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Tuesday, February 26, 2019
Here is Your FedEx Tracking Number
Trump, Trade and the Advantage of Autocrats [feedly]
Trump, Trade and the Advantage of Autocrats
https://www.nytimes.com/2019/02/25/opinion/trump-trade-china.html
https://www.nytimes.com/2019/02/25/opinion/trump-trade-china.html
There's been some good news on global trade lately: A full-scale U.S.-China trade war appears to be on hold, and may be avoided altogether.
The bad news is that if we do make a trade deal with China, it will basically be because the Chinese are offering Donald Trump a personal political payoff. At the same time, a much more dangerous trade conflict with Europe is looming. And the Europeans, who still have this peculiar thing called rule of law, can't bribe their way to trade peace.
The background: Last year the Trump administration imposed tariffs on a wide range of Chinese products, covering more than half of China's exports to the United States. But that might have been only the beginning: Trump had threatened to impose much higher tariffs on $200 billion of Chinese exports starting this Friday.
What was the motivation for these tariffs? Remarkably, there doesn't seem to be any strong constituency demanding protectionism; if anything, major industries have been lobbying against Trump's trade moves, and the stock market clearly dislikes trade conflict, going down when tensions rise and recovering when they ease.
So trade conflict is essentially Trump's personal vendetta — one that he is able to pursue because U.S. international trade law gives the president enormous discretion to impose tariffs on a variety of grounds. Predicting trade policy is therefore about figuring out what's going on in one man's mind.
Now, there are real reasons for the U.S. to be angry at China, and demand policy changes. Above all, China notoriously violates the spirit of international trade rules, de facto restricting foreign companies' access to its market unless they hand over valuable technology. So you could make a case for U.S. pressure on China — coordinated with other advanced economies! — to stop that practice.
But there has been little evidence that Trump is interested in dealing with the real China problem. I was at a trade policy conference over the weekend where experts were asked what Trump really wants; the most popular answer was "tweetable deliveries."
Sure enough, Trump has been crowing about what he portrays as big Chinese concessions, which all seem to involve China's government ordering companies to buy U.S. agricultural products. In particular, the postponement of the trade war came after a Chinese pledge to buy 10 million tons of soybeans. This will please farmers, although it's far from clear that it will even make up for the losses they've suffered from previous Trump actions.
The point, however, is that what China is offering doesn't at all get at the real U.S. national interests at stake. All it does is give Trump something to tweet about.
Oh, and by the way: China's biggest bank, which happens to be majority-owned by the Chinese government, currently occupies three whole floors in the Trump Tower in Manhattan. It has been planning to reduce its space; it will be interesting to see what happens to that plan now.
Meanwhile, the U.S. Commerce Department has prepared a report on imports of European automobiles that, according to the German press, concludes that these imports pose a threat to national security.
If this sounds ridiculous, that's because it is. Indeed, while the Europeans aren't angels, they do abide by global rules, and it's hard to accuse them of any major trade sins. Yes, they do have 10 percent tariffs on U.S. cars — but we impose 25 percent tariffs on their light trucks, which makes us more than even.
But a department headed by perhaps the most corrupt commerce secretary in history will, of course, conclude whatever Trump wants it to conclude. And this report gives the president the legal authority to get us into a trade war with the European Union.
If it happens, this trade war will be immensely damaging. The E.U. is America's biggest export market, directly accounting for around 2.6 million jobs. Moreover, our economies are very much intermeshed — which is why even the U.S. auto industryis horrified at the possibility that Trump will impose tariffs on cars.
But here's the thing: Unlike the Chinese government, the E.U. can't order private companies to make splashy purchases of U.S. goods. And it certainly can't steer business to Trump Organization properties. As a result, the chances of spiraling trade conflict remain high.
The point is that when it comes to dealing with Trump and his team, autocracies have an advantage over democracies that follow the rule of law. And trade disputes are arguably the least of it.
-- via my feedly newsfeed
The bad news is that if we do make a trade deal with China, it will basically be because the Chinese are offering Donald Trump a personal political payoff. At the same time, a much more dangerous trade conflict with Europe is looming. And the Europeans, who still have this peculiar thing called rule of law, can't bribe their way to trade peace.
The background: Last year the Trump administration imposed tariffs on a wide range of Chinese products, covering more than half of China's exports to the United States. But that might have been only the beginning: Trump had threatened to impose much higher tariffs on $200 billion of Chinese exports starting this Friday.
