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The NYT had a piece describing the departure of the UK from the EU as the end of an era:
“The notion that global economic integration amounts to human progress had a good run, dominating the thinking of the powers that be for more than seven decades. But a new era is underway in which national interests take primacy over collective concerns, with trading arrangements negotiated among individual countries.”
This fundamentally misrepresents past trade policies and totally misrepresents the crux of recent trade deals, like the Trans-Pacific Partnership (TPP).
Past trade deals were about making it easier to trade manufactured goods, making it as easy as possible for corporations to take advantage of low-cost labor in the developing world. This has the predicted and actual effect of putting downward pressure on the wages of less-educated workers.
The impact of trade was devastating for large segments of the U.S. workforce. It cost 3.4 million manufacturing jobs (20 percent of the total) between the years 2000 and 2007. (It cost almost 40 percent of all unionized manufacturing jobs.) Note, that this was before the Great Recession, which began in December of 2007.
The argument that this was technology and not trade is truly Trumpian and deserves the same sort of derision as Trump’s claims about his “perfect” phone call with Ukraine’s president. We lost relatively few manufacturing jobs between 1970 and 2000, and we have gained a small number since 2010. So the Trumpers arguing for the technology story want us to believe that technology only cost us manufacturing jobs in the years when the trade deficit exploded, but not in the years prior to that or in the years since. Right.
It is also worth noting that the “free traders” have pretty much zero interest in free trade in professional services. Even though we could save on the order of $100 billion a year ($700 per family per year) if we liberalized rules for physicians, and allowed qualified doctors in places like Canada and Germany to practice in the United States, the people who think that “global economic integration amounts to human progress,” have little interest in global integration when it might reduce the living standards of highly paid professionals.
It is also important to point out that the liberalization of trade in goods is largely a done deal. Tariffs are already zero or near zero in the vast majority of cases. The potential gains from further liberalization are limited, especially since goods are a rapidly falling share of total output.
Instead, deals like the TPP are largely about locking in rules on items like intellectual property protections and preserving Mark Zuckerberg’s dominance of the Internet. The TPP, like other recent trade deals, calls for longer and stronger patent and copyright monopolies.
These protections are 180 degrees at odds with free trade. They are about shifting more income from the bulk of the population to people who benefit from rents on patents and copyrights, by making them pay more for drugs, medical equipment, software and a wide variety of other items.
The deals also look to lock in existing rules on the Internet, making it more difficult for both the United States and other countries to regulate Internet behemoths like Facebook and Google. Perhaps most importantly, these deals enshrine Section 230, which protects Facebook and other Internet intermediaries from facing the same liability for circulating libelous material as print and broadcast outlets. This has nothing obviously to due with economic integration, but it is likely to make Mark Zuckerberg richer.
The NYT had a piece describing the departure of the UK from the EU as the end of an era:
“The notion that global economic integration amounts to human progress had a good run, dominating the thinking of the powers that be for more than seven decades. But a new era is underway in which national interests take primacy over collective concerns, with trading arrangements negotiated among individual countries.”
This fundamentally misrepresents past trade policies and totally misrepresents the crux of recent trade deals, like the Trans-Pacific Partnership (TPP).
Past trade deals were about making it easier to trade manufactured goods, making it as easy as possible for corporations to take advantage of low-cost labor in the developing world. This has the predicted and actual effect of putting downward pressure on the wages of less-educated workers.
The impact of trade was devastating for large segments of the U.S. workforce. It cost 3.4 million manufacturing jobs (20 percent of the total) between the years 2000 and 2007. (It cost almost 40 percent of all unionized manufacturing jobs.) Note, that this was before the Great Recession, which began in December of 2007.
The argument that this was technology and not trade is truly Trumpian and deserves the same sort of derision as Trump’s claims about his “perfect” phone call with Ukraine’s president. We lost relatively few manufacturing jobs between 1970 and 2000, and we have gained a small number since 2010. So the Trumpers arguing for the technology story want us to believe that technology only cost us manufacturing jobs in the years when the trade deficit exploded, but not in the years prior to that or in the years since. Right.
