Beat the Press

Beat the press por Dean Baker

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.

China Has Hugely Outgrown the U.S. Under Trump

This is one in the “whose is bigger?” category; which country has added the most to their GDP over the last three years. There is not any particular reason anyone should care about this, except that Donald Trump has made a big point of touting something about how no one says China will soon be the world’s largest economy anymore.

In fact, China’s economy surpassed the U.S. economy in 2015, using the purchasing power parity measure of GDP. This measure, in principle, uses a common set of prices for all goods and services for all countries’ output. Most economists consider it the best measure of the size of a country’s economy for most purposes.

China has continued to grow much faster the United States, meaning the gap between the economies is growing. China’s economy is currently more than 25 percent larger than the U.S. economy.

The graph below shows the growth in the two countries’ economies since 2016.

Book1 17334 image001

Source: International Monetary Fund.

As can be seen, China’s growth has been more than twice as large as the growth in the United States since Donald Trump came into the White House. In other words, we should put Donald Trump’s claim that his policies have somehow secured the United States’ status as the world’s leading economy alongside his copy of President Obama’s Kenyan birth certificate.

This is one in the “whose is bigger?” category; which country has added the most to their GDP over the last three years. There is not any particular reason anyone should care about this, except that Donald Trump has made a big point of touting something about how no one says China will soon be the world’s largest economy anymore.

In fact, China’s economy surpassed the U.S. economy in 2015, using the purchasing power parity measure of GDP. This measure, in principle, uses a common set of prices for all goods and services for all countries’ output. Most economists consider it the best measure of the size of a country’s economy for most purposes.

China has continued to grow much faster the United States, meaning the gap between the economies is growing. China’s economy is currently more than 25 percent larger than the U.S. economy.

The graph below shows the growth in the two countries’ economies since 2016.

Book1 17334 image001

Source: International Monetary Fund.

As can be seen, China’s growth has been more than twice as large as the growth in the United States since Donald Trump came into the White House. In other words, we should put Donald Trump’s claim that his policies have somehow secured the United States’ status as the world’s leading economy alongside his copy of President Obama’s Kenyan birth certificate.

Is the Local Hardware Store Dying?

I have a lot of respect for Tim Wu, who has done much valuable work on concentration in the tech sector. However, when I saw his NYT piece on the death of the local hardware store I was somewhat skeptical. Most immediately, my experience with my thriving local hardware store (which gives great service, if any readers make it to Kanab) is 180 degrees at odds with his experience with his local hardware story in New York City.

So, I thought I would check the data. According to the Bureau of Labor Statistics, employment in the hardware store category (which is distinct from “home centers,” presumably stores like Lowes and Home Depot) increased from 143,600 in September of 2009 to 159,400 in September, 2019. This is an increase of 11.0 percent. That is somewhat less than the 16.6 percent overall job growth over this period, but hardly makes it appear like hardware stores are dying.

Long and short, it looks like the factors that led to the closing of the hardware store Wu patronizes are largely unique to New York City and don’t reflect the picture throughout the country.

I have a lot of respect for Tim Wu, who has done much valuable work on concentration in the tech sector. However, when I saw his NYT piece on the death of the local hardware store I was somewhat skeptical. Most immediately, my experience with my thriving local hardware store (which gives great service, if any readers make it to Kanab) is 180 degrees at odds with his experience with his local hardware story in New York City.

So, I thought I would check the data. According to the Bureau of Labor Statistics, employment in the hardware store category (which is distinct from “home centers,” presumably stores like Lowes and Home Depot) increased from 143,600 in September of 2009 to 159,400 in September, 2019. This is an increase of 11.0 percent. That is somewhat less than the 16.6 percent overall job growth over this period, but hardly makes it appear like hardware stores are dying.

Long and short, it looks like the factors that led to the closing of the hardware store Wu patronizes are largely unique to New York City and don’t reflect the picture throughout the country.

Should We Have Billionaires?

(This post originally appeared on my Patreon page.)

The Democratic presidential campaign has taken a strange twist in recent days, with candidates being asked whether we should have billionaires. While there may be some grand philosophical questions at stake here, I will stick to more mundane economic ones. The real question is; how do you want the economy to work?

The basic story is that if we have a market economy, some people can get very rich. If we buy the right-wing story, the super-rich got their money from their great contribution to society. If we look at it with clearer eyes, the super-rich got their money because we structured the economy in a way that allowed them to get super-rich.

This is a point which seems very obvious, but for some reason is largely ignored in policy debates. Most typically these debates take the market distribution of income as a given, and then ask the extent to which we might want to redistribute to have less inequality. The right of course wants little if any redistribution, while people on the center and left argue for varying degrees of distribution.

But it is completely absurd to treat the market distribution of income as given. The market is incredibly flexible and it can literally be structured in an infinite number of different ways. (Yeah, I know I make this point all the time, but I can’t help repeating myself.)

My favorite here is patent and copyright monopolies, both because it should be obvious that these features are structured by the government, and there is an enormous amount of money at stake. Patents and related protections raise the price of prescription drugs alone by close to $400 billion a year over the free market price, or 1.8 percent of GDP. If we add in the impact of patents and copyrights on medical equipment, software, movies, fertilizers and pesticides, and other areas, the cost could easily exceed $1 trillion annually or close to 5.0 percent of GDP.

Many of the country’s billionaires, starting with Bill Gates, owe their vast fortunes to these government-granted monopolies. As I, and others, have argued these can be extremely inefficient mechanisms for supporting innovation and creative work. Not only are they redistributing income upward, they also slow economic growth, and in the case of prescription drugs and medical equipment, impair people’s ability to get health care.

The industry with the largest share of the super-rich is finance. There are many ways this sector can be organized differently in ways that are likely to be both more efficient and produce fewer huge fortunes.

