David Brooks used his column today to complain about Hillary Clinton’s lack of imagination. (She will face a candidate in the general election with considerable imagination.) One of his highlights is that she has no plan to deal with the problem faced by coal miners and their communities as a result of the loss of coal mining jobs. He tells readers:
“A few decades ago there were 175,000 coal jobs in the U.S. Now there are 57,000. That economic dislocation has hit local economies in the form of shuttered storefronts and abandoned bank buildings.”
While the numbers are accurate, readers may have been misled about timing. The vast majority of the job loss took place more than two decades ago and had nothing to do with recent measures to reduce greenhouse gas emissions.
Jobs in the Coal Mining Industry
Source: Bureau of Labor Statistics.
Of course this doesn’t change the seriousness of the problem for the workers and communities affected, but it is important that readers be clear on its cause. The effect of measures to reduce greenhouse gas emissions are a relatively minor part of this story.
David Brooks used his column today to complain about Hillary Clinton’s lack of imagination. (She will face a candidate in the general election with considerable imagination.) One of his highlights is that she has no plan to deal with the problem faced by coal miners and their communities as a result of the loss of coal mining jobs. He tells readers:
“A few decades ago there were 175,000 coal jobs in the U.S. Now there are 57,000. That economic dislocation has hit local economies in the form of shuttered storefronts and abandoned bank buildings.”
While the numbers are accurate, readers may have been misled about timing. The vast majority of the job loss took place more than two decades ago and had nothing to do with recent measures to reduce greenhouse gas emissions.
Jobs in the Coal Mining Industry
Source: Bureau of Labor Statistics.
Of course this doesn’t change the seriousness of the problem for the workers and communities affected, but it is important that readers be clear on its cause. The effect of measures to reduce greenhouse gas emissions are a relatively minor part of this story.
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The Washington Post had a piece noting that it is unlikely that the economy will produce the 1 million new jobs in manufacturing by 2016, as promised by President Obama in 2012. The piece is implies that this was an unrealistic promise that Obama should not have made. In fact, the economy had lost more than 2 million manufacturing jobs in the recession, so it was very reasonable to expect that it would get at least half of these jobs back, as it had in prior recoveries.
Jobs in Manufacturing
Source: Bureau of Labor Statistics.
The main reason why we did not recover more manufacturing jobs is that the non-oil trade deficit increased by more than 1 percent of GDP since 2012. If the deficit had remained constant as a share of GDP, then we would have easily exceeded the one million jobs target.
The piece also mentioned that President Obama had increased spending on community colleges by $2 billion over the last four years. This is a bit more than 0.01 percent of federal spending over this period.
Note:
As Ryan Denniston rightly points out in his comment, expressing the spending on community colleges as a share of the total budget is not very helpful. As a better point of reference, the American Association of Community Colleges put the number of people taking courses at community colleges at 12.8 million in the fall of 2012. This means that the $500 million in addition annual spending secured by President Obama would come to a bit less than $40 per student per year.
The Washington Post had a piece noting that it is unlikely that the economy will produce the 1 million new jobs in manufacturing by 2016, as promised by President Obama in 2012. The piece is implies that this was an unrealistic promise that Obama should not have made. In fact, the economy had lost more than 2 million manufacturing jobs in the recession, so it was very reasonable to expect that it would get at least half of these jobs back, as it had in prior recoveries.
Jobs in Manufacturing
Source: Bureau of Labor Statistics.
The main reason why we did not recover more manufacturing jobs is that the non-oil trade deficit increased by more than 1 percent of GDP since 2012. If the deficit had remained constant as a share of GDP, then we would have easily exceeded the one million jobs target.
The piece also mentioned that President Obama had increased spending on community colleges by $2 billion over the last four years. This is a bit more than 0.01 percent of federal spending over this period.
Note:
As Ryan Denniston rightly points out in his comment, expressing the spending on community colleges as a share of the total budget is not very helpful. As a better point of reference, the American Association of Community Colleges put the number of people taking courses at community colleges at 12.8 million in the fall of 2012. This means that the $500 million in addition annual spending secured by President Obama would come to a bit less than $40 per student per year.
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Paul Krugman complains that the media have not exposed the inconsistencies in Paul Ryan’s budgets. While there is some truth to that (Ryan never identifies any of the loopholes he would close to cover the cost of lower tax rates), it is more serious that it never reports what Ryan actually proposes.
