At a time when the income inequality is growing ever larger in most wealthy countries the market for work that highlights inequality between generations is growing rapidly. After all, if young people are spending their time yelling about their parents’ and grandparents’ pensions they won’t have any time to get mad about all the money the one percent are taking.
The Wall Street Journal did its part today with a piece telling readers that “older people do better than those of working age.” While there is some truth to the story (more in Europe than in the United States), it is primarily because European governments have decided to keep tens of millions of people from working through austerity policies.
At a time when near zero inflation and record low interest rates show that the countries of the regions are suffering from a severe lack of demand the European Commission is pushing countries to cut deficits in order to lower demand still further. Complaining that older people are doing better than the workers who are either unemployed or forced to work in low wage jobs as a result of the weak labor market is like giving someone a severe beating and then noting the better health enjoyed by retirees than the beating victim. It’s undoubtedly true, but what exactly is the point?
The piece also suffers from serious lapse in economic reasoning. After touting the relatively high living standards of retirees, it tells readers:
“Younger workers are grappling with flat or falling pay, decreased job security and less-affordable housing, sapping the spending power that helps fuel the economy.”
If the problem in the economy is a lack of spending power (it is), then the relatively high pensions of retirees is helping. After all, the economy doesn’t care whether a euro is spent by a young person or a retiree, it creates the same amount of demand.
Apparently this piece can’t decide why retirees’ pensions are bad for the economy, it just wants to convince readers that they are evil.
At a time when the income inequality is growing ever larger in most wealthy countries the market for work that highlights inequality between generations is growing rapidly. After all, if young people are spending their time yelling about their parents’ and grandparents’ pensions they won’t have any time to get mad about all the money the one percent are taking.
The Wall Street Journal did its part today with a piece telling readers that “older people do better than those of working age.” While there is some truth to the story (more in Europe than in the United States), it is primarily because European governments have decided to keep tens of millions of people from working through austerity policies.
At a time when near zero inflation and record low interest rates show that the countries of the regions are suffering from a severe lack of demand the European Commission is pushing countries to cut deficits in order to lower demand still further. Complaining that older people are doing better than the workers who are either unemployed or forced to work in low wage jobs as a result of the weak labor market is like giving someone a severe beating and then noting the better health enjoyed by retirees than the beating victim. It’s undoubtedly true, but what exactly is the point?
The piece also suffers from serious lapse in economic reasoning. After touting the relatively high living standards of retirees, it tells readers:
“Younger workers are grappling with flat or falling pay, decreased job security and less-affordable housing, sapping the spending power that helps fuel the economy.”
If the problem in the economy is a lack of spending power (it is), then the relatively high pensions of retirees is helping. After all, the economy doesn’t care whether a euro is spent by a young person or a retiree, it creates the same amount of demand.
Apparently this piece can’t decide why retirees’ pensions are bad for the economy, it just wants to convince readers that they are evil.
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Kevin still thinks that we don’t especially protect doctors, or at least not more than any other country. His key factoid is that 25 percent of our doctors were educated in foreign medical schools and then entered U.S. residency programs. He argues that this is roughly the same percentage as for other wealthy countries.
There are two important reasons why this means less than the NCAA basketball tournament scores about the issue at hand. First, we should expect many more foreign doctors would want to work in the U.S., than say in the U.K., because doctors in the U.S. earn more than twice as much as doctors in the U.K. If you’re a “free trader” who has a hard time understanding this point, suppose that we paid twice as much for oil as they do anywhere else in the world. Where do we think the oil would go?
The second point is why would anyone care about the 25 percent number? I have had endless people defiantly given me this statistic as if they have shown something other than their own ignorance. What percent of our shoes comes from overseas? What percent of our clothes? Of our toys? My guess is that it would be around 70–90 percent in each category.
Suppose that just 25 percent of our consumption came from abroad in these categories because we had huge import tariffs. By the Kevin Drum standard I could say, “What do you mean we have protectionism, 25 percent of our shoes, clothes, and toys are imported.”
Kevin also argues that this is an immigration issue, not a trade protection issue. Nope, it isn’t. If doctors from the U.K., Germany, or India wanted to work in the construction industry, in restaurant kitchens, or as nannies for rich people, they probably would not have any problem. But they would get arrested if they worked as doctors. The issue isn’t being in the U.S. or even working in the U.S., the issue is that the protectionists won’t let them work in the United States as doctors.
