Paul Krugman: Killing the Pax Americana [feedly]

PK does a compelling job disentangling the economics from the war and peace challenges in the China trade war.

Killing the Pax Americana
https://www.nytimes.com/2019/05/11/opinion/killing-the-pax-americana.html

O.K., they weren't supposed to start the trade war until I got back from vacation. And I really have too many kilometers to cover and hills to climb to weigh in on a regular basis or at great length. But since I'm currently sitting in an outdoor cafe with my coffee and croissant, I thought I might take a few minutes to address two misconceptions that, I believe, are coloring discussion of the trade conflict.

By the way, I don't mean Trump's misconceptions. As far as I can tell, he isn't getting a single thing about trade policy right. He doesn't know how tariffs work, or who pays them. He doesn't understand what bilateral trade imbalances mean, or what causes them. He has a zero-sum view of trade that flies in the face of everything we've learned over the past two centuries. And to the (small) extent that he is making any coherent demands on China, they're demands China can't/won't meet.

But Trump's critics, while vastly more accurate than he is, also, I think, get a few things wrong, or at least overstate some risks while understating others. On one side, the short-run costs of trade war tend to be overstated. On the other, the long-term consequences of what's happening are bigger than most people seem to realize.

In the short run, a tariff is a tax. Period. The macroeconomic consequences of a tariff should therefore be seen as comparable to the macroeconomic consequences of any tax increase. True, this tax increase is more regressive than, say, a tax on high incomes, or a wealth tax. This means that it falls on people who will be forced to cut their spending, and is therefore likely to have a bigger negative bang per buck than the positive bang for buck from the 2017 tax cut. But we're still talking, at least so far, about a tax hike that is only a fraction of a percent of GDP.

This means that it's hard to justify claims that the trade war, at least what's currently in the pipeline, will cause a global recession.

If the trade war expands not just to all imports from China but to imports from Europe and other parts of the world, we could get this up to a contractionary fiscal policy of a couple of points of GDP; $200 billion here, $200 billion there, and soon you're talking about real money. And that certainly could happen: Trump imagines that he's winning, and might well move on from China to European cars and so on. But we're not there yet.

But doesn't the prospect of foreign retaliation change the picture? Actually, what foreign retaliation does is prevent tariffs from being less bad than an ordinary tax increase. When a large country like the U.S. imposes tariffs, one effect — if we don't face foreign retaliation — is a rise in the price of U.S. exports, either though a rise in the dollar or by drawing resources away from export to import-competing sectors. This price rise is, other things equal, a gain for America (although not for export-oriented sectors like agriculture.) And this "terms of trade" effect can mitigate or even reverse the overall losses as tariffs distort the economy.

If (when) foreigners retaliate, however, the terms of trade effect goes away, and we're back to tariffs just being a tax on domestic consumers.

Maybe the larger point here is that there tends to be a certain amount of mysticism about trade policy, because the fact that it's global and touches on one of the most famous insights in economics, the theory of comparative advantage, gives it an amount of mind space somewhat disproportionate to its actual economic importance. Yes, trade policy is important; but in terms of the strict economics it's not more important than health policy, or fiscal policy, or policy in general.


I say this, by the way, as someone whose career as a professional economist was based mainly on research into international trade and finance. In general, people who actually work on these issues tend to assign them less importance than those who haven't studied them closely.

All of this, however, is only about the strict economics of a trade war, which may be the least important aspect of what's happening.

For trade policy isn't just about economics. It's also about democracy and peace.

This is obvious and explicit in Europe, where the origins of the European Union lie in the Coal and Steel Community of the early 1950s — an agreement whose economic benefits, while real, were in a way incidental to its real purpose, preventing any future wars between France and Germany. And membership of the E.U. has always been contingent on democratization — which is, by the way, why the E.U.'s limp reaction to the de facto collapse of democracy in Hungary and, it appears, Poland represents such moral failure.

It's more implicit in the case of the United States. But the historical record is pretty clear: the postwar trading system grew out of the vision of Cordell Hull, FDR's Secretary of State, who saw commercial links between nations as a way to promote peace. That system, with its multilateral agreements and rules to limit unilateral action, was from the beginning a crucial piece of the Pax Americana. It was as integral to the postwar order as the I.M.F., which was supposed to provide a safety net for nations having balance of payments trouble, or for that matter NATO.

