Dean Baker: Donald Trump’s Big Trade Deals: More Reality TV [feedly]

Donald Trump's Big Trade Deals: More Reality TV

Dean Baker

http://cepr.net/publications/op-eds-columns/donald-trump-s-big-trade-deals-more-reality-tv

As he faced impeachment, Donald Trump touted his trade deals as evidence of the great success of his presidency. Specifically, he touted his revised North American Free Trade Agreement (NAFTA), which the Democratic leadership agreed to, and a first-round trade agreement with China. In both cases, people are more likely to hear Trump's boasts than to see any economic benefit from these deals.

In the case of the new NAFTA (called the United States-Mexico-Canada Agreement), it is essentially the old NAFTA, with some minor twists, both positive and negative. On the positive side, congressional Democrats forced Trump to include some serious language on labor rights in Mexico. While it remains to be seen how enforceable these will be, they are definitely stronger than the provisions in the original NAFTA.

It also helps that Mexico's current president, Andres Manuel Lopez Obrador, is its most labor-friendly leader in more than half-century. In most cases, Obrador will likely be happy to improve labor standards in Mexico in accordance with the agreement.

While provisions that can improve the living standards of Mexican workers should be seen as good, this is unlikely to make much difference in terms of the number of manufacturing jobs going from the U.S. to Mexico. Even if the labor provisions of the deal are fully enforced, wages will still be far lower in Mexico than in the United States.

The one positive aspect of this picture for U.S. workers is that most of the jobs that are likely to be transferred to Mexico have already moved there. Some jobs are undoubtedly still threatened with being moved going forward, but for the most part, the big transfer of manufacturing jobs has already taken place.

A big plus, for which congressional Democrats deserve considerable credit, was the removal of provisions that would have lengthened patent protections for prescription drugs. This provision would not only raise drug prices in our trading partners, it would lock in high prices in the United States. Democrats insisted that the patent-lengthening provisions be removed as a condition of reaching an agreement.

The major downside of the revised NAFTA was that it left in place wording that will make it more difficult to regulate the internet. There is a whole range of internet concerns on issues such as privacy, ownership of data, and the spreading of false information that has been raised in the United States and elsewhere.

The revised NAFTA will make it more difficult to impose new regulations in any of these areas. Of special concern is that the deal locks in, and applies to our trading partners, Section 230 of the Communications Decency Act. This protects internet intermediaries, like Facebook, from facing the same sort of liability for knowingly spreading false information that print and broadcast outlets face.

This means, for example, that if someone falsely alleges that a person committed a horrible crime, Facebook has no responsibility to remove the allegation, even if it can be shown to be false. Since the intention of the administration and Congress is to treat the revised NAFTA as a model for other trade deals, this special treatment of internet intermediaries is a very bad story.

It is harder to pass judgment on the "phase one" China deal, since we don't really know what is there. The Trump administration and the Chinese government are making different claims about what was agreed to.

One thing that we can be reasonably sure of is that the deal will not fundamentally alter the U.S. trading relationship with China. The U.S. is likely to continue to be a large net importer of manufactured goods from China.

China is also not about to restructure its entire economy in accordance with Donald Trump's vision. This fact was obvious to arithmetic fans everywhere. Our imports from China come to less than 4.0 percent of China's GDP. Much of the value added of these imports comes from other countries. For example, most of the value of an iPhone imported from China comes from the U.S. The value added of the items we import from China is almost certainly less than 3.0 percent of its GDP.

Even if Trump's tariffs reduced this by half (they have not come close), that is still only a hit of 1.5 percent of GDP. That would slow China's growth, but not be the sort of thing that would get it to restructure its economy. In fact, it likely would not even cause a recession. In short, Trump was fighting a trade war without any ammunition.

So, enjoy the celebration of Donald Trump's big trade deals, but don't expect to see any benefits for the economy. You won't find them.

 -- via my feedly newsfeed

Blaming Obama for Trump???

I have been thinking more about the recent spate of liberal articles blaming Obama for Trump. Including Paul Krugman. The argument goes that Obama failed to enact a second stimulus, using a belt-tightening argument which is spun as support for "austerity".

its true that a bigger stimulus would have brought the economy closer to full employment, faster. Trump's massive tax cut (a stimulus) has proved that.

