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Year in Review – What Changed at Independent Agencies in 2019?

As we have previously highlighted, independent federal agencies receive too little attention relative to their importance to our collective safety and prosperity. The Revolving Door Project has worked through multiple channels to shed light on these overlooked agencies and the threats that they face. We hope public education will generate pressure to safeguard the independence of these agencies and ensure that they are staffed with advocates for the public interest rather than corporate insiders. 

Eleanor Eagan / January 27, 2020

Article Artículo

Yes, It's Monday Morning and Robert Samuelson Is Worried About Budget Deficits

It's amazing how Samuelson can continue to push his concerns about the budget deficit when all the evidence points to it not being a problem. In his latest tirade he tells us the problems of the deficit:

"First: As government debt piles up, it increasingly crowds out private investment. This, in turn, weakens productivity growth, which is a major source of higher living standards. With interest rates now so low, this doesn’t seem a problem — which is why it is.

"Second: The truly scary possibility is a run on the dollar. If huge budget deficits subvert global confidence in the dollar — causing investors to dump the currency — restoring that confidence might require deep cuts in federal spending and steep increases in taxes."

Okay, that first one is a real head scratcher. The classic story is that large budget deficits lead to high interest rates, which then crowd out investment. That slows productivity growth, which makes us poorer in the future.

The problem with this story in the current environment is that interest rates are not high, they are extraordinarily low. The interest rate on the 10-year Treasury bill is hovering around 1.7 percent. That compares to rates around 4.5 percent back in the late 1990s when we were running budget surpluses. (Inflation in the two periods is comparable, so comparing the nominal rates gives us a rough comparison of the real rates.) Samuelson acknowleges that rates are low, which he says is why the budget deficit is a problem.

This is a bit like being accused of murder, then bringing in the alleged victim alive and healthy, and then have the prosecutor tell you that this is the problem with your defense. This is loon tune land. If interest rates are low, they cannot be crowding out investment: full stop.

The run on the dollar story is also problematic for anyone who gives it a moment's thought. The real value of the dollar is actually quite high now, about 20 percent higher than it was a decade ago. Let's say that it fell by 20 percent to its levels of 2010, would that be a crisis? That's a bit hard to see.

Could it fall further? Well, how would the EU, China, Japan and other countries feel about us putting 25-30 percent tariffs on their exports to us? A drop in the dollar of this magnitude is equivalent to a tariff of the same size, except it is worse for their trade position. A drop in the dollar of 25-30 percent is also equivalent to a subsidy to our exports of 25 to 30 percent. The reality is that an uncontrolled fall in the dollar is at least as much a threat to our trading partners as it is to the United States, which is why we don't have to worry about it as long as we have an otherwise healthy economy that produces tens of trillions of dollars of goods and services.

There are a couple of other points about Samuelson's piece that need correcting. He tells readers:

CEPR / January 27, 2020

Article Artículo

Can Manufacturing Workers Take Many More of Trump’s Trade Victories?

(This piece first appeared on my Patreon page.)

Last week, as Donald Trump was trying to distract attention from his impeachment trial, he was holding events touting his big trade victories. The two items for celebration were the new NAFTA, dubbed by Trump as the U.S.-Mexico-Canada Agreement, and a “phase one” trade deal with China. While these deals may be useful props for the impeachment distraction, they are unlikely to offer much to the manufacturing workers who Trump claims are at the center of his trade agenda.

The new NAFTA may lead to some modest shifts of employment in the auto industry, but its impact on the larger manufacturing sector will be invisible for all practical purposes. The China pact includes bizarre commitments of Chinese purchases of specific items. It’s not clear how these would be enforced, but if they choose to comply with the treaty and play games, there is nothing that prevents China from meeting its commitments by being an intermediary between the United States and other importers of U.S. goods.

Specifically, if China needs to buy another $50 billion of U.S. manufactured goods to meet its commitments, it could simply make $50 billion in purchases and then sell them to current U.S. importers in Japan, Korea, and elsewhere. That leads to no net gain in U.S. exports, but would comply with China’s trade commitments.

The markets have already indicated that they are not impressed with the impact of this deal on U.S. exports. The price of major farm commodities, like soy beans and wheat, remain well below their levels earlier in the decade. If there was an expectation that China’s purchases were going to substantially improve the fate of America’s farmers, then we should have seen the price of these products soaring after the outlines of the deal became known.

Trump punted on the one issue that likely would have made a substantial difference in the U.S. trade balance, the value of the dollar. After running around the country for two years denouncing China as a “world class currency manipulator,” the deal does nothing to change the exchange rate between the Chinese yuan and the dollar. (The term “manipulation” implies something which is surely not appropriate in this case. China openly manages the value of its currency, so we don’t have to catch them doing something secretly in the dark.)

Anyhow, it will take some time to see how these deals fully play out in practice, but we do have plenty of data to assess how manufacturing workers have been doing thus far under Trump. The answer for the most part is not very good.

CEPR / January 23, 2020

Article Artículo

Marital-Status Discrimination Reduces Fertility in China

Building on recent posts by Dean Baker in his Beat the Press Blog (responding to NYT and Washington Post here and Ross Douthat here) that debunk the idea that there is a “demographic crisis” in China, there’s also an important family justice aspect to fertility in China. 

Although Douthat attributes China’s fertility rate (1.6 births per woman) to “cruel policy choices,” particularly the one-child policy, he doesn’t mention that these choices include widespread discrimination against unmarried mothers. As NPR recently reported, unmarried parents in China are often “stuck in a legal gray zone where they are unable to access basic public services for themselves and their children.” In many Chinese provinces, unmarried mothers have to pay fines for having a child, and/or face barriers to “hukou, or household registration, akin to a social security number allowing them to go to school and access services such as health care.” Beyond these legal barriers and penalties, unmarried mothers face severe social stigma in China. 

CEPR / January 23, 2020

Union Membership Byte Artículo


Union Membership Byte 2020
CEPR’s annual Union Membership Byte gives an in-depth analysis of union membership by sector, gender, race, ethnicity, age, education, nativity, industry, occupation, and by state (including the District of Columbia).

Hayley Brown and Hye Jin Rho / January 22, 2020