And Trump's trade war should correspondingly be seen as part and parcel of his embrace of foreign dictators, lack of respect for our allies, and evident contempt for democracy, at home as well as abroad.

But wait, you say: China is neither an ally nor a democracy, and it is in many ways a bad actor in world trade. Isn't there a reasonable case for confronting China over its economic practices?

Yes, there is — or there would be if the tariffs on Chinese products were an isolated story, or better yet if Trump were assembling an alliance of nations to confront objectionable Chinese policies. But in fact Trump has been waging trade war against almost everyone, although at lower intensity. When you're imposing tariffs on imports of Canadian steel, on the ludicrous pretense that they endanger national security, and are threatening to do the same to German autos, you're not building a strategic coalition to deal with a misbehaving China.


What you're doing, instead, is tearing down what's left of the Pax Americana.

Wasn't this inevitable in any case? I don't think so. True, U.S. economic dominance has been eroding over time, not because we're getting poorer, but because the rest of the world is getting richer. But there was reason to hope that a relatively peaceable international order could be sustained by an alliance of democratic powers. In fact, until a few years ago it seemed to me that we were seeing exactly that taking place for the world trading system, which was transitioning from largely benign U.S. hegemony to a comparably benign co-dominion by the U.S. and the E.U.

At this point, however, things look a lot bleaker. It's not just Trump. And it's not even just Trump plus Brexit. The Europeans are also turning out to be a big disappointment. As I said, if they can't even deal with the likes of Viktor Orban within their own community, they're definitely not up to providing the kind of leadership the world needs.

But where the Europeans are weak, Trump is malign. He's working actively to make the world a more dangerous, less democratic place, with trade war just one manifestation of that drive. And the eventual negative consequences for America and the world will be much bigger than anything we can capture with economic modeling of the effects of tariffs.


Paul Krugman has been an Opinion columnist since 2000 and is also a Distinguished Professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography. @PaulKrugman

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Lane Kenworthy: Some fixes for America’s economy [feedly]

Some fixes for America's economy
https://lanekenworthy.net/2019/05/08/some-fixes-for-americas-economy/

More thinking from the advancing social democratic standpoint on how to restructure dysfunctional features of corporate organization  and mission.

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Dean Baker: Productivity Booms in First Quarter, But Will It Last? [feedly]

Productivity Booms in First Quarter, But Will It Last?
http://cepr.net/publications/op-eds-columns/productivity-booms-in-first-quarter-but-will-it-last

For the last decade, we have been bombarded with stories about how robots were going to take all of our jobs. This claim made little sense since productivity growth, which measures the rate at which technology is displacing labor, was extraordinarily low through this period.

It averaged just 1.3 percent a year from 2005 to 2018. That compares to productivity growth rates of 3 percent in the long Golden Age from 1947 to 1973, and again from 1995 to 2005. If the robots were taking all the jobs, they were doing a good job of hiding the evidence from the Bureau of Labor Statistics, which compiles the data.

But the new data on first quarter productivity released last week tells a different story. Productivity growth rose at a 3.6 percent annual rate in the first quarter and has risen 2.4 percent since the first quarter of 2018. That's a big change.

Before making too much of this jump in productivity, some caution is in order. Productivity data are notoriously erratic. The data are subject to large revisions, and even post revisions we often see sharp reversals quarter to quarter that are not plausible as actual changes in the economy.

For example, productivity reportedly rose at a 3.7 percent annual rate in the third quarter of 2014, and then dropped at a 2.2 percent rate the next quarter. This spurt in productivity, followed by an actual decline, almost certainly did not really happen. These were just quirks in measurement. There is at least a 50 percent probability that the uptick in productivity we see in the data now will be reversed either by revisions, or by sharply lower growth in future quarters.

But for the moment, let's assume it is real. One of the main rationales for the Trump tax cut was that it was supposed to lead to a more rapid pace of productivity growth, which would mean higher wages and thereby benefit most of the population. Needless to say, Trump and his crew will surely be taking credit for this jump in productivity, as soon as someone tells them about it.

