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

Republicans’ Refusal to Understand Insurance Still Matters

When attempting to repeal and not really replace Obamacare, various Republicans demonstrated opposition to the idea of insurance. They objected that healthy people shouldn’t subsidize the health care of sick people — that is their honest view of health insurance is that they are against it.

I didn’t keep track of recent examples, googled, and have old examples

Paul Ryan (paraphrased — listen to him if you must — I can’t force myself to listen)

“The conceit of Obamacare,” he said at his press conference on Trumpcare, is that “young and healthy people are going to go into the market and pay for the older, sicker people.” That’s why Obamacare is in a “death spiral,” he noted.

Mo Brooks (very blatantly)

Their immediate problem is to explain why they don’t think health insurance should be eliminated entirely. Their much more serious problem (which I hope will be fatal to their ideology) is that they have to explain why it is reasonable to want there to be health insurance, want there to be community rating and coverage of treatment of pre-existing conditions, and oppose equalitarian redistribution in general.

They ususally understand that they must carefully avoid trying to explain how they are for insurance but against community rating (or for community rating but against welfare) because people might decide to support community rating (and universal basic income and who knows what else) if they understood why Republicans oppose them.

Republican logic is that due to the will of the market or God (to the extent that they distinguish Them at all) people get what they deserve, so the poor deserve to be poor and so do the sick. Most grownups (hell most 4 year olds) have noticed that the world doesn’t work that way.

AFter the jump, I will try ot make an honest to God the market effort to make sense of Ryan et al. I hope this shows how dangerous the discussion is to them.

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Ex-hurricane trend in September industrial production is positive

Ex-hurricane trend in September industrial production is positive

As I outlined earlier this week, a reasonable temporary workaround for industrial production unaffected by the recent hurricanes is to average the 4 regional Fed surveys, minus Dallas, plus the Chicago PMI. Over the long run, each +5 in the average of the indexes is consistent with a +.1 in the manufacturing component of industrial production. Because these indexes have been running “hot” this year compared with industrial production, I further suggested subtracting .3 from the result to be confident in a positive trend.

All of these indexes have been reported for September. Here are the numbers:

Empire State: 24.4
Philadelphia Fed: 23.8
Richmond Fed: 19
Kansas City Fed: 17
Chicago PMI: 30.4 (adjusted)*

Interestingly, even the Dallas Fed’s index was positive, at 19.5!

*Since Chicago is on a 0 to 100 scale with 50 being neutral, we subtract 50 from the raw number of 65.2, which gives us 15.2, and then double the result.

The average of the 5 is 22.9.
Dividing that by 5 gives us +.5.
Subtracting .3 gives us +.2.

We can be reasonably confident that underlying trend in industrial production in September, despite the hurricanes, has been positive.

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Trump’s “Give the Rich a Break” Tax Plan

Trump’s “Give the Rich a Break” Tax Plan

National GOP leaders on Wednesday released a 9-page document that they called a tax “framework” (available here on the Washington Post site) describing in vague terms how they intend to cut taxes for the nation’s wealthiest people while doing very little that serves the government needs. Overall, the GOP framework would amount to about $2.2 TRILLION in less revenue to support federal programs (like protecting the environment from corporate pollutants, supporting higher education loans for students, funding basic university research) (assuming $5.8 trillion loss to lowering rates and shift to territorial system and maybe $3.6 trillion recouped by eliminating as yet unspecified deductions).  See GOP proposes deep tax cuts, provides few details on how to pay for them, Washington Post (Sept. 27, 2017).

  • They promise 3 rates (12%, 25% and 35%, without stating what the applicable income brackets for those rates should be).  That lowering of rates is primarily beneficial to the wealthiest, since the people who just barely get by on their wages (especially with the new corporate regime of calling people in for short shifts, as needed, rather than paying them a regular full-time job) are hit hardest by the payroll taxes that won’t be lowered at all under this plan.  That is, ordinary wage-earners in the middle and lower classes are generally already taxed on a consumption basis–they spend what they earn and have little left for saving for the future.  They pay relative low income taxes but pay significant payroll taxes through withholding on their wages (with no deferral).  This is another excursion into the current GOP’s ‘alternative fact’ universe, where huge tax cuts mainly benefiting the wealthy are sold as a ‘simplifying’ reform that will benefit ordinary people.

