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Steve Rattner had a column on Donald Trump’s deal to keep 1,000 jobs at the Carrier air conditioner factory in Indiana in the country. The column argues against imposing tariff barriers that would protect manufacturing workers, but ignores the protectionist barriers that inflate the wages of doctors and other highly paid professionals.
The United States prohibits foreign doctors, even those with top quality health care systems like Germany and Netherlands, from practicing in the United States unless they complete a U.S. residency program. It also prohibits foreign dentists from practicing in the United States unless they graduate from a U.S. dental school. (Since 2011, graduates of Canadian dental schools have also been allowed to practice here.)
As a result of these and other protectionist measures we pay far more for the services provided by these professionals. In the case of doctors, their average pay of more than $250,000 a year (net of malpractice insurance and other expenses) is twice the average of other wealthy countries. This costs the country close to $100 billion a year (@$700 per household) in higher health care costs.
There are enormous potential gains to the economy from removing the protectionist barriers in these high-end professionals. It would also be a huge step toward reducing inequality. Unfortunately, it seems that people like Rattner and other protectionists who write on trade for the NYT are not willing to consider free trade policies.
Steve Rattner had a column on Donald Trump’s deal to keep 1,000 jobs at the Carrier air conditioner factory in Indiana in the country. The column argues against imposing tariff barriers that would protect manufacturing workers, but ignores the protectionist barriers that inflate the wages of doctors and other highly paid professionals.
The United States prohibits foreign doctors, even those with top quality health care systems like Germany and Netherlands, from practicing in the United States unless they complete a U.S. residency program. It also prohibits foreign dentists from practicing in the United States unless they graduate from a U.S. dental school. (Since 2011, graduates of Canadian dental schools have also been allowed to practice here.)
As a result of these and other protectionist measures we pay far more for the services provided by these professionals. In the case of doctors, their average pay of more than $250,000 a year (net of malpractice insurance and other expenses) is twice the average of other wealthy countries. This costs the country close to $100 billion a year (@$700 per household) in higher health care costs.
There are enormous potential gains to the economy from removing the protectionist barriers in these high-end professionals. It would also be a huge step toward reducing inequality. Unfortunately, it seems that people like Rattner and other protectionists who write on trade for the NYT are not willing to consider free trade policies.
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You need not be a fan of Donald Trump to say that trade has had a big impact on manufacturing jobs, you really just need to be someone in the reality-based community. Unfortunately, a lot of people who should, and probably do, know better are insisting that trade is not a big deal. The story is that we lost the jobs due to productivity growth, not trade.
There are three points worth making here. The first is a simple logical one, we have a trade deficit of around $500 billion a year, a bit less than 3.0 percent of GDP. This is basically all due to a deficit in manufactured goods (we have a surplus on services). Does anyone believe that the extra imports associated with the trade deficit are not associated with jobs? Can $500 billion worth of manufactured goods be produced without hiring people? (This matters much more in a context where we face secular stagnation, meaning there is not enough overall demand in the economy.)
The second point is that our trade deficit has not always been this large. Our deficits had been around 1.0 percent of GDP through most of the period from the late 1970s until the East Asian crisis in 1997. Following the crisis, the value of the dollar soared and the trade deficit did also. It eventually peaked at almost 6.0 percent of GDP in 2005–2006. (I should be giving the non-oil deficit, but I’m too lazy to look that up just now.)
Anyhow, this explosion in the trade deficit coincided with a sharp decline in manufacturing employment.
Jobs in Manufacturing
Source: Bureau of Labor Statistics.
As can be seen, manufacturing employment stayed close to 17.5 million from the early 1970s to 2000. We had plenty of productivity growth over these three decades, but little net change in manufacturing employment, in spite of cyclical ups and downs. It was declining as a share of total employment, which almost doubled over this period. Then, as the trade deficit explodes, we see manufacturing employment plummet. Note that most of the drop is before the Great Recession in 2008.
The final point is that much of the gains in productivity in the last two decades are illusory. Susan Houseman points out that the bulk of the reported gains in productivity growth are not in industries like autos and steel, but in the computer sector. So a pickup in productivity growth cannot explain the decline in manufacturing employment in most sectors.