The problem with the tax cut story is that we are missing an intermediate step. The tax cut was supposed to increase productivity by producing a boom in investment. There actually has been no notable uptick in investment since the tax cut.

Investment in the first quarter of 2019 was up just 4.8 percent from its year-ago level. That's a very modest uptick, which is pretty much standard growth for the economy during a non-recession period. It would take investment growth on the order of 30 percent to see the sort of uptick in productivity shown in the first quarter data.

There is an alternative story which many progressive economists have long pushed. In a period of low unemployment, employers have more incentive to find ways to use their workers better. If it is difficult to find a new worker, then employers have a good reason to figure out ways to get more out of their existing workforce. This means higher productivity.

Also, in a strong labor market, the lowest-paying and least productive jobs go unfilled. For example, a convenience store might be closed from 1 am to 6 am just because it isn't profitable to have someone work those hours. Eliminating the least productive jobs raises the average level of productivity.

The jump in productivity in the first quarter data is consistent with this tight labor market story of productivity growth. If this really proves to be true, it would be very good news.

First, a more rapid sustained rate of productivity growth would mean that workers could get faster rates of wage increases without leading to inflation. Of course, workers could also get faster wage increases at the expense of profit margins, which soared in the Great Recession, but there is even more room for wage growth with a 2.4 percent rate of productivity growth.

The gains from faster productivity growth can also be taken in shorter work hours. We can follow other wealthy countries in having paid sick days and family leave as well as four to six weeks a year of paid vacation.

Also, faster productivity growth will make it easier to finance a Green New Deal to address global warming. If we maintain a growth rate that is a full percentage point more rapid than the previous pace, it would add more than $2 trillion to annual GDP by 2029. Much of the economy's additional production can be devoted to clean energy and conservation, allowing for more rapid reductions in greenhouse gas emissions.

There will be lots of benefits to the economy and society if the upturn in productivity growth reported for the first quarter turns out to be lasting. Unfortunately, it is most likely just a blip.

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Farming First: A Recipe to Feed a Crowded World [feedly]

An interesting take on family farming reminiscent of Pyotr Kropotkin, famous Russian anarchist and early ecologist. IN Mexico it makes sense as an step away from the oppression of the NAFTA agreement in ag products, and the vast social disruption it caused there, with little improvement since. But I doubt President Obrador would go nearly as far as this author does. Sorry, but globally, and in the US, it can't work for very long. Ag societies are inherently poorer. If they cannot scale in at least one, or a few products, heavy state subsidies will be required to trade. Low trade for developing countries == no capital (public or private) for internal investment. And for the US, under 3% of the workforce farm at all. For a country of 300 million, there is no way to back up very far, or for very long.

Farming First: A Recipe to Feed a Crowded World
http://triplecrisis.com/farming-first-a-recipe-to-feed-a-crowded-world/4

By Timothy A. Wise

Cross-posted at Mark Bittman's Heated at Medium. 

One version of an old joke features a shipwrecked economist on a deserted island who, when asked by his fellow survivors what expertise he can offer on how they can be rescued, replies, "Assume we have a boat." Economists have a well-deserved reputation for making their theories work only by making unrealistic assumptions about how the real world operates.

I was reminded of the joke often in the five years I traveled the world researching my book, Eating Tomorrow: Agribusiness, Family Farmers, and the Battle for the Future of Food. Policy-makers from Mexico to Malawi, India to Mozambique, routinely advocated large-scale, capital-intensive agricultural projects as the solution to widespread hunger and low agricultural productivity, oblivious to the reality that such initiatives generally displace more farmers than they employ.

Where are the displaced supposed to go? "Assume we have employment," can be the only answer, because economic growth sure wasn't generating enough jobs to absorb those displaced from rural areas. No one can sail home on an economist's assumed boat. And assumed jobs wouldn't address the chronic unemployment and under-employment that characterize most developing countries.

With demographic shifts creating youth bulges, job-creation remains an urgent priority. Indeed, growing populations are often portrayed as a demographic "time bomb," conjuring images of unemployed youth joining gangs, insurgent groups, or just falling into despair in urban slums.

