Brad DeLong: Worthy reads on equitable growth, May 19-26, 2020 [feedly]

Brad DeLong: Worthy reads on equitable growth, May 19-26, 2020
https://equitablegrowth.org/brad-delong-worthy-reads-on-equitable-growth-may-19-26-2020/

Worthy reads from Equitable Growth:

1. Equitable Growth last week launched a new lecture series. The first installment is with Claudia Sahm, who is saying something very worthy of your attention. Watch her Fighting the coronavirus and the way forward video, in which she discusses promising research ideas that support a robust response to fight the coronavirus recession, as well as longer-term efforts to ensure a more resilient U.S. economy in the years to come.
2. Claudia Sahm sees the freight train bearing down on us, in the form of a very deep and long depression. She watches ideologues and partisans try to tie us to the railroad tracks. Why? Some because they do not understand the importance of ensuring a rapid and complete bounce back from the coronavirus depression. Some because they cynically dismiss the importance of ensuring a rapid and complete bounce back from the coronavirus depression. We have seen this story before, as tragedy. A decade ago ideologues, partisans, and centrists declared victory in late 2009 over the then Great Recession. They shifted their attention away from boosting recovery to austerity. Sahm is terrified that they are doing it again. And she is right to be scared. Read her "The coronavirus recession is severe, and the damage to the U.S. economy will last years," in which she writes: "The U.S. economy is in a severe recession, at least twice as severe as 2007–2009…Today's national unemployment rate is rivaled only by the heights of the Great Depression, when 30 percent of workers were unemployed. Lost income leads to less spending, which leads to business closures and more layoffs …People and businesses are living with overwhelming anxiety. Policymakers need to do more than contain the coronavirus and allow stores to reopen. They need to get money in the pockets of people and calm their fears. If Americans have money to spend, they will spend. Many have no choice. Their low wages make it impossible to support their families in good times, let alone now … Even with relief from Washington, immense damage is happening across country right now. This is not a drill. The Great Recession showed how long it can take to get us back on our feet."
3. The U.S. Bureau of Labor Statistics reports that still more workers, 2.4 million of them, lost their jobs and applied for unemployment benefits in the past week. Relaxing lockdowns looks to have increased the virus caseload. Relaxing lockdowns has not all has not yet boosted production. See Equitable Growth's graphic about the applications for Unemployment Benefits in the week of May 10–16.

 

Worthy reads not from Equitable Growth:

