Open thread June 9, 2020 Dan Crawford | June 9, 2020 9:33 am Tags: open thread Comments (20) | Digg Facebook Twitter |
June 8, 2020
The Enemy is Government-Granted Patent Monopolies, not the Market
By Dean Baker
Leigh Phillips had a very useful piece * in Jacobin on how patent protections are impeding progress in developing and distributing vaccines or treatments for the Coronavirus. The piece points out how the United States has engaged in a pointless competition with the rest of the world, which has involved trying to procure control over a potential vaccine. It also points out how pharmaceutical companies are planning to charge exorbitant prices that are likely to limit access, especially in developing countries.
All of this is very true and important for the public to know, but where the piece goes badly off the mark is in the punchline in its subhead: “But the real architect of these crimes is not CEOs or shareholders, but the market.”
The reason this is so far off the mark is that the clear villain in this piece is government-granted patent monopolies, which exist as a result of the government, not the market. If we envision a world where these government-granted monopolies did not exist, all of the problems (and more) that Phillips mentions would not exist. Without patent monopolies, and related government protections, drugs would be cheap. They are almost invariably cheap to manufacture and distribute.
This means that the problems Phillips points to would disappear in the absence of patent monopolies. It would be absurd to fight over a race to develop a vaccine, since as soon as a vaccine was developed, any manufacturer in the world would be equally able to produce it, regardless of where it originated. And a vaccine, or any drugs that are useful treatments, would be available as cheap generics. That could still raise issues of affordability in the poorest countries, but that is a problem of poverty, not the high cost of drugs.
Patent monopolies actually are causing even worse problems than Phillips indicates. For example, he notes that Gilead is likely to charge very high prices for its drug remdesivir, the first drug that shows clear evidence of being an effective treatment for the coronavirus. It turns out that Gilead has developed another drug, GS-441524, that holds equal or better promise as a treatment for the coronavirus, and is easier to manufacture. The reason that Gilead is pursuing tests with remdesivir, and not GS-441524, is that the patent is much newer for remdesivir, and therefore it can expect many more years of a patent monopoly for this drug.
Another problem with patent monopoly supported research is the incentive to lie about results. We may have seen this with the limited test results reported by Moderna, which were the basis for its jumping ahead with the clinical testing of its vaccine. These reports were sufficient to send its stock price soaring, leading to big payouts for top executives, even if they may not provide much evidence of the vaccine’s effectiveness.
Patent monopolies often lead companies to lie about the safety and effectiveness of their drugs. Merck was forced to pay billions over allegations that it withheld evidence that its blockbuster arthritis drug, Vioxx, increased the risk of strokes and heart attacks. More recently, opioid manufacturers are paying out billions to settle suits claiming they lied about the addictiveness of the new generation of opioids they were pushing. The incentive for such harmful lies largely disappears when drugs are selling in a free market without patent protection.
The possibility for misinformation is also hugely reduced when all research is open-sourced, which is another very big part of the picture with responding to the pandemic. Since we are confronting a worldwide problem, ideally we would have all results posted to the web as quickly as possible so that researchers everywhere could benefit from successes and learn from failures. This is happening to some extent, but the continuing pursuit of patent monopolies, especially in the United States, is slowing progress.
The really perverse part of the story with the development of coronavirus treatments and vaccines is that the government is already picking up most of the tab for the research. Patent monopolies are supposed to be a mechanism for providing companies with incentives to do research, but if the government pays for the research upfront, they just obstruct progress and lead to high prices for whatever may be developed. As a condition of funding, the government should be requiring all results be posted as soon as practical (the Bermuda Principles for the Human Genome Project is a good model), with everything in the public domain, so that it can be produced as a generic from day one.
Companies can still make a profit from their research, and manufacturers can still profit from selling drugs, but their profits would be more like the profits made by manufacturers of plastic cups and paper plates. Drugs would be cheap.
Medical equipment is a similar story to prescription drugs. MRIs, kidney dialysis machines, and other types of medical equipment are expensive because we give companies patent monopolies. Without these government-granted monopolies, these items would be a small fraction of their current price. To take one example that has been in the news, a ventilator typically sells for $25,000 to $30,000. A group of researchers developed an open-sourced model that they calculated could be made for $400 to $500. In nearly all cases, if medical equipment was sold in a free market without patent monopolies, it would cost just a small fraction of the current price.
