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Beat the Press is Dean Baker's commentary on economic reporting. He is a Senior Economist at the Center for Economic and Policy Research (CEPR). To never miss a post, subscribe to a weekly email roundup of Beat the Press. Please also consider supporting the blog on Patreon.

InequalityLa Desigualdad

Beating Up on Finance

When I do one of my diatribes about how our protectionist barriers allow U.S. doctors to earn twice as much as doctors in other wealthy countries, I invariably get complaints from doctors and their friends asking why I don’t go after the really big bucks people on Wall Street. The answer of course is that I do, but the bloated paychecks on Wall Street are not a reason to pay an extra $100 billion a year ($750 per household) to doctors in the United States. But it is true that I haven’t beaten up on the financial sector for a while, and with Biden now putting together his administration, this would be a great time to take a few shots. 

First, we need some important background. Finance is an intermediate good, like trucking. It does not directly provide value to people like housing or health care. Its value to the economy is allocating capital and facilitating transactions so that the sectors that do provide value are as efficient as possible.

For this reason, an efficient financial sector is a small financial sector. People need to be able to borrow money to buy a home or start a business, and businesses need to be able to get money to expand, but we want as few resources as possible employed in handing out the money.

However, rather than getting smaller and more efficient, the financial sector has expanded hugely over the last four decades. This is seen most clearly in the narrow commodities and securities trading sector, which was less than 0.4 percent of GDP in the mid-seventies and is now more than 2 percent of GDP ($400 billion a year). Other parts of finance have exploded also. We now spend over $250 billion a year (1.2 percent of GDP) on the administration of the health insurance industry, $100 billion on life insurance (0.5 percent of GDP), and hundreds of billions more on other financial services.

In addition to being a drain on the rest of the economy, the financial industry is the source of many of the country’s greatest fortunes. Folks who are concerned about inequality need to have their eyes squarely focused on the sector.

 

Financial Transactions Taxes

I have long been a huge fan of financial transactions taxes (FTT) as a great way to reduce the size of the sector and raise a large amount of money for the government.  By my calculations, a FTT could raise an amount of revenue roughly equal to 0.6 percent of GDP or $130 billion a year in the 2021 economy.

This revenue would come almost entirely at the expense of the financial industry. This needs a bit of explaining since the industry spokespeople have worked so hard to create confusion on this issue. It is true that a tax will likely be mostly passed on to investors in the form of higher trading costs. If the tax on stock trades is 0.2 percent, the cost of trading stock is likely to rise by close to 0.2 percentage points.

However, if we want to look at the costs actually borne by investors, we have to look at a fuller picture. Suppose that an increase in trading costs of 0.2 percentage points would double the cost of trading. There is a large amount of research that shows that trading volume would decline by roughly the same percentage as the increase in costs. (in other words, the elasticity of trading is close to 1.0.)

This means that the doubling of trading costs would mean that trading volume would be roughly cut in half. In that situation, investors would be paying twice as much on each trade, but trading half as much as they did previously, which means their total trading costs would be little changed.

Who pays the tax in that story? Well, the industry pays it in the form of reduced revenue. The money that investors had been paying to the industry to carry through trades is instead going to the government as tax revenue. 

What about the reduction in trading volume, won’t investors be worse off with fewer trades? This is the dirty secret that the industry doesn’t want people to know about. In general, investors will not be worse off if their portfolio turned over less frequently.

The logic here is straightforward. Every trade has a winner and a loser. There are a small number of very astute investors who are disproportionately on the winning side of trades, but the vast majority of investment managers are not that skilled. On average they win half the time and they lose half the time.

This means that on average if they reduced their trading, the direct returns on the portfolio would not suffer, and investors would save from lower fees. The losers of course are the people in the financial industry, who get money from trading.

Cutting trading volume in half means cutting their revenue in half. When we realize who is actually paying the tax, it is no longer a surprise that the financial industry screams bloody murder when anyone talks about a financial transactions tax. This is money out of their pockets and they will fight like crazy to protect their income. And, since they are very rich, we can expect a serious fight.

As a practical matter, a financial transactions tax would face an enormous uphill fight in the Senate, even if the Democrats can somehow win the two seats in Georgia that will give them control. But there are other things that can be done to attack the inefficiencies and great fortunes in the sector.

 

Private Equity

Many of the richest people in the country have made their fortunes in private equity. While the industry tries to sell a heroic image of itself as being turn around experts that give failing companies the capital and management skills they need to be successful, more typically they make their money by financial engineering, tax gaming, laying off workers, and pushing down wages. My colleagues, Eileen Appelbaum and Eleanor Eagon, have comprised a Day One agenda of measures the Biden administration can do through executive action to rein in these abuses.

But in addition to measures to rein in abusive practices, there is another side of the equation that is worth pursuing. Private equity actually has not been providing good returns to investors in recent years. While private equity funds did provide outsized returns in the 1980s and 1990s, that has not been the case since 2006.

This means that, while the general partners who run private equity firms might be getting very rich, the limited partners who put up the money are doing no better on average than if they just put their money into a stock index. And, they would face much less risk.

While we can’t keep rich people from blowing their money on bad investments, much of the money for private equity comes from pension funds and especially from public sector pension funds. In most cases, it is not possible to find the terms of the contracts that private equity companies sign with pension funds. Their standard line is that they are giving the pension fund a good deal. If they had to disclose their terms, they would have to give the same deal to everyone else, and then it wouldn’t be profitable.

Of course, the idea that everyone else is being ripped off, except our favored pension fund, is nonsense on its face. Private equity companies want their terms kept secret so that it is not clear how much money they are taking from the pension funds that invest with them.

This practice suggests a very simple and obvious reform: require full disclosure of terms. States could require that contract terms with every private equity company (for that matter any investment manager) be posted in full on their website, so that any reporter, researcher, or individual could quickly see the terms the fund had negotiated.

The pension funds should also report the returns from the private equity fund or investment manager. (In the case of private equity funds, the only returns that will typically be meaningful will be after the fund has been closed. This is generally a period of ten years.) This would allow anyone to quickly assess how much money the pension fund earned on an investment, compared to how much money the private equity fund or an investment manager made.

A little sunshine may go a long way to reducing the worst rip-offs in this sector. As things stand now, private equity partners make a big point of courting pension fund managers, who typically are not financial professionals. The pension fund managers may view the private equity partners as friends, as opposed to shrewd dealers looking to make as much money as possible from the pension fund.

Anyhow, a push for full transparency on public pension fund investments should in principle be a manageable lift. After all, it might be hard for Republicans to claim that insisting the public be able to know where public money is going is “socialism.”

Needless to say, both Republican and Democratic politicians receive large campaign contributions from private equity funds and other investment managers. They will fight like crazy to block disclosure requirements at the state or federal level. But this seems like good grounds on which to fight a battle.

When I do one of my diatribes about how our protectionist barriers allow U.S. doctors to earn twice as much as doctors in other wealthy countries, I invariably get complaints from doctors and their friends asking why I don’t go after the really big bucks people on Wall Street. The answer of course is that I do, but the bloated paychecks on Wall Street are not a reason to pay an extra $100 billion a year ($750 per household) to doctors in the United States. But it is true that I haven’t beaten up on the financial sector for a while, and with Biden now putting together his administration, this would be a great time to take a few shots. 