1. The extremely thoughtful David Glasner explains why those who analogize the coronavirus supply shock to the monopoly oil price shocks of the 1970s are profoundly mistaken. This is not an inflationary supply shock. This looks overwhelmingly likely be a profoundly deflationary supply shock. Read his "The Idleness of Each Is the Result of the Idleness of All," in which he writes: "Some, perhaps many, seem to think that if the shock is a supply, rather than a demand, shock, then there is no role for a countercyclical policy response designed to increase demand … The problem with that reasoning is that reductions in supply are themselves effectively reductions in demand. The follow-on reductions in demand constitute a secondary contractionary shock on top of the primary supply shock, thereby setting in motion a cumulative process of further reductions in supply and demand … The interconnectedness of the entire economy, and the inability of any individual to avoid the consequences of a social or economic breakdown … was recognized by… Frederick Lavington, in his short book The Trade Cycle published in 1922 in the wake of the horrendous 1921-22 depression … To call unemployment "voluntary" under such circumstances is like calling the reduced speed of drivers in a traffic jam "voluntary." To suppose that the intersection of a supply-demand diagram provides a relevant analysis of the problem of unemployment under circumstances in which there are massive layoffs of workers from their jobs is absurd. Nevertheless, modern macroeconomics for the most part proceeds as if the possibility of an inefficient Nash equilibrium is irrelevant to the problems with which it is concerned … In the face of an adverse supply shock, a spell of inflation lasting as long as the downturn is therefore to be welcomed as benign and salutary, not resisted as evil and destructive. The time for a decline in, or reversal of, inflation ought to be postpone till the recovery is under way."
2. Great Depression-level unemployment rates are reached not after three years but after two months. Read William M. Rodgers III and Andrew Stettner, "New Data Show That the True March Jobless Rate Could Near 20 Percent," in which they write; "The Century Foundation has revised upwards our projections for the true March unemployment rate nationally to 18.3 percent … Unemployment insurance … data tell only part of the problem, as issues with overwhelmed state UI systems and eligibility restrictions that exclude many gig workers and independent contractors from receiving benefits … The current jobs crisis is unlike anything we've seen before. Past recessions and economic downturns have brought a snowstorm of job losses—a steady fall, spread over many months, if not years, whose impacts we could address in real-time, with existing tools, to mitigate the damage and keep the accumulation manageable. Today, however, we're facing an avalanche."
3. The political intellectual policy tide from 1975 to 2005 was the neoliberal one: stepping back from even indicative planning and from any form of commitment to equality of result or even of opportunity—the conventional wisdom becoming that there was very little indeed that government was capable of doing efficiently, that sharper and harder incentives were almost always to the social benefit, and that to the extent social democratic ends could be obtained at all they could best be obtained through market means. As of 2005 this neoliberal movement was in intellectual bankruptcy. But in politics and policy it has continued its zombie-like shamble forward to this day. Now my colleagues here at the University of California, Berkeley have decided to see if they can do you some of the intellectual spadework needed to prepare the ground in which to grow a better way of thinking about the political economy. Check out their Network for a New Political Economy: "An interdisciplinary group of faculty and students at the University of California, Berkeley, has launched a Network for a New Political Economy supported by the Hewlett Foundation to rethink political economy and develop a new intellectual paradigm as an alternative to neoliberalism. The roots of the new paradigm reside in ongoing research in social science departments such as Economics, Political Science, Sociology, and History, plus professional schools such as Business, Law, and Public Policy. The Network fosters an intellectual conversation among faculty and students across these units, and encourages them to frame their insights and to package them for public engagement and policy relevance. It facilitates collective deliberation on how political economy should be studied and taught, and how new perspectives on political economy can be applied to broad public debates and pressing policy problems."

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Will Telecommuting Stick? [feedly]

Will Telecommuting Stick?
https://conversableeconomist.blogspot.com/2020/05/will-telecommuting-stick.html

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More than a quarter of the workforce in 10 states has filed for unemployment [feedly]

More than a quarter of the workforce in 10 states has filed for unemployment
https://www.epi.org/blog/more-than-a-quarter-of-the-workforce-has-filed-for-unemployment-in-10-states/

The Department of Labor (DOL) released the most recent unemployment insurance (UI) claims data this morning, showing that another 2.2 million people filed for regular UI benefits last week (not seasonally adjusted) and 1.2 million for Pandemic Unemployment Assistance (PUA), the new program for workers who aren't eligible for regular UI, such as gig workers.

While most states saw a decline in UI claims filed relative to the prior week, 12 states saw increases in UI claims. Washington saw the largest percent increase in claims (31.0%) compared with the prior week, followed by California (15.7%), New York (13.6%), and North Dakota (10.1%).

A note about the data: Unless otherwise noted, the numbers in this blog post are the ones reported by the U.S. Department of Labor, which they receive from the state agencies that administer UI. While DOL is asking states to report regular UI claims and PUA claims separately, many states are also including some or all PUA claimants in their reported regular UI claims. As state agencies work to get these new programs up and running, there will likely continue to be some misreporting. Since the number of UI claims is one of the most up-to-date measures of labor market weakness and access to benefits, we will still be analyzing it each week as reported by DOL, but we ask that you keep these caveats in mind when interpreting the data.

Figure A and Table 1 below compare regular UI claims filed last week with the prior week and the pre-virus period, in both level and percent terms. It also shows the cumulative number of unemployment claims since March 7 and that number as a share of each state's labor force. In 10 states, more than a quarter of the workforce filed an initial claim during the past 10 weeks: Georgia (39.2%), Kentucky (38.0%), Hawaii (35.0%), Washington (30.9%), Louisiana (29.9%), Rhode Island (29.7%), Nevada (29.6%), Michigan (29.2%), Pennsylvania (28.4%), and Alaska (27.9%).

