Dean Baker
Al Jazeera America, November 9, 2015

Tyler Cowen had a piece in the NYT arguing that the mandates in Obamacare may be painful for many moderate-income people who don't qualify for subsidies and don't value the insurance. This is true, but it is also true of almost any policy that would be designed to help low- and moderate-income people.

First, the basic point is that the mandate requires people to buy insurance who might not have otherwise if the law didn't require it. If we give these people credit for acting rationally, they would choose to pay necessary medical expenses out of pocket and to rely on emergency room care rather than pay for an insurance premium. In this case, the mandate is effectively a tax that can be a substantial burden on households who are over the cutoff for subsidies at 350 percent the poverty level. (That would be $41,200 for a single person, $71,300 for a family of three.)

This sort of argument would also apply to a program like Social Security. There are many people who can reasonably expect that they will not enjoy long retirements based on the age at which parents and other relatives have died. Social Security also provides survivors benefits for spouses and dependent children. In addition, it provides disability benefits. But if a person with a short life expectancy does not have children, or they have grown, and either does not have a spouse or the spouse would be entitled to comparable benefits based on their own work history, Social Security will not provide this person with a very good expected payback. We may or may not feel bad about requiring this person to contribute to Social Security, but it is essentially the same sort of dilemma that Cowen raises about Obamacare.

As the debate over a Fed interest rate hike heats up, it is worth noting an important distinction between the types of issues being debated. On the one hand there is a debate over what is likely to happen in a scenario in which the Fed soon begins raising interest rates and one in which it does not. On the other hand there is debate over what we want to see happen.

The first question has to do with the likelihood that we will see more rapid wage growth and more rapid inflation if the Fed holds off compared to a scenario in which it starts raising rates. Looking to the 1990s, many of us see the possibility that wages could grow considerably more rapidly without any substantial uptick in inflation. (There was strong real wage growth in the last year due to a plunge in energy prices, but no one expects that to be repeated. Real wage growth in the year ahead will depend on stronger nominal wage growth.)

Since productivity growth has been incredibly weak in recent years, the possibility of stronger real wage growth will depend at least in part on a return of more normal productivity growth, at least in the range of 1.5–2.0 percent. (Where are the robots when we need them?) There is a story that productivity growth may be in part endogenous. This would mean that in a tighter labor market firms have more incentive to economize on labor. Also, in a tighter labor market workers move from low paying, low productivity jobs to higher paying, higher productivity jobs.

There are clear differences among economists in their views on the extent to which a tighter labor market will first translate into higher wage growth, and secondly how much this will translate into higher inflation. However, there is also a difference on what we might want to see. There was a massive shift from wages to profits at the start of the recession. The weakness of the labor market allowed employers to keep pretty much all of the gains in productivity in 2008–2011.

This is a sharp departure from the rise in inequality that we saw in the prior three decades. That was pretty much entirely a story of redistribution of labor income. Money went from assembly line workers and retail clerks to doctors and lawyers, Wall Street bankers, and CEOs.

Haiti’s Provisional Electoral Council (CEP) announced preliminary results from the October 25 presidential elections yesterday evening, showing the government-backed Jovenel Moïse and former state construction company director Jude Célestin in the top two places, paving the way for a face-off between the two candidates in the second round of the elections scheduled for December 27.

Of the roughly 1.6 million Haitians who voted (roughly 26 percent of registered voters), Moïse received 32.8 percent of the vote while Célestin received 25.3 percent, according to the preliminary results announced by the CEP. Moïse Jean-Charles, an opposition leader, received 14.3 percent to finish in third while Dr. Maryse Narcisse of the Fanmi Lavalas party of twice-ousted Jean Bertrand Aristide came in fourth with just over 7 percent of the vote.

After violence and fraud plagued first-round legislative elections in August, more than 73 percent of registered voters stayed home on election day this time - a similar rate as what was seen in the flawed 2010 presidential elections, but far below turnout in previous presidential elections such as in 2000 and 2006, which was closer to 60 percent.

Nearly as soon as the CEP press conference ended, many leading candidates, including Jude Célestin, denounced the results and pledged to mobilize supporters in the coming days against what they allege was massive fraud in favor of the government. Small protests erupted around the capital and one supporter of Jean-Charles was killed outside of his party’s headquarters. The party has blamed the Haitian police for the death.