First, we need some important background. Finance is an intermediate good, like trucking. It does not directly provide value to people like housing or health care. Its value to the economy is allocating capital and facilitating transactions so that the sectors that do provide value are as efficient as possible.

For this reason, an efficient financial sector is a small financial sector. People need to be able to borrow money to buy a home or start a business, and businesses need to be able to get money to expand, but we want as few resources as possible employed in handing out the money.

However, rather than getting smaller and more efficient, the financial sector has expanded hugely over the last four decades. This is seen most clearly in the narrow commodities and securities trading sector, which was less than 0.4 percent of GDP in the mid-seventies and is now more than 2 percent of GDP ($400 billion a year). Other parts of finance have exploded also. We now spend over $250 billion a year (1.2 percent of GDP) on the administration of the health insurance industry, $100 billion on life insurance (0.5 percent of GDP), and hundreds of billions more on other financial services.

In addition to being a drain on the rest of the economy, the financial industry is the source of many of the country’s greatest fortunes. Folks who are concerned about inequality need to have their eyes squarely focused on the sector.

 

Financial Transactions Taxes

I have long been a huge fan of financial transactions taxes (FTT) as a great way to reduce the size of the sector and raise a large amount of money for the government.  By my calculations, a FTT could raise an amount of revenue roughly equal to 0.6 percent of GDP or $130 billion a year in the 2021 economy.

This revenue would come almost entirely at the expense of the financial industry. This needs a bit of explaining since the industry spokespeople have worked so hard to create confusion on this issue. It is true that a tax will likely be mostly passed on to investors in the form of higher trading costs. If the tax on stock trades is 0.2 percent, the cost of trading stock is likely to rise by close to 0.2 percentage points.

However, if we want to look at the costs actually borne by investors, we have to look at a fuller picture. Suppose that an increase in trading costs of 0.2 percentage points would double the cost of trading. There is a large amount of research that shows that trading volume would decline by roughly the same percentage as the increase in costs. (in other words, the elasticity of trading is close to 1.0.)

This means that the doubling of trading costs would mean that trading volume would be roughly cut in half. In that situation, investors would be paying twice as much on each trade, but trading half as much as they did previously, which means their total trading costs would be little changed.

Who pays the tax in that story? Well, the industry pays it in the form of reduced revenue. The money that investors had been paying to the industry to carry through trades is instead going to the government as tax revenue. 

What about the reduction in trading volume, won’t investors be worse off with fewer trades? This is the dirty secret that the industry doesn’t want people to know about. In general, investors will not be worse off if their portfolio turned over less frequently.

The logic here is straightforward. Every trade has a winner and a loser. There are a small number of very astute investors who are disproportionately on the winning side of trades, but the vast majority of investment managers are not that skilled. On average they win half the time and they lose half the time.

This means that on average if they reduced their trading, the direct returns on the portfolio would not suffer, and investors would save from lower fees. The losers of course are the people in the financial industry, who get money from trading.

Cutting trading volume in half means cutting their revenue in half. When we realize who is actually paying the tax, it is no longer a surprise that the financial industry screams bloody murder when anyone talks about a financial transactions tax. This is money out of their pockets and they will fight like crazy to protect their income. And, since they are very rich, we can expect a serious fight.

As a practical matter, a financial transactions tax would face an enormous uphill fight in the Senate, even if the Democrats can somehow win the two seats in Georgia that will give them control. But there are other things that can be done to attack the inefficiencies and great fortunes in the sector.

 

Private Equity

Many of the richest people in the country have made their fortunes in private equity. While the industry tries to sell a heroic image of itself as being turn around experts that give failing companies the capital and management skills they need to be successful, more typically they make their money by financial engineering, tax gaming, laying off workers, and pushing down wages. My colleagues, Eileen Appelbaum and Eleanor Eagon, have comprised a Day One agenda of measures the Biden administration can do through executive action to rein in these abuses.

But in addition to measures to rein in abusive practices, there is another side of the equation that is worth pursuing. Private equity actually has not been providing good returns to investors in recent years. While private equity funds did provide outsized returns in the 1980s and 1990s, that has not been the case since 2006.

This means that, while the general partners who run private equity firms might be getting very rich, the limited partners who put up the money are doing no better on average than if they just put their money into a stock index. And, they would face much less risk.

While we can’t keep rich people from blowing their money on bad investments, much of the money for private equity comes from pension funds and especially from public sector pension funds. In most cases, it is not possible to find the terms of the contracts that private equity companies sign with pension funds. Their standard line is that they are giving the pension fund a good deal. If they had to disclose their terms, they would have to give the same deal to everyone else, and then it wouldn’t be profitable.

Of course, the idea that everyone else is being ripped off, except our favored pension fund, is nonsense on its face. Private equity companies want their terms kept secret so that it is not clear how much money they are taking from the pension funds that invest with them.

This practice suggests a very simple and obvious reform: require full disclosure of terms. States could require that contract terms with every private equity company (for that matter any investment manager) be posted in full on their website, so that any reporter, researcher, or individual could quickly see the terms the fund had negotiated.

The pension funds should also report the returns from the private equity fund or investment manager. (In the case of private equity funds, the only returns that will typically be meaningful will be after the fund has been closed. This is generally a period of ten years.) This would allow anyone to quickly assess how much money the pension fund earned on an investment, compared to how much money the private equity fund or an investment manager made.

A little sunshine may go a long way to reducing the worst rip-offs in this sector. As things stand now, private equity partners make a big point of courting pension fund managers, who typically are not financial professionals. The pension fund managers may view the private equity partners as friends, as opposed to shrewd dealers looking to make as much money as possible from the pension fund.

Anyhow, a push for full transparency on public pension fund investments should in principle be a manageable lift. After all, it might be hard for Republicans to claim that insisting the public be able to know where public money is going is “socialism.”

Needless to say, both Republican and Democratic politicians receive large campaign contributions from private equity funds and other investment managers. They will fight like crazy to block disclosure requirements at the state or federal level. But this seems like good grounds on which to fight a battle.

I’m not sure why it is so hard for reporters to just tell us what politicians say and do, instead of telling us what they think and believe. This may be news for reporters, but politicians don’t always believe the things they say. For example, almost 90 percent of the Republicans in Congress will not say that Joe Biden won the election (two say Donald Trump won), however, I am quite certain that the overwhelming majority of these politicians understand that Biden’s 306 electoral votes give him the presidency.

Anyhow, our latest episode of reporters telling us what politicians “see” and “think” came on NPR’s Weekend Edition, where Ron Elving told us that many Republican members of Congress are opposed to another pandemic relief package because they don’t “see” the need for more money for state and local government and that they “think” the economy can get by without it. While it is possible that these politicians actually do think that further support for the economy is unnecessary, it is also possible that they see political advantage in damaging the economy as much as possible to make a Biden presidency look bad.

It would be best if Elving not assert that these Republican politicians are acting in a way that they see as being good for the country since there is no way he can know that. He should just tell us that they oppose further pandemic relief and not read their minds for us.

I’m not sure why it is so hard for reporters to just tell us what politicians say and do, instead of telling us what they think and believe. This may be news for reporters, but politicians don’t always believe the things they say. For example, almost 90 percent of the Republicans in Congress will not say that Joe Biden won the election (two say Donald Trump won), however, I am quite certain that the overwhelming majority of these politicians understand that Biden’s 306 electoral votes give him the presidency.

