Relevant and even prescient commentary on news, politics and the economy.

Fifty Shades of Yellow? Post-Truth Then and Now

by Peter Dorman (originally published at Econospeak)

Fifty Shades of Yellow? Post-Truth Then and Now

Simon Wren-Lewis can’t take it anymore. I’ve just read his fulminations on the blatant dishonesty of right wing media outlets in the US and the UK, untethered to any residual professional attachment to standards of evidence and nakedly in the service of political ideologues. He’ll get no argument from me about that.

But I think his distinction between post-truth outlets and the other kind (pre-truth?) is much too clean. We won’t understand the new frontier of news/fiction unless we see what connects it to the rest of the media world.

A first hint appears in his discussion of the difference between UK and German media on the issue of immigration. The nativist tabloids in the UK bombarded its readership with several stories per day that dehumanized immigrants and presented them as threats to jobs, services and civil order, while their counterparts in Germany (e.g. Bild) had heartwarming portrayals of immigrants overcoming great odds to save themselves and their families. This is true; I saw it myself when I was in Germany during the runup to Merkel’s adoption of a Welcome Culture policy.

But this was also the period during which Greece, led by Syriza, faced off against Schäuble and his EU Wall of Nein. Here the ruling interests in Germany showed their other side, and the popular press was filled with made-up atrocities about the lazy, dishonest crew in Greece whose main purpose in life was to fleece the German taxpayer. (I posted here at the time about the false news, widely reported in Germany, that Syriza, financed by EU funds, had made rail travel free as a ploy to buy votes.) Obviously the probity of German journalism was selective.

And similar post-truth spasms have characterized media outlets in the English-speaking world ever since the advent of the printing press. These were in the service of fomenting war fever (the Spanish-American War, World War I, Vietnam, and Iraq, to mention examples from US history), demonizing labor organizers and civil rights activists or whatever cause needed a bit of extra buttressing.

If there is anything new, I think it might be on one of these fronts: (1) The doctrine that deceit and manipulation are virtuous in the service of the Cause, an element of fascism and Leninism alike, has now found a home in somewhat more mainstream ideologies on the right. A self-conscious defense of making stuff up increases its effectiveness, because embarrassment at being caught out is no longer a risk. (2) Post-truth is being deployed, to some extent, against the interests of the capitalist class, particularly as it attacks globalization. It is “out of control”, the figurative loose cannon on the deck of the battleship, rolling around and capable of firing in any direction. It needs to be domesticated again.

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What’s behind stalled nonsupervisory wage growth?

by New Deal democrat

What’s behind stalled nonsupervisory wage growth?

Wage growth for nonsupervisory workers nominally has been stuck in the +2.3% to +2.5% range (or worse) for three years.  Why?

Over the weekend I was cleaning out some old graphs, and came across this one from the Atlanta Fed, suggesting that the Phillips Curve (the tradeoff between unemployment and inflation) is very much alive, with the tweak that the amount of wage growth follows a decline in the unemployment rate with a one year lag:

The red line is the progression of the Phillips Curve since the beginning of 2011. The dotted line indicates that the Altanta Fed’s model was calling for a significant acceleration of wage growth between the spring of 2016 and spring this year.  [NOTE: all of the discussion in this post is about nominal, not inflation-adjusted wage growth, which has an awful lot to do with the volatility of gas prices.]

Except when we look at wages for nonsupervisory workers, that really hasn’t happened, at least not through February.  The below graph compares the YoY change in the unemployment rate (blue) and YoY wage growth for nonsupervisory workers (red):

As noted above, wage growth has been stuck at between 2.3% YoY and 2.5% YoY with some (mainly negative) exceptions since the end of 2013.

Using the U6 underemployment rate to capture the broader picture doesn’t change the outcome:


So, what’s going on?

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Competition from China reduced Innovation in the US

Via Tyler Cowen, here is a piece by David Autor, David Dorn, Gordon Hanson, Gary P. Pisano and Pian Shu.

Cowen quoted the most important part, so let me follow his lead:

The central finding of our regression analysis is that firms whose industries were exposed to a greater surge of Chinese import competition from 1991 to 2007 experienced a significant decline in their patent output. A one standard deviation larger increase in import penetration decreased a firm’s patent output by 15 percentage points. Using data from the 1975 to 1991 period and a regression setup that accounts for the diverging secular innovation trends in computers and chemical, we confirm that firms in China-exposed industries did not already have a weaker patent growth prior to the arrival of the competing imports.

…The innovation activity of US firms did not merely shift from the US to other countries. We estimate similar negative effects of import competition on patents by US firms’ domestic employees and by their foreign employees. Instead, our results are most consistent with the notion that the rapid and large increase in competition squeezed firms’ profitability and forced them to downsize along many margins, including innovation. Consistent with that interpretation, we find that the adverse impact of import competition on patent output was concentrated in firms that were already initially more indebted and less profitable.

Here’s what I think is happening. Chinese imports typically enter a market from the bottom, with a low price and a reputation for low quality. After a few years, the quality begins to improve, though it takes somewhat longer for the reputation to follow.