One of the ways people get very wealthy is finance is by buying or selling stocks or commodities a short time ahead of the market, thereby pocketing large profits. It’s pretty hard to see the contribution to society in this story.

Their actions mean, for example, that GE’s stock price may adjust to new information about its profits five or ten minutes earlier than might otherwise have been the case. The benefit to the economy from this faster adjustment is essentially zero. These high rollers’ profits come at the expense of ordinary traders who are less informed.

As I have argued frequently, a modest financial transactions tax would have a huge impact on this sort of trading. It would have the effect of eliminating a large amount of trading that serves no economic purpose.

When talking about the financial industry, Michael Bloomberg deserves special mention. In addition to ranking among the top ten billionaires, with more than $50 billion in assets, he now seems poised to enter the race for the Democratic nomination.

Bloomberg’s great genius was to develop an important service for large traders. It provided them with terminals that give them information relevant to the economy and particular stocks and commodities faster than anyone else. This allows them to profit at the expense of less well-informed investors. If society is better-off from this innovation, it is hard to see how.

Other financial industry billionaires got their money through private equity (PE) funds, whose main advantage seems to be carrying through activities that publicly traded companies would be too embarrassed to do. Their latest cash cow is surprise medical billing, where a variety of businesses owned by PE funds interject themselves into the medical process and hand patients huge bills. 

It is not hard to envision structuring the financial industry in a way that didn’t provide much room for PE. It’s not obvious that we would risk much, if any, loss of efficiency from having a considerably smaller PE industry.

Beyond finance, we find many billionaires in the tech sector. These are people who would be considerably poorer with shorter and weaker patent and copyright enforcement. There is virtually no public debate on the shape of these government-granted monopolies, even though the amount of money at stake each year dwarfs spending on any government program, even Social Security.

Apart from the fact that a different structure of intellectual property rules could substantially reduce their income, they are other issues with our tech billionaires. Some, like Bill Gates, would have much less money if anti-trust laws were still enforced. Mark Zuckerberg would have much less money if Facebook were subject to the same libel laws as print and broadcast media.

The Walton family collectively has close to $200 billion in assets. They would have considerably less if minimum wage laws had kept pace with productivity growth, as had been the case from 1937, when the first federal minimum wage law was passed, until 1968. The Waltons would also have considerably less wealth if the Federal Reserve Board had done a better job of keeping the economy close to full employment so that workers had more bargaining power.

Many of the super-rich would have less money if labor laws had not been turned so much against workers beginning in the 1980s. Canada, which is not all that different in its economy and culture than the United States, has seen relatively little fall in unionization rates over this period. In the U.S. the private sector unionization rate fell from roughly 20 percent at the end of the seventies to less than 7.0 percent today.

We can go down the list and find major policy failings that allowed many, if not most, of the billionaires to make their billions. While these billionaires may all have been smart and hard-working, what allowed them to get such vast fortunes was a failure of public policy to organize the market efficiently. (This is essentially the point I make in Rigged [it’s free], and just about everything else I write.)

But, there are some cases that more or less fit the billionaire as great innovator story. While many of us have complaints about how Steve Jobs ran his business (e.g., exploitative labor practices in China and anti-poaching agreements with competitors for workers in the US), he did produce products that people really wanted to buy. People really like iPhones, so in that sense, Jobs did contribute to making society better-off.

While it is easy to identify many of the failures that have allowed for extreme wealth, there is still the question of whether a Steve Jobs-type may still get incredibly rich in a context where we have structured the economy efficiently rather than to redistribute income upward. In my view, it is certainly a possibility and not one that we need to spend a lot of time worrying about.

There is no doubt that we want progressive taxation, but this does have its limits. A very high tax rate is an invitation to avoidance and evasion. If we have a 90 percent marginal tax rate, we are effectively paying rich people 90 cents to hide a dollar of income. Or, to make the numbers more realistic, we are paying them $90 million to hide $100 million of income.

That is virtually guaranteed to get us a huge tax avoidance industry. That is a complete waste from an economic standpoint.

The point of taxation is to reduce consumption, thereby freeing resources for public uses, like health care and education. The super-rich spend a relatively small share of their income, which means that increasing taxes by $1 billion on the super-rich creates less room for government spending than increasing taxes on middle class people by $1 billion. (This is the flip side of the argument that if we want to boost demand in the economy we should give tax cuts to the poor and middle class, rather than the rich. If you believe this argument, then you have to believe that taxing the super-rich has less impact in reducing consumption.)

This makes the tax avoidance/evasion story very bad, since the impact of higher taxes on the consumption of the super-rich will be limited. On the other hand, the money they spend hiring tax lawyers, accountants, and others engaged in hiding their income involves a real use of resources. That means we may actually be increasing demand in the economy with very high tax rates on the rich.

Also, insofar as the rich succeed, it undermines respect for the income tax more generally. That is a bad story since we still count to a substantial extent on voluntary compliance.

I realize that proponents of much higher taxes on the rich want to ramp up I.R.S. enforcement. This is a good thing in any case, but this is yet a further use of resources. And, while plenty of very competent people work at the I.R.S., I question the extent they will be successful going after billionaires who are spending $90 million to hide $100 million of income. There is no way the I.R.S. can commit anywhere near as much resources to fighting avoidance/evasion as the rich will spend pursuing this route. For these reasons, there is a limit to how high we should make our tax rates.

There is the argument that the rich are able to use their wealth to buy political power. This is a real concern, but it is unlikely to be addressed by the various progressive taxes currently on the table. Even people with hundreds of millions can use their wealth to exercise inordinate political power.

Rather than focusing on trying to prevent the super-rich from influencing public opinion (the issue goes way beyond campaign contributions, it is also owning media outlets, think tanks, and funding university programs), a more practical focus would be to ensure that the rest of us can have a voice. This would mean some sort of individual tax credit (e.g., $200 per person) to be used to support the newspaper, think tank, or whatever form of expression, intellectual, or political work the person wants.