This is not just a question of making health care affordable. There is a huge amount of money at stake. We will spend over $500 billion this year on prescription drugs, more than $3,000 per household. In the absence of patent monopolies and related protections, we would almost certainly pay less than $100 billion. Patent protections also add more than $100 billion to annual spending on medical equipment. By my calculations, patent and copyright protections cost us more than $1 trillion annually, an amount that is more than half of all after-tax corporate profits.
And, this money is very unevenly distributed. If were not for the patent and copyright protections on Microsoft’s software, Bill Gates would probably still be working for a living. More than a quarter of the Forbes 400 richest people owe their wealth in large part to patent and copyright monopolies.
We would have a far more equal distribution of income and wealth without these government granted monopolies. And, we would still very much have a market-oriented capitalist economy if Bill Gates could not get a copyright on Windows. The issue here is how we have chosen to structure the market, not the market itself.
This point arises in other contexts also. There are many huge fortunes in the financial sector which would not have been made if we had a modest financial transactions tax in place. And, a financial market with a financial transactions tax is still very much a capitalist market, just as a shoe market doesn’t cease to be a capitalist market if we have a sales tax on shoes.
To take another example, if we didn’t exempt Internet intermediaries from the same liability for libel that traditional media companies face, as provided for by Section 230 of the Communications Decency Act, Facebook would be a far smaller company. None of us would then have ever heard of Mark Zuckerberg or give a damn what he thinks about anything. And, we would still have a media market and be every bit as much a capitalist economy.
There are many other examples I could give, including rules on international trade and labor laws (see Rigged), but the point should be clear. The market is infinitely malleable. For the last four decades, the right has been actively working to restructure the market in ways that redistribute income upward. We can structure the market differently so that it leads to more equality and everyone shares in the benefits of growth.
We have to recognize the market as a tool that can be used towards different ends. Lashing out at the market because we don’t like current outcomes would be like lashing out at the wheel because we had a friend run over by a car. For better or worse, we are likely to have the market for a long time into the future. The left needs to figure out how to make it work to achieve ends we want. The right succeeded at this task long ago.
 Drug companies benefit from other forms of government protection, such as data exclusivity, which prevent generic manufacturers from relying on a brand producer’s data to show that a chemically equivalent drug is safe and effective.
 Military contracting in the United States provides a useful model here. The military does get good weapons, even if we may not like what it does with them. Contractors make profits off their payments from the government. They may get patents, but these are really secondary. There is fraud and abuse in the system, but part of this is due to the secrecy in the process. Unlike the development of weapons systems, there is no justification for secrecy in biomedical research. This is discussed in Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer ** (it’s free).
June 9, 2020
Locking down too late but ending lockdown too early
The major reason we have one of the highest death rates as a result of the coronavirus pandemic is that Johnson/Cummings had an intense aversion to imposing a lockdown, and an unusual disregard for human life. Any decent politician, after being told at the end of February that 500,000 of their citizens might die, would have moved heaven and earth to stop that happening. Anyone watching the recent Despatches documentary would have heard about scientists worrying about how to stop the pandemic, with little pressure from politicians to do so. It may have been an ultimatum from French president Macron that finally forced Johnson/Cummings to enact a full lockdown on March 23rd.
Unfortunately the same factors that delayed a lockdown have led Johnson/Cummings to relax the lockdown too early, when the number of infections was still pretty high. This is partly because in the circles that Johnson/Cummings move, the recession that the pandemic has created is associated with the lockdown rather than the pandemic. Free the economy by ending the lockdown, they cry. Some practice what they preach, in the sense that they ignore the lockdown rules. One of these people was Cummings himself, which is the second reason why the UK lockdown is being relaxed too quickly.
This is a tragic error, not just because it will lead to yet more deaths but also because it will delay any economic recovery. As I explained in a Guardian article, any recovery will be severely limited if new infections per day remain high. While we often focus on the irresponsible minority, the majority of people are cautious, and do not want to risk catching the virus. They are going to stay away from shops as much as possible, and will certainly not go back to pubs and restaurants, or public transport if they are able to avoid it.
The idea that there is a trade-off between protecting the economy and protecting people’s health is not only wrong, it is also dangerous. It encourages politicians to relax the lockdown too early, which risks reducing the speed at which the number of new infections fall, or even stabilising infection rates at too high a level. Below is data for the number of COVID-19 admissions to hospital, that is shown in the government’s daily briefing.
