As I always say, don’t conflate trade deals with trade (or the trade deficit) [feedly]

As I always say, don't conflate trade deals with trade (or the trade deficit)
http://jaredbernsteinblog.com/as-i-always-say-dont-conflate-trade-deals-with-trade-or-the-trade-deficit/

Over at the NYT.

Special for OTE readers, parts that had to be cut for space:

"Since the mid-1970s, the US has regularly imported more than we've exported. Net exports (exports-imports) have averaged just under -4 percent of GDP since 2000. Trade deficits are by definition a drag on growth, and that's especially true in sectors, like manufacturing, that drive the deficit. By linking the trade deficit to manufacturing job loss, Trump made a legitimate argument that resonated with some of his core voters.

There are, of course, many moving parts in the economy, and the trade deficit's drag on growth has often been offset by other components of GDP. In 2007, the trade deficit was -5 percent of GDP while the unemployment rate was a low 4.6 percent. But the offset in play—the housing bubble—came at a great cost (and was itself, through inflows of cheap capital, related to the trade deficit)."

The idea here is to explain why targeting the economically large and persistent US trade deficit is a reasonable policy goal.

This view is not widely accepted among economists. Everyone gets the by identity, the trade deficit is a drag on growth, but numerous arguments push back on the idea that it's a problem.

Dean Baker and I tackle the issue here. The punchline, as suggested above, is not that the drag impact of the trade deficit never gets offset. It clearly does, at times. But when offsets are less forthcoming–the Fed's run out of ammo; the fiscal authorities have gone all austere–the demand-reducing drag from trade imbalances is a problem.

Second, even in flush times, the trade deficit, which is exclusively in manufactured goods, affects the industrial composition of employment, and it is in this regard that Trump has been able to so effectively tap its politics. While high-ranking democrats were running around pushing the next trade deal, he was talking directly to those voters who clearly perceived themselves far more hurt than helped by globalization.

Third, the parenthetical reference above to cheap capital inflows plays a central role in my analysis. Details here and in links therein, but I find that many economists who view the trade deficit as wholly benign fail to deal with these macrodynamics.

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The Fruits of Growth: Economic Reforms and Lower Inequality [feedly]

The Fruits of Growth: Economic Reforms and Lower Inequality
https://blog-imfdirect.imf.org/2017/01/26/the-fruits-of-growth-economic-reforms-and-lower-inequality/

v

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Paul Krugman: Making the Rust Belt Rustier [feedly]

Paul Krugman: Making the Rust Belt Rustier
http://economistsview.typepad.com/economistsview/2017/01/paul-krugman-making-the-rust-belt-rustier.html

Will Trump Repeat Reagan's mistake?:

Making the Rust Belt Rustier: Donald Trump ... appears serious about his eagerness to reverse America's 80-year-long commitment to expanding world trade. On Thursday the White House said it was considering a 20 percent tariff on all imports from Mexico; doing so wouldn't just pull the U.S. out of NAFTA, it would violate all our trading agreements. ...

Taken together, the new regime's policies will probably lead to a faster, not slower, decline in American manufacturing.

How do we know this? We can look at the underlying economic logic, and we can also look at what happened during the Reagan years, which in some ways represent a dress rehearsal for what's coming. ...

What Reagan did ... was blow up the budget deficit with military spending and tax cuts. This drove up interest rates, which drew in foreign capital. The inflow of capital, in turn, led to a stronger dollar, which made U.S. manufacturing uncompetitive. The trade deficit soared — and the long-term decline in the share of manufacturing in overall employment accelerated sharply.

Notably, it was under Reagan that talk of "deindustrialization" and the use of the term "Rust Belt" first became widespread.

It's also worth pointing out that the Reagan-era manufacturing decline took place despite a significant amount of protectionism, especially a quota on Japanese car exports ... that ended up costing consumers more than $30 billion in today's prices.

Will we repeat this story? The Trump regime will clearly blow up the deficit, mainly through tax cuts for the rich. (Funny, isn't it, how all the deficit scolds have gone quiet?)..., interest rates have already risen in anticipation of the borrowing surge, and so has the dollar. So we do seem to be following the Reagan playbook for shrinking manufacturing. ...

And there's a further factor to consider: ... Manufacturing is a global enterprise, in which cars, planes and so on are assembled from components produced in multiple countries. ... There will, inevitably, be huge dislocation: Some U.S. factories and communities will benefit, but others will be hurt, bigly, by the loss of markets, crucial components or both.

Economists talk about the "China shock," the disruption of some communities by surging Chinese exports in the 2000s. Well, the coming Trump shock will be at least as disruptive.

And the biggest losers, as with health care, will be white working-class voters who were foolish enough to believe that Donald Trump was on their side.

VISIT WEBSITE
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Dollars and Sense New Issue!-- Trump and neo-liberalism [feedly]

New Issue!
http://dollarsandsense.org/blog/2017/01/new-issue-7.html

Our January/February issue is finally out–sent to e-subscribers a couple of days ago, and in the mail to print subscribers.  We most recently posted David Bacon's contribution to the issue, What Trump Can and Can't Do to Immigrants, especially timely given Trump's recent executive orders.

