Some people may have failed to realize this fact when a NYT article profiling Speaker Ryan told readers:
“Mr. Ryan is the architect of his party’s plan to rein in spending on entitlement programs.”
“Entitlement programs” is a popular euphemism used by politicians who want to cut Social Security and Medicare. The phrase is likely to mislead many readers.
The piece also asserts that:
“For example, if the Republican nominee does not provide an alternative to the Affordable Care Act — something Republicans have failed to do since it passed in 2010 — Mr. Ryan intends to do so, just as he will lay out an anti-poverty plan.”
Actually, the reporter who wrote this article has no idea what Mr. Ryan “intends.” Mr. Ryan says that he “intends” to develop an alternative to the Affordable Care Act, whether he actually does, or whether his proposal will actually pass the laugh test remains to be seen. It is important to remember that Mr. Ryan proposed a budget that would eliminate most of the federal government by 2050. This would have been a useful piece of information to provide readers when they are trying to assess his intentions.
Some people may have failed to realize this fact when a NYT article profiling Speaker Ryan told readers:
“Mr. Ryan is the architect of his party’s plan to rein in spending on entitlement programs.”
“Entitlement programs” is a popular euphemism used by politicians who want to cut Social Security and Medicare. The phrase is likely to mislead many readers.
The piece also asserts that:
“For example, if the Republican nominee does not provide an alternative to the Affordable Care Act — something Republicans have failed to do since it passed in 2010 — Mr. Ryan intends to do so, just as he will lay out an anti-poverty plan.”
Actually, the reporter who wrote this article has no idea what Mr. Ryan “intends.” Mr. Ryan says that he “intends” to develop an alternative to the Affordable Care Act, whether he actually does, or whether his proposal will actually pass the laugh test remains to be seen. It is important to remember that Mr. Ryan proposed a budget that would eliminate most of the federal government by 2050. This would have been a useful piece of information to provide readers when they are trying to assess his intentions.
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Professor Andrew Levin (Dartmouth College), the former special advisor to Fed Chair Ben Bernanke and then-Vice Chair Janet Yellen, released a proposal for reform of the Federal Reserve Board’s governing structure in a press call sponsored by the Fed Up Campaign. The proposal has a number of important features, but the main point is to make the Fed more accountable to democratically elected officials and to reduce the power of the banking industry in monetary policy.
See the fuller story.
Professor Andrew Levin (Dartmouth College), the former special advisor to Fed Chair Ben Bernanke and then-Vice Chair Janet Yellen, released a proposal for reform of the Federal Reserve Board’s governing structure in a press call sponsored by the Fed Up Campaign. The proposal has a number of important features, but the main point is to make the Fed more accountable to democratically elected officials and to reduce the power of the banking industry in monetary policy.
See the fuller story.
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As we all know, one of the major recreational sports of media outlets is finding new and innovative ways to scare people about Social Security. One of my favorites is “infinite horizon accounting.” This is when you project out Social Security spending and revenue into the infinite future and then calculate the difference. It gives you a REALLY BIG NUMBER.
We got an example of the casual use of this infinite horizon accounting in a column by Wharton Business School Professor Olivia Mitchell. The column was actually on a different topic, but towards the end the piece tells readers:
“The Social Security shortfall is enormous. Actuaries have estimated that it’s on the order of $28 trillion in present value. That’s twice the size of the gross domestic product of the U.S.”
Note that there is no mention of the time horizon for the $28 trillion shortfall, so readers would have no way of knowing that it is for all future time. The comparison to current GDP is both wrong (GDP in 2016 will be over $18 trillion) and misleading. Why would we compare a deficit measured for all future time to this year’s GDP? If we compared the deficit to future GDP it would be 1.3 percent, a bit more than one-third of the annual military budget.
It’s also worth noting that the bulk of this deficit is for years after 2100. In other words, we are being cruel to children not yet born by writing down Social Security spending paths that exceed what they are projected to tax themselves. Can you envision anything so cruel? (The big problem is that the projections assume they will live longer and therefore have longer retirements.)
