemployment insurance (UI) benefits. (To qualify for benefits you have to say you are looking for work.) As requirements for UI have gotten stricter more people give up looking for work and drop out of the labor force.
If we look at prime-age employment rates (EPOP) we get a measure that is not sensitive to this problem. So, while Irwin tells us:
“The proportion of men 25 to 54 who are part of the labor force has fallen by 1.4 percentage points during the last eight years.
“What is less widely understood, though, is that this shift isn’t some new phenomenon of the Obama era. That same measure fell by 1.7 percentage points during the eight years of George W. Bush’s presidency. Even during the boom years of the Clinton administration, it fell by 0.9 percentage points.”
If we look at EPOPs we got a somewhat different picture, most notably during the Clinton years. From January 1993 to January of 2001 the EPOP for prime-age men rose by 2.1 percentage points. Even if we take the more reasonable peak to peak comparison we see little evidence of a downward trend with a peak in February of 1990 of 90.1 percent compared to a peak in January of 1999 of 89.7 percent. In other words, if we look at EPOPs, there is not much evidence of a downward trend in EPOPs in the decade prior to the 2001 recession.
The point is important since there are many people in policy positions who want to say that the current level of unemployment and employment rates is the best we can do and that the Fed should jack up rates to prevent the labor market from tightening further. (The same was true when the unemployment rate fell below 6.0 percent in 1995.)
If in fact there are still millions of people who would work if they saw jobs available, then we are needlessly depriving them of employment. Furthermore, by weakening the labor market, the Fed would be preventing tens of millions of workers from having sufficient bargaining power to secure rate increases and make up the ground loss in the recession.
Neil Irwin gave a reasonable assessment of the Obama administration’s record on job creation and wage growth, but there is one item that could use clarification. He notes the decline in prime-age male labor force participation, but then dismisses it as part of a long-term trend.
There are two points here that are worth noting. The participation rate of prime-age women had been rising prior to the recessions in 2001 and 2008–09. In both cases it was projected to continue to rise. Economists are happy to now say that the lower current rate is simply due to more prime-age women choosing not to work, but it is not obvious to me that economists today are better able to determine the underlying rate of labor force participation for prime-age women than economists working in 2000 or 2006. In other words, I don’t buy that the drop in women’s labor force participation is not the result of weak demand.
The other point is that labor force participation is actually an imperfect measure since the decision of someone to look for work, and therefore be classified as part of the labor force, depends in part on the generosity of unemployment insurance (UI) benefits. (To qualify for benefits you have to say you are looking for work.) As requirements for UI have gotten stricter more people give up looking for work and drop out of the labor force.
If we look at prime-age employment rates (EPOP) we get a measure that is not sensitive to this problem. So, while Irwin tells us:
“The proportion of men 25 to 54 who are part of the labor force has fallen by 1.4 percentage points during the last eight years.
“What is less widely understood, though, is that this shift isn’t some new phenomenon of the Obama era. That same measure fell by 1.7 percentage points during the eight years of George W. Bush’s presidency. Even during the boom years of the Clinton administration, it fell by 0.9 percentage points.”
If we look at EPOPs we got a somewhat different picture, most notably during the Clinton years. From January 1993 to January of 2001 the EPOP for prime-age men rose by 2.1 percentage points. Even if we take the more reasonable peak to peak comparison we see little evidence of a downward trend with a peak in February of 1990 of 90.1 percent compared to a peak in January of 1999 of 89.7 percent. In other words, if we look at EPOPs, there is not much evidence of a downward trend in EPOPs in the decade prior to the 2001 recession.
The point is important since there are many people in policy positions who want to say that the current level of unemployment and employment rates is the best we can do and that the Fed should jack up rates to prevent the labor market from tightening further. (The same was true when the unemployment rate fell below 6.0 percent in 1995.)