What was the motivation for these tariffs? Remarkably, there doesn't seem to be any strong constituency demanding protectionism; if anything, major industries have been lobbying against Trump's trade moves, and the stock market clearly dislikes trade conflict, going down when tensions rise and recovering when they ease.
So trade conflict is essentially Trump's personal vendetta — one that he is able to pursue because U.S. international trade law gives the president enormous discretion to impose tariffs on a variety of grounds. Predicting trade policy is therefore about figuring out what's going on in one man's mind.
Now, there are real reasons for the U.S. to be angry at China, and demand policy changes. Above all, China notoriously violates the spirit of international trade rules, de facto restricting foreign companies' access to its market unless they hand over valuable technology. So you could make a case for U.S. pressure on China — coordinated with other advanced economies! — to stop that practice.
But there has been little evidence that Trump is interested in dealing with the real China problem. I was at a trade policy conference over the weekend where experts were asked what Trump really wants; the most popular answer was "tweetable deliveries."
Sure enough, Trump has been crowing about what he portrays as big Chinese concessions, which all seem to involve China's government ordering companies to buy U.S. agricultural products. In particular, the postponement of the trade war came after a Chinese pledge to buy 10 million tons of soybeans. This will please farmers, although it's far from clear that it will even make up for the losses they've suffered from previous Trump actions.
The point, however, is that what China is offering doesn't at all get at the real U.S. national interests at stake. All it does is give Trump something to tweet about.
Oh, and by the way: China's biggest bank, which happens to be majority-owned by the Chinese government, currently occupies three whole floors in the Trump Tower in Manhattan. It has been planning to reduce its space; it will be interesting to see what happens to that plan now.
Meanwhile, the U.S. Commerce Department has prepared a report on imports of European automobiles that, according to the German press, concludes that these imports pose a threat to national security.
If this sounds ridiculous, that's because it is. Indeed, while the Europeans aren't angels, they do abide by global rules, and it's hard to accuse them of any major trade sins. Yes, they do have 10 percent tariffs on U.S. cars — but we impose 25 percent tariffs on their light trucks, which makes us more than even.
But a department headed by perhaps the most corrupt commerce secretary in history will, of course, conclude whatever Trump wants it to conclude. And this report gives the president the legal authority to get us into a trade war with the European Union.
If it happens, this trade war will be immensely damaging. The E.U. is America's biggest export market, directly accounting for around 2.6 million jobs. Moreover, our economies are very much intermeshed — which is why even the U.S. auto industryis horrified at the possibility that Trump will impose tariffs on cars.
But here's the thing: Unlike the Chinese government, the E.U. can't order private companies to make splashy purchases of U.S. goods. And it certainly can't steer business to Trump Organization properties. As a result, the chances of spiraling trade conflict remain high.
The point is that when it comes to dealing with Trump and his team, autocracies have an advantage over democracies that follow the rule of law. And trade disputes are arguably the least of it.
-- via my feedly newsfeed
cepr: A Green New Deal is Fiscally Responsible. Climate Inaction is Not [feedly]
A Green New Deal is Fiscally Responsible. Climate Inaction is Not
http://cepr.net/publications/op-eds-columns/a-green-new-deal-is-fiscally-responsible-climate-inaction-is-not
-- via my feedly newsfeed
http://cepr.net/publications/op-eds-columns/a-green-new-deal-is-fiscally-responsible-climate-inaction-is-not
In the coming days, the Senate majority leader, Mitch McConnell, plans to hold a vote on the Green New Deal resolution recently introduced by congresswoman Alexandria Ocasio-Cortez (D-NY) and Senator Edward Markey (D-MA). Despite polls showing broad bipartisan support for a Green New Deal, McConnell hopes his ploy will divide Democrats and boost the GOP talking point that the plan is fiscally irresponsible.
While McConnell and other critics seem to think that they can defeat the Green New Deal by repeating a tired mantra – "we can't afford to do it" – the real question is: how can we afford not to? Without bold action to tackle climate change, toxic pollution and economic and racial inequity, our society will only see rising fiscal burdens. A Green New Deal would not only help us avoid mounting costs – it also would stimulate broad-based demand in the economy by investing in real drivers of economic prosperity: workers and communities. That's in stark contrast to the GOP's expensive recent policy priority – the nearly $2tn tax cuts of 2018 – which did little more than enrich stateless mega-corporations and the wealthiest investors.
A Green New Deal is first and foremost about justice – prioritizing working people, communities of color and others who bear the brunt of stagnant wages, polluted air and water, and climate impacts. It's about acting at the speed and scale that equity and science demand. But if opponents want to debate the plan's straight economic merits, Green New Deal backers should welcome the opportunity. The plan is also about fiscal foresight.
