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

Mueller et al Declared that there Was Collusion

The post entitled “Trump’s Claim Mueller Found ‘NO COLLUSION’ Is Literal Nonsense” is not up to Jon Chait’s usual standard. Trump’s claim is, of course, nonsense. Chait accurately described Trump’s typical pathetic rhetorical trick “One of President Trump’s favorite methods to defend his innocence in the Russia investigation is to claim that any piece of evidence that does not explicitly assert his guilt is in fact evidence of his innocence. ” and added some high quality snark “It is exactly like saying Trump was cleared by the Warren Commission because the Warren Commission report makes no conclusion about Trump and Russia.” However, he missread the indictment.

Chait (and many many others) concedes that the indictment didn’t declare that collusion has been detected “this particular indictment probably has nothing to do with collusion. ” In fact the indictment declared that collusion has been detected. it didn’t name all of the conspirators, but the grand jury did definitely claim to know of conspirators who were not named in the indictment.

I quote (with a pdf warning and my emphasis)

From in or around 2014 to the present, Defendants knowingly and intentionally conspired with each other (and with persons known and unknown to the Grand Jury) to defraud the United States by impairing, obstructing, and defeating the lawful functions of the government through fraud and deceit for the purpose of interfering with the U.S. political and electoral processes, including the presidential election of 2016.

The indictment explicitly states that only some of the “known” conspirators have been indicted. It doesn’t say whether any of the unindicted conspirators worked for the Trump campaign, but it definitely also doesn’t say that no crimes Trump campaign workers have been detected in the investigation into internet trolling (let alone the broader investigation).

The indictment explicitly states that there are known unindicted co-conspirators. It does not address the question of whether one is, say, named Donald Trump, even within the narrow limits of the investigation of “INTERNET RESEARCH AGENCY LLC” and its employees.

I mean which word in “conspired with … persons known … to the grand jury” didn’t he understand ?

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All Economists Are Bastards — Except Us

All Economists Are Bastards — Except Us

Peter Frase has a very interesting post up about the role of popular culture in legitimizing the police.  Frase recounted a forum he attended with Alex Vitale  talking about his book, The End of Policing. In response to a question about why people believe that the function of policing is to maintain peace in the liberal order when its actual practice and history suggest otherwise, Vitale cited television cop shows like  as “a relentless machine for producing and reproducing the legitimacy of policing in the public mind.”

This is what called to Frase’s mind the perpetual plot line he calls “‘ACAB-EU’: All Cops Are Bastards, Except Us.”:

The trope works by consistently portraying its central characters as liberal fantasies of the good cop–whether it’s the pseudo-scientists of CSI, the workaday victim-protectors of SVU, or the magical profiler-geniuses of Criminal Minds. At the same time, it makes a seeming concession to concerns about police misconduct, by constantly putting its protagonists in conflict with “bad cops” and their enablers, whether it be a rapist Corrections Officer or a corrupt small town department whose cover-up leads all the way to the Governor.

Of course this trope works for politicians too. And economists.

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Fiscal Stability or Dire Straights: John Cochrane’s Latest Rant

Fiscal Stability or Dire Straights: John Cochrane’s Latest Rant

At times John Cochrane babbles on incoherently on what should be a straight forward issue. This post is one example:

Once you net out interest costs, it is interesting how sober US fiscal policy actually has been over the years. In economic good times, we run primary surpluses. The impression that the US is always running deficits is primarily because of interest costs. Even the notorious “Reagan deficits” were primarily payments, occasioned by the huge spike in interest rates, on outstanding debt. On a tax minus expenditure basis, not much unusual was going on especially considering it was the bottom of the (then) worst recession since WWII. Only in the extreme of 1976, 1982, and 2002, in with steep recessions and in the later case war did we touch any primary deficits, and then pretty swiftly returned to surpluses.

I too advocate looking at the primary surplus. Cochrane is a finance professor so let’s make this simple. Let g = the ratio of Federal expenditures excluding interest payments to GDP and t = the ratio of Federal taxes to GDP. If we assume a steady state model, the present value of future primary surplus is simply V = (t- g)/(r – n), where r = the real interest rate and n = the long-term growth rate. As long as V is at least as great as the debt/GDP ratio, we are not on the bankruptcy path that economists were talking about when Reagan initiated his 1981 fiscal fiasco. Tax rates were massively cut and defense spending spiked and had this fiscal stance continued forever, then the debt/GDP ratio would have exploded. Of course it didn’t as there were future tax increases and the peace dividend. Cochrane takes us through the Great Recession:

Until 2008. The last 10 years really have been an anomaly in US fiscal policy. One may say that the huge recession demanded huge fiscal stimulus, or one may think $10 trillion in debt was wasted. In either case, what we just went through was huge. And in the last data point, 2017, we are sliding again into territory only seen in severe recessions. That too is unusual.