A version of this is already in place in Seattle where they give every voter a voucher for $75 to support the local candidate(s) of their choice. It would be great to see this sort of system expanded and implemented on a national scale, but state and local governments are a great place to start.

That won’t guarantee that there will be enough money to support whatever venture some of us might like, but it will ensure that the non-rich collectively have plenty of money to support progressive politics. Our energies are likely to be better spent ensuring that the non-rich have an effective voice than playing a whack-a-mole game to limit the voice of the super-rich.

Long and short, I have no opinion on whether there should be billionaires. My opinion is that we have more important things to worry about.  

(This post originally appeared on my Patreon page.)

The Democratic presidential campaign has taken a strange twist in recent days, with candidates being asked whether we should have billionaires. While there may be some grand philosophical questions at stake here, I will stick to more mundane economic ones. The real question is; how do you want the economy to work?

The basic story is that if we have a market economy, some people can get very rich. If we buy the right-wing story, the super-rich got their money from their great contribution to society. If we look at it with clearer eyes, the super-rich got their money because we structured the economy in a way that allowed them to get super-rich.

This is a point which seems very obvious, but for some reason is largely ignored in policy debates. Most typically these debates take the market distribution of income as a given, and then ask the extent to which we might want to redistribute to have less inequality. The right of course wants little if any redistribution, while people on the center and left argue for varying degrees of distribution.

But it is completely absurd to treat the market distribution of income as given. The market is incredibly flexible and it can literally be structured in an infinite number of different ways. (Yeah, I know I make this point all the time, but I can’t help repeating myself.)

My favorite here is patent and copyright monopolies, both because it should be obvious that these features are structured by the government, and there is an enormous amount of money at stake. Patents and related protections raise the price of prescription drugs alone by close to $400 billion a year over the free market price, or 1.8 percent of GDP. If we add in the impact of patents and copyrights on medical equipment, software, movies, fertilizers and pesticides, and other areas, the cost could easily exceed $1 trillion annually or close to 5.0 percent of GDP.

Many of the country’s billionaires, starting with Bill Gates, owe their vast fortunes to these government-granted monopolies. As I, and others, have argued these can be extremely inefficient mechanisms for supporting innovation and creative work. Not only are they redistributing income upward, they also slow economic growth, and in the case of prescription drugs and medical equipment, impair people’s ability to get health care.

The industry with the largest share of the super-rich is finance. There are many ways this sector can be organized differently in ways that are likely to be both more efficient and produce fewer huge fortunes.

One of the ways people get very wealthy is finance is by buying or selling stocks or commodities a short time ahead of the market, thereby pocketing large profits. It’s pretty hard to see the contribution to society in this story.

Their actions mean, for example, that GE’s stock price may adjust to new information about its profits five or ten minutes earlier than might otherwise have been the case. The benefit to the economy from this faster adjustment is essentially zero. These high rollers’ profits come at the expense of ordinary traders who are less informed.

As I have argued frequently, a modest financial transactions tax would have a huge impact on this sort of trading. It would have the effect of eliminating a large amount of trading that serves no economic purpose.

When talking about the financial industry, Michael Bloomberg deserves special mention. In addition to ranking among the top ten billionaires, with more than $50 billion in assets, he now seems poised to enter the race for the Democratic nomination.

Bloomberg’s great genius was to develop an important service for large traders. It provided them with terminals that give them information relevant to the economy and particular stocks and commodities faster than anyone else. This allows them to profit at the expense of less well-informed investors. If society is better-off from this innovation, it is hard to see how.

Other financial industry billionaires got their money through private equity (PE) funds, whose main advantage seems to be carrying through activities that publicly traded companies would be too embarrassed to do. Their latest cash cow is surprise medical billing, where a variety of businesses owned by PE funds interject themselves into the medical process and hand patients huge bills. 

It is not hard to envision structuring the financial industry in a way that didn’t provide much room for PE. It’s not obvious that we would risk much, if any, loss of efficiency from having a considerably smaller PE industry.

Beyond finance, we find many billionaires in the tech sector. These are people who would be considerably poorer with shorter and weaker patent and copyright enforcement. There is virtually no public debate on the shape of these government-granted monopolies, even though the amount of money at stake each year dwarfs spending on any government program, even Social Security.

Apart from the fact that a different structure of intellectual property rules could substantially reduce their income, they are other issues with our tech billionaires. Some, like Bill Gates, would have much less money if anti-trust laws were still enforced. Mark Zuckerberg would have much less money if Facebook were subject to the same libel laws as print and broadcast media.

The Walton family collectively has close to $200 billion in assets. They would have considerably less if minimum wage laws had kept pace with productivity growth, as had been the case from 1937, when the first federal minimum wage law was passed, until 1968. The Waltons would also have considerably less wealth if the Federal Reserve Board had done a better job of keeping the economy close to full employment so that workers had more bargaining power.

Many of the super-rich would have less money if labor laws had not been turned so much against workers beginning in the 1980s. Canada, which is not all that different in its economy and culture than the United States, has seen relatively little fall in unionization rates over this period. In the U.S. the private sector unionization rate fell from roughly 20 percent at the end of the seventies to less than 7.0 percent today.

We can go down the list and find major policy failings that allowed many, if not most, of the billionaires to make their billions. While these billionaires may all have been smart and hard-working, what allowed them to get such vast fortunes was a failure of public policy to organize the market efficiently. (This is essentially the point I make in Rigged [it’s free], and just about everything else I write.)