While some people talk about the costs of climate change as far-off hypotheticals, there's growing evidence that costs are already here. On 6 February, the National Oceanic and Atmospheric Administration and NASA released findings that climate change impacts in 2018 directly resulted in 247 deaths and $91bn in damages. The longer-term fiscal implications are also becoming clearer. In November, 13 US federal agencies reported that, under current emissions trajectories, the US economy would bear more than $500bn per year in costs due to labor and agricultural losses, sea level rise and extreme weather impacts by the end of the century. This annual half-trillion-dollar burden didn't account for many unpredictable second-order costs of climate change, like the implications of mass forced migrations driven by water scarcity and flooding. These are risks that the Pentagon has been highlighting for a decade.
A Green New Deal would help to seriously reduce climate pollution and cut these long-term liabilities, whether by supporting a transition to 100% clean energy, expanding access to clean public transportation, or spurring innovation in clean manufacturing. While some impacts of climate change are now inevitable, a Green New Deal also would help communities mitigate costly damage by investing in urban green spaces to prevent flooding, restoring wetlands to buffer hurricanes, protecting houses from forest fires, and shielding coastlines from sea level rise. In addition to supporting community resilience, this would reduce long-run costs for the federal government and for the states and municipalities that tend to shoulder the biggest burdens in emergencies.
Of course, a Green New Deal isn't just about managing risks – it's also about creating economic opportunities. The plan would create millions of jobs with family-sustaining wages for workers whose inflation-adjusted pay hasn't budged since the 1970s. Whether replacing lead pipes, weatherizing homes, manufacturing components for light rail, or rehabilitating damaged ecosystems, a Green New Deal would put money in the pockets of the workers who are most impacted by rising economic inequality. Given that low-income workers tend to spend more of their available money than the wealthy, this targeted effort to boost working class wages would strengthen growth, reduce the income gap, and ultimately improve the nation's economic fundamentals.
Even people who deny the evidence that inequality is slowing economic growth must admit that a Green New Deal would address other long-term liabilities. The plan would invest in the kinds of infrastructure upgrades that nearly everyone agrees are needed – not only to create good jobs, slash pollution and build community resilience, but also to support economic growth. Renewal of our energy, water and transportation infrastructure is long overdue – and today's low borrowing costs make the investment all the more prudent. Looking to the long-term, a Green New Deal also would spur innovation and growth in advanced manufacturing through policies like "Buy Clean" that direct tax dollars for public projects to the most efficient, least polluting forms of production.
Contrast these forward-looking investments with a spending deal that many opponents of a Green New Deal so ardently championed: the Republican tax cuts of 2018. While backers of the GOP tax package billed it as a vision of fiscal responsibility – a program that would "pay for itself" according to the treasury secretary, Steve Mnuchin – the nonpartisan Congressional Budget Office estimates the deal will now add $1.9tn to the national debt over a decade.
And it's not as if this money has gone toward solving real challenges. Much of the large sum has gone to share buybacks that serve one purpose: lining the pockets of the richest investors. Recent economic analysis show that the short-term stimulus effect of the tax cuts has now been mostly exhausted.
Some in the GOP seem to think that fiscal responsibility means spending billions to prop up the financial interests of billionaires and corporate polluters. A Green New Deal offers a better definition: laying the groundwork for a more vibrant and equitable economy that sustains the communities and physical resources on which our society is built.
Mitch McConnell and fossil fuel lobbyists are hiding behind flimsy talking points to justify the costly path of continued inaction on climate and inequality. Backers of a Green New Deal should stand up to this hypocrisy and reclaim the mantle of real social and economic responsibility.
Justin Talbot-Zorn is the senior advisor for policy and strategy at the Center for Economic and Policy Research. Ben Beachy is the director of the Sierra Club's Living Economy Program. Rhiana Gunn-Wright is the policy director for New Consensus.
-- via my feedly newsfeed
Monday, February 25, 2019
Jobs and Medicare for All [feedly]
A VERY important point, here, by Jack Metzgar He highlights the precise issue in Medicare for All that Haunts the Green New Deal Resolution. What about the losers in the transitions and big reforms contemplated, and deemed "necessary". Who will pay the insurance industry workers the $58, 000 THEY need to make a manageable, not traumatic transition. Same with the GND resolution. Put the JOBS and INCOME protections and enhancements UP FRONT. Otherwise, as Brother Metzgar notes, the doors to backlash are opened. The losers costs are gonna be paid, paid, paid in one form or another. Pay them up front! That way you get more support, not division. Same with approaches to Amazon, IMO, btwl
. Accept, that with change, there will be losers. Pay them. Make them winners.
https://workingclassstudies.wordpress.com/2019/02/25/jobs-medicare-for-all/
You can tell that Medicare for All is becoming a real possibility when it gets a rigorous cost-benefit analysis and when its advocates start seriously raising and addressing the inevitable downsides of the policy. There is no greater downside to Medicare for All than the 1.8 million clerical and administrative jobs it will eliminate in the insurance industry and in health providers' offices.