Figure A

All states continue to see astonishingly high numbers of claims relative to the pre-virus period, but the rise in claims has been particularly pronounced in the South. Last week, Florida and Georgia saw the largest percent increase in claims (4,319% and 3,198%, respectively) compared with the pre-virus period. Eight of the 10 states that had the highest percent change in initial regular UI claims relative to the pre-virus period are in the South: Florida, Georgia, Mississippi, Kentucky, North Carolina, Virginia, Louisiana, and Oklahoma.

Table 2 below displays the reported number of people who applied for Pandemic Unemployment Assistance (PUA)—the new federal program that extends unemployment compensation to workers who are not eligible for regular UI but are out of work due to the pandemic, such as gig workers and people who left their jobs to care for a child. The U.S. DOL's release on 5/21/2020 reported that 1,184,792 initial PUA claims were filed in Massachusetts last week, but the correct number is 115,952. The total number of initial PUA claims in the U.S. last week has also been corrected to 1.2 million to reflect this change.

In the last three weeks, about three million workers in 36 states have filed for PUA, with the most PUA claims in California (547,188), Michigan (388,749), New York (269,426), Massachusetts (255,242), and North Carolina (184,304).

To mitigate the economic harm to workers, the next federal relief and recovery package should extend the across-the-board $600 increase in weekly unemployment benefits well past its expiration at the end of July. The package should also include substantial aid to state and local governments (without which, a prolonged depression is inevitable), worker protections, investments in our democracy, and resources for coronavirus testing and contact tracing, which is necessary to reopen the economy.

Table 1

Table 2

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The Sure Way to End Concerns About China’s “Theft” of a Vaccine: Make it Open [feedly]

The Sure Way to End Concerns About China's "Theft" of a Vaccine: Make it Open
https://cepr.net/the-sure-way-to-end-concerns-about-chinas-theft-of-a-vaccine-make-it-open/

I luv Dean when he turns his snarky temperament in the right directions. Countering the BS drumbeats against China with solid analysis is a good example.

In the last couple of weeks both the New York Times and National Public Radio have warned that China could steal a vaccine against the coronavirus, or at least steal work in the U.S. done towards developing a vaccine. Both outlets obviously thought their audiences should view this as a serious concern.

As I wrote previously, it is not clear why those of us who don't either own large amounts of stock in drug companies, or give a damn about Donald Trump's ego, should be upset about the prospect of China "stealing" a vaccine. Concretely, if China gained knowledge from labs in the United States that allowed it to develop and produce a vaccine more quickly, this would mean that hundreds of millions of people might be protected against a deadly disease more quickly than would otherwise be the case. If China made this vaccine available to people in the developing world, then the numbers could be in the billions.

Sounds pretty scary, right?

It is amazing that neither the reporters writing these stories nor their editors apparently gave much thought to the implications of China "stealing" a vaccine. Or perhaps, even worse, maybe they did. Anyhow, I suspect that most of the audiences of these outlets would not consider it a terrible thing if people in China or other countries could get vaccinated more quickly against the coronavirus.

But the issue of this potential theft is just the beginning of the story. If China can in principle develop a vaccine more quickly if it has access to data from labs in the United States then it must also be the case that researchers in the United States could develop a vaccine more quickly if they had data from labs in China and elsewhere. This raises the question of why we are not researching a vaccine collectively, with researchers all over the world posting their findings as quickly as practical so that teams of researchers everywhere can benefit from them?

There is a bad answer and somewhat less bad answer to this question. The bad answer is that the goal of the researchers is to get a government-granted patent monopoly so that they can charge lots of money for a vaccine and get very rich. The less bad answer is that we rely on grants of patent monopolies to finance research. If companies didn't have the hope of getting a patent monopoly, they would have no way to recoup the costs they are incurring paying researchers and undertaking the trials necessary to establish the safety and effectiveness of a vaccine.

