Senate Health Bill Old Wine, New Bottle Betrays West Virginians [feedly]

Senate Health Bill Old Wine, New Bottle Betrays West Virginians
http://www.wvpolicy.org/senate-health-bill-old-wine-new-bottle-betrays-west-virginians/

For Immediate Release
Contact: Caitlin Cook, 304.720.8682

[Charleston, WV] – West Virginia Center on Budget and Policy Executive Director Ted Boettner issued this statement in response to the latest Senate health bill:

Senate Republican leaders have released a "new" version of their health bill that fixes none of the original Senate bill's core problems for West Virginia and makes some of them worse. PDF news release.

The Senate bill ends the Medicaid expansion, under which 168,206 of West Virginians have gained coverage. lt drastically cuts and caps the entire Medicaid program – putting coverage at risk for 539,000 of West Virginians, largely people with disabilities, seniors, and families with children. In fact, because its cap is harsher, the Senate draft's overall cuts to Medicaid are even deeper than the House bill's 24 percent federal funding cut over the long run.

It would raise premiums and deductibles for millions of Americans who buy coverage in the individual marketplace by slashing tax credits and eliminating cost-sharing assistance, especially for older people and people in high-cost states. It also would gut consumer protections, leaving people with pre-existing conditions without access to needed health care.

While we don't yet have a CBO score, we know enough about the Senate bill's cuts to Medicaid and to marketplace financial assistance to know that it will cause many millions of Americans to lose health insurance.

We also know why the Senate bill makes these cuts:to give $400 billion in tax cuts to the wealthy, and drug companies, insurers and other corporations.

The changes Senate Republican leaders made to the bill don't solve these problems, and in some cases make them worse. They are touting additional "stability" funds for states. But the funds are woefully inadequate, poorly designed and will do little to improve health insurance for low-income people losing Medicaid coverage as a result of the bill or for moderate-income people hurt by the bill's marketplace subsidy cuts.  In addition, these funds are already spoken for: if they aren't used mostly for reinsurance, the bill's increases in sticker price premiums would be even larger.

They are also touting additional funding for opioid treatment. But it provides far less than experts estimate we need. And, more importantly, it would be greatly outweighed by the bill's deep Medicaid cuts and other fundamental changes to the ACA that would cost millions of people their health care coverage, leaving many opioid sufferers without the care they need to recover.

The bill's "Cruz Amendment" would eviscerate protections for people with pre-existing conditions, which the original version of the Senate bill would already drastically weaken.

Now Senate Republicans are trying to rush this bill through next week with no time for Senator Capito or the public to understand what's in it and how it will affect West Virginians. And just like in the House, they are likely to make more minor changes right before they vote and claim to have solved major problems with the bill. But we won't be fooled.

Senator Capito opposed the original Senate bill and none of its flaws regarding Medicaid and funding for battle the opioid crisis have been fixed.

Senator Capito must reject this bill and pursue a bipartisan approach that leaves Medicaid alone and addresses our real needs: stabilizing the marketplace and improving affordability.

And, Senator Capito must reject any bill that causes large coverage losses, ends the Medicaid expansion, caps and cuts the Medicaid program, or guts critical protections for people with health conditions.

Anything less would be breaking her promise to the people of our state.

 -- via my feedly newsfeed

Don’t Call It “Coal Country”: How Economic Stereotypes Are Hurting West Virginia [feedly]

Don't Call It "Coal Country": How Economic Stereotypes Are Hurting West Virginia
http://www.wvpolicy.org/dont-call-it-coal-country-how-economic-stereotypes-are-hurting-west-virginia/

Salon – If President Donald Trump is to be believed, Appalachian states like West Virginia and Kentucky are filled with unemployed coal miners who are oppressed because out-of-touch liberals won't let them do the jobs that geography and God foreordained for them. Read.