In their nearly 200-page Economic Analysis of Medicare for All, researchers at the Political Economy Research Institute (PERI) at the University of Massachusetts provide a thorough cost-benefit analysis of Senator Bernie Sanders' proposal (Senate Bill 1804). And for the first time they've estimated the likely magnitude and character of jobs that will be lost and have taken a first crack at suggesting what to do about that job loss. I want to critique their "just transition" program for these workers, but before I get to that, let me first marvel at the level of detail in their analysis.
It's an important moment. Medicare for All is no longer just a fine sentiment, but a real policy with all the nuts and bolts and messiness of things that are real. The PERI analysis is rightly focused on how much the new system will cost and how to pay for it. They figure it will cost the government about $1 trillion a year above current costs, with nearly 60% of that being paid by employer contributions that will be lower than they are currently paying. The rest is paid for with a sales tax on non-necessities, a small wealth tax, and taxing capital gains as ordinary income. In the long-run, though more expensive for the government, Medicare for All will reduce the country's overall health expenditures by about $500 billion a year. Most of the savings will go to workers and households in lower premiums and out-of-pocket costs. Plus, of course, everybody will be assured of access to the health care they need – a huge direct benefit to the more than one-third of us who are uninsured or underinsured while providing everyday peace of mind and life-planning stability, as well as more take-home pay, for all of us.
As the study is at pains to point out, however, the transition from the current system, which is both wasteful and of mediocre quality, to Medicare for All will be tricky. The bulk of the savings comes from the dramatic reduction in paperwork and administration that will result from eliminating private health insurance. But this also means a huge job loss over a 2- to 4-year period – about 800,000 jobs in the insurance industry and a little more than 1 million in doctors' offices, clinics, hospitals, and other health providers.
The PERI analysis profiles these workforces by occupations, average wages, ages, educational credentials, and racial and gender composition. That analysis shows the median wage in health insurance is $54,400 but only about $39,400 in health care administration, where 92% of workers are women compared with only 55% in insurance. The level of statistical detail PERI produces on these workers is itself refreshing, and is fairly rare in not treating dislocated workers as after-thoughts at best and chaff at worst – as so many industrial and extractive workers have been treated in public policy in the past.
It is also refreshing that the PERI authors insist on a "just transition" and open up that discussion. Their program would use ERISA, the federal government regulatory agency for private pensions, to ensure that health insurance companies and providers cannot raid their currently solvent pension funds, thereby guaranteeing all workers their current pension benefits. In addition, of the 1.8 million displaced workers, nearly 300,000 are 60 years or older and that part of the workforce is treated very generously – they will be paid 100% of their current salaries until age 65 if they choose to retire.
But the rest of the plan, though probably the most generous ever proposed for dislocated workers, is not just enough, and it leaves Medicare for All subject to political backlashes that could be offset by a more thorough program. It leaves about 1.5 million displaced workers, who would be guaranteed one-year's salary and would receive $10,000 each to pay for education or training and $10,000 each to cover relocation expenses. This is historically generous, but it is not enough primarily because the American system of training is an ill-coordinated mess about which workers are highly, and rightly, cynical. In the Rust Belt, for example, so-called Trade Adjustment Assistance training programs have been notoriously poorly funded and have often led not to jobs but to flooded labor markets for specific occupations, thereby pulling down wages in those occupations. Likewise, the relocation assistance is very generous money-wise, but the U.S. does not have a nationally coordinated employment system that helps workers find out where they might be needed elsewhere in the country. So, though very generous, the PERI proposal pretty much throws money at displaced workers and tells them to figure out what to do on their own. Without a nationally coordinated training and employment system, I fear this "just transition" will be rightly seen as merely "buying off while selling out" these workers. What's more, helping workers relocate does nothing for the communities those workers are leaving – an issue especially important in places where insurance or health care is concentrated, like Connecticut for insurance and Pittsburgh for health care.