The Great Recession did demand huge fiscal stimulus – we got a tempered version of what was really needed. The last decade has taken the debt/GDP ratio to 100% but we have returned to near full employment so I do not get his 2 last sentences quoted. In 2017, g was 19.5% and t was 18.5% so maybe we should be more concerned especially since we have had another tax cut for the rich as well as a call for a larger defense budget. But then comes his update!

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Why I’m worried about the decline in real wages

Why I’m worried about the decline in real wages

This is a follow-up to my post yesterday concerning the decline in real average and aggregate wages. Why should the data from just one month cause me to warn that “This is Bad?”
To show you, let’s decompose the data into CPI and nominal aggregate wages, shown in the below two graphs, the first of which covers the inflationary era of the 1960s and 1970s, and the second covers the disinflationary era since:
In the year prior to at least 5 (arguably 6) of the last 7 recessions, BOTH nominal aggregate wage growth was decelerating (1980 and arguably 1969 being the exceptions) and consumer inflation was increasing (1980 and arguably 2007 being the exceptions). The 1981 recession was caused by the Fed very aggressively raising rates, and in the other two instances the pattern held, but with much less of a lead.

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This is bad: real wages *declined* in January; may be rolling over

This is bad: real wages *declined* in January; may be rolling over

Consumer prices rose +0.5% in January. That in itself isn’t bad news, as they rose an equal +0.5% one year ago, so the YoY inflation rate remains at +2.1% (so if 2% really is a target rather than a ceiling, it should not give the Fed any cause for alarm).
But that much vaunted wage hike in the January jobs report has entirely disappeared, and not just for non-managerial workers, but for the average of all workers including managers. In fact in January real wages declined.
And the trend is a little worrying.
To begin with, real wages declined -0.3% for ordinary workers, and they are now down -0.8% from their July peak:
On a YoY basis, real wages are only up +0.3%:

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Rumble on Wall St. — No Other Way of Keeping Profits Up!

Rumble on Wall St. — No Other Way of Keeping Profits Up!

At Jacobin, Seth Ackerman did an interview with J.W. Mason about The Class Struggle on Wall Street that considers the trade-off between relative profit and wage shares of income. Whether you agree with his analysis or not, Josh teases out some of the implications of the relationship, both for profit expectations and for political prospects.

One assertion I would question is “there is absolutely no reason to expect an uptick in inflation.” Well, yes, no one expects the Spanish Inquisition, either. While there may indeed be no reason to expect inflation, inflation’s chief weapon is surprise… surprise and fear… and ruthless efficiency,

And this is also why I think it would be impossible to empirically confirm Egmont Kakarot-Handtke’s “law” of profit. There is no “real” yardstick with which to measure aggregate profit. If Egmont is right that “[m]acroeconomic profit depends in the most elementary case alone on deficit spending, that is, on the change of private or public debt,” then he is wrong that his profit “law” can be tested empirically and “will be confirmed without exception.”

Josh Mason also talks about the “tightrope we have to walk” in thinking about the relationships between profits, wages, inflation and productivity. Not only is the rope tight, it is also tied in knots with “inflation” and “productivity” referring to ratios between incomes, costs and outputs. Egmont’s theory reminds us of yet another tightrope — the tightrope central bank authorities must walk between inflating the money supply through the expansion of credit and persuading the public that such inflation is not inflationary.

The conventional persuader is unemployment. One doesn’t have to subscribe to the NAIRU doctrine that insufficient unemployment accelerates inflation to concede that policy-induced unemployment tips the scales against wage increases and thus insulates the profit share of income from the latent inflationary consequences of credit expansion. Yes, the trick here is how to sustain compound profit inflation without accelerating priceinflation! How to debase the coin of the realm without debasing the coin of the realm. It’s a beauty contest.

There is, after all, no other way of keeping profits up!