On Friday, all of the top four candidates held morning press conferences to state their position on the results. Jovenel Moïse, of the ruling PHTK party, was the only one not to question the results announced by the CEP. Célestin, together with seven other presidential candidates, had sent a letter to the CEP days before results were announced, denouncing massive fraud in the elections and calling for an independent commission to investigate. “We are working on this with all the candidates because we are all saying the same thing: 'This is not the people's vote and they are trying to steal the vote of the population,’” the Associated Press reported Célestin as saying at this morning’s press conference. Afterwards, supporters of his party, LAPEH, began protesting throughout the capital.

Followers of Jean-Charles’ Pitit Dessalines platform and Narcisse’s Fanmi Lavalas party also took to the streets. Haitian police have responded with tear gas to break up the protests, which are expected to continue over the coming days.

The fraud allegations have been wide-ranging but many have focused on the problem with political party monitors; some 900,000 accreditation passes were distributed before the election which may have allowed monitors to place fraudulent votes. Local observers and party representatives have denounced a black market that developed for the passes in the days leading up to the vote, with passes going for as much as $30, and as little as $2 on election day. In the West department, where over 40 percent of registered voters live, these monitors accounted for upwards of 50 percent of voters, according to observer groups.

The day before results were announced, a local observer group noted that a lack of transparency and other problems at the tabulation center where votes are counted, “helped create a general atmosphere of suspicion and generate legitimate fears that the reality of the ballot boxes or the expression of the will of the people are being altered, in whole or in part.”

In a statement released today, the group of presidential candidates termed the announced results “unacceptable,” and again called for an independent commission to investigate fraud. The announced results only reinforce the perception that “those who vote decide nothing,” the candidates said in the statement. The group characterized the current process as a “dangerous return to the past” when dictators organized elections and warned that it “threatens the stability of the country.”

November 9, 2015

Mark WeisbrotMiami Herald (FL), November 8, 2015

This morning the Bureau of Labor Statistics released its newest jobs figures for the month of October. In the household survey, the unemployment rate fell to 5.0 percent, the lowest rate in over seven years. Perhaps more importantly, the unemployment rate today is now the same as it was at the beginning of the recession in December 2007.

Undoubtedly, this will be cheered as a positive development for the economy, and other things equal, a low unemployment rate is preferable to a high unemployment rate. But, unemployment is only part of the story of a weak labor market. There are other categories of non-employed workers which can be described as follows:

• Discouraged Workers: Persons who have searched for a job within the past year but not the past four weeks and gave up their search because they were discouraged over their job prospects.

• Marginally Attached Workers: Persons who have searched for a job within the past year but not the past four weeks. (Discouraged workers are a subset of marginally attached workers.)

• Persons not in the labor force who would like a job: Persons who haven’t searched for a job within the past four weeks but report to the Bureau of Labor Statistics that they want to be employed.

Earlier this year, CEPR released a report titled From Recession to Collapse: The Bush Administration and the Over-Valued Dollar. The report shows that the strong value of the dollar during the Clinton-Bush years led to large trade deficits which decreased demand in the economy and resulted in lost jobs.

The economics on this point is pretty simple. A stronger dollar makes imports from other countries cheaper and makes U.S. exports more expensive. So when the dollar strengthens, American producers end up selling less merchandise, leading to job losses in sectors specializing in tradable goods.

However, some media outlets seem to view a strong dollar as a positive. Reporting on the dollar sometimes takes for granted that the term “strong” has a positive meaning and that the term “weak” conversely has a negative meaning.

Most young people today are having tough times economically. As we know, the main reason for this fact is that so much income has been redistributed upward over the last thirty five years. (Also, we have a cult of deficit reduction in which our leaders in Washington insist on keeping deficits small even when this means slowing growth and keeping people out of work.) Their parents are not doing notably better, with most approaching retirement with little to support them other than their Social Security and Medicare. The wealth holdings of the middle quintile of households headed by someone between the ages 55–64 averaged $165,700 in 2013. Excluding home equity it was just $89,300. 

But Social Security and Medicare are still something. And the guiding philosophy of many in Washington is that a dollar that is in the pocket of a poor or middle-class person is a dollar that could be in the pocket of a rich person. Furthermore, if they can get the kiddies to complain about their parents' Social Security and Medicare they may not notice all the money that the Wall Street gang, the pharmaceutical companies, and the rest are pocketing at their expense.