What is needed is a jobs program for these (and other) workers – that is, a systematic effort to create and stimulate job creation. Here's where Medicare for All could meet with a now widely discussed Green New Deal, which would create more than a million jobs. However, these jobs, primarily in construction and manufacturing, are likely to disproportionately benefit men, while the dislocated workers in health and insurance administration are 75% women.
For administrative workers displaced by Medicare for All, we need a plan that matches existing skills with the training needed for jobs that can be productively created. Maybe House Democrats could commission an audit of the number and kind of government jobs that are needed to greatly improve our government's functioning at all levels – beginning perhaps with the jobs that would support a competent national system of training and employment. Or maybe create more positions like those 50,000 Internal Revenue Service auditors who would produce six times their own salaries by tracking down some of the $400 billion in tax fraud and avoidance that occurs each year. Likewise, most federal and state government agencies are understaffed to adequately perform their jobs, often purposely so because of decades of Republican budget cuts. And rare is the teachers' strike today that doesn't document the crying need for more librarians, social workers, and nurses, as well as for smaller class sizes that would require more teachers. A 10% increase in government workers at all levels, phased in over a four-year period, would produce more than 2 million jobs.
I have no idea whether an increase of that magnitude would be realistic or desirable, but that's what an audit of employment needs would provide. What I am sure of, however, is that even the generous amounts of money provided in the PERI proposal are political liabilities – not only among workers directly affected and their friends and neighbors, but also for all those who are sick to death of hearing about "retraining and relocation" that is almost always nothing but a tragically ineffective sop, something politicians say to make us think they care. We need plans that provide training for specific jobs that we know are being created, with at least some jobs that can be located in places that need them most.
The Sanders bill and the PERI analysis, pushed by nurses' and other unions who have built a social movement for health care as a right, are making Medicare for All a real possibility. But there is still time for them to design a much more just transition for the workers who will be dislocated so that all of us can enjoy better, cheaper, and more secure health care.
Jack Metzgar
Editor's Note: An excellent summary of the PERI analysis is available in a video interview with chief author Robert Pollin at Common Dreams.
Jack Metzgar is a retired professor of Humanities from Roosevelt University in Chicago, where he is a core member of the Chicago Center for Working-Class Studies. His research interests include labor politics, working-class voting patterns, working-class culture, and popular and political discourse about class. He is a former President of the Working-Class Studies Association.
-- via my feedly newsfeed
Bernstein: The economic reasoning behind the Democrats’ bold agenda [feedly]
The economic reasoning behind the Democrats' bold agenda
https://www.washingtonpost.com/outlook/2019/02/25/economic-reasoning-behind-democrats-bold-agenda/
https://www.washingtonpost.com/outlook/2019/02/25/economic-reasoning-behind-democrats-bold-agenda/
Jared Bernstein
Just because Congress is anchored in a toxic combination of partisan gridlock and Trumpian chaos doesn't mean policy debates are dead. Democrats are working overtime to craft an alternative to the status quo, including progressive tax reform, jobs programs, pushback on climate change, universal health care, expanded Social Security and more.
As it happens, economic conditions right now make this an excellent time for a bolder-the-better agenda.
First, the Federal Reserve recently announced that its previously planned interest-rate increases were on pause. After holding the benchmark rate they control at zero for an unprecedented six years, in late 2015, the Fed began raising rates. A few years later, even as interest rates and unemployment remained historically low, enough economic head winds developed that the bank realized it had better stop tapping the growth brakes.
There were lots of reasons for those head winds, including President Trump's trade war, global growth problems, stock market volatility and more. But there's always a lot of other stuff going on in global markets. The key fact is that the U.S. economy started to wobble with the Fed funds rate at 2.5 percent, a level that's but one-half of its long-term average.
Low inflation even at low unemployment means the Fed is correct to pause, and that the terms of the traditional trade-off of equally balanced inflation and employment risks have changed. In today's economy, the risks of weak demand, left-behind people and places, and stagnant low- and mid-level wages and incomes are greater than those of higher inflation. This is a symptom of structurally weak underlying demand and a rationale for stimulative policies.
Second, the U.S. economy is probably significantly slowing as we speak because of fading fiscal stimulus. The tax cuts and a big uptick in government spending, both of which were deficit-financed, added close to an extra point to gross domestic product growth in 2018 and most of this year. But as they leave the system, the Atlanta Fed is predicting that GDP growth fell to 1.4 percent last quarter (half the average growth rate this year), and forecasts for the next few years are well below 2018's pace.