But, there are some cases that more or less fit the billionaire as great innovator story. While many of us have complaints about how Steve Jobs ran his business (e.g., exploitative labor practices in China and anti-poaching agreements with competitors for workers in the US), he did produce products that people really wanted to buy. People really like iPhones, so in that sense, Jobs did contribute to making society better-off.

While it is easy to identify many of the failures that have allowed for extreme wealth, there is still the question of whether a Steve Jobs-type may still get incredibly rich in a context where we have structured the economy efficiently rather than to redistribute income upward. In my view, it is certainly a possibility and not one that we need to spend a lot of time worrying about.

There is no doubt that we want progressive taxation, but this does have its limits. A very high tax rate is an invitation to avoidance and evasion. If we have a 90 percent marginal tax rate, we are effectively paying rich people 90 cents to hide a dollar of income. Or, to make the numbers more realistic, we are paying them $90 million to hide $100 million of income.

That is virtually guaranteed to get us a huge tax avoidance industry. That is a complete waste from an economic standpoint.

The point of taxation is to reduce consumption, thereby freeing resources for public uses, like health care and education. The super-rich spend a relatively small share of their income, which means that increasing taxes by $1 billion on the super-rich creates less room for government spending than increasing taxes on middle class people by $1 billion. (This is the flip side of the argument that if we want to boost demand in the economy we should give tax cuts to the poor and middle class, rather than the rich. If you believe this argument, then you have to believe that taxing the super-rich has less impact in reducing consumption.)

This makes the tax avoidance/evasion story very bad, since the impact of higher taxes on the consumption of the super-rich will be limited. On the other hand, the money they spend hiring tax lawyers, accountants, and others engaged in hiding their income involves a real use of resources. That means we may actually be increasing demand in the economy with very high tax rates on the rich.

Also, insofar as the rich succeed, it undermines respect for the income tax more generally. That is a bad story since we still count to a substantial extent on voluntary compliance.

I realize that proponents of much higher taxes on the rich want to ramp up I.R.S. enforcement. This is a good thing in any case, but this is yet a further use of resources. And, while plenty of very competent people work at the I.R.S., I question the extent they will be successful going after billionaires who are spending $90 million to hide $100 million of income. There is no way the I.R.S. can commit anywhere near as much resources to fighting avoidance/evasion as the rich will spend pursuing this route. For these reasons, there is a limit to how high we should make our tax rates.

There is the argument that the rich are able to use their wealth to buy political power. This is a real concern, but it is unlikely to be addressed by the various progressive taxes currently on the table. Even people with hundreds of millions can use their wealth to exercise inordinate political power.

Rather than focusing on trying to prevent the super-rich from influencing public opinion (the issue goes way beyond campaign contributions, it is also owning media outlets, think tanks, and funding university programs), a more practical focus would be to ensure that the rest of us can have a voice. This would mean some sort of individual tax credit (e.g., $200 per person) to be used to support the newspaper, think tank, or whatever form of expression, intellectual, or political work the person wants.

A version of this is already in place in Seattle where they give every voter a voucher for $75 to support the local candidate(s) of their choice. It would be great to see this sort of system expanded and implemented on a national scale, but state and local governments are a great place to start.

That won’t guarantee that there will be enough money to support whatever venture some of us might like, but it will ensure that the non-rich collectively have plenty of money to support progressive politics. Our energies are likely to be better spent ensuring that the non-rich have an effective voice than playing a whack-a-mole game to limit the voice of the super-rich.

Long and short, I have no opinion on whether there should be billionaires. My opinion is that we have more important things to worry about.  

This was in the context of the tariffs he has imposed on imports from China. According to the Washington Post, Trump boasted:

“I like what’s happening right now. We’re taking in billions and billions of dollars.”

Tariffs, of course, are taxes on imports. The evidence is overwhelming that the vast majority of these taxes are being borne either by consumers or retailers in the United States. According to the Bureau of Labor Statistics, the price of imports from China has fallen just 1.6 percent over the last year. This means that people in the United States are paying the overwhelming majority of the tariffs that run as high as 25 percent and apparently Donald Trump is very happy about that. 

This was in the context of the tariffs he has imposed on imports from China. According to the Washington Post, Trump boasted:

“I like what’s happening right now. We’re taking in billions and billions of dollars.”

Tariffs, of course, are taxes on imports. The evidence is overwhelming that the vast majority of these taxes are being borne either by consumers or retailers in the United States. According to the Bureau of Labor Statistics, the price of imports from China has fallen just 1.6 percent over the last year. This means that people in the United States are paying the overwhelming majority of the tariffs that run as high as 25 percent and apparently Donald Trump is very happy about that. 

Donald Trump Brings Ukraine Scandal Home in Texas

Donald Trump went to Texas yesterday to take credit for the opening of an Apple plant that had been open for five years and is not actually an Apple plant. (It is a supplier than produces parts for Apple products.) While there, he indicated that he may exempt Apple products imported from China from the 25 percent tariffs he has imposed on Chinese imports more generally.

While the prospect of a seemingly politically motivated waiver did get some attention, it deserves much more. There are real economic arguments against tariffs. They unambiguously raise the cost of items subject to the tariff. Such costs have to be measured against the potential benefits, both as a weapon in a trade war and potentially as part of an economic development strategy.

However, one unambiguous negative of tariffs is the opportunity to exploit exemptions for political or personal advantage. (Tariffs generally allow exemptions, usually for items that cannot be obtained elsewhere.) It appears that this is exactly what Trump was doing with his trip to Texas.

Obviously Trump valued the photo-op, where he could boast about his economic accomplishments. If this can buy Apple an exemption from China’s tariffs it sends a powerful message to other companies about the benefits of showing support for Trump.

This use of government power to advance his political agenda is exactly what Trump did with respect to aid to Ukraine. This sort of abuse is a hugely important issue. As a practical matter, there are far more companies looking for exemptions from tariffs than there are countries in desperate need of aid from the United States.