I should also add that even the productivity growth we do see is in part due to the trade deficit. When jobs are lost due to import competition, it is generally going to be jobs in the least productive plants. By eliminating low productivity jobs, average productivity will rise even if no plant has actually increased its productivity.
Anyhow, we should not look to combat Donald Trump by following his tendency to ignore reality. Yes, trade has cost manufacturing workers jobs. We can propose different remedies (mine begin with getting the value of the dollar down against other currencies), but let’s not deny what is true.
You need not be a fan of Donald Trump to say that trade has had a big impact on manufacturing jobs, you really just need to be someone in the reality-based community. Unfortunately, a lot of people who should, and probably do, know better are insisting that trade is not a big deal. The story is that we lost the jobs due to productivity growth, not trade.
There are three points worth making here. The first is a simple logical one, we have a trade deficit of around $500 billion a year, a bit less than 3.0 percent of GDP. This is basically all due to a deficit in manufactured goods (we have a surplus on services). Does anyone believe that the extra imports associated with the trade deficit are not associated with jobs? Can $500 billion worth of manufactured goods be produced without hiring people? (This matters much more in a context where we face secular stagnation, meaning there is not enough overall demand in the economy.)
The second point is that our trade deficit has not always been this large. Our deficits had been around 1.0 percent of GDP through most of the period from the late 1970s until the East Asian crisis in 1997. Following the crisis, the value of the dollar soared and the trade deficit did also. It eventually peaked at almost 6.0 percent of GDP in 2005–2006. (I should be giving the non-oil deficit, but I’m too lazy to look that up just now.)
Anyhow, this explosion in the trade deficit coincided with a sharp decline in manufacturing employment.
Jobs in Manufacturing
Source: Bureau of Labor Statistics.
As can be seen, manufacturing employment stayed close to 17.5 million from the early 1970s to 2000. We had plenty of productivity growth over these three decades, but little net change in manufacturing employment, in spite of cyclical ups and downs. It was declining as a share of total employment, which almost doubled over this period. Then, as the trade deficit explodes, we see manufacturing employment plummet. Note that most of the drop is before the Great Recession in 2008.
The final point is that much of the gains in productivity in the last two decades are illusory. Susan Houseman points out that the bulk of the reported gains in productivity growth are not in industries like autos and steel, but in the computer sector. So a pickup in productivity growth cannot explain the decline in manufacturing employment in most sectors.
I should also add that even the productivity growth we do see is in part due to the trade deficit. When jobs are lost due to import competition, it is generally going to be jobs in the least productive plants. By eliminating low productivity jobs, average productivity will rise even if no plant has actually increased its productivity.
Anyhow, we should not look to combat Donald Trump by following his tendency to ignore reality. Yes, trade has cost manufacturing workers jobs. We can propose different remedies (mine begin with getting the value of the dollar down against other currencies), but let’s not deny what is true.
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The NYT had a major article focused on a Chinese man who makes his living by exposing retailers for selling unauthorized versions of clothes, shoes, and other retail products. His income comes from the government, which rewards people who find unauthorized copies of products being sold in stores. The article repeatedly refers to these items as “counterfeit.” This is inaccurate.
While all the items noted in the piece are in principle being sold without the consent of the named manufacturer, many would not qualify as “counterfeits.” The difference is that in many cases, the buyer knows that they are not getting a product made by the named manufacturer. They are willing to buy the product anyhow because it comes with a substantial discount. In this case, the product is not actually a counterfeit, since the consumer knows what they are buying.
This is not just a semantic point. If the consumer is being deceived, they are an ally in cracking down on the practice. On the other hand, if consumers willingly buys a product, knowing that it is not actually the named brand, then they will resist efforts to crack down.
Clearly China’s law in this area is designed to crack down on both actual counterfeits, in some cases raising serious safety issues, and also unauthorized copies that allow consumers to buy products at large discounts. It would have been helpful to be clear on this distinction so that readers would have a better idea of what is at stake.
The NYT had a major article focused on a Chinese man who makes his living by exposing retailers for selling unauthorized versions of clothes, shoes, and other retail products. His income comes from the government, which rewards people who find unauthorized copies of products being sold in stores. The article repeatedly refers to these items as “counterfeit.” This is inaccurate.
