Eduardo Porter argued in his column that part of the story of growing inequality is a failure of competition policy. The argument is that increased concentration in a number of industries has led to rents being shared by high earning employees in the largest firms. Porter cites research from Jason Furman, the current head of the Council of Economic Advisers, and Peter Orszag, the former chief of the Office of Management and Budget, which support this view.
While Porter mentions a number of firms that might fit this story, he neglected to mention Uber. Uber is striking in that it appears to be trying to form a monopoly by using its political power (it hired David Plouffe, President Obama’s chief political adviser, as a lobbyist) to maintain an unsettled regulatory structure in the industry. While Uber is prepared to act in defiance of existing regulations, and then use its power to prevent legal sanctions, smaller competitors are likely to be less comfortable operating in defiance of the law. While a clear set of regulations would help to level the playing field, Uber is working hard to prevent modernized regulations from coming into effect.
This is exactly the sort of situation that leads to concentration of wealth (Uber’s stock now has a market value of $68 billion), without generating efficiency gains for the economy. It is a good illustration of the problem noted in Porter’s column.
Eduardo Porter argued in his column that part of the story of growing inequality is a failure of competition policy. The argument is that increased concentration in a number of industries has led to rents being shared by high earning employees in the largest firms. Porter cites research from Jason Furman, the current head of the Council of Economic Advisers, and Peter Orszag, the former chief of the Office of Management and Budget, which support this view.
While Porter mentions a number of firms that might fit this story, he neglected to mention Uber. Uber is striking in that it appears to be trying to form a monopoly by using its political power (it hired David Plouffe, President Obama’s chief political adviser, as a lobbyist) to maintain an unsettled regulatory structure in the industry. While Uber is prepared to act in defiance of existing regulations, and then use its power to prevent legal sanctions, smaller competitors are likely to be less comfortable operating in defiance of the law. While a clear set of regulations would help to level the playing field, Uber is working hard to prevent modernized regulations from coming into effect.
This is exactly the sort of situation that leads to concentration of wealth (Uber’s stock now has a market value of $68 billion), without generating efficiency gains for the economy. It is a good illustration of the problem noted in Porter’s column.
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That’s what folks must have been wondering after reading this Bloomberg piece singing the praises of Antonio Weiss’s work on restructuring Puerto Rico’s debt. The piece told readers:
“Weiss, 49, a former Lazard Ltd. investment banker who spent almost two decades on Wall Street, became a champion for the island’s cause — a debt crisis with a human toll.”
A debt crisis having a human toll, imagine that.
That’s what folks must have been wondering after reading this Bloomberg piece singing the praises of Antonio Weiss’s work on restructuring Puerto Rico’s debt. The piece told readers:
“Weiss, 49, a former Lazard Ltd. investment banker who spent almost two decades on Wall Street, became a champion for the island’s cause — a debt crisis with a human toll.”
A debt crisis having a human toll, imagine that.
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The media often feel the need to be balanced in its coverage of Republicans and Democrats even when the evidence doesn’t lend itself to much balance. We got a strange example of such an effort at balance in a NYT article reporting on a piece on the Affordable Care Act by President Obama that ran in the Journal of the American Medical Association. According to the NYT piece, Obama said that he would like to see larger subsidies for the health insurance policies in the exchanges, that he would like people to be able to buy into a public plan like Medicare, and he would like to rein in the drug companies.
After laying out the changes that President Obama would like to see in the Affordable Care Act the piece tells readers:
“Mr. Obama accused Republicans of ‘hyperpartisanship’ without saying what he might have done differently.”
This assertion makes no sense since the whole article is describing an agenda that President Obama would like to see, if not for the obstruction of Republicans. In other words, Obama was very specific about what he might have done differently, at least according to the article.
The media often feel the need to be balanced in its coverage of Republicans and Democrats even when the evidence doesn’t lend itself to much balance. We got a strange example of such an effort at balance in a NYT article reporting on a piece on the Affordable Care Act by President Obama that ran in the Journal of the American Medical Association. According to the NYT piece, Obama said that he would like to see larger subsidies for the health insurance policies in the exchanges, that he would like people to be able to buy into a public plan like Medicare, and he would like to rein in the drug companies.