Ryan’s budgets, as analyzed by the Congressional Budget Office under his direction, call for eliminating the whole of the federal government by 2050, except for Social Security, Medicare and Medicaid, and the military. This is implied by his reducing everything except Social Security, Medicare, and Medicaid to 3.5 percent of GDP, roughly the current size of the military budget. That leaves zero for the Justice Department, the State Department, the Food and Drug Administration, the National Institutes of Health, the Education Department, the National Park Service and everything else we think of as the federal government.
While Krugman is right in calling attention to proposals to pay for large tax cuts with the elimination of unnamed deductions, it seems more serious that Speaker Ryan is a person who wants to phase out the federal government. That is about as radical a position as you can find in D.C. and Ryan has repeated it many times. (He boasts how CBO scored his plan as eliminating the federal debt.)
Next to no one seems to know that Ryan is an abolitionist. It is difficult to see how someone espousing this view can be seen as a moderate conservative.
Paul Krugman complains that the media have not exposed the inconsistencies in Paul Ryan’s budgets. While there is some truth to that (Ryan never identifies any of the loopholes he would close to cover the cost of lower tax rates), it is more serious that it never reports what Ryan actually proposes.
Ryan’s budgets, as analyzed by the Congressional Budget Office under his direction, call for eliminating the whole of the federal government by 2050, except for Social Security, Medicare and Medicaid, and the military. This is implied by his reducing everything except Social Security, Medicare, and Medicaid to 3.5 percent of GDP, roughly the current size of the military budget. That leaves zero for the Justice Department, the State Department, the Food and Drug Administration, the National Institutes of Health, the Education Department, the National Park Service and everything else we think of as the federal government.
While Krugman is right in calling attention to proposals to pay for large tax cuts with the elimination of unnamed deductions, it seems more serious that Speaker Ryan is a person who wants to phase out the federal government. That is about as radical a position as you can find in D.C. and Ryan has repeated it many times. (He boasts how CBO scored his plan as eliminating the federal debt.)
Next to no one seems to know that Ryan is an abolitionist. It is difficult to see how someone espousing this view can be seen as a moderate conservative.
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It is bizarre how many people feel the need to claim that a large trade deficit in manufactured goods does not cost manufacturing jobs. You can argue all sorts of things about the merits of trade, and even make a story about how a trade deficit is good (pretty hard, when we’re below full employment), but it is almost impossible to tell a story that the explosion of the trade deficit between 1997 and 2006 did not cost manufacturing jobs.
Nonetheless that is the story the NYT gave its readers when discussing Indiana’s economy just before the primaries this week. It presents the views of Michael J. Hicks, director of the Center for Business and Economic Research at Ball State University in Muncie, Indiana:
“Factory jobs have declined, he added, but not because of trade deals with other countries as Mr. Trump and Mr. Sanders assert, but because Indiana factories are increasingly efficient and fewer workers are needed.
“‘Manufacturing employment peaked in 1973,’ he said, adding that since then the productivity of Indiana factory workers has climbed 250 percent. ‘We need far fewer workers, and a very different type of worker, too.'”
In the country as whole manufacturing employment peaked in the early 1970s, but then remained more or less constant, while falling as a share of total employment since the labor force grew. However employment fell sharply in the years from 2000 to 2006. While there was productivity growth in manufacturing over the years 2000 to 2006, that was also true for the years 1973 to 2000. The difference in the years 2000 to 2006 was the sharp rise in the trade deficit.
This was also the story in manufacturing employment in Indiana, as can be seen in the graph below.
Manufacturing Employment in Indiana
Source: Bureau of Labor Statistics.
As can be seen, manufacturing employment had been rising through the 1990s recovery. It peaked in December of 1999 at 672,200 and then fell to 556,700 by December of 2006, a drop of almost 20 percent. Employment fell further during the 2008-2009 recession, although it has recovered the ground lost. Anyhow, the data certainly seems to support the case that Indiana lost a large number of jobs due to trade in the years 1999-2006, it’s not clear why the NYT would want to deny this fact.
It is bizarre how many people feel the need to claim that a large trade deficit in manufactured goods does not cost manufacturing jobs. You can argue all sorts of things about the merits of trade, and even make a story about how a trade deficit is good (pretty hard, when we’re below full employment), but it is almost impossible to tell a story that the explosion of the trade deficit between 1997 and 2006 did not cost manufacturing jobs.
Nonetheless that is the story the NYT gave its readers when discussing Indiana’s economy just before the primaries this week. It presents the views of Michael J. Hicks, director of the Center for Business and Economic Research at Ball State University in Muncie, Indiana:
“Factory jobs have declined, he added, but not because of trade deals with other countries as Mr. Trump and Mr. Sanders assert, but because Indiana factories are increasingly efficient and fewer workers are needed.