Donald Trump went to Texas yesterday to take credit for the opening of an Apple plant that had been open for five years and is not actually an Apple plant. (It is a supplier than produces parts for Apple products.) While there, he indicated that he may exempt Apple products imported from China from the 25 percent tariffs he has imposed on Chinese imports more generally.

While the prospect of a seemingly politically motivated waiver did get some attention, it deserves much more. There are real economic arguments against tariffs. They unambiguously raise the cost of items subject to the tariff. Such costs have to be measured against the potential benefits, both as a weapon in a trade war and potentially as part of an economic development strategy.

However, one unambiguous negative of tariffs is the opportunity to exploit exemptions for political or personal advantage. (Tariffs generally allow exemptions, usually for items that cannot be obtained elsewhere.) It appears that this is exactly what Trump was doing with his trip to Texas.

Obviously Trump valued the photo-op, where he could boast about his economic accomplishments. If this can buy Apple an exemption from China’s tariffs it sends a powerful message to other companies about the benefits of showing support for Trump.

This use of government power to advance his political agenda is exactly what Trump did with respect to aid to Ukraine. This sort of abuse is a hugely important issue. As a practical matter, there are far more companies looking for exemptions from tariffs than there are countries in desperate need of aid from the United States.

I’m not kidding, this is what the piece said. The article was about talks by current prime minister and Conservative Party candidate Boris Johnson and Labour Party leader Jeremy Corbin before the United Kingdom’s biggest business group.

The piece told readers:

“In Mr. Johnson’s speech on Monday, he promised a package of tax cuts designed to entice businesses to support his party but said a further cut to the corporation tax would be postponed. Money designated to finance that tax cut would instead be directed to the National Health Service, he said.

“‘Before you storm the stage and protest,’ Mr. Johnson said, ‘let me remind you this saves 6 million pounds that we can put into the priorities of the British people.'”

Since readers may not be immediately familiar with the importance of this 6 million pounds to people in the UK, it would have been helpful to put in a context that makes it understandable. Since a pound is worth roughly $1.25, this money would be equivalent to $7.5 million. The U.K. has a bit less than 70 million people, which means that Johnson is referring to a sum that comes to a bit more than 10 cents per person in the U.K.

The piece also refers to plans by Corbyn to nationalize the railroads and various utilities. It would have been helpful to point out that most of these businesses had previously been owned by the government. They were privatized under Margaret Thatcher.

I’m not kidding, this is what the piece said. The article was about talks by current prime minister and Conservative Party candidate Boris Johnson and Labour Party leader Jeremy Corbin before the United Kingdom’s biggest business group.

The piece told readers:

“In Mr. Johnson’s speech on Monday, he promised a package of tax cuts designed to entice businesses to support his party but said a further cut to the corporation tax would be postponed. Money designated to finance that tax cut would instead be directed to the National Health Service, he said.

“‘Before you storm the stage and protest,’ Mr. Johnson said, ‘let me remind you this saves 6 million pounds that we can put into the priorities of the British people.'”

Since readers may not be immediately familiar with the importance of this 6 million pounds to people in the UK, it would have been helpful to put in a context that makes it understandable. Since a pound is worth roughly $1.25, this money would be equivalent to $7.5 million. The U.K. has a bit less than 70 million people, which means that Johnson is referring to a sum that comes to a bit more than 10 cents per person in the U.K.

The piece also refers to plans by Corbyn to nationalize the railroads and various utilities. It would have been helpful to point out that most of these businesses had previously been owned by the government. They were privatized under Margaret Thatcher.

The Wall Street Journal had a piece last week that purported to explain why wage growth remains weak. The explanation is that people are more reluctant to switch jobs than they had been in the past.

While this is a concern (I have often noted the surprisingly low quit rate, given an unemployment rate of less than 4.0 percent), real wage growth is roughly where we might expect given the extraordinarily low productivity growth of recent years. The real average hourly wage has risen a bit more than 1.1 percent annually over the last five years. This is a period in which economy-wide productivity growth has been around 0.7 percent annually. (Economy-wide productivity is an unpublished series that the Bureau of Labor Statistics produces annually. It is the appropriate basis for comparison with economy-wide wage growth.)

It would be good to see a somewhat larger gap between wage growth and productivity, given how much ground workers lost in the Great Recession, but this pace of real wage seems pretty reasonable give the slow rate of productivity growth. The extraordinarily weak productivity growth of recent years is striking, but that is another story. It also is completely opposite the concern raised by Andrew Yang, of mass job displacement due to extraordinarily rapid productivity growth.

The Wall Street Journal had a piece last week that purported to explain why wage growth remains weak. The explanation is that people are more reluctant to switch jobs than they had been in the past.

While this is a concern (I have often noted the surprisingly low quit rate, given an unemployment rate of less than 4.0 percent), real wage growth is roughly where we might expect given the extraordinarily low productivity growth of recent years. The real average hourly wage has risen a bit more than 1.1 percent annually over the last five years. This is a period in which economy-wide productivity growth has been around 0.7 percent annually. (Economy-wide productivity is an unpublished series that the Bureau of Labor Statistics produces annually. It is the appropriate basis for comparison with economy-wide wage growth.)

It would be good to see a somewhat larger gap between wage growth and productivity, given how much ground workers lost in the Great Recession, but this pace of real wage seems pretty reasonable give the slow rate of productivity growth. The extraordinarily weak productivity growth of recent years is striking, but that is another story. It also is completely opposite the concern raised by Andrew Yang, of mass job displacement due to extraordinarily rapid productivity growth.

Margot Sanger-Katz has a very useful Upshot piece on Elizabeth Warren’s transition plan for Medicare for All, highlighting steps that the president can take unilaterally. The piece mentioned that one of these proposals is to take advantage of current law, which allows the government to effectively end patent monopolies on drugs that it helped to develop.

