tag:blogger.com,1999:blog-53070752966694834022024-03-17T20:00:10.139-07:00socialist-economicsUnknownnoreply@blogger.comBlogger4412125tag:blogger.com,1999:blog-5307075296669483402.post-69638007991679951792023-12-01T07:08:00.000-08:002023-12-01T07:21:11.976-08:00Kissinger is gone.<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgBVeJGJMtJVQQxD4wEcqTWbAZPCFS8d_lhAU_g2h2Zxr_tSbjiosBx3-VS0B1mxystjHt8t1I5h0epqrbtHMiH1rT7EKndo_KAXlD6I7ROQo7ZnjJtX8M2GyhkaEDIRId7-Eu2S1HDmXRe5V0piQsE8qyN394goF_b0-9awT0nTo573ZIkLOYEHgOZitE" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="1055" data-original-width="1500" height="225" src="https://blogger.googleusercontent.com/img/a/AVvXsEgBVeJGJMtJVQQxD4wEcqTWbAZPCFS8d_lhAU_g2h2Zxr_tSbjiosBx3-VS0B1mxystjHt8t1I5h0epqrbtHMiH1rT7EKndo_KAXlD6I7ROQo7ZnjJtX8M2GyhkaEDIRId7-Eu2S1HDmXRe5V0piQsE8qyN394goF_b0-9awT0nTo573ZIkLOYEHgOZitE" width="320" /></a></div> <p></p><p><br /></p><p>Henry Kissinger is gone, at 100 years. Some will mourn him, while others, including myself, preferred he face judgement for crimes against humanity in Vietnam, Chile, and beyond, long ago.</p><p>Judgement is a cultured expression for less dignified revenge. As Eastwood's "Unforgiven" hitman's revenge tale concludes: "We all got it comin'". But that may also be an evasion from deeper truths.</p><p><br />Kissinger's rise to intellectual prominence, and eventually to power via the Rockefellers, among other energy interests, rested on a hash analysis of 19th Century "Great Power" conflicts. I say hash, because it contained very little original thought, and furthermore, Kissinger was keenly aware that the intellectual framework's sole value was as a fungible fraud to cover the real purpose of post war IS foreign policy -- namely, the removal or compromise of ALL obstacles to US Big Business --- aka "monopoly capitalism" --- expansion and dominion over markets, supply chains, and Security throughout the world. Contrary to the intuition of most Americans, I submit the historical evidence, and actual NSA documentation reported on extensively by Seymour Hersh, demonstrates that the expansion of <b>capitalism </b>is the ONLY thing meant by the worldwide "defense of <b>democracy</b>".</p><p>Socialist countries, and socialist or communist led patriotic liberation movements in former colonies, were the chief adversaries of the 'Kiss' strategies. The Kiss strategy ran into disaster in Vietnam, where a far superior military force, was defeated by a patriotic movement with mass support. 2 million Vietnamese perished. In their country they are heroes. 50,000 Americans perished, including two of my childhood friends. What did the 50, 000 Americans die for? To keep communists from winning both the elections and civil war against colonialism in Vietnam? Of all the things impinging on the working and living standards and security of working class families in the US, how many are caused by communism, or socialism?<br /><br />Despite this monumental failure, the Kiss strategy persists, respected in both parties. But we lost more than the 50,000 souls sacrificed in Vietnam. In the resistance to the war, and the massive struggle for civil rights, and their suppression by assassinations, terror, and further corporate consolidation of political and economic power -- the many frauds could not conceal the fact that we, as a nation, had become infected with a cancer, whose cure is not in sight. And it is killing us.<br /><br />Vietnam was followed by Iraq, endless intrigues and assassinations fostered by the CIA to similar effects, and now Russia and Palestinians. Argentina prolly next.<br /><br />"We all got it comin'"!<br /><br />That's the existential view, not the Marxist, or Communist view, or even the Quaker view. As individuals, yes, we come and then go. RIP Henry Kissinger. I do not believe in either heaven or hell, despite their value in storytelling. </p><p><b>It's </b>not necessarily "comin' for ALL of <b>US</b>.</p><p><br />As peoples, as vast, potentially global family, social and political formations, we can both survive, and progress, and remake the world within the measure of human and material conditions handed down to us.</p><p>Or not. </p><p>I think the most scientific approach is generally the most optimistic. But as AI practice and research is demonstrating, the most scientific approach tends to be the one encompassing the broadest and richest data. It is in that sense, I believe that democracy has its most profound contribution. Far more profound than the current frauds reflected in contests between two "for sale" political parties.<br /><br />That "for sale" expression is not intended to make Trump, a fascist creep, equivalent to Biden, a decent human being if nonetheless hostage to the same fundamental Kissingerism.</p><p>The best eulogy for the Kiss: Lets Move On!<br /><br /><br /><br /><br /></p><p><br /></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-16191412369509212042023-11-18T13:34:00.000-08:002023-11-18T13:34:27.883-08:00The Marxist Summaries - Nov 18, 2023
<h3 style="text-align: center;">ChatGPT-assisted summaries of recent blog posts by Michael Roberts, a UK Marxist economist.</h3><div style="text-align: center;"><b><i>November 18, 2023</i></b></div>
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Lenin In Disguise: He is Making a Comeback.
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<a href="https://thenextrecession.wordpress.com/2023/11/12/from-a-sahm-recession-to-global-downturn/">From A Sahm Recession To Global Downturn</a>
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<span style="font-family: trebuchet,serif;">
Michael Roberts
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<span style="font-family: trebuchet,serif;">
This article was originally published: November 12, 2023
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The selected text discusses the current state of the US and global economies, highlighting potential risks and challenges they may face. It mentions differing opinions on whether the US will avoid a recession in the next 12 months, with William Dudley, former New York Fed chief, believing that the chances of a recession increase dramatically once the unemployment rate rises by a certain amount. Claudia Sahm, a former Fed economist, has developed the Sahm rule, which accurately predicted recessions since the 1970s, and notes that the reading on the Sahm Rule in October was 0, indicating a potential recession.
The text also mentions that even if the US avoids a contraction in real GDP, it is likely to experience a significant slowdown next year, with inflation remaining above the pre-pandemic average and the Fed's target of 2%. It highlights that major economies worldwide face the risk of recession, as global business activity stalled in October and the global PMI fell below 50, indicating contraction. The Eurozone, Sweden, Canada, and the UK are already experiencing economic contractions, with the UK potentially heading into a technical recession.
The IMF projects a global growth slowdown in 2024, particularly in the European Union, China, and India. Many emerging market economies are facing a debt crisis, with rising debt servicing costs and vulnerability to currency crashes. The World Food Program estimates that food insecurity will affect around 345 million people in 2023, driven by high energy prices and reliance on higher-emission fuels.
The underlying cause of the slowdown in productivity and world trade, as well as the increased geopolitical rivalry, is attributed to the slowing of productive investment growth in the major economies. The text suggests that unproductive investment in finance, real estate, and military spending has been keeping growth up, while investment in technology, education, and manufacturing has dropped away. The global profitability of productive capital has been stagnating or even declining in the 21st century.
The IMF calls for structural reforms, including labor market flexibility, fiscal consolidation, clean energy investment, and increased multilateral cooperation to address global challenges and prevent further fragmentation. However, the text argues that these proposals may be unrealistic given the increased spending on fossil fuel production and rising global temperatures. The IMF's support for financial globalization is also criticized, as it exposes countries to certain risks and can be used as blackmail to stop national governments from implementing measures to stop financial globalization.
In summary, the selected text highlights concerns about the possibility of a recession in the US and major economies, as well as the challenges posed by inflation, debt crises, and food insecurity. It emphasizes the potential slowdown in global growth and the need for sustainable and resilient economic policies.
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<a href="https://thenextrecession.wordpress.com/2023/11/09/visions-of-inequality/">Visions Of Inequality</a>
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<span style="font-family: trebuchet,serif;">
Michael Roberts
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<span style="font-family: trebuchet,serif;">
This article was originally published: November 9, 2023
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The selected text is a review of Branco Milanovic's book "Visions of Inequality" by an economics website. The book explores the evolution of thinking about economic inequality over the past two centuries, focusing on the works of influential economists. Milanovic's analysis of Karl Marx's views on inequality is highlighted in the review.
Milanovic argues that Marx's theory of value can be separated from his discussion of forces that affect income distribution between classes. However, the reviewer questions this observation, suggesting that Marx did address inequality in his writings. According to Milanovic, Marx believed that attempts to reduce inequality within the capitalist system would only lead to reformism and trade unionism, and that the institutions of capitalism needed to be abolished.
The reviewer acknowledges that descriptions of poverty and inequality are present in Marx's work, but argues that they are meant to illustrate the reality of capitalist society and the need to end the wage-labor system, rather than advocate for reducing inequality within the existing system. Milanovic suggests that Marx's view of capitalism and inequality was unfinished, with some important parts of his work remaining incomplete.
The text also mentions other economists discussed in Milanovic's book, such as François Quesnay, Vilfredo Pareto, and Thomas Piketty. It highlights the debate surrounding Marx's interest in inequality and his belief that addressing it requires the abolition of capitalist institutions.
The text provides historical data on wealth and income inequality in the UK and the US during the 18th and 19th centuries. It notes that wealth inequality in the UK was exceptionally high during Marx's time, with the top 1% of wealth-holders owning around 60% of the country's wealth. Income inequality was also high, with capitalists and landlords earning significantly more than workers.
Marx's theory of exploitation is discussed, which is based on the idea that workers produce value greater than the value of their labor-power, leading to profit for capitalists. The text also mentions Marx's theory of classes in capitalist society, which is derived from his theory of value.
The text concludes by mentioning the debate about whether the exploitation of the Global South by the rich imperialist bloc is mainly due to low wages or the productive power of the imperialist bloc. Marx's observation that the value of labor-power differs according to historical and social needs is highlighted in this debate.
Overall, the selected text provides an overview of Milanovic's book and focuses on his analysis of Marx's views on inequality. It highlights the debate surrounding Marx's interest in inequality and his belief that addressing it requires the abolition of capitalist institutions. The text also provides historical data on wealth and income inequality and discusses Marx's theories of exploitation and classes in capitalist society.
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<a href="https://thenextrecession.wordpress.com/2023/11/06/sri-lankas-debt-trap-and-the-vultures/">Sri Lanka’s Debt Trap</a>
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<span style="font-family: trebuchet,serif;">
Michael Roberts
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This article was originally published: November 6, 2023
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The selected text discusses the debt crisis faced by Sri Lanka and the role of China in this situation. It highlights the recent court decision to grant Sri Lanka a six-month pause on a creditor lawsuit filed by Hamilton Reserve Bank, which holds a significant portion of Sri Lanka's defaulted bonds. The court's decision allows Sri Lanka to negotiate with other private sector creditors, bilateral lenders, and the International Monetary Fund (IMF) to arrange a deal and obtain new funds.
The text argues that China is not a major lender to Sri Lanka compared to Western creditors and multinational agencies. Japan and the World Bank remain significant lenders, while China's share is equal to theirs. Commercial lenders now account for nearly 50% of Sri Lanka's debt. The rise in Sri Lanka's debt burden is attributed to the corrupt and autocratic Sri Lankan government's mismanagement rather than China's alleged debt trap.
The Sri Lankan government turned to international sovereign bonds to finance its spending after the 2008 Global Financial Crisis. However, the COVID-19 pandemic further worsened the country's economic situation, with the tourism sector being severely affected. Increased spending and imports, coupled with a decline in foreign currency reserves, led the government to print money to cover deficits, resulting in high inflation.
The text emphasizes that Sri Lanka's debt crisis was primarily caused by domestic policy decisions and facilitated by Western lending and monetary policies. The government's sustained budget deficit was financed by foreign borrowing, with a significant portion owed to private financial institutions. Despite warnings about the Sri Lankan economy, foreign creditors continued lending, and the government refused to change course for political reasons.
The text also addresses the issue of the Sri Lankan port project, often cited as an example of China's debt trap. It argues that China did not propose the port project, and it was driven by the Sri Lankan government's aim to reduce trade costs. The debt trap was a result of domestic policy decisions and facilitated by lax governance and inadequate risk management on both sides.
The article concludes by mentioning the political instability in Sri Lanka, with former President Rajapaksa being forced out of office and replaced by his close supporter, Ranil Wickremesinghe. Despite agreeing to fiscal measures with the IMF, Wickremesinghe has been unable to secure approval for fund release, and the debt rescheduling agreement remains unachieved. Hamilton Reserve Bank is opposing any agreement and demanding full repayment on its Sri Lankan bond holdings.
In summary, the selected text highlights the complexities of Sri Lanka's debt crisis, challenges the notion of China's debt trap, and emphasizes the role of domestic policy decisions and Western lending in exacerbating the situation.
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<a href="https://thenextrecession.wordpress.com/2023/11/04/50-years-of-dependency-theory/">50 Years Of Dependency Theory</a>
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<span style="font-family: trebuchet,serif;">
Michael Roberts
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This article was originally published: November 4, 2023
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The selected text discusses dependency theory, a critique of modernization theory that emerged in the 1960s and 1970s. Dependency theorists argue that poor countries are systematically exploited by wealthy countries and that economic development does not apply to economies in South America, the Middle East, or Africa. The theory identifies two main groups of countries in the global economic system: the core and the periphery. The core countries are wealthy and control the global economy, while the periphery countries are poor and dependent on the core countries for trade, investment, and technology.
The text also references Marx's belief that the more industrially developed countries show the less developed countries an image of their own future. However, only a small group of industrial and commercial capitalist economies achieved Marx's prediction, and these dominant imperialist economies continue to control the world's technology, finance, and resources.
The author, Claudio Katz, focuses on the Marxist variant of dependency theory, which argues that countries remain "dependent" due to the extraction of value from labor in their economies to the imperialist bloc through trade, finance, and technology. The theory of "unequal exchange" in international trade is a fundamental component of Marx's theory of value.
Differences arise within dependency theory regarding the nature of unequal exchange. Some argue it is due to wage differences, while others attribute it to technologically driven productivity differences. The author agrees with the latter perspective, emphasizing that value transfer from the periphery to the core economies is mainly due to productivity differences and technological superiority. The concept of "super-exploitation," where wages in the periphery fall below the value of labor power or below the average international wage, is also discussed. However, the author argues that super-exploitation cannot be the main determinant of value transfer between rich and poor countries.
The text also touches on the role of monopoly power in the dominance of imperialist companies. While some dependency theorists claim it is the main cause, the author argues that it was not the case according to Marini, a prominent Latin American Marxist dependency theorist.
Overall, the text provides a comprehensive overview of dependency theory, its Marxist variant, and the key debates within the theory. It emphasizes the exploitation of poor countries by wealthy countries and challenges mainstream development economics. The author also discusses the concept of "sub-imperialism" and its relevance in understanding contemporary capitalism, but expresses skepticism about its usefulness. The text concludes by highlighting the importance of integrating the theory of value into the explanation of dependency and understanding the logic of underdevelopment in present-day capitalism.
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<a href="https://thenextrecession.wordpress.com/2023/10/31/debt-distress/">Debt Distress</a>
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<span style="font-family: trebuchet,serif;">
Michael Roberts
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This article was originally published: October 31, 2023
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The selected text discusses the increasing rate of debt distress in both poorer countries and the Global North. It highlights how poorer countries struggle to prosper due to international forces setting commodity prices for their exports. Debt owed by poor countries to richer ones in the Global South has been rising rapidly, and debt servicing costs have mounted despite relatively low interest rates. The recent global inflationary spike has led to a sharp rise in interest rates on debt, further increasing the burden of servicing that debt. The contraction of world trade growth, particularly in resource commodities, has also contributed to the debt distress.
In the Global North, rising debt levels and costs are affecting both the capitalist sector and governments. US companies are already facing high interest rates, with borrowing costs for some firms doubling or nearly tripling in 2023 compared to previous years. This has led to an increase in bankruptcy filings and the rise of "zombie" companies that survive by borrowing more because they do not generate enough profit to service their existing debt. The increasing number of corporate defaults and the pressure on creditors, particularly banks, is highlighted as a potential consequence of rising debt distress.
The public sector is also facing debt servicing pressure. The US government, for example, has seen a significant increase in the cost of borrowing due to rate hikes by the Federal Reserve, resulting in substantial spending on interest payments.
Overall, the selected text emphasizes the growing debt distress in both poorer countries and the Global North, highlighting the challenges faced by governments, companies, and the public sector in servicing their debts. The text suggests that debt must be reduced, central banks must keep interest rates up, and governments must reduce deficits through fiscal austerity. The US stock market has already fallen over 10% in the last few months as the cost of borrowing has risen.
The text also mentions the need for entitlement reforms, such as raising retirement pension contributions and the age threshold, and cutting public services. It suggests that many emerging market and developing economies need to reduce the footprint of state-owned enterprises through privatization. The text argues that putting "fiscal houses in order" is essential to ensure governments can deliver for their people, but questions whether this approach is the right way round. It suggests that planned investment in productive sectors and government services globally could lead to economic growth, which would then put fiscal houses in order and alleviate debt distress.
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Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-37557148074146511852023-11-14T04:25:00.000-08:002023-11-14T04:55:08.079-08:00Job Losses For Which a "Just Transition" Awaits<p> </p><h1 style="text-align: center;">"Just Transition" Challenges</h1><h1 style="text-align: center;">Arising from Tech Plus Progressive Agendas</h1><h2 style="text-align: center;"><span> </span><b>At Least 30 Million Jobs seriously impacted</b></h2><div style="text-align: center;"></div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blog.ucsusa.org/wp-content/uploads/2022/01/Untitled-design6-1000x600.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="600" data-original-width="1000" height="240" src="https://blog.ucsusa.org/wp-content/uploads/2022/01/Untitled-design6-1000x600.jpg" width="400" /></a></div><br /><div style="text-align: center;"><br /></div><p>Data from the BLS and American Community Survey, 2022.</p><p>1.<b> Artificial Intelligence: Our (OpenAI) </b> <a href="https://arxiv.org/pdf/2303.10130.pdf">findings</a> reveal that around 80% of the U.S. workforce could have at least 10% of their work tasks
affected by the introduction of LLMs, while approximately 19% of workers may see at least 50% of their
tasks impacted. These estimates were performed based on comparative scoring of high school and college students compared to GPT on a range of standardized tests, and and skill sets or tasks where GPT scoring could be trusted.</p>U.S. civilian labor force seasonally adjusted 2021-2023In October 2023, the civilian labor force amounted to 167.73 million people in the United States.<p>That computes roughly .8 x 167,730,000 x .1 + .5 X 167, 730,000 x .19 JOBS requiring a 'JUST TRANSITION' of </p><p> <b>-- 13.4 MILLION JOBS PLUS 15.9 million Potentially lost.</b></p><p><b><br /></b></p><p style="text-align: center;"><b>**************************</b></p><p style="text-align: center;"><b>Just Transitions for Energy workers?</b></p><div><b>2. Oil and Gas extraction </b>includes 619 reporting workplaces with </div><div><div><br /></div><div><b>-- 126,188 JOBS.</b> Petroleum and Coal refining had fewer facilities (358) and employees (106,450).</div><div><br /></div><div>That does not count <b>500,00 auto mechanics and 157,000 gas station attendants impacted by transition from fossil fuel based vehicles.</b></div><div><b><br /></b></div><div><b><br /></b></div><div style="text-align: center;"><b>************************</b></div><div style="text-align: center;"><b><br /></b></div><div><div style="text-align: center;"><b>Just Transition for Military Industrial Complex</b></div><div style="text-align: center;"><b><br /></b></div><div style="text-align: center;"><br /></div><div>The US military employs <b>700, 000 civilian</b> and <b>2 million military personnel directly.</b></div><div><br /></div>National Defense Industrial Association, in 2021 the domestic DIB included nearly <b>60,000 companies </b><br /><div><br /><div><br /></div><div><br /></div><div><br /></div><div><br /></div><div><br /></div><div><br /></div><div><br /></div></div></div></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-11849532089726804732023-11-11T05:00:00.000-08:002023-11-11T05:00:15.022-08:00GPT vs Collge grad -- SAT -- and Labor Market Performance Contest<p> </p><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><span style="font-size: large;"><a href="https://arxiv.org/pdf/2303.10130.pdf">GPTs are GPTs: An Early Look at the Labor Market Impact Potentialof Large Language Models</a></span></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://images.hothardware.com/contentimages/newsitem/61141/content/small_gpt4-mmlu-translated-accuracy.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="401" data-original-width="708" height="227" src="https://images.hothardware.com/contentimages/newsitem/61141/content/small_gpt4-mmlu-translated-accuracy.png" width="400" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">Abstract </div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">We investigate the potential implications of large language models (LLMs), such as Generative Pretrained Transformers (GPTs), on the U.S. labor market, focusing on the increased capabilities arising from
LLM-powered software compared to LLMs on their own. Using a new rubric, we assess occupations based
on their alignment with LLM capabilities, integrating both human expertise and GPT-4 classifications.
Our findings reveal that around 80% of the U.S. workforce could have at least 10% of their work tasks
affected by the introduction of LLMs, while approximately 19% of workers may see at least 50% of their
tasks impacted. We do not make predictions about the development or adoption timeline of such LLMs.