As we all know, one of the major recreational sports of media outlets is finding new and innovative ways to scare people about Social Security. One of my favorites is “infinite horizon accounting.” This is when you project out Social Security spending and revenue into the infinite future and then calculate the difference. It gives you a REALLY BIG NUMBER.
We got an example of the casual use of this infinite horizon accounting in a column by Wharton Business School Professor Olivia Mitchell. The column was actually on a different topic, but towards the end the piece tells readers:
“The Social Security shortfall is enormous. Actuaries have estimated that it’s on the order of $28 trillion in present value. That’s twice the size of the gross domestic product of the U.S.”
Note that there is no mention of the time horizon for the $28 trillion shortfall, so readers would have no way of knowing that it is for all future time. The comparison to current GDP is both wrong (GDP in 2016 will be over $18 trillion) and misleading. Why would we compare a deficit measured for all future time to this year’s GDP? If we compared the deficit to future GDP it would be 1.3 percent, a bit more than one-third of the annual military budget.
It’s also worth noting that the bulk of this deficit is for years after 2100. In other words, we are being cruel to children not yet born by writing down Social Security spending paths that exceed what they are projected to tax themselves. Can you envision anything so cruel? (The big problem is that the projections assume they will live longer and therefore have longer retirements.)
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The Washington Post is well known as a hotbed of protectionist sentiment, at least when it comes to policies that redistribute income upward. For that reason it was not altogether surprising that the paper never once mentioned the role of patent monopolies and related protections in a front page article on the difficulties cancer patients face in dealing with the high price of drugs.
The article begins by talking about a patient, Scott Steiner, who needed the cancer drug Gleevec. The manufacturer, Novartis, charges $3,500 a month for the drug. The article tells readers that the Mr. Steiner’s insurer was unwilling to pay for the drug and there was no way that he and his family could afford this expense. Fortunately, an oncology social worker (the hero of this article) was able to negotiate a free supply of the drug from the manufacturer.
While this is good news for Mr. Steiner, what the article neglected to mention is that the only reason Gleevec costs $3,500 a month is because the government granted the company a patent monopoly. A high quality of generic version is produced by Indian manufacturers for $2,500 a year.
This difference in prices is equivalent to the United States imposing a 1,600 percent tariff on Gleevec. This patent monopoly leads to all the waste and economic distortions that economists would predict from massive tariffs. Undoubtedly many cancer patients don’t get Gleevec because they can’t afford its patent protected price and are not as lucky as Mr. Steiner in having a social worker who can work out an arrangement with Novartis.
In addition, the whole struggle to get a drug whose price is artificially inflated is a needless waste that is being imposed on people facing a potentially fatal disease. And of course the time spent by a third party is a total waste of resources that would not be necessary if Gleevec were sold at its free market price. In addition, the enormous mark-up received by Novartis gives it an incentive to oversell its drug, promoting it in cases where it may not be the best treatment. (Yes, we have to finance the research, but there are far more efficient mechanisms than this relic of the middle ages.)
While economists have written endless articles and books on the costs of protectionism, none of this information finds its way into the Post’s article. It is probably worth noting that drug companies are a major source of advertising revenue for the Post.
The Washington Post is well known as a hotbed of protectionist sentiment, at least when it comes to policies that redistribute income upward. For that reason it was not altogether surprising that the paper never once mentioned the role of patent monopolies and related protections in a front page article on the difficulties cancer patients face in dealing with the high price of drugs.
The article begins by talking about a patient, Scott Steiner, who needed the cancer drug Gleevec. The manufacturer, Novartis, charges $3,500 a month for the drug. The article tells readers that the Mr. Steiner’s insurer was unwilling to pay for the drug and there was no way that he and his family could afford this expense. Fortunately, an oncology social worker (the hero of this article) was able to negotiate a free supply of the drug from the manufacturer.
While this is good news for Mr. Steiner, what the article neglected to mention is that the only reason Gleevec costs $3,500 a month is because the government granted the company a patent monopoly. A high quality of generic version is produced by Indian manufacturers for $2,500 a year.
