Senate Republicans reportedly will retain the House health bill's damaging Medicaid per capita cap in their bill, but some of them are considering a change that would "reset" or rebase the annual cap amounts for states every two or three years, a Vox article yesterday suggests.
Trump's withdrawal from the Paris accord sets the US economy back
The alarm that greeted President Donald Trump's announcement that the U.S. will withdraw from the Paris climate accord was an overreaction in one respect. The pace at which the world moves away from fossil fuels won't, in fact, be greatly affected. The other countries that together now account for 85% of carbon emissions will not change course even if the U.S. drags its heels. In another respect, however, Trump's latest proclamation is truly alarming: in what it means for America's economy.
The U.S. joins Syria and Nicaragua as the only countries in the world that are not parties to the Paris accord. Syria's absence stems from the fact that the country is in a horrific civil war and its leaders are under international sanctions. Nicaragua refused to sign not because it considered the accord too onerous, but because it didn't go far enough to combat climate change.
Oddly, Trump echoed Nicaragua's position when he said the accord would reduce global temperatures by only 0.2 degrees Celsius in 2100, calling this a "tiny, tiny amount." His main rationale for pulling out, however, was not the modesty of the accord's benefits. Instead it was "the draconian financial and economic burdens the agreement imposes" on the U.S. Never mind that the agreement "imposes" nothing: All commitments under the Paris accord are voluntary and non-binding, and each country's policies can be changed at will.
Trump asserted that "the onerous energy restrictions it has placed on the United States could cost America as much as 2.7 million lost jobs by 2025." His source for this claim was a report by a Washington, DC consulting firm called National Economic Research Associates. In a footnote, the report acknowledges two omissions: First, it "does not take into account potential benefits from avoided emissions," and second, it "does not take into account yet to be developed technologies" but instead is based on "current technology costs and availability."
Both limitations have huge economic implications. Assuming zero technological change means ignoring the rapidly plummeting costs of renewable energy. And the motivation for pro-active climate policy is precisely to secure the non-trivial benefits of avoided emissions, like keeping Miami above water. A side benefit, also far from trivial, is cleaner air: The Obama administration's Clean Power Plan would have generated health benefits for Americans valued at $29 billion per year by 2020.
A third major omission is that the report does not take into account robust job creation in energy efficiency and renewable energy sectors. The U.S. coal industry today employs roughly 76,000 workers; the solar industry employs more than 250,000. As my colleagues Robert Pollin and Heidi Garrett-Peltier have documented, investments in energy efficiency and renewables yield substantially more jobs per dollar than spending on fossil fuels. At the same time, far from writing off coal miners and other fossil fuel workers as "collateral damage" of the energy revolution, they and others advocate "just transition" policies for their re-employment and pension guarantees.
The "draconian" financial burden called out by Trump is the UN's Green Climate Fund, which he claimed is "costing the United States a vast fortune." National contributions to the fund are strictly voluntary. The U.S. has pledged $3 billion – less than $10 per American – a "tiny, tiny" amount, one could say, compared to climate adaptation needs in vulnerable countries. Sweden has pledged six times as much per person.
Trump's announcement will have little effect on the pace of the world's transition from fossil fuels to clean energy. As before, all other countries (apart from Syria) remain committed to the Paris accord or stronger measures (as in Nicaragua's case). China is investing heavily in solar, wind and energy conservation, and starting to scrap plans for new coal plants. India, too, is canceling coal plants because they can no longer compete with cheaper solar power. In the US, Trump is moving in the opposite direction: before withdrawing from Paris, his administration decided to scrap the Clean Power Plan and other Obama-era initiatives.
The good news is that within the U.S., many remain committed to cutting carbon emissions. California, the world's sixth largest economy, is proposing to extend its cap-and-trade program beyond 2020 by setting one of the highest carbon prices in the world and rebating the revenue directly to its people as carbon dividends. A dozen states that together account for 36% of U.S. GDP, including California, New York, Washington, Massachusetts, Minnesota and Virginia, have entered into a U.S. Climate Alliancecommitted to meeting or exceeding the Obama administration's goals. Major cities, along with corporations that compete in the global marketplace, have announced similar plans.