It is also worth noting that the “free traders” have pretty much zero interest in free trade in professional services. Even though we could save on the order of $100 billion a year ($700 per family per year) if we liberalized rules for physicians, and allowed qualified doctors in places like Canada and Germany to practice in the United States, the people who think that “global economic integration amounts to human progress,” have little interest in global integration when it might reduce the living standards of highly paid professionals.
It is also important to point out that the liberalization of trade in goods is largely a done deal. Tariffs are already zero or near zero in the vast majority of cases. The potential gains from further liberalization are limited, especially since goods are a rapidly falling share of total output.
Instead, deals like the TPP are largely about locking in rules on items like intellectual property protections and preserving Mark Zuckerberg’s dominance of the Internet. The TPP, like other recent trade deals, calls for longer and stronger patent and copyright monopolies.
These protections are 180 degrees at odds with free trade. They are about shifting more income from the bulk of the population to people who benefit from rents on patents and copyrights, by making them pay more for drugs, medical equipment, software and a wide variety of other items.
The deals also look to lock in existing rules on the Internet, making it more difficult for both the United States and other countries to regulate Internet behemoths like Facebook and Google. Perhaps most importantly, these deals enshrine Section 230, which protects Facebook and other Internet intermediaries from facing the same liability for circulating libelous material as print and broadcast outlets. This has nothing obviously to due with economic integration, but it is likely to make Mark Zuckerberg richer.
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People who remember the 1990s stock bubble and the housing bubble of the last decade know that markets are not always right. But it is nonetheless worth following their response to events to see how ostensibly knowledgeable people see them.
In the case of Trump’s trade deal with China, where the big highlight was an announcement of new soybean purchases, the response was a big thumbs down. While soybean prices did go up by close to 1.0 percent yesterday, they are still around 3.0 percent below November levels and more than 10 percent below highs hit last year. This means that, for now, the markets do not expect Trump’s trade deal to substantially improve the prospects for soybean farmers.
People who remember the 1990s stock bubble and the housing bubble of the last decade know that markets are not always right. But it is nonetheless worth following their response to events to see how ostensibly knowledgeable people see them.
In the case of Trump’s trade deal with China, where the big highlight was an announcement of new soybean purchases, the response was a big thumbs down. While soybean prices did go up by close to 1.0 percent yesterday, they are still around 3.0 percent below November levels and more than 10 percent below highs hit last year. This means that, for now, the markets do not expect Trump’s trade deal to substantially improve the prospects for soybean farmers.
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Dawn Niederhauser, CEPR’s Development Department here. It’s the time of year when I highjack Dean’s blog to ask that you consider making a year-end donation to CEPR. As you may have heard, it’s CEPR’s 20th Anniversary this year. Yep, Dean has been calling out bad economic reporting for two decades now, and while he’s definitely made an impact over the years, there’s much more work to do.
So please, click here and donate in Dean’s honor today. Help us to help Dean keep those reporters on their toes!
Many thanks for your support. And as Dean always says, don’t believe everything you read in the papers…
Dawn Niederhauser, CEPR’s Development Department here. It’s the time of year when I highjack Dean’s blog to ask that you consider making a year-end donation to CEPR. As you may have heard, it’s CEPR’s 20th Anniversary this year. Yep, Dean has been calling out bad economic reporting for two decades now, and while he’s definitely made an impact over the years, there’s much more work to do.
So please, click here and donate in Dean’s honor today. Help us to help Dean keep those reporters on their toes!
Many thanks for your support. And as Dean always says, don’t believe everything you read in the papers…
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The NYT and Washington Post gave us more of their fraternity ritual budget reporting in talking about the new $738 billion military budget agreed to by Congress and Donald Trump. This is known as fraternity ritual reporting because everyone knows that the number $738 billion is completely meaningless to the overwhelming majority of NYT and Post readers. Nonetheless, reporters put it down knowing that it conveys no information, because that is the ritual.
If the papers were actually interested in providing information to their readers they could have told them the budget comes to just under 3.4 percent of GDP. Alternatively, they could have said that it accounts for a bit less than 17 percent of projected federal spending for the fiscal year. But no one expects these newspapers to be in the business of providing information.