 -- via my feedly newsfeed

Links to start the week: “That horse ain’t real,” Reeves v. Samuelson, Why R’s don’t understand insurance. [feedly]

Links to start the week: "That horse ain't real," Reeves v. Samuelson, Why R's don't understand insurance.
http://jaredbernsteinblog.com/links-to-start-the-week-that-horse-aint-real-reeves-v-samuelson-why-rs-dont-understand-insurance/

First, an excellent video-metaphor for the R's health-care replacement ideas thus far. I particularly like the way the real horse shakes its head in a kinda equine WTF moment after it checks out the other "horse."

Second, given that Ben S and I featured Richard Reeves talking about his new book "Dream Hoarders" in our last episode of the On the Economy podcast, I wanted to take on a few points Robert Samuelson makes today in his critique of Reeves thesis. While Bob makes some important points, I think he gets some stuff wrong.

In response to Reeves' fundamental point that relative mobility in the US income distribution is too sticky–too many kids end up in adulthood near where they start–Bob S points out, and he's right, that there is, in fact, some degree of downward mobility ("roughly two-thirds dropped out of the top fifth").

But check out this figure (not the one from the book but one to which I can link with very similar results) which shows that close to two-thirds of kids who start out in the top fifth end up in the top 40% (39%+23%=62%). And even more importantly, look how relative downward mobility declines–gets stickier–as you go up the income scale. Or, inversely, how too many poor kids are stuck at the bottom.

Bob asks the fair question, "how many is too many?" That is, what, ideally, should that mobility matrix look like? No one expects 20%'s across the figure (meaning total upward and downward mobility across the quintiles–where you're born has no impact of where you end up) but I suspect Reeves has an answer to this query, which I'd like to hear, and will post here.

The second thing I think Bob gets wrong is his intimation that Reeves' work contradicts this goal: "As a society, we should try not to restrict the upper middle class, but to expand it." Since we're talking relative mobility here, you can't really expand the upper class (it will always be 20%) but what I think Bob is getting at is we want people to make good choices that improve or maintain the economic life chances of themselves and their kids.

That's surely what Richard wants too, but he believes, and I agree, that there's far too little by way of opportunity for poor and low-income kids to climb that ladder (which again, given relativity conditions, means some richies have to climb down to make room for others to climb up). And this is a policy problem that Richard sees clearly, as we discuss in the podcast. The tax code, for example, is fraught with upside-down subsidies that serve as the glue behind the stickiness in the income distribution (see figure), a fact that I suspect both Richard and Bob would agree is problematic.

Third, see my new WaPo piece about how today's conservatives clearly and willfully do not understand the critical role of government as an insurer, in no small part because they're paid not to understand it.

 -- via my feedly newsfeed

Chart of the Week: A Golden Aging for Vietnam? [feedly]

Chart of the Week: A Golden Aging for Vietnam?
https://blogs.imf.org/2017/07/17/chart-of-the-week-a-golden-aging-for-vietnam/

By IMFBlog

July 17, 2017 

A worker in a silk factory in Dalat, Vietnam. Encouraging more women to join the workforce and shifting to higher productivity occupations will help the country overcome the impact of an aging population (photo: Gerhard Zwerger-Schoner/imageBroker/Newscom)

Vietnam's demographic dividend is fast turning into a handicap.

For decades, working-age Vietnamese made up an expanding share of the population, boosting economic growth and helping to keep retirement and health spending in check.

That changed in 2013. While the southeast Asian nation's population of 92 million is still relatively young (the median age is 26), it is graying quickly. Birth rates are falling, and life expectancy is rising. This phenomenon is by no means unique to Vietnam. The problem is that it's happening much faster there, and at a much earlier stage of development.

In other words, as the Chart of the Week shows, Vietnam is at risk of growing old before it grows rich. And it will have less time to adapt to the challenges of an older society than many advanced economies had.

What are the implications for Vietnam's economy? The decline in the share of working age people will probably be a drag on per capita growth between 2020 and 2050. Because so many Vietnamese workers are engaged in physically taxing occupations like farming or forestry (as opposed to law or medicine) overall labor productivity is likely to decline. An aging population also means more spending on pensions and health care and less tax revenue from workers, putting a strain on the state budget.