Still, Trump's announcement will handicap the US economy in the energy revolution that promises to be the defining technological breakthrough of the 21stcentury. Forsaking national movement toward energy efficiency and clean energy means foregoing opportunities for both cost savings and job creation. Compare this to the picture a century ago, when the U.S. pioneered the transition from horses to automobiles, averting the specter of cities drowning in manure. It is as if, today, the world was moving to automobiles while the U.S. was sticking resolutely to its horses.
For the American economy, this is a recipe for global non-competitiveness. Moreover, as other countries forge ahead in the energy revolution, Trump's policies expose U.S. exports to the risk of carbon sanctions.
Within the U.S. economy, those states, cities and businesses that persevere in the energy revolution will fare better than those that lag behind. Over time, this divergence will further widen the economic inequalities that are tearing American society apart.
The world energy revolution train has already left the station. It started late and it's running behind schedule, but it's gathering steam. Trump's announcement does not alter this reality. His policies will merely relegate the U.S. to the caboose. In the name of "America first," he's really putting America last.
Originally published by the Institute for New Economic Thinking.
"Whether Corbyn wins or loses, Labour MPs and associated politicos have to recognise that his popularity is not the result of entryism, or some strange flight of fancy by Labour's quarter of a million plus members, but a consequence of the political strategy and style that lost the 2015 election. …. A large proportion of the membership believe that Labour will not win again by accepting the current political narrative on austerity or immigration or welfare or inequality and offering only marginal changes to current government policy."
Sorry to recycle, but with the Comey hearings sucking up all the air, folks may have missed that today the House today passed that fahrblunget bit of chazari known as the Choice Act, which largely repeals Dodd-Frank financial reform (it requires D votes in the Senate, so a much heavier lift over there, thankfully). Back in February, I wrote this defense of "finreg" (for WaPo) and while I insert a few updates [in brackets], I think I was as right then as now on this.
[From Feb 2, 2017]
There are two important pieces of economic news out this morning, and while it might not seem so, they're intimately connected.
First, we got another in a stream of solid reports on the U.S. job market. Payrolls were up 227,000, and while the jobless rate ticked up to 4.8 percent, that was for a good reason: more people entering the labor market. Hourly pay is up 2.5 percent over the past year, ahead of inflation, meaning real paychecks have more buying power. There's still some slack in the job market — too many underemployed folks, for example (part-timers who want to work full-time) — but if we stick on this path, we'll squeeze out the remaining slack within the year or so.
[Of course, since last Feb, unemployment has fallen further, to 4.3 percent, though hourly pay is still growing at around 2.5% and inflation has picked up (that's overall inflation, due to higher gas prices; core inflation has decelerated!]
That's the good news.
The bad news is that the Trump administration is threatening to blow up the job market recovery by rolling back financial market oversight. It's repeal-without-replace all over again, invoking the feared economic shampoo cycle: bubble, bust, repeat.
If you think I'm being alarmist, let me explain. The economic recovery of the 2000s was unquestionably ended by the bursting of the housing bubble, which in turn was inflated by underpriced risk. Financial "innovations," often poorly understood by even those selling them (you saw "The Big Short," right?), securitization (bundling loans into opaque packages), and sloppy underwriting of mortgage loans led to a housing boom that fed on itself. Brokers explained to home buyers that their obviously unsustainable loans would be absolutely fine, as long as home prices kept defying gravity.
But gravity has a way of reasserting itself, which is exactly what it did, and, as I explained above, eight years into this expansion, we're still not fully recovered.
The thing is, while this round of the shampoo cycle was uniquely damaging, it was anything but unique (ergo, the "cycle"). We saw a mini-version of the same dynamics in the dot.com bubble that ended the previous expansion. Economic historians have unearthed countless such examples, and the economist Hy Minsky documented the process. The bust and the losses it generates realign the price of risk with reality. But as the recovery proceeds, the memory of the bust fades and lenders begin to "get their risk on," often through clever new instruments, and not just exotic loans, but derivatives that take out bets on how those loans will perform.
As the cycle proceeds, the onset of econo-amnesia is sharply goosed by the fact that everybody's making stupid money (i.e., everybody in the top few percent). Even the "risk-assessors" are in on the deal, as loan quality analysis is beset with grade inflation.