The reason why the less bad answer is still a pretty damn bad answer is that it assumes that we have no other way to pay for the research and testing of a vaccine, except with patent monopolies. It should be pretty obvious that this is not the case since much of the funding for the research now taking place comes from the government.[1] However, for some reason, the idea that the government would take up the slack and pick up the full tab for developing a vaccine, including testing and going through the FDA approval, is difficult for people to conceive.

The failure of imagination here is more than a little bizarre. This is in part because the government already pays for many clinical trials through the National Institutes of Health and other agencies. However, there is also an obvious model for large-scale funding for research and development, the Defense Department.

The Defense Department will sign large multi-year contracts with major military suppliers, like Lockheed or Boeing. The contractors will typically subcontract much of the work to smaller and newer companies, but the decision on what to do in-house and what to do under contract is largely left up to the prime contractors.

There are many grounds for complaints about the military, but the fact is that we do get good weapons systems. And, we have a huge advantage with medical research over military research. There are legitimate reasons for keeping military research secret, we would not want ISIS to be able to download the plans for our latest weapons systems off the web. By contrast, there is no good reason for wanting to keep medical research secret. There could be nothing better than to have a team of researchers in another country, learn from findings here, and then build on them to develop a successful vaccine or treatment for the coronavirus. (I discuss this issue in more detail in chapter 5 of Rigged[its free.])

Ideally, we would have some system of international coordination where the costs of research were shared. This would require some negotiations but our current system of patent monopolies also involves difficult negotiations. Provisions on patents and related protections were a major part of every trade deal for the last three decades. These provisions have often been especially contentious. In fact, the final version of the Trans-Pacific Partnership was delayed for several years over the terms on patent-related protections demanded by the U.S. pharmaceutical industry. So, while it is true that we would like a mechanism to ensure fair sharing of research costs, it is likely that negotiating this sharing will be no more difficult than it has been under the patent monopoly system.

However, in a context where the whole world is struggling to deal with a pandemic that is killing hundreds of thousands of people, it might be reasonable to just do the research and worry about the cost-sharing later. It would make sense for governments to fund their own research to the extent practical and require that everything be fully public as soon as possible.

If we went this route, our leading news outlets could put aside their fears that China would steal the vaccine. If they take advantage of U.S. research and rush ahead and develop an effective vaccine before our own researchers, then the whole world will benefit from having a vaccine sooner than would otherwise be the case.

If China somehow decides to break commitments and keep its vaccine secret, surely we will be able to secure a dosage and reverse engineer it. This should still leave us hugely better off than if our researchers are struggling to overcome obstacles that China's researchers have already managed to surmount. In any case, China certainly does not have a poor record of adhering to international agreements, at least not compared to the United States under Donald Trump.

We have a huge amount of potential gain from going the route of open research and very little to lose. And our leading news outlets would be able to stop worrying about China stealing our vaccine.

[1] It is worth noting on this topic that remdesivir, currently the most promising drug for treating the coronavirus, was developed to a large extent with public money, even though Gilead owns a patent on it.

The post The Sure Way to End Concerns About China's "Theft" of a Vaccine: Make it Open appeared first on Center for Economic and Policy Research. 

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Deindustrialization as a Template for COVID-19 [feedly]

Deindustrialization as a Template for COVID-19 [feedly]

https://workingclassstudies.wordpress.com/2020/05/18/deindustrialization-as-a-template-for-covid-19/  

A long line of cars at a Mahoning Valley food bank in April

As we wrote in Steeltown USA: Work and Memory in Youngstown, Youngstown's story is America's story. That's true now as we try to imagine American life after the pandemic. No doubt, coronavirus is a natural disaster that is more contagious, widespread, and deadly than the economic disaster of deindustrialization. But the struggles that Youngstown and similar Rust Belt cities faced after the plant closings of the late 1970s offer a stark warning: the economic crash hitting so many Americans now will have long-term costs. Youngstown's story also makes clear that we can't rely on private enterprise or individual effort to fix things.