[ https://1.bp.blogspot.com/-RhaMMyh5UC8/Xt9CSHah5yI/AAAAAAAADVk/JQ8LrKPso_MV2q0pA_A0znWrJVRI3qFhwCLcBGAsYHQ/s640/Admissions.JPG ]
It is probably the best indirect measure we have for the path of new infections over time, with a lag of 2-3 weeks. (The problem with data on the number of people tested is that it depends on how easy it is to get tested, which has varied greatly over time.) This seems reasonably consistent with the Cambridge/PHE Joint Modelling Team’s estimates that currently there are around 17,000 new infections every day.
The worrying aspect of this data is that it seems to be levelling off, which is another way of saying that R is getting close to 1. This also accords with Cambridge/PHE Joint Modelling Team’s estimates of regional R values. They note “There is some evidence that Rt has risen in all regions and we believe that this is probably due to increasing mobility and mixing between households and in public and workplace settings”.
All this is important not because we might see ‘a second peak’. It is important because it means that the number of new infections is declining very slowly, which in turn means that most people will not return to previous patterns of ‘social consumption’. That in turn means that there cannot be a complete recovery. We do not know at what level of daily infections people will be happy to resume social consumption, but it is bound to be well below 17,000. The difference between R=0.8 and R=0.9 in getting to that much lower number of infections is measured in months, as is the difference between R=0.9 and R=0.95. We are relaxing lockdown at much higher levels for daily new infections compared to Italy, France and Germany.
Relaxing the lockdown might (I stress might) be justified if there was a tried and tested alternative mechanism to suppress R. That mechanism does exist: a well functioning and comprehensive track, trace and isolate (TTI) infrastructure. Yet the government still attempts to gaslight journalists with a launch of the new Serco led, “world beating” TTI regime at the beginning of June, that we now learn will not be fully operational until September or October. Quite how Serco sold that to ministers/Cummings we can only guess. Scaling up existing local authority teams would have been both quicker and more effective, but is contrary to this government’s ideology and the interests of those who fund it.
It seems clear that many/most of the scientists advising the government also think lockdown is ending too quickly. The alert level remains at 4, despite Johnson/Cummings’ wishes. As Rafael Behr put it, “Johnson’s relationship with science has gone the way of most of his relationships.” Yet this divergence does not seem to worry him and those around him at all, which is a bit odd for a government that kept claiming they were following the science.
I should resist the temptation to suggest that all this is obvious. When I modeled the economic impact of a pandemic I was surprised at how much of aggregate consumption was social. It isn’t just pubs, restaurants and tourism, but large parts of recreation, culture and transport. These sectors make up over a third of consumption. Even the demand for clothing may decline if there are no parties to go to. The pandemic creates a huge demand shock even without any lockdown measures like school closures.
That is why many better-off households have been saving much more during the pandemic. The certain way to get a recovery is to release those savings, by creating the conditions for social consumption to resume. That in turn means getting daily infections down substantially by not relaxing the lockdown too soon. As the Faculty of Public Health writes “Like everyone else we are longing for restrictions on our lives to be lifted. But evidence from around the globe shows that the way to achieve this is not to merely suppress covid-19, but to systematically reduce its incidence.”
In other words there is no trade-off between public health and the economy: better public health (less COVID-19 infections) is the sure way to a substantial recovery. The idea that we have to lift the lockdown for the sake of the economy is the new austerity. With austerity it was about how we had to get the deficit down, in order to have a sound economy. Now it is that we have to end the lockdown, in order to free the economy. In both cases it was the opposite of the truth. In both cases lives were unnecessarily lost. In both cases the recovery was blunted.
Could we get a similar recovery by some other means, such as a large fiscal stimulus? The short answer is no. Because social consumption is such a large proportion of the total, you would need a ridiculously large increase in spending in other sectors even to come close to substituting for that loss. The only reason why you would contemplate not doing the first best option, getting infections down, is because your ideology is screwing your common sense. Which is a pretty good description of how this government has dealt with this pandemic so far.
— Simon Wren-Lewis
Maggie Haberman @maggieNYT
Still rubbing eyes at this tweet. The guy was bleeding from his ears and was hospitalized. That was…faked?
Donald J. Trump @realDonaldTrump
Buffalo protester shoved by Police could be an ANTIFA provocateur. 75 year old Martin Gugino was pushed away after appearing to scan police communications in order to black out the equipment. @OANN I watched, he fell harder than was pushed. Was aiming scanner. Could be a set up?