These dynamics imply that a fiscal policy twofer is on offer. Increased investment in public goods, including education, infrastructure and the Green New Deal can help push back both on structural inequality and slower growth. At the same time, progressive tax policy, such as Sen. Elizabeth Warren's wealth tax or Sen. Bernie Sanders's estate tax expansion, can help support that fiscal agenda while also chipping away at wealth concentration.
But the broader point is that without the push of stimulative monetary or fiscal policy — or both — the U.S. economy will probably slow and the unemployment rate will rise. We're a bit like a bicycle that cruises along at a decent clip until it hits the slightest hill, and then, without a push, starts to shake.
Third, even as the heretofore stimulated U.S. economy was closing in on full employment, interest rates and inflation stayed very low and lots of people were/are still struggling to make ends meet.
Low interest and inflation at low unemployment imply that a supposedly high-pressure economy isn't showing up in traditional pressure gauges. Economist Larry Summers discusses this phenomenon under the rubric of "secular stagnation," meaning that even late in an expansion, economies underperform without an extra push. Such sluggishness is occurring not just here, but in Europe as well, as Euro area growth rates, inflation and interest rates all remain historically low.
The result is that both here and abroad, weak underlying growth alongside high levels of inequality means many households and communities remain left behind.
In other words, the Democrats' progressive agenda is not only a response to the upward redistribution that Republicans have successfully pushed since President Ronald Reagan. It is also a coherent and essential response to underlying stagnation that has grown to plague advanced economies.
Why that stagnation exists is not well answered. It may have to do with aging demographics, inequality, persistent U.S. trade deficits, the rise of unproductive finance, monopolistic concentration in key industries (retail, tech, health care), suboptimal public and private investment, and more.
But we needn't wait for a thorough diagnosis of causes if we know what will reverse them. -- via my feedly newsfeed
As it happens, economic conditions right now make this an excellent time for a bolder-the-better agenda.
First, the Federal Reserve recently announced that its previously planned interest-rate increases were on pause. After holding the benchmark rate they control at zero for an unprecedented six years, in late 2015, the Fed began raising rates. A few years later, even as interest rates and unemployment remained historically low, enough economic head winds developed that the bank realized it had better stop tapping the growth brakes.
There were lots of reasons for those head winds, including President Trump's trade war, global growth problems, stock market volatility and more. But there's always a lot of other stuff going on in global markets. The key fact is that the U.S. economy started to wobble with the Fed funds rate at 2.5 percent, a level that's but one-half of its long-term average.
Low inflation even at low unemployment means the Fed is correct to pause, and that the terms of the traditional trade-off of equally balanced inflation and employment risks have changed. In today's economy, the risks of weak demand, left-behind people and places, and stagnant low- and mid-level wages and incomes are greater than those of higher inflation. This is a symptom of structurally weak underlying demand and a rationale for stimulative policies.
Second, the U.S. economy is probably significantly slowing as we speak because of fading fiscal stimulus. The tax cuts and a big uptick in government spending, both of which were deficit-financed, added close to an extra point to gross domestic product growth in 2018 and most of this year. But as they leave the system, the Atlanta Fed is predicting that GDP growth fell to 1.4 percent last quarter (half the average growth rate this year), and forecasts for the next few years are well below 2018's pace.
These dynamics imply that a fiscal policy twofer is on offer. Increased investment in public goods, including education, infrastructure and the Green New Deal can help push back both on structural inequality and slower growth. At the same time, progressive tax policy, such as Sen. Elizabeth Warren's wealth tax or Sen. Bernie Sanders's estate tax expansion, can help support that fiscal agenda while also chipping away at wealth concentration.
But the broader point is that without the push of stimulative monetary or fiscal policy — or both — the U.S. economy will probably slow and the unemployment rate will rise. We're a bit like a bicycle that cruises along at a decent clip until it hits the slightest hill, and then, without a push, starts to shake.
Third, even as the heretofore stimulated U.S. economy was closing in on full employment, interest rates and inflation stayed very low and lots of people were/are still struggling to make ends meet.
Low interest and inflation at low unemployment imply that a supposedly high-pressure economy isn't showing up in traditional pressure gauges. Economist Larry Summers discusses this phenomenon under the rubric of "secular stagnation," meaning that even late in an expansion, economies underperform without an extra push. Such sluggishness is occurring not just here, but in Europe as well, as Euro area growth rates, inflation and interest rates all remain historically low.
The result is that both here and abroad, weak underlying growth alongside high levels of inequality means many households and communities remain left behind.