This is a really huge deal since the vast majority of drugs do include a government research component. Ending a patent monopoly will typically reduce the price of a drug by 90 percent or more. Drugs are almost invariably cheap to manufacture and distribute. Without government-granted patent monopolies, paying for prescription drugs would no longer be a major problem.

If the government were to go this route on a large scale, it would undoubtedly lead to a drop in research funded by the industry. Warren has proposed some additional public funding to make up a shortfall, although we are likely to need more than she has suggested.

However, a great advantage of publicly funded research is that it could all be fully open so that other researchers and clinicians would be able to benefit from it. Also, we would end the incentive to misrepresent the safety and effectiveness of drugs, substantially reducing the risk of another opioid-type crisis.

 

Margot Sanger-Katz has a very useful Upshot piece on Elizabeth Warren’s transition plan for Medicare for All, highlighting steps that the president can take unilaterally. The piece mentioned that one of these proposals is to take advantage of current law, which allows the government to effectively end patent monopolies on drugs that it helped to develop.

This is a really huge deal since the vast majority of drugs do include a government research component. Ending a patent monopoly will typically reduce the price of a drug by 90 percent or more. Drugs are almost invariably cheap to manufacture and distribute. Without government-granted patent monopolies, paying for prescription drugs would no longer be a major problem.

If the government were to go this route on a large scale, it would undoubtedly lead to a drop in research funded by the industry. Warren has proposed some additional public funding to make up a shortfall, although we are likely to need more than she has suggested.

However, a great advantage of publicly funded research is that it could all be fully open so that other researchers and clinicians would be able to benefit from it. Also, we would end the incentive to misrepresent the safety and effectiveness of drugs, substantially reducing the risk of another opioid-type crisis.

 

Making Andrew Yang Smarter

The New York Times ran a column by Andrew Yang, one of the candidates for the Democratic presidential nomination. Mr. Yang used the piece to repeat his claim that automation is leading to massive job loss.

His one piece of evidence is a study that purports to find that 88 percent of job loss between 2000 and 2010 was due to automation. As I and others have pointed out, it is difficult to take this claim seriously. This was a period in which the trade deficit exploded from 3.0 percent of GDP to almost 6.0 percent of GDP. This would seem to be the more obvious source of job loss.

It is also worth noting that we lost very few manufacturing jobs between 1970 and 2000. Since 2010 we gained a small number of manufacturing jobs. So anyone wanting to push the automation job loss story has to believe that for some reason automation didn’t cause substantial job loss from 1970 and 2000 and then stopped causing job loss in 2010.

I suppose Andrew Yang can believe something like this, but I don’t know too many other people who could consider this story credible.

We do have a measure of the rate at which automation costs jobs, it’s called “productivity growth.” Contrary to what Yang claims, productivity growth has been unusually slow the last fourteen years. (A slowdown began in after 2005.) It actually fell slightly in the last quarter. (The quarterly data are highly erratic, so the decline is most likely a measurement fluke.)

Yang goes on to use his piece to present data showing the bad economic condition of much of the U.S. workforce. He is certainly right that most workers have not been doing well for the last four decades. (Contrary to what Yang seems to believe, wage stagnation is not a new story.) However, there is no evidence to support his claim that automation is the main factor behind stagnating incomes for most workers.

The New York Times ran a column by Andrew Yang, one of the candidates for the Democratic presidential nomination. Mr. Yang used the piece to repeat his claim that automation is leading to massive job loss.

His one piece of evidence is a study that purports to find that 88 percent of job loss between 2000 and 2010 was due to automation. As I and others have pointed out, it is difficult to take this claim seriously. This was a period in which the trade deficit exploded from 3.0 percent of GDP to almost 6.0 percent of GDP. This would seem to be the more obvious source of job loss.

It is also worth noting that we lost very few manufacturing jobs between 1970 and 2000. Since 2010 we gained a small number of manufacturing jobs. So anyone wanting to push the automation job loss story has to believe that for some reason automation didn’t cause substantial job loss from 1970 and 2000 and then stopped causing job loss in 2010.

I suppose Andrew Yang can believe something like this, but I don’t know too many other people who could consider this story credible.

We do have a measure of the rate at which automation costs jobs, it’s called “productivity growth.” Contrary to what Yang claims, productivity growth has been unusually slow the last fourteen years. (A slowdown began in after 2005.) It actually fell slightly in the last quarter. (The quarterly data are highly erratic, so the decline is most likely a measurement fluke.)

Yang goes on to use his piece to present data showing the bad economic condition of much of the U.S. workforce. He is certainly right that most workers have not been doing well for the last four decades. (Contrary to what Yang seems to believe, wage stagnation is not a new story.) However, there is no evidence to support his claim that automation is the main factor behind stagnating incomes for most workers.

Impeachment Is a Kitchen Table Issue

(This post originally appeared on my Patreon page.)

As the Democrats have pushed ahead with impeachment proceedings, there have been criticisms from both the right and left that impeachment is a needless distraction from the pocketbook issues that people really care about. The argument is that people will see the Democrats as playing political games rather than focusing on health care, jobs, wages, and other issues that directly affect people’s lives.

This sort of argument ignores the world we now live in. First, we have to be clear about the Republican agenda. To put it simply, it is to give all the money to rich people.

This means that not only that they don’t want rich people to pay taxes, the rich also get to cheat workers out of their pay, pollute drinking water, destroy the planet, and do anything else to ordinary people and the environment that might boost their income. Republicans and their allies also design patent and copyright monopolies to give even more money to the rich (both here and overseas) and they structure the digital economy in ways that deny ordinary people any privacy.

It’s true that some Democrats also seem to share much of this agenda, but that’s beside the point. If the Republicans can control the White House and Congress, this is what they will do.