From the perspective of incumbent players, the Chinese don’t play at the top of the market where the high margin flagships are, but they take up a lot of market share in the lower end products. But, though broadline products have slim profit margins, they keep the plants operating at capacity, and that’s what covers capital costs.

So… the existential threat to the incumbents comes from having higher costs than the new competitor. The natural reaction then, is to cut costs. Fire people, idle plants and reduce expenses like marketing and R&D.

Despite Schumpeterian theory, many of the most innovative (large) companies in post-WW2 America were monopolies or awfully close to it. Think Bell Labs, Xerox Parc or Skunk Works (i.e., Lockheed’s Advanced Development Projects) for classic examples from back in the day. Ma Bell could afford the time and money needed to do world-class research.  Today’s phone companies cannot. Smaller companies have other dynamics, and often they are the source of innovation in many industries.  Smaller innovators whose technology proves successful end up being bought (and sometimes ruined) by the more established players.

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Repeal of the PPACA Vote On Hold

House leaders postponed a vote Thursday on their plan to overhaul the nation’s health-care system, casting doubt on whether President Trump and House Speaker Paul D. Ryan (R-Wis.) can deliver on one of the GOP’s central promises to the voters who placed Republicans in power.
Lawmakers and White House officials continued to express confidence that the revisions to the Affordable Care Act would pass by week’s end, and talks resumed soon after leaders announced the postponement. As evening came, members of the conservative House Freedom Caucus filed into the office of Speaker Paul D. Ryan (R-Wis.), as did White House Chief of Staff Reince Priebus and Trump’s chief strategist, Steve Bannon.”

It would be nice to snatch their healthcare at the same time or make sure some of those old folk get to pay for premiums at a 5:1 ratio. New CBO scoring after changes to the bill shows only $150 billion saved. Also the changes to the bill do nothing to prevent 14 million from being uninsured in the next year.

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What Percentage of Americans are Attorneys?

Here’s a graph showing the number of attorneys as a share of the US population:

attorneys as a pct of US pop 20170322a

The increase seems pretty inexorable starting around 1970, doesn’t it?

For grins and giggles, here’s snide graph on which I will make no comment:

attorneys as a pct of US pop v Growth in Real GDP per capita 20170322a

If you’re wondering where the lawyers live, a quick google search turned up this post which shows attorneys by state. Needless to say, the share of attorneys as a percentage of the population is greater in the District of Columbia than any of the states, by far.

Data for (“resident active”) attorneys used in these graphs comes are from the American Bar Association. The ABA’s website seems insistent that anyone referencing their data should state it is “Reprinted by permission of the American Bar Association. All rights reserved.” I am afraid to argue with them.

Data and estimates for the US population originates with the Census, but I’m using the set cleaned up by the Texas State Library and Archives Commission since its in an easy to use format. Real GDP per capita comes from NIPA Table 7.1.

If you want my spreadsheet, drop me a line at my first name (mike) dot my last name (that’s kimel with one m) at gmail with a dot com.

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Housing, production, and JOLTS all good news

by New Deal democrat

Housing, production, and JOLTS all good news

We’ve had a good run of economic news this week.

First, in the leading housing sector, both of the most important datapoints made new highs.  Single family permits, which are just as leading as permits overall, but much less volatile, made yet another post-recession high.  Further, the three month rolling average of housing starts, which are more volatile and a little less leading, but represent actual economic activity, also made a new post-recession high:


The headline number for industrial production for February was flat, but once again that was due to the seasonally-adjusted big

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It Takes “Alternative Math” to Claim That Redistribution Is Futile

Via Economists View (some of the comments are worth review as Deirdre McCloskey comments).  Also see below Peter Dorman’s   Review of Economism: Bad Economics and the Rise of Inequality by James Kwak at Econospeak.

Adam M. Finkel at RegBlog:

It Takes “Alternative Math” to Claim That Redistribution Is Futile: The unequal distribution of costs and benefits across society is one of the hottest topics in the regulatory arena—and one that, regretfully, has sparked fundamentally flawed arguments, threatening to distort and obscure much-needed discussion about redistributive policies. …

Although all policies have redistributive effects, some ideologies are viscerally, even militantly, opposed to government interventions that benefit the poor, whether by intention or even as a side effect of an otherwise sound policy. …

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The Battle for Healthcare in the US

In 2026, an estimated 52 million would be uninsured in the US, a dramatic reversal from the 2016 uninsured count of 28/29 million. Pretty much, the Republicans will put healthcare back to the way it was pre-2014 if Paul Ryan’s bill is passed by Congress and Donald signs the bill in its present form.

- By 2018, 14 million could be uninsured with many of the uninsured practicing the tyranny of a minority, as John S. Mill might call it, upon the rest of the insured population as they drop out. Others will simply lose healthcare insurance as states withdraw from the Medicaid expansion and employers drop the coverage they were required to carry as they had 50 or more employees. Many of today’s insured will be unable to afford the increased premiums due to smaller subsidies. The elderly will be faced with smaller subsidies and a higher 5:1 ratio premium, which is up from the present 3:1 under the ACA program.