In other words, the Democrats' progressive agenda is not only a response to the upward redistribution that Republicans have successfully pushed since President Ronald Reagan. It is also a coherent and essential response to underlying stagnation that has grown to plague advanced economies.
Why that stagnation exists is not well answered. It may have to do with aging demographics, inequality, persistent U.S. trade deficits, the rise of unproductive finance, monopolistic concentration in key industries (retail, tech, health care), suboptimal public and private investment, and more.
But we needn't wait for a thorough diagnosis of causes if we know what will reverse them. -- via my feedly newsfeed
The very smart Simon Johnson believes that something like codetermination is essential if modern capitalism is going to... [feedly]
The very smart Simon Johnson believes that something like codetermination is essential if modern capitalism is going to...
https://www.bradford-delong.com/2019/02/simon-johnson-_saving-capitalism-from-economics-101-by-simon-johnson-project-syndicatehttpswwwproject-syndicate.html
https://www.bradford-delong.com/2019/02/simon-johnson-_saving-capitalism-from-economics-101-by-simon-johnson-project-syndicatehttpswwwproject-syndicate.html
The very smart Simon Johnson believes that something like codetermination is essential if modern capitalism is going to work: Simon Johnson: Saving Capitalism from Economics 101: "Warren is proposing a much broader rethink. Large corporations can still do well, but they need to be held accountable in a much more transparent way. Incentives for executives would be adjusted, and running these companies would no longer be so much about lining their own pockets.... The legitimacy of capitalism–private ownership and reliance on market mechanisms–would be greatly strengthened under the Accountable Capitalism Act. So, yes, like it or not, this will be on the final exam...
-- via my feedly newsfeed
-- via my feedly newsfeed
Tim Taylor: Universal Basic Income: Preliminary Results from the Finnish Experiment [feedly]
I tend to favor the UBI approach, although the results are ambiguous in this first year study. However, I believe politically all guaranteed income has to be linked to work or service for able-bodied or able minded recipients.
http://conversableeconomist.blogspot.com/2019/02/universal-basic-income-preliminary.html
The big selling points for a universal basic income are simplicity and work incentives. The simplicity arises because with a universal basic income, there are no qualifications to satisfy or forms to fill out. People just receive it, regardless of factors like income levels or whether they have a job. There are not bureaucratic costs of determining eligibility, and no stigma of applying for such benefits or in receiving them.
The gains for work incentives arise because many programs aimed at helping the poor have a built-in feature that as you earn more on the job, you receive less in government assistance. From one standpoint, this seems logical and fair. But economists have been quick to point out that if someone loses a dollar of government benefits every time they gain a dollar from working, the implicit tax rate is 100%. When there are a number of different programs aimed at the working poor, all phasing out on their own individual schedules as income rises, the result can be that low-income people face very high implicit tax rates--even in some situations close to 100%. But a universal basic income does not decline or phase out as someone earns more income.
There are plenty of assertions about how a universal basic income would affect work incentives, but actual hard evidence is still accumulating. The province of Ontario announced that it would run a three- year experiment, but then cancelled it after one year. An organization called GiveDirectly is running a universal basic income experiment in Kenya, although results aren't available yet, but there is reason to be skeptical as to whether the cost and effects of such a program in a low-income country will offer natural lessons for high-income countries. A firm called YCombinator is planning to run a universal basic income experiment in two US cities starting in 2019, but details still seem sketchy. The city of Stockton in California has just started an experiment where 130 people will get monthly payments of $500 for the next 18 months. The program in Alaska in which residents get a payment from the state based on oil royalties, typically $1000-$2000 per year, can be viewed as a form of a universal basic income, although it's clearly not enough to live on by itself.
Finland has been running an experiment with a university basic income for the last couple of years, and preliminary results on work behavior are now available. The report is "The basic income experiment 2017–2018in Finland," edited by Olli Kangas, Signe Jauhiainen, Miska Simanainen, Minna Ylikännöand published by Finland's Ministry of Social Affairs and Health (February 2019). They write:
It's important to note that like all practical experiments, the Finnish experiment was not a completely pure universal basic income. For example, the experiment targeted the long-term unemployed, not the working poor as a group, and those receiving the benefit still dealt with the government for other support programs, like housing assistance. In adidtion, the experiment would need to be considered in the context of Finland's overall labor market. So the results are preliminary in a number of ways. But it's hard to spin them as encouraging.
For those who would like a bunch of links to discussion of the Finnish experiment and broader recent discussions of a universal basic income, a useful starting point is the extended blog post at the Brueghel website byCatarina Midoes, "Universal basic income and the Finnish experiment" (February 18, 2019).