9:15 AM · Jun 9, 2020
The guy lives in a fantasy word where everyone is the enemy and after him. A man slightly older than he, dressed in plain civilian clothes, sans any protect gear, and as tall as a tree is a terrorist. How does that tune to the Twilight Zone go? https://www.youtube.com/watch?v=-b5aW08ivHU “You are traveling to another dimension . . .
June 9, 2020
Learn to Love Trillion-Dollar Deficits
Our country’s myth about federal debt, explained.
By Stephanie Kelton
Last week, a bipartisan group of 60 members of the U.S. House of Representatives sent a letter to congressional leadership, raising concerns about mounting debt and deficits that have come as a result of the federal government’s response to the coronavirus pandemic. “We cannot ignore the pressing issue of the national debt,” they wrote. The letter warned of “irreparable damage to our country” if nothing is done to stem the tide of red ink. Senator Mike Enzi, Republican of Wyoming, chairman of the Senate Budget Committee, echoed their concerns.
It’s an ominous sign for the smaller businesses and millions of unemployed Americans whose survival may very well depend on continued government support in this crisis. While these Democratic and Republican lawmakers stopped short of calling for immediate austerity measures, their remarks demonstrate that they have fallen prey to what I call the deficit myth: that our nation’s debt and deficits are on an unsustainable path and that we need to develop a plan to fix the problem.
As a proponent of what’s called Modern Monetary Theory and as a former chief economist for the Democrats on the Senate Budget Committee, intimately familiar with how public finance actually works, I am not worried about the recent multitrillion-dollar surge in spending.
But there was a time when it would have rattled me too.
I understand the deficit myth because in the early part of my career in economics I, too, bought into the conventional way of thinking. I was taught that the federal government should manage its finances in ways that resemble good old-fashioned household budgeting, that it should hold spending in line with revenues and avoid adding debt whenever possible.
Prime Minister Margaret Thatcher of Britain — President Ronald Reagan’s partner in the conservative revolution of the late 20th century — captured these sentiments in a seminal speech in 1983, declaring that “the state has no source of money other than the money people earn themselves. If the state wishes to spend more, it can only do so by borrowing your savings or by taxing you more.”
That thinking sounds reasonable to people, including me when I first absorbed it. But Mrs. Thatcher’s articulation of the deficit myth concealed a crucial reality: the monetary power of a currency-issuing government. Governments in nations that maintain control of their own currencies — like Japan, Britain and the United States, and unlike Greece, Spain and Italy — can increase spending without needing to raise taxes or borrow currency from other countries or investors. That doesn’t mean they can spend without limit, but it does mean they don’t need to worry about “finding the money,” as many politicians state, when they wish to spend more. Politics aside, the only economic constraints currency-issuing states face is inflation and the availability of labor and other material resources in the real economy.
It is true that in a bygone era, the U.S. government didn’t have full control of its currency. That’s because the U.S. dollar was convertible into gold, which forced the federal government to constrain its spending to protect the stock of its gold reserves. But President Richard Nixon famously ended the gold standard in August 1971, freeing the government to take full advantage of its currency-issuing powers. And yet, roughly a half-century later, top political leaders in the United States still talk as Ms. Thatcher did and legislate as though we, the taxpayers, are the ultimate source of the government’s money.
In 1997, during my early training as a professional economist, someone shared a little book titled “Soft Currency Economics” with me. Its author, Warren Mosler, a successful Wall Street investor, argued that when it came to money, debt and taxes, our politicians (and most economists) were getting almost everything wrong. I read it and wasn’t convinced. One of Mr. Mosler’s claims was that the money the government collects isn’t directly used to pay its bills. I had studied economics with world-renowned economists at Cambridge University, and none of my professors had ever said anything like that.
In 1998, I visited Mr. Mosler at his home in West Palm Beach, Fla., where I spent hours listening to him explain his thinking. He began by referring to the U.S. dollar as “a simple public monopoly.” Since the U.S. government is the sole issuer of the currency, he said, it was silly to think of Uncle Sam as needing to get dollars from the rest of us.
My head spun. Then he told me a story: Mr. Mosler had a beautiful beachfront property and all the luxuries of life anyone could hope to enjoy. He also had a family that included two teenagers, who resisted doing household chores. Mr. Mosler wanted the yard mowed, the beds made, the dishes done, the cars washed and so on. To encourage them to help out, he promised to compensate them by paying for their labor with his business cards. Nothing much got done.
“Why would we work for your business cards? They’re not worth anything!” they told him. So Mr. Mosler changed tactics. Instead of offering to compensate them for volunteering to pitch in around the house, he demanded a payment of 30 of his business cards, each month, with some chores worth more than others. Failure to pay would result in a loss of privileges: no more TV, use of the swimming pool or shopping trips to the mall.