Anyhow, our latest episode of reporters telling us what politicians “see” and “think” came on NPR’s Weekend Edition, where Ron Elving told us that many Republican members of Congress are opposed to another pandemic relief package because they don’t “see” the need for more money for state and local government and that they “think” the economy can get by without it. While it is possible that these politicians actually do think that further support for the economy is unnecessary, it is also possible that they see political advantage in damaging the economy as much as possible to make a Biden presidency look bad.

It would be best if Elving not assert that these Republican politicians are acting in a way that they see as being good for the country since there is no way he can know that. He should just tell us that they oppose further pandemic relief and not read their minds for us.

Steve Rattner used his NYT column to tell progressives that they should not try to pressure President-Elect Biden to implement progressive policies with noisy protests. He argues that compromise with the Republicans is necessary and argues that the Clinton presidency after the 1994 Republican takeover of Congress is a good model.

“Progressive history has not treated kindly President Bill Clinton’s decision to work with Republicans after their enormous midterm victory in 1994. But taxes got cut, the budget was balanced for the first time in decades, and the late 1990s is remembered as a period of strong prosperity.”

There are several important points here that apparently Mr. Rattner has forgotten. First, the economy was driven in the late 1990s by a stock bubble that crashed in 2000-2002. While that recession is usually considered by economists to be short and mild, from the standpoint of the labor market, at the time, it was the worse recession since the Great Depression. We did not get back the jobs lost in the recession, which began in March of 2001, until almost four full years later.

The stock bubble was also the origin of the underfunding problem of many pension funds today. Pensions assumed that the market would continue to rise even in the bubble. (That’s what Clinton’s all-star economists told them.) When the market crashed, they suddenly faced serious funding shortfalls, which no one wanted to make up with increased pension contributions in the middle of a recession.

This was also the period when partial deregulation of finance (the industry always wanted their government protection against failure safety blanket) was in full bloom. We saw the fruits of the Clinton era deregulation in the housing bubble and the widespread abuses in the mortgage industry that fed it.

Rattner also touts the “free trade” of the era. Of course, Rattner does not really support free trade; he is fine with longer and stronger patent and copyright protections. And, I have never seen him object to the protections that allow our doctors to earn twice as much as their counterparts in other wealthy countries, costing us $100 billion annually in higher medical bills. Anyhow, it was the Clinton-Rattner version of free trade that cost us millions of manufacturing jobs, making large parts of the country into solid Trump territory.

Anyhow, many progressives have better memories than Rattner, which is why they are determined to not have the Biden presidency be a repeat of the Clinton presidency. We also get why people like him don’t like noisy protests, but for people who can’t attend $10,000-a-plate fundraisers, these protests are how you can hope to have an impact on politicians’ agendas.

 

Steve Rattner used his NYT column to tell progressives that they should not try to pressure President-Elect Biden to implement progressive policies with noisy protests. He argues that compromise with the Republicans is necessary and argues that the Clinton presidency after the 1994 Republican takeover of Congress is a good model.

“Progressive history has not treated kindly President Bill Clinton’s decision to work with Republicans after their enormous midterm victory in 1994. But taxes got cut, the budget was balanced for the first time in decades, and the late 1990s is remembered as a period of strong prosperity.”

There are several important points here that apparently Mr. Rattner has forgotten. First, the economy was driven in the late 1990s by a stock bubble that crashed in 2000-2002. While that recession is usually considered by economists to be short and mild, from the standpoint of the labor market, at the time, it was the worse recession since the Great Depression. We did not get back the jobs lost in the recession, which began in March of 2001, until almost four full years later.

The stock bubble was also the origin of the underfunding problem of many pension funds today. Pensions assumed that the market would continue to rise even in the bubble. (That’s what Clinton’s all-star economists told them.) When the market crashed, they suddenly faced serious funding shortfalls, which no one wanted to make up with increased pension contributions in the middle of a recession.

This was also the period when partial deregulation of finance (the industry always wanted their government protection against failure safety blanket) was in full bloom. We saw the fruits of the Clinton era deregulation in the housing bubble and the widespread abuses in the mortgage industry that fed it.

Rattner also touts the “free trade” of the era. Of course, Rattner does not really support free trade; he is fine with longer and stronger patent and copyright protections. And, I have never seen him object to the protections that allow our doctors to earn twice as much as their counterparts in other wealthy countries, costing us $100 billion annually in higher medical bills. Anyhow, it was the Clinton-Rattner version of free trade that cost us millions of manufacturing jobs, making large parts of the country into solid Trump territory.

Anyhow, many progressives have better memories than Rattner, which is why they are determined to not have the Biden presidency be a repeat of the Clinton presidency. We also get why people like him don’t like noisy protests, but for people who can’t attend $10,000-a-plate fundraisers, these protests are how you can hope to have an impact on politicians’ agendas.

 

Apparently, Donald Trump has gotten into his head that he wants to repeal Section 230 of the 1996 Communications Decency Act. Apparently, he is upset that Facebook and Twitter have pointed out that much of what he posts is not true.

It’s not clear what Trump thinks he would accomplish by repealing this provision of the law. Section 230 exempts Facebook and other Internet intermediaries from being liable for material that is passed along through their systems, either as ads or through individuals’ or groups’ posts. The loss of this protection would actually make it more likely that Facebook and Twitter would restrict false information coming from Donald Trump and his allies.

But the consequences of repealing Section 230 would go far beyond its impact on Donald Trump’s ability to spew crazy conspiracy theories over the web. It would almost certainly fundamentally restructure the Internet, as I explain here.

The basic story is that making Facebook and other intermediaries liable for defamatory material circulated over their systems would impose enormous costs on these networks. They would have to monitor hundreds of millions of posts and constantly be dealing with complaints about defamation.

This would both directly eat into their profits, since it will require a huge commitment of personnel, and also likely lead to a loss of traffic, as people got annoyed at having material pulled off the site. If Section 230 protection were left in place for true common carriers — sites that did not profit from selling ads or personal data — we would likely see a massive migration to old-fashioned bulletin boards and other sites where people could post what they wanted without review.

The net effect would be to make Facebook much smaller, so what Mark Zuckerberg chose to favor or ban would not make much difference to anyone. To my mind, this would be a fantastic outcome and the world would have been well-served by this particular Trump temper tantrum. But, has anyone ever known Trump to do anything good?

Apparently, Donald Trump has gotten into his head that he wants to repeal Section 230 of the 1996 Communications Decency Act. Apparently, he is upset that Facebook and Twitter have pointed out that much of what he posts is not true.

It’s not clear what Trump thinks he would accomplish by repealing this provision of the law. Section 230 exempts Facebook and other Internet intermediaries from being liable for material that is passed along through their systems, either as ads or through individuals’ or groups’ posts. The loss of this protection would actually make it more likely that Facebook and Twitter would restrict false information coming from Donald Trump and his allies.

But the consequences of repealing Section 230 would go far beyond its impact on Donald Trump’s ability to spew crazy conspiracy theories over the web. It would almost certainly fundamentally restructure the Internet, as I explain here.

The basic story is that making Facebook and other intermediaries liable for defamatory material circulated over their systems would impose enormous costs on these networks. They would have to monitor hundreds of millions of posts and constantly be dealing with complaints about defamation.