But what if we saw all those unemployed workers as a resource rather than a curse? Economist Michael Lipton and others have long argued that the bulge in working-age youth can be a demographic dividend rather than a demographic time bomb, but only with policies that focus on creating and rewarding work, beginning with labor-intensive farming in agricultural societies. That is exactly what I see starting to happen in Mexico under its new president.

The Demographic Dividend

Lipton makes what should be an obvious point: labor creates wealth. So a society with a large share of able-bodied workers has a vast resource to generate economic development. The economic success stories in South and East Asia relied on an increase in the number of young people entering the workforce to accelerate economic growth. Lipton estimated that about one-third of the widely acclaimed "Asian miracles" of growth and poverty reduction could be attributed to those countries' low dependency ratios — the share of the population (children and older people) who don't work and are therefore dependent on the share of the population who can.

The United States now faces the opposite problem, with baby-boomers collecting their Social Security checks and with fewer workers paying into the government retirement system. But in Africa, low dependency ratios, economically, mean fewer mouths to feed per able-bodied worker. In 2012 there were 120 working-age people for every 100 dependents; in 2050 there are projected to be 196, a 63% rise in workers-per-dependent.

That should be a boon to economic growth, but only if those available workers can be put to productive work. In contemporary Asian success stories, such as China's, the first place they were put to work was in labor-intensive agriculture, with land reforms that created and supported intensive production on small farms of about two acres each.

Sub-Saharan Africa is the ticking demographic time bomb everyone now worries about; populations are expected to double, or more, by 2050. But that could be a demographic dividend if governments pursue policies that put people to work, first in agriculture. The young will be a resource, not a curse. And bottom-up economic development, particularly if it improves the lives of women and girls, will slow population growth, as it has in other developing countries.

Little Support for Labor-Intensive Agriculture

In my research in Africa, I didn't see much evidence that governments saw working-age youth as a resource. And they certainly were not investing in the kind of labor-intensive small-scale farming that was the foundation for Asia's economic miracles. But I saw plenty of examples of farmers taking matters into their own hands and intensifying their own production, generally with scant government support.

Intensification now has a bad name among many sustainable agriculture advocates because the term has become associated with increased use of commercial inputs to raise productivity. Even "sustainable intensification" has been co-opted by advocates of Green Revolution technologies to argue for "sustainable" use of chemicals.

But everywhere I traveled to research Eating Tomorrow, I saw farmers creatively intensifying the farming of their small plots, in truly sustainable ways. Those few who had access to irrigation could essentially double production, growing a second set of crops on the same land by irrigating it in the dry season. Even those who couldn't irrigate raised goats or other small livestock, composted the manure, and applied it to their fields, increasing soil composition, fertility, and productivity. Farmers inter-planted various food crops with their corn, ignoring Green Revolution monocultures and the bribes –- subsidies for commercial corn seeds and chemical fertilizers –- that backed them up.

Farmers knew when they harvested cowpeas from the same fields from which they had recently picked their corn that they had indeed intensified production –- two harvests rather than one –- from their land. Agricultural economists measure yield as corn-per-acre, not total-food-per-acre, so those shipwrecked economists see intercropped fields as less productive than monocultures. But these farmers know better. And when corn crops fail due to drought or pests, they also know they have grown other foods that survive to sustain their families.

Lipton's policy advice is to provide public support so small-scale farmers can intensify production, putting all able-bodied family members to productive work. Organic and ecological agriculture, in fact, require more intensive farm management, more labor. If that labor is rewarded with good prices, it can initiate a virtuous cycle of economic development, taking advantage of the productive resource represented by a large working-age population, turning a potential demographic time bomb into a demographic dividend.

Making Rural Mexico Great Again

Interestingly, I now see such policies being implemented in Mexico, 25 years into the rural disaster that the North American Free Trade Agreement (NAFTA) helped create. The new approach comes from the government of Andrés Manuel López Obrador, who was swept into office last year in a landslide of discontent with Mexico's corrupt leaders and their failure to sustain a decent standard of living for the majority of Mexicans.