After laying out the changes that President Obama would like to see in the Affordable Care Act the piece tells readers:
“Mr. Obama accused Republicans of ‘hyperpartisanship’ without saying what he might have done differently.”
This assertion makes no sense since the whole article is describing an agenda that President Obama would like to see, if not for the obstruction of Republicans. In other words, Obama was very specific about what he might have done differently, at least according to the article.
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It speaks to the truly bizarre nature of political reporting that a person who calls for eliminating most areas of the federal government in the next three decades (exceptions are Social Security, Medicare and Medicaid, and the Defense Department) is viewed as a thoughtful moderate, but that is how the NYT and the rest of the media treat House Speaker Paul Ryan. Somehow, we are supposed to ignore the fact that Speaker Ryan has repeatedly proposed budgets that would eliminate federal funding for education, infrastructure, the Justice Department, the National Institutes of Health and just about every other area of federal spending.
The NYT is worried that the rise of Donald Trump and the conservatives in the House will prevent him from continuing his serious discussions of budget issues. Or at least that is what they claim to be worried about.
It speaks to the truly bizarre nature of political reporting that a person who calls for eliminating most areas of the federal government in the next three decades (exceptions are Social Security, Medicare and Medicaid, and the Defense Department) is viewed as a thoughtful moderate, but that is how the NYT and the rest of the media treat House Speaker Paul Ryan. Somehow, we are supposed to ignore the fact that Speaker Ryan has repeatedly proposed budgets that would eliminate federal funding for education, infrastructure, the Justice Department, the National Institutes of Health and just about every other area of federal spending.
The NYT is worried that the rise of Donald Trump and the conservatives in the House will prevent him from continuing his serious discussions of budget issues. Or at least that is what they claim to be worried about.
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No, I’m not engaging in name calling, this is based on Barton Swaim’s self-description of his abilities in his Washington Post column on the United States being in decline. Swaim, a contributing columnist to the Washington Post complained to readers that the United States is becoming a European-style regulatory state, then added:
“…neither the country’s political class nor its voters seem to care that the national debt has reached literally incomprehensible levels…”
In fact, the numerate among us have little difficulty comprehending the level of debt. If we look at the publicly held debt, it’s a bit more than 75 percent of GDP. If we include the debt held by Social Security and other government trust funds it is a bit more than 100 percent of GDP.
Of greater relevance than these debt to GDP figures is the interest burden associated with the debt. Currently this is around 0.8 percent of GDP, after we net out the money rebated from the Fed. This compares to an interest burden of over 3.0 percent of GDP in the early 1990s.
This article referring to the debt by someone who claims that he finds it “literally incomprehensible,” follows by a day a NYT column by Steven Rattner who told readers that he found Social Security and Medicare’s projected shortfalls “terrifying.”
It might be helpful if these papers could insist that the people who write on the debt and deficit have some understanding of the issues, as opposed to people who by their own admission find the topics “literally incomprehensible” or “terrifying.” If Swaim had a better understanding of the debt he might have even re-evaluated his thesis that the United States is in decline.
I should add that the United States today has a much larger implicit liability, relative to the size of the economy, in the form of patent and copyright liabilities than would have been the case in prior decades. These are commitments that the government has made of the public’s money to the holders of these property claims in order to compensate them for innovative and creative work. Unfortunately, there is no record of the size of these commitments in the government’s accounts.
No, I’m not engaging in name calling, this is based on Barton Swaim’s self-description of his abilities in his Washington Post column on the United States being in decline. Swaim, a contributing columnist to the Washington Post complained to readers that the United States is becoming a European-style regulatory state, then added:
“…neither the country’s political class nor its voters seem to care that the national debt has reached literally incomprehensible levels…”
In fact, the numerate among us have little difficulty comprehending the level of debt. If we look at the publicly held debt, it’s a bit more than 75 percent of GDP. If we include the debt held by Social Security and other government trust funds it is a bit more than 100 percent of GDP.