This would both directly eat into their profits, since it will require a huge commitment of personnel, and also likely lead to a loss of traffic, as people got annoyed at having material pulled off the site. If Section 230 protection were left in place for true common carriers — sites that did not profit from selling ads or personal data — we would likely see a massive migration to old-fashioned bulletin boards and other sites where people could post what they wanted without review.

The net effect would be to make Facebook much smaller, so what Mark Zuckerberg chose to favor or ban would not make much difference to anyone. To my mind, this would be a fantastic outcome and the world would have been well-served by this particular Trump temper tantrum. But, has anyone ever known Trump to do anything good?

It’s good to see the New York Times making the case for higher wages in an editorial. Unfortunately, they get much of the story confused.

First off, the essence of the case is that higher wages will lead to more consumption, which will spur growth. This is true, but higher pay is not the only way to generate more demand. We also get more demand with larger budget deficits, lower interest rates, and a smaller trade deficit.

But that is the less important problem with the piece. The bigger problem is the assertion that the failure of pay to keep pace with productivity growth over the last four decades is due to higher profits.

“Wages are influenced by a tug of war between employers and workers, and employers have been winning. One clear piece of evidence is the yawning divergence between productivity growth and wage growth since roughly 1970. Productivity has more than doubled; wages have lagged far behind.”

In fact, a rising profit share only explains about 10 percent of the gap between productivity growth and the median wage since 1979. The overwhelming majority of the gap is explained by rising high-end wages — the money earned by CEOs and other top execs, high pay in the financial sector, the earnings of some workers in STEM areas, and high-end professionals, like doctors and dentists.

For some reason, the NYT never wants to talk about the laws and structures that allow for the explosion of pay at the top. This would include factors like our corrupt corporate governance structure, that essentially lets CEOs determine their own pay, a bloated financial sector that uses its political power to steer ever more money in its direction, longer and stronger patent and copyright monopolies, and protectionist barriers that largely shield our most highly paid professionals from both foreign and domestic competition. (Yes, this is all covered in Rigged [it’s free].)

Readers can speculate on why these topics are almost entirely forbidden at the NYT, but if we want to be serious about addressing low wages, we have to look where the money is, and most of it is not with corporate profits. And, just to remind people why this matters, the minimum wage would be $24 an hour today if it had kept pace with productivity growth since 1968.

It’s good to see the New York Times making the case for higher wages in an editorial. Unfortunately, they get much of the story confused.

First off, the essence of the case is that higher wages will lead to more consumption, which will spur growth. This is true, but higher pay is not the only way to generate more demand. We also get more demand with larger budget deficits, lower interest rates, and a smaller trade deficit.

But that is the less important problem with the piece. The bigger problem is the assertion that the failure of pay to keep pace with productivity growth over the last four decades is due to higher profits.

“Wages are influenced by a tug of war between employers and workers, and employers have been winning. One clear piece of evidence is the yawning divergence between productivity growth and wage growth since roughly 1970. Productivity has more than doubled; wages have lagged far behind.”

In fact, a rising profit share only explains about 10 percent of the gap between productivity growth and the median wage since 1979. The overwhelming majority of the gap is explained by rising high-end wages — the money earned by CEOs and other top execs, high pay in the financial sector, the earnings of some workers in STEM areas, and high-end professionals, like doctors and dentists.

For some reason, the NYT never wants to talk about the laws and structures that allow for the explosion of pay at the top. This would include factors like our corrupt corporate governance structure, that essentially lets CEOs determine their own pay, a bloated financial sector that uses its political power to steer ever more money in its direction, longer and stronger patent and copyright monopolies, and protectionist barriers that largely shield our most highly paid professionals from both foreign and domestic competition. (Yes, this is all covered in Rigged [it’s free].)

Readers can speculate on why these topics are almost entirely forbidden at the NYT, but if we want to be serious about addressing low wages, we have to look where the money is, and most of it is not with corporate profits. And, just to remind people why this matters, the minimum wage would be $24 an hour today if it had kept pace with productivity growth since 1968.

We know that the economy is likely to get worse in the immediate future as the pandemic is spreading out of control in most parts of the country. However, the latest data on average weekly hours indicates we may be facing a longer-term issue that has not generally been anticipated.

In a normal recession, we see both a loss of jobs and a reduction in hours for those who managed to keep their jobs. The shortening of hours is a better way for employers to deal with reduced demand for labor since it keeps workers attached to their jobs. (This is the argument for work-sharing as an alternative to unemployment.) However, in this recession, we are actually seeing some lengthening of the average workweek, not the usual shortening.

The chart below compares the change in the average workweek from 2007 to 2009 and from 2019 to 2020. For 2020, I have used the most recent two months’ data (September and October) to just take the period where the economy was operating at a level somewhat close to normal.

Source: Bureau of Labor Statistics and author’s calculations.

As can be seen, we see a very different picture in the pattern of work hours between the two recessions. The average workweek for all employees fell by 1.5 percent in the Great Recession. By contrast, it increased by 1.2 percent from 2019 to September and October of this year. Some of this was undoubtedly due to composition effects. In the Great Recession, like most recessions, construction and manufacturing were the hardest hit sectors. These sectors have longer average hours than most, so job loss in these sectors will automatically reduce the length of the average workweek.

To control for this, I have compared the change in average hours in the two recessions for production and non-supervisory workers in several major sectors. Starting with the overall average, the difference is even sharper. The drop in the Great Recession was 2.0 percent, compared to a 1.6 percent increase in the Pandemic Recession.

Looking at major sectors, there was a drop in the length of the average workweek of 3.0 percent in manufacturing in the Great Recession compared to 1.0 percent in this recession. This may be explained largely by the fact that manufacturing was much harder hit in the Great Recession.

This explanation doesn’t fit for other sectors. Average hours fell by 1.1 percent in retail in the Great Recession, they rose by 2.2 percent in this recession. In the broad category of professional and business services, hours fell by 0.1 percent in the Great Recession, they have risen by 1.8 percent in this recession.

In education and health care, average hours fell by 1.0 percent in the Great Recession, they have risen by 1.9 percent in this recession. In the category leisure and hospitality, which includes hotels and restaurant workers, hours fell by 2.7 percent in the last recession, compared to a drop of just 0.2 percent in this recession. Hours in other services, which includes areas like laundry, gyms, and hair salons, fell by 1.4 percent in the Great Recession, they have risen by 1.9 percent in this recession.    

The rise in hours during this recession is a really big deal because it accentuates the unemployment problem. To take the simple arithmetic, if the average workweek is 3 percent longer because of a change in employer behavior, with our pre-pandemic employment of roughly 150 million, that means 4.5 million fewer jobs given the same demand for labor. The real world will of course always be more complicated, but the basic story would apply. Longer hours means fewer jobs.

This is likely to matter not just for the immediate future when the pandemic limits employment in large areas of the economy, but also in the longer term, as we adjust to the work structures that have been permanently altered as a result of the recession. As I have written elsewhere, the increase in telecommuting is likely to be enduring, meaning that there will be many fewer jobs serving a smaller population of commuters. 

One way of dealing with this reduction in employment opportunities is to have shorter work weeks/work years. Unfortunately, it seems we are now headed in the wrong direction.  

 

We know that the economy is likely to get worse in the immediate future as the pandemic is spreading out of control in most parts of the country. However, the latest data on average weekly hours indicates we may be facing a longer-term issue that has not generally been anticipated.