However I have serious problems with the "its Obama's fault". analysis, both economically and politically. On the economic side, I think it is highly debatable whether a second stimulus was a better choice than the investment in expanded medicaid and Obamacare's struggle to advance universal health coverage. Especially if the realpolitik choice was one or the other, not both. I do not see, nor recall, any evidence that "both" were enactable.

When I evaluate "better" I try to do so from the standpoint of working people, especially the uninsured and underinsured, which amounted to over half of wage earners when Obama took office. A second stimulus, as the tax cut shows, would have got us to where we are now, employment-wise, but still doing next to nothing, just spit, about income inequality.

At the same time, I have personal experience about the lives and life savings of low wage families that expanded Medicaid has saved. And if Medicare for All has any chance in the future, it will owe a lot to both the wins, and shortcomings of Obamacare, which are now part of the US experience, not just an ideological dispute. I

t's also worth noting a feature/defect of Keynesian economics. Fiscal and monetary policy can counter (over time) the employment losses from recession or depression. But it is agnostic and indifferent to the inequality problem. For example, If all the new jobs are minimum.low wage, as most have been, Keynesian economics theory does not object.

On the political side, I do not believe Obama's pivot to health care was motivated by support for "austerity". Even with all the concessions (the public option, etc), the bill only passed with Democratic votes. Not a single Republican. So, the concessions denounced by the Fake Left, and now some liberals, were made just to keep all the Dems in line.

Further, the R blockade against Obama began immediately after the first stimulus -- which the moron Rs only supported because Bush did. The Fake Left of course asserts both the stimulus and single payer health care could just be 'commanded'. Any other outcome "must" be a result of a "neo-liberal" conspiracy.

Relationships of forces never have much impact on the anarchist (however manifest) mentality. But in real politics they are more than half of EVERY decision.

No "austerity" pol I know of ever worked to bring health care to low wage families -- ever.

I submit going after Obama hunting for the causes of Trump is a fool's errand, and, like some of the anti-globalization fetishes on the left, fertile sucker bait for the fascists and racists. Both the blockades against Obama reforms, and the rise of Trump, reflect, IMO, nothing less than --- a serious decay and unravelling of US capitalism in its current form. Its out of control. It paralyzing the political process. It's aggravated conflicts and contradictions are undermining civil society and democracy in nearly every dimension.

As Bernie Sanders has said: Its not really about the President -- the whole people, in multitudes, in its overwhelming majority, must be mobilized to defend against the grave threats. States of emergency are coming. But are there enough firemen? Australia is coming. There will not be a market solution.

  

--

John Case
Harpers Ferry, WV

Enlighten Radio

Socialist Economics

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Chris Dillow: Wages vs social value [feedly]

Interesting and timely post on a matter of high importance to socialist theory and policy going forward....how to 'value' non-monetized 'value'.

Wages vs social value
https://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2020/01/wages-vs-social-value.html

Today is the 23^rd anniversary of the death of Townes Van Zandt, who is now universally regarded as one of the greatest songwriters ever.

And yet during his lifetime he made very little money. Even in his best years he got less than $100,000 from song-writing royalties, and for much of his life he might well have earned more from the oil drilling rights bequeathed by his rich family than from his music.

Which vindicates a recent tweet from Cameron Murray:

Actions that have social value only rarely coincide with actions that are monetarily compensated.

In Van Zandt's case, this was partly because his genius was not fully recognised during his lifetime. But there are other reasons why Cameron point is correct in many more cases – reasons which are in fact entirely consistent with mainstream economics. I'm thinking of three ideas here.

1. Externalities. Let's assume (heroically) that people are paid their marginal product. Even where this is the case, it is the private marginal product for which they are rewarded, not the social marginal product. The two differ because of externalities. A worker whose job generates huge carbon emissions or other pollution will have a wage greater than their social value.

There are other forms of pollution. There's also risk pollution. In the run-up to the financial crisis, bankers were paid more than their social value because the risks generated by their activities would fall upon others; they were externalities. I suspect this is still the case.

And then there's intellectual pollution. "Writers" such as Giles Coren or Toby Young have a highish marginal product for their employers, but their gibberings coarsen the public sphere. One baleful effect of Twitter is that this is brought to wider attention than previously and thus imposes a greater negative externality.

By the same token, there are also positive externalities, as when researchers' findings inspire further ones. William Nordhaus has famously shown that innovators have captured "only a miniscule fraction of the social returns from technological advances."