The projected effects span all wage levels, with higher-income jobs potentially facing greater exposure to
LLM capabilities and LLM-powered software. Significantly, these impacts are not restricted to industries
with higher recent productivity growth. Our analysis suggests that, with access to an LLM, about 15%
of all worker tasks in the US could be completed significantly faster at the same level of quality. When
incorporating software and tooling built on top of LLMs, this share increases to between 47 and 56%
of all tasks. This finding implies that LLM-powered software will have a substantial effect on scaling
the economic impacts of the underlying models. We conclude that LLMs such as GPTs exhibit traits of
general-purpose technologies, indicating that they could have considerable economic, social, and policy
implications. </div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><p></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-12868218602061413852023-10-31T04:05:00.002-07:002023-10-31T04:05:29.015-07:00Krugman: Autoworkers Strike a Blow for Equalitytext only version:<div><a href="https://www.nytimes.com/2023/10/30/opinion/columnists/uaw-autoworkers-strike-union.html">original:</a> <br /><br /> It’s not officially over yet, but the United Auto Workers appear to have won a significant victory. The union, which began rolling strikes on Sept. 15, now has <a href="https://www.nytimes.com/2023/10/28/business/economy/uaw-stellantis-contract-deal.html">tentative agreements</a> with Ford, Stellantis (which I still think of as Chrysler) and, finally, <a href="https://www.nytimes.com/2023/10/30/business/economy/gm-uaw-contract-deal.html">General Motors</a>.<br /><br /><br />All three agreements involve a roughly 25 percent wage increase over the next four and a half years, plus other significant concessions. Autoworkers are a much smaller share of the work force than they were in Detroit’s heyday, but they’re still a significant part of the economy.<br /><br />Furthermore, this apparent union victory follows on significant organized-labor wins in other industries in recent months, notably a big settlement with <a href="https://www.nytimes.com/2023/08/22/business/economy/ups-contract-vote-teamsters.html">United Parcel Service</a>, where the Teamsters represent more than 300,000 employees.<br /><br />And maybe, just maybe, union victories in 2023 will prove to be a milestone on the way back to a less unequal nation.<br /><br /><br /><br /><br />Some history you should know: Baby boomers like me grew up in a nation that was far less polarized economically than the one we live in today. We weren’t as much of a middle-class society as we liked to imagine, but in the 1960s we were a country in which many blue-collar workers had incomes they considered middle class, while extremes of wealth were far less than they have since become. For example, <a href="https://www.epi.org/publication/ceo-pay-in-2021/">chief executives of major corporations</a> were paid “only” 15 times as much as their average workers, compared with more than 200 times as much as their average workers now.<br /><br />Most people, I suspect, believed — if they thought about it at all — that a relatively middle-class society had evolved gradually from the excesses of the Gilded Age, and that it was the natural end state of a mature market economy.<br /><br /><br />However, a revelatory <a href="https://www.nber.org/papers/w3817">1991 paper</a> by Claudia Goldin (who just won a <a href="https://www.nytimes.com/2023/10/12/opinion/columnists/claudia-goldin-nobel-prize.html">richly deserved</a> Nobel) and Robert Margo showed that a relatively equal America emerged not gradually but suddenly, with an abrupt narrowing of income differentials in the 1940s — what the authors called the Great Compression. The initial compression no doubt had a lot to do with wartime economic controls. But income gaps remained narrow for decades after these controls were lifted; <a href="https://fred.stlouisfed.org/series/GINIALLRF">overall income inequality</a> didn’t really take off again until around 1980.<br /><br />Why did a fairly flat income distribution persist? No doubt there were multiple reasons, but surely one important factor was that the combination of war and a favorable political environment led to a huge <a href="https://capture.dropbox.com/EvOEDZnsyx0nqy4B">surge in unionization</a>. Unions are a force for <a href="https://davidcard.berkeley.edu/papers/union-wage.pdf">greater wage equality</a>; they also help enforce the “<a href="http://www.law.harvard.edu/faculty/bebchuk/pdfs/2003.Bebchuk-Fried.Executive.Compensation.pdf">outrage constraint</a>” that used to limit executive compensation.<br /><br />Conversely, the decline of unions, which now represent <a href="https://unionstats.com/">less than 7 percent</a> of private-sector workers, must have played a role in the coming of the Second Gilded Age we live in now.<br /><br /><br /><br />The great decline of unions wasn’t a necessary consequence of globalization and technological progress. Unions remain strong in some nations; in Scandinavia, the great majority of workers are <a href="https://www.oecd-ilibrary.org/employment/data/trade-unions/trade-union-density_data-00371-en">still union members</a>. What happened in America was that workers’ bargaining power was held back by the combination of a persistently slack labor market, with <a href="https://www.whitehouse.gov/nec/briefing-room/2023/01/20/the-biden-economic-agenda-two-years-in/">sluggish recoveries</a> from recessions and an unfavorable political environment — let’s not forget that early in his presidency, Ronald Reagan crushed the <a href="https://www.nytimes.com/2011/08/03/opinion/reagan-vs-patco-the-strike-that-busted-unions.html">air traffic controllers’ union</a>, and his administration was consistently hostile to union organizing.<br /><br />But this time is different. Research by <a href="https://blueprintlabs.mit.edu/research/the-unexpected-compression-competition-at-work-in-the-low-wage-labor-market/">David Autor, Arindrajit Dube and Annie McGrew</a> shows that a rapid recovery that has brought <a href="https://fred.stlouisfed.org/series/UNRATE">unemployment</a> near to a 50-year low seems to have empowered lower-wage workers, producing an “unexpected compression” in wage gaps that has eliminated around a quarter of the rise in inequality over the previous four decades. The strong job market has probably encouraged unions to stake out more aggressive bargaining positions, a stance that so far seems to be working.<br /><br />By the way, I constantly encounter people who believe that the recent economic recovery has disproportionately benefited the affluent. The truth is exactly the opposite.<br /><br />The political ground also seems to be shifting. <a href="https://news.gallup.com/poll/398303/approval-labor-unions-highest-point-1965.aspx">Public approval of unions</a> is at its highest point since 1965, and Joe Biden, in a presidential first, <a href="https://www.nytimes.com/2023/09/26/us/politics/biden-uaw-strike-picket-michigan.html">joined an autoworker picket line</a> in Michigan in September to show support.<br /><br />None of what’s happening now seems remotely big enough to produce a second Great Compression. It might, however, be enough to produce a Lesser Compression — a partial reversal of the great rise in inequality since 1980.<br /><br /><br /><br />Of course, this doesn’t have to happen. A recession could undermine workers’ bargaining power. If Donald Trump, who also visited Michigan but spoke at a <a href="https://www.nytimes.com/2023/09/27/us/politics/trump-autoworkers-detroit.html">nonunion shop</a>, returns to the White House, you can be sure that his policies will be anti-union and anti-worker. And Mike Johnson, the new speaker of the House, has an <a href="https://www.politico.com/news/2023/10/25/new-house-speaker-mike-johnson-on-the-issues-00123627">almost perfect record</a> of opposing policies supported by unions.<br /><br />So the future is, as always, uncertain. But we might, just might, be seeing America finally turn back toward the kind of widely shared prosperity we used to take for granted.</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-26097442876015562382023-09-22T04:08:00.002-07:002023-09-22T04:14:01.743-07:00Dean Baker: A High National Debt Can be Bad News, Sort of Like a High Stock Market<br />A High National Debt Can be Bad News, Sort of Like a High Stock Market<div><br /></div><div>Dean Baker <a href="https://www.patreon.com/posts/high-national-be-89645725?utm_medium=post_notification_email&utm_campaign=patron_engagement&utm_source=post_link&token=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYTpjOWY5OGI4Mi1iY2JlLTRkM2ItYTJiYS05Mjc3NzYwNTRlOGYiLCJwb3N0X2lkIjo4OTY0NTcyNSwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.E9cgVVrceyGd7BYK7CvIDJYijjko1Dzt5g1pbAozRBA">via Patreon</a><br /><br /><br /><br /><br /><a href="https://www.patreon.com/posts/high-national-be-89645725?utm_medium=post_notification_email&utm_campaign=patron_engagement&utm_source=post_link&token=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYTpjOWY5OGI4Mi1iY2JlLTRkM2ItYTJiYS05Mjc3NzYwNTRlOGYiLCJwb3N0X2lkIjo4OTY0NTcyNSwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.E9cgVVrceyGd7BYK7CvIDJYijjko1Dzt5g1pbAozRBA"><img height="158" src="https://blogger.googleusercontent.com/img/proxy/AVvXsEj5aMx1McV2Fk58kUOZE9p_N9HB0k7PH18-Tjk_IyGdsG0ueupo6Gio8rf1UcgjS8_EIT9qtv2A7mFtNLEwWXe-hmPbtB7DB6T-_x1SrfKd2QKbhYK6gHc3eW7YEKLJRlnt94F_kNMSVmj3-onZTETlV85BN1rUhPuHYusX5Ft2Ro_wpLJG_sWKs-KtFwiUbgZ9McNapVR2WoWzOy139eAmuu85LiN4n7QjSGKVnDIZ8KM6zN7E4TmlRXZvC8jGK_Sz9a0JB32Ol0EecMFakjpz7ZB1MeNrHXUOxNjv2ioPGrSv8ZRa4EZog8FopCCHS4VG_WONe7rOV5QjIVNGdB6Q6aYvYUtHVa8=w400-h158" width="400" /></a><br /><br /><br /><br /><br />The media have been giving considerable attention to the national debt in the last year or so. They have some cause, it has been rising rapidly, and more importantly, the interest burden of the debt has increased sharply since the Fed began raising rates last year. But, if we want to be serious, rather than just write <a href="https://www.nytimes.com/2023/09/18/us/politics/us-national-debt.html">scary</a> <a href="https://www.cnbc.com/2023/09/19/united-states-national-debt-tops-33-trillion-for-first-time.html">headlines</a>, we have to ask why the debt is a problem.<br /><br />The first concern to dispel is the idea that the country somehow has to pay off its debt. Our national debt is in dollars, which the government prints. Unless something truly bizarre happens, we will always be able to print the dollars needed to pay interest and principal on government bonds.<br /><br />We could have some story that if our economy collapses people could lose confidence in our debt. That is true, but a bit nuts. If our economy collapses, we should be worried about our economy collapsing, the debt is really beside the point.<br /><br />The more serious issue is that rising interest payments will be a burden. This is a real issue, but there are several important qualifications. First, in spite of the large debt, even relative to the size of the economy, interest payments relative to GDP are not especially high. Currently, interest payments relative to GDP were just hitting 2.8 percent last quarter. They are still below the 4.4 percent share reached in the early 1990s. And, for history fans, this burden did not prevent the 1990s from being a period of general prosperity.<br /><br /><br /><br /><br />Military Spending<br /><br />The second point is that we do need to put this burden in a bit of perspective since it is often treated as a generational issue. Suppose the interest burden does rise to three or four percent of GDP, or even higher. Is that an unbearable burden?<br /><br />Back in my younger days, we use to spend a much larger share of the budget on the military. In the 1950s and 1960s military spending was generally over 8.0 percent of GDP. At the peak of the Vietnam War it exceeded 10.0 percent of GDP. It dropped in the 1970s, but the Cold War buildup under Reagan again pushed it above 6.0 percent of GDP.<br /><br />Military spending is currently under 3.0 percent of GDP. Suppose a magician came down and eliminated the national debt so we no longer had to pay any interest, but forced us to increase spending on the military to 6.0 percent of GDP. Are we now better off? Can we tell our children that they should be happy?<br /><br />What we should care about with military spending is that we are secure as a country. If that can be accomplished spending less than 3.0 percent of GDP on the military, then we are much better off than in a world where we are spending 6.0 percent of GDP on the military.<br /><br />The amount of spending it takes to make us secure, and what that means, are obviously debatable points, but the basic logic is not. From the standpoint of maintaining and improving our living standards, spending on the military is the same thing as throwing money down the toilet.<br /><br />This is an important point that needs to be yelled loudly at the people anxious to have a New Cold War with China. They also need to recognize that the Soviet economy peaked at around 60 percent of the size of the U.S. economy. The Chinese economy is already <a href="https://cepr.net/a-cold-war-with-china-global-warming-and-why-we-cant-have-nice-things/">more than 20 percent</a> larger using a purchasing power parity measure of GDP. This means that Cold War-type competition with China is likely to be incredibly expensive, even assuming we never get into an actual hot war.<br /><br />Global Warming: Will We Celebrate Containing the Debt if the Planet Burns?<br /><br />The third point on this generational issue is that we need to look around at the country and the world. Global warming is having a large and devastating effect on the environment. We are seeing an unprecedented wave of extreme weather events, including droughts, dangerous heat waves, hurricanes and flooding. This will only get worse through time.<br /><br />It is great that Biden put the country on a path toward clean energy with the Inflation Reduction Act, but we will need to do much more. Thankfully, the rest of the world, and especially <a href="https://cepr.net/the-chinese-need-to-stay-poor-because-the-united-states-has-done-so-much-to-destroy-the-planet/">China</a>, is far ahead of us. The idea that somehow the debt is an overriding generational issue, when we are facing the destruction of the planet, is something that can only be taken seriously by our policy elites. Our success in limiting global warming will have infinitely more relevance to the quality of the lives seen by our children and grandchildren than anything that happens with the national debt.<br /><br />Why Spend Money When We Can Just Issue Patent Monopolies?<br /><br />The fourth point is that direct spending is only one way the government pays for things. The government supports a huge amount of innovation and creative work by awarding patent and copyright monopolies. While these monopolies are <a href="https://cepr.net/report/professor-stiglitzs-contributions-to-debates-on-intellectual-property/">one way</a> to provide incentives, they also carry an enormous cost. In the case of prescription drugs alone, they likely cost the country more than $400 billion a year (more than $3,000 per family, each year) in higher drug prices. We will spend over <a href="https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categories=underlying#eyJhcHBpZCI6MTksInN0ZXBzIjpbMSwyLDNdLCJkYXRhIjpbWyJjYXRlZ29yaWVzIiwiU3VydmV5Il0sWyJOSVBBX1RhYmxlX0xpc3QiLCIyMDE3Il1dfQ==">$570 billion</a> this year for drugs that would likely cost us less than $100 billion if they were sold in a free market without patent monopolies or related protections.<br /><br />If we look at the impact of these government-granted monopolies in other industries, like medical equipment, computers, software, video games, and movies, they almost certainly add more than $1 trillion a year to what households pay for goods and services. For some reason, the people screaming about the debt literally never say a word about the costs the government imposes on us by issuing patent and copyright monopolies.<br /><br />And, these costs are interchangeable. For example, we can spend more money on government-funded research in developing prescription drugs and require that drugs developed as a result are available as generics sold in a free market. In the standard deficit accounting, we would only pick up the extra cost from the government-funded research. We would not see the savings from cheaper drugs, except insofar as the government paid less for buying drugs.<br /><br />We could also go the other way. We could give out patent or copyright monopolies as a way to fund various government services. For example, we could give the Social Security trust fund a patent monopoly on ice that lasts for 1000 years. It could finance benefits by charging licensing fees for using ice. That would save the government around $1 trillion a year in Social Security spending. That should make the deficit hawks very happy.<br /><br />Yeah, that would be absurdly inefficient and be a license for all sorts of corruption. But so is our current patent system, which does things like encourage drug companies to push opioids and <a href="https://www.nytimes.com/2022/12/29/health/alzheimers-drug-aduhelm-biogen.html">lie</a> about the effectiveness of their drugs. But, we know the deficit hawks, and many in the media who push their handouts, don’t care about efficiency, they just want lower debt. So, the patent monopoly on ice should be good with them.<br /><br />Debt and Stock Prices<br /><br />Okay, but I promised to say how a higher debt can be bad news like higher stock prices. This requires a little bit of Econ 101. The serious story of how higher debt is bad is that it can lead to higher interest payments.<br /><br />The “can” here is important. The debt-to-GDP ratio rose considerably in the Great Recession and the years immediately following, but the ratio of interest payments to GDP fell. This was because we had very low interest rates in these years. The Fed deliberately kept rates near zero because it was combatting weak growth and high unemployment, as we faced a period of secular stagnation.<br /><br />We don’t know yet whether the economy will return to something like secular stagnation as the impact of the pandemic fades into the distance. Some of the factors that led to this stagnation, most notably slower population and labor force growth, and an upward skewed distribution of income, are still present. However, we have seen some reversal of the upward redistribution of income, as wage growth has been strongest for those at the bottom of the wage ladder. But, we don’t know how far this trend will go. We also don’t know if the full increase in profit shares will be reversed.<br /><br />The impact of new technologies, most notably AI, is still very much unclear. If they do have a substantial impact on productivity growth, then we may again see rising unemployment and a need for the Fed to push rates lower. Also, as we switch to clean technologies, there will be less demand for fossil fuels and many of the associated services. Of course, these technologies may also be associated with an investment boom that will increase demand for labor.<br /><br />There are reasonable arguments on both sides of the secular stagnation issue, but let’s assume that the Fed does not return to its zero-interest policy, but rather we get an interest rate structure that looks something like what we saw just before the pandemic. In that context, we will see higher interest payments as a share of GDP.<br /><br />It is worth thinking for a moment why this would be bad. As the Modern Monetary Theory people remind us, the problem of a government deficit is not the financing – we can always print the money – the problem is that it can be inflationary, since it can lead to too much demand in the economy.<br /><br />Interest payments on the debt don’t directly create demand in the economy. They create demand only when people spend the interest payments. Insofar as the payments are made to high-income people with low propensities to consume, they will have a relatively limited impact on spending and demand. But not all interest payments go to rich people, and even rich people will spend some fraction of their interest.<br /><br />So, the problem of higher interest payments on the debt is increased consumption demand, which can create inflationary pressures in the economy. This gets us to the problem of a rising stock market.<br /><br />While some people think of the stock market as a way to raise money for investment, most firms rarely raise money through this channel. In fact, companies typically go public as way for the initial investors to cash out their gains. The main economic impact of a rising stock market is not on investment but rather on consumption.<br /><br />There is a well-known, <a href="https://www.newyorkfed.org/medialibrary/media/research/epr/99v05n2/9907ludv.pd">stock wealth effect</a> that is usually estimated at between 3 to 4 percent. This means that an additional dollar of stock wealth leads to an increase in annual consumption of 3 to 4 cents. Households currently hold around <a href="https://www.federalreserve.gov/releases/z1/20230908/html/l224.htm">$30 trillion</a> in stock wealth. If the stock market rises by 20 percent, that would create another $6 trillion in stock wealth.<br /><br />Assuming that people spend 3-4 percent of this new wealth, we would see an increase in annual consumption of between $180 billion and $240 billion. If we are concerned about excess demand creating inflationary pressures in the economy, then we should be worried about the impact of this rise in stock wealth.<br /><br />In that sense, a rising stock market is bad news for the economy in the same way as increased interest payments on government debt. If we assume that 70 percent of interest payments are spent, then a 20 percent rise in the stock market will create roughly the same inflationary pressure as $300 billion in additional interest payments.<br /><br />So, if we are worried that interest on the debt will be leading to inflation, we should also be reporting the bad news on inflation every time we see a big run-up in stock prices. In short, interest on the debt can be a problem, but it gets far more attention than items that are much bigger problems in any realistic assessment of the situation.<br /><br /><br /><br /><br /><br /><br /><br /><br /><img src="https://blogger.googleusercontent.com/img/proxy/AVvXsEhClgEDE4z2FL9-Qc8VTI6Lp2nBPq6VSbnsFYKStRdcngP-_ItHNsfPBVS4vT5BCwutEQXg45b1mwG2RLtfABZ1Wr-yaiG8xE6ETgGJWd7ax06eKlC-fl1e9r8Ld1_kMWiDPePqVWVMel7z-LtuwC0601TkbjC0j3pxezTF7xOK0_yfwG0_8z8eQOdWSJeKAdgdRvqV99SIL-LCCaCqA05oU-BwBcPWGxH9GH8FHlDMnfQbDu7TsSsaAj_WaqPp3_yLJsPDHfNFTn_fhG-hlpu91qX9VgIsQ6QHMMzLK1MkwdaKPeECJiKNwi8JiMVPVonL5XgV9Bcs2PUm-KQx7TyQx9c24-2ic4qKFX24boBF74tGU9OFazs8B5w0qLAbhJMHq7KS0Wo2lZ3zPU-xkF7smABMa9-BD62HGm-Qa2Vg8PbomUSOHZ6KyxEMAauvybdBu8c-6wXRtVOGz0nSAmw1ixYE0phqd85NhiZ1ZB5Aoy0LsoF_MJYXRpyY1kr45Sx4X2Ipeang_LiQUAmBHTN4Xo0FrcyzqyYFEuMZ9HP5tPHP3mU8Ak2lchD7qrS4j-tgZXkwaIoRlSB_y7pRXZsUgGaRtt3UlS0jg9SEIiKbAz7JsPnMUDeLKN1_J-RS5a2Wtq8CtdHPwVEPKxzkocyQh85P8STzUzbY7w8t98mOmL1_6N86YKgNx4FIUqlZV3ydeu2ZpiW3hx_REsch_fzORcJzirVSh-gasya0yPJwo_SjFA5TfAeiPwlmE81CboeofOJZLLvWH6LW=s0-d-e1-ft" /><br /><br /><br /><br /><br /><br /><br /><br /><br /></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-78671547862485525242023-08-05T11:42:00.002-07:002023-08-05T11:42:27.846-07:00Playing Games with GDP Numbers: China’s Growth Has Not Slowed to a Crawl<p> <span style="background-color: white; color: rgba(11, 12, 15, 0.95); font-family: system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Arial, sans-serif; font-weight: var(--global-fontWeights-heading-default);"><span style="font-size: large;">Playing Games with GDP Numbers: China’s Growth Has Not Slowed to a Crawl</span></span></p><p><span style="background-color: white; color: rgba(11, 12, 15, 0.95); font-family: system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Arial, sans-serif; font-weight: var(--global-fontWeights-heading-default);"><span style="font-size: large;"><br /></span></span></p><p><span style="background-color: white; color: rgba(11, 12, 15, 0.95); font-family: system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Arial, sans-serif; font-weight: var(--global-fontWeights-heading-default);"><span style="font-size: large;">Dean Baker, <a href="https://www.patreon.com/posts/playing-games-to-87214374?utm_medium=post_notification_email&utm_campaign=patron_engagement&utm_source=post_link&token=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYTo3OTcxOTVkZi03YTE1LTQzMjItYTViZC04YmI2MjFjOGZjMGIiLCJwb3N0X2lkIjo4NzIxNDM3NCwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.rYDt6lf4lvsbau-B6MvjbTFvbzgJ6fdOlAXKaKrm2uE" target="_blank">via Patreon</a></span></span></p><div class="sc-1sp3zau-0 fYcGch sc-rcywpx-0 hRKPxe" data-tag="post-content" style="background-color: white; color: rgba(11, 12, 15, 0.95); font-family: system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Arial, sans-serif; font-size: var(--global-fontSizes-body-md) !important; line-height: 1.5; white-space-collapse: preserve-breaks;"><div class="sc-1ye87qi-0 cZNwdx" style="font-size: inherit;"><p style="font-size: inherit; line-height: 1.5; margin: 10px 0px !important;">GDP growth in the United States is <em>always</em> reported as an annual rate. This means that if the economy grew 0.5 percent from the first quarter to the second quarter, it would be universally reported as 2.0 percent growth, with reporters always giving the annual rate. This is basically four times the quarterly rate. (It’s actually the first quarter’s growth rate taken to the fourth power, but this will be the same for small numbers.)</p><p style="font-size: inherit; line-height: 1.5; margin: 10px 0px !important;">This is a simple and obvious point. It is not something that is debated among reporters or economists, it is just a standard that has become universally accepted.</p><p style="font-size: inherit; line-height: 1.5; margin: 10px 0px !important;">Many other countries do not report their growth numbers as annual rates. They report a quarter’s growth number at a quarterly rate. That is fine, there is nothing that makes the use of an annual rate better, the point is that everyone should know that the number is being reported as a quarterly rate, if that is the case.</p><p style="font-size: inherit; line-height: 1.5; margin: 10px 0px !important;">I have often railed at news stories that have reported another country’s growth number, without telling readers that it is a quarterly rate. That obviously gives a very distorted picture.</p><p style="font-size: inherit; line-height: 1.5; margin: 10px 0px !important;">Fareed Zakaria committed this sin today in a Washington Post <a href="https://www.washingtonpost.com/opinions/2023/08/04/america-survive-china-not-trump/" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;">column</a> that told people that China’s economy is stuck in a rut. Zakaria <a href="https://www.washingtonpost.com/opinions/2023/08/04/america-survive-china-not-trump/" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;">told readers</a>:</p><p style="font-size: inherit; line-height: 1.5; margin: 10px 0px !important;">“China’s economy is in bad shape. Economic growth last quarter came in at <a href="https://www.reuters.com/world/china/chinas-q2-gdp-growth-slows-08-qq-just-above-expectations-2023-07-17/" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;">0.8 percent</a>, putting China at risk of missing the <a href="https://www.bloomberg.com/news/articles/2023-07-17/china-growth-forcasts-cut-as-economists-highlight-risks-in-data" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;">government’s target</a> for the year.”</p><p style="font-size: inherit; line-height: 1.5; margin: 10px 0px !important;">Since Zakaria did give a link for his growth figure it was easy to click through and see that the 0.8 percent figure was in fact a quarterly growth rate. This translates into a 3.2 percent annual rate. Zakaria is right that this growth rate is a disappointment for China, but a 3.2 percent rate is very different from a 0.8 percent rate.</p><p style="font-size: inherit; line-height: 1.5; margin: 10px 0px !important;">I’m sure Zakaria is well aware of the distinction between a quarterly growth rate and an annual rate. I’m also sure he would not have made this sort of mistake on purpose. He could have made his point just fine using the actual number.</p><p style="font-size: inherit; line-height: 1.5; margin: 10px 0px !important;">But it does reflect extraordinary sloppiness on Zakaria’s part, as well as the Post’s proofreading system, that this mistake was not caught before it found its way into print. I would hope that the Post would correct it, but I know that the Post’s opinion editors <a href="https://cepr.net/the-washington-post-s-nafta-fantasy-10-years-later/" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;">do not care</a> about correcting mistakes.</p></div></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-72576735533884090932023-07-23T11:10:00.001-07:002023-07-23T11:11:46.384-07:00Dean Baker: The Chinese Need to Stay Poor because the United States Has Done So Much to Destroy the Planet<p> <span style="color: rgba(11, 12, 15, 0.95); font-family: system-ui, -apple-system, BlinkMacSystemFont, Segoe UI, Roboto, Arial, sans-serif;"><span style="background-color: white;">Dean Baker -- <a href="https://www.patreon.com/posts/chinese-need-to-86495176?utm_medium=post_notification_email&utm_campaign=patron_engagement&utm_source=post_link&token=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYTo5YmM2ZTc2MS03ZDNiLTRjODMtOGNkOC0xNDllY2QzNzg1MzIiLCJwb3N0X2lkIjo4NjQ5NTE3NiwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.Dq0L8AyzLTRs54Hr2pZFNLFD790pQCZCqrVfnUgmhok">via Patreon</a></span></span></p><div class="sc-1sp3zau-0 fYcGch sc-rcywpx-0 hRKPxe" data-tag="post-content" style="background-color: white; color: rgba(11, 12, 15, 0.95); font-family: system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Arial, sans-serif; font-size: var(--global-fontSizes-body-md) !important; line-height: 1.5; white-space-collapse: preserve-breaks;"><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">That line is effectively the conventional wisdom among people in policy circles. If that seems absurd, then you need to think more about how many politicians and intellectual types are approaching climate change.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Just this <a href="https://www.nytimes.com/2023/07/19/world/asia/xi-china-climate-kerry.html?searchResultPosition=3" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">week</a>, John Kerry, President Biden’s climate envoy, was in China. He was asking the Chinese government to move more quickly in reducing its greenhouse gas emissions. President Xi told Kerry that China was not going to move forward its current target, which is to start reducing emissions by 2030.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">I know from Twitter that many people think that Kerry’s request was reasonable and that Xi is jeopardizing the planet with his refusal to move forward China’s schedule for emission reductions. This is in spite of the fact that China is by far the world leader in wind energy, solar energy, and electric cars and that all three are growing at double-digit annual rates.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">The basic complaint is that China must start reducing its emissions now because of the crisis facing the planet. To my Twitter friends, the problem is that China is the world’s biggest emitter of greenhouse gas. It doesn’t matter that it has four times the population of the U.S. and emits less than <a href="https://www.worldometers.info/co2-emissions/co2-emissions-per-capita/" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">half as much</a> on a per person basis. Nor does it matter that its economy is growing rapidly as it tries to catch up to the living standards enjoyed in the United States and other wealthy countries.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">This complaint against China hinges on two sorts of arguments that would be dismissed as nonsense if they were used against the United States.</p><ul style="margin: 0px;"><li>Population size doesn’t matter. We care about how much China is emitting on the whole, not per person.</li><li>Levels don’t matter, we only care about rates of change.</li></ul><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Taking these in turn, a line I heard endlessly (maybe it came from Chatgpt) is that the climate doesn’t care about per capita emissions, it only cares about total emissions. I have no idea what people were thinking when they wrote this.