Mr. Mosler had essentially imposed a tax that could be paid only with his own monogrammed paper. And he was prepared to enforce it. Now the cards were worth something. Before long, the kids were scurrying around, tidying up their bedrooms, the kitchen and the yard — working to maintain the lifestyle they wanted.
This, broadly speaking, is how our monetary system works. It is true that the dollars in your pocket are, in a physical sense, just pieces of paper. It’s the state’s ability to make and enforce its tax laws that sustains a demand for them, which in turn makes those dollars valuable. It’s also how the British Empire and others before it were able to effectively rule: conquer, erase the legitimacy of a given people’s original currency, impose British currency on the colonized, then watch how the entire local economy begins to revolve around British currency, interests and power. Taxes exist for many reasons, but they exist mainly to give value to a state’s otherwise worthless tokens.
Coming to terms with this was jarring — a Copernican moment. By the time I developed this subject into my first published, peer-reviewed academic paper, I realized that my prior understanding of government finance had been wrong.
In 2020, Congress has been showing us — in practice if not in its rhetoric — exactly how M.M.T. works: It committed trillions of dollars this spring that in the conventional economic sense it did not “have.” It didn’t raise taxes or borrow from China to come up with dollars to support our ailing economy. Instead, lawmakers simply voted to pass spending bills, which effectively ordered up trillions of dollars from the government’s bank, the Federal Reserve. In reality, that’s how all government spending is paid for.
M.M.T. simply describes how our monetary system actually works. Its explanatory power doesn’t depend on ideology or political party. Rather, the theory clarifies what is economically possible and shifts the terrain of policy debates currently hamstrung by nagging questions of so-called pay-fors: Instead of worrying about the number that falls out of the budget box at the end of each fiscal year, M.M.T. asks us to focus on the limits that matter.
At any point in time, every economy faces a sort of speed limit, regulated by the availability of its real productive resources — the state of technology and the quantity and quality of its land, workers, factories, machines and other materials. If any government tries to spend too much into an economy that’s already running at full speed, inflation will accelerate. So there are limits. However, the limits are not in our government’s ability to spend money or to sustain large deficits. What M.M.T. does is distinguish the real limits from wrongheaded, self-imposed constraints.
An understanding of Modern Monetary Theory matters greatly now. It could free policymakers not only to act boldly amid crises but also to invest boldly in times of more stability. It matters because to lift America out of its current economic crisis, Congress does not need to “find the money,” as many say, in order to spend more. It just needs to find the votes and the political will.
Stephanie Kelton is a professor of economics and public policy at Stony Brook University.
June 8, 2020
Hospitals Got Bailouts and Furloughed Thousands While Paying C.E.O.s Millions
Dozens of top recipients of government aid have laid off, furloughed or cut the pay of tens of thousands of employees.
By Jessica Silver-Greenberg, Jesse Drucker and David Enrich
HCA Healthcare is one of the world’s wealthiest hospital chains. It earned more than $7 billion in profits over the past two years. It is worth $36 billion. It paid its chief executive $26 million in 2019.
But as the coronavirus swept the country, employees at HCA repeatedly complained that the company was not providing adequate protective gear to nurses, medical technicians and cleaning staff. Last month, HCA executives warned that they would lay off thousands of nurses if they didn’t agree to wage freezes and other concessions.
A few weeks earlier, HCA had received about $1 billion in bailout funds from the federal government, part of an effort to stabilize hospitals during the pandemic.
HCA is among a long list of deep-pocketed health care companies that have received billions of dollars in taxpayer funds but are laying off or cutting the pay of tens of thousands of doctors, nurses and lower-paid workers. Many have continued to pay their top executives millions, although some executives have taken modest pay cuts.
The New York Times analyzed tax and securities filings by 60 of the country’s largest hospital chains, which have received a total of more than $15 billion in emergency funds through the economic stimulus package in the federal CARES Act.
The hospitals — including publicly traded juggernauts like HCA and Tenet Healthcare, elite nonprofits like the Mayo Clinic, and regional chains with thousands of beds and billions in cash — are collectively sitting on tens of billions of dollars of cash reserves that are supposed to help them weather an unanticipated storm. And together, they awarded the five highest-paid officials at each chain about $874 million in the most recent year for which they have disclosed their finances.
At least 36 of those hospital chains have laid off, furloughed or reduced the pay of employees as they try to save money during the pandemic….