Because Vietnam is peaking so early, demographically speaking, it needs to move fast to adopt policies to boost productivity and growth and limit the budget burden. Here are some steps it could take, as outlined in a recent IMF staff paper titled Vietnam: Selected Issues published on July 5 in conjunction with the Fund's annual assessment of the country's economy: 

• Increase participation in the workforce among women and older workers, and encourage the movement of people into higher-productivity occupations (currently, 40 percent of workers are employed on farms)

• Raise the retirement age (currently 60 for men and 55 for women), reduce incentives for early retirement and align indexation of benefits more closely with inflation.

• End preferential access to capital and land enjoyed by state-owned enterprises to create a level playing field for private companies and shift allocation of resources to more productive uses.

• Recapitalize state banks to reduce non-performing loans and increase flow of credit to the economy.

Vietnam's high educational achievement and progress on moving labor from low productivity agriculture to high productivity industry and services should help boost growth. With the right policies, Vietnamese can live long, healthy, productive and prosperous lives.  For a look at the issue of growing old before growing rich across Asia, please see our spring 2017 Regional Economic Outlook.

 -- via my feedly newsfeed

Economic models vs 'techno-optimism': Predicting medium-term total factor productivity rates in the US

Nicholas Crafts, Terence Mills 17 July 2017

Estimates of trend total factor productivity growth in the US have been significantly reduced, contributing to fears that the slowdown is permanent. This column provides an historical perspective on the relationship between estimated trends in total factor productivity growth and subsequent outcomes. It argues that In the past, trend growth estimates have not been a good guide for future medium-term outcomes, and 'techno-optimists' should not be put off by time-series econometrics.

Productivity growth in the US has slowed down markedly since the heady 'new economy' days around the turn of the century. The slowdown is similar to the much-remarked experience after the halcyon post-war years (Table 1). Moreover, a number of recent papers have pointed out that productivity growth had weakened significantly prior to the 'Great Recession' (Cardarelli and Lusinyan 2015, Fernald 2015) and analyses based on time-series econometrics (see Table 2) have found that it is trend labour productivity growth that has decreased (Antolin-Diaz et al. 2017, Ollivaud et al. 2016). The slowdown does not appear to be a temporary blip associated with the financial crisis.

Table 1 TFP growth in the business sector (% per year)

Source: based on data underlying Fernald (2016) available here.

Table 2 Estimates of trend productivity growth (% per year)

Note: estimates obtained using an HP filter methodology. Source: Ollivaud et al. (2016)

At the same time, it seems paradoxical that, although the productivity statistics are gloomy, there is also great excitement (or possibly fear) about the digital economy and the implications for jobs of the arrival of new technologies based on robots, artificial intelligence, and so on. The situation is reminiscent of the so-called 'Solow Productivity Paradox' that provoked so much debate 30 years ago.1

The coexistence of weak productivity performance and rapid technological advance becomes even more puzzling and worrying when it is recognised that from a growth accounting perspective, the underlying reason for slower labour productivity growth is almost entirely weak total factor productivity (TFP) growth (Fernald et al. 2017). In a conventional neoclassical growth model, a rise in the TFP growth rate induces capital accumulation, and the steady-state rate of labour productivity growth is proportional to TFP growth. So, the TFP growth rate is a fundamental building block for projections of the rate of growth of potential output and also the foundation stone for future economic growth.

It is of course the case that pundits are divided on what technological progress will imply for future productivity growth over, say, the next ten years. Partly this is a question of how big the cumulative economic impact of the new technologies is expected to be and partly a question of how soon it will materialise. The range of 'informed' opinion is currently very wide, ranging from TFP growth in the business sector of the American economy at an annual average of 0.4% per year (Gordon 2016), to 2% per year (Brynjolfsson and McAfee 2014). The difference between these projections is between a belief that the economic impact of the new technologies will be unimpressive and an expectation that a large economic impact is just around the corner. Interestingly, the Congressional Budget Office, which provides a regular projection, is about halfway between these two extremes at 1.1% per year (CBO 2017) having projected 1.5% per year in August 2006.