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Baumol Cost Disease and Relative Prices – Part 2

Baumol Cost Disease and Relative Prices – Part 2

Many thanks to the Angrybear for reposting this as well as some excellent comments (save that absurd contention I’m a Luddite). If you check the comments over at Mark Perry’s place you will see that Paul Wynn made the same point I made and even linked to Timothy Lee:

This became known as Baumol’s cost disease, and Baumol realized that it had implications far beyond the arts. It implies that in a world of rapid technological progress, we should expect the cost of manufactured goods — cars, smartphones, T-shirts, bananas, and so forth — to fall, while the cost of labor-intensive services — schooling, health care, child care, haircuts, fitness coaching, legal services, and so forth — to rise. And this is exactly what the data shows. Decade after decade, health care and education have gotten more expensive while the price of clothing, cars, furniture, toys, and other manufactured goods has gone down relative to the overall inflation rate — exactly the pattern Baumol predicted a half-century ago… this has an important implication for government policy. Most of federal and state budgets are spent on services — law enforcement, education, health care, the courts, and so forth — that are subject to Baumol’s cost disease. Government spending on these categories has grown inexorably in recent decades, and many conservatives see this as a sign that there’s something badly wrong with how the government provides these services. But Baumol’s work suggests another explanation: It was simply inevitable that these services would get more expensive over time, at least relative to private sector manufactured goods like televisions and cars. The rising cost of services is an unavoidable side effect of rising affluence generally. There’s probably no way to maintain our current standard of living while cutting the cost of these services back to the levels of the 1950s.

Lee wrote this back on May 4 and included the same graph that Mark Perry presented.

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The WaPo Gang Going After The Usual Suspects On the Budget Falls On Its Face Factually

The WaPo Gang Going After The Usual Suspects On the Budget Falls On Its Face Factually

All right, all right, that is not completely fair.  Yes, they dump all over Trump and the GOP-run Congress for their massive tax cut directed at the rich, as well as the hypocrisy of the Republicans in so smoothly switching from denouncing budget deficits during the Obama era to a “what? me worry?” attitude now with deficits set to soar in a period of near full employment.  But, of course, the Monday gang at the Washington Post simply cannot avoid making a big deal about somehow “entitlements” are not being cut, although all kinds of other areas are going up, especially defense.  But they just cannot get off this schtick.

I note that Dean Baker has just posted a whole bunch of comments on the newly proposed budget, as well as the recent tax cut, including one focusing on the WaPo gang and their annoying commentaries.  However, I hope to add here some points he does not make.  I am largely in agreement with his posts, with only minor disagreements not worth bothering with here.

Curiously, the usually more annoying WaPo editorial page editor, Fred Hiatt, was less annoying than the usual WaPo Monday economics commentator, Robert J. Samuelson.  Of course, Hiatt mourned that in 2012 and 2013 Obama and Boehner could not agree on “tax hikes and entitlement cuts.”  Quite aside from this annoying terminology of “entitlements,” there simply was never any good reason for cutting Social Security, Medicare, or Medicaid, at least not directly.  As has been pointed out by many of us from well before then and up to the current time, especially Dean Baker, cuts could have been made, but the way to  do it was to get the wildly high US medical care costs under control in general, which would show up in reductions of Medicare and Medicaid spending, without any loss in quality in care, assuming things were to be managed reasonably.  But Hiatt and crew simply never recognize that. It is just how irresponsible all these politicians are or not just cut cut cutting those darned entitlements, although preferably in conjunction with that very unlikely to happen tax increase.  As noted already, while Hiatt nods at dumping on Dems for supporting some spending increases (not noting that some of them such as disaster relief are really needed), he spends most of his fire dumping on Trump and the GOPsters for their deficit hypocrisy.

However, Samuelson puts on one of his classic performances, indeed worse than usual.  Yes, he does plenty of bashing on the GOP tax cut, but he seems to justify the GOP-pushed increase in military spending (plus $80 billion, the largest increase of any item).  According to RJS, “On defense, President Obama’s budgets reduced readiness, left the services too small and made it harder to counter new technological threats, notably cyberwarfare.” Really?  The US has bases in 70 nations and special forces in at least 122.  Do we need all that, not to mention that our military spending exceeds the sum of all that going on in the next five or so nations’ spending?  I almost do not even know what more to say about this item.

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Healthcare Notes

National Health Spending at $3.5 Trillion in 2017, CMS Says:

CMS is reporting healthcare spending was $3.5 trillion in 2017. National healthcare spending grew by 4.6%, up 3 tenths of 1% from 2016. The increase was blamed on increased spending for Medicare and higher premiums for healthcare insurance. The increase in healthcare premiums can be partially attributed to Republicans blocking the Risk Corridor – Reissuances Programs which eliminated competition through withdrawal of insurance companies and bankruptcy of Coops.