January 30, 2018
Homeownership Rate for the United States, White, Black and Hispanic, 2000-2018
January 30, 2018
Homeownership Rate for White, Black and Hispanic, 2000-2018
Paul Krugman @paulkrugman
I agree with Stephanie Kelton about deficits not being a problem. But I get that from perfectly conventional macroeconomics, not MMT. What does MMT contribute here?
America Can Welcome Trillion-Dollar Deficits
Our country’s myths about federal debt, explained.
2:05 PM · Jun 9, 2020
[ The applicability of Modern Monetary Theory escapes me. I agree with Paul Krugman. ]
June 9, 2020
No ethnic group should be left behind in China’s poverty eradication: Xi
YINCHUAN — Xi Jinping, general secretary of the Communist Party of China Central Committee, on Monday said all ethnic groups are part of the big family of the Chinese nation and no ethnic group should be left behind in the country’s fight against poverty, in its building of a moderately prosperous society in all respects and in its drive toward modernization.
Xi made the remarks when he talked with residents on the square of the Jinhuayuan community in the city of Wuzhong during his inspection in northwest China’s Ningxia Hui Autonomous Region.
The community is home to more than 13,000 permanent residents, nearly half of whom are of ethnic minority groups.
It represents the fine tradition of the Chinese nation and the great strength of the socialist system with Chinese characteristics to enable people of all ethnic groups to walk hand in hand into a moderately prosperous society in all respects, Xi said.
“With the continuous efforts of the Party and the government as well as the tireless endeavors of the people, the days ahead will surely be better and happier,” he added.
Xi hails community volunteers’ work during Ningxia tour
Xi Focus: Xi inspects northwest China’s Ningxia
June 7, 2020
China suspends debt repayment for 77 developing nations, regions
China has announced the suspension of debt repayment for 77 developing countries and regions as the nation is working with other G20 members to carry out the G20 debt relief initiative for low-income countries, Chinese officials said at a press briefing at the State Council Information Office on Sunday.
China announced in May that it would provide $2 billion over two years to help other countries respond to the impact of the coronavirus pandemic.
Ma Zhaoxu, Vice Minister of Foreign Affairs, said that the fund will not only include medical supplies, but also support other countries restart their economies and development. Ma made the comment at the press briefing to release the white paper titled “Fighting COVID-19 China in Action.”
The fund includes both bilateral aid and multilateral donations, according to Ma.
June 9, 2020
Cases ( 2,045,549)
Deaths ( 114,148)
June 9, 2020
Coronavirus (Deaths per million)
Belgium ( 830)
UK ( 602)
Spain ( 580)
Italy ( 563)
Sweden ( 467)
France ( 449)
Netherlands ( 352)
US ( 345)
Ireland ( 343)
Switzerland ( 222)
Canada ( 209)
Luxembourg ( 176)
Portugal ( 146)
Germany ( 105)
Denmark ( 102)
Austria ( 75)
Finland ( 58)
Norway ( 44)
Greece ( 18)
About the American demonstrations focusing on Black Lives Matter, I am told and struck by the echo of these demonstrations abroad, especially so in Western Europe where Black Lives Matter has taken a decided turn against European colonialism. I hope consideration of the colonial matter is given here as well. After all, I have watched film of Muhammad Ali refusing to wage war against a Vietnamese people who Ali directly identified with. For Ali, Black or Vietnamese Lives Mattered. So too for Martin Luther King:
April 4, 1967
By Martin Luther King
Riverside Church, New York City
in explaining their rationale for picking February as the peak of the cycle, the NBER Business Cycle Dating Committee said:
“The committee believes that the two most reliable comprehensive estimates of aggregate production are the quarterly estimates of real Gross Domestic Product (GDP) and of real Gross Domestic Income (GDI), both produced by the Bureau of Economic Analysis (BEA). These measures estimate production that occurred over an entire quarter and are not available monthly.“
that’s not true; the monthly GDP data is released and revised with each monthly GDP report. go to https://www.bea.gov/data/gdp/gross-domestic-product and select the “Key source data and assumptions” excel file. that file has the monthly data for each quarterly metric that goes into GDP, often as source date first, then as converted to NIPA metrics. the BEA doesn’t compute monthly GDP, but with a little tedious math, someone at the NBER certainly could have done that themselves…
i agree with their recession call, btw, just pointing out they could have supported it with more data..
June 9, 2020
America Fails the Marshmallow Test
We lack the will to beat Covid-19.