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Would it be okay if Djibouti, with a population of just over 1 million had fifty times the emissions it has now, because the climate only cares about total emissions, not per capita? After all, even with fifty times its current emissions, Djibouti would only be admitting a small fraction of what the U.S. emits.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">If we said this about every country with a relatively small population, we would have enormously more emissions than is now the case. I assume anyone who actually cares about the future of the planet would not say that it’s okay for small countries to have per capita emissions that are many times larger than the U.S.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Measured in per capita terms, the United States is among the worst emitters on the planet. We only have a prayer of preventing a horrible climate disaster because just about every other country emits far less per capita.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">The second argument raises the question of whether historic emissions somehow entitle a country to future emissions. Just writing that sentence seems close to crazy, but that is in fact what many of my Twitter friends seem to believe.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">If we only care about changes and not levels, we are effectively saying that high levels of past emissions allow us to have high levels of future emissions. This line becomes even more absurd when we consider that, in general, higher GDP has been associated with higher levels of emissions. In other words, at least historically, as countries have gotten richer, they have emitted more greenhouse gases.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">In the context of China, which is no longer poor, but still a rapidly growing developing country, limiting its future emissions growth would effectively be saying that the country doesn’t have the right to reach U.S. standards of living. This sort of restriction applied to poorer countries would be even more onerous. It would mean that poor countries in Sub-Saharan Africa, Latin America, and South Asia should be denied the opportunity to improve the living standards of their populations because they had not had high emissions in prior years.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">The story gets even worse when we consider that the only reason that the planet now faces a climate crisis is that the United States and other wealthy countries have spewing vast amounts of greenhouse gases into the atmosphere for decades. If we all still had 19th or 18th century living standards, global warming would not pose an imminent crisis.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Our China critics are effectively saying that China, and implicitly other developing countries, must be denied the opportunity to improve the living standards of their people because we messed up the planet so badly. That might make sense in intellectual circles here, but that is not an argument that is likely to impress people in China or anywhere outside those circles.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Fortunately for the planet, China actually is moving ahead rapidly in promoting clean energy and electric cars. It is now <a href="https://www.carbonbrief.org/guest-post-why-china-is-set-to-significantly-overachieve-its-2030-climate-goals/" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">projected</a> to have its emissions peak in 2025, after which they will be headed downward. This is the result of aggressive policies that it has undertaken to control its emissions, policies that are far more aggressive than anything we have put in place here.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">The Chinese government apparently has far more concern for the future of the planet than its critics in the United States. If we did want an opportunity to put our money where our mouth is, the United States could adopt a policy of making all the technology that it develops fully open-source, so that everyone in the world could take advantage of it, without concerns about patent monopolies or other protections.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">That would help to speed the process of diffusion so that clean technologies could be adopted more quickly around the world. But doing this could actually mean money out of the pocket of intellectual-types here. For that reason, don’t expect to see any discussion of open-sourcing clean technologies in any reputable publication here. Hurting poor people in the developing world might be a fair topic for debate, not taking away money from relatively affluent people here.</p></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-69065346919312530562023-07-22T10:46:00.001-07:002023-07-22T10:46:56.309-07:00Enlighten Radio Podcasts: Labor Beat Radio: Is it Time for Single Payer?<a href="http://podcasts.enlightenradio.org/2023/07/labor-beat-radio-is-it-time-for-single.html?spref=bl">Enlighten Radio Podcasts: Labor Beat Radio: Is it Time for Single Payer?</a>: Enlighten Radio Presents: The Labor Beat Radio Podcast Broadcast LIVE, Tuesday, 9:00 AM Eastern, July 18, 2023 Hosts: John Case, JB ...Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-63127666221314185042023-07-20T17:43:00.004-07:002023-07-21T03:52:56.519-07:00notes on the Working Class 1913 - 2002<i><u>note: statistics were sparse before WWI, and the call up for WW</u></i><br /><br /><b><i>Size of wc and prop of society 1913 and now</i></b><div><b><i><br /></i></b></div><div><b><i>before WWI labor data is very sparse and not considered accurate. The data below includes all occupations AND farming, both tenant and family farm operations</i></b></div><div><b><i>There were 300,00 workers in the Horse and Buggy industry in 1900. Virtually none 30 years later.<br /></i></b><br /><br /><br /><br /><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><ul style="text-align: left;"><li>1910 total workforce -- 51 million in 1900 census</li></ul></blockquote><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><div>38,000,000 men</div></blockquote></blockquote><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><div>13 million women</div></blockquote></blockquote><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><div><br /></div></blockquote></blockquote><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><div>51 million workers</div></blockquote></blockquote><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><div><br /></div></blockquote></blockquote><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><div><div>1913 total population 97,225,000</div></div></blockquote></blockquote></blockquote><div><div><br /></div></div><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><div><ul style="text-align: left;"><li>2020 population 331,4 million</li></ul></div></blockquote><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><div><div><span> </span><span> </span>2020 workforce 149.8 million</div></div></blockquote><div><div><br /></div><div><br /></div><div><br /></div><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEj3zMd-S4vPnCMudhMbHqlSNNX5nE3pwxuUZX5rLsz-L4_Y-x0LjETv0ZkKnb2MRenasmjfr3WEZE3OTR2bEi4i9UM1fhbKTWEpBTsWuZVDZ_r_y8nsmbtAItxU7rrx2W7O2-7k0fD4B8IAyk5EcAC-WT9SIHF00fvy1sFECKBc4EjCZv7r_pJjdsCfMUM" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="261" data-original-width="660" height="254" src="https://blogger.googleusercontent.com/img/a/AVvXsEj3zMd-S4vPnCMudhMbHqlSNNX5nE3pwxuUZX5rLsz-L4_Y-x0LjETv0ZkKnb2MRenasmjfr3WEZE3OTR2bEi4i9UM1fhbKTWEpBTsWuZVDZ_r_y8nsmbtAItxU7rrx2W7O2-7k0fD4B8IAyk5EcAC-WT9SIHF00fvy1sFECKBc4EjCZv7r_pJjdsCfMUM=w640-h254" width="640" /></a></div><br /><br /></div><div><br /></div><div><b><i>1910 -- 2015 workforce division of labor graph comparison</i></b></div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjhHhVUgUTfmNT3CYlRYrOmO0qBO1u65h36wkNRZERm9-DpUgty7Zur_6TXb37esCSat3liotgx8K_3zhsPNRJAIyR2u6V_5N4GagFM4SpedKjz8CW4F3qrS-0-S7bN4D_hc44LDDrd8yMSMbeuu2FRkf9M_eafBjb1bnP8tJR4C07A7MrX5fgf5L-kDJU/s1360/nonfarm-employment-by-ma.jpeg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1360" data-original-width="1240" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjhHhVUgUTfmNT3CYlRYrOmO0qBO1u65h36wkNRZERm9-DpUgty7Zur_6TXb37esCSat3liotgx8K_3zhsPNRJAIyR2u6V_5N4GagFM4SpedKjz8CW4F3qrS-0-S7bN4D_hc44LDDrd8yMSMbeuu2FRkf9M_eafBjb1bnP8tJR4C07A7MrX5fgf5L-kDJU/w365-h400/nonfarm-employment-by-ma.jpeg" width="365" /></a></div><br /><div><br /></div><div><br /></div><div>Notes on 1910 - 1915 data</div><div><br /></div><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><div><p style="background-color: white; font-family: Tahoma, Arial, Helvetica, sans-serif; font-size: 13.92px; line-height: 1.5; margin: 0px; padding: 0px 0px 8px;"><i>Comprehensive data by industry do not exist for 1915, but we have information for 1910 from the decennial census. Data from the 1910 Census show that 32 percent of nonfarm jobs were in manufacturing; in 2015, manufacturing accounted for less than 9 percent of total nonfarm employment. The number of people employed in manufacturing was 8 million in 1910 and 12 million in 2015. While employment in manufacturing grew over the past 100 years, employment in other industries grew more.</i></p></div><div><p style="background-color: white; font-family: Tahoma, Arial, Helvetica, sans-serif; font-size: 13.92px; line-height: 1.5; margin: 0px; padding: 0px 0px 8px;"><i>Transportation and public utilities also declined in percentage terms over the last century, from 13 percent in 1910 to 4 percent in 2015. The number of people employed in transportation and public utilities was 3 million in 1910 and 6 million in 2015.</i></p></div></blockquote><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><div><p style="background-color: white; font-family: Tahoma, Arial, Helvetica, sans-serif; font-size: 13.92px; line-height: 1.5; margin: 0px; padding: 0px 0px 8px;"><i>From 1910 to 2015, employment in mining and the percentage of total employment in mining both decreased. In 1910 there were 1 million people employed in mining, accounting for 4 percent of nonfarm employment; in 2015, the number employed was 25 percent lower than in 1910 and less than 1 percent of total 2015 employment.</i></p></div><div><p style="background-color: white; font-family: Tahoma, Arial, Helvetica, sans-serif; font-size: 13.92px; line-height: 1.5; margin: 0px; padding: 0px 0px 8px;"><i>Domestic service, such as maids and cooks in private households, accounted for about 9 percent of nonfarm employment in 1915; comparable data for recent years are not available.</i></p></div><div><p style="background-color: white; font-family: Tahoma, Arial, Helvetica, sans-serif; font-size: 13.92px; line-height: 1.5; margin: 0px; padding: 0px 0px 8px;"><i>Employment in wholesale and retail trade, including eating and drinking places, increased from 3 million (or 13 percent of nonfarm employment) in 1910 to 33 million (23 percent) in 2015.</i></p></div><div><p style="background-color: white; font-family: Tahoma, Arial, Helvetica, sans-serif; font-size: 13.92px; line-height: 1.5; margin: 0px; padding: 0px 0px 8px;"><i>Far fewer people worked in professional services in 1910. Today’s economy includes professional services related to computers and electronics that didn’t exist a century ago. Fewer than 1 million workers were employed in professional services, accounting for 3 percent of nonfarm employment in 1910. In 2015, 41 million people were employed in professional services, 29 percent of the nonfarm total.</i></p></div></blockquote><div><div><br /></div><div><br /></div><div><br /><br /><ul style="text-align: left;"><li>Over the course of the 20th century, the composition of the labor force shifted from industries dominated by primaryproduction occupations, such as farmers and foresters, to those dominated by professional, technical, and service workers.</li><li>At the turn of the century, about 38 percent of the labor force worked on farms. By the end of the century, that figure was less than 3 percent. </li><li>Likewise, the percent who worked in goods-producing industries, such as mining, manufacturing, andconstruction, decreased from 31 to 19 percent of the workforce. </li><li>Service industries were the growth sector during the 20thcentury, jumping from 31 percent3 of all workers in 1900 to 78 percent4 in 1999.</li></ul><br /><br /><br /><br /><b>Include sharecroppers</b><br /><br /><br /></div></div></div><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px;"><div><div><div style="text-align: left;">Sharecropping continued to be a significant institution in many states for decades following the Civil War. By the early 1930s, there were 5.5 million white tenant farmers, sharecroppers, and mixed cropping/laborers in the United States; and 3 million Blacks.</div></div></div></blockquote><div><div><br /><br /><b>Gdp 1913 to now</b></div><div><b><br /></b></div><div><b>1913 -- 571 billion</b></div><div><b><br /></b></div><div><b>2020 -- 20.1 Trilliion</b></div><div><br /></div><div><span> </span><br /><br /><b>Labor movement size relative to wealth distribution over century</b></div><div> <br />
<iframe frameborder="0" height="460" src="https://www.epi.org?p=107473&view=embed&embed_template=charts_v2013_08_21&embed_date=20230720&onp=107767&utm_source=epi_press&utm_medium=chart_embed&utm_campaign=charts_v2" width="100%"></iframe>
<br /><br /><br /><br /><br /><br /><b>Voting rights for labor no data found, except rise in immigrant and informal work, and incarceration has had negative impact.</b><br /><br /><br /><b>Bea lumpkin -- shorter work week</b><br /></div></div><div><br /></div><div>1914 -- 50.8 hrs</div><div>2020 -- 34.6 hrs</div></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-14661417976179003492023-07-10T11:41:00.000-07:002023-07-10T11:41:19.543-07:00Dean Baker: Mixed Progress in the Fight Against Inequality and for Democracy<p> </p><div class="separator" style="clear: both; text-align: center;"><a href="https://www.thenation.com/wp-content/uploads/2020/09/Sinha-Oligarchs-ftr_img.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="504" data-original-width="800" height="252" src="https://www.thenation.com/wp-content/uploads/2020/09/Sinha-Oligarchs-ftr_img.jpg" width="400" /></a></div><br /><p></p><p><br /></p><p><br /></p><div class="stackable mb-xs" style="background-color: white; color: rgba(11, 12, 15, 0.95); font-family: system-ui, Roboto, sans-serif; font-size: 16px; margin-bottom: var(--global-space-4);"><div class="sc-fotOHu jvdevC" style="-webkit-box-pack: justify; align-items: flex-start; box-sizing: border-box; display: flex; flex-flow: row nowrap; margin: 0rem; padding: 0rem; place-content: flex-start space-between; transition: all 300ms cubic-bezier(0.19, 1, 0.22, 1) 0s;"><span class="sc-rcywpx-1 dLjzQA" data-tag="post-title" style="font-size: var(--global-fontSizes-heading-lg) !important; font-weight: var(--global-fontWeights-heading-default);"><a href="https://www.patreon.com/posts/mixed-progress-85887750?utm_medium=post_notification_email&utm_campaign=patron_engagement&utm_source=post_link&token=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYTo4MmZhOTAzMy01Yjg4LTQzNmQtOGViOS1lZGY4NjVhZmRiNmIiLCJwb3N0X2lkIjo4NTg4Nzc1MCwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.bYpeeL7sW2B1Us956_fRtoqd4DPFUELlLXiwjnCVCDQ">Mixed Progress in the Fight Against Inequality and for Democracy</a></span><span class="sc-rcywpx-1 dLjzQA" data-tag="post-title" style="font-size: var(--global-fontSizes-heading-lg) !important; font-weight: var(--global-fontWeights-heading-default);"><br /></span><span class="sc-rcywpx-1 dLjzQA" data-tag="post-title" style="font-size: var(--global-fontSizes-heading-lg) !important; font-weight: var(--global-fontWeights-heading-default);">Dean Baker</span></div></div><div class="sc-1sp3zau-0 fYcGch sc-rcywpx-0 hRKPxe" data-tag="post-content" style="background-color: white; color: rgba(11, 12, 15, 0.95); font-family: system-ui, Roboto, sans-serif; font-size: var(--global-fontSizes-body-md) !important; line-height: 1.5; white-space-collapse: preserve-breaks;"><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">I have a birthday coming up, so it seems a good time to assess progress, or lack thereof, on the various issues that I have worked on over the decades. There is some big progress in at least a couple of areas, but not much to boast about in the others.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">I’ll start with the success stories.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;"><strong>The Benefits of a Tight Labor Market</strong></p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">The big one, where I feel we really have made huge progress, is the battle for full employment. It might seem like ancient history, but a quarter century ago the absolute standard wisdom in the economics profession was that we could not get unemployment rates below 6.0 percent without ever accelerating inflation. To argue otherwise was to invite ridicule.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">The reality repeatedly contradicted the theory. We sustained an unemployment rate of 4.0 percent in 2000, with only a very modest increase in the inflation rate. The recession caused by the collapse of the stock bubble drove the unemployment rate back up in 2001 and 2002, but we eventually did start to see it fall again, eventually reaching levels around 4.5 percent in 2007.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Unfortunately, this drop in unemployment was driven by a housing bubble, the collapse of which gave us the worst downturn since the Great Depression. The timid response to the recession by the Obama administration and the Republican Congress gave us a weak recovery. However, by the end of 2017, the unemployment rate was again approaching 4.0 percent.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">The Federal Reserve Board had already begun raising interest rates, following the theory that an unemployment rate this low would trigger inflation. But inflation remained tame. In the summer of 2019, the Fed made the remarkable decision to lower rates, even though the unemployment rate was below 4.0 percent.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Fed Chair Jerome Powell said it was time to give the full employment side of the Fed’s mandate equal weight with the price stability side. He noted the huge benefits accruing to Blacks, Hispanics, people with less education, and people with criminal records from low unemployment. He said, given the huge benefits of low unemployment, he wanted to press the unemployment rate as low as possible, until there was clear evidence of inflation.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">This was exactly the script that those of us on the left had been pushing for decades. It was great to hear it from the mouth of a Fed chair.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">We saw this story further reinforced following the pandemic. Many leading lights of the economic profession denounced the Biden stimulus package and warned that it would take a prolonged period of high unemployment to bring inflation back down to acceptable levels.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Well, at this point we can say that the package, along with subsequent policies like the infrastructure bill and the Inflation Reduction Act, quickly boosted the economy back to full employment. While inflation did jump in 2021 and the first half of 2022, we are most of the way back down to the Fed’s 2.0 percent target, even as unemployment remains near its half century low. We are not necessarily out of the woods yet, as the Fed will likely have further rate hikes and we have not yet seen the full impact of past hikes, but thus far, things look pretty damn good.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Furthermore, the benefits of a tight labor market for those at the bottom are clearer than ever. <a href="https://www.nber.org/system/files/working_papers/w31010/w31010.pdf" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">Work</a>by Arin Dube, David Autor, and Annie Mcgrew shows that as much as a quarter of the wage inequality that built up over the prior four decades has been reversed with the tight labor markets in the recovery from the pandemic recession. That is a really big deal.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">We also have moved away from the idea that we need to weaken unions and reduce labor market supports, like minimum wages and unemployment benefits, to have a strong labor market. These were literally the policies being pushed on countries by the OECD in the 1990s and the start of the century. They reflected the consensus view in the economics profession.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">This is no longer the case. Countries with very high unionization rates, like Denmark and Sweden, have managed to maintain high levels of employment and strong growth. It is also now generally recognized that reasonable levels of minimum wages are not impediments to employment. This is huge progress.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;"><strong>Saving Social Security</strong></p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">In the 1990s there was widespread agreement across party lines that Social Security was broken and needed to be “fixed.” Only the ramshackle left and most of the public wanted to protect the current benefit structure. Incredibly, in spite of efforts supported by presidents of both parties, there were no cuts to the program.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">This was a period in which the program faced serious vulnerability because of its structure and the demographics of the populations. In the 1990s, and the first decade of this century, Social Security had a large annual surplus. This was due to the fact that the huge baby boom cohort was in its prime working years. The program was structured so that its trust fund would build up a large surplus in these decades, which could then be used to partially cover the cost of the baby boomers’ retirement.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">This surplus also created a door for privatization. Instead of putting the money into the trust fund, the privatizers dreamed of turning it over to Wall Street, who could make tens of billions of dollars in fees managing individual accounts.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">We managed to get through these decades without privatizing or cutting the program. Now a large portion of the baby boom generation is retired and receiving benefits, eliminating the annual surplus. Also, with this huge cohort either currently dependent on Social Security, or likely to be in the very near future, cuts to benefits will face more opposition than ever. This doesn’t mean that there can never be any cuts to the program, but the probability of cuts that hit a substantial segment of the poor or middle class seems very low.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;"><strong>Failed Efforts</strong></p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Well, that’s my good news, the story with other issues that I worked on is much less bright.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;"><strong>Patent and Copyright Monopolies</strong></p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">In the effort to promote alternative mechanisms to patent and copyright monopolies for financing innovation and creative work, I would say that we have gotten pretty much nowhere. There is virtually no understanding of how these monopolies work and that there can in fact be alternative mechanisms. There is also almost no understanding of how much money is at stake.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">On the first point, it is really hard to get people, including economist-type people, to understand that we don’t need to attach patents to innovation and copyrights to creative work. I don’t know how many times I have laid out a scheme to have the government pay for <em>all</em> the research and testing involved with developing a drug and then have someone ask “how long would the patent be?” [1]</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Somehow people just can’t grasp that if the government pays for the research, there is no patent, there would be no point to a patent, and there would be no one to have a claim to one. Patent monopolies are a mechanism for providing incentive. If the government paid the money (as we did with the Moderna Covid vaccine), it already provided the incentive. If the money wasn’t adequate, then people didn’t have do the work.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">I recall when I read Marx back when I was an undergrad. In <em>Capital</em> he talks about how people see it as natural that money gets interest, failing to recognize that lending money at interest is a social relationship. There seems to be a similar story with innovation and creative work and patents and copyrights. People seem to think that these government-granted monopolies are inherent to these processes, rather than an explicit policy choice.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">There are obviously arguments for these mechanisms as policy tools, but it is impossible to have a serious discussion if people don’t even recognize that they are policy tools and not facts of nature. I don’t know how to advance this point, I just know that, to date, I and others have made very little progress.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">I’m sure that part of the issue is that this hits very directly at people’s view of the economy and its fairness. It is absolutely conventional wisdom that the upward redistribution of the last four decades is explained in large part by the development of technology.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">However, pointing out that who benefits from this technology and how much is a political decision, destroys that view. As a practical matter, we can make patent and copyright monopolies longer and stronger, or shorter and weaker. We don’t even need to have them at all.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">In a world where these monopolies do not exist, there is zero reason to think that all the educated STEM-types would get rich at the expense of everyone else. That may not be a good way to structure the economy, but the point is that it is a possible way. The fact that people like Bill Gates can get hugely rewarded for his talent and work is the result of how we chose to structure the market. It was not “technology.”</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">The other part of the story is getting people to understand how much money is at stake. Here also the ignorance of well-educated people is astounding. If we had a world without patent and copyright monopolies, we would likely free up more than <a href="https://cepr.net/images/stories/reports/ip-2018-10.pdf" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">$1 trillion</a> a year, close to half of all after-tax corporate profits.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">In the case of prescription drugs alone we are likely talking about more than $450 billion a year. That comes to $3,000 per family or more than four times the annual food stamp budget. The money at stake with these monopolies swamps the amount at stake in almost all the political battles that take place in Washington.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Apart from the money involved, expecting someone with a serious illness to effectively pay for research that was done long ago should strike anyone as an act of irrational cruelty. Economists all go nuts if you talk about a tariff of 10-20 percent. Drug patents are effectively tariffs of several thousand percent. Furthermore, since we generally have third party payers (insurers or the government) this is not even a question of consumer choice. How can this policy possibly make any sense?</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">I have been around Washington long enough to know that you don’t just reshape the whole financing mechanism for prescription drugs, medical equipment, or anything else important in one big move. But it should be possible to get a foot, or ideally feet, in the door, pointing the way to alternatives. In recent months I have been hoping that it would be possible to secure funding for a trial of the open-source Covid vaccine developed by Drs. Peter Hotez and Maria Elena Bottari at Baylor College of Medicine and Texas Children’s Hospital.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">This vaccine has already been used by <a href="https://www.npr.org/sections/goatsandsoda/2022/08/31/1119947342/whatever-happened-to-the-new-no-patent-covid-vaccine-touted-as-a-global-game-cha" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">over 100 million people</a> in India and Indonesia, so they should not be too much question about its safety and effectiveness. It just needs a domestic trial to get FDA approval so that it can be used here.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">If it were approved, the shots would likely cost less than $5 each (they cost $2 in India), compared to more than $100 a shot for the Moderna or Pfizer boosters. This contrast should help drive home the benefits of open-source funding of research, but it is an uphill battle.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">For the most part, people, including progressives, can’t even conceive of a world where drugs are cheap. Their hope is largely that the U.S. government will limit drug prices in the same way that governments in Europe, Canada, and elsewhere limit them. But the idea that we would get the government to stop making drugs expensive by giving out patent monopolies, is not even within their realm of thinking. That’s a problem.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;"><strong>The Financial Industry Money Pit</strong></p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Any economics textbook tells students that the purpose of the financial industry is to facilitate transactions and to allocate capital. That should be fairly straightforward, sort of like the purpose of the trucking industry is to move goods from one place to another.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Unfortunately, while most people grasp the purpose of the trucking industry pretty well, they seem to have forgotten the textbook story on finance the moment they leave the class. The point here is simple, but important. An efficient financial industry is a small financial industry.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">We want to be able to conduct transactions quickly and safely. That means I should be able to buy my groceries, pay my rent or mortgage, or do other transactions in the least amount of time and with minimal risk of fraud or theft.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">We also want capital allocated efficiently. That means when someone has a useful innovation, they should be able to get the money to market it on a large scale. People also need capital to buy homes, cars, and to pay for education.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">The textbook tells us we want these tasks done with as few resources as possible, meaning a minimal number of workers and capital being used. If we applied this standard in thinking about the financial industry, many issues become simple.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Take Bitcoin and other crypto currencies. These currencies serve no purpose for the real economy, they are just a form of gambling. And, how do we deal with gambling? We tax it.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Suppose we had a 1.0 percent tax on all crypto trades. That should radically downsize the industry, while raising a nice chunk of revenue for the government, with no negative effects on the real economy at all.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">I know that crypto proponents insist it will eliminate racial discrimination in the financial industry and in other ways create heaven on earth. It’s hard to take these folks seriously, but let’s put it this way. In Utah, I paid 8.0 percent sales tax when I bought a pair of shoes. Surely if crypto is the way to heaven on earth, a 1.0 percent tax won’t stand in the way.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">It’s the same story with the financial industry more generally. We will have roughly $40 trillion in stock trades this year, or $160 billion a day. Does anyone think capital would be less efficiently allocated if we cut this in half to $20 trillion a year? A financial transaction tax that cut the volume in trading in half would free up roughly $120 billion a year (0.5 percent of GDP) that is now spent carrying through these trades.