In a normal recession, we see both a loss of jobs and a reduction in hours for those who managed to keep their jobs. The shortening of hours is a better way for employers to deal with reduced demand for labor since it keeps workers attached to their jobs. (This is the argument for work-sharing as an alternative to unemployment.) However, in this recession, we are actually seeing some lengthening of the average workweek, not the usual shortening.

The chart below compares the change in the average workweek from 2007 to 2009 and from 2019 to 2020. For 2020, I have used the most recent two months’ data (September and October) to just take the period where the economy was operating at a level somewhat close to normal.

Source: Bureau of Labor Statistics and author’s calculations.

As can be seen, we see a very different picture in the pattern of work hours between the two recessions. The average workweek for all employees fell by 1.5 percent in the Great Recession. By contrast, it increased by 1.2 percent from 2019 to September and October of this year. Some of this was undoubtedly due to composition effects. In the Great Recession, like most recessions, construction and manufacturing were the hardest hit sectors. These sectors have longer average hours than most, so job loss in these sectors will automatically reduce the length of the average workweek.

To control for this, I have compared the change in average hours in the two recessions for production and non-supervisory workers in several major sectors. Starting with the overall average, the difference is even sharper. The drop in the Great Recession was 2.0 percent, compared to a 1.6 percent increase in the Pandemic Recession.

Looking at major sectors, there was a drop in the length of the average workweek of 3.0 percent in manufacturing in the Great Recession compared to 1.0 percent in this recession. This may be explained largely by the fact that manufacturing was much harder hit in the Great Recession.

This explanation doesn’t fit for other sectors. Average hours fell by 1.1 percent in retail in the Great Recession, they rose by 2.2 percent in this recession. In the broad category of professional and business services, hours fell by 0.1 percent in the Great Recession, they have risen by 1.8 percent in this recession.

In education and health care, average hours fell by 1.0 percent in the Great Recession, they have risen by 1.9 percent in this recession. In the category leisure and hospitality, which includes hotels and restaurant workers, hours fell by 2.7 percent in the last recession, compared to a drop of just 0.2 percent in this recession. Hours in other services, which includes areas like laundry, gyms, and hair salons, fell by 1.4 percent in the Great Recession, they have risen by 1.9 percent in this recession.    

The rise in hours during this recession is a really big deal because it accentuates the unemployment problem. To take the simple arithmetic, if the average workweek is 3 percent longer because of a change in employer behavior, with our pre-pandemic employment of roughly 150 million, that means 4.5 million fewer jobs given the same demand for labor. The real world will of course always be more complicated, but the basic story would apply. Longer hours means fewer jobs.

This is likely to matter not just for the immediate future when the pandemic limits employment in large areas of the economy, but also in the longer term, as we adjust to the work structures that have been permanently altered as a result of the recession. As I have written elsewhere, the increase in telecommuting is likely to be enduring, meaning that there will be many fewer jobs serving a smaller population of commuters. 

One way of dealing with this reduction in employment opportunities is to have shorter work weeks/work years. Unfortunately, it seems we are now headed in the wrong direction.  

 

After having Donald Trump in the White House for four years, we have gotten used to being lied to by people in high positions. Trump and his top staff have no qualms about telling us night is day, black is white, and two plus two equals five.

But we expect better from Team Reality: you know, the folks who write newspaper and magazine articles and opinion pieces, teach at major universities, and pass themselves off as great thinkers on the important issues of the day. But when it comes to discussions of the development of vaccines against the coronavirus, Team Reality is not doing much better than the Trumpers.

For the last couple of weeks, we have seen the celebration of reports of successful vaccine trials by Pfizer/BioNTech, Moderna, and Oxford-Astra Zeneca. Their success in such a short time-period is being treated as a remarkable achievement, given that it has often taken more than a decade to develop vaccines in the past. In the case of many diseases, most notably AIDS, we still don’t have an effective vaccine after many decades of trying. In this context, the seeming success of these vaccines is indeed an impressive achievement, as well as being very good news with the pandemic now exploding out of control in the United States.  

But the part of the story the celebrants seem determined to ignore is that the U.S. and European researchers do not appear to be the only ones with success in developing vaccines. China now has five vaccines in Phase 3 testing and Russia has one. Several of China’s vaccines have already been widely distributed in China, and to a lesser extent in other countries, under Emergency Use Authorizations.

It probably is not a good practice to widely distribute a vaccine before it has been properly tested, but you would think that the fact that China is already in a position to make a vaccine widely available would arouse some interest here. After all, we are now looking at close to 200,000 new infections a day and more than 2,000 deaths. If we had begun distributing a vaccine widely a month ago, these numbers would almost certainly look much better today and would presumably be getting lower rather than higher.

Incredibly, in spite of the enormous human and economic cost of the unchecked spread of the pandemic, literally no one in any major news outlet is asking the simple question of whether we could have benefited from access to China’s vaccines. There were a number of articles (here, here, here, and here) that reported on the claims of Sinopharm, one of the Chinese vaccine manufacturers, that it had already given its vaccine to nearly one million people. However, this was treated as an oddity, sort of like a four-legged chicken, not anything that could conceivably be relevant for slowing the spread of the pandemic here.

It might have been reasonable to ask a public health expert about whether the United States could have in the past, or even now, benefit from access to this or other Chinese vaccines. But that question did not get raised in any of these articles.

 

Can We Cooperate With China?

 

As my regular readers know, I have harped on this point at length, but I was moved to again push the issue by a piece in the New York Times by Fu Ying, a Chinese academic who has held high positions in its government. There were some items in this piece, which can be assumed to reflect the government’s position, that are troublesome, most importantly its claim that human rights abuses in China are not anyone else’s business. But apart from these items, there is one specific area that certainly deserves attention.  

Near the end of the column, Ms. Fu outlines areas for cooperation between the United States and China:

“Finally, a host of global issues call for close cooperation between China and the United States — the most urgent being the fight against the coronavirus pandemic.

“Scientists from both countries have a solid track record of professional cooperation in responding to past health crises, and they should be encouraged to maximize again the potential for exchange and joint research. Both China and America are resourceful in vaccine development. If they cooperate to make vaccines more affordable and accessible, the whole world will benefit.

“Climate change is another area that needs urgent attention. The world expects China and the United States to play a leading role, and the two countries have a lot to work on together.”

 

These points are very well-taken and we should hope the Biden administration tries to follow through with the Chinese government.  It was tragic that the United States and the rest of the world took a narrow nationalistic approach to develop treatments and vaccines. If we had continued the path of international collaboration that scientists were following in the early days of the pandemic, it is very possible that we would have had an effective vaccine already.

If we had followed a collaborative path, with no patent monopolies, all results would be fully public as soon as they are available. Anyone would be free to do their own tests and, they could mass produce any vaccine for which they had manufacturing capacity. This would mean, for example, that if the Sinopharm vaccine seemed promising, our researchers would be able to do whatever additional tests were needed to secure FDA approval. We would also be able to manufacture the vaccine as quickly as our factories were able to produce it, without seeking permission from Sinopharm or the Chinese government.

This is a good backdrop for possible paths of cooperation going forward. If we decided to cooperate with China on areas of common concern, such as health care and global warming, we could go this route of shared and open research.

This would mean that both countries would commit to certain levels of expenditure on research in specific areas, with all results being posted on the Internet in a timely manner and any patents being placed in the public domain so that everyone could freely use them. Presumably, we would want to bring other countries into such an agreement, so that they would both contribute to the research and share in the innovations that come from it. (I describe this sort of system in chapter 5 of Rigged [it’s free].)