Here is the issue's editorial note:

Arise!

If you've just awakened from a Rip Van Winkle-like sleep, you should probably stay lying down for a little while. You're in for a shock.

A presidential candidate who slandered Mexican immigrants as criminals and rapists, claimed a Mexican-American judge was inherently biased against him, called for a ban on Muslims coming to the United States, called for compulsory registration of Muslims in the country, boasted of sexually assaulting women, insinuated that gun advocates might assassinate his opponent, and pledged to abide by the election result "if I win" … was elected president.

Here's another shocker. Who among us expected to hear the Republican nominee for president—just four years after the party's nominee was private-equity mogul Mitt Romney—say the following, as Donald Trump did in a October 2016 speech? "The establishment has trillions of dollars at stake in this election. For those who control the levers of power in Washington and for the global special interests. They partner with these people who don't have your good in mind. … It's a global power structure that is responsible for the economic decisions that have robbed our working class, stripped our country of its wealth and put that money into the pockets of a handful of large corporations and political entities."

The leading figures in the mainstream of the Democratic Party certainly did not expect an adversary raging against corporate globalization (even with the anti-Semitic dog whistles audible in Trump's denunciations of the "global elite"). For decades, leading Democrats had bought into the neoliberal economic agenda, steering away from policies that could get them branded as "anti-business." They derided criticism from the left as juvenile and quixotic, not dreaming that they would be outflanked on the right by a populism like Trump's.

The analysis by liberal and progressive commentators since the election has focused largely on why Trump won and what it says about the country. We have to remember, however, that election results are not revelations of the national soul—especially not under the United States' non-majoritarian presidential election system. The overt racism, nativism, and misogyny of Trump, his allies, and supporters are important facts about the United States today, but they are not the singular truth about the country or its people.

Yet there is nothing to be gained by minimizing what Trump has conjured. He tapped into widespread sentiments of grievance in a manner typical of right-wing populists: simultaneously directing his supporters' ire at (some of) the wealthy and powerful and (some of) the poor and marginalized—blaming both, jointly, for the ruin of the country. The people Trump speaks to and claims to speak for are overwhelmingly white, predominantly male, and the grievances to which he gives voice are not simply those of workers and poor people in general. They are, rather, the particular grievances of those who recoil at gradually sinking into a mass they see as beneath them.

The articles in this issue attempt to dig deeply into both what has gotten us to this point, and what are possible ways forward.

Our cover article for the issue, by political scientist Sasha Breger Bush, argues that what we're seeing is not the end of neoliberalism, but rather its transformation, from globalized neoliberalism into "national neoliberalism," and its culmination: a corporate capture of government now more complete than ever.

Steve Pressman and Gerald Friedman both add depth to our understanding of Trump and what he represents. Pressman explains Trump in light of the squeeze on "middle class" incomes and the rise of economic inequality. Friedman adds to his previous analysis of American nativism (the November/December 2016 cover story) an "Economy in Numbers" on U.S. immigration in the current era.

David Bacon and Frank Ackerman, meanwhile, turn from retrospect to prospect. What does the coming period hold in store? Bacon focuses on immigration policy, noting the constraints under which a Trump administration will operate. Even in an era of increased border enforcement and deportations nationwide, Bacon argues, immigration policy will continue to be driven by employers' need for a cheap and controllable labor force.

Meanwhile, Ackerman looks at the prospect for meaningful climate action, even with the Denier-in-Chief in the White House. He argues for a consortium of U.S. state and local governments—a "Green-State America"—committing to meet the emissions-reduction goals set down in the Paris climate agreement. "And this could be a model for other issues," he concludes. "Green-State America might also want to support international treaties on the rights of women, the treatment of migrants, the rights of indigenous peoples, and more."

To be sure, there will be many struggles ahead. Time to arise.

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Eastern Panhandle Independent Community (EPIC) Radio:Big Lineup for Friday on EPIC Radio

John Case has sent you a link to a blog:



Blog: Eastern Panhandle Independent Community (EPIC) Radio
Post: Big Lineup for Friday on EPIC Radio
Link: http://www.enlightenradio.org/2017/01/big-lineup-for-friday-on-epic-radio.html

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Austerity Economics has just been Smashed. By the IMF. [feedly]

Austerity Economics has just been Smashed. By the IMF.
http://www.globalpolicyjournal.com/blog/26/01/2017/austerity-economics-has-just-been-smashed-imf

Sometimes an ideology is so brilliantly propagated that observers might not even notice it's an ideology. In the corridors of power and in mainstream discussion, it ceases to be questioned. Then it goes catastrophically wrong. And it begins to seen again for the ideology it is. It becomes questioned again. And, if they are smart, leaders hear this and start to self-correct. This is where we've got to with neoliberalism, austerity, and rising inequality. Except for the self-correct part. Right now, instead of self-correction, we're seeing many mainstream politicians unable to shift away from dead economics, and what seems in too many countries like the start of social breakdown. Change is well overdue. Who can prompt leaders to drop the old economic nostrums are causing so much harm?