2. Compensating advantages. Adam Smith thought the rewards to work tended to be equal across all occupations, once we considered both financial and non-financial returns. And, he said:

Honour makes a great part of the reward of all honourable professions. In point of pecuniary gain, all things considered, they are generally under-recompensed.

So, for example, professions such as nursing carry low wages but these are offset by a sense of pride and honour. But professions where these are lacking must pay more to offset that lack.

In his wonderful Bullshit Jobs, David Graeber has revived this idea. Many businesses, he writes, "now feel that if there's work that's gratifying in any way at all, they really shouldn't have to pay for it." But the same bosses who begrudge paying writers, he says, "are willing to shell out handsome salaries for 'Vice Presidents for Creative Development' and the like, who do absolutely nothing." This is pure Smith: financial rewards offset the dissatisfaction that comes from doing a bullshit job, whilst enjoyable work pays less.

3. Bargaining. Your income does not depend upon how much social value you produce. It depends upon your power to extract that value. And Van Zandt was typical of musicians in being unable to do so. In Rockonomics, Alan Krueger wrote that "musicians are not rewarded fairly for their services" because they earn little compared to the countless hours of entertainment they deliver. He pointed out that the typical musician made only $100 in 2018 from streaming and that many artists have suffered from bad record deals: Paul McCartney, he says, made more money with Wings than he did with the Beatles. Jolie Holland, the Van Zandt of our era, has said:

I barely make a living. I think you have to be famous to make a living. I live out of a suitcase.

Although Econ101 tells fairy stories of how W=MP, bargaining (pdf)models are in fact mainstream economics: I recommend chapter 5 of Sam Bowles Microeconomics for a discussion of them.

Yes, we can and should supplement such models with analyses of how power relations (which of course include sexism and racism) also affect (pdf) wages and drive further wedges between social value and earnings. But we don't need to do so to see that Cameron is right. Mainstream economics alone shows that wages need not often coincide with social value.

 -- via my feedly newsfeed

'The Tone of Civil Life Has Its Necessity and May Even Have Its Heroic Quality" [feedly]

I found myself moved by Tim Taylor's New Years appeal (via Lionel Trilling) to the possible "heroism" of civil discourse. A good resolution. I will try to do better myself.

'The Tone of Civil Life Has Its Necessity and May Even Have Its Heroic Quality"
http://conversableeconomist.blogspot.com/2020/01/the-tone-of-civil-life-has-its.html

Yes, we live in outrageous times. But we also live in a time when there is cachet in being the most outraged, kudos to being the most highly angered and offended, and eminence in being the most exceptionally shocked and appalled. When the rewards for dialing up the emotional level are high, other discourse can be drowned out. This blog, in its own small way, tries to model the virtues of civil discourse.

I was moved to consider this point when I ran across a comment from the prominent literary critic Lionel Trilling in a 1951 letter to his former student Norman Podhoretz. Podhoretz had reviewed a book by Trilling, and in the course of an overall positive review raised concerns that the Trilling's exposition was perhaps not confrontational enough. Trilling responded in this way (the quotation is from Life in Culture: Selected Letters of Lionel Trilling, edited by Adam Kirsch, 2018, p. 193):

What I would have said about my own prose is that there is a need for a tone of reasonableness and demonstration, that it was of the greatest importance that we learn to consider that the tone of civil life has its necessity and may even have its heroic quality, that we must have a modification of all that is implied by the fierce posture of modern literature.

However, Trilling also expressed a fear that rises in the hearts of all of us who attempt to be civil--that our attempts at a kind of clarity and civility could mean that people just don't understand when or how we are disagreeing with them. Trilling continues:

I still think this ... But with the arrival in the last few days of some of the English reviews of my book, I have come to feel that my tone isn't what I had thought or meant it to be. I have always supposed it had more intensity, irony, and acerbity than the English have been finding in it, and several remarks about its "gentleness" have disturbed me, for I don't think I am gentle in my intellectual judgments, and don't want to be. Possibly the British response is to my willingness to forgive the writer while condemning the idea, but I must also suppose there is something in the style itself--that something is there that I did not mean to be there, or something not there that I meant to be. 