Is the econometric evidence to be preferred to techno-optimism or techno-pessimism? Our recent research (Crafts and Mills 2017) provides an historical perspective on the relationship between estimated trends in TFP growth and subsequent outcomes. Using a Kalman-filter method, we estimated an unobserved components model for quarterly TFP growth in the US business sector using data for 1947Q2 to 2016Q4 from John Fernald's website.

We first used the full sample of observations to produce a 'smoothed' trend growth estimate which is shown in Figure 1. Then we obtained two fixed-window estimates (based on the data for the previous 20 or 25 years) for each successive quarter from 1967Q2 and 1972Q2, respectively. This exercise utilises data that would have been available to agents at the time and unlike the 'smoothed' estimate does not include future information that would not have been available ex-ante.

Figure 1 'Smoothed' trend TFP growth using complete sample

These trend estimates are basically of a similar type to those which have been produced recently. The results are shown in Figure 2. We also plot the outturn for the average TFP growth rate over 10 years forward from each data point.

Figure 2 Trend TFP growth estimates using 20 and 25 year fixed samples plus 10-year ahead outturn of average TFP growth adjusted for capacity utilisation: 1975 – 2016

Our main findings are as follows. First, over fifty years American trend TFP growth in the business sector has declined slowly but steadily over time, from about 1.5% per year in 1967 to about 1% per year by 2016. Second, forecast trend TFP growth based on estimated trends over the previous 20- or 25-year window exhibits considerable variation and does not show monotonic decreases. From a level around 2% at the start of the 1970s, these forecasts are generally falling until they reach lows of about 0.5% at times in the 1990s before rising to about 1.2% in the mid-2000s, and then falling back to 1990s levels more recently. Third, average realised TFP growth (adjusted for capacity utilisation) over 10 year intervals – the horizon for which the Congressional Budget Office makes projections – has also varied substantially over time. The outturn fell from 2% per year or a little less for intervals starting in the 1960s to 0.5% per year or a little more for intervals from the early-1970s to the late 1980s. It then rose to a peak of 2% in the mid-1990s for the years encompassing the height of the 'new economy' before falling back to below 0.5% per year for the period of the financial crisis and its aftermath. Fourth, these 10-year-ahead outturns are not well predicted by recent trend TFP growth. In particular, sharp reversals of medium-term TFP growth performance are not identified in advance. Indeed, forecasting on this basis would have missed the productivity slowdown of the 1970s, the acceleration of the mid-1990s, and the slowdown of recent years – in other words, all the major episodes during the period!

These results provide a perspective on today's discussions of the prospects for future American productivity growth. Three points stand out. First, medium-term TFP growth is very unpredictable. Recent performance is not a reliable guide, implying that an econometric estimate of low trend productivity growth currently does not necessarily rule out a productivity surge in the near future. The precedent of the 1990s is witness to this. Second, a smoothed estimate of trend TFP growth has changed only slowly over time and is well above recent actual TFP growth. This suggests that pessimism about long-term prospects can easily be overdone. Third, given the substantial fluctuations in medium-term TFP growth and the likelihood that forecasts are confounded, it would not be surprising if revisions to expectations about future productivity growth are a source of significant aggregate-demand shocks.

Overall, it is uncertain how long slow TFP growth will persist in the US. It does, however, seem clear that econometric estimates of trend TFP growth extracted from recent past performance should not be given much weight in projections of average TFP growth rates over the next 10 years. Reasonably enough, the CBO seems to take a similar view. Informed views of the prospects for technological progress and its impact on productivity are potentially more valuable but currently exhibit substantial divergence. Finding an answer to the question of whether there is a 'new normal' low TFP growth rate has to go into the 'too difficult' box.

References

Antolin-Diaz, J, T Drechsel, and I Petrella (2017), "Tracking the Slowdown in Long-Run GDP Growth", Review of Economics and Statistics, forthcoming.