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">The same goes for other parts of the financial industry. We may not outlaw private equity, but we need not structure our tax laws to give the industry special tax advantages like the carried interest tax break. We could also look to have the Fed offer everyone digital bank accounts so that we could save tens of billions annually in bank fees. And, we could have the federal government offer low cost IRAs, like the federal employees’ Thrift Savings Plan, which would save people tens of billions annually on needless management fees charged by brokerage houses and insurance companies.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">On this issue, there is some progress to report. Several states now let private sector employees buy into their state employees retirement system, effectively giving them a low-cost IRA/401(k) option.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">But progress in this and other areas would be so much easier if we could just get everyone to remember their intro econ treatment of finance. We want it simple and we want it cheap: full stop.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">In this vein, I should probably also mention the <a href="https://cepr.net/insight-the-simple-fix-for-corporate-income-tax-tax-stock-returns/" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">idea</a>of converting the basis of the corporate income tax from profits to the returns companies provide to shareholders (dividends and capital gains). The logic of this is straightforward, corporate accountants tell us how much profit the company made. We can get returns to shareholders from any financial website.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">This would effectively be a tax that would be impossible to avoid. The I.R.S. could calculate every company’s tax liability on a single spreadsheet. (That is, all companies tax liability could be calculated on the same spreadsheet.)</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Not only does this mean that we could be sure to get the tax rate we targeted, it would also destroy the tax gaming industry. The tens of billions of dollars that companies currently spend on gaming the tax code could instead go to productive uses.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">We actually have made serious progress on this sort of switch. As part of the Inflation Reduction Act, we now have a 1.0 percent tax on share buybacks. I’m sure that this tax was not put in place as a step towards shifting the basis for the corporate income tax to returns to shareholders, it could end up being a big step in this direction.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Since buybacks are 100 percent transparent (companies can’t very well keep them a secret), this will be the easiest tax ever from the standpoint of enforcement. When people recognize how simple and easy it is to collect a tax that is based on returns to shareholders, there could be momentum to increase the portion of the income tax that is based on buybacks, dividends, and capital gains. It’s always best to tax things we can see directly, as opposed to a number manufactured by corporate accountants.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;"><strong>Reining in CEO Pay</strong></p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">It is common to see people on Twitter and elsewhere complain about the tens of millions pulled down each year by the CEOs of major corporations. While the complaints are certainly justified, they rarely go beyond moral indignation. Few make the point that CEOs are not worth their paychecks, at least in the very narrow sense that they do not produce for their companies an amount of value equal to their $20 million or $30 million paycheck.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">This point is important, since it means CEOs are ripping off the companies they work for. That implies that the shareholders of these companies should be allies in the effort to rein in CEO pay.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">While that point would seem obvious, there is almost no recognition of this logical inference from most progressives. Even people who complain about CEOs using stock buybacks to manipulate stock prices and increase the value of their options, rarely take the next step and say shareholders should be upset about CEOs taking money from them.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">In my view, the key to bringing down CEO pay is to give shareholders more ability to rein it in. As it stands, the corporate board of directors are supposed to be the ones who act on shareholders’ behalf to limit CEO pay. But a recent <a href="https://onlinelibrary.wiley.com/doi/10.1002/smj.3320" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">survey</a> found that these boards don’t even see it as their responsibility to rein in CEO pay. Rather they see their job as helping top management.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">We should be focused on making it easy for shareholders to pressure boards to take CEO pay seriously. I have suggested that the “Say on Pay” votes on CEO pay, which were part of the Dodd-Frank financial reform act, have a bit more teeth.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">As it stands, there is no consequence for a no vote on a CEO compensation package, except for a bit of embarrassment. Suppose that directors lost their pay if a vote went down. My guess is that if two or three packages went down, and boards felt some real consequence from overpaying their CEOs, they would start to ask questions like “can we get someone just as good for less money?” That could end the upward spiral of CEO pay and start to bring it back down to earth.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">This is not just a question of a small number of top execs getting too much money. The bloated pay for CEOs affects pay structures throughout the economy. If the CEO gets $20 million, the rest of C-suite might get close to $10 million, and third tier execs can get $2 million or $3 million. This also affects pay outside the corporate sector. It is now common for presidents of universities or major charities to get several million dollars a year for their work.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">The world would look very different if we had not seen the explosion of CEO pay relative to ordinary workers. If we still had the ratios of 20 or 30 to 1, that we had in the 1960s and 1970s, CEOs would be getting $2 million to $3 million a year. The lower pay for the top end of the income distribution would free up lots of money for everyone else. Unfortunately, we cannot even get a serious discussion of this issue.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;"><strong>Free Trade for Doctors and High-End Professionals</strong></p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">It has become gospel that the United States has pursued a policy of free trade for the last four decades. This is a lie.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Our trade policy has been focused on removing barriers to trade in manufactured goods. This has the effect of putting U.S. manufacturing workers in direct competition with low-paid workers in the developing world. This has the predicted and actual effect of reducing the number of manufacturing jobs in the United States and reducing the pay for the jobs that remain.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">While this policy can be justified by pointing to the benefits for consumers in the form of lower prices, we could have gone the same route of “free trade” when it came to doctors and other highly paid professionals. The models showing the gains from trade work the same way when we talk about physicians’ or dentists’ services as when we talk about cars and clothes.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">However, our trade negotiators never had free trade in physicians’ services on their agenda. That is understandable, since they probably all have friends and relatives who work as doctors, dentists, or as other highly paid professionals.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">But, even if we have to recognize the power relations that are behind trade deals that have the effect of redistributing income upward, there is no excuse for covering up the true story by calling it “free trade.” Trade rules were constructed to redistribute income upward. No one involved in the process had any interest in real free trade.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Anyhow, we continue to get these absurd battles over “free trade.” It’s sort of like debating Catholic or Jewish theology where you first have to accept the tenets of the faith before you can be admitted into the discussion. For now, the participants in trade debates all must pretend that we have a free trade policy, instead of a policy of selective protectionism designed to screw ordinary workers.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;"><strong>Saving Journalism</strong></p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">I raise this one because there is not even a debate on the topic, simply a steady drumbeat of stories about how local newspapers are closing around the country and how national news outlets, both print and broadcast, are laying off reporters because they can’t make money in the current system. While there apparently is a big market for pieces bemoaning the current situation, there is very little interest in discussing policies that could alter the picture and revitalize reporting.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">This is unfortunate, because these <a href="https://www.cepr.net/saving-journalism-will-require-some-new-thinking/" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">ideas</a>do exist. The basic story is finding some way to get public funds to people doing journalism. For whatever reason, we can’t get a serious discussion in major news outlets about how to repair the news system.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">I should also mention another aspect to this issue. Many people rightly complain about the outsize power that the rich have in politics. Under the current system, billionaires can basically contribute as much as they want to support their favored candidates or causes.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Here also, there is a lot of ink spilled decrying the situation, but almost no discussion of serious remedies. Not only would it be almost impossible to limit political contributions given the current makeup of the Supreme Court, it’s not clear it would make much difference even if we could.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Suppose no one was allowed to give more than $1,000 to a candidate and/or a PAC or PAC-equivalent. Is anyone proposing measures that would prevent right-wing billionaires from creating another Fox News, or two or three Fox News networks? Alternatively, are there proposals to prevent right-wing billionaires from buying up CBS, NBC, CNN and every other major news outlets?</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">If right-wing billionaires controlled all the major news outlets, they could effectively run ads for their favored candidates as “news.” They would have no reason to make campaign contributions to get their candidates elected. Their news shows would be far more effective in pushing the case.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">If progressives want to be serious about countering the political power of billionaires, there is no alternative to finding mechanisms that give more voice to ordinary people. No one has even conceived of an effective way to restrict billionaires’ political power, much less put forward a proposal that would have prayer in hell of becoming law in anyone’s lifetime.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">While we are on the topic of the political power of the rich, it would also be a good idea to have a serious discussion of restructuring Section 230 protection for Internet platforms. There is no obvious reason that Internet platforms should be protected from liability for defamation suits based on third party content, when print and broadcast media don’t enjoy this protection.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Although it is not feasible for these platforms to preemptively screen content for defamatory material, they could be subject to take-down rules in the same way that is now the case for allegations of copyright infringement. We can also <a href="https://www.cepr.net/repealing-section-230-giving-mark-zuckerberg-what-he-wants/" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">write the rules</a> in ways that are likely to disadvantage giants like Facebook and Twitter and benefit smaller sites.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Anyhow, there are an infinite number of ways to slice and dice a Section 230 repeal, but the key thing is to get it on the agenda. As of now, it isn’t. All we get are complaints about the way billionaire jerks run their platforms, as though the rest of us are powerless in the story.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;"><strong>Changing the Narrative Is not Easy</strong></p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">It is not easy to move policy debates, as most people recognize. As the old saying goes, “intellectuals have a hard time dealing with new ideas.” And, as we know, intellectuals control the outlets where these issues get debated, which means it’s hard to find an entry point to even try to move the debate. Anyhow, I will keep trying and maybe the picture will look better on my next birthday.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">[1]See <a href="https://deanbaker.net/books/rigged.htm" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank"><em>Rigged</em></a> chapter 5 for an outline of my alternative mechanisms. (It’s free.)</p></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-13577132405194555122023-06-16T06:09:00.001-07:002023-06-16T06:09:42.226-07:00Jerry Brown: Washington's Crackpot Realism -- text only<br /><br /> via the <a href="https://www.nybooks.com/articles/2022/03/24/washingtons-crackpot-realism-jerry-brown/">New York Review of Books</a><br /><br /><br /><br /><br /><br /><br /><br />The twenty years of war since the September 11, 2001, attacks have killed more than 900,000 people, displaced at least 38 million, and cost the United States an estimated $8 trillion.<br /><br /><br /> During these two decades of intense fighting and killing, the US has been responsible for a quantity of suffering that would have been unthinkable when President George W. Bush, with the near-unanimous backing of Congress, launched his assault on Afghanistan. It is clear now that America’s leaders deluded themselves and failed to ask basic questions about the ultimate goal of the war before invading: its human and financial costs, its benefits, or how it would end.<br /><br /><br /><br />One might assume that such disastrous results, and the ignominious end of the war in Afghanistan last year, would lead to a period of reflection and soul-searching. Yet no such inquiry has occurred—at least not one that fully grapples with the shocking self-deception, pervasive misreading of events, and powerful groupthink that drove the longest war in American history.<br /><br />Instead, without missing a beat, Washington power brokers and pundits, in and out of government, have fixed their gaze on a new foe: China. Think tank specialists and defense insiders are churning out books and articles on how to contain China and engage in what they have called a “great power conflict,” a vague description encompassing all manner of hostile interactions—ideological, economic, political, and military. Last year, Admiral Philip Davidson, head of the US Indo-Pacific Command, told a Senate Armed Services Committee hearing that China is accelerating its ambitions to supplant America’s leadership in the world, and that it could invade Taiwan within “the next six years.”<br /><br />The Strategy of Denial by Elbridge Colby well exemplifies this new confrontational and Manichean zeal. Colby’s book clearly, but perhaps unwittingly, exposes the extreme peril we face, as he and others like him lay the intellectual foundations for yet another war thousands of miles from our shores, and one that is more treacherous than those we fought in the Middle East.<br /><br />Colby worked under Defense Secretary Jim Mattis and helped write the 2018 US National Defense Strategy, which proclaimed that “inter-state strategic competition, not terrorism, is now the primary concern.” His book reflects a growing perception throughout the country that China poses a mortal threat to America and its Asian allies. A Gallup poll in March 2021 found that the share of Americans who see China as our greatest enemy doubled in just one year, from 22 percent to 45 percent.<br /><br /><br /><br />Colby’s focus is not on human rights or democratic values, ours or anyone else’s, but rather on how to deter China and “wage war” against it to prevent it from dominating Asia—and ultimately the entire world. He emphasizes relentless military competition among states, while omitting any discussion of how we might compete economically with China or what part international institutions could play. He considers Asia the most important region in the world because it produces 40 percent of global GDP. There are, in his view, stable balances of power in Europe and the Persian Gulf, leaving the Pacific as the primary theater of conflict between America and China.<br /><br />Colby believes that if China were ever to achieve what he calls “hegemony” in Asia, it would have substantial incentives to use such power to exclude the US from the region and “compromise Americans’ freedom, prosperity, and even physical security.” To contain China, he proposes a “binding strategy” that would enmesh the military of the US with those of our Pacific allies, such as Japan, Australia, South Korea, the Philippines, and Taiwan. This, he believes, would force China, if it invaded Taiwan, to attack these countries as well—resulting in a much wider war. The US position would thus be stronger because more countries would be fighting alongside us in an “anti-hegemonic coalition” against China.<br /><br />He also looks to what he calls “thumotic impulses”—spiritedness or passion—to spur on the coalition to fight with greater resolve. Colby takes the concept from Homer’s Iliad, in which Achilles, driven mad by his anger (θυμός, thumos) at the killing of his friend Patroclus, slays Hector. In recent years this theme has been articulated by a number of conservative scholars, such as Harvey Mansfield in his book Manliness (2006); Michael Anton, who served on President Trump’s National Security Council, in his essay “The Flight 93 Election” (2016); Robert Kagan in The Return of History and the End of Dreams (2008); and the political science professor Carson Holloway, who published an essay on thumos in which he described Trump as “a preeminently thumotic being.”<br /><br />Colby acknowledges that war with China over Taiwan could lead to the “limited” use of nuclear weapons and that as a last resort, “selective nuclear proliferation”—which is to say, providing nuclear weapons to allies—might be necessary. He adds:<br /><br /><br />Selective nuclear proliferation to such states as Japan, South Korea, Australia, and even Taiwan might help bridge the gap between regional conventional defeat and US willingness to employ its nuclear forces, especially at scale.<br /><br />Colby tries to assure us that China would be deterred from escalating to a broader nuclear exchange because of America’s retaliatory power.<br /><br /><br />Advertisement<br /><br />Confident about his strategy and markedly unconcerned about its catastrophic implications, Colby seems cavalier about the fog of war and the possibility of errant intelligence. He blithely ignores how much can go wrong. For evidence, consider the recently declassified video footage of a US drone strike during the final days of our withdrawal from Afghanistan that mistakenly killed ten innocent civilians, including seven children. In its subsequent review of more than 1,300 documents from a hidden Pentagon archive, The New York Times found that this wayward bombing was no aberration, but rather part of a pattern of airstrikes in Iraq, Syria, and Afghanistan over the past eight years that were “plagued by deeply flawed intelligence, rushed and imprecise targeting and the deaths of thousands of civilians, many of them children.”<br /><br />These are just the latest examples of shocking intelligence failures stretching back to the Korean War, Vietnam, and the Cuban Missile Crisis, when the US totally missed the fact that Russian missiles in Cuba were already loaded with nuclear weapons and would have been launched before any disabling US strike.<br /><br />The danger here is not this specific book, but that Colby is not an outlier in Washington. In The Long Game: China’s Grand Strategy to Displace American Order, Rush Doshi, currently Biden’s director for China at the National Security Council, writes from a similar zero-sum perspective but focuses more broadly on what he sees as China’s decades-long determination to become the world’s new hegemon. Citing voluminous Communist Party documents, he carefully traces the emergence of what he believes is China’s grand strategy to drive America out of Asia and displace its paramount influence in the world.<br /><br />Writing in scholarly, sometimes jargon-laden prose, Doshi presents the US–China contest as “a competition over regional and global order, as well as the various ‘forms of control’ that sustain it.” According to him, the US cannot maintain its preeminent position unless it blunts China’s worldwide military, economic, and political “order-building” and simultaneously reinvests in “the foundations of American order.”<br /><br />With respect to military engagement, this will entail deploying and sharing with allies a number of advanced weapons systems throughout the Indo-Pacific and conducting joint training and war exercises. On the political and economic front, Doshi calls for expansive industrial policies and innovative initiatives to keep America at the forefront of the vital technologies of the future. Though he recognizes the country’s polarized political environment, he believes that there is enough bipartisan consensus on the threat from China that America can rise to the challenge.<br /><br />Despite this unrelenting competition, Doshi envisions cooperation with China on what he calls “transnational challenges,” such as nuclear proliferation and climate change. Unfortunately, he does not explain how cooperation on these threats would ever be possible in view of the mutual hostility and deep mistrust inherent in his grand strategy.<br /><br />It’s worth noting that “political realism,” the school of thought that Colby and Doshi in their different ways represent, has genuine value. Such an approach can sharpen our understanding of the way nation-states have historically acted as they jockey for advantage over competitors. The doctrine explains why the competition between China and the US is so dangerous, and how diplomacy and human judgment can be overwhelmed by the powerful forces of nationalism—even more so when exacerbated by historical grievances and rapid weapons innovation.<br /><br />World War I is the classic example of how nations move from competition to miscalculation to war, even though it results in mutual catastrophe. In his 2012 book The Sleepwalkers: How Europe Went to War in 1914, the historian Christopher Clark diagnoses self-reinforcing “processes of interaction” that led to the unforeseen and unwanted war, inducing each state to repeatedly react to the other in an attempt to gain an advantage.<br /><br /><br /> So it could be, too, with respect to the current “great power competition” between the US and China. Few want war, but highly competitive actions are fostering increasingly hostile perceptions based on profoundly different histories and social systems.<br /><br /><br /><br />Compounding the danger is a long history of self-assured but mistaken—even delusional—thinking in Washington. More than sixty years ago, the sociologist C. Wright Mills coined the phrase “crackpot realism,” referring to leaders who he believed were making incredibly reckless decisions with little understanding of the consequences, while believing themselves to be exceptionally rational.<br /><br /><br /> In The Hell of Good Intentions (2018), Stephen Walt describes countless blunders made by the foreign policy elites in the Clinton, Bush, Obama, and Trump administrations. He convincingly demonstrates that very bright people with the best of intentions, no matter their party or ideology, get caught up in “rational” processes that lead to disastrous outcomes.<br /><br /><br /><br />This is what makes current groupthink on China, based almost exclusively on zero-sum assumptions, so alarming. General Mark A. Milley, the chairman of the Joint Chiefs of Staff, described China’s recent testing of a hypersonic missile as “very close” to a “Sputnik moment,” referencing the technological advantage that US planners perceived the Soviet Union to have achieved with its satellite launch in 1957. Such statements reinforce the notion that China or America must subordinate the other and engage in a new cold war, rivaling the contest between the US and the USSR. But this one would be, in many ways, far different.<br /><br />First, China, unlike the USSR, has an enormous and growing economy. Second, it is a major trading partner with neighboring countries and is tightly integrated with the rest of the world, including the US. Third, it is making huge investments in research and development and driving technological innovations of all kinds. Finally, China is intensifying its nationalistic fervor with repeated invocations of its victimhood during a “century of national humiliation.”<br /><br />This nationalistic fervor is on display in China’s efforts to threaten and pressure even ordinary people if they dare to criticize Chinese policies. In China Unbound: A New World Disorder, Joanna Chiu, a reporter for the Toronto Star, provides a powerful, heartfelt account of Chinese immigrants and their fraught encounters with Beijing’s United Front Work Department, a lavishly funded government agency that works with the Ministry of State Security. Chiu tells gripping stories of influence operations in such disparate places as Australia, Canada, the US, Italy, Greece, Turkey, and Russia. Chinese agents are sent throughout the world to intimidate international students and others of the far-flung Chinese diaspora. Chiu’s stories demonstrate in human terms just how formidable a task it will be to put the US and China on any kind of cooperative path.<br /><br />The most telling example of China’s nationalism is its deep and pervasive conviction that Taiwan is a part of China. This is an area where compromise seems inconceivable. I can’t imagine China accepting defeat, ever, in a conflict with the US over Taiwan.<br /><br />Kevin Rudd, a former prime minister of Australia and a Mandarin speaker, recognizes this stark reality in The Avoidable War: The Dangers of a Catastrophic Conflict Between the US and Xi Jinping’s China. Rudd directly confronts the growing possibility of war and offers well-thought-out proposals to prevent that catastrophic outcome and the “global carnage” it would cause.<br /><br />Rudd is undaunted by the fact that, in his view, for both Washington and Beijing, “the question is no longer whether such confrontation can be avoided, but when it will occur and under what circumstances,” and he rejects “decoupling, containment, confrontation, and perhaps ultimately the unthinkable itself.” Instead, he sketches out “a joint strategic framework” that would allow China and America to (1) agree on procedures for navigating each other’s strategic red lines, which if inadvertently crossed would lead to military escalation; (2) identify acceptable areas of “nonlethal” but “full-blown strategic competition”; and (3) define those areas where cooperation would be recognized and encouraged, such as on climate change. All of this would be anchored in negotiation, verification, deterrence, and mutual respect. Rudd calls this “managed strategic competition.” He sees a military conflict between China and the US as a catastrophe “beyond imagining” and therefore makes the case for “all necessary precautionary measures” to reduce the risk of war.<br /><br />Like Rudd, several leading scholars envision a future where both China and the US, despite their radically different systems, learn to coexist and even cooperate without waging a new cold war. In Limit, Leverage, and Compete: A New Strategy on China, a 2019 report from the Center for American Progress, Melanie Hart and Kelly Magsamen (who now hold senior positions at the US Departments of State and Defense, respectively) detail a “new strategic framework” for the US–China competition, which they call the “central contest of this century.” Hart and Magsamen grant that China is “actively undermining US interests around the world,” but they diverge from the more hawkish China hands in their strong emphasis on policies that would rejuvenate and strengthen America, “regardless of how China acts.”<br /><br />In plain language, the writers explain what America must do to reassert global leadership and rectify a “pattern of serious missteps” and “decades of strategic inertia.” Hart and Magsamen emphasize the dramatic investments needed to transform American education, specifically calling for debt-free undergraduate education for all students; tuition assistance for postgraduate science, technology, engineering, and math degrees; federal funding for state and local colleges; a redesigned workforce development system; and a substantial commitment to research and development, and public infrastructure. It all sounds plausible, but the politics of getting it done seem remote. The unrecoverable trillions spent on fighting terrorism could have paid the bill; alas, this is not how official Washington sees America’s challenges.<br /><br />Looking outward, Hart and Magsamen are concerned about China’s efforts to obtain sensitive US technology. They recommend a variety of preventive measures aimed at curbing “operations that threaten US prosperity or national security,” though the consequences of these measures remain unclear. They also suggest finding ways to “leverage” Chinese investments in development projects, such as those in its Belt and Road Initiative. The idea here is for America to invest, along with others, to make development projects more transparent and sustainable. This will require the US to work with countries in the Belt and Road target areas and provide competitive financing so that recipient countries are not solely dependent on China. Additionally, they call for partnering with China on such public goods as disaster relief, ocean protection, climate initiatives, and combating pandemics.<br /><br />Focusing on global economic and financial structures, The United States vs. China: The Quest for Global Economic Leadership by C. Fred Bergsten makes an even more urgent case for US–China cooperation: work together to stabilize the world economy or risk a disaster on par with the Great Depression of the 1930s. Bergsten doesn’t ignore the deep differences between our political systems, but he says that the world economy will encounter dangerous disruptions unless the US and China ensure orderly functioning of trade, currencies, lending, and investment. He categorically rejects decoupling the two economies and asserts that if America follows this path, China will just continue to rise and America will falter. He notes that the tariffs imposed by Trump failed to slow China’s growth and adds that most other countries will not follow America if it goes its own way.<br /><br />Bergsten calls for “conditional competitive cooperation,” with both strenuous competition and substantive cooperation on global economic issues that are vitally important to both countries—and to the world. He acknowledges that China has engaged in currency manipulation, theft of intellectual property, and forced transfer of technologies, but he argues that these problems are best confronted through global institutions and skillful diplomacy. Like Hart and Magsamen, Bergsten sees the absolute need for America to straighten out its own economy; make serious investments in research and development, and infrastructure of all kinds; and enact policies that reduce its gross inequalities and wage stagnation.<br /><br />Framing the China threat as irredeemably antagonistic, as many “political realists” are currently doing, misses the reality that both countries—to prosper and even to survive—must cooperate as well as compete. While competition is inevitable, the US and China do share common interests, which could help form the basis of what I would call “planetary realism.” This is an informed realism that faces up to the unprecedented global dangers caused by carbon emissions, nuclear weapons, viruses, and new disruptive technologies, all of which cannot be addressed by one country alone. Both America and China recognized such planetary realism when they pledged, albeit loosely, at the Glasgow climate summit in late 2021 to work together to cut greenhouse gas emissions. The stakes for the world have never been higher, and there has never been a greater need to see the world as profoundly interdependent.