While all the items noted in the piece are in principle being sold without the consent of the named manufacturer, many would not qualify as “counterfeits.” The difference is that in many cases, the buyer knows that they are not getting a product made by the named manufacturer. They are willing to buy the product anyhow because it comes with a substantial discount. In this case, the product is not actually a counterfeit, since the consumer knows what they are buying.
This is not just a semantic point. If the consumer is being deceived, they are an ally in cracking down on the practice. On the other hand, if consumers willingly buys a product, knowing that it is not actually the named brand, then they will resist efforts to crack down.
Clearly China’s law in this area is designed to crack down on both actual counterfeits, in some cases raising serious safety issues, and also unauthorized copies that allow consumers to buy products at large discounts. It would have been helpful to be clear on this distinction so that readers would have a better idea of what is at stake.
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This is an important point that would have been worth including in this NYT article on the growing risks in the subprime car loan market. The lack of oversight from the Consumer Financial Protection Bureau (CFPB) is likely a major reason that bad lending practices persist in this area.
Note: I corrected the title to make it more accurate. The loans themselves are covered by the CFPB, the arrangements and discussions by dealers explaining the terms of the loan are not. Thanks to Robert Salzberg for calling this to my attention.
This is an important point that would have been worth including in this NYT article on the growing risks in the subprime car loan market. The lack of oversight from the Consumer Financial Protection Bureau (CFPB) is likely a major reason that bad lending practices persist in this area.
Note: I corrected the title to make it more accurate. The loans themselves are covered by the CFPB, the arrangements and discussions by dealers explaining the terms of the loan are not. Thanks to Robert Salzberg for calling this to my attention.
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He may not have intended to say that Trump voters were driven by illusions, but that is effectively what he wrote. His column warned Democrats that they have to move right to get more political support:
“…some of the Trumpian (and pre-Trumpian) backlash against liberalism in white working-class communities was associated with welfare programs — disability rolls, food stamps, Medicaid — that seem to effectively underwrite worklessness at a time of social disarray. It would not require Democrats abandoning their commitment to the social safety net to foreground programs more directly linked to work and independence, and to acknowledge the problems of dependence and stagnation associated with no-strings-attached support.”
Of course, fans of reality know that the number of people getting disability benefits has fallen somewhat as the economy recovered from the downturn. The combined number of people getting workers compensation or disability has actually been falling since 2000. So if Trump voters are upset about people using disability related programs to avoid working, they have less to complain about under the liberal Obama administration than under President Bush.
There has been an increase in the number of people getting food stamps under President Obama, but it seems unlikely that benefits averaging $125 a month per person are keeping too many people out of work. The same story applies to the Medicaid expansion.
As a practical matter, if the concern is about prime-age workers (ages 25 to 54) not working, then Trump voters should have been angry at the Bush conservatives, not President Obama. The employment-to-population ratio for prime-age workers fell by 4.4 percentage points while President Bush was in the White House. It has risen by 1.2 percentage points since President Obama took office.
So it seems that Trump voters are angry about something that does not exist in the world. Apparently, they have been misinformed by their news sources, including people like Douthat.
He may not have intended to say that Trump voters were driven by illusions, but that is effectively what he wrote. His column warned Democrats that they have to move right to get more political support:
“…some of the Trumpian (and pre-Trumpian) backlash against liberalism in white working-class communities was associated with welfare programs — disability rolls, food stamps, Medicaid — that seem to effectively underwrite worklessness at a time of social disarray. It would not require Democrats abandoning their commitment to the social safety net to foreground programs more directly linked to work and independence, and to acknowledge the problems of dependence and stagnation associated with no-strings-attached support.”
Of course, fans of reality know that the number of people getting disability benefits has fallen somewhat as the economy recovered from the downturn. The combined number of people getting workers compensation or disability has actually been falling since 2000. So if Trump voters are upset about people using disability related programs to avoid working, they have less to complain about under the liberal Obama administration than under President Bush.
There has been an increase in the number of people getting food stamps under President Obama, but it seems unlikely that benefits averaging $125 a month per person are keeping too many people out of work. The same story applies to the Medicaid expansion.
As a practical matter, if the concern is about prime-age workers (ages 25 to 54) not working, then Trump voters should have been angry at the Bush conservatives, not President Obama. The employment-to-population ratio for prime-age workers fell by 4.4 percentage points while President Bush was in the White House. It has risen by 1.2 percentage points since President Obama took office.