This sort of system could be an enormous benefit to both China and the United States, and humanity in general. In medicine, the new vaccines and treatments developed could be sold as cheap generics from the day they were approved. Paying for drugs would no longer be a major problem in rich countries, and even in poor countries, securing necessary medicines could be accomplished with modest commitments of aid from rich country governments, international organizations, or private philanthropies.

In terms of dealing with global warming, new innovations in solar energy, wind energy, energy storage, and other areas would be quickly diffused throughout the world. The price would plummet as buyers need only pay the costs associated with manufacturing and installation, there would be no royalties going to companies with patent or copyright monopolies.

Perhaps best of all, we would be removing a large area of potential conflict between the United States and China. One of the items that always appears near the top of our list of complaints against China is the theft of intellectual property. However, if a large portion of our innovation is fully open, there is nothing to steal. We actually want China to install clean energy as quickly as possible, and they want the same from the United States. In this context, the greater and quicker diffusion of technology is truly a win-win.

We can also say the same about advances in health care. Whatever forms our competition with China might take, no reasonable person would want to see their population needlessly getting sick and dying. And, as we can clearly see now, we certainly share an interest in preventing the spread of infectious diseases anywhere in the world.

 

The End of the Thanksgiving Dream

Okay, this picture of international cooperation might be a very rosy scenario, but I have been around long enough to know it is not a realistic one. A big part of that story is that the industries that might see lower profits in this picture – the pharmaceutical industry, medical equipment manufacturers, wind and solar power companies – are powerful actors who will fight very hard to block any efforts to change the current system.

But the problem goes even deeper. There is an overwhelming consensus among elite types that free trade is the best way to go. We see endless articles and columns that warn us of the stupidity of tariffs on items like steel or cars. While the protection of these and other sectors may have allowed for higher pay for U.S. workers in years past, the story goes that they just have to adjust to a world where these industries will no longer be protected.

We could tell the exact same story about the pharmaceutical industry, medical equipment manufacturers, wind, and solar power companies. But the people who would see their incomes most at risk if we moved towards free trade in these areas (moving away from patent and copyright protection) would be highly educated professionals, largely people with college and advanced degrees in biology, chemistry, and engineering or physicians.  

These people are parents, siblings, or children of the people who write about economic policy and international relations. Policy types are much more likely to have very direct connections with the people who benefit from protections of intellectual property than the less-educated manufacturing workers who might benefit from tariffs on steel or cars.

Whether or not social position explains the differing attitudes towards the protection of manufactured goods and the protection of intellectual property is something I will leave to people to argue about over Thanksgiving dinner. But the fact remains, protection for manufactured goods is universally derided in outlets like the New York Times, Washington Post, and The Atlantic. Protectionism in the form of patent and copyright monopolies, which is hugely more costly, is never even raised as an issue. I’m open to other explanations for this difference in treatment.

Happy Thanksgiving Everyone (hopefully by Zoom).

 

 

After having Donald Trump in the White House for four years, we have gotten used to being lied to by people in high positions. Trump and his top staff have no qualms about telling us night is day, black is white, and two plus two equals five.

But we expect better from Team Reality: you know, the folks who write newspaper and magazine articles and opinion pieces, teach at major universities, and pass themselves off as great thinkers on the important issues of the day. But when it comes to discussions of the development of vaccines against the coronavirus, Team Reality is not doing much better than the Trumpers.

For the last couple of weeks, we have seen the celebration of reports of successful vaccine trials by Pfizer/BioNTech, Moderna, and Oxford-Astra Zeneca. Their success in such a short time-period is being treated as a remarkable achievement, given that it has often taken more than a decade to develop vaccines in the past. In the case of many diseases, most notably AIDS, we still don’t have an effective vaccine after many decades of trying. In this context, the seeming success of these vaccines is indeed an impressive achievement, as well as being very good news with the pandemic now exploding out of control in the United States.  

But the part of the story the celebrants seem determined to ignore is that the U.S. and European researchers do not appear to be the only ones with success in developing vaccines. China now has five vaccines in Phase 3 testing and Russia has one. Several of China’s vaccines have already been widely distributed in China, and to a lesser extent in other countries, under Emergency Use Authorizations.

It probably is not a good practice to widely distribute a vaccine before it has been properly tested, but you would think that the fact that China is already in a position to make a vaccine widely available would arouse some interest here. After all, we are now looking at close to 200,000 new infections a day and more than 2,000 deaths. If we had begun distributing a vaccine widely a month ago, these numbers would almost certainly look much better today and would presumably be getting lower rather than higher.

Incredibly, in spite of the enormous human and economic cost of the unchecked spread of the pandemic, literally no one in any major news outlet is asking the simple question of whether we could have benefited from access to China’s vaccines. There were a number of articles (here, here, here, and here) that reported on the claims of Sinopharm, one of the Chinese vaccine manufacturers, that it had already given its vaccine to nearly one million people. However, this was treated as an oddity, sort of like a four-legged chicken, not anything that could conceivably be relevant for slowing the spread of the pandemic here.

It might have been reasonable to ask a public health expert about whether the United States could have in the past, or even now, benefit from access to this or other Chinese vaccines. But that question did not get raised in any of these articles.

 

Can We Cooperate With China?

 

As my regular readers know, I have harped on this point at length, but I was moved to again push the issue by a piece in the New York Times by Fu Ying, a Chinese academic who has held high positions in its government. There were some items in this piece, which can be assumed to reflect the government’s position, that are troublesome, most importantly its claim that human rights abuses in China are not anyone else’s business. But apart from these items, there is one specific area that certainly deserves attention.  

Near the end of the column, Ms. Fu outlines areas for cooperation between the United States and China:

“Finally, a host of global issues call for close cooperation between China and the United States — the most urgent being the fight against the coronavirus pandemic.

“Scientists from both countries have a solid track record of professional cooperation in responding to past health crises, and they should be encouraged to maximize again the potential for exchange and joint research. Both China and America are resourceful in vaccine development. If they cooperate to make vaccines more affordable and accessible, the whole world will benefit.

“Climate change is another area that needs urgent attention. The world expects China and the United States to play a leading role, and the two countries have a lot to work on together.”

 

These points are very well-taken and we should hope the Biden administration tries to follow through with the Chinese government.  It was tragic that the United States and the rest of the world took a narrow nationalistic approach to develop treatments and vaccines. If we had continued the path of international collaboration that scientists were following in the early days of the pandemic, it is very possible that we would have had an effective vaccine already.

If we had followed a collaborative path, with no patent monopolies, all results would be fully public as soon as they are available. Anyone would be free to do their own tests and, they could mass produce any vaccine for which they had manufacturing capacity. This would mean, for example, that if the Sinopharm vaccine seemed promising, our researchers would be able to do whatever additional tests were needed to secure FDA approval. We would also be able to manufacture the vaccine as quickly as our factories were able to produce it, without seeking permission from Sinopharm or the Chinese government.

This is a good backdrop for possible paths of cooperation going forward. If we decided to cooperate with China on areas of common concern, such as health care and global warming, we could go this route of shared and open research.