In 1994, NAFTA opened the floodgates to cheap, subsidized U.S. corn, wheat, soybeans, and other crops, inundating rural Mexico. Corn imports jumped fivefold, driving local corn prices down by two-thirds. Some five million able-bodied workers fled rural Mexico, and they did not find waiting for them any of the job's NAFTA's economists had assumed would materialize. Some ended up as seasonal laborers on Driscoll's strawberry farms in Northern Mexico. Others swelled city slums. Many risked the increasingly dangerous crossing to seek work in the United States. Most sent money back home so the family could keep its farm, often its only asset.

Today, an embarrassing 57 percent of Mexico's able-bodied workers are in the informal sector, the broad category of off-the-books work ranging from street vending to drug trafficking. That is a higher share than before NAFTA. Clearly, Mexico hadn't put its able-bodied people to productive work to jumpstart economic development.

The new López Obrador administration, however, seems determined to make rural Mexico great again by investing in the productivity of the country's family farmers in the most neglected areas of the country. The leader of his new Office of Food Self-Sufficiency, veteran farm leader Victor Suárez, has ambitious programs underway to reinvigorate rural economies by paying support prices for key food crops –- corn, beans, wheat, rice, and milk –- and using that public procurement to provide high-quality foodstuffs to schools, hospitals, and other public institutions and to the poor. A host of other policies, such as a massive agro-forestry program, aim to invest in soil fertility and sustainable resource use on the country's small farms.

If that approach sounds familiar, it should. It is exactly what the U.S. government did in the Great Depression, and it is part of what won Brazil's "Zero Hunger" campaign international recognition. It is the cornerstone of India's National Food Security Program, which I document in my book.

In Mexico, López Obrador says that the explicit goal is to eliminate the root causes of rural outmigration and illicit drug trafficking. In other words, echoing Lipton, to create dignified work in agriculture to turn Mexico's chronic youth unemployment into a demographic dividend.

Timothy A. Wise directs the Land and Food Rights Program at the Small Planet Institute in Cambridge, Mass. He is the author of the recently released Eating Tomorrow: Agribusiness, Family Farmers, and the Battle for the Future of Food (New Press, 2019), available wherever books are sold.

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Mark Thoma: Economic Links (5/6/19) [feedly]

Economic Links (5/6/19)
https://economistsview.typepad.com/economistsview/2019/05/links-5619.html