So, is impeachment a distraction from fighting this disastrous agenda? Not at all, impeachment is a necessary step in trying to stop it.

In case people somehow have missed it, Republicans do not care at all about democracy or the rule of law. They will do anything and everything they can get away with to keep power. We see this again and again.

To take one prominent example, Republicans wanted to include a question on citizenship on the Census to discourage immigrants from answering. The explicit purpose was to reduce political representation in areas with large immigrant populations. The Supreme Court ultimately blocked this effort because the Trump administration could not find a plausible reason to include this question, other than to discriminate against immigrants.

Just last week, the Republican leader of Kentucky’s state senate suggested reversing the results of the state’s gubernatorial election (which the Democrat won), based on his assessment that a third party candidate had pulled away enough votes from the Republican to cost him the election. While he seems to have backed away from this position in response to mass public outcry, the fact that he could seriously consider completely ignoring the results of an election shows the lack of respect that Republicans have for democracy and the rule of law.

The Ukraine affair has to be understood in this context. Trump is quite openly using the State Department, the Justice Department, and most likely other branches of government to directly advance his personal and political interests.

The issue has nothing to do with what one thinks of Joe Biden. Trump invented a scandal out of thin air and had the State Department apply pressure on Ukraine to pretend it was real.

If that sounds far-fetched, remember, this is a guy who ran around the country for five years insisting that Barack Obama was born in Kenya. And, he has never apologized for that or any other racist idiocy.

If Trump’s actions are allowed to go unchecked, we can take it for granted that he will continue to use the power of the government against his political opponents. If Warren gets the nomination, expect to see IRS investigations of her consulting work and the Justice Department examining charges that she was an affirmative action hire at Harvard based on her Native American ancestry.

If Sanders gets the nomination, don’t be surprised to see the IRS and Justice Department investigating Jane Sanders’ dealings at Burlington College, which went bankrupt several years after her presidency. Look for ominous news stories about money paid to “the Sanders,” as though Bernie and his wife were a single person.

This use of government power will also extend to supporters of candidates. Those who are in the forefront of the campaign to unseat him can expect I.R.S. audits and Justice Department investigations of real or imagined infractions.

Trump has made it clear that he will use the power of the government against news outlets that don’t give him positive coverage. He interfered with a Pentagon contract that likely would have gone to Amazon because he didn’t like the Washington Post’s coverage of him. Jeff Bezos is the owner of the Washington Post as well as being the CEO and largest stockholder in Amazon.

Trump also ordered all government agencies to cancel their subscriptions to the New York Times and Washington Post. Again, the issue is that he doesn’t like their coverage.

Suppose Trump ordered I.R.S. audits of the leading shareholders of every major news outlet. Jim Jordon, Lindsey Graham, and the rest can be counted on to angrily insist that President Trump is doing his job in cracking down on tax fraud. When this happens, we can expect many newspapers and television stations will begin to sound more like Fox News.

Trump has made it absolutely as clear as he can that he intends to use the full power of the government to advance his re-election campaign. If anyone thinks that their favored candidate will be able to overcome this sort of corruption and defeat Trump anyhow, they are seriously out of touch with reality. If any Democrat is going to have a shot at defeating Trump in 2020, the Democrats will have to rein in his abuses of power.

It is certainly true that people are much more concerned about their pocketbook than the rule of law, but that is a problem that has to be confronted by Democrats or anyone concerned about democracy. If Trump gets to cheat as much as he wants, we can just skip the election since it will be a waste of everyone’s time.

We can take it for granted that the Republican-controlled Senate will not remove Trump. As Trump has said, he can shoot someone on Fifth Avenue in broad daylight and his supporters will still be with him.

Nonetheless, holding up Trump’s crimes in the full light of day will put some check on his abuses. We already saw this when he was forced to abandon his plans to give himself millions of dollars by holding the G-7 summit at his Doral Resort. Clearly Republicans pressured Trump to not so visibly use the federal Treasury as a personal piggy bank. An open airing of Trump’s corruption in an impeachment trial is likely to force Trump to at least nominally follow the law through the remainder of his term in office.

The Democrats have been fortunate to have career civil servants who have been willing to risk their careers, if not their lives, by calling attention to Trump’s abuses of power. If the Democrats don’t take advantage of these people’s courage, it is a safe bet that no one else will come forward in the future, and Trump will have a free hand to ignore the law as much as he wants.

Some on the left have been bothered by the fact that many of the people coming forward seem to be motivated in part by the desire to have a more aggressive foreign policy towards Russia. That is likely true, but also completely beside the point.

In politics we find few people with entirely pure motives. The people who are coming forward in the Ukraine case are reporting a very real and extreme abuse of presidential power. If the idea is that this is all a grand conspiracy, the world doesn’t have enough tin foil to make the necessary hats.

Did the conspirators doctor the pseudo-transcript Trump released of his call where he tried to extort the Biden dirt from Ukraine’s president? Alternatively, did they somehow trick Trump and his other top aides into this bizarre extortion attempt so that they could then expose it and undermine his presidency?

Conspiracies do exist in the world, but sometimes events are just as they seem. We have a president who thinks he can use the entire state apparatus for his own personal and political ends. Through his incredible stupidity, he got caught red-handed. It would take an act of even bigger stupidity to just look the other way and drop the issue.

(This post originally appeared on my Patreon page.)

As the Democrats have pushed ahead with impeachment proceedings, there have been criticisms from both the right and left that impeachment is a needless distraction from the pocketbook issues that people really care about. The argument is that people will see the Democrats as playing political games rather than focusing on health care, jobs, wages, and other issues that directly affect people’s lives.

This sort of argument ignores the world we now live in. First, we have to be clear about the Republican agenda. To put it simply, it is to give all the money to rich people.