This would mean that both countries would commit to certain levels of expenditure on research in specific areas, with all results being posted on the Internet in a timely manner and any patents being placed in the public domain so that everyone could freely use them. Presumably, we would want to bring other countries into such an agreement, so that they would both contribute to the research and share in the innovations that come from it. (I describe this sort of system in chapter 5 of Rigged [it’s free].)

This sort of system could be an enormous benefit to both China and the United States, and humanity in general. In medicine, the new vaccines and treatments developed could be sold as cheap generics from the day they were approved. Paying for drugs would no longer be a major problem in rich countries, and even in poor countries, securing necessary medicines could be accomplished with modest commitments of aid from rich country governments, international organizations, or private philanthropies.

In terms of dealing with global warming, new innovations in solar energy, wind energy, energy storage, and other areas would be quickly diffused throughout the world. The price would plummet as buyers need only pay the costs associated with manufacturing and installation, there would be no royalties going to companies with patent or copyright monopolies.

Perhaps best of all, we would be removing a large area of potential conflict between the United States and China. One of the items that always appears near the top of our list of complaints against China is the theft of intellectual property. However, if a large portion of our innovation is fully open, there is nothing to steal. We actually want China to install clean energy as quickly as possible, and they want the same from the United States. In this context, the greater and quicker diffusion of technology is truly a win-win.

We can also say the same about advances in health care. Whatever forms our competition with China might take, no reasonable person would want to see their population needlessly getting sick and dying. And, as we can clearly see now, we certainly share an interest in preventing the spread of infectious diseases anywhere in the world.

 

The End of the Thanksgiving Dream

Okay, this picture of international cooperation might be a very rosy scenario, but I have been around long enough to know it is not a realistic one. A big part of that story is that the industries that might see lower profits in this picture – the pharmaceutical industry, medical equipment manufacturers, wind and solar power companies – are powerful actors who will fight very hard to block any efforts to change the current system.

But the problem goes even deeper. There is an overwhelming consensus among elite types that free trade is the best way to go. We see endless articles and columns that warn us of the stupidity of tariffs on items like steel or cars. While the protection of these and other sectors may have allowed for higher pay for U.S. workers in years past, the story goes that they just have to adjust to a world where these industries will no longer be protected.

We could tell the exact same story about the pharmaceutical industry, medical equipment manufacturers, wind, and solar power companies. But the people who would see their incomes most at risk if we moved towards free trade in these areas (moving away from patent and copyright protection) would be highly educated professionals, largely people with college and advanced degrees in biology, chemistry, and engineering or physicians.  

These people are parents, siblings, or children of the people who write about economic policy and international relations. Policy types are much more likely to have very direct connections with the people who benefit from protections of intellectual property than the less-educated manufacturing workers who might benefit from tariffs on steel or cars.

Whether or not social position explains the differing attitudes towards the protection of manufactured goods and the protection of intellectual property is something I will leave to people to argue about over Thanksgiving dinner. But the fact remains, protection for manufactured goods is universally derided in outlets like the New York Times, Washington Post, and The Atlantic. Protectionism in the form of patent and copyright monopolies, which is hugely more costly, is never even raised as an issue. I’m open to other explanations for this difference in treatment.

Happy Thanksgiving Everyone (hopefully by Zoom).

 

 

Like Donald Trump, Bill Gates apparently has a hard time understanding some things. The NYT had a major article on Gate’s role in developing vaccines against the coronavirus. At one point, the piece notes critics of Gates, who complain about how he has promoted patent monopoly financing of the development of vaccines and drugs, which allow these items to sell at prices that can be many thousand percent above the free market price.

The piece then presents Gates’ rejoinder:

“This capitalism thing — there actually are some domains that actually works in, …. North Korea doesn’t have that many vaccines, as far as we can tell.”

Gates apparently is not aware that the U.S. government paid for Moderna’s research and testing costs for its vaccines. While it also granted Moderna a patent monopoly on the vaccine (we can never give drug companies too much money) it is apparently possible to pay for research up front, and the patent monopolies are not necessary. This would allow for vaccines and drugs to be sold as cheap generics from the day they are approved by the FDA. It would also take away the incentive for drug companies to lie about the safety and effectiveness of their drugs, as they did in pushing opioids in the 1990s and 00s.

This would still very much be a capitalist system. The companies doing research would be making profits, just as military contractors like Lockheed make profits. They just would not be doing it through government-granted patent monopolies. It is perhaps understandable that someone who became one of the world’s richest people as a result of these monopolies (actually most copyright monopolies), may not want to envision a capitalism that uses more efficient incentive mechanisms, the rest of us should be able to think more clearly about such issues.

Like Donald Trump, Bill Gates apparently has a hard time understanding some things. The NYT had a major article on Gate’s role in developing vaccines against the coronavirus. At one point, the piece notes critics of Gates, who complain about how he has promoted patent monopoly financing of the development of vaccines and drugs, which allow these items to sell at prices that can be many thousand percent above the free market price.

The piece then presents Gates’ rejoinder:

“This capitalism thing — there actually are some domains that actually works in, …. North Korea doesn’t have that many vaccines, as far as we can tell.”

Gates apparently is not aware that the U.S. government paid for Moderna’s research and testing costs for its vaccines. While it also granted Moderna a patent monopoly on the vaccine (we can never give drug companies too much money) it is apparently possible to pay for research up front, and the patent monopolies are not necessary. This would allow for vaccines and drugs to be sold as cheap generics from the day they are approved by the FDA. It would also take away the incentive for drug companies to lie about the safety and effectiveness of their drugs, as they did in pushing opioids in the 1990s and 00s.

This would still very much be a capitalist system. The companies doing research would be making profits, just as military contractors like Lockheed make profits. They just would not be doing it through government-granted patent monopolies. It is perhaps understandable that someone who became one of the world’s richest people as a result of these monopolies (actually most copyright monopolies), may not want to envision a capitalism that uses more efficient incentive mechanisms, the rest of us should be able to think more clearly about such issues.

Margaret Sullivan, the Washington Post’s media columnist, had a good piece on how reporters can try to combat the nonsense that right-wing politicians and media sources are spewing. I would like to add one item to her list, writing big-budget numbers in ways that are meaningful to readers.

While this seems stupidly simple, for some reason reporters refuse to do it.  The point is that when readers see that we are spending $70 billion on food stamps or $15 billion on foreign aid (roughly last year’s numbers), they think that we are spending lots of money in these areas. These sums are hugely larger than what most of us will see in our lifetime. This leads people to believe that a large portion of their tax dollars are going for these purposes. (Yes, I know some people are racist and want to believe this because they hate people of color, but many people who are not racist, or at least not too racist to consider themselves liberal, also believe that a large share of their tax dollars go to these purposes.) 

Anyhow, if people were constantly told the $70 billion for food stamps is roughly 1.7 percent of the budget and the $15 billion for foreign aid is roughly 0.4 percent of the budget, it might be harder for them to believe that most of their hard-earned tax dollars were going to support these programs. That might make it a bit harder to rile up the hate for the liberal establishment, deep-state, etc.

I thought that there was going to be a change in the New York Times policy on this issue a number of years back, when Margaret Sullivan, who was then the paper’s Public Editor wrote a great piece largely making this point. She got the paper’s Washington editor at the time, David Leonhardt, to chime in, strongly agreeing on this point. To me, this was incredible news, since given the NYT’s standing as the country’s premier news outlet, if they adopted a standard of putting these big numbers in context, it is likely that other news outlets would quickly follow.