Finally, it is worth considering the potential numbers here compared with current immigration flows. At present, we have around 1.4 million immigrants a year. Suppose we brought in 50,000 additional doctors a year for the next decade. This would be a net increase of 500,000 doctors, increasing the supply by more than 50 percent. That would hugely affect the market for doctors and likely be more than sufficient to bring their wages down to world levels.
However, this inflow of doctors would imply a net increase of immigration flows of less than 4.0 percent. If we double the number to account for immigrants of dentists, lawyers, and other currently protected professionals, we’re still only talking about an increase in immigration of less than 8.0 percent. If we think that this is too many immigrants, we could reduce the flow of immigrants in other areas by an offsetting amount.
In short, we do prop up the pay of our doctors through protectionism. We can argue whether it is good policy or not, but we can’t argue that our barriers are not protectionist.
Kevin still thinks that we don’t especially protect doctors, or at least not more than any other country. His key factoid is that 25 percent of our doctors were educated in foreign medical schools and then entered U.S. residency programs. He argues that this is roughly the same percentage as for other wealthy countries.
There are two important reasons why this means less than the NCAA basketball tournament scores about the issue at hand. First, we should expect many more foreign doctors would want to work in the U.S., than say in the U.K., because doctors in the U.S. earn more than twice as much as doctors in the U.K. If you’re a “free trader” who has a hard time understanding this point, suppose that we paid twice as much for oil as they do anywhere else in the world. Where do we think the oil would go?
The second point is why would anyone care about the 25 percent number? I have had endless people defiantly given me this statistic as if they have shown something other than their own ignorance. What percent of our shoes comes from overseas? What percent of our clothes? Of our toys? My guess is that it would be around 70–90 percent in each category.
Suppose that just 25 percent of our consumption came from abroad in these categories because we had huge import tariffs. By the Kevin Drum standard I could say, “What do you mean we have protectionism, 25 percent of our shoes, clothes, and toys are imported.”
Kevin also argues that this is an immigration issue, not a trade protection issue. Nope, it isn’t. If doctors from the U.K., Germany, or India wanted to work in the construction industry, in restaurant kitchens, or as nannies for rich people, they probably would not have any problem. But they would get arrested if they worked as doctors. The issue isn’t being in the U.S. or even working in the U.S., the issue is that the protectionists won’t let them work in the United States as doctors.
Finally, it is worth considering the potential numbers here compared with current immigration flows. At present, we have around 1.4 million immigrants a year. Suppose we brought in 50,000 additional doctors a year for the next decade. This would be a net increase of 500,000 doctors, increasing the supply by more than 50 percent. That would hugely affect the market for doctors and likely be more than sufficient to bring their wages down to world levels.
However, this inflow of doctors would imply a net increase of immigration flows of less than 4.0 percent. If we double the number to account for immigrants of dentists, lawyers, and other currently protected professionals, we’re still only talking about an increase in immigration of less than 8.0 percent. If we think that this is too many immigrants, we could reduce the flow of immigrants in other areas by an offsetting amount.
In short, we do prop up the pay of our doctors through protectionism. We can argue whether it is good policy or not, but we can’t argue that our barriers are not protectionist.
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I generally restrict my comments on this blog to economic issues. But the Post really went over the top in its criticisms of Donna Edwards when it endorsed her opponent Chris Van Hollen in the race for the Democratic nomination the fill the open Maryland senate seat.
Before commenting, I should say that I know Representative Edwards and consider her somewhat of a friend. I also know and like her opponent, with whom I went to college many years ago.
Anyhow, the Post complained that Edwards is too ideological and uncompromising. By contrast, it argued that Van Hollen can make the compromises needed to get things done. The editorial told readers:
“Her allergy to compromise, comparable to the disdain expressed by tea party Republicans, is what has brought Congress to a standstill. She is proof that doctrinaire ideology is alive and well on both sides of the aisle.”
Comparing Representative Edwards to the Tea Party is way over the top. The Tea Party denies reality in fundamental areas. It insists that human caused global warming is not happening. The Tea Party contends the 2008 economic collapse was because the government forced banks to make loans to minorities. It also complains that government spending is out of control on programs other than the ones Tea Party supporters like (Social Security, Medicare and Medicaid, and the military).
If the Post can identify an issue where Edwards has been comparably out of touch with reality then they should share it with readers. Otherwise they owe Ms. Edwards an apology. The Post may think Edwards approach is unproductive, but that is not the same thing as bringing your own reality to policy debates.
I generally restrict my comments on this blog to economic issues. But the Post really went over the top in its criticisms of Donna Edwards when it endorsed her opponent Chris Van Hollen in the race for the Democratic nomination the fill the open Maryland senate seat.