Enter the IMF with a sledgehammer. Progressives duck in case in the sledgehammer is meant for them. But then the IMF demolishes the case for neoliberalism and austerity. It sounds extraordinary, and it is.

Today the IMF will launch a new report, "Macro-Structural Policies and Income Inequality in Low-Income Developing Countries", the latest in series that mark the intellectual journey the IMF research department has been travelling in recent years. Packed with detailed quantitative analysis it demonstrates that much of what elites have been advancing as unquestioned economics is demonstrably harmful both to economic growth and to public wellbeing.

Of course what makes this surprising, and what may make some progressives unenthusiastic about welcoming this, is also what makes it so powerful: an institution that has been, for far too long, a defender of the free market story and the Washington Consensus – the idea that liberalizing trade, privatizing everything possible and cutting down public spending was a one-size-fits-all solution to any government in trouble – has now refuted it.

This paper is not the first by the IMF to take a stand on inequality, but it is notable because it claims in no uncertain terms that public spending – i.e. the opposite of the budget cuts that it once advocated for – decreases income inequality. They even have a formula – a 1% increase in public spending, they report, leads to a 2.3 decrease in inequality after 5 years.

 

 

The paper also takes a strong stand against prioritizing indirect taxes, such as VAT, showing that they increase inequality.

 

 

The paper not only demolishes neoliberal economics but also helps build the evidence base around the kinds of policies that are necessary to reduce inequality. Those include some of the things that NGOs like ActionAid have been talking about: emphasizing direct taxes instead of indirect taxes, spending on social services (this paper focuses on infrastructure, but we would see that more broadly), support for cash transfer programmes, and the need to ensure that any programs that are likely to increase inequality are offset by measures to decrease inequality.

Lives and livelihoods are being lost because those who design policies are following a damaging model. And now, in countries around the world, the lack of action in inequality is leading to a resurgence of xenophobic nationalism and the far right. Broken economics is breaking society. But too many leaders still seem trapped in the belief that there is no alternative. So let them know that today the IMF – yes, the IMF – has comprehensively set out why that broken economics must be consigned to the dustbin of history.

 

 

Ben Phillips, currently based in Nairobi, is co-founder of the #FightInequality alliance, and Campaigns and Policy Director at ActionAid International. He has lived and worked in four continents and a dozen cities, and led programmes and campaigns teams in Oxfam, Save the Children, the Children's Society, the Global Call to Action Against Poverty and the Global Campaign for Education. He began his development work at the grassroots, as a teacher and ANC activist living in Mamelodi township, South Africa, in 1994, just after the end of apartheid. All his posts are personal reflections. He tweets at @benphillips76. This post first appeared on Global Dashboard.

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The Color of Law: A Forgotten History of How Our Government Segregated America [feedly]

The Color of Law: A Forgotten History of How Our Government Segregated America
http://www.epi.org/publication/the-color-of-law-a-forgotten-history-of-how-our-government-segregated-america/

In The Color of Law (to be published by Liveright in May 2017), Richard Rothstein argues with exacting precision and fascinating insight how segregation in America—the incessant kind that continues to dog our major cities and has contributed to so much recent social strife—is the byproduct of explicit government policies at the local, state, and federal levels.

To scholars and social critics, racism in our neighborhoods has long been viewed as a manifestation of unscrupulous real estate agents, unethical mortgage lenders, and exclusionary covenants working outside the law. This is what is commonly known as "de facto segregated," practices that were the outcome of private, not legal or public policy, means. Yet, as Rothstein breaks down in case after case, until the last quarter of the 20th century de facto paled in comparison with de jure (government-sponsored) segregation.

A former columnist for the New York Times and a research associate at the Economic Policy Institute, as well as a Fellow at the Thurgood Marshall Institute of the NAACP Legal Defense Fund, Rothstein has spent years documenting the evidence that government not merely ignored discriminatory practices in the residential sphere, but promoted them. The impact has been devastating for generations of African-Americans who were denied the right to live where they wanted to live, and raise and school their children where they thought best.

While the Fair Housing Act of 1968 provided modest enforcement to prevent future discrimination, it did nothing to reverse or undo a century's worth of state-sanctioned violations of the Bill of Rights, particularly the Thirteenth Amendment which banned treating former slaves as second-class citizens. So the structural conditions established by 20th century federal policy endure to this day.

At every step of the way, Rothstein demonstrates, the government and our courts upheld racist policies to maintain the separation of whites and blacks—leading to the powder keg that has defined Ferguson, Baltimore, Charleston, and Chicago. The Color of Law is not a tale of Red versus Blue states. It is sadly the story of America in all of its municipalities, large and small, liberal and reactionary.

As William Julius Wilson has stated: "The Color of Law is one of those rare books that will be discussed and debated for many decades."

Pre-order the book

You can pre-order the book on Amazon.com, Barnes & Noble, or from IndieBound.org, including your local bookseller.

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