<br /><br />It would be foolish to minimize the military dangers that China poses, but it would be even more foolish to act in ways that actually exacerbate them. The better path—in fact, the only path that avoids the horror of war—is to accept that China’s system is different from ours, get our own house in order, and seek a decent modus vivendi. Given America’s recent history of ill-conceived and disastrous wars, we should be skeptical of any other course—especially of loud calls for potentially catastrophic confrontations. Rather than thumos and grand strategies, America desperately needs clarity about the perilous predicament in which it now finds itself, and the courage to think and act anew.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-62486800007660307032023-06-06T10:11:00.004-07:002023-06-06T10:11:36.743-07:00It is difficult to overstate the hostility of the Roberts court to organized labor and the rights of American workers.<br /><br />By <a href="https://www.nytimes.com/column/jamelle-bouie">Jamelle Bouie</a><br /><br /><a href="https://www.nytimes.com/2023/06/06/opinion/roberts-court-glacier-labor-workers.html">Opinion Columnist, NYT</a><br /><br /><br /><br /><h3 style="text-align: left;"><b>It is difficult to overstate the hostility of the Roberts court to organized labor and the rights of American workers.</b></h3><br /><a href="https://illinoislawreview.org/online/how-the-roberts-court-has-changed-labor-and-employment-law/">Under John Roberts</a>, who became chief justice in 2005, the court has made it harder for workers to bring suit against employers collectively, limited the power of workers to hold employers responsible for discrimination on the job, ended the ability of public sector unions to require dues from nonmembers who benefit from collective bargaining and struck down a California law that allowed unions to recruit workers on the property of agricultural employers.<br />Listen to ‘Matter of Opinion’<br />Four Opinion writers on the scandal-prone justice and the Supreme Court.<br /><a href="https://www.nytimes.com/2023/05/11/opinion/matter-opinion-clarence-thomas.html?action=click&module=RelatedLinks&pgtype=Article"><img src="" /><br />Opinion | Michelle Cottle, Ross Douthat, Carlos Lozada, Lydia Polgreen and Phoebe Lett<br />‘Matter of Opinion’: What if We Just Paid Clarence Thomas $1 Million?<br />May 11, 2023</a><br /><br /><br />In pretty much any given conflict between an employer and a group of workers, you can count on Roberts and his Republican allies on the court to side with the employer.<br /><br /><br /><br />We saw this dynamic at work last week when the court issued <a href="https://www.supremecourt.gov/opinions/22pdf/21-1449_d9eh.pdf">its decision</a> in Glacier Northwest v. International Brotherhood of Teamsters Local Union No. 174. The case involves a struggle in Washington State between workers represented by the Teamsters and their employer, a concrete manufacturer.<br /><br />In its lawsuit, Glacier <a href="https://www.scotusblog.com/2023/06/supreme-court-rules-against-union-over-strike-liability/">alleged</a> that its workers timed a 2017 strike so that it would begin after some of the company’s mixing trucks were already filled with wet concrete, a perishable material. Glacier’s non-unionized workers were able to remove the concrete before the trucks were significantly damaged, but the company sued the Teamsters in state court anyway for damages relating to lost revenue from the wrecked concrete.<br /><br /><br />The union countered, citing the right to strike. It also noted that the damaged concrete was essentially spoilage of a product, for which unions have not generally been held liable. The Washington State Supreme Court dismissed the suit on the grounds that the dispute was “pre-empted by the National Labor Relations Act.”<br /><br />The Supreme Court took Glacier’s appeal. And in an opinion joined by Roberts and Justices Sonia Sotomayor, Elena Kagan and Brett Kavanaugh, Justice Amy Coney Barrett held that unions are liable for damages during strikes under federal labor law when they take “affirmative steps to endanger” the employer’s property rather than “reasonable precautions to mitigate that risk.” She also sent the case back to the Washington State court for further litigation.<br /><br />In a separate concurrence joined by Neil Gorsuch, Clarence Thomas said the Supreme Court should reconsider its 1959 decision in <a href="https://en.wikipedia.org/wiki/San_Diego_Building_Trades_Council_v._Garmon">San Diego Building Trades Council v. Garmon</a>, which held that state courts are barred from handling claims concerning conduct that is “arguably” covered by the National Labor Relations Act. Under Garmon, employers must first receive a favorable ruling from the National Labor Relations Board if they want to sue a union for striking in state court. Tossing Garmon would bring labor law much closer to its pre-N.L.R.A. status quo, when conservative judges treated union actions as little more than criminal conspiracies to harm employers. Justice Samuel Alito also filed a concurrence in support of the majority.<br /><br /><br /><br /><br />The divide among the liberal justices was especially striking. The sole dissent came from Justice Ketanji Brown Jackson, who argued that the ruling would “erode the right to strike” and undermine the oversight of workplace law by the N.L.R.B. “Workers are not indentured servants, bound to continue laboring until any planned work stoppage would be as painless as possible for their master,” she wrote. “They are employees whose collective and peaceful decision to withhold their labor is protected by the N.L.R.A. even if economic injury results.”<br /><br />It is possible that Justices Kagan and Sotomayor joined Barrett’s opinion in a strategic move meant to foreclose a more expansive decision from Thomas, Gorsuch and Alito. If so, it may ultimately prove a short reprieve in the face of a conservative majority that is eager to undermine a set of interests (labor’s interests) and a set of rights (workers’ rights) that it does not respect.<br /><br />One point that must be emphasized is how, with its war on workers, the Roberts court is only acting in the Supreme Court’s historical capacity as an agent of capital. At times, the court has taken an expansive view of the civil and political rights of the American people. But it has rarely been a friend to the right of workers to organize and act in their own interests.<br /><br />In the decade before the passage of the National Labor Relations Act, for example, the Supreme Court under William Howard Taft issued rulings <a href="https://supreme.justia.com/cases/federal/us/268/295/">constraining</a> the ability of unions to act and organize, <a href="https://en.wikipedia.org/wiki/Duplex_Printing_Press_Co._v._Deering">subjecting</a> union actions to antitrust law and <a href="https://en.wikipedia.org/wiki/Whitney_v._California">upholding</a> restrictions on speech that targeted unions and other pro-labor organizations.<br /><br />In other words, the Supreme Court is first and foremost the leading defender of property within our political order. And how could it be otherwise? The Constitution itself was written, in part, to protect the rights of property in the face of democracy and the spirit of egalitarianism. Even a more liberal Supreme Court than the one we have now would eventually find itself acting against labor, for the simple reason that the American political system was not built with the interests of workers in mind.<br /><br /><br /><br /><br /><br />This means, as our actual court has again made clear, that the struggle for the emancipation of labor does not, as Samuel Gompers once wrote, take place in an “ideal world.” Instead, “we are in the bitter struggles of an unjust society.” If labor is ever going to get what it needs, it probably won’t be with the helping hand of a judge or a justice.<br /><br /><br /><br /><br /><br /><a href="https://www.nytimes.com/2023/06/06/opinion/roberts-court-glacier-labor-workers.html#commentsContainer"></a><a href="https://www.nytimes.com/2023/06/06/opinion/roberts-court-glacier-labor-workers.html"></a><br /><br /><a href="https://www.nytimes.com/content/help/site/usercontent/usercontent.html"></a><br /><br /><br />Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-65759599156306057242023-05-22T07:58:00.004-07:002023-05-22T07:58:56.652-07:00Baker: Note on Debt Burden and the Burden of Patent and Copyright Monopolies<p> via <a href="https://www.patreon.com/posts/quick-note-on-of-83343474?utm_medium=post_notification_email&utm_campaign=patron_engagement&utm_source=post_link&token=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYTplZjM5ZDg3ZC1hZWIwLTRkMTEtOTY3Mi1lODI2NmFkNDQ2ODYiLCJwb3N0X2lkIjo4MzM0MzQ3NCwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.0sSyZqDtFwEl1Tb-B2gFcFUvtI8AuHkfvtf90Mxr4jQ">Patreon</a></p><p><span style="background-color: white; color: rgba(11, 12, 15, 0.95); font-family: system-ui, Roboto, sans-serif; font-size: var(--global-fontSizes-heading-lg); font-weight: var(--global-fontWeights-heading-default);"></span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjuAEUK6Whsjq5T2p2mbPADLj-AHJm2RRdvEsqkCr8gC-hGp0EwyG084Fct-H6SzuRh5kW148pEKM8g_MBmff9swpq6DLNaAK-lrM8MGt1jjTXy-g5bOeref7IrlqQLr4Bm3A7W7dW2wd4x0BjyOXHAT1-xrYzoG_xOF33dzDefSgmrniCGcYWjdErQ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="173" data-original-width="291" height="190" src="https://blogger.googleusercontent.com/img/a/AVvXsEjuAEUK6Whsjq5T2p2mbPADLj-AHJm2RRdvEsqkCr8gC-hGp0EwyG084Fct-H6SzuRh5kW148pEKM8g_MBmff9swpq6DLNaAK-lrM8MGt1jjTXy-g5bOeref7IrlqQLr4Bm3A7W7dW2wd4x0BjyOXHAT1-xrYzoG_xOF33dzDefSgmrniCGcYWjdErQ" width="320" /></a></div><br /><br /><p></p><p><span style="background-color: white; color: rgba(11, 12, 15, 0.95); font-family: system-ui, Roboto, sans-serif; font-size: var(--global-fontSizes-heading-lg); font-weight: var(--global-fontWeights-heading-default);">Quick Note on the Debt Burden and the Burden of Patent and Copyright Monopolies</span></p><div class="sc-1sp3zau-0 fYcGch sc-rcywpx-0 hRKPxe" data-tag="post-content" style="background-color: white; color: rgba(11, 12, 15, 0.95); font-family: system-ui, Roboto, sans-serif; font-size: var(--global-fontSizes-body-md) !important; line-height: 1.5; white-space: pre-line;"><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">The debt whiners are out in full force these days as we face the risk of default at the start of next month. We hear them complain endlessly about the burden we are imposing on future generations. If we imagine for a moment that any of these people actually care about the future (anyone hear of global warming?), we should ask why none of them ever says anything about the burden of patent and copyright monopolies?</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">This may be too simple for great minds, but the granting of patent and copyright monopolies is a mechanism that the government uses to pay for innovation and creative work. It is an alternative to direct government spending. The government could directly pay companies for innovating and producing movies, writing books, and performing music, but instead it gives these companies monopolies that allow them to charge far more than the free market price for the duration of a patent or copyright.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">In the case of prescription drugs, pharmaceutical companies will often charge ten or even 100 times the free market price of a drug for the period in which it holds a patent monopoly. This means that a drug that might sell for $10-$20 a prescription, instead sells for hundreds or thousands of dollars per prescription. There is a similar story with a wide range of other items, like medical equipment, seed, fertilizers, and pesticide. Patent monopolies make items expensive, that would otherwise be cheap.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">The same is true of copyright. We could costlessly copy and transfer books, music, movies, software and many other types of creative work over the web, if it were not for the copyright monopolies granted by the government.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">We can debate the merits of patents and copyrights as government mechanisms for financing innovation and creative work, but we can’t deny that they impose a large cost. Arguably, the higher prices we pay as a result of these monopolies comes to over <a href="https://cepr.net/images/stories/reports/ip-2018-10.pdf" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">$1 trillion</a> a year, close to half of all after-tax corporate profits.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">In the case of prescription drugs alone, patent monopolies and related protections will likely cost us over $400 billion this year. We will <a href="https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categories=underlying#eyJhcHBpZCI6MTksInN0ZXBzIjpbMSwyLDNdLCJkYXRhIjpbWyJjYXRlZ29yaWVzIiwiU3VydmV5Il0sWyJOSVBBX1RhYmxlX0xpc3QiLCIyMDE3Il1dfQ==" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">spend</a>over $550 billion for drugs that would probably cost us less than $100 billion in a free market without government granted patent monopolies (National Income and Product Accounts, Table 2.4.5U, Line 121). By contrast, we are <a href="https://www.cbo.gov/system/files/2023-05/51118-2023-05-Budget-Projections.xlsx" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">projected</a>to spend $663 billion in interest payments on the debt. If we added in the higher costs due to patent and copyright monopolies on other items, it would almost certainly dwarf the interest payments on the debt.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">It is bizarre that people who endlessly obsess about the burden of the debt literally never talk about the burdens created by government-granted patent and copyright monopolies. This failure to address this massive burden created by government policy might cause one to question the sincerity of their concern about the burden of the debt.</p></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-68423357412567639072023-05-17T09:31:00.004-07:002023-05-17T09:31:22.260-07:00Dean Baker: Will Biden Pull It Out in the 14th?<p> I'm betting Dean is right on this......I think PK is having an elite-downer attack this week.</p><p><br /></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgzHKa9G0U96xPNZpU0NrlPoKWklgu_pFPL90QCQNTEaGZpPxN8fF4gvYNjage-Wcol9j14wkjRy2mLDKbWD-USGUcZ8xBDYTTS3_0pfcedJLiCemkjfYQOMTlRq-usQ4cEvrU13NppcHdvsMxOeAejzPffVm8m0DUC2OqNj2bUx4tAL048WA7GUjwH" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="420" data-original-width="640" height="210" src="https://blogger.googleusercontent.com/img/a/AVvXsEgzHKa9G0U96xPNZpU0NrlPoKWklgu_pFPL90QCQNTEaGZpPxN8fF4gvYNjage-Wcol9j14wkjRy2mLDKbWD-USGUcZ8xBDYTTS3_0pfcedJLiCemkjfYQOMTlRq-usQ4cEvrU13NppcHdvsMxOeAejzPffVm8m0DUC2OqNj2bUx4tAL048WA7GUjwH" width="320" /></a></div><br /><br /><p></p><p><br /></p><p><a data-saferedirecturl="https://www.google.com/url?q=https://www.patreon.com/posts/will-biden-pull-83135318?utm_medium%3Dpost_notification_email%26utm_campaign%3Dpatron_engagement%26utm_source%3Dpost_link%26token%3DeyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYToyNTFlNjg2MC05Njk4LTQyYzgtYTQ3Yy02NjE0ZDExYmMzOGEiLCJwb3N0X2lkIjo4MzEzNTMxOCwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.XSINTjVps07M3x7gdIT9t1VYnu1nxneadJdXXRn27dc&source=gmail&ust=1684416969485000&usg=AOvVaw0DSy_AOWoLORxN2zGIe-zM" href="https://www.patreon.com/posts/will-biden-pull-83135318?utm_medium=post_notification_email&utm_campaign=patron_engagement&utm_source=post_link&token=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYToyNTFlNjg2MC05Njk4LTQyYzgtYTQ3Yy02NjE0ZDExYmMzOGEiLCJwb3N0X2lkIjo4MzEzNTMxOCwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.XSINTjVps07M3x7gdIT9t1VYnu1nxneadJdXXRn27dc" rel="noopener noreferrer" style="border-radius: 4px; color: #ff424d; display: inline !important; font-family: aktiv-grotesk, sans-serif; font-size: 1rem; line-height: 1.5; max-width: 100%; overflow: hidden; text-align: center; text-decoration-line: none; text-overflow: ellipsis; vertical-align: bottom;" target="_blank"><span color="dark" style="color: #241e12; font-family: Walsheim, sans-serif; font-size: 1.625rem; font-weight: 700; line-height: 1.25; margin: 0px;">Will Biden Pull It Out in the 14th?</span></a></p><div style="background-color: white; box-sizing: border-box; color: #241e12; font-family: aktiv-grotesk, sans-serif; font-size: 16px; margin: 1.5rem 0rem 0rem; padding: 0rem; text-align: center;"><span color="gray1" style="font-size: 1rem; line-height: 1.5; margin: 0px; text-align: left;"><p>Like everyone else, I have been following the negotiations between the White House and House Republicans over the debt ceiling. I know that many of my comrades are worried that Biden is being played and will have to give up the store to save the economy. Paul Krugman laid out this case in his <a data-saferedirecturl="https://www.google.com/url?q=https://www.nytimes.com/2023/05/16/opinion/biden-debt-ceiling-republicans.html&source=gmail&ust=1684416969485000&usg=AOvVaw2DY3GqEG23A8utDvzhvQkq" href="https://www.nytimes.com/2023/05/16/opinion/biden-debt-ceiling-republicans.html" style="background-color: transparent; color: #1155cc;" target="_blank">column</a>today.</p><p>I understand their concerns, but remain an optimist on this. First, Biden has been around the block on this one more than anyone. He may well have been expecting respectable types to act a bit more respectable and to lean on the Republicans to reach a deal.</p><p>But, Biden also knows that these respectable types are totally willing to deal with Donald Trump, a vicious anti-Semite and racist, who has open contempt for American democracy and the rule of law. The elites in the media and the business community will not stick their necks out for the good of the country. He had every reason to expect that they would take the cautious route and do the “both sides” routine we see them doing now.</p><p>Surely Biden recognized this was a real possibility and was prepared for it. What does that mean? To my view, it means that after engaging in negotiations with Republicans, who are asking for absurd concessions based on their four-seat advantage in one house of Congress, he says that he will spend the money Congress told him spend, whether or not this means crashing the debt ceiling.</p><p>I don’t have any legal analysis to add to the work done by <a data-saferedirecturl="https://www.google.com/url?q=https://www.nytimes.com/2023/05/07/opinion/debt-limit.html?searchResultPosition%3D3&source=gmail&ust=1684416969485000&usg=AOvVaw0fz6RSzs39InNoJq9UgzkZ" href="https://www.nytimes.com/2023/05/07/opinion/debt-limit.html?searchResultPosition=3" style="background-color: transparent; color: #1155cc;" target="_blank">Lawrence Tribe</a> and <a data-saferedirecturl="https://www.google.com/url?q=https://www.nytimes.com/2023/01/20/opinion/debt-limit-congress-biden-mccarthy.html?searchResultPosition%3D4&source=gmail&ust=1684416969485000&usg=AOvVaw3xD-uwbLEdX2P_4nC3MMAw" href="https://www.nytimes.com/2023/01/20/opinion/debt-limit-congress-biden-mccarthy.html?searchResultPosition=4" style="background-color: transparent; color: #1155cc;" target="_blank">others</a>. I do have to say that I find it delicious that the wording on the debt in the 14th Amendment was put there to deal with pretty much exactly the situation we face today: a gang of former confederates gain control of Congress and look to wreck the economy to avenge their defeat in the Civil War.</p><p>So, is Biden also thinking of invoking the 14thAmendment and saying that the government is not constrained by Republican efforts to default on the debt? I can’t say. I also can’t say what the Republican Supreme Court will do.</p><p>But many of us have underestimated Biden before. He managed to get an amazing amount of important legislation through a 50-50 Senate, and with only a narrow Democratic majority in the House. It doesn’t seem likely that he would walk into negotiations with a Republican Speaker indebted to the party’s biggest loons without a backup plan.</p><p>I guess we will know the answer on this one soon enough.</p></span></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-89306280370892952862023-05-13T12:27:00.001-07:002023-05-13T12:27:06.946-07:00Flush With Federal Money, Strings Attached, a Deep South Factory Votes to Unionize<div class="css-1vkm6nb ehdk2mb0" style="background-color: white; border: 0px; color: #333333; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 16px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variation-settings: inherit; line-height: inherit; margin: 0px; padding: 0px; text-size-adjust: 100%; vertical-align: baseline;"><h2 style="background-color: white; border: 0px; color: var(--color-content-secondary,#363636); font-family: nyt-cheltenham, georgia, "times new roman", times, serif; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: 1.4375rem; font-stretch: normal; font-variant-alternates: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; font-variation-settings: inherit; line-height: 1.875rem; margin: 0px auto 1.875rem; max-width: 600px; padding: 0px; text-align: left; text-size-adjust: 100%; vertical-align: baseline; width: 600px;">Flush With Federal Money, Strings Attached, a Deep South Factory Votes to Unionize<br /></h2><h4 style="text-align: left;">Friday’s victory by the United Steelworkers at a factory building electric school buses was a test for Democratic hopes that clean-energy funding from Washington could bolster organized labor.</h4></div><br /><br /><br /> Workers at a rural Georgia factory that builds electric school buses under generous federal subsidies voted to unionize on Friday, handing organized labor and Democrats a surprise victory in their hopes to turn huge new infusions of money from Washington into a union beachhead in the Deep South.<br /><br /><br />The company, Blue Bird in Fort Valley, Ga., may lack the cachet of Amazon or the ubiquity of Starbucks, two other corporations that have attracted union attention. But the 697-to-435 vote by Blue Bird’s workers to join the United Steelworkers was the first significant organizing election at a factory receiving major federal funding under legislation signed by President Biden.<br /><br />“This is just a bellwether for the future, particularly in the South, where working people have been ignored,” Liz Shuler, president of the A.F.L.-C.I.O., said Friday evening after the vote. “We are now in a place where we have the investments coming in and a strategy for lifting up wages and protections for a good high-road future.”<br /><br />The three bills making up that investment include a <a href="https://www.nytimes.com/2021/11/15/us/politics/biden-signs-infrastructure-bill.html">$1 trillion infrastructure package</a>, a <a href="https://www.nytimes.com/2022/08/09/us/politics/biden-semiconductor-chips-china.html">$280 billion measure to rekindle a domestic semiconductor industry</a> and the <a href="https://www.nytimes.com/2022/08/16/business/biden-climate-tax-inflation-reduction.html">Inflation Reduction Act</a>, which included $370 billion for clean energy to combat climate change.<br /><br /><br /><br /><br />Each of the <a href="https://www.nytimes.com/2023/02/10/us/politics/democrats-biden-unions.html">bills included language to help unions</a> expand their membership, and Blue Bird’s management, which opposed the union drive, had to contend with the Democrats’ subtle assistance to the Steelworkers.<br /><br /><br />Image<br /><img src="https://static01.nyt.com/images/2023/05/12/multimedia/12pol-union-pjlk/12pol-union-pjlk-articleLarge.jpg?quality=75&auto=webp&disable=upscale" />Banners appeared outside the Blue Bird plant in the period leading up to the union vote.Credit...Jonathan Weisman/The New York Times<br /><br /><img src="https://static01.nyt.com/images/2023/05/12/multimedia/12pol-union-pjlk/12pol-union-pjlk-articleLarge.jpg?quality=75&auto=webp&disable=upscale" /><br /><br />Blue Bird stands to benefit from the new federal funds. Last year, <a href="https://www.blue-bird.com/about-us/press-releases/234-blue-bird-lauds-epa-s-2022-clean-school-bus-rebate-program">it hailed the $500 million</a> that the Biden administration was providing through the infrastructure bill for the replacement of diesel-powered school buses with zero- and low-emission buses. Georgia school systems alone will get $51.1 million to buy new electric buses, but Blue Bird sells its buses across the country. Still more money will come through the Inflation Reduction Act, <a href="https://www.businesswire.com/news/home/20220816005896/en/Blue-Bird-Lauds-Biden-Administration%E2%80%99s-Inflation-Reduction-Act#:~:text=The%20Inflation%20Reduction%20Act%20authorizes,by%20roughly%2040%25%20by%202030.">another law praised by the company</a>.<br /><br />Labor Organizing and Union DrivesMinor League Baseball: Chris Rowley was the first West Point graduate to make it to the majors. <a href="https://www.nytimes.com/2023/05/09/sports/baseball/chris-rowley-mlb-union-law-school.html?action=click&pgtype=Article&state=default&module=styln-labor-movement&variant=show&region=MAIN_CONTENT_1&block=storyline_top_links_recirc">Now he’s getting a law degree on a union scholarship</a>. His goal? Reform the minors.<br />Hollywood Writers’ Strike: Hollywood’s 15 years of labor peace was shattered, as movie and television writers <a href="https://www.nytimes.com/2023/05/01/business/media/hollywood-writers-strike.html?action=click&pgtype=Article&state=default&module=styln-labor-movement&variant=show&region=MAIN_CONTENT_1&block=storyline_top_links_recirc">went on strike</a>. <a href="https://www.nytimes.com/article/wga-writers-strike-hollywood.html?action=click&pgtype=Article&state=default&module=styln-labor-movement&variant=show&region=MAIN_CONTENT_1&block=storyline_top_links_recirc">Here is what to know</a>.<br />Randi Weingarten: School closures and culture wars turned classrooms into battlegrounds — and made the head of one of the country’s largest teachers’ unions <a href="https://www.nytimes.com/2023/04/28/magazine/randi-weingarten-teachers-unions.html?action=click&pgtype=Article&state=default&module=styln-labor-movement&variant=show&region=MAIN_CONTENT_1&block=storyline_top_links_recirc">a lightning rod for criticism</a>.<br />Nonprofit Workers: Employees of mission-based organizations across the country are joining workers at private companies in organizing. Their union negotiations <a href="https://www.nytimes.com/2023/04/28/nyregion/nonprofits-unions.html?action=click&pgtype=Article&state=default&module=styln-labor-movement&variant=show&region=MAIN_CONTENT_1&block=storyline_top_links_recirc">can be particularly awkward</a>.<br /><br />But that money came with strings attached — strings that subtly tilted the playing field toward the union. Just two weeks ago, for instance, the Environmental Protection Agency, which administers the Clean School Bus Program, pushed a <a href="https://www.epa.gov/system/files/documents/2023-04/fy23-csb-oem-workforce-req-info-2024-04.pdf">demand on all recipients</a> of federal subsidies to detail the health insurance, paid leave, retirement and other benefits they were offering their workers.<br /><br />They also required the companies to have “committed to remain neutral in any organizing campaign and/or to voluntarily recognize a union based on a show of majority support.” And under the rules of the infrastructure bill, no federal money may to be used to thwart a union election.<br /><br /><br /><br /><br />The Steelworkers union used the rules to its advantage. In late April, it filed multiple unfair labor practice charges against Blue Bird’s management, citing $40 million in rebates the company had received from the E.P.A., which <a href="https://nepis.epa.gov/Exe/ZyPDF.cgi/P1014WNH.PDF?Dockey=P1014WNH.PDF">stipulated</a> that those funds could not be used for anti-union activity.<br /><br /><br />“The rules say if workers want a union, you can’t use any money to hire anti-union law firms, or use people to scare workers,” Daniel Flippo, director of the Steelworkers district that covers the Southeast, said before the vote. “I’m convinced Blue Bird has done that.”<br /><br />Politicians also got involved. Georgia’s two Democratic senators and southwestern Georgia’s Democratic House member also subtly nudged the plant’s management, in a union-hostile but politically pivotal state, to at least keep the election fair.<br /><br />“I have been a longtime supporter of the USW and its efforts to improve labor conditions and living standards for workers in Georgia,” the Democratic congressman, Representative Sanford Bishop, wrote of the United Steelworkers in an open letter to Blue Bird workers. “I want to encourage you in your effort to exercise your rights granted by the National Labor Relations Act.”<br /><br />Blue Bird’s management minimized such pressure in its public statements, even as it fought hard to beat back union organizers.<br /><br /><br /><br /><br /><br />“Although we respect and support the right for employees to choose, we do not believe that Blue Bird is better served by injecting a labor union into our relationship with employees,” said Julianne Barclay, a spokeswoman for the company. “During the pending election campaign, we have voiced our opinion to our employees that a union is not in the best interest of the company or our employees.”<br /><br />Friday’s union victory has the labor movement thinking big as the federal money continues to flow, and that could be good for Mr. Biden and other Democrats, especially in the pivotal state of Georgia.<br /><br />“Workers at places like Blue Bird, in many ways, embody the future,” Mr. Flippo said after the vote, adding, “For too long, corporations cynically viewed the South as a place where they could suppress wages and working conditions because they believed they could keep workers from unionizing.”<br /><br />The Blue Bird union shop, 1,400 workers strong, will be one of the biggest in the South, and union leaders said it could be a beachhead as they eyed new electric vehicle suppliers moving in — and potentially the biggest, most difficult targets: foreign electric vehicle makers like Hyundai, Mercedes-Benz and BMW, which have located in Georgia, Alabama and South Carolina in part to avoid unions.<br /><br />“Companies move there for a reason — they want as smooth a path toward crushing unions as possible,” said Steve Smith, a national spokesman for the A.F.L.-C.I.O. “But we have federal money rolling in, a friendly administration and a chance to make inroads like we have never had before.”Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-41842403429843447502023-05-10T12:33:00.003-07:002023-05-10T12:33:35.408-07:00Deen Baker defends the Biden Economy<div dir="ltr"><a href="http://plt_gradients(x_train,y_train, compute_cost, compute_gradient) plt.show()">via Patreon</a></div><div dir="ltr" style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEj_WfCXzHGEGwsPKX7dzf3Wypl_BUbHebTYQYl92fZ6qUPJzprGvSAz2sB9mDAOx1yhHcePqdb0kVtmkUgpNTK_3PzxM74t3y-4dUiqF2vRyDK7hIVbvTAImke7XWTjSLqrpGq54FmhLdvXIBvGwOU-UAfUow17NE545VdNIeVRpYmBf9h6mFmhypbm" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="534" data-original-width="800" height="214" src="https://blogger.googleusercontent.com/img/a/AVvXsEj_WfCXzHGEGwsPKX7dzf3Wypl_BUbHebTYQYl92fZ6qUPJzprGvSAz2sB9mDAOx1yhHcePqdb0kVtmkUgpNTK_3PzxM74t3y-4dUiqF2vRyDK7hIVbvTAImke7XWTjSLqrpGq54FmhLdvXIBvGwOU-UAfUow17NE545VdNIeVRpYmBf9h6mFmhypbm" width="320" /></a></div><br /><br /></div><div dir="ltr"><br /><div><br clear="all" /><div>We now have the greatest economy ever. I'm saying that because President Biden won't and everyone knows damn well that if Donald Trump was in the White House, and we had the same economic situation, he would be boasting about the greatest economy ever all the time. Every Republican politician in the country would be touting the greatest economy ever. And, all the political reporters would be writing stories about how the strong economy will make it difficult for the Democrats to beat Trump in the next election.[1]<br /><br />Incredibly we are seeing stories about how the economy is a liability for Biden and the Democrats. We don't know what is in people's heads and how they think about the economy, but the basic points are very straightforward.<br /><br />Starting with unemployment, the current unemployment rate of 3.4 percent is the lowest in more than half a century. More than any time in this period, people who want a job are able to get one. The unemployment rate for Blacks is at 4.7 percent, the lowest number on record. The unemployment rate for Black teens stands at 12.9 percent, which unfortunately, is the lowest on record.