If in fact there are still millions of people who would work if they saw jobs available, then we are needlessly depriving them of employment. Furthermore, by weakening the labor market, the Fed would be preventing tens of millions of workers from having sufficient bargaining power to secure rate increases and make up the ground loss in the recession.
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Yet again the Washington Post tries to tell readers that trade has not been a major factor in the loss of manufacturing jobs in this century. It concluded an interesting piece on Ford’s decision to cancel plans for a plant in Mexico by telling readers:
“The president-elect has argued that trade policy has quashed American livelihoods, encouraging businesses to seek cheaper labor in other countries. He has criticized Ford, General Motors and Carrier on Twitter for shuttling work south of the border.
“A study last year from the Center for Business and Economic Research at Ball State University, a school in the manufacturing heartland, tells a different story. Co-author Michael Hicks, an economics professor, found that advances in technology caused far more job loss. That’s because automation has enabled factories to produce more goods with fewer people.“
Actually, automation is not new. It’s called “productivity growth” and has been going on for centuries, often much faster than it is today. As we can see, manufacturing employment remained roughly even, with cyclical ups and downs, from 1970 to 2000. It then plunged as the trade deficit exploded to almost 6.0 percent of GDP in 2005 and 2006 ($1.1 trillion in today’s economy).
Manufacturing Employment
Source: Bureau of Labor Statistics.
The basic story is that manufacturing employment was declining as a share of total employment through this whole period and undoubtedly would have continued to do so regardless of what happened with trade. However, the sharp plunge in employment that we saw in the years 2000 to 2007 (pre-crash) was due to the trade deficit.
It is remarkable that the Washington Post feels so much need to deny this simple fact. It is in the same vein as its refusal to correct its 2007 editorial claiming that NAFTA had led Mexico’s GDP to quadruple between 1987 and 2007. The actual number is 83 percent according to I.M.F data. A serious newspaper would correct such an egregious error.
Yet again the Washington Post tries to tell readers that trade has not been a major factor in the loss of manufacturing jobs in this century. It concluded an interesting piece on Ford’s decision to cancel plans for a plant in Mexico by telling readers:
“The president-elect has argued that trade policy has quashed American livelihoods, encouraging businesses to seek cheaper labor in other countries. He has criticized Ford, General Motors and Carrier on Twitter for shuttling work south of the border.
“A study last year from the Center for Business and Economic Research at Ball State University, a school in the manufacturing heartland, tells a different story. Co-author Michael Hicks, an economics professor, found that advances in technology caused far more job loss. That’s because automation has enabled factories to produce more goods with fewer people.“
Actually, automation is not new. It’s called “productivity growth” and has been going on for centuries, often much faster than it is today. As we can see, manufacturing employment remained roughly even, with cyclical ups and downs, from 1970 to 2000. It then plunged as the trade deficit exploded to almost 6.0 percent of GDP in 2005 and 2006 ($1.1 trillion in today’s economy).
Manufacturing Employment
Source: Bureau of Labor Statistics.
The basic story is that manufacturing employment was declining as a share of total employment through this whole period and undoubtedly would have continued to do so regardless of what happened with trade. However, the sharp plunge in employment that we saw in the years 2000 to 2007 (pre-crash) was due to the trade deficit.
It is remarkable that the Washington Post feels so much need to deny this simple fact. It is in the same vein as its refusal to correct its 2007 editorial claiming that NAFTA had led Mexico’s GDP to quadruple between 1987 and 2007. The actual number is 83 percent according to I.M.F data. A serious newspaper would correct such an egregious error.
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Folks undoubtedly heard about Donald Trump’s boast about getting Ford to keep jobs in the U.S. rather than investing in a new plant in Mexico. The decision seems to have more to do with Ford’s product mix than anything that Trump did with his boast and bully strategy, but whatever. We’re getting used to a guy that would take credit for the sun rising and gives us jobs that you can count on your fingers. (To be clear, I think it would be great if Donald Trump pushes policies that bring (or save) good-paying manufacturing jobs to the United States, but we’re interested in policies that affect millions of jobs, not press shows with hundreds of jobs.)