“‘Manufacturing employment peaked in 1973,’ he said, adding that since then the productivity of Indiana factory workers has climbed 250 percent. ‘We need far fewer workers, and a very different type of worker, too.'”
In the country as whole manufacturing employment peaked in the early 1970s, but then remained more or less constant, while falling as a share of total employment since the labor force grew. However employment fell sharply in the years from 2000 to 2006. While there was productivity growth in manufacturing over the years 2000 to 2006, that was also true for the years 1973 to 2000. The difference in the years 2000 to 2006 was the sharp rise in the trade deficit.
This was also the story in manufacturing employment in Indiana, as can be seen in the graph below.
Manufacturing Employment in Indiana
Source: Bureau of Labor Statistics.
As can be seen, manufacturing employment had been rising through the 1990s recovery. It peaked in December of 1999 at 672,200 and then fell to 556,700 by December of 2006, a drop of almost 20 percent. Employment fell further during the 2008-2009 recession, although it has recovered the ground lost. Anyhow, the data certainly seems to support the case that Indiana lost a large number of jobs due to trade in the years 1999-2006, it’s not clear why the NYT would want to deny this fact.
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That’s what a Reuters article in the NYT inadvertently told readers. The piece begins by telling readers:
“Some of the richest, smartest and most powerful humans have an important message for the rest of us as they convened this week to discuss pressing global issues: the robots are coming.
“At the Milken Institute’s Global Conference in Beverly Hills, California, at least four panels so far have focused on technology taking over markets to mining – and most importantly, jobs.”
The piece goes to blame technology for destroying large numbers of middle class jobs, which it argues is a main cause of wage stagnation. The problem is that if these smart and powerful people had access to the Bureau of Labor Statistics website (BLS) they would know that productivity growth (the rate at which robots and other technologies are taking our jobs), has been extremely slow over the last decade, as in the opposite of fast.
This means that we have to look to other causes of inequality, like boneheaded macro policy that leaves millions unemployed, trade policy that displaced millions of manufacturing workers, and longer and stronger patent and copyright protection that make the rest of us pay larger rents for drugs, software, and other protected items.
But the rich and powerful prefer the robot story, and apparently, because they are rich and powerful, they can get the media to take it seriously.
That’s what a Reuters article in the NYT inadvertently told readers. The piece begins by telling readers:
“Some of the richest, smartest and most powerful humans have an important message for the rest of us as they convened this week to discuss pressing global issues: the robots are coming.
“At the Milken Institute’s Global Conference in Beverly Hills, California, at least four panels so far have focused on technology taking over markets to mining – and most importantly, jobs.”
The piece goes to blame technology for destroying large numbers of middle class jobs, which it argues is a main cause of wage stagnation. The problem is that if these smart and powerful people had access to the Bureau of Labor Statistics website (BLS) they would know that productivity growth (the rate at which robots and other technologies are taking our jobs), has been extremely slow over the last decade, as in the opposite of fast.
This means that we have to look to other causes of inequality, like boneheaded macro policy that leaves millions unemployed, trade policy that displaced millions of manufacturing workers, and longer and stronger patent and copyright protection that make the rest of us pay larger rents for drugs, software, and other protected items.
But the rich and powerful prefer the robot story, and apparently, because they are rich and powerful, they can get the media to take it seriously.
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Eduardo Porter used his weekly column to chronicle Brazil’s economic course over the last two decades. He argues that many of its current problems are due to excessive government involvement in the economy in imposing price controls and trade barriers.
While there is likely some truth to this argument, it is worth extending Porter’s warning to patent and copyright protection. These forms of protection are equivalent to tariffs of many thousand percent, they typically raise the price of protected items by ten or even a hundred times the free market price.
The rationale for this protection is to promote innovation and creative work, but the market doesn’t care about the rationale, raising prices by 2000 percent above the free market price has the same impact whether we call the cause a “tariff” or a “patent.” And, patents and copyrights do affect a very large segment of the economy. In the case of prescription drugs alone, patents and related protection likely add close to $380 billion (@ 2.1 percent of GDP) to the what the country pays for drugs each year.
If anyone wants to give advice to developing countries, avoiding the protectionism that the United States is trying to impose in deals like the Trans-Pacific Partnership would be a good place to start. These deals would both create enormous economic distortions through their impact on the prices of protected products and also be a substantial drain on these countries economies, since the income from the patents and copyrights will mostly go to foreign corporations.