The NYT and Washington Post gave us more of their fraternity ritual budget reporting in talking about the new $738 billion military budget agreed to by Congress and Donald Trump. This is known as fraternity ritual reporting because everyone knows that the number $738 billion is completely meaningless to the overwhelming majority of NYT and Post readers. Nonetheless, reporters put it down knowing that it conveys no information, because that is the ritual.
If the papers were actually interested in providing information to their readers they could have told them the budget comes to just under 3.4 percent of GDP. Alternatively, they could have said that it accounts for a bit less than 17 percent of projected federal spending for the fiscal year. But no one expects these newspapers to be in the business of providing information.
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A very large portion of U.S. workers will earn more than $2 million. That’s not in a year, but in a working lifetime. That makes a huge difference.
Apparently that point is too subtle for the people who write headlines for the Washington Post. The headline of an article on Senator Warren’s income from consulting fees told readers, “Sen. Elizabeth Warren earned nearly $2 million consulting for corporations and financial firms, records show.”
As people who read the article would learn, this amount was earned over roughly twenty years, meaning that the average payments were in the neighborhood of $50,000 a year. While that is still a considerable chunk of change, it is common for a lawyer of Ms. Warren’s stature to earn millions of dollars a year. (I’m not saying that’s justified, it just happens to be the reality.)
In any case, there is a huge difference between earning $2 million in a single year or a short period of time and earning it over a long portion of a person’s career. The people who write headlines for major newspapers should understand this point.
A very large portion of U.S. workers will earn more than $2 million. That’s not in a year, but in a working lifetime. That makes a huge difference.
Apparently that point is too subtle for the people who write headlines for the Washington Post. The headline of an article on Senator Warren’s income from consulting fees told readers, “Sen. Elizabeth Warren earned nearly $2 million consulting for corporations and financial firms, records show.”
As people who read the article would learn, this amount was earned over roughly twenty years, meaning that the average payments were in the neighborhood of $50,000 a year. While that is still a considerable chunk of change, it is common for a lawyer of Ms. Warren’s stature to earn millions of dollars a year. (I’m not saying that’s justified, it just happens to be the reality.)
In any case, there is a huge difference between earning $2 million in a single year or a short period of time and earning it over a long portion of a person’s career. The people who write headlines for major newspapers should understand this point.
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NPR had a piece on how the percentage of prime-age men (ages 25 to 54) in the workforce remains low, despite the relatively strong labor market. While the basic point is true, there are a couple of important qualifications. First, this is not a new story. The share of men who are employed has been dropping for a half-century. The second point is that, contrary to what is implied in the piece, the decline in employment rates has occurred for men at all education levels.
On the first point, if we look at business cycle peaks, we have a decline in prime-age employment to population (EPOP) ratios of 9.1 percentage points, taking business cycle peaks, from 95.6 in 1967 to 86.5 percent in the November data. (This assumes we are at a business cycle peak, which may prove not to be true.) I use employment rates since the decision to look for work, and therefore be counted as part of the workforce, is affected by the structure of unemployment benefits, which has been frequently changed over this period.
Most of this drop took place prior to 1990 when the prime age male EPOP peaked at 90.0 percent, 5.6 percentage points below its 1967 peak. The drop in the remaining 29 years has been just 3.5 percentage points, as shown below.
Prime Age (ages 25-54) Male Employment to Population Ratios
Source: Bureau of Labor Statistics.
The other point is that the drop in EPOPs has occurred at all education levels, as is actually shown in a figure included in the piece. While the decline has been sharpest for less-educated workers, the figure shows a drop in EPOPs for prime-age men with a college degree of roughly five percentage points between 1975 and 2018. The drop for those with some college and with just a high school degree is larger (roughly 8.0 percentage points and 10.4 percentage points, respectively), but clearly, this drop cannot be explained by declining demand for workers with less education by itself.
In fact, if the story is that trade and technology have led to a decreased demand for workers with less skill, the implication is that it should have led to an increase in demand for workers with more skill. Other things equal, we would have expected that to mean an increased, or at least constant, EPOP for prime age men with college degrees.
In short, there clearly has been a drop in employment among prime age men, but this is not a new story, nor is it a simple story of changing skills demand in the labor market.