Anyhow, one aspect of these Ford jobs that has not gotten sufficient attention is that the only reason they exist is because of President Obama’s policy on combating global warming. As the NYT article points out, the plant in Michigan where production is being increased produces hybrid and electric cars. These cars were given subsidies as part of President Obama’s efforts to curb greenhouse gas emissions. This was part of Obama’s strategy to combat global warming.
As folks may recall, Donald Trump has said that global warming is a hoax invented by the Chinese. It turns out that President Obama’s response to this hoax is responsible for creating the jobs that Trump claims to have saved.
Folks undoubtedly heard about Donald Trump’s boast about getting Ford to keep jobs in the U.S. rather than investing in a new plant in Mexico. The decision seems to have more to do with Ford’s product mix than anything that Trump did with his boast and bully strategy, but whatever. We’re getting used to a guy that would take credit for the sun rising and gives us jobs that you can count on your fingers. (To be clear, I think it would be great if Donald Trump pushes policies that bring (or save) good-paying manufacturing jobs to the United States, but we’re interested in policies that affect millions of jobs, not press shows with hundreds of jobs.)
Anyhow, one aspect of these Ford jobs that has not gotten sufficient attention is that the only reason they exist is because of President Obama’s policy on combating global warming. As the NYT article points out, the plant in Michigan where production is being increased produces hybrid and electric cars. These cars were given subsidies as part of President Obama’s efforts to curb greenhouse gas emissions. This was part of Obama’s strategy to combat global warming.
As folks may recall, Donald Trump has said that global warming is a hoax invented by the Chinese. It turns out that President Obama’s response to this hoax is responsible for creating the jobs that Trump claims to have saved.
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Yes, I know Peter Peterson is a major source of employment in Washington and that the Washington Post editors and many pundits would have to look for substantive issues to talk about if they couldn’t whine about the debt, but really it is time for these folks to grow up. The immediate provocation here is Steven Rattner’s NYT column giving “2016 in Charts.”
Most of the charts are actually quite interesting and useful, but then he ends the piece with a tirade about the prospects for the national debt under a Trump administration. Rattner warns:
“These huge tax giveaways — along with Mr. Trump’s promises to increase infrastructure spending and not touch Social Security and Medicare — would blow up the deficit and add $4 trillion to the national debt over the next 10 years over and above current projections.”
Just to be clear, there is no reason to be giving more money to Donald Trump’s billionaire friends as he proposes, but the argument is not that it will “blow up” the deficit and add to the debt. The argument is that this money could be much better used educating our children, improving our infrastructure, and making health care affordable, among other things.
The debt stuff is just silliness that we really need to get over. The problem of an actually excessive debt would show itself in high interest rates and high inflation rates. Have you checked those measures lately? Long-term interest rates are still way below their levels from the late 1990s when the government was running surpluses. And inflation remains persistently below the Fed’s 2.0 percent target and in recent months has edged downward. (And, for those keeping score at home, the government’s ratio of interest payments to GDP is near a post-World War II low.)
Furthermore, the whole focus on the debt encourages sloppy thinking that has no place in serious policy discussions. The government makes obligations for us all the time that don’t take the form of explicit debt. Donald Trump wants to have private companies spend a trillion dollars building infrastructure that they will then recoup in tolls. How do these tolls differ from taxes? So we would be doing bad things to our kids if we financed infrastructure with debt, but then taxed to repay the bonds, but if private companies charge the same amount (most likely much more) in tolls, everything is cool?
To take a much more important example, grants of patent and copyright monopolies are ways in which the government finances innovation and creative work. We pay $430 billion a year for prescription drugs that would likely cost around $60 billion in a free market without patents and related protection. (Yes, you can read more in my [free] book, Rigged.) If the government imposed a tax of $370 billion a year on drugs being sold in a free market the deficit hawks would be yelling and screaming about high taxes, but when we give drug companies a legal monopoly so that they can add this amount to the price of drugs it’s no big deal?
