Joe Nocera used his NYT column this morning to beat up on a number of politicians who oppose President Obama's call for fast-track authority to facilitate passage of the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Pact (TTIP). He claims that they have the trade story badly wrong and that recent trade deals have actually been a big help to the country.

While Nocera may be correct in saying that many politicians have exaggerated the negative impact on NAFTA and other recent trade deals (stop the presses! politicians exaggerating!), but their basic story is correct. There are three points that people should understand in assessing the impact of trade and the meaning of these trade deals:

1) Trade has been an important factor increasing inequality in the United States;

2) The trade deficit is the major reason that the economy has weak demand and remains far below full employment;

3) The TPP and TTIP are about imposing a corporate friendly regulation structure, not trade.

Taking these in turn, the fact that trade has been a major factor contributing to inequality is no longer just a claim from the fringe lefty types. Paul Krugman has written about as has M.I.T. economist David Autor. It was even highlighted in the report of the commission on inclusive prosperity set up by the Center for American Progress and co-chaired by Larry Summers.

The basic point is a simple one. We constructed trade agreements designed to put our steelworkers and textile workers in direct competition with low-paid workers in the developing world. The predicted and actual effect of this policy is to lower the wages of steelworkers and textile workers.

If anyone finds this difficult to understand, imagine that the trade deals of the last quarter century were focused on making it as easy as possible for smart kids in India, China, and other developing countries to train to U.S. standards and then work as doctors, lawyers, dentists and in other highly paid professions in the United States. What would we expect to happen to the wages of doctors, lawyers, dentists and other highly paid professionals? They would fall, bingo!

The story on the trade deficit should be equally straightforward. Our annual trade deficit of $500 billion (@ 3.0 percent of GDP) is a direct drain on domestic demand. This represents money being spent by workers and companies in the United States that is creating demand in other countries, not in the United States. In the good old days, mainstream economists ridiculed the idea that a trade deficit could lead to a shortfall in demand because they assumed as an article of faith that any demand lost due to a trade deficit would be made by increased demand from other sources.

Last July, in a stirring and rare demonstration of bipartisanship, the U.S. House and the Senate passed a bill dedicated to increasing transparency and accountability around the billions of dollars of U.S. government funds allocated to assistance to Haiti since the January 2010 earthquake.  On August 8, President Obama signed the Assessing Progress in Haiti Act and the clock began ticking down for the State Department to produce the first of several comprehensive reports detailing the government’s assistance efforts, as mandated by the new law.

Assessing Progress instructed the State Department to complete a first report by the end of 2014.  While it’s not clear that that deadline was met, the Department’s Office of the Haiti Special Coordinator posted their report on their web page by the time the fifth anniversary of Haiti’s earthquake rolled around on January 12.

The reporting requirements outlined in Assessing Progress are far-reaching and fairly concrete.  It’s therefore not surprising that the report is truly massive in size, consisting of a general report on the results of U.S. assistance to Haiti and 17 attachments, many of which are PDFs of spreadsheets containing detailed quantitative and qualitative information about U.S. aid programs.

The question is: Is all of this information useful to those seeking an answer to the oft-repeated question, “Where did the money go?”  The answer is undoubtedly yes, but it doesn’t take more than a rapid survey of the report to see that the information provided is, in many cases, incomplete.  Furthermore, there are instances where State’s reporting may formally comply with the letter of the law, but not with its clear intent of providing lawmakers and the public with a better idea of the concrete results of U.S. Haiti assistance.

We’re not going to attempt a thorough analysis of this report at this time.  A rigorous and complete assessment requires considerable input from stakeholders, in particular those on the ground in Haiti.  For now we’ll share a few general observations regarding the report’s contents, highlighting what we see as the good, the bad and the murky.

A United Nations Security Council delegation is set to arrive in Haiti beginning a three-day visit to discuss the ongoing political crisis in the country. Thousands of protesters, who have taken to the streets of the capital to call for the president’s resignation, planned to go to the airport to greet the visiting members.  On Monday, Haiti’s Foreign Minister, Duly Brutus addressed the Security Council in New York, asking for “the Security Council as well as all of our partners in the international community to continue to back the government” of President Martelly.

But the international community’s overt support for Martelly has already had a negative impact on the political crisis, as Jacqueline Charles of the Miami Herald reported earlier this week:  

The U.S. had hoped a last-minute deal brokered between Martelly and several opposition political parties would have allowed for lawmakers’ terms to be extended for up to four months, and an electoral law to be passed. But parliament dissolved before either measures could be voted after pro and anti-Martelly senators failed to show up to provide the necessary 16 member quorum.

Biden commended Martelly’s “efforts to reach a negotiated agreement,” while recognizing that he had “made several important concessions in order to reach consensus, and expressed disappointment that Haiti’s Parliament did not pass an electoral law before lapsing on January 12,” said the statement from the White House.

Hours before the signing of the deal, the U.S. Embassy issued a press release stating U.S. support for Martelly should he have to rule by decree. Many believed that statement, and later U.S. Ambassador Pamela White’s appearance in the parliament chambers on the night of the aborted vote, were deal changers that helped encourage senators not to show up. Both were widely condemned as un-welcomed interference in Haitian domestic politics.