<br /><br />We can flip this over and also talk about the good news with people getting jobs. Many people left the labor market during the pandemic, but we are now seeing comparable or higher rates of labor force participation and employment for most demographic groups.<br /><br />The overall employment to population rate (EPOP) for prime age workers (ages 25 to 54) stood at 80.8 percent in April, 0.2 percentage points above its pre-pandemic peak. For prime age women the EPOP stood at 75.1 percent last month. This is not just higher than its pre-pandemic peak, it is the highest EPOP for prime age women ever.<br /><br />Not only are people able to get jobs, but they have had unprecedented ability to leave jobs they don't like. The percentage of workers quitting their job in a month increased to 3.0 percent In October of 2021 and again last April. Its prior peak was 2.4 percent. It is now down to 2.5 percent, which is probably a more sustainable rate, but still above the previous peak.<br /><br />There also was a huge boom in mortgage refinancing since the pandemic. Before interest rates began to rise last year, more than 20 million people were able to refinance their mortgages. The average interest savingfrom refinancing was over $2,000 a year.<br /><br />We have also seen an explosion in the number of people working from home. Before the pandemic, roughly 5 percent of the workforce worked from home. Now the figure is closeto 30 percent. That comes to more than 45 million people. These people are saving themselves thousands of dollars a year in commuting costs and related expenses. In addition they are saving hundreds of hours a year they would have otherwise spent commuting.<br /><br />While working from home is a benefit largely restricted to more educated and higher paid workers, lower paid workers have also been doing well in the recovery. Research by Arin Dube, David Autor, and Annie McGrew shows that much of the wage inequality we have seen grow in the last four decades has been reversed in the last three years. While there is still far to go, workers in the bottom 20 percent of the wage distribution are seeing their pay grow far more rapidly than those at the middle or top of the wage distribution.<br /><br />The broader wage picture is more mixed. Workers were hit by the worldwide inflation resulting from the pandemic, but are again coming out ahead of inflation. For all workers, the average hourly wage, adjusted for inflation, just reached its pre-pandemic level last month, but over the last six months it has been growing at a 0.9 percent annual rate. In keeping with the Autor, Dube, and McGrew findings, the average hourly wage for production and non-supervisory workers, a category that excludes roughly 20 percent of mostly higher paid workers, is 1.3 percent above its pre-pandemic level. It has been rising at a 1.9 percent annual rate over the last six months.<br /><br />We also have seen a large increase in homeownership from the period just before the pandemic. The overall rate of homeownership stoodat 60.0 percent in first quarter of this year, up from 65.1 percent in the fourth quarter of 2019, just before the pandemic. For people under age 35 the increase was 1.6 percentage points, from 37.6 percent to 39.3 percent in the most recent quarter. The homeownership rate for Black households increased by 1.8 percentage points from 44.0 percent to 45.8 percent.<br /><br />The homeownership rate for Hispanics increased by 1.6 percentage points, from 48.1 percent to 49.7 percent. And, for households with incomes below the median, the homeownership rate increased by 2.0 percentage points, from 51.4 percent to 53.4 percent.<br /><br />We are also seeing a hugely accelerated transition to clean energy. Electric car sales in the U.S. are up more than 70 percent from their year ago level. Solar energy installations in 2023 are expected to exceed their previous peak in 2021 by 40 percent. Wind power generation capacity is also increasingrapidly.<br /><br />These are all really good stories that we can tell about the economy. They are especially impressive given that we have gone through a worldwide pandemic and are seeing the largest war among wealthy countries since World War II.<br /><br />Does this amount to the greatest economy ever? That's a tough call. We expect living standards to improve over time as technology improves, people become better educated and we get a larger and better capital stock.<br /><br />The real question is the rate of improvement. By that score, it would be hard to beat the decades of the fifties, sixties, and early seventies. We saw a quarter century of generally low unemployment and rapid economic growth, from which the gains were widely shared.<br /><br />Also, while we have seen some gains for those in the bottom half of the income distribution, we are still seeing falling life expectancies for this group. That is not due to strictly economic factors, but clearly economics does play an important role.<br /><br />But these realities would not have stopped Donald Trump from proclaiming the "greatest economy ever." They certainly didn't before the pandemic. So, grading on a curve, we can declare Biden's economy the greatest ever.<br /><br />[1] Of course, Trump would not be eligible to run for a third term, but again, this is a hypothetical.<br /></div><span class="gmail_signature_prefix">-- </span><br /><div class="gmail_signature" data-smartmail="gmail_signature" dir="ltr"><div dir="ltr"><div><div dir="ltr"><div><div dir="ltr"><div dir="ltr"><div dir="ltr"><div dir="ltr"><div dir="ltr"><div dir="ltr"><div dir="ltr">John Case<br />Harpers Ferry, WV<div><a href="http://www.enlightenradio.org/" target="_blank">Enlighten Radio</a></div><div><a href="http://economics.enlightenradio.org/" target="_blank">Socialist Economics</a></div><div><a href="https://www.facebook.com/john.d.case" target="_blank">Facebook</a></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div> Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-34093744703502390862023-05-01T17:52:00.000-07:002023-05-01T17:52:11.235-07:00The Economic Costs of America’s Conflict with China<p> via Project Syndicate: https://www.project-syndicate.org/commentary/economic-costs-of-china-america-conflict-by-stephen-s-roach-2023-04</p><br />The Economic Costs of America’s Conflict with China<br />Apr 24, 2023<a href="https://www.project-syndicate.org/columnist/stephen-s-roach">STEPHEN S. ROACH</a><br /><br /><br />In a wide-ranging speech on the US-China relationship, US Treasury Secretary Janet Yellen reversed the terms of engagement with China, prioritizing national-security concerns over economic considerations. The US case, however, rests not on hard evidence but on the presumption of China's nefarious intent.<br /><br /><br />NEW HAVEN – Five years into a once-unthinkable trade war with China, US Treasury Secretary Janet Yellen <a href="https://home.treasury.gov/news/press-releases/jy1425">chose her words</a> carefully on April 20. In a wide-ranging speech, she reversed the terms of US engagement with China, prioritizing national-security concerns over economic considerations. That formally ended a 40-year emphasis on economics and trade as the anchor to the world’s most important bilateral relationship. Yellen’s stance on security was almost confrontational: “We will not compromise on these concerns, even when they force trade-offs with our economic interests.”<br /><br /><a href="https://www.project-syndicate.org/section/politics-world-affairs"></a><a href="https://www.project-syndicate.org/commentary/preparing-for-long-emergencies-by-fostering-public-private-partnerships-by-ngaire-woods-2023-04#comments">0</a><br />B<br /><br /><br />Yellen’s view is very much in line with the strident anti-China sentiment that has now gripped the United States. The “<a href="https://www.ft.com/content/42922712-cd33-4de0-8763-1cc271331a32">new Washington consensus</a>,” as Financial Times columnist Edward Luce calls it, maintains that engagement was the original sin of the US-China relationship, because it gave China free rein to take advantage of America’s deal-focused naiveté. China’s accession to the World Trade Organization in 2001 gets top billing in this respect: the US opened its markets, but China purportedly <a href="https://www.congress.gov/event/115th-congress/house-event/LC47864/text?s=1&r=4">broke its promise</a> to become more like America. Engagement, according to this convoluted but widely accepted argument, opened the door to security risks and human-rights abuses. American officials are now determined to slam that door shut.<br /><br />There is more to come. President Joe Biden is about to issue an <a href="https://www.bloomberg.com/news/articles/2023-04-20/biden-to-unveil-china-investment-curbs-before-g7-summit-in-may">executive order</a> that will place restrictions on foreign direct investment (FDI) by US firms in certain “sensitive technologies” in China, such as artificial intelligence and quantum computing. The US rejects the Chinese allegation that these measures are aimed at stifling Chinese development. Like sanctions against the Chinese telecoms giant Huawei and those being considered against the social-media app TikTok, this one, too, is being justified under the amorphous guise of national security.<br /><br />The US case rests not on hard evidence but on the presumption of nefarious intent tied to China’s dual-purpose military-civilian fusion. Yet the US struggles with its own security fusion – namely, the fuzzy distinction between <a href="https://yalebooks.yale.edu/book/9780300259643/accidental-conflict/">America’s under-investment in innovation</a> and the real and imagined threats of Chinese technology.<br /><br />Significantly, Yellen’s speech put both superpowers on the same page. At the Communist Party’s 20th National Congress last October, Chinese President Xi Jinping’s opening message also stressed national security. With both countries equally fearful of the security threat that each poses to the other, the shift from engagement to confrontation is mutual.<br /><br />Yellen is entirely correct in framing this shift as a tradeoff. But she only hinted at the economic consequences of conflict. Quantifying these consequences is not simple. But the American public deserves to know what is at stake when its leaders rethink a vitally important economic relationship. Some fascinating new research goes a long way toward addressing this issue.<br /><br /><br /><br />A just-published study by the International Monetary Fund (summarized in the <a href="https://www.imf.org/en/Publications/WEO/Issues/2023/04/11/world-economic-outlook-april-2023">April 2023 World Economic Outlook</a>) takes a first stab at identifying the costs. IMF economists view the problem through the lens of “slowbalization”: the reduction of cross-border flows of goods and capital, reflected in geostrategic strategies of “reshoring” (bringing offshore production back home) and what Yellen herself has called “<a href="https://www.atlanticcouncil.org/news/transcripts/transcript-us-treasury-secretary-janet-yellen-on-the-next-steps-for-russia-sanctions-and-friend-shoring-supply-chains/">friend-shoring</a>” (shifting offshore production from adversaries to like-minded members of alliances).<br /><br />Such actions result in “dual bloc” FDI fragmentation. The IMF estimates that the formation of a US bloc and a China bloc could reduce global output by as much as 2% over the longer term. As the world’s largest economy, America will account for a significant share of foregone output.<br /><br />European Central Bank President <a href="https://www.project-syndicate.org/columnist/christine-lagarde">Christine Lagarde</a> recently <a href="https://www.ecb.europa.eu/press/key/date/2023/html/ecb.sp230417~9f8d34fbd6.en.html">stressed</a> a different channel through which an escalating US-China conflict could adversely affect economic performance. Drawing on <a href="https://www.ecb.europa.eu/pub/economic-bulletin/focus/2023/html/ecb.ebbox202302_03~d4063f8791.en.html">research</a> by ECB staff, she focuses on the higher costs and inflation resulting from supply-chain disruptions implied by conflict-driven FDI fragmentation. The ECB study concludes that geostrategic conflict could boost inflation by as much as 5% in the short run and around 1% over the longer term. Collateral effects on monetary policy and financial stability would follow.<br /><br />Collectively, these model-based calculations of the costs of conflict imply a stagflationary combination of lower output and higher inflation – hardly a trivial consideration in today’s fragile economic climate. And they dovetail with economic theory. Countries trade with others to reap the benefits of comparative advantage. Both inward and outward flows of foreign investment seek to achieve similar benefits, offering offshore efficiencies for multinational corporations that face higher costs in their home markets and attracting foreign capital to support domestic capacity expansion and job creation. Regardless of their different political systems and economic structures, this is true for both America and China. It follows that conflict will reduce these benefits.<br /><br />Yet there is an important twist for the US: a chronic shortfall of domestic saving casts the economic consequences of conflict with China in a very different light. In 2022, <a href="https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categories=survey">net US saving</a> – the depreciation-adjusted saving of households, businesses, and the government sector – fell to just 1.6% of national income, far below the longer-term 5.8% average from 1960 to 2020. Lacking in saving and wanting to invest and grow, the US takes full advantage of the dollar’s “<a href="https://www.ft.com/content/46b1a230-8c6c-4feb-b617-21a520cc201b">exorbitant privilege</a>” as the world’s dominant reserve currency and freely imports surplus saving from abroad, running a massive current-account and multilateral trade deficit to attract foreign capital.<br /><br />As such, the economic interests of saving-short America are tightly aligned with its outsize imbalances of trade and capital flows. Barring a highly unlikely resurgence of domestic US saving, compromising those flows for any reason – say, security concerns over China – is not without meaningful economic and financial consequences. The research cited above suggests those consequences will take the form of slower economic growth, higher inflation, and possibly a weaker dollar.<br /><br />This is hardly an ideal outcome for a US economy that is already at a precarious point in the business cycle. The tradeoff for national security should not be taken lightly. Nor should the US penchant to over-hype the security threat be accepted on blind faith.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-22088266152007163022023-04-22T07:33:00.003-07:002023-04-22T07:33:20.023-07:00Dean Baker: Get Over It -- China is bigger.<p> <img class="sc-fcyAHI lmLoGN" data-pin-nopin="true" src="https://c10.patreonusercontent.com/4/patreon-media/p/post/81886770/e5b45f788e454825aaffdc116df308b2/eyJ3Ijo2MjB9/1.png?token-time=1683417600&token-hash=s2y97RybsnfExfOu2hTJi_4DOskkvFPwYp7x-GHoyXc%3D" style="background-color: white; border: 0px; color: rgba(11, 12, 15, 0.95); cursor: zoom-in; font-family: system-ui, Roboto, sans-serif; font-size: 16px; max-width: 100%; text-align: center;" width="100%" /></p><div class="sc-fMEUvU iIyFDo" style="background-color: white; color: rgba(11, 12, 15, 0.95); font-family: system-ui, Roboto, sans-serif; font-size: 16px; padding: var(--global-space-16) var(--global-space-16) 0 var(--global-space-16);"><div class="stackable mb-xs" style="margin-bottom: var(--global-space-4);"><div class="sc-dTBbbW buixeG" style="position: relative; z-index: 100;"><div class="sc-jJoQJp jSAvug" style="-webkit-box-align: center; -webkit-box-pack: justify; align-items: center; box-sizing: border-box; display: flex; justify-content: space-between; margin: 0rem; padding: 0rem; transition: all 300ms cubic-bezier(0.19, 1, 0.22, 1) 0s;"><div class="sc-jJoQJp kMVAiy" style="box-sizing: border-box; display: inline-block; margin: 0rem; padding: 0rem; transition: all 300ms cubic-bezier(0.19, 1, 0.22, 1) 0s;"><a class="sc-ikJyIC jJKbvs" data-tag="post-published-at" href="https://www.patreon.com/posts/china-is-bigger-81886770" style="background-color: transparent; border-radius: var(--global-radius-sm); cursor: pointer; display: inline-block; font-size: var(--global-fontSizes-body-md) !important; font-weight: var(--global-fontWeights-body-default); line-height: 1.5 !important; max-width: 100%; overflow: hidden; text-decoration-line: none; text-overflow: ellipsis; transition: all 300ms cubic-bezier(0.19, 1, 0.22, 1) 0s; vertical-align: bottom;"><span class="sc-gWXbKe gSUlhD" color="gray2" style="color: var(--global-content-muted-default); font-family: var(--global-fontStack-body); font-size: var(--global-fontSizes-heading-xs) !important; font-weight: var(--global-fontWeights-heading-default) !important; letter-spacing: 0.1em; line-height: 1.5 !important; margin: 0px; position: relative; text-transform: uppercase; transition: all 300ms cubic-bezier(0.19, 1, 0.22, 1) 0s;">38 MINUTES AGO</span></a></div><button aria-expanded="false" class="sc-ikJyIC gnVQIQ" style="appearance: button; background-attachment: initial; background-clip: initial; background-image: none; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; border-color: initial; border-radius: var(--global-radius-sm); border-style: none; border-width: initial; cursor: pointer; font-family: inherit; font-feature-settings: inherit; font-kerning: inherit; font-optical-sizing: inherit; font-size: var(--global-fontSizes-body-md) !important; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-variation-settings: inherit; 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vertical-align: unset;"><svg viewbox="0 0 24 24" xmlns="http://www.w3.org/2000/svg"><path clip-rule="evenodd" d="M7.504 10.508V6.382c0-1.512.317-2.392 1.023-3.098.706-.707 1.586-1.024 3.097-1.024h.76c1.51 0 2.39.317 3.097 1.024.705.706 1.023 1.586 1.023 3.098v1.127a.75.75 0 0 1-1.5 0V6.382c0-.961-.202-1.522-.651-1.971-.45-.45-1.01-.652-1.971-.652h-.756c-.962 0-1.522.202-1.97.652-.45.45-.652 1.01-.652 1.971v4.126h7.874a1.566 1.566 0 0 1 1.5 1.625v6.5a1.566 1.566 0 0 1-1.5 1.625h-9.75a1.566 1.566 0 0 1-1.5-1.625v-6.5a1.566 1.566 0 0 1 1.5-1.625h.376zm-.377 8.182.001-.028v-6.558l-.001-.029a.066.066 0 0 1 .053-.067h9.646a.066.066 0 0 1 .053.067v6.615a.066.066 0 0 1-.053.068H7.18a.066.066 0 0 1-.053-.068z" fill-rule="evenodd"></path></svg></div></div></div><span class="sc-gWXbKe klIuOD" color="var(--global-content-muted-default)" style="color: var(--global-content-muted-default); font-family: var(--global-fontStack-body); font-size: var(--global-fontSizes-heading-sm) !important; font-weight: var(--global-fontWeights-body-default) !important; line-height: 1.5 !important; margin: 0px; position: relative; transition: all 300ms cubic-bezier(0.19, 1, 0.22, 1) 0s; white-space: nowrap;">Unlocked</span></div></button></div></div><div class="sc-jJoQJp gFxXxp" style="-webkit-box-pack: justify; align-items: flex-start; box-sizing: border-box; display: flex; flex-flow: row nowrap; margin: 0rem; padding: 0rem; place-content: flex-start space-between; transition: all 300ms cubic-bezier(0.19, 1, 0.22, 1) 0s;"><span class="sc-fpGCtG fVDXQH" data-tag="post-title" style="font-size: var(--global-fontSizes-heading-lg) !important; font-weight: var(--global-fontWeights-heading-default);">China is Bigger, Get Over It</span></div></div><div class="sc-wAsCI jTiHzU sc-bRcdvP lllsVV" data-tag="post-content" style="font-size: var(--global-fontSizes-body-md) !important; line-height: 1.5; white-space: pre-line;"><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">It is standard for politicians, reporters, and columnists to refer to the United States as the world’s largest economy and China as the second largest. I suppose this assertion is good for these people’s egos, but it happens not to be true. Measuring by purchasing power parity, China’s economy <a href="https://www.imf.org/en/Publications/WEO/weo-database/2023/April/weo-report?c=924,532,546,111,&s=NGDPD,PPPGDP,NGDPRPPPPC,&sy=2012&ey=2028&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">passed</a>the U.S. in 2014, and it is now roughly 25 percent larger.[1]The I.M.F. projects that China’s economy will be nearly 40 percent larger by 2028, the last year in its projections.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">The measure that the America boosters use is an exchange rate measure, which takes each country’s GDP in its own currency and then converts the currency into dollars at the current exchange rate. By this measure, the U.S. economy is still more than one-third larger than China’s economy.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Economists usually prefer the purchasing power parity measure for most purposes. The exchange rate measure fluctuates hugely, as exchange rates can easily change 10 or 15 percent in a year. Exchange rates also can be somewhat arbitrary, as they are affected by countries’ decisions to try to control the value of their currency in international money markets.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">By contrast, the purchasing power parity measure applies a common set of prices to all the items a country produces in a year. In effect, this means assuming that a car, a television set, a college education, etc. cost the same in every country. Applying common prices is a difficult task, goods and services vary substantially across countries, which is makes it hard to apply a single price. As a result, purchasing power parity measures clearly have a large degree of imprecision.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Nonetheless, it is clear that this is the measure that we are more interested for most purposes. If we want to know the quantity of goods and services a country produces in a year, we need to use the same set of prices. By this measure, there is no doubt that China’s economy is both considerably larger than the U.S. economy and growing far more rapidly.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Just to be clear, this doesn’t mean the Chinese people are on average richer than people in the United States. China has nearly four times the population, so on a per person basis, the U.S. is still more than three times as rich as China. But, it should not be a shock to us that a country with more than 1.4 billion people would have a larger economy than a country with 330 million.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">For the folks who need more convincing, we can make comparisons of various items. We can start with auto production, a standard metric of manufacturing output. Last year, China <a href="https://en.wikipedia.org/wiki/List_of_countries_by_motor_vehicle_production" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">produced</a>more than 27.0 million cars, the United States produced a bit less than 10.1 million. (China also leads the world by far in the production and use of electric cars.) The cars made in the United States undoubtedly were better on average, but they would have to be an awful lot better to make up this gap.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">To take a more old-fashioned measure, China <a href="https://en.wikipedia.org/wiki/List_of_countries_by_steel_production" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">produced</a>over 1,030 million metric tons of steel in 2021. The United States produced less than 90 million metric tons.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">China <a href="https://en.wikipedia.org/wiki/List_of_countries_by_electricity_production" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">generated</a>8,540,000 gigawatt hours of electricity in 2021, nearly twice the 4,380,000 gigawatt hours generated in the United States. The gap is even larger if we look at solar and wind energy production. China <a href="https://worldpopulationreview.com/country-rankings/solar-power-by-country" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">has</a>307,000 megawatt hours of installed solar capacity, compared to 97,000 in the United States. China <a href="https://en.wikipedia.org/wiki/Wind_power_by_country" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">has</a> 366,000 megawatt hours of installed wind capacity versus 141,000 in the United States.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">We can look to some more modern measures. China <a href="https://www.statista.com/statistics/262966/number-of-internet-users-in-selected-countries/" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">has 1,050 million</a> Internet users. The United States has 311 million. China <a href="https://newzoo.com/resources/rankings/top-countries-by-smartphone-penetration-and-users" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">has 975 million</a> smartphone users, the United States has 276 million. In 2016 China <a href="https://www.weforum.org/agenda/2023/03/which-countries-students-are-getting-most-involved-in-stem/" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">graduated</a>4.7 million students with STEM degrees. In the U.S. the <a href="https://nces.ed.gov/programs/raceindicators/indicator_reg.asp" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">number</a>was 330,000 for the same year. The definitions for STEM degrees are not the same, so the numbers are not strictly comparable, but it would be difficult to make the case that U.S. number is somehow larger. And the figure has almost certainly moved more in China’s favor over the last seven year.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">In terms of impact on the world economy, China <a href="https://unctad.org/topic/trade-analysis/chart-10-may-2021" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">accounted</a>for 14.7 percent of goods exports in 2020. The United States accounted for 8.1 percent. In the first nine months of last year, China was <a href="https://www.oecd.org/investment/statistics.htm" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">responsible</a> for $90 billion in foreign direct investment. This compares to $66 billion for the United States.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">We can pile on more statistics, but in category after category, China outpaces the United States, and often by a very large margin. If people want to put on their MAGA hats and insist the U.S. is still the world’s largest economy, they are welcome to do so, but Donald Trump lost the 2020 election and China’s economy is bigger.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;"><strong>Size Matters</strong></p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">The issue here is not just a question of bragging rights. China is clearly an international competitor, economically, militarily, and diplomatically. Many people want to take a confrontational approach to China, with the idea that we can isolate the country and spend it into the ground militarily, as we arguably did with the Soviet Union.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">At its peak, the Soviet economy was roughly 60 percent of the size of the U.S. economy, China’s economy is already 25 percent larger. And, this gap is expanding rapidly. China is also far more integrated with the world economy than the Soviet Union ever was. This makes the prospect of isolating China far more difficult.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">As a practical matter, it doesn’t matter whether we like China or not. It is here and it is not about to go away. We will need to find ways to deal with China that do not lead to military conflict.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">Ideally, we would find areas where we could cooperate, for example <a href="https://cepr.net/the-u-s-china-and-the-new-cold-warriors/" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">sharing</a> <a href="https://cepr.net/biden-china-and-the-new-cold-war/" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">technology</a> to <a href="https://cepr.net/how-many-lives-would-have-been-saved-if-we-had-collaborating-on-vaccines-with-china/" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">address</a> <a href="https://www.thenation.com/article/economy/inequality-patents-taxes-copyright/" rel="nofollow noopener" style="background-color: transparent; cursor: pointer; font-weight: var(--global-fontWeights-body-default) !important;" target="_blank">climate</a>change and dealing with pandemics and other health threats. But, if anyone wants to push the New Cold War route, they should at least be aware of the numbers. This would not be your grandfather’s Cold War.</p><p style="font-size: var(--global-fontSizes-body-md); line-height: 1.5; margin: 10px 0px !important;">[1] I have included both Hong Kong and Macao in this calculation, since both are now effectively part of China.</p></div></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-86776242254532747292023-04-15T08:39:00.001-07:002023-04-15T08:39:16.634-07:00Dean Baker: Can Jerome Powell Pivot on Interest Rates, Again?<p> <a data-saferedirecturl="https://www.google.com/url?q=https://www.patreon.com/posts/can-jerome-pivot-81550946?utm_medium%3Dpost_notification_email%26utm_campaign%3Dpatron_engagement%26utm_source%3Dpost_link%26token%3DeyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYToyNDYzOGNlMS01MmQzLTQ4ZDctOTU5OC1jOTE1OGI4YjQ2NWMiLCJwb3N0X2lkIjo4MTU1MDk0NiwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.QcvdoseQmlG7h-ioOL_XuZp_S_5NOBfHkSTZ5hMSkLo&source=gmail&ust=1681649322358000&usg=AOvVaw2rFrOzmY1N3YVVLvEOX2iJ" href="https://www.patreon.com/posts/can-jerome-pivot-81550946?utm_medium=post_notification_email&utm_campaign=patron_engagement&utm_source=post_link&token=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYToyNDYzOGNlMS01MmQzLTQ4ZDctOTU5OC1jOTE1OGI4YjQ2NWMiLCJwb3N0X2lkIjo4MTU1MDk0NiwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.QcvdoseQmlG7h-ioOL_XuZp_S_5NOBfHkSTZ5hMSkLo" rel="noopener noreferrer" style="border-radius: 4px; color: #ff424d; display: inline !important; font-family: aktiv-grotesk, sans-serif; font-size: 1rem; line-height: 1.5; max-width: 100%; overflow: hidden; text-align: center; text-decoration-line: none; text-overflow: ellipsis; vertical-align: bottom;" target="_blank"><span color="dark" style="color: #241e12; font-family: Walsheim, sans-serif; font-size: 1.625rem; font-weight: 700; line-height: 1.25; margin: 0px;">Can Jerome Powell Pivot on Interest Rates, Again?</span></a></p><p><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://cepr.net/wp-content/uploads/2020/03/Headshot_Dean-Baker_400x400.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="400" data-original-width="400" height="400" src="https://cepr.net/wp-content/uploads/2020/03/Headshot_Dean-Baker_400x400.jpg" width="400" /></a></div><br /><p><br /></p><p><br /></p><div style="background-color: white; box-sizing: border-box; color: #241e12; font-family: aktiv-grotesk, sans-serif; font-size: 16px; margin: 1.5rem 0rem 0rem; padding: 0rem; text-align: center;"><span color="gray1" style="font-size: 1rem; line-height: 1.5; margin: 0px; text-align: left;"><p>When Jerome Powell took over as chair of the Federal Reserve Board in January of 2018, the Fed had already been on a path of gradually hiking interest rates. They had moved away from the Great Recession zero rate in December of 2015 and had been hiking in quarter point increments at every other meeting. The Federal Funds rate stood at 1.25 percent when Powell took over from his predecessor Janet Yellen.</p><p>Powell continued with this path of rate hikes until the fall of 2018, and then he did something remarkable: he lowered rates. He had lowered rates by 0.75 percentage points by the time the pandemic hit in 2020.</p><p>This reversal was remarkable because it went very much against the conventional wisdom at the Fed and the economics profession as a whole. The unemployment rate at the time was well under 4.0 percent, a level that most economists argued would lead to higher inflation.</p><p>However, Powell pointed out that there was no serious evidence of inflationary pressures in the economy at the time. He also noted the enormous benefits of low unemployment. As many of us had long <a data-saferedirecturl="https://www.google.com/url?q=https://deanbaker.net/books/getting-back-to-full-employment.htm&source=gmail&ust=1681649322358000&usg=AOvVaw2ydytRizGxs1sta8Ahm7qx" href="https://deanbaker.net/books/getting-back-to-full-employment.htm" style="background-color: transparent; color: #1155cc;" target="_blank">argued</a>, Powell pointed to the fact that the biggest beneficiaries from low unemployment were the people who were most disadvantaged in the labor.</p><p>A 1.0 percentage point drop in the unemployment rate generally meant a drop of 1.5 percentage points for Hispanic workers and 2.0 percent for Black workers. The decline was even larger for Black teens. Workers with less education saw the biggest increase in their job prospects. And, in a tight labor market, employers seek out workers with disabilities and even those with criminal records.