To be clear, a civil tone doesn't mean avoiding disagreement. It doesn't mean go-along-to-get-along. It doesn't mean squishiness. It doesn't mean a belief that all discussions should be robotic or "just-the-facts." It means a dose of earnestness about trying to convey one's own beliefs, and a dose of humility when confronted by differing beliefs of others.

It does mean not rising too quickly when the easy bait of anger and outrage is proffered. It means trying to make allowances for those who give in to excess, because none of us is perfect, but also not feeding or amplifying that excess, and indeed trying to tamp it down. It means that politeness will be the first and second and probably the third response to disagreements, and even in the cases where politeness must needs be abandoned, a cold, explicit, and angry disagreement can be followed by disengagement, rather than feeding the fire of disagreement for its own sake. 

Those who forsake a civil tone may find that later, when they wish to call on others for sober reflection or careful thought, they have done injury to this form of discourse. If and when they later wish to appeal for a civil discussion, it may no longer be available to them. When tempted to say that you find it impossible to disagree on certain subjects in a civil manner, it may be useful to ask oneself about whether you wish to encourage a society in which conversations will be ruled by those who can emote the loudest, longest, and hardest. 

Most people demonstrate a capacity for civil disagreement in many areas of their lives: family, friends, work, institutions of worship, clubs, local government, and others. In my own experience, there is often a kind of performative dishonesty and group-signalling that occurs when conversations disintegrate into passionate incivility.  What I have in mind here is similar to the sentiment that James Madison expressed in Federalist #50, when he wrote:

Throughout the continuance of the council, it was split into two fixed and violent parties. The fact is acknowledged and lamented by themselves. Had this not been the case, the face of their proceedings exhibits a proof equally satisfactory. In all questions, however unimportant in themselves, or unconnected with each other, the same names stand invariably contrasted on the opposite columns. Every unbiased observer may infer, without danger of mistake, and at the same time without meaning to reflect on either party, or any individuals of either party, that, unfortunately, passion, not reason, must have presided over their decisions. When men exercise their reason coolly and freely on a variety of distinct questions, they inevitably fall into different opinions on some of them. When they are governed by a common passion, their opinions, if they are so to be called, will be the same.

If someone's passion always aligns them with the same group, it seems to me a tell-tale sign that their membership in the group has become so important that they fear the possibility of being seen to disagree with the group more than they desire to think their own thoughts. In that way, the disciplline of civility offers a kind of personal freedom both to oneself and others. 

 -- via my feedly newsfeed

Lawler: US Population Growth Slowed Again in 2019 [feedly]

Lawler: US Population Growth Slowed Again in 2019
http://www.calculatedriskblog.com/2019/12/lawler-us-population-growth-slowed.html

CR Note: These lower population estimates are important for projections of economic growth and housing. I mentioned this slowdown in growth earlier this month in Is the Future still Bright?

From housing economist Tom Lawler: US Population Growth Slowed Again in 2019

Yesterday the Census Bureau released its "Vintage 2019" estimates of the US resident population, which showed that population growth in 2019 was the slowest (in numbers) since 1942 and the slowest in percentage growth since 1918. According to these estimates, the US resident population on July 1, 2019 was 328,239,523, just 1,552,022 (or 0.475%) higher than the downwardly-revised population estimate for July 1, 2018. 2009 was the third consecutive year that US population growth slowed significantly, reflecting lower births, higher deaths, and lower net international migration.

	Births	Deaths	Net International Migration	Total
2010-2016 (Yr. Avg.)	3,961,544	2,601,247	909,644	2,269,941
2016-2017	3,901,982	2,788,163	930,409	2,044,228
2017-2018	3,824,521	2,824,382	701,823	1,701,962
2018-2019	3,791,712	2,835,038	595,348	1,552,022

The latest population estimate for July 1, 2018 was 479,933 lower than the "Vintage 2018" estimate for that year, with the downward revision reflecting somewhat lower births, somewhat higher deaths, and significant lower net international migration. Population estimates for previous years of this decade were also revised downward modestly, mainly reflecting lower estimates for net international migration.

While updated estimates of the population by age won't be available for several months, these latest estimates, if accurate, suggest that both total population growth and the growth in the working-age population were significantly slower over the past two years than previously thought.

For folks who use Census population projections to forecast other key variables, it is worth noting that the latest population estimate for 2019 is a sizable 1,965,493 lower than the estimate from the "Census 2017" projections, which are the latest available.