This difference in prices is equivalent to the United States imposing a 1,600 percent tariff on Gleevec. This patent monopoly leads to all the waste and economic distortions that economists would predict from massive tariffs. Undoubtedly many cancer patients don’t get Gleevec because they can’t afford its patent protected price and are not as lucky as Mr. Steiner in having a social worker who can work out an arrangement with Novartis.
In addition, the whole struggle to get a drug whose price is artificially inflated is a needless waste that is being imposed on people facing a potentially fatal disease. And of course the time spent by a third party is a total waste of resources that would not be necessary if Gleevec were sold at its free market price. In addition, the enormous mark-up received by Novartis gives it an incentive to oversell its drug, promoting it in cases where it may not be the best treatment. (Yes, we have to finance the research, but there are far more efficient mechanisms than this relic of the middle ages.)
While economists have written endless articles and books on the costs of protectionism, none of this information finds its way into the Post’s article. It is probably worth noting that drug companies are a major source of advertising revenue for the Post.
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We know that the Washington Post editors really hate Bernie Sanders and rarely miss an opportunity to show it. Dana Milbank got in the act big time today as he once again denounced Sanders (along with Donald Trump and Ted Cruz) in his column.
There was much good stuff in the column but my favorite was when he told readers:
“MacGuineas’s group [the Committee for a Responsible Federal Budget] calculates that Sanders would increase government spending to unimaginable levels: to as much as 35 percent of gross domestic product, from the current 22 percent.”
The key word here is “unimaginable.” Most western European governments have ratios of government spending to GDP of more than 40 percent and some have ratios of more than 50 percent. Apparently, Mr. Milbank finds the whole European continent unimaginable.
What is especially striking is that most of the increase in government spending would be the result of the government diverting payments for employer provided health insurance to a government-run universal Medicare system. Apparently, Milbank thinks it intolerable that the money taken out of workers’ paychecks to be sent to private insurers would instead be taken out of workers paychecks to be sent to the government, even if it would lead to savings of several hundred billion dollars a year in administrative costs and insurance industry profits. In Dana Milbank-land this is the height of irresponsibility.
What is perhaps most incredible is Milbank’s notion of irresponsible. His sole measure of responsibility is the size of the government budget deficit and debt, which are for all practical purposes meaningless numbers. (If the government puts in place patent protection that requires us to pay an extra $400 billion a year for prescription drugs, this adds zero to the budget deficit or debt and therefore doesn’t concern Milbank. However, if it borrowed an extra $400 billion a year to pay for developing new drugs, he would be furious.)
On the other hand, forcing millions of people to be out of work because of deficits that are too small apparently does not bother Milbank in the least. Since the crash in 2008 we have needlessly foregone more than $7 trillion in potential output. Millions of people have been kept out of work with their children thereby growing up in families that were in or near poverty levels. We also have the stories like the children in Flint exposed to lead, all because Milbank and his friends want to whine about budget deficits.
Many might view this set of policies as being irresponsible. But in Milbank’s worldview, which is widely shared in Washington policy circles, it doesn’t matter what you do to the country as long as you keep the deficit down.
We know that the Washington Post editors really hate Bernie Sanders and rarely miss an opportunity to show it. Dana Milbank got in the act big time today as he once again denounced Sanders (along with Donald Trump and Ted Cruz) in his column.
There was much good stuff in the column but my favorite was when he told readers:
“MacGuineas’s group [the Committee for a Responsible Federal Budget] calculates that Sanders would increase government spending to unimaginable levels: to as much as 35 percent of gross domestic product, from the current 22 percent.”
The key word here is “unimaginable.” Most western European governments have ratios of government spending to GDP of more than 40 percent and some have ratios of more than 50 percent. Apparently, Mr. Milbank finds the whole European continent unimaginable.
What is especially striking is that most of the increase in government spending would be the result of the government diverting payments for employer provided health insurance to a government-run universal Medicare system. Apparently, Milbank thinks it intolerable that the money taken out of workers’ paychecks to be sent to private insurers would instead be taken out of workers paychecks to be sent to the government, even if it would lead to savings of several hundred billion dollars a year in administrative costs and insurance industry profits. In Dana Milbank-land this is the height of irresponsibility.