Some contributing factors:

• Spending on physician, clinical care increased 5%, to $698 billion. This is a decline from 5.4% in 2016. High deductible plans have more than likely caused this reduction. Price increases for both were 2.4% and expected to increase in 2018.
• Healthcare spending as a portion of GDP is expected to grow from 17.9% to 19.7% between 2018 and 2026. Much of this will be the result of increased prices for medical supplies and services, income growth, and increased enrollment in Medicare.
• The insured portion of the population is expected to drop to 89.3% from 91.1%.
• Private healthcare insurance spending is expected to have grown at 4.7% in 2017 due to higher deductible plans, employer management of their plans, and an aging baby boomer population.
• Hospital Care is expected to grow at 5.5% annually over the decade. It is expected to be at $1.1 trillion in 2017 or a 4.6% increase over 2016 and similar in growth. Private healthcare insurance payments to hospitals is expected to slow by almost 1%.
• Pharmaceutical spending is expected to increase at a rate of 6.6% annually from 2017 to 2026. “Growth in pharmaceuticals is expected to take a bit of a jump soon, from an estimated 2.9% increase in 2017 to a 6.6% increase in 2018.”

Report: Use, Not Price, Drives State Health Costs

“In healthcare, costs of individual services and products make less of a difference in state-level spending than the overall use of those products and services, a new report indicated.” A report of rising costs at the state level being attributed to use as opposed to the rising cost of healthcare products/pharma, hospital/clinal care, and a service for fees cost model impact cost. As I wrote in answer to this perspective:

“If this is leading to people being the cause of higher costs, this is certainly the first time it is being raised in such a manner. One of the much-maligned factors in the ACA was having, as Congress called it, “skin-in-the game” which spells out in the form of higher copays, deductibles, and no discount to charge master and other pricing till the deductible is paid. It is a drag on usage by those with lower income and not qualifying for Medicaid.

Speaking of which (Medicaid) was expanded in 33 states with 18 states abstaining. Dependent upon what time period this study covers, the increased usage and state costs could be the result of such. Maryland is in a unique situation in that it uses an all payer system to control costs. I do not believe the other states intrude upon healthcare costs the same as there.

So what is the direction of this study, lower usage to control cost? It is already being done with the deductibles, copays, and payment schemes. Limit healthcare to those who can pay? If the current administration has its way, the Medicaid experiment will end. I need to see more of the detail. The article cites 3 years of data which would mean from 2014. Are we going to base rising costs upon the implementation of Medicaid and not look at time periods before 2010?

Healthcare costs are still rising at a faster rate than inflation with only the cost of getting an education beating it out from time to time. Pharma is able to raise pricing whenever they choose with little interference other than the media. Services for fees business model still exists. Hospitals and clinics are in a mad dash to consolidate to bargain better. Non-profit hospitals disappeared a long time ago.

Caring for Ms. L. — Overcoming My Fear of Treating Opioid Use Disorder

New England Journal of Medicine had an article on the human side treatment of opioid addiction by a PCP. This story does not end well for the patient. Feeling normal again is what many work towards and never quite get there. Intermingled are the political interests protecting the commercial interests who spend inordinate amounts of money to influence decisions. Pharmaceutical companies have spent $880 million in lobbying all 50 state legislatures and in state campaign contributions to influence politicians to prevent laws restricting Opioid prescriptions. Their spending has outstripped those advocating for greater controls on prescriptions by 200 times giving them greater influence at the state level.

“Ms. L. always showed up 10 minutes early for her appointments, even though I always ran late. Her granddaughter would rest her cheek against Ms. L.’s chest, squishing one eye shut, and scroll through Ms. L.’s phone while they waited. After reviewing her blood sugars, which Ms. L. recorded assiduously in a dog-eared blue diary, we’d talk about smoking cessation. That was a work in progress. ‘There’s just nothing like a cigarette,’ she’d sigh. “Don’t you ever start,” she’d admonish her granddaughter, kissing the top of her head.

One day, I knew something was wrong the moment I opened the door. Ms. L. was alone. Sweat dotted her lip and forehead. She closed her eyes and looked away, and tears fell onto her lap. ‘I need help,’ she whispered, and it all came out: she had taken a few of the oxycodone pills prescribed for her husband after a leg injury, then a few more from a friend. And like a swimmer pulled into the undertow, she was dragged back into the cold, dark brine of addiction. I tried to hide my shock. I’d known she was in recovery from opioid use disorder (OUD), but it had simply never come up. She hadn’t used in decades.

‘No one can know that I relapsed,’ she said. ‘If my kids find out, they won’t let me see my granddaughter.’ She wanted to try buprenorphine and was frustrated to hear that I could not prescribe it. ‘Why not?’ Annoyed, she rocked in her chair. ‘I just want to feel normal again, and I know you. I don’t want to tell anyone else.’”

Just a few short notes on what I have been reading as of late. If you have some time, please click on the links and read the articles. They are not lengthy. More to come as I finish up.

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