Of greater relevance than these debt to GDP figures is the interest burden associated with the debt. Currently this is around 0.8 percent of GDP, after we net out the money rebated from the Fed. This compares to an interest burden of over 3.0 percent of GDP in the early 1990s.
This article referring to the debt by someone who claims that he finds it “literally incomprehensible,” follows by a day a NYT column by Steven Rattner who told readers that he found Social Security and Medicare’s projected shortfalls “terrifying.”
It might be helpful if these papers could insist that the people who write on the debt and deficit have some understanding of the issues, as opposed to people who by their own admission find the topics “literally incomprehensible” or “terrifying.” If Swaim had a better understanding of the debt he might have even re-evaluated his thesis that the United States is in decline.
I should add that the United States today has a much larger implicit liability, relative to the size of the economy, in the form of patent and copyright liabilities than would have been the case in prior decades. These are commitments that the government has made of the public’s money to the holders of these property claims in order to compensate them for innovative and creative work. Unfortunately, there is no record of the size of these commitments in the government’s accounts.
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Apparently the answer is “no.” Steven Rattner used his NYT column to make the important complaint that we are starving large areas of the federal government, leading to a deteriorating infrastructure and poor quality public service. All of this is fine. It has been said a few hundred thousand times, but it can’t hurt to say it a few hundred thousand more.
But then Rattner tells us:
“Yes, we needed to bring the deficit down. And yes, we still face terrifyingly large obligations in years to come as baby boomers retire and expect to receive Social Security and Medicare benefits.”
And how did he know we needed to bring the deficits down? Is this something he got from his parents? He sure didn’t get it from any reasonable assessment of the state of the economy. The problem with overly large deficits is high interest rates and then high inflation rates if we accommodate the high interest rates with easy money. When since the downturn have interest rates been high? When has the inflation rate been too high? It’s cute that Mr. Rattner remembers what his parents told him, but it would be nice when giving advise on economic policy if he relied on economics instead.
As far as the “terrifying large obligations”: really? We raised Social Security and Medicare taxes in the 1980s. If we raised them by the same amount somewhere in the next three decades these programs would be fully funded for the rest of the century. It’s too bad that Mr. Rattner finds this “terrifying.”
There is one last point on which I am going to seriously beat up the budget whiners from now on. When we give patent and copyright monopolies to private companies and individuals the government is just as much imposing a tax on future generations as when we hand them government debt. If any budget “expert” ignores these commitments, which run into many trillions of dollars over the next decade, they are either incompetent or dishonest. Either way, anyone who tries to talk about the government deficit without factoring in the size of these obligations does not deserve to be taken seriously.
Apparently the answer is “no.” Steven Rattner used his NYT column to make the important complaint that we are starving large areas of the federal government, leading to a deteriorating infrastructure and poor quality public service. All of this is fine. It has been said a few hundred thousand times, but it can’t hurt to say it a few hundred thousand more.
But then Rattner tells us:
“Yes, we needed to bring the deficit down. And yes, we still face terrifyingly large obligations in years to come as baby boomers retire and expect to receive Social Security and Medicare benefits.”
And how did he know we needed to bring the deficits down? Is this something he got from his parents? He sure didn’t get it from any reasonable assessment of the state of the economy. The problem with overly large deficits is high interest rates and then high inflation rates if we accommodate the high interest rates with easy money. When since the downturn have interest rates been high? When has the inflation rate been too high? It’s cute that Mr. Rattner remembers what his parents told him, but it would be nice when giving advise on economic policy if he relied on economics instead.
As far as the “terrifying large obligations”: really? We raised Social Security and Medicare taxes in the 1980s. If we raised them by the same amount somewhere in the next three decades these programs would be fully funded for the rest of the century. It’s too bad that Mr. Rattner finds this “terrifying.”