So it seems that Trump voters are angry about something that does not exist in the world. Apparently, they have been misinformed by their news sources, including people like Douthat.
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Donald Trump is about to become president and immediately begin violating the constitution. The constitution explicitly prohibits the president from taking payments and gifts from foreign governments. (Can we stop using the term “emolument”? No one has used it for a hundred years. We want to be clear on what the constitution means.)
Donald Trump is right now and will continue to be taking payments and gifts from foreign governments in the form of benefits to his properties, unless he dumps the stuff. This is about as clear a violation of the constitutional provision imaginable, so why on earth do we have Andrew Ross Sorkin approvingly accepting Donald Trump’s nonsense claim in his letter to Mr. Trump:
“You understand the conundrum. ‘In theory, I don’t have to do anything’ to distance yourself from your business holdings, you told journalists at The New York Times last week, ‘but I would like to do something — I would like to try and formalize something.'”
This is wrong. Trump absolutely does have to do something. It’s not a question of his being a nice guy. This is a constitutional provision. The constitution sets the rules on who can be president and how they conduct themselves. Just as it says the president must be at least 35 years old and must be a native born citizen, it also says the president can’t take payments from foreign governments.
Perhaps even more incredible than Sorkin’s misrepresentation of the constitution, his plan is just a bad joke.
“Voluntarily agree to hire what is known as a ‘corporate monitor,’ an independent overseer with unfettered access to your organizations who will provide regular reports to the public about any possible instances of conflicts.”
Okay, let’s get this one straight. Donald Trump can’t keep himself from tweeting out loony claims about massive vote fraud in the middle of the night. He routinely makes personal attacks on his critics without any evidence. This guy is going to defer to a “corporate monitor” in his actions as president.
So when President Erdogan in Turkey gives favorable treatment to Trump’s golf courses there, is the corporate monitor going to be able to know if this affects Donald Trump’s decision to look the other way as he locks up all his political opponents? If Scotland decides to ban the wind turbines near his resort, will the corporate monitor know if this affects his attitude towards Scottish independence? And, as a practical matter, do we really believe that Trump would be constantly checking in with his corporate monitor anyhow?
Sorkin’s proposal is a complete joke. If we give a damn about the constitution, Donald Trump has to sell off his empire and place his assets in a blind trust, just like every other president has done for the last half century. (I explain how he could do this here.) If he chooses not to do this, then Trump is constitutionally unable to be president, just as if he was born in Kenya. It’s that simple.
Donald Trump is about to become president and immediately begin violating the constitution. The constitution explicitly prohibits the president from taking payments and gifts from foreign governments. (Can we stop using the term “emolument”? No one has used it for a hundred years. We want to be clear on what the constitution means.)
Donald Trump is right now and will continue to be taking payments and gifts from foreign governments in the form of benefits to his properties, unless he dumps the stuff. This is about as clear a violation of the constitutional provision imaginable, so why on earth do we have Andrew Ross Sorkin approvingly accepting Donald Trump’s nonsense claim in his letter to Mr. Trump:
“You understand the conundrum. ‘In theory, I don’t have to do anything’ to distance yourself from your business holdings, you told journalists at The New York Times last week, ‘but I would like to do something — I would like to try and formalize something.'”
This is wrong. Trump absolutely does have to do something. It’s not a question of his being a nice guy. This is a constitutional provision. The constitution sets the rules on who can be president and how they conduct themselves. Just as it says the president must be at least 35 years old and must be a native born citizen, it also says the president can’t take payments from foreign governments.
Perhaps even more incredible than Sorkin’s misrepresentation of the constitution, his plan is just a bad joke.
“Voluntarily agree to hire what is known as a ‘corporate monitor,’ an independent overseer with unfettered access to your organizations who will provide regular reports to the public about any possible instances of conflicts.”
Okay, let’s get this one straight. Donald Trump can’t keep himself from tweeting out loony claims about massive vote fraud in the middle of the night. He routinely makes personal attacks on his critics without any evidence. This guy is going to defer to a “corporate monitor” in his actions as president.