Updated population projections, originally slated for release in late October, are now scheduled to be released sometime in January. These estimates, however, will use the "Vintage 2018" estimates as a starting point, and as such are out of date before they are even released. Below is the latest from Census on the upcoming population projections release.

"The U.S. Census Bureau will be releasing several new and updated population projection reports that cover projected life expectancy by nativity, projected population by alternative migration scenarios and updated population projections by demographic characteristics. Supplemental data files for the alternative migration scenarios and input data sets for the main projections series are also being released."

 -- via my feedly newsfeed

Krugman: The Legacy of Destructive Austerity [feedly]

The Legacy of Destructive Austerity
https://www.nytimes.com/2019/12/30/opinion/deficits-economy.html

Paul Krugman

text only: 

A decade ago, the world was living in the aftermath of the worst economic crisis since the 1930s. Financial markets had stabilized, but the real economy was still in terrible shape, with around 40 million European and North American workers unemployed.

Fortunately, economists had learned a lot from the experience of the Great Depression. In particular, they knew that fiscal austerity — slashing government spending in an attempt to balance the budget — is a really bad idea in a depressed economy.

Unfortunately, policymakers on both sides of the Atlantic spent the first half of the 2010s doing exactly what both theory and history told them not to do. And this wrong turn on policy cast a long shadow, economically and politically. In particular, the deficit obsession of 2010-2015 helped set the stage for the current crisis of democracy.

Why is austerity in a depressed economy a bad idea? Because an economy is not like a household, whose income and spending are separate things. In the economy as a whole, my spending is your income and your spending is my income.  

What happens if everyone tries to cut spending at the same time, as was the case in the aftermath of the financial crisis? Everyone's income falls. So to avoid a depression you need to have someone — namely, the government — maintain or, better yet, increase spending while everyone else is cutting. And in 2009 most governments engaged in at least a bit of fiscal stimulus.  In 2010, however, policy discourse was taken over by people insisting, on one side, that we needed to cut deficits immediately or we would all turn into Greece and, on the other side, that spending cuts wouldn't hurt the economy because they would increase confidence.

The intellectual basis for these claims was always flimsy; the handful of academic papers purporting to make the case for austerity quickly collapsed under scrutiny. And events soon confirmed Macroeconomics 101: America didn't turn into Greece, and countries that imposed harsh austerity suffered severe economic downturns.

So why did policy and opinion makers go all in for austerity when they should have been fighting unemployment?  




One answer, which shouldn't be discounted, is that inveighing against the evils of deficits makes you sound responsible, at least to people who haven't studied the issue or kept up with the state of economic research. That's why I used to mock centrists and media figures who preached the need for austerity as Very Serious People. Indeed, to this day, billionaires with political ambitions imagine that dire warnings about debt prove their seriousness.

Beyond that, the push for austerity was always driven in large part by ulterior motives. Specifically, debt fears were used as an excuse to cut spending on social programs, and also as an excuse for hobbling the ambitions of center-left governments.

Here in the United States, Republicans went through the entire Obama era claiming to be deeply concerned about budget deficits, forcing the country into years of spending cuts that slowed economic recovery. The moment Donald Trump moved into the White House, all those supposed concerns vanished, vindicating those of us who argued from the beginning that Republicans who posed as deficit hawks were phonies.

This politically weaponized Keynesianism is, by the way, probably the main reason U.S. economic growth has been good (not great) over the past two years, even though the 2017 tax cut completely failed to deliver the promised surge in private investment: federal spending has been growing at a rate not seen since the early years of the past decade.

But why does this history matter? After all, at this point unemployment rates in both the United States and Europe are near or below pre-crisis levels. Maybe there was a lot of unnecessary pain along the way, but aren't we O.K. now?

No, we aren't. The austerity years left many lasting scars, especially on politics.

There are multiple explanations for the populist rage that has put democracy at risk across the Western world, but the side effects of austerity rank high on the list.

In Eastern Europe, white nationalist parties came to power after center-left governments alienated the working class by letting themselves be talked or bullied into austerity policies. In Britain, support for right-wing extremists is strongest in regions hit hardest by fiscal austerity. And would we have Trump if years of wrongheaded austerity hadn't delayed economic recovery under Barack Obama?

 -- via my feedly newsfeed