There is one last point on which I am going to seriously beat up the budget whiners from now on. When we give patent and copyright monopolies to private companies and individuals the government is just as much imposing a tax on future generations as when we hand them government debt. If any budget “expert” ignores these commitments, which run into many trillions of dollars over the next decade, they are either incompetent or dishonest. Either way, anyone who tries to talk about the government deficit without factoring in the size of these obligations does not deserve to be taken seriously.
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In his Washington Post column this morning, E.J. Dionne warns of liberals who suffer from nostalgia in believing that we can just bring back and expand the New Deal agenda from the 1930s. He also complains about the amnesia of conservatives who forget all the ways in which government investments in infrastructure, education, and research and development paved the way for economic growth.
Although these points are well-taken, the piece suffers from myopia in failing to acknowledge how the elites have stacked the deck in ways that both redistribute income upward and slow growth. To take some of the most obvious examples, while trade deals like NAFTA have been quite explicitly designed to put our manufacturing workers in direct competition with low-paid workers in the developing world, with the predictable impact on wages, we have maintained protections for doctors, lawyers, and other highly paid professions.
No serious person can believe that the only way someone can become a competent doctor is to complete a residency program in the United States. Yet, this is the law. It costs us close to $100 billion a year in higher health care payments and allows U.S. doctors to have average earnings of more than $250,000 a year.
We also continually make patent and copyright protections longer and stronger redistributing a massive amount of income upward. We will spend close to $430 billion in 2016 on prescription drugs that would likely cost around one-tenth of this amount in a free market. (Drug patents are equivalent in their distortionary effects as tariffs in the range of 1,000 to 10,000 percent.)
And, we have an incredibly bloated financial sector that pulls away five times as much resources from the productive economy as it did forty years ago. If the sector were subject to the same sort of sales tax as the rest of us pay when we buy items in stores, it would likely shrink by more than 50 percent, saving the country over $100 billion a year in fees on useless trading.
Unfortunately, Dionne omits mentions of these and other items which are responsible for the massive upward redistribution of the last four decades. I suppose these are things that you are not allowed to say in the Washington Post.
In his Washington Post column this morning, E.J. Dionne warns of liberals who suffer from nostalgia in believing that we can just bring back and expand the New Deal agenda from the 1930s. He also complains about the amnesia of conservatives who forget all the ways in which government investments in infrastructure, education, and research and development paved the way for economic growth.
Although these points are well-taken, the piece suffers from myopia in failing to acknowledge how the elites have stacked the deck in ways that both redistribute income upward and slow growth. To take some of the most obvious examples, while trade deals like NAFTA have been quite explicitly designed to put our manufacturing workers in direct competition with low-paid workers in the developing world, with the predictable impact on wages, we have maintained protections for doctors, lawyers, and other highly paid professions.
No serious person can believe that the only way someone can become a competent doctor is to complete a residency program in the United States. Yet, this is the law. It costs us close to $100 billion a year in higher health care payments and allows U.S. doctors to have average earnings of more than $250,000 a year.
We also continually make patent and copyright protections longer and stronger redistributing a massive amount of income upward. We will spend close to $430 billion in 2016 on prescription drugs that would likely cost around one-tenth of this amount in a free market. (Drug patents are equivalent in their distortionary effects as tariffs in the range of 1,000 to 10,000 percent.)
And, we have an incredibly bloated financial sector that pulls away five times as much resources from the productive economy as it did forty years ago. If the sector were subject to the same sort of sales tax as the rest of us pay when we buy items in stores, it would likely shrink by more than 50 percent, saving the country over $100 billion a year in fees on useless trading.
Unfortunately, Dionne omits mentions of these and other items which are responsible for the massive upward redistribution of the last four decades. I suppose these are things that you are not allowed to say in the Washington Post.
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There are serious arguments to be made against raising the minimum wage to $15. At this point we really don’t have enough data to say with much certainty what the employment impact will be. But we do know that the story that Peter Salins tried to sell readers in his NYT column is wrong.