• The economics of mobile money - VoxEU Mobile money has transformed the landscape of financial inclusion in developing and emerging market countries, leapfrogging the provision of formal banking services. This column explains how mobile money potentially helps ameliorate several areas of market failure in developing economies, including saving, insurance, and the empowerment of women. It illustrates these effects using examples from aburgeoning empirical literature and concludes that the system-wide effects of mobile money may be even greater than current studies suggest.
• A Tax That Could Fix Big Tech - Paul Romer It is the job of government to prevent a tragedy of the commons. That includes the commons of shared values and norms on which democracy depends. The dominant digital platform companies, including Facebook and Google, make their profits using business models that erode this commons. They have created a haven for dangerous misinformation and hate speech that has undermined trust in democratic institutions. And it is troubling when so much information is controlled by so few companies. What is the best way to protect and restore this public commons? Most of the proposals to change platform companies rely on either antitrust law or regulatory action. I propose a different solution. Instead of banning the current business model — in which platform companies harvest user information to sell targeted digital ads — new legislation could establish a tax that would encourage platform companies to shift toward a healthier, more traditional model. ...
• The Economics of Donald J. Keynes - Paul Krugman I made a bad economic call on election night 2016, predicting a Trump recession. But I quickly realized that political dismay had clouded my judgment, and retracted the call three days later. "It's at least possible," I wrote on Nov. 11, 2016, "that bigger budget deficits will, if anything, strengthen the economy briefly." What I didn't realize at the time was just how much bigger the deficits would get. Since 2016, the Trump administration has, in practice, implemented the kind of huge fiscal stimulus followers of John Maynard Keynes pleaded for when unemployment was high — but Republicans blocked. Contrary to what Donald Trump and his supporters claim, we are not seeing an unprecedented boom. ...
• Improving the Phillips Curve with an Interaction Variable - FRBSF A key challenge for monetary policymakers is to predict where inflation is headed. One promising approach involves modifying a typical Phillips curve predictive regression to include an interaction variable, defined as the multiplicative combination of lagged inflation and the lagged output gap. This variable appears better able to capture the true underlying inflationary pressure associated with the output gap itself. Including the interaction variable helps improve the accuracy of Phillips curve inflation forecasts over various sample periods.
• Improving Labor Force Participation - macroblog Without question, the U.S. labor market has tightened a lot over the last few years. But a shifting trend in labor force participation—and especially a rise in the propensity to seek employment by those in their prime working years—seems to be relieving some labor market pressure. From the first quarter of 2015 to the first quarter of 2019, the labor force participation (LFP) rate among prime-age workers (those between 25 and 54 years old) increased by about 1.5 percentage points (see the chart below), adding about 2 million workers more than if the participation rate had not increased. ...
• Two Measures of Core Inflation: A Comparison - Dallasfed.org Abstract: Trimmed-mean Personal Consumption Expenditure (PCE) inflation does not clearly dominate ex-food-and-energy PCE inflation in real-time forecasting of headline PCE inflation. However, trimmed-mean inflation is the superior communications and policy tool because it is a less-biased real-time estimator of headline inflation and because it more successfully filters out headline inflation's transitory variation, leaving only cyclical and trend components.
• Smith, MMT, and science in economics - John Cochrane Many blog readers have asked for my opinions of "Modern Monetary Theory." I haven't written yet, because I try to read about things in some detail, ideally from original sources, before reviewing them, which I have not done. Life is short. From the summaries I have read, some of the central propositions of MMT draw a false conclusion from two sensible premises. 1) Countries that print their own currencies do not have to default on excessive debts. They can always print money to pay off debts. True. 2) Inflation in the end can and must be controlled by raising taxes or cutting spending, sufficiently to soak up such printed (non-interest-bearing) money. True. The latter proposition is the heart of the fiscal theory of the price level, so I would have an especially tough time objecting. It does not follow that the US need not worry about deficits, and may happily borrow tens of trillions to finance all sorts of spending. ...
• Housing market and bank lending effects on young firms and local economies - VoxEU Young firms live a financially precarious life, often dependent on self-funding tied to the value of the business owners' homes. This column uses data from the US to show that housing market fluctuations play a major role in driving medium-term changes in young firm employment shares. As young firms hire a disproportionate number of younger and less-educated workers, these groups are disproportionately affected by house price fluctuations.
• The economy isn't getting better for most Americans. But there is a fix - Heather Boushey The economy is getting bigger, but not better. Not for most Americans, anyway. In the United States, additional income from productivity and growth has been going mostly to those at the top of the income and wealth ladder. Between 1979 and 2016, the US national income grew by nearly 60%, but after accounting for taxes and transfers, the bottom half of the income distribution experienced incomes rising by 22%, while those in the top 10% had income gains that were almost five times as much – 100%. As income inequality widens, it's calcified into some at the top accumulating larger and larger stocks of assets – money, but also property, stocks, bonds and other kinds of capital. In the United States, the distribution of wealth is even more severely unequal than income. Since 1979, wealth gains at the top have grown even faster than income; those in the top 1% now control about 40% of all wealth in the US economy, and the top 0.1% control more than 20% – three times as much as the late 1970s. ...
• The Great Depression: An Intake from "Slouching Towards Utopia?: An Economic History of the Long Twentieth Century 1870-2016" - Brad DeLongThis is the current draft of chapter 10 of Slouching Towards Utopia?. I am, again, of several minds with respect to it. I think it says what really needs to be said. I am not sure it says it in the right length. And I am not sure that I have successfully assembled the puzzle pieces in the right way... So tell me what you think of it:
• The Sabotage Years - Paul Krugman Do you remember the great inflation scare of 2010-2011? The U.S. economy remained deeply depressed from the aftereffects of the burst housing bubble and the 2008 financial crisis. Unemployment was still above 9 percent; wage growth had slowed to a crawl, and measures of underlying inflation were well below the Federal Reserve's targets. So the Fed was doing what it could to boost the economy — keeping short-term interest rates as low as possible, and buying long-term bonds in the hope of getting some extra traction. But Republicans were up in arms, warning that the Fed's policies would lead to runaway inflation. ...