As leaders debate when and how to reopen the American economy, some have warned that the economic crisis will lead to as many deaths as COVID-19. Our research on the social costs of deindustrialization suggests that although this economic displacement is not as lethal as the virus itself, if not adequately addressed, it will indeed cost lives. After deindustrialization left thousands without jobs, heart disease, strokes, and cancer rates increased in places like Youngstown.

So did mental health problems. A lost job doesn't just mean lost wages, homelessness, or hunger – important as those material realities are. Laid-off workers also lose important networks and routines. For many, losing a job also means losing a sense of purpose and identity. Combine anxiety, isolation, and self-doubt with fear about an uncertain future, and it's no wonder so many become depressed or seek relief from drugs or alcohol. As Anne Case and Angus Deaton's by now familiar study of "deaths of despair" has shown, an uptick in alcoholism, addiction, and depression in the early 1980s eventually become an epidemic of disease, overdoses, and suicides.

Youngstown provides a discouraging glimpse of how the economic devastation of COVID-19 could play out for communities as well. Lost jobs reduce tax revenues, so cities struggle to maintain streets, fight crime, and run schools, libraries, and recreation centers. This disrupts the social networks that enable communities to pull together to address problems.

Deteriorating infrastructure, high crime rates, and poor local schools also pose challenges for attracting new business and investments. Residents and local leaders pursue any new opportunity, competing with other localities and offering tax abatements in exchange for jobs. Too often, the result is disappointing, as Youngstown knows all too well. Companies hire few locals, and they move on as soon as the tax deals end, feeding a cycle of local desperation.

Americans may well, like many in Youngstown, lose faith in government, business, labor, foundations, and even religious institutions. They might also lose faith in themselves. Self-doubt undermined our community, in part because people internalized the blame implied in media stories questioning why people failed to pull themselves up by the proverbial bootstraps, fell victim to phony economic schemes, or weren't sufficiently entrepreneurial.

Youngstown's story had political outcomes, too. Political resentment about insufficient government assistance, led local voters to embrace political demagogues like Jim Traficant. A few decades later, frustration over the community's continuing struggles and false promises from too many candidates made this traditionally-Democratic area into "ground zero" of Trump country. The current crisis might also generate political effects that could last for a very long time.

People often ask us, what is the answer for Youngstown? Our response is sobering: this place will probably never fully recover. It will survive, but it will not likely thrive. Will that be true for the U.S. after COVID-19?

The answer depends on how we respond. First, we must recognize how the economic policies and business practices of the last few decades created the economic precarity that makes today's crisis so overwhelming. A society in which so many people live on the edge is particularly vulnerable, as we have seen in recent weeks.

Second, we must expand social welfare programs to provide not only basic food, healthcare, and shelter but also mental health resources to help people recover from the multiple losses of this crisis.

Finally, we must insist that relief programs rebuild the economy from the ground up. We can't count on business to act in the best interests of communities or workers. History tells us they will act in the interest of investors. We must create a more just and sustainable economy, and that means prioritizing the security of all, not the wealth of a few.

If we fail to recognize that we have the responsibility not only to protect each other's health but also to protect each other from the devastation of economic collapse, then Youngstown's story will yet again become America's story.

Sherry Linkon and John Russo, Kalmanovitz Initiative for Labor and the Working Poor

 

An earlier version of this piece appeared on NewGeography.

Victory: Ohio’s plan to deny workers their unemployment insurance is shelved [feedly]

Victory: Ohio's plan to deny workers their unemployment insurance is shelved
https://economicfront.wordpress.com/2020/05/18/victory-ohios-plan-to-deny-workers-their-unemployment-insurance-is-shelved/

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PK: We Should Help Workers, Not Kill Them [feedly]

We Should Help Workers, Not Kill Them
https://www.nytimes.com/2020/05/18/opinion/coronavirus-unemployment.html

text only
As far as I can tell, most epidemiologists are horrified by America's rush to reopen the economy, to abandon much of the social distancing that has helped contain Covid-19. We know what a safe reopening requires: a low level of infection, abundant testing and the ability to quickly trace and isolate the contacts of new cases. We don't have any of those things yet.