What is perhaps most incredible is Milbank’s notion of irresponsible. His sole measure of responsibility is the size of the government budget deficit and debt, which are for all practical purposes meaningless numbers. (If the government puts in place patent protection that requires us to pay an extra $400 billion a year for prescription drugs, this adds zero to the budget deficit or debt and therefore doesn’t concern Milbank. However, if it borrowed an extra $400 billion a year to pay for developing new drugs, he would be furious.)
On the other hand, forcing millions of people to be out of work because of deficits that are too small apparently does not bother Milbank in the least. Since the crash in 2008 we have needlessly foregone more than $7 trillion in potential output. Millions of people have been kept out of work with their children thereby growing up in families that were in or near poverty levels. We also have the stories like the children in Flint exposed to lead, all because Milbank and his friends want to whine about budget deficits.
Many might view this set of policies as being irresponsible. But in Milbank’s worldview, which is widely shared in Washington policy circles, it doesn’t matter what you do to the country as long as you keep the deficit down.
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Contrary to the robots taking our jobs story, Robert Samuelson gets the basic story right. Productivity growth has fallen through the floor, rather than going through the roof as the robot story would have us believe. Productivity growth has averaged just over 1.0 percent annually since the start of the recession in December of 2007. It has been less than 0.4 percent a year in the last two years.
Samuelson speculates that this slow growth might be due to the old economy competing with the new economy. His example is Walmart setting up an Internet based system to compete with Amazon. He argues that much of this will end up being wasted, as only one of the sellers will end up winning.
While Samuelson is right that this competition can lead to waste, but that is always true. Companies always are competing to gain or keep market share. Some end up losing, meaning that their investment was a waste from the standpoint of the economy as a whole. (The competition is nonetheless important in a dynamic sense in that it forces the winners to be more efficient.)
For Samuelson’s story to be correct, we would have to be seeing much more of this competition today than in prior periods. That doesn’t in any obvious way appear to be true. For example, investment is not especially high as a share of GDP.
My alternative explanation is that a weak labor market and low wages explain much of the slowdown in productivity. The argument is straightforward. When Walmart can hire people at very low wages, they are happy to pay people to stand around and do almost nothing. That is why many retailers now have greeters or sales people standing in aisles who contribute little to productivity.
If wages were higher, Walmart would not employ these people. This would make little difference in its sales, but would reduce the number of people they have working, thereby increasing productivity. If this phenomenon is common, it could be a factor in the productivity slowdown since the start of the Great Recession.
Contrary to the robots taking our jobs story, Robert Samuelson gets the basic story right. Productivity growth has fallen through the floor, rather than going through the roof as the robot story would have us believe. Productivity growth has averaged just over 1.0 percent annually since the start of the recession in December of 2007. It has been less than 0.4 percent a year in the last two years.
Samuelson speculates that this slow growth might be due to the old economy competing with the new economy. His example is Walmart setting up an Internet based system to compete with Amazon. He argues that much of this will end up being wasted, as only one of the sellers will end up winning.
While Samuelson is right that this competition can lead to waste, but that is always true. Companies always are competing to gain or keep market share. Some end up losing, meaning that their investment was a waste from the standpoint of the economy as a whole. (The competition is nonetheless important in a dynamic sense in that it forces the winners to be more efficient.)
For Samuelson’s story to be correct, we would have to be seeing much more of this competition today than in prior periods. That doesn’t in any obvious way appear to be true. For example, investment is not especially high as a share of GDP.
My alternative explanation is that a weak labor market and low wages explain much of the slowdown in productivity. The argument is straightforward. When Walmart can hire people at very low wages, they are happy to pay people to stand around and do almost nothing. That is why many retailers now have greeters or sales people standing in aisles who contribute little to productivity.
If wages were higher, Walmart would not employ these people. This would make little difference in its sales, but would reduce the number of people they have working, thereby increasing productivity. If this phenomenon is common, it could be a factor in the productivity slowdown since the start of the Great Recession.
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