But, nothing changed at the NYT or anywhere else. I really can’t understand why. This is not a big time commitment. In the case of budget numbers, any budget reporter should have the size of the federal budget at their fingertips. It takes two seconds to do the division. (The numbers can also be expressed as per person or per household expenditures, which are also good ways to provide context.) But we still just get the really big numbers with no context.

Anyhow, if reporters are really interested in countering the nonsense thrown out by the right, writing big numbers in ways that actually provide information to their audience would be a big help. I have many other ways to improve reporting, as regular BTP readers know, but this is a very simple one that should not be controversial.

Margaret Sullivan, the Washington Post’s media columnist, had a good piece on how reporters can try to combat the nonsense that right-wing politicians and media sources are spewing. I would like to add one item to her list, writing big-budget numbers in ways that are meaningful to readers.

While this seems stupidly simple, for some reason reporters refuse to do it.  The point is that when readers see that we are spending $70 billion on food stamps or $15 billion on foreign aid (roughly last year’s numbers), they think that we are spending lots of money in these areas. These sums are hugely larger than what most of us will see in our lifetime. This leads people to believe that a large portion of their tax dollars are going for these purposes. (Yes, I know some people are racist and want to believe this because they hate people of color, but many people who are not racist, or at least not too racist to consider themselves liberal, also believe that a large share of their tax dollars go to these purposes.) 

Anyhow, if people were constantly told the $70 billion for food stamps is roughly 1.7 percent of the budget and the $15 billion for foreign aid is roughly 0.4 percent of the budget, it might be harder for them to believe that most of their hard-earned tax dollars were going to support these programs. That might make it a bit harder to rile up the hate for the liberal establishment, deep-state, etc.

I thought that there was going to be a change in the New York Times policy on this issue a number of years back, when Margaret Sullivan, who was then the paper’s Public Editor wrote a great piece largely making this point. She got the paper’s Washington editor at the time, David Leonhardt, to chime in, strongly agreeing on this point. To me, this was incredible news, since given the NYT’s standing as the country’s premier news outlet, if they adopted a standard of putting these big numbers in context, it is likely that other news outlets would quickly follow.

But, nothing changed at the NYT or anywhere else. I really can’t understand why. This is not a big time commitment. In the case of budget numbers, any budget reporter should have the size of the federal budget at their fingertips. It takes two seconds to do the division. (The numbers can also be expressed as per person or per household expenditures, which are also good ways to provide context.) But we still just get the really big numbers with no context.

Anyhow, if reporters are really interested in countering the nonsense thrown out by the right, writing big numbers in ways that actually provide information to their audience would be a big help. I have many other ways to improve reporting, as regular BTP readers know, but this is a very simple one that should not be controversial.

We know that Republican office holders are not allowed to say that Joe Biden won the election. Apparently, there is a similar ban in place for news outlets when it comes to the question of the United States collaborating with China, and other countries, in developing vaccines against the pandemic.

In recent days, there have been articles in several major news outlets about how China vaccinated close to 1 million people, under an Emergency Use Authorization, for vaccines that are currently in Phase 3 clinical testing (here, here, here, and here). While the large-scale distribution of vaccines, that have not completed testing for safety and effectiveness, is probably not a good public health practice, none of these pieces raised any questions about whether the United States and other countries, might have benefited from access to the Chinese vaccines.

It would not be reasonable to distribute Chinese vaccines here based on safety and effectiveness data that had not been thoroughly vetted by the Food and Drug Administration. But, if we had chosen to go a collaborative route in developing vaccines, we could have done our own tests, in addition to using data available from tests done by the Chinese manufacturers. 

And, the claims made in these pieces do suggest a high degree of effectiveness. For example, the CEO of Sinopharm, one of the leading vaccine manufacturers, claimed that they gave the vaccine to 81 of the 99  people in an overseas office of a major Chinese corporation. He said there was an outbreak in the office, and 10 of the 18 people who were not vaccinated became infected. None of the 81 people who were vaccinated became infected. This is of course not a carefully controlled clinical trial, and claims by the CEO of the company should be viewed with skepticism, but if anything close to this claim is true, it would suggest that we could have had an effective vaccine much sooner if we had chosen a route of international collaboration with China.

There are now many people in both political parties who want to have a new Cold War with China. There are certainly grounds to have complaints about China’s conduct, most importantly its abysmal human rights record and specifically its abuse of its Uighur population. But regardless of what we think of its government, it is not going away. 

For this reason, it makes sense to cooperate in areas of mutual benefit. Developing vaccines and treatments against the pandemic would have been an obvious example. Going forward, this applies to biomedical research more generally. It also applies to developing solar and other forms of clean energy in the effort to combat global warming. 

It is unfortunate that hostility to China, and the absurd “America First!” philosophy of the Trump administration, along with a quest for pharmaceutical industry profits, prevented this sort of collaboration on a vaccine. It would be interesting to speculate on how many lives here and elsewhere could have been saved if we adopted this approach. Unfortunately, reporters at major news outlets are not allowed to ask this sort of question.

We know that Republican office holders are not allowed to say that Joe Biden won the election. Apparently, there is a similar ban in place for news outlets when it comes to the question of the United States collaborating with China, and other countries, in developing vaccines against the pandemic.

In recent days, there have been articles in several major news outlets about how China vaccinated close to 1 million people, under an Emergency Use Authorization, for vaccines that are currently in Phase 3 clinical testing (here, here, here, and here). While the large-scale distribution of vaccines, that have not completed testing for safety and effectiveness, is probably not a good public health practice, none of these pieces raised any questions about whether the United States and other countries, might have benefited from access to the Chinese vaccines.

It would not be reasonable to distribute Chinese vaccines here based on safety and effectiveness data that had not been thoroughly vetted by the Food and Drug Administration. But, if we had chosen to go a collaborative route in developing vaccines, we could have done our own tests, in addition to using data available from tests done by the Chinese manufacturers. 

And, the claims made in these pieces do suggest a high degree of effectiveness. For example, the CEO of Sinopharm, one of the leading vaccine manufacturers, claimed that they gave the vaccine to 81 of the 99  people in an overseas office of a major Chinese corporation. He said there was an outbreak in the office, and 10 of the 18 people who were not vaccinated became infected. None of the 81 people who were vaccinated became infected. This is of course not a carefully controlled clinical trial, and claims by the CEO of the company should be viewed with skepticism, but if anything close to this claim is true, it would suggest that we could have had an effective vaccine much sooner if we had chosen a route of international collaboration with China.

There are now many people in both political parties who want to have a new Cold War with China. There are certainly grounds to have complaints about China’s conduct, most importantly its abysmal human rights record and specifically its abuse of its Uighur population. But regardless of what we think of its government, it is not going away. 

For this reason, it makes sense to cooperate in areas of mutual benefit. Developing vaccines and treatments against the pandemic would have been an obvious example. Going forward, this applies to biomedical research more generally. It also applies to developing solar and other forms of clean energy in the effort to combat global warming. 

It is unfortunate that hostility to China, and the absurd “America First!” philosophy of the Trump administration, along with a quest for pharmaceutical industry profits, prevented this sort of collaboration on a vaccine. It would be interesting to speculate on how many lives here and elsewhere could have been saved if we adopted this approach. Unfortunately, reporters at major news outlets are not allowed to ask this sort of question.

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