</p><p>In short, there are huge benefits to pushing the unemployment rate as low as possible, and Powell happily pointed to these benefits as he lowered interest rates even in an environment where the economy was already operating at full employment by standard estimates. Powell was willing to put aside the Fed’s obsession with fighting inflation, even when it wasn’t there.</p><p>This was the reason that many progressives, including me, wanted President Biden to reappoint Powell. While Lael Brainard, who was then a Fed governor, would have also been an outstanding pick, as a Republican, Powell’s reappointment faced far fewer political obstacles. There was no risk that one of our “centrist” showboat senators (Manchin and Sinema) might seize on some real or imagined slight and block the nomination.</p><p>Powell was also likely to have more leeway as a second term chair in pursuing a dovish interest rate policy. Fed chair is a position where seniority matters a lot, as can be seen by the Greenspan worship that stemmed largely from his long service as Fed chair. Although Brainard was a highly respected economist, she might have a harder time staying the course if the business press pushed for higher rates.</p><p><span style="font-weight: 700;">Powell’s Pandemic Policy</span></p><p>Powell did pursue a dovish policy, acting aggressively to support the economy during the pandemic with both a zero federal funds rate, and also extensive quantitative easing that pushed the 10-year Treasury bond rate to under 1.0 percent in the summer of 2020. Low rates helped to spur construction and allowed tens of millions of people to refinance mortgages, saving thousands of dollars a year on interest rates.</p><p>As virtually everyone (including me) would now agree, he kept these expansionary policies in place for too long. While Fed policy was not the major factor in the pandemic inflation, it did play a role, especially in the housing market. While most of the rise in house prices and rents was driven by fundamentals in the market (unlike in the bubble years from 2002-2007), there was clearly a speculative element towards the end of 2021 and the start of 2022.</p><p>This became evident when the Fed first raised rates in March of 2022. Even though the initial hike was just 0.25 percentage points, the housing market changed almost immediately. Prior to the hike, almost every house immediately got multiple above listing offers. After the hike, many houses received no offers and it became standard for buyers to offer prices well below the asking price.</p><p>Given this outcome, it would have been good if the Fed had made this move several months sooner. Speculative runups in house prices are not good news for the economy in general, even if there may be a small number of lucky sellers who might hit the peak of the market.</p><p>Anyhow, after having waited too long to raise rates, Powell felt the need to re-establish his status as a determined inflation fighter. He embarked on a series of aggressive three-quarter point rate hikes and repeatedly appealed to the ghost of Paul Volcker.</p><p>Powell went farther and faster than many of us felt was warranted. It will take time to see the full effect of past rate hikes on the economy. The rapid rise in rates did create stresses in the banking system, although the failures of the Silicon Valley Bank (SVB) and Signature Bank seem to be largely due to incredibly inept management, coupled with major regulatory failures at the Fed.</p><p>While bank failures are always fun, the more important issue is what happens to the real economy. At this point it seems the economy faces greater risk on the downside, with unemployment rising, than with inflation reversing its current downward path.</p><p>There has been a clear hit to credit availability as a result of banks tightening standards following the SVB panic. Higher rates are also having their expected effect on loan availability. Housing starts have slowed sharply, although residential construction remains strong due to a large backlog of unfinished homes resulting from supply chain problems during the pandemic.</p><p>Higher rates have also put an end to the flood of housing refinancing that helped to support consumption growth through the pandemic. And, non-residential investment has also slowed sharply in recent months.</p><p>For these reasons, there are real grounds for expecting a growth slowdown and a resulting rise in the unemployment rate. The other side of the story is that it looks as the Fed has won its war on inflation.</p><p>I’ll admit to having been an inflation dove all along, but the facts speak for themselves. We know that housing inflation will slow sharply in the months ahead based on private indexes of marketed housing units. These indexes have been showing much lower inflation, and even deflation, since the late summer. They lead the CPI rental indexes by 6-12 months.</p><p>We got the first clear evidence of lower inflation in the CPI rental indexes with the March release, with both rent indexes rising just 0.5 percent, after rising at more than a 9.0 percent annual rate in the prior three months. The CPI rent indexes are virtually certain to show further declines over the course of the year, with rental inflation likely falling below its pre-pandemic pace.</p><p>Much has been made of the big bad news items in the March CPI, the 0.4 percent rise in new vehicle prices. This is certainly bad news for the immediate inflation picture as it seems that supply chain problems continue to limit the production of new cars and trucks.</p><p>But this is not a long-term inflation issue. We have not forgotten how to build cars and trucks. This is a story where the chip shortage, resulting from a fire at a major semi-conductor factory in Japan, has proved to be <a data-saferedirecturl="https://www.google.com/url?q=https://www.iif.com/Publications/ID/5337/The-COVID-Inflation-Shock-Monetary-Policy-Gradualism-and-Lingering-Supply-Chain-Effects&source=gmail&ust=1681649322358000&usg=AOvVaw3MwN24DNE-Jgq8K5OeDbev" href="https://www.iif.com/Publications/ID/5337/The-COVID-Inflation-Shock-Monetary-Policy-Gradualism-and-Lingering-Supply-Chain-Effects" style="background-color: transparent; color: #1155cc;" target="_blank">more enduring</a> that many had expected. That hardly seems like a good reason to be raising interest rates and throwing people out of work.</p><p>The picture for many non-housing services was also positive. In particular, the medical services index fell 0.5 percent in March after dropping 0.7 percent in each of the prior two months. Some of this decline is due to the peculiarities of the way health insurance costs are measured in the CPI, but it is pretty hard to tell a story of excessive inflation in this key sector of the economy.</p><p>The March <a data-saferedirecturl="https://www.google.com/url?q=https://www.bls.gov/news.release/ppi.nr0.htm&source=gmail&ust=1681649322358000&usg=AOvVaw2zlveBesdB6-znKqxvLW8w" href="https://www.bls.gov/news.release/ppi.nr0.htm" style="background-color: transparent; color: #1155cc;" target="_blank">Producer Price Index</a>showed even better news about inflationary pressures at earlier stages of production. The overall final demand index fell by 0.5 percent in March, while the index for final demand for services dropped by 0.3 percent. While there are areas where there seem to be price pressures, the overwhelming picture in this release is one of sharply lower inflation, or even deflation. Clearly higher inflation will not be driven by price pressures at the wholesale level.</p><p>Perhaps most importantly, the pace of wage growth has slowed sharply. The annualized rate of growth in the average hourly wage over the last three months is just 3.2 percent, down from a 6.0 percent pace at the start of 2022. This is lower than the pace of wage growth in 2018 and 2019, when inflation was below the Fed’s 2.0 percent target. It is very difficult to tell a story where wage growth is under 4.0 percent, and inflation is still much above the Fed’s target.</p><p><span style="font-weight: 700;">Can Powell Change Course Again?</span></p><p>This raises the question as to whether Powell will again follow the path he took in 2019 and reverse course when the data indicate it is appropriate? There is still much uncertainty about the course of the economy at this point. We don’t know the full effect of the fallout from the SVB failure and it’s not clear how much of the impact of past Fed rate hikes is yet to be felt.</p><p>That makes a strong argument for a pause at the Fed’s meeting next month, which will come before we get any data from April. However, if we continue to see evidence of economic weakness, as well as slowing inflation, the Fed needs to be prepared to start lowering rates.</p><p>Powell was quite vocal in recognizing the Fed’s twin mandate for full employment, as well as price stability, when he lowered rates in 2019. There is no virtue in going overboard in the effort to fight inflation. If the data show that the war on inflation has been won, and we see the prospect of a weakening economy with higher unemployment, it needs to shift course.</p><p>Powell went in the right direction four years ago when he bucked the conventional wisdom and lowered rates in 2019. He needs to be prepared to do that again this year.</p></span></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-46786967345622103712023-04-06T05:20:00.002-07:002023-04-06T05:20:12.457-07:00Dean Baker: Have Workers Gotten Back Their Share of Income?<p> </p><table align="center" bgcolor="#FFFFFF" border="0" cellpadding="0" cellspacing="0" style="background-color: white; border-collapse: collapse; border-spacing: 0px; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: small; text-align: center; width: 600px;" valign="top"><tbody><tr><td style="margin: 0px; padding: 0px;"><div style="box-sizing: border-box; margin: 0rem; padding: 0rem;"><div style="border-bottom: 1px solid rgb(229, 227, 221); box-sizing: border-box; margin: 0rem; padding: 0rem; text-align: left; vertical-align: middle; width: 600px;"><table style="border-spacing: 1em 0px; overflow-wrap: break-word; table-layout: fixed; width: 100%px;"><tbody><tr><td colspan="6" style="margin: 0px; padding: 0px; vertical-align: middle;" valign="middle"><div style="box-sizing: border-box; margin: 0rem; padding: 0.5rem;"><p color="dark" style="background-color: transparent; border-radius: 4px; color: #241e12; display: inline-block; font-family: Walsheim, sans-serif; font-size: 1.3125rem; font-weight: 700; line-height: 1.25; margin: 0px; max-width: 100%; overflow: hidden; text-decoration-line: none; text-overflow: ellipsis; vertical-align: bottom; white-space: nowrap;"><a data-saferedirecturl="https://www.google.com/url?q=https://www.patreon.com/BeatThePress&source=gmail&ust=1680820307788000&usg=AOvVaw2FQZmDuxAauYL4kilEPyF9" href="https://www.patreon.com/BeatThePress" rel="noopener noreferrer" style="background-color: transparent; border-radius: 4px; color: #ff424d; display: inline-block; font-size: 1rem; line-height: 1.5; max-width: 100%; overflow: hidden; text-decoration-line: none; text-overflow: ellipsis; vertical-align: bottom;" target="_blank">Dean Baker</a> via Patreon</p></div></td></tr></tbody></table></div></div></td></tr><tr><td style="margin: 0px; padding: 0px;"><div style="box-sizing: border-box; margin: 0rem; padding: 0rem 1rem;"><span color="dark" style="color: #241e12; font-family: aktiv-grotesk, sans-serif; font-size: 1rem; line-height: 1.5; margin: 0px;"><div style="border-color: initial; border-radius: 4px; border-style: none; border-width: initial; overflow: hidden;"><div style="box-sizing: border-box; margin: 0rem; padding: 0rem;"><div style="box-sizing: border-box; margin: 1.5rem 0rem 0rem; padding: 0rem;"><div style="box-sizing: border-box; display: flex; margin: 0rem 0rem 1rem; padding: 0rem;"><a data-saferedirecturl="https://www.google.com/url?q=https://www.patreon.com/posts/have-workers-of-81103382?utm_medium%3Dpost_notification_email%26utm_campaign%3Dpatron_engagement%26utm_source%3Dpost_link%26token%3DeyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYTowNGE4Zjc0Mi0yMmU3LTQyZDUtOTFjYy1iZjViNDgyMmRhNTAiLCJwb3N0X2lkIjo4MTEwMzM4MiwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.TQ52wBADsZcg2lUw3_H3LhPgj2tDZgmrA-oaAjQ5vDM&source=gmail&ust=1680820307788000&usg=AOvVaw3kkIXtp_v7Xu-eY78siAYT" href="https://www.patreon.com/posts/have-workers-of-81103382?utm_medium=post_notification_email&utm_campaign=patron_engagement&utm_source=post_link&token=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYTowNGE4Zjc0Mi0yMmU3LTQyZDUtOTFjYy1iZjViNDgyMmRhNTAiLCJwb3N0X2lkIjo4MTEwMzM4MiwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.TQ52wBADsZcg2lUw3_H3LhPgj2tDZgmrA-oaAjQ5vDM" rel="noopener noreferrer" style="background-color: transparent; border-radius: 4px; color: #ff424d; display: inline-block; font-size: 1rem; line-height: 1.5; max-width: 100%; overflow: hidden; text-decoration-line: none; text-overflow: ellipsis; vertical-align: bottom;" target="_blank"><span color="dark" style="color: #241e12; font-family: Walsheim, sans-serif; font-size: 1.625rem; font-weight: 700; line-height: 1.25; margin: 0px;">Have Workers Gotten Back Their Share of Income?</span></a></div><div style="box-sizing: border-box; margin: 0rem 0rem 1rem; padding: 0rem;"><a data-saferedirecturl="https://www.google.com/url?q=https://www.patreon.com/posts/have-workers-of-81103382?utm_medium%3Dpost_notification_email%26utm_campaign%3Dpatron_engagement%26utm_source%3Dpost_link%26token%3DeyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYTowNGE4Zjc0Mi0yMmU3LTQyZDUtOTFjYy1iZjViNDgyMmRhNTAiLCJwb3N0X2lkIjo4MTEwMzM4MiwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.TQ52wBADsZcg2lUw3_H3LhPgj2tDZgmrA-oaAjQ5vDM&source=gmail&ust=1680820307788000&usg=AOvVaw3kkIXtp_v7Xu-eY78siAYT" href="https://www.patreon.com/posts/have-workers-of-81103382?utm_medium=post_notification_email&utm_campaign=patron_engagement&utm_source=post_link&token=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYTowNGE4Zjc0Mi0yMmU3LTQyZDUtOTFjYy1iZjViNDgyMmRhNTAiLCJwb3N0X2lkIjo4MTEwMzM4MiwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.TQ52wBADsZcg2lUw3_H3LhPgj2tDZgmrA-oaAjQ5vDM" rel="noopener noreferrer" style="background-color: transparent; border-radius: 4px; color: #ff424d; display: inline-block; font-size: 1rem; line-height: 1.5; max-width: 100%; overflow: hidden; text-overflow: ellipsis; vertical-align: bottom;" target="_blank"><img alt="Have Workers Gotten Back Their Share of Income?" class="CToWUd" data-bit="iit" src="https://blogger.googleusercontent.com/img/proxy/AVvXsEhPdOIylLwPkoaTEJta6hfVS_6bloLKcPyV0TLnsPjVZ3HoqysCXtWZd5ZcoTFcw5rdhfmmcwGnDcHca8CVDJTVpUapHPNeF1o6uwMluIAtc3mwz5fvpTah2nkwiK8gwGKYx0GoE4Pp-UVfqHzsMomwFLWCofsN21_VQgqMxKnAN8U_oVqCjJkKfhzXx6qJIZ_pZuWZXk7Kf6rvYq1fRPpyN5XVQTcm552rZc3JLjvRZmB3Ep41pPEn8yN7fQN0Cri6bHPkidlHE1OPtcnaRihREvEGef-l4BcW6erJ9G6PQeRKzedE82cBg8bRcp448tLLngnBnF6bE-g7j86cYEpAmj81-J8q1NI=s0-d-e1-ft&token-hash=ajTSMhnHCZcpbmeNNiQG-ciUH9f1hpNvkzjJTKCQ94c%3D" style="border: 0px; max-width: 100%;" width="100%" /></a></div><div style="box-sizing: border-box; margin: 1.5rem 0rem 0rem; padding: 0rem;"><span color="gray1" style="font-size: 1rem; line-height: 1.5; margin: 0px; text-align: left;"><p>I was surprised to see a Twitter thread last week from Jason Furman in which he said that the labor share of national income in 2022 was actually above its pre-pandemic level. I have been following this issue closely and the labor share of corporate income was still down by more than a percentage point from its 2019 level.</p><p>If that sounds trivial, if the wage share rose back to its pre-pandemic level, and it was evenly shared, every worker would have a 1.7 percent increase in real pay. That won’t make anyone rich, but for a full-time full-year worker earning $25 an hour, the increase would be worth $850 a year.</p><p>But Jason said there is no prospective dividend like this, because the labor share is already above its pre-pandemic level. Jason referred to the labor share of national income, and using this measure, he was right. I looked back to 2000 and saw that the labor share of national income had not fallen anywhere near as much as the labor share of corporate income, as shown above.</p><p>The question is what is going on here. My reason for preferring the labor share of corporate income is that profits and labor compensation are well defined in the corporate sector. We have a corporation that earns profits and it pays out wages and benefits to workers. The corporate sector is also about 75 percent of the private business sector, so generally what is going on in the corporate sector tells us what is going on the business sector as a whole.</p><p>But not this time. Apparently, there was a large increase in the labor share of income in the non-corporate sector. The Commerce Department has not published data for the non-corporate sector for 2022 yet, but in 2021 the labor share stood at 41.4 percent, up by 2.2 percentage points from its 39.2 percent share in 2019. A further increase in 2022 could certainly be enough to raise the economy-wide labor share above its 2019 level.</p><p>So, what do we make of this large rise in the labor share in the non-corporate sector? That’s a difficult question to answer, but it’s certainly peculiar that the labor share in the non-corporate sector would be going in the opposite direction as the labor share in the corporate sector.</p><p>There is at least one possible explanation that doesn’t involve ordinary workers in non-corporate sector gaining relative to their counterparts in the corporate sector. Most of the businesses (by revenue) in the non-corporate sector are organized as partnerships. This would include private equity and hedge funds. The earnings of the partners in these funds, which often are in the millions or tens of millions, are largely classified as wage income. If these partners were getting more wage income, or simply classifying a larger share of their fund’s earning as wages, it could lead to a larger labor share of income in the national accounts. That doesn’t especially help the worker in a fast food restaurant owned by a private equity company, but this could explain the rise in the labor share that Jason noted.</p><p>This is obviously speculative and there could be a different story here, but in the corporate sector, where we do have solid data, we know the labor share has not recovered to its pre-pandemic level. And, if we want to go back to ancient history, the labor share is still down by 7.2 percentage points from its 2000 level. It would be a useful exercise to sort out what is going on with the labor share in the non-corporate sector, but it doesn’t seem unreasonable to think that the labor share in the corporate sector would at least return to its pre-pandemic level.</p></span></div></div></div></div></span></div></td></tr></tbody></table>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-23508628504904649062023-04-03T08:00:00.001-07:002023-04-03T08:00:10.986-07:00Dean Baker: The Social Security Scare Story Industry<p> </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgkAY_Fldal7L1yB4e72VNGEvGFghO_KNouNjNL2xr274pmf0p5m8ENaBqF4_wSToSu5mpclYBXMLkNtFdmxHAMBeTz66uQwUjCI2mWijh0F_n79yAz58KCrKe3KMkpzlxRhcf2PJ4mg05NsyQ7gAyc3PW740CqAmhyVeROW3n-Ea0-oURL38kxZg73" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="194" data-original-width="259" height="240" src="https://blogger.googleusercontent.com/img/a/AVvXsEgkAY_Fldal7L1yB4e72VNGEvGFghO_KNouNjNL2xr274pmf0p5m8ENaBqF4_wSToSu5mpclYBXMLkNtFdmxHAMBeTz66uQwUjCI2mWijh0F_n79yAz58KCrKe3KMkpzlxRhcf2PJ4mg05NsyQ7gAyc3PW740CqAmhyVeROW3n-Ea0-oURL38kxZg73" width="320" /></a></div><br /><p></p><table align="center" bgcolor="#FFFFFF" border="0" cellpadding="0" cellspacing="0" style="background-color: white; border-collapse: collapse; border-spacing: 0px; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: small; text-align: center; width: 600px;" valign="top"><tbody><tr><td style="margin: 0px; padding: 0px;"><div style="box-sizing: border-box; margin: 0rem; padding: 0rem;"><div style="border-bottom: 1px solid rgb(229, 227, 221); box-sizing: border-box; margin: 0rem; padding: 0rem; text-align: left; vertical-align: middle; width: 600px;"><br /></div></div></td></tr><tr><td style="margin: 0px; padding: 0px;"><div style="box-sizing: border-box; margin: 0rem; padding: 0rem 1rem;"><span color="dark" style="color: #241e12; font-family: aktiv-grotesk, sans-serif; font-size: 1rem; line-height: 1.5; margin: 0px;"><div style="border-color: initial; border-radius: 4px; border-style: none; border-width: initial; overflow: hidden;"><div style="box-sizing: border-box; margin: 0rem; padding: 0rem;"><div style="box-sizing: border-box; margin: 1.5rem 0rem 0rem; padding: 0rem;"><div style="box-sizing: border-box; display: flex; margin: 0rem 0rem 1rem; padding: 0rem;"><a data-saferedirecturl="https://www.google.com/url?q=https://www.patreon.com/posts/social-security-80929217?utm_medium%3Dpost_notification_email%26utm_campaign%3Dpatron_engagement%26utm_source%3Dpost_link%26token%3DeyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYTo1MGUyODFkNC1mNDk1LTQwNTUtYmNmMS1iOGRjMWUyZDdmOTEiLCJwb3N0X2lkIjo4MDkyOTIxNywicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.EY60MHAw9l_9IjkaRDFORK2biB1s5PAI-xirwaetQe0&source=gmail&ust=1680536626120000&usg=AOvVaw27fR2UyZ30TGaD4LEIPr8v" href="https://www.patreon.com/posts/social-security-80929217?utm_medium=post_notification_email&utm_campaign=patron_engagement&utm_source=post_link&token=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYTo1MGUyODFkNC1mNDk1LTQwNTUtYmNmMS1iOGRjMWUyZDdmOTEiLCJwb3N0X2lkIjo4MDkyOTIxNywicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.EY60MHAw9l_9IjkaRDFORK2biB1s5PAI-xirwaetQe0" rel="noopener noreferrer" style="background-color: transparent; border-radius: 4px; color: #ff424d; display: inline-block; font-size: 1rem; line-height: 1.5; max-width: 100%; overflow: hidden; text-decoration-line: none; text-overflow: ellipsis; vertical-align: bottom;" target="_blank"><span color="dark" style="color: #241e12; font-family: Walsheim, sans-serif; font-size: 1.625rem; font-weight: 700; line-height: 1.25; margin: 0px;">The Social Security Scare Story Industry</span></a></div><div style="box-sizing: border-box; margin: 1.5rem 0rem 0rem; padding: 0rem;"><span color="gray1" style="font-size: 1rem; line-height: 1.5; margin: 0px; text-align: left;"><p>I’m on the road (literally, driving from southern Utah to western Oregon) but I thought I should quickly weigh in the on the scare stories we heard yesterday after the release of the 2023 Social Security and Medicare Trustees Reports. I’ll make four quick points:</p><p>1) The scare stories stem entirely from how we account for Social Security, as opposed to programs like education or the military;</p><p>2) We’ve already seen most of the increased burden associated with the retirement of the baby boomers;</p><p>3) It’s not true that our only choices are raising taxes or cutting benefits, as has been widely asserted;</p><p>4) We have seen great news on Medicare since the passage of the Affordable Care Act, which has been largely ignored.</p><p><span style="font-weight: 700;">The Problem is Largely Accounting</span></p><p>Starting with the accounting, Social Security is a program that we have decided to fund from dedicated taxes, primarily the 6.2 percent tax that employers and employees pay on the first $160,200 of income. (Part of the program’s problem is that the share of wage income going over the cap, and avoiding taxation, rose from 10.0 percent in 1982 to almost 20 percent today. This is because of the huge upward redistribution of wage income over the last forty years.)</p><p>Most other items in the budget are not funded by a dedicated tax. If they were, we would have had many scary moments in the past and possibly in the future. For example, government spending on education increased from 1.3 percent in 1946 to a peak of 3.8 percent of GDP in 1970. This 2.5 percentage point increase in spending to accommodate the baby boomers needs when we were kids, is far larger than 1.8 percentage point <a data-saferedirecturl="https://www.google.com/url?q=https://cepr.net/why-would-anyone-think-the-republicans-are-interested-in-lower-budget-deficits/&source=gmail&ust=1680536626120000&usg=AOvVaw2wSwIcoN1_TJLMd688Hju-" href="https://cepr.net/why-would-anyone-think-the-republicans-are-interested-in-lower-budget-deficits/" style="background-color: transparent; color: #1155cc;" target="_blank">projected</a>increase in spending in Social Security from 2000 to 2040, the peak pressure of the baby boomers’ retirement.</p><p>If we had funded education from a dedicated tax and were looking at accurate projections of future spending in 1946, it would have looked far more scary than the Social Security projections do now. In the same vein, many people want the U.S. to have a Cold War with China. China’s economy is already <a data-saferedirecturl="https://www.google.com/url?q=https://www.imf.org/en/Publications/WEO/weo-database/2022/October/weo-report?c%3D924,532,111,%26s%3DPPPGDP,%26sy%3D2020%26ey%3D2027%26ssm%3D0%26scsm%3D1%26scc%3D0%26ssd%3D1%26ssc%3D0%26sic%3D0%26sort%3Dcountry%26ds%3D.%26br%3D1&source=gmail&ust=1680536626120000&usg=AOvVaw2P_cyXwdJgPXoZtHoKNAIO" href="https://www.imf.org/en/Publications/WEO/weo-database/2022/October/weo-report?c=924,532,111,&s=PPPGDP,&sy=2020&ey=2027&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1" style="background-color: transparent; color: #1155cc;" target="_blank">more than 20 percent larger</a> than ours and is growing considerably more rapidly. (The Soviet economy peaked at around 60 percent of the size of the U.S. economy.)</p><p>We are currently spending a bit more than 3.0 percent of GDP on the military. We spent 6.0 percent of GDP during the Reagan military buildup in the 1980s. If we went to this level of spending, or higher, to match the spending of a larger enemy, the projections would look much worse than anything we see with Social Security.</p><p><span style="font-weight: 700;">We’ve Already Seen Most of the Cost Increase</span></p><p>The Social Security trust fund built up a large surplus in the years when most of the baby boomers were in the labor force. This trust fund is helping to cover the current costs of the program. However, the cost themselves have been rising for the last fifteen years.</p><p>We went from spending 4.19 percent of GDP on Social Security in <a data-saferedirecturl="https://www.google.com/url?q=https://www.ssa.gov/oact/tr/TR00/tr00.pdf&source=gmail&ust=1680536626120000&usg=AOvVaw1DiRli86PyI0DnBAyKnBGH" href="https://www.ssa.gov/oact/tr/TR00/tr00.pdf" style="background-color: transparent; color: #1155cc;" target="_blank">2000</a> to spending 5.22 percent of GDP <a data-saferedirecturl="https://www.google.com/url?q=https://www.ssa.gov/OACT/TR/2023/VI_G2_OASDHI_GDP.html%23200732&source=gmail&ust=1680536626120000&usg=AOvVaw1OyG32zfg9lYTyjukO3yod" href="https://www.ssa.gov/OACT/TR/2023/VI_G2_OASDHI_GDP.html#200732" style="background-color: transparent; color: #1155cc;" target="_blank">this year</a>, and increase of 1.03 percentage points. This cost is projected to increase further to 6.03 percentage points by 2040, a rise of 0.81 percentage points.</p><p>This increased cost will impose some burden on the economy, but less than the increased burden we have seen to date. So, the idea that we are looking at some horror story down the road doesn’t make any sense, unless we think we are already living a horror story.</p><p><span style="font-weight: 700;">It’s not True that Our Only Choices are Raising Taxes or Cutting Benefits</span></p><p>Contrary to what NPR <a data-saferedirecturl="https://www.google.com/url?q=https://www.houstonpublicmedia.org/npr/2023/03/31/1167378958/social-security-is-now-expected-to-run-short-of-cash-by-2033/&source=gmail&ust=1680536626120000&usg=AOvVaw2ZQjlcthay5b7e2Tq-cRK-" href="https://www.houstonpublicmedia.org/npr/2023/03/31/1167378958/social-security-is-now-expected-to-run-short-of-cash-by-2033/" style="background-color: transparent; color: #1155cc;" target="_blank">told us</a> yesterday (“Patching the program will require higher taxes, lower benefits or some combination of the two”) there is an alternative. Historically, Social Security has been funded by its designated taxes, as noted earlier. But, if we are changing the law, we can also change this feature of Social Security.</p><p>We could have it funded in part from general revenue, like the military or almost every other program. There are reasons we may not want to make this switch, but it is wrong for NPR and others to tell us that it is not a possible option. It is.</p><p>Can we spend more from general revenue without raising some taxes? That is an open question. From an economic standpoint, it doesn’t matter whether spending comes from past surplus accumulated in the trust fund or whether it’s simply an appropriation from general revenue. As noted above, we have already seen most of the burden associated the retirement of the baby boomers, perhaps we could see the additional burden without any additional taxes.</p><p>If the economy’s main problem is secular stagnation (a lack of demand) as economists like Larry Summers had <a data-saferedirecturl="https://www.google.com/url?q=https://www.imf.org/en/Publications/fandd/issues/2020/03/larry-summers-on-secular-stagnation&source=gmail&ust=1680536626120000&usg=AOvVaw1Ep9sBU74Tr8yS4t2zqZPA" href="https://www.imf.org/en/Publications/fandd/issues/2020/03/larry-summers-on-secular-stagnation" style="background-color: transparent; color: #1155cc;" target="_blank">argued</a>before the pandemic, there is little reason to believe that the additional deficits associated with higher Social Security spending will be a major problem. This would especially be the case if artificial intelligence leads to the huge productivity boom that many analysts are predicting.</p><p><span style="font-weight: 700;">The Untold Great Story on Medicare</span></p><p>The Trustees Report released yesterday showed a further improvement in Medicare’s finances. This is a huge deal that has gone largely unreported. In 2000, the Medicare Hospital Insurance Trust Fund was <a data-saferedirecturl="https://www.google.com/url?q=https://www.ssa.gov/oact/tr/TR00/tr00.pdf&source=gmail&ust=1680536626120000&usg=AOvVaw1DiRli86PyI0DnBAyKnBGH" href="https://www.ssa.gov/oact/tr/TR00/tr00.pdf" style="background-color: transparent; color: #1155cc;" target="_blank">projected</a> to face costs of 1.91 percent of GDP this year and 2.54 percent of GDP in 2040. In the most recent report we are <a data-saferedirecturl="https://www.google.com/url?q=https://www.ssa.gov/OACT/TR/2023/VI_G2_OASDHI_GDP.html%23200732&source=gmail&ust=1680536626120000&usg=AOvVaw1OyG32zfg9lYTyjukO3yod" href="https://www.ssa.gov/OACT/TR/2023/VI_G2_OASDHI_GDP.html#200732" style="background-color: transparent; color: #1155cc;" target="_blank">projected</a>to spend 1.52 percent of GDP this year and 2.12 percent in 2040, a savings of 0.39 percentage points of GDP this year and 0.42 percentage points for 2040.</p><p>These savings have hugely helped the program and meant that we have far more resources to spend elsewhere. People pushing scare stories probably don’t want to promote these facts, but that is the world.</p><p>Anyhow, there are clearly issues with how we will deal with the retirement of the baby boomers, but the situation is not nearly as dire as many would like us to believe.</p></span></div></div></div></div></span></div></td></tr></tbody></table>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-75943380581140516542023-03-30T05:43:00.001-07:002023-04-03T07:58:05.230-07:00<p> <a data-saferedirecturl="https://www.google.com/url?q=https://www.patreon.com/posts/silicon-valley-80766075?utm_medium%3Dpost_notification_email%26utm_campaign%3Dpatron_engagement%26utm_source%3Dpost_link%26token%3DeyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYTphYzY5MGY3YS1hMzUwLTQxYzMtOTYwZC02YWJjMDYxOWMwNDEiLCJwb3N0X2lkIjo4MDc2NjA3NSwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.y4B4cUL0V2_lUQA_sAOUNRSWBolLTFz2DwBIX93tA78&source=gmail&ust=1680262848158000&usg=AOvVaw0wGaI65J5veyB-V9KAdb7S" href="https://www.patreon.com/posts/silicon-valley-80766075?utm_medium=post_notification_email&utm_campaign=patron_engagement&utm_source=post_link&token=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJyZWRpc19rZXkiOiJpYTphYzY5MGY3YS1hMzUwLTQxYzMtOTYwZC02YWJjMDYxOWMwNDEiLCJwb3N0X2lkIjo4MDc2NjA3NSwicGF0cm9uX2lkIjo1MjM5ODQ2Mn0.y4B4cUL0V2_lUQA_sAOUNRSWBolLTFz2DwBIX93tA78" rel="noopener noreferrer" style="border-radius: 4px; color: #ff424d; display: inline !important; font-family: aktiv-grotesk, sans-serif; font-size: 1rem; line-height: 1.5; max-width: 100%; overflow: hidden; text-align: center; text-decoration-line: none; text-overflow: ellipsis; vertical-align: bottom;" target="_blank"><span color="dark" style="color: #241e12; font-family: Walsheim, sans-serif; font-size: 1.625rem; font-weight: 700; line-height: 1.25; margin: 0px;">The Silicon Valley Bank Bailout: The Purpose of Government Is to Make the Rich Richer #63,486</span></a></p><div style="background-color: white; box-sizing: border-box; color: #241e12; font-family: aktiv-grotesk, sans-serif; font-size: 16px; margin: 1.5rem 0rem 0rem; padding: 0rem; text-align: center;"><span color="gray1" style="font-size: 1rem; line-height: 1.5; margin: 0px; text-align: left;"><p>There is a standard tale of politics where conservatives want to leave things to the market, whereas the left want a big role for government. The right likes to tell this story because it advantages them politically, since most people tend to have a positive view of the market. The left likes to tell it because they are not very good at politics and have an aversion to serious thinking.