For a pragmatic discussion of how a true universal basic income--that is, a payment to everyone that does not phase out regardless of income--might work in a US context, interested readers might start with Universal Basic Income: A Thought Experiment" (July 29, 2014). If one took all the money from US (nonhealth) antipoverty programs, as well as a number of tax breaks that tend to benefit the middle-and upper-class, one could fund a universal basic income for the US of about $5800 per year.
-- via my feedly newsfeed
The gains for work incentives arise because many programs aimed at helping the poor have a built-in feature that as you earn more on the job, you receive less in government assistance. From one standpoint, this seems logical and fair. But economists have been quick to point out that if someone loses a dollar of government benefits every time they gain a dollar from working, the implicit tax rate is 100%. When there are a number of different programs aimed at the working poor, all phasing out on their own individual schedules as income rises, the result can be that low-income people face very high implicit tax rates--even in some situations close to 100%. But a universal basic income does not decline or phase out as someone earns more income.
There are plenty of assertions about how a universal basic income would affect work incentives, but actual hard evidence is still accumulating. The province of Ontario announced that it would run a three- year experiment, but then cancelled it after one year. An organization called GiveDirectly is running a universal basic income experiment in Kenya, although results aren't available yet, but there is reason to be skeptical as to whether the cost and effects of such a program in a low-income country will offer natural lessons for high-income countries. A firm called YCombinator is planning to run a universal basic income experiment in two US cities starting in 2019, but details still seem sketchy. The city of Stockton in California has just started an experiment where 130 people will get monthly payments of $500 for the next 18 months. The program in Alaska in which residents get a payment from the state based on oil royalties, typically $1000-$2000 per year, can be viewed as a form of a universal basic income, although it's clearly not enough to live on by itself.
Finland has been running an experiment with a university basic income for the last couple of years, and preliminary results on work behavior are now available. The report is "The basic income experiment 2017–2018in Finland," edited by Olli Kangas, Signe Jauhiainen, Miska Simanainen, Minna Ylikännöand published by Finland's Ministry of Social Affairs and Health (February 2019). They write:
"[T]he amount of basic income was 560 euros per month. This corresponded to the monthly net amount of the basic unemployment allowance and the labour market subsidy provided by Kela (the Social Insurance Institution of Finland). Two thousand persons aged 25–58 years who received an unemployment benefit from Kela in November 2016 were selected for the actual experiment. They were selected through random sampling without any regional or other emphasis. ... Despite its deficiencies, the Finnish experiment is exceptional from an international perspective in that participation in the experiment was compulsory and it was designed as a randomised field experiment."The effects on employment during the first year of the experiment (that is in 2017) turn out to be essentially nonexistent
Of the persons who in November 2016 received an unemployment benefit from Kela, 57 per cent had no earnings or income from self-employment in 2017. The figures also reveal that the average income of those who had been in employment was only around 9,920 euros. ... [T]he experiment did not have any effect on employment status during the first year of the experiment. The number of annual days in employment for the group that received a basic income is on average about half a day higher than for the control group. Overall, receipt of any positive earnings or income from self-employment, either from the open labour market or the subsidised labour market, is about one percentage point more common in the treatment group. However, resulting earnings and incomes from self-employment turned out to be 21 euros smaller.In other results based on phone surveys, those who received the universal basic income expressed greater confident in their own future, and they expressed a belief that it would be easier to accept a future job offer. It will be interesting to see if these attitudes lead to actually higher employment as the 2018 data becomes available .
It's important to note that like all practical experiments, the Finnish experiment was not a completely pure universal basic income. For example, the experiment targeted the long-term unemployed, not the working poor as a group, and those receiving the benefit still dealt with the government for other support programs, like housing assistance. In adidtion, the experiment would need to be considered in the context of Finland's overall labor market. So the results are preliminary in a number of ways. But it's hard to spin them as encouraging.
For those who would like a bunch of links to discussion of the Finnish experiment and broader recent discussions of a universal basic income, a useful starting point is the extended blog post at the Brueghel website byCatarina Midoes, "Universal basic income and the Finnish experiment" (February 18, 2019).
For a pragmatic discussion of how a true universal basic income--that is, a payment to everyone that does not phase out regardless of income--might work in a US context, interested readers might start with Universal Basic Income: A Thought Experiment" (July 29, 2014). If one took all the money from US (nonhealth) antipoverty programs, as well as a number of tax breaks that tend to benefit the middle-and upper-class, one could fund a universal basic income for the US of about $5800 per year.
-- via my feedly newsfeed
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