Brynjolfsson, E, and A McAfee (2014), The Second Machine Age, New York: Norton.

Cardarelli, R, and L Lusinyan (2015), "U.S. Total Factor Productivity Slowdown: Evidence from the U.S. States", IMF Working Paper no. 15/116.

Congressional Budget Office (2017), The Budget and Economic Outlook 2017-2027.

Crafts, N, and T C Mills (2017), "Trend TFP Growth in the United States: Forecasts versus Outcomes", CEPR Discussion Paper No. 12029.

Fernald, J (2015), "Productivity and Potential Output before, during and after the Great Recession", NBER Macroeconomics Annual 2014, 29, 1-51.

Fernald, J (2016), "Reassessing Longer-Run U.S. Growth: How Low?", Federal Reserve Bank of San Francisco Working Paper Series WP 2016-18.

Fernald, J, R Hall, J Stock, and M Watson, M (2017), "The Disappointing Recovery of Output after 2009", NBER Working Paper No. 23543.

Gordon, R J (2016), The Rise and Fall of American Growth, Princeton, NJ: Princeton University Press.

Ollivaud, P, Y Guillemette, and D Turner (2016), "Links between Weak Investment and the Slowdown in Productivity and Potential Output Growth across the OECD", OECD Economics Department Working Paper No. 1304.

Endnotes

[1] As stated by Robert Solow in the New York Times in 1987, the paradox was that ''you can see the computer age everywhere except in the productivity statistics".

[2] These estimates are inferred from comparative statements in these authors' books rather than being stated directly by them.

--

John Case
Harpers Ferry, WV

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Thoma: Winter is Coming [feedly]

Winter is Coming

Mark Thoma

http://economistsview.typepad.com/economistsview/2017/07/winter-is-coming.html

en will the next recession hit the economy? Nobody knows for sure, but we can be certain that sooner or later the economy will experience another downturn. When that happens, will monetary and fiscal policymakers have the ability to respond effectively? 

The inevitability of another recession is evident in a graph of the unemployment rate. Notice that, before 1970, it was common for the unemployment rate to reach a low point and then hover around that point for several years. For example, the unemployment rate was around 4 percent for an extended period in both the mid to late 1950s and 1960s. But since 1970 the unemployment rate has behaved differently. Instead of reaching a low point and then leveling off for a period of time, it has tended to "bounce" off the low point and almost immediately begin rising again. 

Related: Killing Banking Rules Will Invite a Whopper of a Recession  

07172017_Unemployment.jpg

Even during the period known as the Great Moderation from 1982 – 2007 when recessions were less frequent, unemployment was, for the most part, either rising or falling. There was one period in the late 1980s when the unemployment rate stabilized at a bit over 5 percent for approximately two years, and the two subsequent periods in 2000 and 2006 that lasted approximately a year, but for the most part since 1970 the unemployment rate has almost always been either going up or going down. 

The question is, if we are at or very near a new low point for the unemployment rate, how long will it last before it begins rising again? One year? Two years? Will this time be different? 

This is not a prediction that a recession is just around the corner. It's possible that unemployment will stay low for several years before the next recession cycle starts. Instead, it's a warning that we need to be ready in case a recession does hit relatively soon, as it well could. 

The problem is, we aren't ready. Even a year or so from now, the Fed's target interest rate won't be high enough to leave much room for cuts in response to an economic downturn. And if Janet Yellen is replaced as Fed Chair when her term ends early next year, as looks very likely, a Fed chair appointed by a Republican administration and backed up by at least three Trump appointed Board members is unlikely to engage in quantitative easing and the other creative ways the Fed tried to stimulate the economy when its target interest rate couldn't be cut any further. 

Related: Will Trump Continue the GOP's Recession Curse? 

Maybe I'm wrong that hypocrisy doesn't seem to bother Republicans these days. But criticism from the right over the Fed's quantitative easing policies, which was related to fears of inflation that never materialized, was loud and widespread on the political right. Without much room to cut interest rates, and without support from the Trump Fed for other stimulative measures, there's little the Fed will be willing and able to do in response to economic problems. 