Before commenting, I should say that I know Representative Edwards and consider her somewhat of a friend. I also know and like her opponent, with whom I went to college many years ago.
Anyhow, the Post complained that Edwards is too ideological and uncompromising. By contrast, it argued that Van Hollen can make the compromises needed to get things done. The editorial told readers:
“Her allergy to compromise, comparable to the disdain expressed by tea party Republicans, is what has brought Congress to a standstill. She is proof that doctrinaire ideology is alive and well on both sides of the aisle.”
Comparing Representative Edwards to the Tea Party is way over the top. The Tea Party denies reality in fundamental areas. It insists that human caused global warming is not happening. The Tea Party contends the 2008 economic collapse was because the government forced banks to make loans to minorities. It also complains that government spending is out of control on programs other than the ones Tea Party supporters like (Social Security, Medicare and Medicaid, and the military).
If the Post can identify an issue where Edwards has been comparably out of touch with reality then they should share it with readers. Otherwise they owe Ms. Edwards an apology. The Post may think Edwards approach is unproductive, but that is not the same thing as bringing your own reality to policy debates.
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I usually think Kevin Drum makes pretty good arguments even when I disagree with them, but his trade case really strikes out badly. He wants to take issue with my argument that we protect doctors with average paychecks of more than $250k a year, while deliberately putting autoworkers in direct competition with their low paid counterparts in the developing world.
He quotes my comment that we ban foreign trained physicians unless they go through a U.S. residency program. He then comments:
“Cars made overseas are required to meet American standards. You can’t just build anything you want and sell it here. In the case of doctors, the doctor herself is the product, and we require the product to meet American standards. Aside from the minor jolt of hearing a human being called a “product,” there’s not really much difference. You can argue that standards for cars and standards for doctors are poorly designed, but that’s a much subtler case to make. One way or another, both doctors and cars are going to be required to meet certain standards.”
Umm, the reason that cars overseas meet American standards is because we negotiated a set of standards for them to meet. In other words, that is what our trade negotiators were doing so that they could place U.S. autoworkers in direct competition with low paid workers in Mexico, China and elsewhere.
Our trade negotiators could have been negotiating standards for foreign residency programs. (I know Donald Trump says they are stupid, but they can’t possibly be that stupid.) This would mean that other countries could establish residency programs that ensure that doctors in Germany, Canada, and hopefully many other countries were trained to a level where they were as good as U.S. trained doctors. The reason this didn’t happen is because doctors have much more political power than autoworkers.
Sorry Kevin, you’re a knuckle-scraping Neanderthal protectionist.
I usually think Kevin Drum makes pretty good arguments even when I disagree with them, but his trade case really strikes out badly. He wants to take issue with my argument that we protect doctors with average paychecks of more than $250k a year, while deliberately putting autoworkers in direct competition with their low paid counterparts in the developing world.
He quotes my comment that we ban foreign trained physicians unless they go through a U.S. residency program. He then comments:
“Cars made overseas are required to meet American standards. You can’t just build anything you want and sell it here. In the case of doctors, the doctor herself is the product, and we require the product to meet American standards. Aside from the minor jolt of hearing a human being called a “product,” there’s not really much difference. You can argue that standards for cars and standards for doctors are poorly designed, but that’s a much subtler case to make. One way or another, both doctors and cars are going to be required to meet certain standards.”
Umm, the reason that cars overseas meet American standards is because we negotiated a set of standards for them to meet. In other words, that is what our trade negotiators were doing so that they could place U.S. autoworkers in direct competition with low paid workers in Mexico, China and elsewhere.
Our trade negotiators could have been negotiating standards for foreign residency programs. (I know Donald Trump says they are stupid, but they can’t possibly be that stupid.) This would mean that other countries could establish residency programs that ensure that doctors in Germany, Canada, and hopefully many other countries were trained to a level where they were as good as U.S. trained doctors. The reason this didn’t happen is because doctors have much more political power than autoworkers.
Sorry Kevin, you’re a knuckle-scraping Neanderthal protectionist.
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That is the question millions are asking, or at least the question that people who talk about whether China’s government is holding down the value of its currency should be asking. Neil Irwin is on that list.
In a NYT column today he argued that China is no longer holding down the value of the yuan to maintain a competitive advantage in trade. He pointed to their recent sale of reserves to keep the yuan from falling against the dollar and other currencies. However, however his discussion ignores the country’s massive holdings of foreign exchange reserves.