</p><p>The Silicon Valley Bank (SVB) bailout is yet another great example of how the right is just fine with government intervention, as long as the purpose is making the rich richer. Left to the market, the outcome in this case was clear. The FDIC guaranteed accounts up to $250k. This meant that the government’s insurance program would ensure that everyone got the first $250,000 in their account returned in full.</p><p>The amounts above $250,000 were not insured. This is both a matter of law and a matter of paying for what you get. The FDIC <a data-saferedirecturl="https://www.google.com/url?q=https://www.fdic.gov/deposit/insurance/assessments/proposed.html&source=gmail&ust=1680262848158000&usg=AOvVaw18GSYA3h_H4lhk2GM8hEim" href="https://www.fdic.gov/deposit/insurance/assessments/proposed.html" style="background-color: transparent; color: #1155cc;" target="_blank">charges</a>a fee on the first $250,000 in an account based on the size and strength of the bank. This fee ranges from 0.015 percent to 0.40 percent annually, depending on the size and riskiness of the bank. Most people would not see the insurance fee directly, because it is charged to bank, but we can be sure that the bank passes this cost on to its depositors.</p><p>However, these fees only apply to the first $250,000 in an account. This means that people who had more than $250,000 in an account were not paying for insurance. Nonetheless, when they needed insurance from the government, they got it, even though they didn’t pay for it.</p><p>As we are now hearing, in many cases this handout ran into the tens of millions, or even billions, of dollars, almost all of it going to the very richest people in the country. Compare these depositors’ sense of entitlement to a government handout, to the outrage over President Biden’s proposal to forgive $10,000 of student loan debt. (To be clear, depositors likely would have gotten 80 to 90 percent of their money back in any case.)</p><p>In the case of SVB, rich depositors could not bother themselves with taking steps to ensure that their money was parked in a safe place. This is in spite of the fact that almost all of them pay people to help them manage their money.</p><p>By contrast, in the case of student loan debt, many 18-year-olds may have misjudged their future labor market prospects. This sort of error would not be surprising given the economic turmoil we have seen since the collapse of the housing bubble and the Great Recession.</p><p><span style="font-weight: 700;">Making the Rich Richer with Drugs and Vaccines</span></p><p>The idea that the purpose of government is to make the rich richer pervades every aspect of economic policy. When we were confronted with a worldwide pandemic, the government spent billions of dollars to quickly develop effective vaccines and treatments. And then, after developing them, we gave private companies like Moderna intellectual property rights over the product.</p><p>Naturally, this sent Moderna’s stock soaring and made at least <a data-saferedirecturl="https://www.google.com/url?q=https://www.forbes.com/sites/giacomotognini/2021/06/15/surging-moderna-stock-mints-the-vaccine-makers-fifth-billionaire/?sh%3D5f85c3312ee0&source=gmail&ust=1680262848158000&usg=AOvVaw07CForqUnO6SQ5MTb60bSz" href="https://www.forbes.com/sites/giacomotognini/2021/06/15/surging-moderna-stock-mints-the-vaccine-makers-fifth-billionaire/?sh=5f85c3312ee0" style="background-color: transparent; color: #1155cc;" target="_blank">five</a>Moderna executives into billionaires. Only children and elite intellectuals could think the extreme inequality we see in this story has anything to do with the market, but we will get the same tale again and again. The right wants to accept market outcomes, while the left wants to use the government to address inequality.</p><p>It’s striking that even now the government is acting to make the Moderna crew still richer. Moderna and Pfizer have announced that they want to charge between $110 and $130 a shot for their new Covid booster.</p><p>Peter Hotez and Elena Bottazzi, two highly respected researchers at Baylor University and Texas Children’s Hospital, <a data-saferedirecturl="https://www.google.com/url?q=https://www.npr.org/sections/goatsandsoda/2022/01/05/1070046189/a-texas-team-comes-up-with-a-covid-vaccine-that-could-be-a-global-game-changer&source=gmail&ust=1680262848158000&usg=AOvVaw1ua656y1YdXPd9G7NWylsk" href="https://www.npr.org/sections/goatsandsoda/2022/01/05/1070046189/a-texas-team-comes-up-with-a-covid-vaccine-that-could-be-a-global-game-changer" style="background-color: transparent; color: #1155cc;" target="_blank">developed</a>a simple to produce, 100 percent open-source Covid vaccine. It uses well-established technologies that are not complicated (unlike mRNA). Their vaccine has been widely used in India and Indonesia, with over 100 million people getting the vaccine to date.</p><p>If we want to see the vaccine used here it would need to be approved by the Food and Drug Administration (FDA). In principle, the FDA could rely on the clinical trials used to gain approval in India, but it indicated that they want a U.S. trial. (In fairness, India’s trials are probably lower quality.)</p><p>However, the government could fund a trial of Hotez-Bottazzi vaccine (Corbevax) with pots of money left over from Operation Warp Speed, or alternatively from the budgets of National Institutes of Health or other agencies like Biomedical Advanced Research and Development Authority (BARDA). With tens of billions of dollars of government money going to support biomedical research each year, the ten million or so needed for a clinical trial of Corbevax would be a drop in the bucket.</p><p>The arithmetic on this is incredible. Shots of Corbevax cost less than $2 a piece in India. If it costs two and a half times as much in the U.S., that still puts it at $5 a shot. That implies savings of more than $100 a shot.</p><p>That means that if we get 100,000 people to take the Corbevax booster, rather than the Modern-Pfizer ones (Pfizer is planning to also charge over $100 for its booster), we’ve covered the cost of the trials. If we get 1 million to take Corbevax, we’ve covered the cost ten times over, and if 10 million people get the Corbevax booster, we will have saved one hundred times the cost of the clinical trial.</p><p>But for now, we are not going this route. Remember, the purpose of government is to make the rich richer.</p><p>This is a huge story in the pharmaceutical industry more generally. We will spend close to $550 billion this year on prescription drugs. These drugs would almost certainly cost less than $100 billion a year if they were sold in a free market without government-granted patent monopolies or related protections.</p><p>The differences of $450 billion is roughly half the size of the military budget and more than four times what we will spend on the Food Stamp program. It comes to more than $3,000 per household each year, and yes, it mostly goes to people at the top end of the income distribution.</p><p>We would have to replace the roughly $100 billion a year that the industry spends on research, but we would almost certainly come out way ahead in that story, as with the Hotez-Bottazzi vaccine.</p><p>In addition, by making drugs cheap, we will end the crisis that many people face in trying to come up with the money to pay for life-saving drugs. We would also eliminate the enormous incentive that patent-protected drug prices give drug companies to lie about the safety and effectiveness of their drugs.</p><p><span style="font-weight: 700;">Structuring Finance to Serve the Market, not the Rich</span></p><p>We don’t need to have a financial system that has periodic bank collapses and makes millionaires and billionaires out of top bank executives. This is a policy choice by a government committed to making the rich richer.</p><p>The most obvious solution would be to have the Federal Reserve Board give every person and corporation in the country a digital bank account. The idea is that this would be a largely costless way for people to carry on their normal transactions. They could have their paychecks deposited there every two weeks or month. They could have their mortgage or rent, electric bill, credit card bill, and other bills paid directly from their accounts.</p><p>This sort of system could be operated at minimal cost, with the overwhelming majority of transactions handled electronically, requiring no human intervention. There could be modest charge for overdrafts, that would be structured to cover the cost of actually dealing with the problem, not gouging people to make big profits.</p><p>Former Fed economist (now at Dartmouth), <a data-saferedirecturl="https://www.google.com/url?q=https://sites.dartmouth.edu/alevin/recent-presentations/&source=gmail&ust=1680262848158000&usg=AOvVaw1YOzouY_upr6bFSTGWV4EF" href="https://sites.dartmouth.edu/alevin/recent-presentations/" style="background-color: transparent; color: #1155cc;" target="_blank">Andy Levin</a>, has been etching the outlines of this sort of system for a number of years. The idea would be to effectively separate out the banking system we use for carrying on transactions from the system we use for saving and financing investment.</p><p>We would have the Fed run system to carry out the vast majority of normal financial transactions, replacing the banks that we use now. However, we would continue to have investment banks, like Goldman Sachs and Morgan Stanley, that would borrow on financial markets and lend money to businesses, as well as underwriting stock and bond issues. While investment banks still require regulation to prevent abuses, we don’t have to worry about their failure shutting down the financial system.</p><p>Not only would the shift to Fed banking radically reduce the risk the financial sector poses to the economy, it would also make it hugely more efficient. We waste tens of billions of dollars every year maintaining the structure of a financial system that technology has made obsolete.</p><p>The current system also makes some people incredibly rich, even when they fail disastrously. Greg Becker, the President and Chief Executive Officer, <a data-saferedirecturl="https://www.google.com/url?q=https://www1.salary.com/SVB-FINANCIAL-GROUP-Executive-Salaries.html&source=gmail&ust=1680262848158000&usg=AOvVaw0wpGlniiZZiZBpGuh5SfWa" href="https://www1.salary.com/SVB-FINANCIAL-GROUP-Executive-Salaries.html" style="background-color: transparent; color: #1155cc;" target="_blank">earned</a>$9,922,000 in SVB’s 2021 fiscal year (the most recent year for which I could find the data). That would be roughly 684 times what a minimum wage worker would earn for a full year’s work. (Top execs at the largest banks can earn three or four times this amount.)</p><p>If we think that a worker has a 45-year working lifetime, then Mr. Becker pulls down more in a year than what a minimum wage worker would get in 15 working lifetimes. The CEOs at Lehman and Bear Stearns, two of the huge failed banks in the financial crisis, walked away with hundreds of millions of dollars for their work.</p><p>So, the basic story is that the government has designed a financial system designed to redistribute massive amounts of money to the rich. We could have a hugely more efficient system, but since that would end the gravy train for those at the top, it is not on the political agenda.</p><p><span style="font-weight: 700;">The Big Lie: Conservatives Don’t Like Big Government</span></p><p>As this bailout should make clear is that, contrary to what the media tell us, conservatives <em>love</em> big government. They just think that the focus of big government should be making the rich as rich as possible, not helping ordinary people and securing the economy and society.</p><p>To be clear, I do think this bailout was necessary given the fragility of the economy at present (unlike the 2008-09 bailout, that was sold with the lie that we faced a Second Great Depression). However, we need to get our eye on the ball here.</p><p>The idea that conservatives like the market and not the government is unadulterated crap. It is a myth that they use to conceal the ways they have rigged the market to make income flow upward. Unfortunately, virtually the entire left has agreed to go along with this absurd myth. Moments like the bailout of the rich depositors at SVB make the truth about conservatives and the market apparent to all. (And yes, this is the point of <a data-saferedirecturl="https://www.google.com/url?q=https://deanbaker.net/books/rigged.htm&source=gmail&ust=1680262848158000&usg=AOvVaw0poTWqqOWUkRTFqrRSw6Xl" href="https://deanbaker.net/books/rigged.htm" style="background-color: transparent; color: #1155cc;" target="_blank"><em>Rigged</em></a> [it’s free].)</p></span></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-6126048914589829302023-03-21T06:00:00.001-07:002023-03-21T06:00:05.875-07:00Joseph Stiglitz: Another Predictable Bank Failure<p> <span style="background-color: #fafafa; color: inherit; font-family: var(--font-serif); font-size: 16px; font-style: italic; white-space: nowrap;">ar 13, 2023</span></p><div class="article__byline" style="background-color: #fafafa; box-sizing: border-box; display: flex; flex-flow: row wrap;"><span class="byline" itemprop="author" itemscope="" itemtype="https://schema.org/Person" style="box-sizing: border-box; color: #333333; font-family: var(--font-serif); font-size: 16px;"><a class="track-event" data-entity-id="64127c0246f86f2c0fc9210b" data-entity-link-name="joseph-e-stiglitz" data-entity-type="member" data-event-action="click" data-href-original="/columnist/joseph-e-stiglitz" data-language="english" href="https://www.project-syndicate.org/columnist/joseph-e-stiglitz" itemprop="url" style="box-sizing: border-box; text-decoration-line: none;"><span class="listing__author author" itemprop="name" style="box-sizing: border-box; color: inherit; font-family: var(--font-sans); font-weight: 700; text-transform: uppercase;">JOSEPH E. STIGLITZ</span></a></span><span class="byline" itemprop="author" itemscope="" itemtype="https://schema.org/Person" style="box-sizing: border-box;"><span style="color: #333333;">https://www.project-syndicate.org/commentary/predictable-silicon-valley-bank-collapse-by-joseph-e-stiglitz-2023-03?utm_source=Project+Syndicate+Newsletter&utm_campaign=47be6695f6-sunday_newsletter_03_19_2023&utm_medium=email&utm_term=0_73bad5b7d8-47be6695f6-93461969&mc_cid=47be6695f6&mc_eid=6194caf520</span></span></div><div class="article__abs u-mt-se" dir="ltr" itemprop="abstract" style="box-sizing: border-box; line-height: 1.35; margin-top: 1.25rem;"><p style="box-sizing: border-box; margin: 0px; padding: 0px;"><span style="color: #333333; font-family: var(--font-serif);"><span style="background-color: #fafafa;"><i>The collapse of Silicon Valley Bank is em</i></span></span>blematic of deep failures in the conduct of both regulatory and monetary policy. Will those who helped create this mess play a constructive role in minimizing the damage, and will all of us – bankers, investors, policymakers, and the public – finally learn the right lessons?<br /><br /><br />NEW YORK – The run on Silicon Valley Bank (SVB) – on which <a href="https://www.npr.org/2023/03/11/1162805718/silicon-valley-bank-failure-startups">nearly half</a> of all venture-backed tech start-ups in the United States depend – is in part a rerun of a familiar story, but it’s more than that. Once again, economic policy and financial regulation has proven inadequate.<img src="https://webapi.project-syndicate.org/library/5a9729ce0294fa11c8ac43bd42521246.16-9-medium.1.jpg" /><br /><a href="https://www.project-syndicate.org/section/economics"></a><a href="https://www.project-syndicate.org/commentary/svb-failure-lessons-comprehensive-deposit-insurance-systemic-risk-key-sectors-by-lucrezia-reichlin-2023-03#comments">2</a><br />Lessons from the SVB Coll<br /><br /><br />The news about the second-biggest bank failure in US history came just days after Federal Reserve Chair Jerome Powell assured Congress that the financial condition of America’s banks was sound. But the timing should not be surprising. Given the large and rapid increases in interest rates Powell engineered – probably the most significant since former Fed Chair Paul Volcker’s interest-rate hikes of 40 years ago – it was predicted that dramatic movements in the prices of financial assets would cause trauma somewhere in the financial system.<br /><br />But, again, Powell assured us not to worry – despite abundant historical experience indicating that we should be worried. Powell was part of former President Donald Trump’s regulatory team that worked to weaken the Dodd-Frank bank regulations enacted after the 2008 financial meltdown, in order to free “smaller” banks from the standards applied to the largest, systemically important, banks. By the standards of Citibank, SVB is small. But it’s not small in the lives of the millions who depend on it.<br /><br />Powell said that there would be pain as the Fed relentlessly raised interest rates – not for him or many of his friends in private capital, who reportedly were planning to make a killing as they hoped to sweep in to buy uninsured deposits in SVB at 50-60 cents on the dollar, before the government <a href="https://edition.cnn.com/2023/03/12/investing/svb-customer-bailout/index.html">made it clear</a> that these depositors would be protected. The worst pain would be reserved for members of marginalized and vulnerable groups, like young nonwhite males. Their unemployment rate is typically four times the national average, so an increase from 3.6% to 5% translates into an increase from something like 15% to 20% for them. He blithely calls for such unemployment increases (falsely claiming that they are necessary to bring down the inflation rate) with nary an appeal for assistance, or even a mention of the long-term costs.1<br /><br />Now, as a result of Powell’s callous – and totally unnecessary – advocacy of pain, we have a new set of victims, and America’s most dynamic sector and region will be put on hold. Silicon Valley’s start-up entrepreneurs, often young, thought the government was doing its job, so they focused on innovation, not on checking their bank’s balance sheet daily – which in any case they couldn’t have done. (Full disclosure: my daughter, the CEO of an education startup, is one of those dynamic entrepreneurs.)<br /><br />While new technologies haven’t changed the fundamentals of banking, they have increased the risk of bank runs. It is much easier to withdraw funds than it once was, and social media turbocharges rumors that may spur a wave of simultaneous withdrawals (though SVB reportedly simply didn’t respond to orders to transfer money out, creating what may be a legal nightmare). Reportedly, SVB’s downfall wasn’t due to the kind of bad lending practices that led to the 2008 crisis and that represent a fundamental failure in banks performing their central role in credit allocation. Rather, it was more prosaic: all banks engage in “maturity transformation,” making short-term deposits available for long-term investment. SVB had bought long-term bonds, exposing the institution to risks when yield curves changed dramatically.<br /><br /><br />New technology also makes the old $250,000 limit on federal deposit insurance absurd: some firms engage in regulatory arbitrage by scattering funds over a large number of banks. It’s insane to reward them at the expense of those who trusted regulators to do their job. What does it say about a country when those who work hard and introduce new products that people want are brought down simply because the banking system fails them? A safe and sound banking system is a sine qua non of a modern economy, and yet America’s is not exactly inspiring confidence.<br /><br />As Barry Ritholtz <a href="https://twitter.com/ritholtz/status/1634536402418294785?cxt=HHwWgoCz6dSMha8tAAAA">tweeted</a>, “Just as there are no atheists in Fox Holes, there are also no Libertarians during a financial crisis.” A host of crusaders against government rules and regulations suddenly became champions of a <a href="https://www.latimes.com/business/story/2023-03-12/with-demands-for-a-bank-bailout-silicon-valley-shows-its-small-government-mantra-was-just-a-scam">government bailout of SVB</a>, just as the financiers and policymakers who engineered the massive deregulation that led to the 2008 crisis called for bailing out those who caused it. (<a href="https://www.project-syndicate.org/columnist/lawrence-h-summers">Lawrence Summers</a>, who led the financial deregulation charge as US Treasury Secretary under President Bill Clinton, also <a href="https://www.washingtonpost.com/us-policy/2023/03/11/silicon-valley-bank-bailout-washington/">called for a bailout</a> of SVB – all the more remarkable after he took a strong stance against helping students with their debt burdens.)1<br /><br />The answer now is the same as it was 15 years ago. The shareholders and bondholders, who benefited from the firm’s risky behavior, should bear the consequences. But SVB’s depositors – firms and households that trusted regulators to do their job, as they repeatedly reassured the public they were doing – should be made whole, whether above or below the $250,000 “insured” amount.<br /><br />To do otherwise would cause long-term damage to one of America’s most vibrant economic sectors; whatever one thinks of Big Tech, innovation must continue, including in areas such as green tech and education. More broadly, doing nothing would send a dangerous message to the public: The only way to be sure your money is protected is to put it in the systemically important “too big to fail” banks. This would result in even greater market concentration – and less innovation – in the US financial system.<br /><br />After an anguishing weekend for those potentially affected throughout the country, the government finally did the right thing – it guaranteed that all depositors would be made whole, preventing a bank run that could have disrupted the economy. At the same time, the events made clear that something was wrong with the system.<br /><br />Some will say that bailing out SVB’s depositors will lead to “moral hazard.” That is nonsense. Banks’ bondholders and shareholders are still at risk if they don’t oversee managers properly. Ordinary depositors are not supposed to be managing bank risk; they should be able to rely on our regulatory system to ensure that if an institution calls itself a bank, it has the financial wherewithal to pay back what is put into it.<br /><br />SVB represents more than the failure of a single bank. It is emblematic of deep failures in the conduct of both regulatory and monetary policy. Like the 2008 crisis, it was predictable and predicted. Let’s hope that those who helped create this mess can play a constructive role in minimizing the damage, and that this time, all of us – bankers, investors, policymakers, and the public – will finally learn the right lessons. We need stricter regulation, to ensure that all banks are safe. All bank deposits should be insured. And the costs should be borne by those who benefit the most: wealthy individuals and corporations, and those who rely most on the banking system, based on deposits, transactions, and other relevant metrics. <br /><br />It has been more than 115 years since the panic of 1907, which led to the establishment of the Federal Reserve System. New technologies have made panics and bank runs easier. But the consequences can be even more severe. It’s time our framework of policymaking and regulation responds.</p></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-5307075296669483402.post-26233543355751185842023-03-13T13:03:00.003-07:002023-03-13T13:06:40.269-07:00Dean Baker on SVB - Its a billionaire bailout; and it's Trump's Fault<h2 style="text-align: center;"> </h2><h2 style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEig3ajFc2_z6c7fZDj4bw2XdHhfKdKWNHQCsCR8-YJRfymrkyXucluXJADkui7pJMonQ3jHLpFWvSppLagxnGViOC3bP3XPnx8enOLo7hP4mdmFpdVyj_sxJISyvSivSpGh1ZH_uO5s1SjjX6xdjfxUQ_ww8162RHfStFh8yOTtkRGxp-BYEkiZobXJ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="217" data-original-width="232" height="240" src="https://blogger.googleusercontent.com/img/a/AVvXsEig3ajFc2_z6c7fZDj4bw2XdHhfKdKWNHQCsCR8-YJRfymrkyXucluXJADkui7pJMonQ3jHLpFWvSppLagxnGViOC3bP3XPnx8enOLo7hP4mdmFpdVyj_sxJISyvSivSpGh1ZH_uO5s1SjjX6xdjfxUQ_ww8162RHfStFh8yOTtkRGxp-BYEkiZobXJ" width="257" /></a></div><br /><br /></h2><h2 style="text-align: left;"><span face=""merriweather sans", sans-serif" style="background-color: white; color: #282828; font-size: 19px;"><a href="https://cepr.net/svb-was-donald-trumps-bailout/?utm_source=substack&utm_medium=email">There are two key points that people should recognize about the decision to guarantee all the deposits at Silicon Valley Bank (SVB):</a></span><ul style="background-color: white; box-sizing: border-box; color: #4a4a4a; font-family: "merriweather sans", sans-serif; font-size: 16px; list-style-image: initial; list-style-position: initial; margin: 20px 0px 20px 40px; padding: 0px;"><li style="box-sizing: border-box; margin: 5px 0px; padding: 0px;">It was a bailout</li></ul><ul style="background-color: white; box-sizing: border-box; color: #4a4a4a; font-family: "merriweather sans", sans-serif; font-size: 16px; list-style-image: initial; list-style-position: initial; margin: 20px 0px 20px 40px; padding: 0px;"><li style="box-sizing: border-box; margin: 5px 0px; padding: 0px;">Donald Trump was the person responsible.</li></ul></h2><p style="background-color: white; box-sizing: border-box; color: #282828; font-family: "merriweather sans", sans-serif; font-size: 19px; line-height: 30px; margin: 20px 0px; padding: 0px;">The first point is straightforward. We gave a government guarantee of great value to people who had not paid for it.</p><p style="background-color: white; box-sizing: border-box; color: #282828; font-family: "merriweather sans", sans-serif; font-size: 19px; line-height: 30px; margin: 20px 0px; padding: 0px;">We will get a lot of silly game playing on this issue, just like we did back in 2008-09. The game players will tell us that this guarantee didn’t cost the government a penny, which will very likely end up being true. But that doesn’t mean we didn’t give the bank’s large depositors something of great value.</p><p style="background-color: white; box-sizing: border-box; color: #282828; font-family: "merriweather sans", sans-serif; font-size: 19px; line-height: 30px; margin: 20px 0px; padding: 0px;">If the government offers to guarantee a loan, it makes it far more likely that the beneficiary will be able to get the loan and that they will pay a lower interest rate for this loan. In this case, the people who held large uninsured deposits at SVB apparently decided that it was better, for whatever reason, to expose themselves to the risk by keeping these deposits at SVB, rather than adjusting their finances in a way that would have kept their money better protected.</p><p style="background-color: white; box-sizing: border-box; color: #282828; font-family: "merriweather sans", sans-serif; font-size: 19px; line-height: 30px; margin: 20px 0px; padding: 0px;">This would have meant either parking their deposits at a larger bank that was subject to more careful scrutiny by regulators, or adjusting their assets so that they were not so exposed to a single bank. They also could have taken ten minutes to examine SVB’s financial situation, which was mostly a <a href="https://fortune.com/2023/03/10/silicon-valley-bank-svb-short-seller-william-martin-twitter-2-months/" style="box-sizing: border-box; color: #4998f2; cursor: pointer; margin: 0px; padding: 0px; text-decoration-line: none; transition: all 0.4s ease 0s;">matter of public record</a>. </p><p style="background-color: white; box-sizing: border-box; color: #282828; font-family: "merriweather sans", sans-serif; font-size: 19px; line-height: 30px; margin: 20px 0px; padding: 0px;">For whatever reason, the bank’s large depositors chose to expose themselves to serious risk. When their bet turned out badly, they in effect wanted the government to provide the insurance that they did not pay for.</p><p style="background-color: white; box-sizing: border-box; color: #282828; font-family: "merriweather sans", sans-serif; font-size: 19px; line-height: 30px; margin: 20px 0px; padding: 0px;">This brings us to the second point; this is Donald Trump’s bailout. The reason this is a bailout is that the government is providing a benefit that the depositors did not pay for. It also is, in effect, a subsidy to other mid-sized banks, since it tells their depositors that they can count on the government covering their deposits, even though they are not insured and the bank is not subject to the same scrutiny as the largest banks.</p><p style="background-color: white; box-sizing: border-box; color: #282828; font-family: "merriweather sans", sans-serif; font-size: 19px; line-height: 30px; margin: 20px 0px; padding: 0px;">This is where the fault lies with Donald Trump. It was his decision to stop <a href="https://www.politico.com/story/2018/03/14/senate-passes-bill-scaling-back-dodd-frank-463825" style="box-sizing: border-box; color: #4998f2; cursor: pointer; margin: 0px; padding: 0px; text-decoration-line: none; transition: all 0.4s ease 0s;">scrutinizing banks</a> with assets between $50 billion and $250 billion that led to the problems at SVB. </p><p style="background-color: white; box-sizing: border-box; color: #282828; font-family: "merriweather sans", sans-serif; font-size: 19px; line-height: 30px; margin: 20px 0px; padding: 0px;">Prior to the passage of this bill, a bank the size of SVB would have been subject to regular stress tests. A stress test means projecting how a bank would fare in various bad situations, like the rise in interest rates that apparently sank SVB.</p><p style="background-color: white; box-sizing: border-box; color: #282828; font-family: "merriweather sans", sans-serif; font-size: 19px; line-height: 30px; margin: 20px 0px; padding: 0px;">If regulators had subjected to SVB to a stress test, they would have almost surely recognized its problems. They then would have required it to raise more capital and/or shed deposits.</p><p style="background-color: white; box-sizing: border-box; color: #282828; font-family: "merriweather sans", sans-serif; font-size: 19px; line-height: 30px; margin: 20px 0px; padding: 0px;">But Trump pulled the regulators off the job. This is wrongly described as “deregulation.” It isn’t.</p><p style="background-color: white; box-sizing: border-box; color: #282828; font-family: "merriweather sans", sans-serif; font-size: 19px; line-height: 30px; margin: 20px 0px; padding: 0px;">Deregulation would mean both eliminating the scrutiny of SVB and ending insurance for the bank. (In principle that would mean ending all deposit insurance, not the just the insurance for large accounts that is at issue here.)</p><p style="background-color: white; box-sizing: border-box; color: #282828; font-family: "merriweather sans", sans-serif; font-size: 19px; line-height: 30px; margin: 20px 0px; padding: 0px;">What happened in 2018 was effectively allowing SVB to still benefit from insurance without having to pay for it. It is comparable to telling drivers that they don’t have to buy auto insurance, but will still be covered if they are in an accident. Or, perhaps a better example would be telling a restaurant that it is covered by fire insurance, but it doesn’t have to adhere to safety standards.</p><p style="background-color: white; box-sizing: border-box; color: #282828; font-family: "merriweather sans", sans-serif; font-size: 19px; line-height: 30px; margin: 20px 0px; padding: 0px;">It is dishonest to describe this as “deregulation.” It is the government giving a subsidy to the banks in question. It is understandable that the banks prefer to describe their subsidy as deregulation, but it is not accurate.</p><p style="background-color: white; box-sizing: border-box; color: #282828; font-family: "merriweather sans", sans-serif; font-size: 19px; line-height: 30px; margin: 20px 0px; padding: 0px;">Anyhow, this bailout is the Donald Trump bailout. He touted the 2018 bill when he signed it. We are now seeing the fruits of his action. </p>Unknownnoreply@blogger.com0