Eduardo Porter used his weekly column to chronicle Brazil’s economic course over the last two decades. He argues that many of its current problems are due to excessive government involvement in the economy in imposing price controls and trade barriers.
While there is likely some truth to this argument, it is worth extending Porter’s warning to patent and copyright protection. These forms of protection are equivalent to tariffs of many thousand percent, they typically raise the price of protected items by ten or even a hundred times the free market price.
The rationale for this protection is to promote innovation and creative work, but the market doesn’t care about the rationale, raising prices by 2000 percent above the free market price has the same impact whether we call the cause a “tariff” or a “patent.” And, patents and copyrights do affect a very large segment of the economy. In the case of prescription drugs alone, patents and related protection likely add close to $380 billion (@ 2.1 percent of GDP) to the what the country pays for drugs each year.
If anyone wants to give advice to developing countries, avoiding the protectionism that the United States is trying to impose in deals like the Trans-Pacific Partnership would be a good place to start. These deals would both create enormous economic distortions through their impact on the prices of protected products and also be a substantial drain on these countries economies, since the income from the patents and copyrights will mostly go to foreign corporations.
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Thomas Friedman really is a gift to the world. As a long established New York Times columnist and author of many widely touted books, he is a great source of insight into establishment thinking. He comes through brilliantly in his column today.
Friedman’s basic story is that the two parties need to work out compromises, like the “Grand Bargain” on the budget, that President Obama tried to negotiate in 2011 with then Speaker John Boehner. Friedman blames the intransigence of the Republicans for failing to come to an agreement on this and other important issues. He argues that Trump is where this extremism gets them. His hope is that now the Republicans will move to the center and work out the deals that Friedman would like to see.
It’s good to see that Friedman is looking forward to working with Republican centrists again, but let’s look at the nature of his argument. Basically his story is that the truth lies in the center and these know nothing types need to be chased out of the political debate:
“In this vortex [the 2008 economic collapse and the political polarization that followed] a lot of the public got unmoored and disoriented, opening the way for populists with simple answers. Get rid of immigrants, end trade with China or eliminate big banks and all will be fine. It’s nonsense.”
Friedman is right that it is nonsense, but it is also not what anyone is saying. Even Donald Trump doesn’t propose getting rid of all immigrants, which is not to say that his plan for departing 11 million unauthorized immigrants is not absurd and inhumane. And neither Trump nor Sanders proposed ending trade with China. And, while Sanders agrees with many leading economists that breaking up the big banks is important, he has certainly never implied that this would somehow make everything fine.
In short, Friedman is making up absurd positions, attributing them to the people he doesn’t like, and using this as an excuse to throw them out of the discussion. He wants to leave it to the real experts.
Okay, let’s see how the experts have done, starting with some of the details of the “Grand Bargain.” As Friedman reminds us, a big part of the Grand Bargain was cutting Social Security and Medicare. Is it really true, that in a world where few workers now have traditional pensions and most are not able to accumulate substantial sums in 401(k)s or other savings, Social Security is too generous? The vast majority of the public does not hold this view. On what basis has Thomas Friedman decided it is true?
With Medicare the problem is a wasteful health care system, not the coddling of the over 65 population. One of the ironies, that has apparently escaped Friedman’s attention, is that the slowdown in health care cost growth over the last six years has actually led to more savings in Medicare than had been sought by Bowles and Simpson in their deficit cutting plan that was the basis for the Grand Bargain.
Of course the whole idea that we needed to reduce the deficit in an economy that was and is still well below its full employment level of output is wrong. Had the Grand Bargainers gotten their way in 2011, the recovery would have been even slower and weaker.
But this is the real story of the establishment. After all, the 2008 crash was not a rare weather event that struck the country and the world unexpectedly. It was the result of the incompetence of our country’s leading economists in both parties. They could not see the dangers in an $8 trillion housing bubble.
A similar story applies in foreign policy circles, where many foreign policy experts were prepared to believe the Bush administration’s transparent lies about Saddam Hussein’s weapons of mass destruction. And, they actually thought that the United States could go into Iraq and put in place a stable government that enjoyed popular support.
The amazing part of the story is that the establishment types pay no price for being wrong in really big ways in their areas of expertise. This is best exemplified by Friedman himself. He can be wrong on every single thing he writes, every day of his life, and it will not in any way jeopardize his standing as one of the country’s most respected commentators on policy and politics.
And he wonders why the public is angry.