By Paul Krugman
The marshmallow test is a famous psychological experiment that tests children’s willingness to delay gratification. Children are offered a marshmallow, but told that they can have a second marshmallow if they’re willing to wait 15 minutes before eating the first one. Claims that children with the willpower to hold out do much better in life haven’t held up well, but the experiment is still a useful metaphor for many choices in life, both by individuals and by larger groups.
One way to think about the Covid-19 pandemic is that it poses a kind of marshmallow test for society.
At this point, there have been enough international success stories in dealing with the coronavirus to leave us with a clear sense of what beating the pandemic takes. First, you have to impose strict social distancing long enough to reduce the number of infected people to a small fraction of the population. Then you have to implement a regime of testing, tracing and isolating: quickly identifying any new outbreak, finding everyone exposed and quarantining them until the danger is past.
This strategy is workable. South Korea has done it. New Zealand has done it.
But you have to be strict and you have to be patient, staying the course until the pandemic is over, not giving in to the temptation to return to normal life while the virus is still widespread. So it is, as I said, a kind of marshmallow test.
And America is failing that test.
New U.S. cases and deaths have declined since early April, but that’s almost entirely because the greater New York area, after a horrific outbreak, has achieved huge progress. In many parts of the country — including our most populous states, California, Texas, and Florida — the disease is still spreading. Overall, new cases are plateauing and may be starting to rise. Yet state governments are moving to reopen anyway.
This is a very different story from what’s happening in other advanced countries, even hard-hit nations like Italy and Spain, where new cases have fallen dramatically. It now looks likely that by late summer we’ll be the only major wealthy nation where large numbers of people are still dying from Covid-19.
Why are we failing the test? It’s easy to blame Donald Trump, a man-child who would surely gobble down that first marshmallow, then try to steal marshmallows from other kids. But America’s impatience, its unwillingness to do what it takes to deal with a threat that can’t be beaten with threats of violence, runs much deeper than one man.
It doesn’t help that Republicans are ideologically opposed to government safety-net programs, which are what make the economic consequences of social distancing tolerable; as I explain in my recent column, they seem determined to let crucial emergency relief expire far too soon. Nor does it help that even low-cost measures to limit the spread of Covid-19, above all wearing face masks (which mainly protect other people), have been caught up in our culture wars.
America in 2020, it seems, is too disunited, with too many people in the grip of ideology and partisanship, to deal effectively with a pandemic. We have the knowledge, we have the resources, but we don’t have the will.
What, you did not like my version of the marshmallow experiment on June 5th? 🙂 http://angrybearblog.com/2020/06/trumps-marshmallow-experiment.html#more-56972
June 5, 2020
Trump’s Marshmallow Dilemma
[ Actually, I thought this essay was excellent and immediately thought about it when I read the similarly themed essay by Paul Krugman. I should have noted the original essay.
Both essays are important. ]
I was kidding you!!! The original belongs to Anne Kim at Washington Monthly. I used parts of hers thoughts, not the exacted wording persay, and attributed to her article. It is perfect in describing the issue in Michigan. People from the south of the state are flocking up north to Traverse City and the UP and will infect them up there were resources are thin. Even though Gov. Gretchen Whitmer has done an excellent job, Republicans who control the legislature (and have most of the time since 1990) have been doing their best to resist and stymie her efforts. The courts sided with her.
June 10, 2020
The illusion of a rapid U.S. recovery
By James K. Galbraith
As protests roil the U.S., the country’s center-left economists gaze brightly into their crystal balls. Harvard’s Jason Furman, formerly chair of U.S. President Barack Obama’s Council of Economic Advisers, has warned Democrats – eager to defeat President Donald Trump in the November election – that “the best economic data … in the history of this country” will emerge just before voters head to the polls. Paul Krugman is likewise predicting a “fast recovery.” The non-partisan Congressional Budget Office agrees. The stock market seems equally optimistic.
The arithmetic behind this thinking is simple. The CBO expects real GDP to shrink by 12 percent in the second quarter, and by 40 percent in annual terms. But it forecasts a third-quarter rebound of 5.4 percent – resulting in spectacular annual growth of 23.5 percent.
That is certainly possible: already in May, unemployment figures took a favorable turn, and it is looking like the second-quarter slump may not be as bad as projected. But, even if the CBO is right on both counts, GDP at election time would be seven percentage points below its first-quarter level, and unemployment would be above – possibly far above – 10 percent.