- Doctors, clinics, and hospitals have seen increased numbers of patients coming through the front door rather than the rear door due to the expansion of Medicaid to 138% FPL and subsidies for healthcare insurance to those under 400% FPL. My own PCP has seen many new patients who have never been to a doctor before except at the ER. With the proposed reversal of the mandate to have healthcare insurance and the dropping of Medicaid, it will fall upon hospitals and doctors to still provide stabilizing care as defined by law to all who arrive at their door. Except this time, the subsidizing payments for care for the uninsured to hospitals and clinics will not be available as it was reduced with the advent of the PPACA. It appears the AHA is not too pleased with Paul Ryan’s AHCA bill either.

- Our new Health and Human Services Secretary Tom Price had this to say; “You’re falling into the same old trap of individuals who are measuring the success of Medicaid by how much money we put into it. We ought not be measuring programs by how much money we put into it, we ought to be measuring them by whether or not they work.” Or take one aspirin and you will be alright in the morning. Interestingly, Republicans are happy with constituents paying a surcharge/mandate for not having healthcare insurance or healthcare. And if they suddenly have to have healthcare insurance, they pay the penalty to private companies rather than use it to fund subsidies. Who would have thought?

- Medicaid currently is not working according to Tom Price and as many as one in three doctors are not accepting Medicaid patients. That part is partially true. In a survey of its membership, the American Academy of Family Physicians discovered 68% of its members accepting new Medicaid patients in 2016. This is the highest level of Medicaid acceptance since 2004. The same argument was made for Medicare in the past. As Health Beat’s Maggie Mahar has said, “if Medicare is the largest business in town, are you going to ignore it or work within its confines?”

- Mr. Price argues on behalf of states claiming the granting of greater flexibility would result in better results and quality. My own observations with Michigan Medicaid when there was no Federal Government expansion disagrees with Tom Price’s claims. Michigan State Senator Joseph Hune said it all in one sentence when he stated; “I am ‘sick to his stomach with the expansion of Medicaid in Michigan.” Even with the expansion, the state legislature delayed the implementation of it to the following year so they could go on Christmas vacation and lost $thousands in Federal aid. This occurred in a state which can not fix its roads and bridges, argues about replacing Flint lead pipes, and wastes money going to 6th District COA and SCOTUS because it does not like rulings conflicting with its absurd beliefs. After all, Hune and his associates have their healthcare for life having been in the legislature for short periods of time; why should 600,000 Michigan residents matter to Hune and his associates.

Pre-Michigan expansion in order for adults to be insured and they had to be working. If they were working they had to be making just so much in order to be eligible. If they were not working, they were ineligible. Michigan and State Senator Joe Hune did their damnest to block people from access to healthcare. If this is Tom Price’s better results and quality, it did not work then and will only make it worse now.

- Joan Aker at Georgetown University Healthcare Policy Institute puts greater state flexibility into perspective:

“So in practical terms what does that mean? States could get new flexibility to limit enrollment. They could gain the ability to limit enrollment directly by imposing enrollment caps or rolling back eligibility; or indirectly by putting up barriers such as imposing work requirements or lockout periods, which reduce enrollment. States could also gain more flexibility in determining what benefits people receive (in the case of children this might mean limits on the child-centered EPSDT benefit) or on how much families have to pay for those services (including premiums, cost-sharing or spend down rules before seniors qualify for long term services and supports). In fact, one piece of this so-called “flexibility” that is included in the repeal bill would allow states to require seniors to spend down even more of their assets before qualifying for long-term care services and supports by placing restrictions on how much equity seniors can have in their homes.” We did this in Michigan already and pre-PPACA.

- The AHCA penalizes the poor and elderly more severely than the ACA did. The ACA has a penalty for not getting healthcare insurance, which is based on the income of the uninsured and is paid yearly at tax time. The AHCA also has a penalty for not getting healthcare insurance. It is based upon the premium you would pay, not income, and each person pays the same penalty regardless on income; however if you are older, the 5:1 ratio will apply to your penalty. As I showed using a Avalere* chart, a 27 year old person making $11,880 annually would be paying $695 at tax time under the ACA and under the AHCA plan $1,006 for a bronze plan.

If the insured was 50 years old and made $11,880 annually, the penalty under the ACA is determined by income and remains the same; however under the AHCA, the penalty under a Bronze plan format jumps to $1,713. This is an ~ $700 difference between a 27 year old and a 50 year old. If it is a Silver plan add ~100 dollars for a 27 year old and ~ $250 for a 50 year old. Whether 27 or 50 and making $11,880 annually; the payment is harsh and is harder to pay the larger it gets.

As I get more information I will pass it on. There is much going on at a rapid pace and it takes a bit to gather it up.

*After leaving the White House Office of Management and Budget in 2000, Dan Mendelson founded what is today Avalere firm and initially named it The Health Strategies Consultancy LLC.

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