Okay, this is just silliness. We need discussions of the economy that are serious. When people scream about debt and deficits they are not being serious. The national debt is not a real measure of anything and folks should know that even if the “experts” don’t.
Yes, I know Peter Peterson is a major source of employment in Washington and that the Washington Post editors and many pundits would have to look for substantive issues to talk about if they couldn’t whine about the debt, but really it is time for these folks to grow up. The immediate provocation here is Steven Rattner’s NYT column giving “2016 in Charts.”
Most of the charts are actually quite interesting and useful, but then he ends the piece with a tirade about the prospects for the national debt under a Trump administration. Rattner warns:
“These huge tax giveaways — along with Mr. Trump’s promises to increase infrastructure spending and not touch Social Security and Medicare — would blow up the deficit and add $4 trillion to the national debt over the next 10 years over and above current projections.”
Just to be clear, there is no reason to be giving more money to Donald Trump’s billionaire friends as he proposes, but the argument is not that it will “blow up” the deficit and add to the debt. The argument is that this money could be much better used educating our children, improving our infrastructure, and making health care affordable, among other things.
The debt stuff is just silliness that we really need to get over. The problem of an actually excessive debt would show itself in high interest rates and high inflation rates. Have you checked those measures lately? Long-term interest rates are still way below their levels from the late 1990s when the government was running surpluses. And inflation remains persistently below the Fed’s 2.0 percent target and in recent months has edged downward. (And, for those keeping score at home, the government’s ratio of interest payments to GDP is near a post-World War II low.)
Furthermore, the whole focus on the debt encourages sloppy thinking that has no place in serious policy discussions. The government makes obligations for us all the time that don’t take the form of explicit debt. Donald Trump wants to have private companies spend a trillion dollars building infrastructure that they will then recoup in tolls. How do these tolls differ from taxes? So we would be doing bad things to our kids if we financed infrastructure with debt, but then taxed to repay the bonds, but if private companies charge the same amount (most likely much more) in tolls, everything is cool?
To take a much more important example, grants of patent and copyright monopolies are ways in which the government finances innovation and creative work. We pay $430 billion a year for prescription drugs that would likely cost around $60 billion in a free market without patents and related protection. (Yes, you can read more in my [free] book, Rigged.) If the government imposed a tax of $370 billion a year on drugs being sold in a free market the deficit hawks would be yelling and screaming about high taxes, but when we give drug companies a legal monopoly so that they can add this amount to the price of drugs it’s no big deal?
Okay, this is just silliness. We need discussions of the economy that are serious. When people scream about debt and deficits they are not being serious. The national debt is not a real measure of anything and folks should know that even if the “experts” don’t.
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This fact was implicit in a NYT piece that discussed the extent to which U.S. medical schools are expanding enrollments. The piece notes that the number of doctors in the United States is limited by the requirement that they complete a U.S. residency program. It doesn’t give any indication that this protectionist restriction might be removed or weakened in the years ahead.
As a result of this protectionism, U.S. doctors earn on average more than twice as much as their counterparts in Germany, France, and other wealthy countries. This costs the country close to $100 billion a year in higher health care costs. Because of the political power of doctors, there is little public debate over this protectionism and news outlets like the NYT rarely even mention it.
This fact was implicit in a NYT piece that discussed the extent to which U.S. medical schools are expanding enrollments. The piece notes that the number of doctors in the United States is limited by the requirement that they complete a U.S. residency program. It doesn’t give any indication that this protectionist restriction might be removed or weakened in the years ahead.
As a result of this protectionism, U.S. doctors earn on average more than twice as much as their counterparts in Germany, France, and other wealthy countries. This costs the country close to $100 billion a year in higher health care costs. Because of the political power of doctors, there is little public debate over this protectionism and news outlets like the NYT rarely even mention it.
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