Let’s assume that the optimists are right about the third quarter. What happens next? Will the economy continue merrily along, with incomes and jobs bouncing back? Or will it stay in depression, requiring a new revolution – or, more precisely, a new New Deal – to save it?
To assess this question, Furman, Krugman, and the CBO share a mental model. They regard the pandemic as an economic shock, like an earthquake or the 9/11 terrorist attacks. It is a disruption to a solid structure, a deviation from normal growth. To get America moving again, what is mainly needed is confidence, perhaps aided by stimulus. If consumers channel their pent-up demand into new spending, this “shock-stimulus” model dictates, then businesses will revive investment, and soon enough, all will be well once again.
This is how mainstream center-left economists and policymakers have thought about recessions and recoveries since at least the 1960s, when President John F. Kennedy and his successor, Lyndon B. Johnson, pushed through tax cuts. But it ignores three major changes in the U.S. economy since then: globalization, the rise of services in consumption and employment, and the impact of personal and corporate debts.
In the 1960s, the U.S. had a balanced economy that produced goods for both businesses and households, at all levels of technology, with a fairly small (and tightly regulated) financial sector. It produced largely for itself, importing mainly commodities.
Today, the U.S. produces for the world, mainly advanced investment goods and services, in sectors such as aerospace, information technology, arms, oilfield services, and finance. And it imports far more consumer goods, such as clothing, electronics, cars, and car parts, than it did a half-century ago.
And whereas cars, televisions, and household appliances drove U.S. consumer demand in the 1960s, a much larger share of domestic spending today goes (or went) to restaurants, bars, hotels, resorts, gyms, salons, coffee shops, and tattoo parlors, as well as college tuition and doctor’s visits. Tens of millions of Americans work in these sectors.
Finally, American household spending in the 1960s was powered by rising wages and growing home equity. But wages have been largely stagnant since at least 2000, and spending increases since 2010 were powered by rising personal and corporate debts. House values are now stagnant at best, and will likely fall in the months ahead.
Mainstream economics pays little attention to such structural questions. Instead, it assumes that business investment responds mostly to the consumer, whose spending is dictated equally by income and desire. The distinction between “essential” and “superfluous” does not exist. Debt burdens are largely ignored.
But demand for many U.S.-made capital goods now depends on global conditions. Orders for new aircraft will not recover while half of all existing planes are grounded. At current prices, the global oil industry is not drilling new wells. Even at home, though existing construction projects may be completed, plans for new office towers or retail outlets won’t be launched soon. And as people commute less, cars will last longer, so demand for them (and gasoline) will suffer.
Faced with radical uncertainty, U.S. consumers will save more and spend less. Even if the government replaces their lost incomes for a time, people know that stimulus is short term. What they do not know is when the next job offer – or layoff – will come along.
Moreover, people do distinguish between needs and wants. Americans need to eat, but they mostly don’t need to eat out. They don’t need to travel. Restaurant owners and airlines therefore have two problems: they can’t cover costs while their capacity is limited for public-health reasons, and demand would be down even if the coronavirus disappeared. This explains why many businesses are not reopening even though they legally can. Others are reopening, but fear they cannot hold out for long. And the many millions of workers in America’s vast services sector are realizing that their jobs are simply not essential.
Meanwhile, U.S. household debts – rent, mortgage, and utility arrears, as well as interest on education and car loans – have continued to mount. True, stimulus checks have helped: defaults have so far been modest, and many landlords have been accommodating. But as people face long periods with lower incomes, they will continue to hoard funds to ensure that they can repay their fixed debts. As if all this were not enough, falling sales- and income-tax revenues are prompting U.S. state and local governments to cut spending, compounding the loss of jobs and incomes.
America’s economic plight is structural. It is not simply the consequence of Trump’s incompetence or House Speaker Nancy Pelosi’s poor political strategy. It reflects systemic changes over 50 years that have created an economy based on global demand for advanced goods, consumer demand for frills, and ever-growing household and business debts. This economy was in many ways prosperous, and it provided jobs and incomes to many millions. Yet it was a house of cards, and COVID-19 has blown it down.
“Reopen America” is therefore an economic and political fantasy. Incumbent politicians crave a cheery growth rebound, and the depth of the collapse makes possible some attractive short-term numbers. But taking them seriously will merely set the stage for a new round of disillusion. As nationwide protests against systemic racism and police brutality show, disillusion is America’s one big growth sector right now.
James K. Galbraith is professor of government and chair in Government/Business Relations at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin.
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