The epidemiologists could, of course, be mistaken. But at every stage of this crisis they've been right, while predictions of a quick end to the pandemic by politicians and their minions have proved utterly wrong. And if the experts are right again, premature opening could lead to hundreds of thousands of deaths — and backfire even in economic terms, as a second wave of infections forces us back into lockdown.

So where is the push to reopen coming from?

Some of it comes from right-wing crazies. Only a small minority of Americans believes that freedom includes the right to endanger other people's lives (which is what congregating in large groups in the midst of a pandemic does); that wearing a mask is un-American, or unmanly, or something; that Covid-19 is a hoax perpetrated by liberals. But that minority has huge influence within the Republican Party.

Some of it comes from Donald Trump's obsession with the stock market. His initial refusal to do anything to prepare for the pandemic reportedly reflected concern that any acknowledgment of the threat would "spook the market." And the push to reopen may similarly reflect a belief that going back to normal life would be good for the market, even if it kills many people. Let's die for the Dow!

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One thing I keep hearing, however, is that we must reopen for the sake of workers, who need to start earning wages again to put food on their families' tables. So it's important to realize that this is a really bad argument.

For America is fully capable of shielding workers idled by the lockdown from severe economic hardship. As Jerome Powell, the chairman of the Federal Reserve, said in a TV interview aired Sunday, we can and should pursue policies that "keep workers in their homes, keep them paying their bills. Keep families solvent."

And the somewhat surprising fact is that we're already doing a lot of that. The CARES Act, the $2 trillion disaster relief bill enacted in late March, greatly expanded both eligibility for unemployment benefits and the generosity of those benefits. And those expanded benefits are, despite early stumbles, increasingly doing what needs to be done.

It's true that when claims for unemployment benefits began surging in March, unemployment offices — which are run by individual states — were overwhelmed, so that many Americans who were entitled to benefits simply couldn't get through. And many families still aren't getting what they should.

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Even so, a Brookings Institution study suggests that in April unemployment benefits offset about half the wages lost because of the lockdown — an estimate that matches my own back-of-the-envelope calculations.

And this "replacement rate" has almost surely increased substantially in recent weeks. Unemployment offices are gradually catching up on their backlog, so that benefits are reaching a rising number of unemployed workers. At the same time, the available evidence suggests that labor markets more or less stabilized, at least for now, around a month ago.

So it's a good bet that at this point most though not all of the loss in wages caused by social distancing is being offset by increased government aid. That's a largely unheralded success story; most media attention has focused on other parts of the CARES Act, especially small-business support, which is a shambles.

But unemployment assistance, after a troubled start, is doing a lot to help American workers. And credit should go to Democrats, who insisted that this aid be a part of the package.

I suspect that the success of unemployment aid helps explain a key feature of the politics of reopening — namely, that the clamor to end restrictions isn't coming from workers. Job losses have been concentrated among lower-paid workers; but polling suggests that the demand for faster opening is coming largely from high-income Republicans.

So we've done a much better job than I think most people realize of protecting American workers from hardship in a time of lockdown. Of course we haven't been completely successful, and the first few weeks were very rocky. There is, however, a lot less suffering than you might expect given a true unemployment rate that's probably around 20 percent.

But the expanded unemployment benefits that are doing so much good are set to expire on July 31. That should scare you.

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Suppose, after all, that the epidemiologists are right, and that premature reopening leads to a second wave of infections. What we'll need in that case is a second lockdown. But all indications are that Republicans are totally opposed to extending benefits.

What they want, instead, is legislation that would protect businesses from liability if their employees get sick.

That is, they want to force Americans to go to work even if it kills them.

The Times is committed to publishing a diversity of letters to the editor. We'd like to hear what you think about this or any of our articles. Here are some tips. And here's our email: letters@nytimes.com.

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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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