NPR had a piece on how the percentage of prime-age men (ages 25 to 54) in the workforce remains low, despite the relatively strong labor market. While the basic point is true, there are a couple of important qualifications. First, this is not a new story. The share of men who are employed has been dropping for a half-century. The second point is that, contrary to what is implied in the piece, the decline in employment rates has occurred for men at all education levels.
On the first point, if we look at business cycle peaks, we have a decline in prime-age employment to population (EPOP) ratios of 9.1 percentage points, taking business cycle peaks, from 95.6 in 1967 to 86.5 percent in the November data. (This assumes we are at a business cycle peak, which may prove not to be true.) I use employment rates since the decision to look for work, and therefore be counted as part of the workforce, is affected by the structure of unemployment benefits, which has been frequently changed over this period.
Most of this drop took place prior to 1990 when the prime age male EPOP peaked at 90.0 percent, 5.6 percentage points below its 1967 peak. The drop in the remaining 29 years has been just 3.5 percentage points, as shown below.
Prime Age (ages 25-54) Male Employment to Population Ratios
Source: Bureau of Labor Statistics.
The other point is that the drop in EPOPs has occurred at all education levels, as is actually shown in a figure included in the piece. While the decline has been sharpest for less-educated workers, the figure shows a drop in EPOPs for prime-age men with a college degree of roughly five percentage points between 1975 and 2018. The drop for those with some college and with just a high school degree is larger (roughly 8.0 percentage points and 10.4 percentage points, respectively), but clearly, this drop cannot be explained by declining demand for workers with less education by itself.
In fact, if the story is that trade and technology have led to a decreased demand for workers with less skill, the implication is that it should have led to an increase in demand for workers with more skill. Other things equal, we would have expected that to mean an increased, or at least constant, EPOP for prime age men with college degrees.
In short, there clearly has been a drop in employment among prime age men, but this is not a new story, nor is it a simple story of changing skills demand in the labor market.
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The Washington Post had an article telling readers “retail drug prices declined last year for the first time since 1973.” While the article refers to a study done by the Center for Medicare and Medicaid Services, it is not clear that this decline would have much meaning for anyone. As the piece notes, many people were still paying more for drugs in 2018 than 2017 because they faced higher deductibles and co-pays from insurance.
It is also important to note that this study only looked at the retail drug market. That excludes drugs purchases by hospitals, nursing homes, and other institutions. If their spending is included, total spending on prescription drugs rose by 4.0 percent in 2018. Furthermore, it is on a path to increase by more than 8.0 percent in 2019 (National Income and Product Accounts, Table 2.4.5U, Line 121).
The piece also notes a sharp increase in the cost of health insurance in 2018, which it speculates could have been due to an increase in taxes on insurance in 2018. That does not appear to be the cause since insurance costs have been increasing even more rapidly in 2019.
The Bureau of Labor Statistics reports that the cost of health care insurance (administrative expenses and profits — not premiums) increased by 20.1 percent over the last twelve months and rose 2.1 percent in October alone. This rise cannot be explained by a tax increase that took effect at the start of 2018.
The Washington Post had an article telling readers “retail drug prices declined last year for the first time since 1973.” While the article refers to a study done by the Center for Medicare and Medicaid Services, it is not clear that this decline would have much meaning for anyone. As the piece notes, many people were still paying more for drugs in 2018 than 2017 because they faced higher deductibles and co-pays from insurance.
It is also important to note that this study only looked at the retail drug market. That excludes drugs purchases by hospitals, nursing homes, and other institutions. If their spending is included, total spending on prescription drugs rose by 4.0 percent in 2018. Furthermore, it is on a path to increase by more than 8.0 percent in 2019 (National Income and Product Accounts, Table 2.4.5U, Line 121).
The piece also notes a sharp increase in the cost of health insurance in 2018, which it speculates could have been due to an increase in taxes on insurance in 2018. That does not appear to be the cause since insurance costs have been increasing even more rapidly in 2019.
The Bureau of Labor Statistics reports that the cost of health care insurance (administrative expenses and profits — not premiums) increased by 20.1 percent over the last twelve months and rose 2.1 percent in October alone. This rise cannot be explained by a tax increase that took effect at the start of 2018.
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