Salins, a professor of political science at Stony Brook University and a senior fellow at the Manhattan Institute, is a big advocate of an expanded earned income tax credit as an alternative to a higher minimum wage. He tells readers of his estimate that a $15 minimum wage would cost 3 million jobs and then adds:
“Regardless of the magnitude of job cuts caused by a minimum-wage increase, all the workers who lost jobs as a result would be ineligible for the earned-income tax credit. In most states they would receive unemployment insurance for up 26 weeks at a level well below their former earnings; after that, their income would fall to zero.”
The problem with this story is that it completely misrepresents the nature of the low-wage labor market. The jobs that pay near the minimum wage tend to be high turnover jobs. According to the Bureau of Labor Statistics’ Job Opening and Labor Turnover Survey, over 6.0 percent of the workers in the hotel and restaurant sector leave their job every month. That comes to more than 72 percent annually. In the strong labor market at the start of the century the turnover rate was over 8.0 percent monthly.
Given this rate of turnover, the story of job loss due to the minimum wage is not a story of people losing their jobs and going without work for the rest of the year. It’s a story of people taking longer to find jobs when they lose or leave their job. This means that there will be few workers who go without work for a whole year and see their income falling to zero, as described by Salins.
It is possible that a higher minimum wage will lead to enough job loss that the net effect will be to reduce the annual pay of a large portion of low-wage workers. This is a reasonable concern, which we will be better able to answer as we experiment with higher minimum wages, but it will not be a story of millions of losers going without employment altogether, as Salins implies.
It is striking how plans to raise the minimum wage invariably brings out calls for an expanded Earned Income Tax credit (EITC) from conservatives. This is a good policy, hopefully it will be part of the mix of measures that will raise the income of low-wage earners. (A full employment policy from the Federal Reserve Board is also a big part of this picture.) It is worth noting that in standard economic models, the EITC will also lead to lower employment, since it requires more taxes and/or more borrowing, which leads to economic distortions, slower growth, and fewer jobs.
There are serious arguments to be made against raising the minimum wage to $15. At this point we really don’t have enough data to say with much certainty what the employment impact will be. But we do know that the story that Peter Salins tried to sell readers in his NYT column is wrong.
Salins, a professor of political science at Stony Brook University and a senior fellow at the Manhattan Institute, is a big advocate of an expanded earned income tax credit as an alternative to a higher minimum wage. He tells readers of his estimate that a $15 minimum wage would cost 3 million jobs and then adds:
“Regardless of the magnitude of job cuts caused by a minimum-wage increase, all the workers who lost jobs as a result would be ineligible for the earned-income tax credit. In most states they would receive unemployment insurance for up 26 weeks at a level well below their former earnings; after that, their income would fall to zero.”
The problem with this story is that it completely misrepresents the nature of the low-wage labor market. The jobs that pay near the minimum wage tend to be high turnover jobs. According to the Bureau of Labor Statistics’ Job Opening and Labor Turnover Survey, over 6.0 percent of the workers in the hotel and restaurant sector leave their job every month. That comes to more than 72 percent annually. In the strong labor market at the start of the century the turnover rate was over 8.0 percent monthly.
Given this rate of turnover, the story of job loss due to the minimum wage is not a story of people losing their jobs and going without work for the rest of the year. It’s a story of people taking longer to find jobs when they lose or leave their job. This means that there will be few workers who go without work for a whole year and see their income falling to zero, as described by Salins.
It is possible that a higher minimum wage will lead to enough job loss that the net effect will be to reduce the annual pay of a large portion of low-wage workers. This is a reasonable concern, which we will be better able to answer as we experiment with higher minimum wages, but it will not be a story of millions of losers going without employment altogether, as Salins implies.
It is striking how plans to raise the minimum wage invariably brings out calls for an expanded Earned Income Tax credit (EITC) from conservatives. This is a good policy, hopefully it will be part of the mix of measures that will raise the income of low-wage earners. (A full employment policy from the Federal Reserve Board is also a big part of this picture.) It is worth noting that in standard economic models, the EITC will also lead to lower employment, since it requires more taxes and/or more borrowing, which leads to economic distortions, slower growth, and fewer jobs.
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