The conventional rule of thumb is that a country needs reserves that are equal to six months of imports. In China’s case this would be $1 trillion. The country in fact holds more than $3 trillion in reserves. These excess reserves would be expected to keep down the value of the Chinese yuan against the dollar in the same way that the Fed’s holding of more than $3 trillion in assets is thought to hold down long-term interest rates.
As long as China’s central bank holds such a large amount of reserves, it is deliberately keeping down the value of its currency. As a practical matter, we would expect a rapidly growing developing country like China to be running large trade deficits. While its surplus is down from its peak of more than 10 percent of GDP in the last decade, it is still more than 2.0 percent of GDP.
The U.S. trade deficit with China and other matters hugely in the context of an economy that is below full employment. The trade deficit creates a gap in demand that cannot be easily filled from other sources. In principle we could run a larger budget deficit to fill the $500 billion gap (@ 3.0 percent of GDP) created by the trade deficit, but this has proven to be politically impossible.
For this reason, the trade deficit is hugely important since it directly leads to more unemployment. Also, since the wages of the workers at the middle and bottom of the labor market depend hugely on the strength of the labor market, the trade deficit directly reduces the wages of large segments of the U.S. workforce, contributing to the rise in inequality.
That is the question millions are asking, or at least the question that people who talk about whether China’s government is holding down the value of its currency should be asking. Neil Irwin is on that list.
In a NYT column today he argued that China is no longer holding down the value of the yuan to maintain a competitive advantage in trade. He pointed to their recent sale of reserves to keep the yuan from falling against the dollar and other currencies. However, however his discussion ignores the country’s massive holdings of foreign exchange reserves.
The conventional rule of thumb is that a country needs reserves that are equal to six months of imports. In China’s case this would be $1 trillion. The country in fact holds more than $3 trillion in reserves. These excess reserves would be expected to keep down the value of the Chinese yuan against the dollar in the same way that the Fed’s holding of more than $3 trillion in assets is thought to hold down long-term interest rates.
As long as China’s central bank holds such a large amount of reserves, it is deliberately keeping down the value of its currency. As a practical matter, we would expect a rapidly growing developing country like China to be running large trade deficits. While its surplus is down from its peak of more than 10 percent of GDP in the last decade, it is still more than 2.0 percent of GDP.
The U.S. trade deficit with China and other matters hugely in the context of an economy that is below full employment. The trade deficit creates a gap in demand that cannot be easily filled from other sources. In principle we could run a larger budget deficit to fill the $500 billion gap (@ 3.0 percent of GDP) created by the trade deficit, but this has proven to be politically impossible.
For this reason, the trade deficit is hugely important since it directly leads to more unemployment. Also, since the wages of the workers at the middle and bottom of the labor market depend hugely on the strength of the labor market, the trade deficit directly reduces the wages of large segments of the U.S. workforce, contributing to the rise in inequality.
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The Washington Post had a piece on the latest efforts by centrist Democrats to counter the rise of the progressive wing of the party. It tells readers:
“Many of them pushed in the 1990s, under President Bill Clinton, to expand global trade and deregulate the financial sector. They now concede those efforts did not go according to script, particularly for middle-class workers, but they are not calling for a full rewrite in response.”
Actually, increasing inequality was an entirely predictable outcome of expanded trade with developing countries with large amounts of low-paid labor. Reduced wages for manufacturing workers and less-educated workers is exactly what the Stolper-Samuelson theory, one of the bedrocks of trade theory, predicts.
In fact, since the trade agreements of the last quarter century left in place or increased protections for highly paid professionals and also increased patent and copyright protections, it is difficult to believe anyone would not have expected the upward redistribution that occurred. It certainly was entirely predictable at the time.
The Washington Post had a piece on the latest efforts by centrist Democrats to counter the rise of the progressive wing of the party. It tells readers:
“Many of them pushed in the 1990s, under President Bill Clinton, to expand global trade and deregulate the financial sector. They now concede those efforts did not go according to script, particularly for middle-class workers, but they are not calling for a full rewrite in response.”
Actually, increasing inequality was an entirely predictable outcome of expanded trade with developing countries with large amounts of low-paid labor. Reduced wages for manufacturing workers and less-educated workers is exactly what the Stolper-Samuelson theory, one of the bedrocks of trade theory, predicts.
In fact, since the trade agreements of the last quarter century left in place or increased protections for highly paid professionals and also increased patent and copyright protections, it is difficult to believe anyone would not have expected the upward redistribution that occurred. It certainly was entirely predictable at the time.
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