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Why is teaching becoming a less appealing occupation? One answer is right in front of us [feedly]

Why is teaching becoming a less appealing occupation? One answer is right in front of us
https://www.epi.org/blog/why-is-teaching-becoming-a-less-appealing-occupation-one-answer-is-right-in-front-of-us/

Proof that teaching is increasingly becoming a profession under siege is mounting.

Many of us have relatives or friends who were dismissed from their schools during the recession or kept their jobs but faced cuts in school funding and other challenges affecting their work lives. News reports are replete with stories of teachers who quit or who are thinking about quitting. And the most recent PDK pollof American's views of public education found that more than half of the parents surveyed said they do not want their children to become public school teachers—the largest share since the question was introduced in 1969 and the first time a majority of parents answered this way.

The U.S Department of Education closes the school year with the publication of the Teacher Shortage Areas. Researchers point to a lack of available individuals to fill teaching positions as a factor in the teacher shortage, which we explore in a series of reports being released this spring and summer. The shortage is estimated to exceed 110,000 teachers missing in the current school year, according to our colleagues at the Learning Policy Institute.

Why is the role of educating our children becoming so unpopular?

The explanations people would provide for the declining popularity of teaching are many and may vary depending on the respondent and her or his connection to the profession. Still, it is pretty likely that low teacher pay would be a common response, either as a single cause or as an important feature in a constellation of causes that includes disrespect from policymakers, underfunding (which leaves teachers without the supports to handle their day-to-day needs), and disinvestment in the professional supports that help teachers adapt to changing conditions, continue their professional education, and collaborate with one another—key elements of any professional occupation. It's likely that explanations from teachers themselves would emphasize both the lack of professional supports that reflect a lack of appreciation for teaching as a professional like any other profession and the pay penalty they live with.

Teacher complaints about low pay are backed by the evidence. The teacher weekly wage penalty—how much less teachers make than comparable college-educated workers—is both very large (21.4 percent in 2018) and has grown nonstop since our colleagues Sylvia Allegretto and Larry Mishel have been tracking the penalty. In our new report Low Relative Pay and High Incidence of Moonlighting Play a Role in the Teacher Shortage, Particularly in High-poverty Schools we find that more than half of the teachers (59.0 percent) moonlight—performing extra work for pay inside or outside of the school system to supplement their salaries. That share, which uses data from the 2015–2016 school year, is up from 55.6 percent in the 2011–2012 school year.

Moonlighting brings in extra pay— about $4,100, or 7 percent of a teacher's combined salary and moonlighting pay— but at the cost of reduced family and personal time. And low pay is more acute in high-poverty schools. Teachers in high-poverty schools earn $5,600 less, bring in $300 less in moonlighting income, and are less likely to get their moonlighting income from activities that include a career-building component such as coaching, student activity sponsorships, mentoring other teachers, or teaching evening classes.

So how do we address these pay issues in teaching?

First we must understand why teachers are underpaid. Among the possible reasons is the fact that teaching was historically a ‟pink-collar" profession, i.e., one occupied by women, and it is likely that the teacher pay penalty is partly due to a gender pay gap that persists. Also, teachers' salaries are not set in perfectly competitive markets, which may explain why wages do not reflect teachers' real value or reward the investments in education that people make to become a teacher. Likely, the systems in place to fund education and teacher salaries are inadequate, insufficient, and outdated.

Second we must find the policy, social, and political will to implement the necessary fixes. As a society, it's clearly not a smart strategy to underinvest in those who have the responsibility of educating our children and thus nurturing our human and social capital. What would be smart would be to recognize the role of teachers in building human and social capital and understand that we can't advance the quality of education provided to our young people if we don't support the teachers in charge of the task. Higher salaries for teachers is a policy intervention that has the support of academics, and the general public—a record high two-thirds of Americans say teachers are underpaid. And of course pay increases respond to the call by teachers who have walked out for higher pay and other education investments. Rightfully, politicians are putting teachers' matters at the front end of their agendas.

In today's report, we examine low pay and the need to moonlight as contributors to the teacher shortage problem, because they make attracting and retaining teachers in the schools difficult. But beyond the specific findings is the moral implication of our analysis: that whatever the structural, historical, political, or societal causes behind the pay penalty in education, the penalty, at its heart, is just fundamentally unfair and requires a fix that is commensurate with its unfairness.