As for fiscal policy, when the recession does hit the economy keep your fingers crossed that Congressional gridlock stops Republicans from making things worse. During the Great Recession, Republicans made it very clear how they will respond when millions and millions of people lose their jobs and need help. First, they will use the recession as an opportunity to argue for their favorite policy, tax cuts for the wealthy. 

Republicans will claim that this helps to cure a recession, but there's little evidence to back this up. In any case, there are much better ways to stimulate the economy, e.g. tax cuts for lower income households who will spend rather than save the money, social insurance that helps people survive until the economy improves, and government spending on infrastructure and other things. 

Related: Special Report: How the Federal Reserve serves U.S. foreign intelligence 

The other thing that Republicans made clear is that they will use the inevitable increase in the deficit that occurs in a recession to argue for austerity – cuts to government programs. In a recession, spending on social services goes up as more people are in need, and tax revenues fall due to lower incomes, both of which cause a temporary increase in the government deficit. 

There was no indication from financial markets that the government debt load was worrisome during the Great Recession if financial markets were worried interest rates on government debt would have spiked. But during the Great Recession, Republicans used fear of rising debt and the threat of a government shutdown to force through cuts to government programs. Unfortunately, this was the opposite of what needed to be done, cutting government spending in a recession makes things worse, not better. But the argument did allow Republicans to take a step towards their goal of a meaner, leaner government. Once again, maybe they will hypocritically respond differently if a recession comes under a Republican president, but it's hard to imagine today's Republican Party giving up on its political goals for the sake of the economy and the needs of the working class. 

Our best hope is that the economy remains at full employment long enough for the Fed to restore its ability to cut rates and that Congress is gridlocked when the downturn comes (or that midterm elections somehow bring some sanity). If a recession comes before the Fed is ready, there will be millions and millions of people in need of help that won't arrive. Even worse, if Congress overcomes gridlock and pursues austerity as a way of achieving its ideological goals under the false cover of helping the economy, it will prolong the recession and unnecessarily hurt millions more. 

It would be hard to be less prepared for a recession than we are right now.

 -- via my feedly newsfeed

On labor nominations, what a difference a president makes [feedly]

On labor nominations, what a difference a president makes
http://www.epi.org/blog/on-labor-nominations-what-a-difference-a-president-makes/

Tomorrow, the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP) is set to consider President Trump's nominees to the National Labor Relations Board (NLRB), as well as Trump's pick for Deputy Secretary of Labor. Both the NLRB and the Department of Labor are critically important agencies for this nation's workers. Senate Republicans were so concerned about President Obama's nominees to the NLRB that they refused to allow a vote, leading to a showdown that culminated in then-Senate Majority Leader Reid threatening to use the "nuclear option" to change the Senate rules for confirmations. What a difference a president makes. Now, Senate Republicans have decided to rush the confirmation hearings by consolidating consideration of the NLRB nominees with a nominee to a senior post at the Department of Labor.

As an independent agency, the NLRB members do not report to the president, but rather, serve as neutral arbiters of our nation's labor law ("umpires rather than advocates," as Senator Lamar Alexander, the chair of the committee, likes to say). DOL, meanwhile, is a cabinet-level agency—and its leaders report directly to the president. The Deputy Secretary of Labor is a political position whose main role is not neutral interpretation of the law but rather to advance the administration's policies. Considering these nominees alongside each other, given the incongruous nature of the positions and agencies they will serve, is an abdication of the committee's responsibility to thoroughly review these nominations.

Rushing this process and consolidating what should be separate hearings on important nominations deprives senators of the opportunity to examine these nominations. Most importantly, it shortchanges U.S. workers who depend on these agencies and the officials who lead them to enforce their rights and protect their freedoms. We deserve a process that enables our representatives to meaningfully consider the nominations. At the very least, the HELP Committee should hold separate hearings on nominees who, if confirmed, would serve vastly different roles in vastly different agencies.

 -- via my feedly newsfeed