In trying to push its case with the public, Uber decided to share its internal data with Alan Krueger, a prominent Princeton economist and former head of President Obama's Council of Economic Advisers. (Could this be part of Uber's dividend from hiring former Obama political adviser David Plouffe?) Anyhow, Kreuger finds that Uber drivers on average earn a gross premium of $6.00 an hour over the pay of drivers of traditional cabs. (He also had some rather unsurprising findings, for example that more people are now working for Uber after it expanded the number of cities in which it operates.)

The key issue here is the use of the gross premium rather than a direct earnings comparison. The difficulty, as the paper notes, is that we don't know the costs incurred by Uber drivers, who use their own car. (There is a good write-up of the study by Emily Badger in Wonkblog.) Depending on how much Uber drivers drive, they could still end up with less money than their counterparts in traditional cabs.

A useful piece of information is the cost of driving a car, which Badger's colleague, Andrea Peterson tells us is 57 cents per mile, according to the Internal Revenue Service. Well, this one seems pretty straightforward, if Uber drivers average more than 11 miles per hour, they are less well-paid than their counterparts working for traditional cab companies.

Krueger's study doesn't have data on miles traveled (this is strange, since Uber has this data, at least for the time that a paying passenger is in the car), but it does tell us that the median number of trips per hour is 1.3. We really would want the average here, since we are looking at an average wage pay difference. But if we take the 1.3 median number of trips per hour given in the study, then the average trip distance would have to be 8 miles or less for Uber drivers to come out ahead, assuming they did no unpaid miles.

This second assumption is of course obviously wrong. If an Uber driver take a rider 30 miles from downturn to a suburb, there is a good chance that they will be driving back with an empty car. Also, Uber drivers often cruise high density areas to try to be in line for a call. (This is my casual empiricism from asking the few Uber drivers I have been in contact with.) Anyhow, clearly total miles driven will exceed paid miles driven, which means that the average length of a ride would have to be considerably less than 8 miles for Uber drivers to come out ahead of drivers for traditional cabs.

There is one other item in this mix worth noting. The I.R.S figure of 57 cents a mile is a figure for a commercial driver. It assumes that this person has paid for the necessary licenses and insurance. Most Uber drivers have not paid for commercial licenses for themselves and their vehicles. Most probably also don't carry insurance that covers them for commercial driving.

Dean Baker
Fortune, January 21, 2015

There may be some case here, but of course that is not what George Will is actually arguing. He is pulling numbers from outer space to tell a story of a run away welfare state. As he quotes that great welfare reformer of the past, Daniel Patrick Moynihan:

"the issue of welfare is not what it costs those who provide it but what it costs those who receive it."

Okay, none of us like to see healthy people in their prime working years scamming the rest of us rather than working. But in spite of Will's best efforts at playing with numbers, he does not have much of a story. He tells readers:

"Transfers of benefits to individuals through social welfare programs have increased from less than 1 federal dollar in 4 (24 percent) in 1963 to almost 3 out of 5 (59 percent) in 2013. In that half-century, entitlement payments were, Eberstadt says, America’s “fastest growing source of personal income,” growing twice as fast as all other real per capita personal income. It is probable that this year a majority of Americans will seek and receive payments.

This is not primarily because of Social Security and Medicare transfers to an aging population. Rather, the growth is overwhelmingly in means-tested entitlements."

If we go to the Congressional Budget Office, we can quickly find data going back to 1973. This shows entitlement spending, which accounts for the vast majority of federal government transfers, went from 7.5 percent of GDP in 1973 to 12.3 percent in 2014. I'm not sure that this sort of growth will destroy the nation's fiber. (I realize that this excludes the 1963-73 period, but if that is the story, then the nation's fiber was destroyed more than 40 years ago.)

Furthermore, contrary to what Will tells us, most of the growth was in Social Security and Medicare payments to an aging population, which went from 4.2 percent of GDP in 1973 to 7.8 percent in 2014. This increase accounts for 3.6 percentage points of the 4.8 percentage points of growth in entitlement payments over this period. (Most of the rest can be accounted for by Medicaid, which increased by 1.2 percentage points as a share of GDP. This is a means-tested program, but more than half of expenditures go to low-income seniors.)

Jake Johnston
The Nation, January 21, 2015

E.J. Dionne had a very nice piece in the Washington Post last Thursday on how the U.S. tax code is less progressive than most reporting indicates. Dionne’s main point is that by focusing on federal taxes, many journalists miss out on state and local taxes, which tend to tax the poor at higher rates than the rich:

“It is thus a public service that the Institute on Taxation and Economic Policy (ITEP) has issued a report showing that, at the state and local level, government is indeed engaged in redistribution — but it’s redistribution from the poor and the middle class to the wealthy.

“The institute found that in 2015 the poorest fifth of Americans will pay, on average, 10.9 percent of their incomes in state and local taxes and the middle fifth will pay 9.4 percent. But the top 1 percent will pay states and localities only 5.4 percent of their incomes in taxes.”

Dionne attributes the regressive nature of state and local taxes to the types of taxes that these areas tend to impose. As he notes, states and localities often rely heavily on sales and excise taxes; according to the ITEP report, both taxes are quite regressive. Property taxes are also regressive, though state-level income taxes tend to be progressive.

But there’s another way in which state and local taxes tend to be regressive: they contribute to inequality between states.