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Tim Taylor: How Single Payer Requires Many Choices [feedly]

Single will not be Simple.

How Single Payer Requires Many Choices
http://conversableeconomist.blogspot.com/2019/05/how-single-payer-requires-many-choices.html

I sometimes hear "single payer" spoken as if it was a complete description of a plan for revising the US health care system. But "single payer" actually involves a lot of choices. The Congressional Budget Office walks through the options in their report "Key Design Components and Considerations for Establishing a Single-Payer Health Care System" (May 2019).

As a preview of some of these issues, its worth noting that a some prominent countries with universal health coverage and reasonably good cost control (at least by US standards!) use regulated multipayer systems, like Germany, Switzerland and Netherlands. For those who like the sound of "Medicare for All," it's worth remembering that a certain number of analysts don't consider Medicare to be a single-payer system, because of the large role played by private insurers in the Medicare Advantage program, while all of Medicare's drug benefits (in Part D of the program) are delivered by private insurers.

However, if one narrows the options to an actual single player plan, which is the label typically put on Canada, Denmark, the UK, Sweden and others, a number of questions still need to be answered. Here's a chart from the report showing many of these questions, but because I fear it won't be readable in this blog format, I repeat a number of the questions below:

Would the plan be run by the federal government, the states, or some third-party administration? In Canada, for example, national health insurance is best-understood as 13 separate plans run by the provinces and territories. Would the single-payer plan use a single information technology infrastructure nationwide?

Who determines exactly what services are covered or not covered by the single payer plan? Who decides when new treatments would be covered? Would the mandated package of benefits cover outpatient prescription drugs? What about dental, vision, and mental health services? These are not mandated benefits in Canada.

Would there be cost-sharing for physician and hospital services? There is in Sweden, but not in the United Kingdom. How about a limit on out-of-pocket spending? There is such a limit in Sweden, but not in the UK. Would long-term care services be covered? The answer is "yes" in Sweden, "limited" in the UK, and "no" in Canada. If there is cost-sharing, would it take the form of deductibles, co-payments, or co-insurance?

Will supplemental health insurance be allowed? "In England, private insurance givespeople access to private providers, faster access to care, or coverage for complementary or alternative therapies, but participants must pay for it separately in addition to paying their individual required tax contributions to the NHS. In Australia, private insurance covers services that the public plan does not, such as access to private hospitals, a choice of specialists in both public and private hospitals, and faster access to nonemergency care."

Would people be allowed to "opt out" of the government health insurance plan and purchase private insurance instead?

Will hospitals be publicly owned, privately owned, or a mixture? Will hospitals be paid with a global budget to allocate across patients, or by a payment based on what patients are diagnosed with what conditions, or by fee-for-service? "Currently, about 70 percent of U.S. hospitals are privately owned: About half are private, nonprofit entities, and 20 percent are for-profit. Almost all physicians are self-employed or privately employed. A single-payer system could retain current ownership structures, or the government could play a larger role in owning hospitals and employing providers. In one scenario, the government could own the hospitals and employ the physicians, as it currently does in most of the VHA [Veterans Health Administration] system."

Will doctors be salaried public employees? If they are private providers, will they be paid on a fee-for-service basis, or receive a per-head or "capitation" payment based on the number of patients they serve? In many single-payer systems, the primary care physicians are private, but the outpatient specialist physicians are sometimes (Denmark) or always (UK) public and salaried.

How are prices to be determined for prescription drugs?

Does the financing for the system come from general tax revenues (Canada), an earmarked income tax (Denmark), a mixture of general revenues and payroll taxes (UK), or some other source?

The CBO report goes into these kinds of questions, and others, in more detail. My point here isn't to argue for or against "single payer." There are versions of single payer I would prefer to others, and although it's a story for another day, I like a lot of the elements of the German and Swiss multi-payer systems for financing health care. My point here is that if you are trying to describe a direction for reform of the US health care system, all $3.5 trillion of it, "single payer" is barely the beginning of a useful description; indeed, it sidesteps many of the tough decisions that would still need to be made.

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