Thomas Friedman really is a gift to the world. As a long established New York Times columnist and author of many widely touted books, he is a great source of insight into establishment thinking. He comes through brilliantly in his column today.
Friedman’s basic story is that the two parties need to work out compromises, like the “Grand Bargain” on the budget, that President Obama tried to negotiate in 2011 with then Speaker John Boehner. Friedman blames the intransigence of the Republicans for failing to come to an agreement on this and other important issues. He argues that Trump is where this extremism gets them. His hope is that now the Republicans will move to the center and work out the deals that Friedman would like to see.
It’s good to see that Friedman is looking forward to working with Republican centrists again, but let’s look at the nature of his argument. Basically his story is that the truth lies in the center and these know nothing types need to be chased out of the political debate:
“In this vortex [the 2008 economic collapse and the political polarization that followed] a lot of the public got unmoored and disoriented, opening the way for populists with simple answers. Get rid of immigrants, end trade with China or eliminate big banks and all will be fine. It’s nonsense.”
Friedman is right that it is nonsense, but it is also not what anyone is saying. Even Donald Trump doesn’t propose getting rid of all immigrants, which is not to say that his plan for departing 11 million unauthorized immigrants is not absurd and inhumane. And neither Trump nor Sanders proposed ending trade with China. And, while Sanders agrees with many leading economists that breaking up the big banks is important, he has certainly never implied that this would somehow make everything fine.
In short, Friedman is making up absurd positions, attributing them to the people he doesn’t like, and using this as an excuse to throw them out of the discussion. He wants to leave it to the real experts.
Okay, let’s see how the experts have done, starting with some of the details of the “Grand Bargain.” As Friedman reminds us, a big part of the Grand Bargain was cutting Social Security and Medicare. Is it really true, that in a world where few workers now have traditional pensions and most are not able to accumulate substantial sums in 401(k)s or other savings, Social Security is too generous? The vast majority of the public does not hold this view. On what basis has Thomas Friedman decided it is true?
With Medicare the problem is a wasteful health care system, not the coddling of the over 65 population. One of the ironies, that has apparently escaped Friedman’s attention, is that the slowdown in health care cost growth over the last six years has actually led to more savings in Medicare than had been sought by Bowles and Simpson in their deficit cutting plan that was the basis for the Grand Bargain.
Of course the whole idea that we needed to reduce the deficit in an economy that was and is still well below its full employment level of output is wrong. Had the Grand Bargainers gotten their way in 2011, the recovery would have been even slower and weaker.
But this is the real story of the establishment. After all, the 2008 crash was not a rare weather event that struck the country and the world unexpectedly. It was the result of the incompetence of our country’s leading economists in both parties. They could not see the dangers in an $8 trillion housing bubble.
A similar story applies in foreign policy circles, where many foreign policy experts were prepared to believe the Bush administration’s transparent lies about Saddam Hussein’s weapons of mass destruction. And, they actually thought that the United States could go into Iraq and put in place a stable government that enjoyed popular support.
The amazing part of the story is that the establishment types pay no price for being wrong in really big ways in their areas of expertise. This is best exemplified by Friedman himself. He can be wrong on every single thing he writes, every day of his life, and it will not in any way jeopardize his standing as one of the country’s most respected commentators on policy and politics.
And he wonders why the public is angry.
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A NYT article on Donald Trump’s threats to impose high tariffs on Chinese imports discussed the possibility that Trump might seek rules that addressed policies aimed at currency management. The piece included the strange assertion that:
“A central problem is defining currency manipulation in a way that excludes the United States — in particular, the Federal Reserve’s post-recession stimulus campaign, which had the effect of weakening the dollar much in the same way that other countries do to their currency.”
Actually it is difficult to see the problem here. Currency management (“manipulation” is a peculiar term, since it is generally done in the open) involves buying another country’s bonds, the Fed’s quantitative easing program involved buying U.S. bonds. It’s not clear what the basis for confusion is.
A NYT article on Donald Trump’s threats to impose high tariffs on Chinese imports discussed the possibility that Trump might seek rules that addressed policies aimed at currency management. The piece included the strange assertion that:
“A central problem is defining currency manipulation in a way that excludes the United States — in particular, the Federal Reserve’s post-recession stimulus campaign, which had the effect of weakening the dollar much in the same way that other countries do to their currency.”
Actually it is difficult to see the problem here. Currency management (“manipulation” is a peculiar term, since it is generally done in the open) involves buying another country’s bonds, the Fed’s quantitative easing program involved buying U.S. bonds. It’s not clear what the basis for confusion is.
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