So when President Erdogan in Turkey gives favorable treatment to Trump’s golf courses there, is the corporate monitor going to be able to know if this affects Donald Trump’s decision to look the other way as he locks up all his political opponents? If Scotland decides to ban the wind turbines near his resort, will the corporate monitor know if this affects his attitude towards Scottish independence? And, as a practical matter, do we really believe that Trump would be constantly checking in with his corporate monitor anyhow?
Sorkin’s proposal is a complete joke. If we give a damn about the constitution, Donald Trump has to sell off his empire and place his assets in a blind trust, just like every other president has done for the last half century. (I explain how he could do this here.) If he chooses not to do this, then Trump is constitutionally unable to be president, just as if he was born in Kenya. It’s that simple.
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Hey, why should he be left out? He repeats the story about prime age (ages 25–54) men dropping out of the workforce. As noted here before, since 2000 there has been a comparable drop in employment rates for prime-age women. It is important to add in this respect that employment rates for women had been rising before 2000 and were almost universally expected to continue to rise. In other words, there is a simple story where the drop in both men and women’s employment rates is due to a weak labor market, but hey that’s too easy, let’s see if we can blame the workers rather than the folks who make economic policy.
The other point where Samuelson is misleading is in citing the claim that government benefits, like disability payments, are a possible reason that men have been dropping out. While he notes that the Council of Economic Advisers (CEA) argued against this by noting that these benefits had not risen rapidly enough to explain the increase in the drop out rate, it also would have been worth noting the rest of the argument. The CEA also pointed out that the United States ranks near the bottom of OECD countries in the generosity of its benefits, but it also ranks near the bottom in labor force participation rates for prime-age workers. In other words, that doesn’t sound like a very plausible explanation.
Hey, why should he be left out? He repeats the story about prime age (ages 25–54) men dropping out of the workforce. As noted here before, since 2000 there has been a comparable drop in employment rates for prime-age women. It is important to add in this respect that employment rates for women had been rising before 2000 and were almost universally expected to continue to rise. In other words, there is a simple story where the drop in both men and women’s employment rates is due to a weak labor market, but hey that’s too easy, let’s see if we can blame the workers rather than the folks who make economic policy.
The other point where Samuelson is misleading is in citing the claim that government benefits, like disability payments, are a possible reason that men have been dropping out. While he notes that the Council of Economic Advisers (CEA) argued against this by noting that these benefits had not risen rapidly enough to explain the increase in the drop out rate, it also would have been worth noting the rest of the argument. The CEA also pointed out that the United States ranks near the bottom of OECD countries in the generosity of its benefits, but it also ranks near the bottom in labor force participation rates for prime-age workers. In other words, that doesn’t sound like a very plausible explanation.
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The NYT had an interesting piece on the hopes that West Virginians placed on the ability of Donald Trump to bring back jobs to the state. However, a comment on the loss of mining jobs under President Obama may have misled readers.
The piece noted:
“Coal has always been boom and bust; its decline began long before Mr. Obama took office. But in West Virginia alone, 12,000 coal industry jobs have been lost during his tenure.”
While this is true, the start of the Obama administration was a temporary peak for the coal industry, as the sharp run-up in oil prices in the prior four years had substantially increased the demand for coal as shown in the figure below.
Coal Mining Jobs in West Virginia
Source: Bureau of Labor Statistics.
While there was a substantial loss of coal mining jobs during the Obama years, mostly due to the availability of low cost natural gas, the most recent employment levels are almost the same as they were in 2000.
The NYT had an interesting piece on the hopes that West Virginians placed on the ability of Donald Trump to bring back jobs to the state. However, a comment on the loss of mining jobs under President Obama may have misled readers.
The piece noted:
“Coal has always been boom and bust; its decline began long before Mr. Obama took office. But in West Virginia alone, 12,000 coal industry jobs have been lost during his tenure.”
While this is true, the start of the Obama administration was a temporary peak for the coal industry, as the sharp run-up in oil prices in the prior four years had substantially increased the demand for coal as shown in the figure below.
Coal Mining Jobs in West Virginia
Source: Bureau of Labor Statistics.
While there was a substantial loss of coal mining jobs during the Obama years, mostly due to the availability of low cost natural gas, the most recent employment levels are almost the same as they were in 2000.
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