Hence we get folks like private equity billionaire Peter Peterson devoting much of his fortune to perpetuate attacks on Social Security and Medicare. The Washington Post has also been a major actor in this effort using both its news and opinion pages to advance the cause. Unfortunately, they appear to have enlisted a relatively new economics reporter, Jim Tankersley, who should know better.

Tankersley used his column to complain that "baby boomers are what's wrong with the economy." He adds in the subhead, "they chewed up resources, they ran up the debt, and escaped responsibility."

He lays out the case in the third and fourth paragraph:

"Boomers soaked up a lot of economic opportunity without bothering to preserve much for the generations to come. They burned a lot of cheap fossil fuels, filled the atmosphere with heat-trapping gases, and will probably never pay the costs of averting catastrophic climate change or helping their grandchildren adapt to a warmer world. They took control of Washington at the turn of the millennium, and they used it to rack up a lot of federal debt, even before the Great Recession hit.

"If anyone deserves to pay more to shore up the federal safety net, either through higher taxes or lower benefits, it’s boomers — the generation that was born into some of the strongest job growth in the history of America, gobbled up the best parts, and left its children and grandchildren with some bones to pick through and a big bill to pay. Politicians shouldn’t be talking about holding that generation harmless. They should be asking how future workers can claw back some of the spoils that the “Me Generation” hoarded for itself."

The Labor Department reported the economy added 271,000 jobs in October. With slight upward revisions to the prior two months data, this brought the three month average to 187,000. This job growth was sufficient to push the unemployment rate down slightly to 5.0 percent. While the employment to population ratio edged up slightly to 59.3 percent, it is still below the 59.4 percent high for the recovery. The labor force participation rate is actually down 0.4 percentage points from its year-ago level.

Insanely high drug prices have been in the news lately. We are regularly hearing about new miracle drugs like the Hepatitis C drug Sovaldi. Sovaldi comes with an $84,000 price tag for a 3-month course of treatment. Many of the new cancer drugs cost well over $100,000 for a year's dosage. And of course we had the case of Turing Pharmaceuticals, which raised the price of a Daraprim, an old but important anti-infection drug, by 5000 percent. 

These stories of extraordinarily high drug prices are especially painful because they are unnecessary. In almost all cases drugs are cheap to produce. The reason they are expensive is because the government grants them a patent monopoly. (In the case of Daraprim, at the moment Turing is the only licensed manufacturer, even though the drug is off-patent.) Generic Sovaldi is available for just $300 a treatment in Egypt, less than one percent of the U.S. price. Most of the cutting edge cancer drugs would also be available for less than one percent of the U.S. price if they could be sold as generics in a free market.

The rationale for patent monopolies is that the drug companies need high prices to recover their research costs. And, they claim they have very high research costs. According to Joe DiMasi, an economist with close ties to the industry, the research and development costs of the pharmaceutical industry averages almost $2.6 billion for each new drug they produce that is a new molecular entity. (New molecular entities account for only about 15 percent of the new drugs approved by the Food and Drug Administration.)

Patent monopolies are not the only way to support research. There are other mechanisms. For example, the U.S. government spends over $30 billion a year on biomedical research through the National Institutes of Health. There are also various private initiatives that support research.

One such initiative is the Drugs for Neglected Diseases Initiative (DNDI). This is a research network, led by Doctors Without Borders, that was established to develop treatments for diseases that primarily affect poor people in the developing world. It was created in 2002. On their tenth anniversary, DNDI produced a report describing some of their accomplishments. The figure below shows some of the highlights and their price tag and compares them to DiMasi's estimate of what it costs the big pharmaceutical companies to develop a single drug.

Source: DNDI and DiMasi, 2014.

As the figure shows, DNDI was able to develop ASAQ, a combination drug for treating Malaria, for $17 million. More than 250 million dosages have been distributed since 2007. It developed Fexinidazole, a new drug candidate and new chemical entity, intended to treat sleeping sickness, at a cost of $38 million. DNDI developed SSG&PM, a combination therapy for visceral leishmaniasis at a cost of $17 million. DNDI's entire budget for its first 10 years of existence was $242 million, less than one-tenth of what DiMasi estimates it costs the pharmaceutical industry to develop a single new drug.

November 6, 2015 (Jobs Byte)

November 6, 2015

Dean Baker
The Hankyoreh, November 5, 2015