This means that not only that they don’t want rich people to pay taxes, the rich also get to cheat workers out of their pay, pollute drinking water, destroy the planet, and do anything else to ordinary people and the environment that might boost their income. Republicans and their allies also design patent and copyright monopolies to give even more money to the rich (both here and overseas) and they structure the digital economy in ways that deny ordinary people any privacy.

It’s true that some Democrats also seem to share much of this agenda, but that’s beside the point. If the Republicans can control the White House and Congress, this is what they will do.

So, is impeachment a distraction from fighting this disastrous agenda? Not at all, impeachment is a necessary step in trying to stop it.

In case people somehow have missed it, Republicans do not care at all about democracy or the rule of law. They will do anything and everything they can get away with to keep power. We see this again and again.

To take one prominent example, Republicans wanted to include a question on citizenship on the Census to discourage immigrants from answering. The explicit purpose was to reduce political representation in areas with large immigrant populations. The Supreme Court ultimately blocked this effort because the Trump administration could not find a plausible reason to include this question, other than to discriminate against immigrants.

Just last week, the Republican leader of Kentucky’s state senate suggested reversing the results of the state’s gubernatorial election (which the Democrat won), based on his assessment that a third party candidate had pulled away enough votes from the Republican to cost him the election. While he seems to have backed away from this position in response to mass public outcry, the fact that he could seriously consider completely ignoring the results of an election shows the lack of respect that Republicans have for democracy and the rule of law.

The Ukraine affair has to be understood in this context. Trump is quite openly using the State Department, the Justice Department, and most likely other branches of government to directly advance his personal and political interests.

The issue has nothing to do with what one thinks of Joe Biden. Trump invented a scandal out of thin air and had the State Department apply pressure on Ukraine to pretend it was real.

If that sounds far-fetched, remember, this is a guy who ran around the country for five years insisting that Barack Obama was born in Kenya. And, he has never apologized for that or any other racist idiocy.

If Trump’s actions are allowed to go unchecked, we can take it for granted that he will continue to use the power of the government against his political opponents. If Warren gets the nomination, expect to see IRS investigations of her consulting work and the Justice Department examining charges that she was an affirmative action hire at Harvard based on her Native American ancestry.

If Sanders gets the nomination, don’t be surprised to see the IRS and Justice Department investigating Jane Sanders’ dealings at Burlington College, which went bankrupt several years after her presidency. Look for ominous news stories about money paid to “the Sanders,” as though Bernie and his wife were a single person.

This use of government power will also extend to supporters of candidates. Those who are in the forefront of the campaign to unseat him can expect I.R.S. audits and Justice Department investigations of real or imagined infractions.

Trump has made it clear that he will use the power of the government against news outlets that don’t give him positive coverage. He interfered with a Pentagon contract that likely would have gone to Amazon because he didn’t like the Washington Post’s coverage of him. Jeff Bezos is the owner of the Washington Post as well as being the CEO and largest stockholder in Amazon.

Trump also ordered all government agencies to cancel their subscriptions to the New York Times and Washington Post. Again, the issue is that he doesn’t like their coverage.

Suppose Trump ordered I.R.S. audits of the leading shareholders of every major news outlet. Jim Jordon, Lindsey Graham, and the rest can be counted on to angrily insist that President Trump is doing his job in cracking down on tax fraud. When this happens, we can expect many newspapers and television stations will begin to sound more like Fox News.

Trump has made it absolutely as clear as he can that he intends to use the full power of the government to advance his re-election campaign. If anyone thinks that their favored candidate will be able to overcome this sort of corruption and defeat Trump anyhow, they are seriously out of touch with reality. If any Democrat is going to have a shot at defeating Trump in 2020, the Democrats will have to rein in his abuses of power.

It is certainly true that people are much more concerned about their pocketbook than the rule of law, but that is a problem that has to be confronted by Democrats or anyone concerned about democracy. If Trump gets to cheat as much as he wants, we can just skip the election since it will be a waste of everyone’s time.

We can take it for granted that the Republican-controlled Senate will not remove Trump. As Trump has said, he can shoot someone on Fifth Avenue in broad daylight and his supporters will still be with him.

Nonetheless, holding up Trump’s crimes in the full light of day will put some check on his abuses. We already saw this when he was forced to abandon his plans to give himself millions of dollars by holding the G-7 summit at his Doral Resort. Clearly Republicans pressured Trump to not so visibly use the federal Treasury as a personal piggy bank. An open airing of Trump’s corruption in an impeachment trial is likely to force Trump to at least nominally follow the law through the remainder of his term in office.

The Democrats have been fortunate to have career civil servants who have been willing to risk their careers, if not their lives, by calling attention to Trump’s abuses of power. If the Democrats don’t take advantage of these people’s courage, it is a safe bet that no one else will come forward in the future, and Trump will have a free hand to ignore the law as much as he wants.

Some on the left have been bothered by the fact that many of the people coming forward seem to be motivated in part by the desire to have a more aggressive foreign policy towards Russia. That is likely true, but also completely beside the point.

In politics we find few people with entirely pure motives. The people who are coming forward in the Ukraine case are reporting a very real and extreme abuse of presidential power. If the idea is that this is all a grand conspiracy, the world doesn’t have enough tin foil to make the necessary hats.

Did the conspirators doctor the pseudo-transcript Trump released of his call where he tried to extort the Biden dirt from Ukraine’s president? Alternatively, did they somehow trick Trump and his other top aides into this bizarre extortion attempt so that they could then expose it and undermine his presidency?

Conspiracies do exist in the world, but sometimes events are just as they seem. We have a president who thinks he can use the entire state apparatus for his own personal and political ends. Through his incredible stupidity, he got caught red-handed. It would take an act of even bigger stupidity to just look the other way and drop the issue.

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