Then it ends, and guess who gets screwed? Yes, there are big financial losses, but in a scheme that would make Bernie Madoff blush, the banks that inflated the bubble point out that because they're now sitting on bundles of nonperforming loans, we either bail them out or the ensuing credit freeze blocks the recovery.
As a member of the Obama administration when Dodd-Frank was devised and passed, I assure you that the legislation was motivated by our desire to break this cycle. I'm not claiming it's perfect by a long shot. It's super complicated, but then again, so are these markets. And we left a lot of the regulatory details to be completed post-legislation, which meant we allowed the deep-pocketed bank lobbyists to get into the fray, and that never ends well.
But somewhat to my surprise, many aspects of the law are working. As Dennis Kelleher, president of Better Markets, told me before the election:
"Financial regulation is much better today than it has been in decades. However, there is still a long way to go before the unique risks from this handful of very dangerous too-big-to-fail firms are either eliminated or reduced to the lowest levels possible. No question a number of key Dodd-Frank provisions are working, but many still have to be finalized, implemented and, importantly, enforced. It is a comprehensive, integrated law and it all must be enacted to effectively rein in Wall Street's riskiest activities."
[See also this short post I put up this AM on ways in which DF is making markets safer/less bubbly.]
One thing we recognized back when crafting Dodd-Frank (with heavy prompting from now-Sen. Elizabeth Warren) was that, given the evolution of the shampoo cycle and the complexity of modern credit markets, financial reform needed to set up a Consumer Financial Protection Bureau. Here's what Kelleher said about this:
"The CFPB had to be started from scratch just five years ago but has already made consumer protection a priority in our financial markets, as proved by an impressive record of returning more than $10 billion to 27 million ripped off American consumers. One of the key accelerants of the 2008 crash was widespread predatory, illegal and, too often, criminal conduct where consumers were routinely ripped off and fraud was a frequently a business model. That was due to very little consumer protection pre-crash, which was also highly fragmented and mostly ineffective. The CFPB was a solution to that gaping regulatory hole and it is proving itself to be an invaluable protector of financial consumers across the country."
[The Choice Act cuts CFPB off at the knees.]
Today I read that team Trump is going after Dodd-Frank, the CFPB, and another, similarly oriented Obama-era initiative, the "fiduciary rule" designed to diminish conflicts of interest between financial advisers and people saving for retirement by requiring such advisers to adopt a standard to act in their clients' best interests, not their own.
Now, check out this poll result from a recent survey of Trump voters by the respected pollster Morning Consult. Strikingly, 65 percent say that Obama-era regulations "requir[ing] financial advisors to put their clients' interests ahead of their own when providing retirement and investment advice" should be kept in place, while only 17 percent support repeal.
Dismantling consumer protections, restoring conflicts of interest and cranking up the economic shampoo cycle are all absolutely fantastic ways to kill the expansion, end the job and wage gains finally starting to reach low- and moderate-income households, exacerbate the income and wealth inequality still very much embedded in our economy, and stick it to some of the very people that helped elect this administration.
Or, as team Trump calls it, the end of week two.
[Updated: end of day 139…]
In the midst of a chaotic week, Congress and the Trump administration found time to quietly attack important worker protections and undermine the rules and regulations that make our economy fairer for working people and their families. Yesterday, the House passed legislation that makes our economy more susceptible to financial crises in the future, exposes consumers and investors to heightened risk of abuse in their dealings with the financial sector and rolls back the "fiduciary rule," which requires financial advisers to act in the best interest of their clients. On Wednesday, Secretary of Labor Acosta testified in support of President Trump's budget request for fiscal year 2018 that slashes funding for the agency that protects workers' wages and health and safety by 20 percent. And in a symbolic anti-worker move, the Trump administration also withdrew Department of Labor guidance designed to help employers understand their obligations under the law.
Today, the Department of Labor regulation known as the "fiduciary rule" was officially implemented. So, all financial advisers are finally, technically required to act in the best interest of clients saving for retirement. This is a huge win for savers but, while the rule's fiduciary standard is now in effect, it comes with a couple of catches. Important compliance provisions built into the rule's exemptions have been delayed until January 1, 2018. DOL has made it clear that it will not enforce the rule until then, either. Until the rule has been fully implemented and is being fully enforced, retirement savers will keep losing money to unscrupulous financial advisers.