 

  • Although the lowest rate is higher than the poorest wage-earning taxpayers pay now, the planners claim that this is still a tax cut because of the “doubling” of the standard deduction for those taxpayers that do not itemize.  However, the personal exemptions are eliminated, so that the combination of the standard deduction and the higher rate is likely to be at best a minimal cut for small families and an actual tax increase for larger families.  See, e.g., this article.

 

  • They promise to eliminate the “alternative minimum tax”, a tax provision that was enacted as a safety provision to ensure that wealthy taxpayers who can afford tax planning and generally can most easily benefit from the various loopholes and tax subsidies written into the code would pay some modicum of taxes rather than get off scott-free from any tax burden. The “framework” (page 5) claims that “it no longer serves its intended purpose and creates significant complexity.”  It is admittedly somewhat complex, but not unduly so with modern tax preparation software which makes that complexity a minimal problem.  I have been required to pay the AMT, and it hasn’t made my life or tax return filing more complex.  In fact, the people who owe the AMT should be paying more tax than they would pay without the AMT, and that means it is in fact serving its intended purpose of ensuring that taxpayers cannot aggregate too many of the various haphazard subsidies in the Code to permit them to essentially escape a reasonable tax burden on their economic income.  Elimination of the AMT is a tax break for the well-to-do:  Trump, for example, has had to pay the AMT (real estate developers are one of the much-favored groups in terms of various tax expenditures in the Code that benefit them).

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How I Came To No Longer Be A Kaldorian Economist

How I Came To No Longer Be A Kaldorian Economist

Yes, for a period of time, according to some sources, I was a member of the “Kaldorian” school of Post Keynesian  economic thought, although I had not previously thought of myself as such, indeed, had been unaware that there even was such a school of economic thought.  But now, according to such sources, I am no longer a member of such a school.  Indeed, it is not clear that there even is such a school, if there ever was.  This is a tale of the ongoing tangle of schools of Post Keynesian economics, as well as how Wikipedia operates, and more broadly the history of economic thought.

I note that while it lasted, this matter was taken at least somewhat seriously.  So, a few years ago I was at a conference and walked into a plenary address that was being given by Tyler Cowen of George Mason.  There was a pretty large crowd, but Tyler interrupted his talk when I came in to note, “I see that Barkley Rosser has entered the room, so I had better be careful what I say about Nicholas Kaldor.”  Indeed, ironically, he was just about to say something about Kaldor, and I must say that I had no serious disagreement with his remarks, although maybe he cleaned up his act, given my presence as the representative of “the Kaldorian School,” if not the late Lord Kaldor’s personal representative.  That was then, but this is now, and I am nothing, nothing, I tell you!

Anyway, as I said, I had not been aware of such a school, much less that I was supposedly a part of it, but then in 2014, my friend Marc Lavoie published his excellent Post-Keynesian Economics: New Foundations.  In it he provided set of supposed schools of Post Keynesian economic thought.  I note that there has long been a history of arguing and battling and generally warring among various strands of Post Keynesian thought, with some expelling others, although not necessarily totally.  Joan Robinson coined the term back in the 1950s, and for a while Paul Samuelson was using the term for an eclectic bunch of Keynesian economists of the early 1960s.  But the term became narrower as the 1960s moved on and journals were started, and battle lines were drawn.  Going into the 1980s, and focused on Post-Keynesian summer schools being held in Trieste, Italy, there was a sharp split between Sraffian neo-Ricardians based in Italy, led by the late Pierangelo Garegnani, and American Post Keynesians who focused on uncertainty and the role of money led by Paul Davidson.  In between them was a more British and Australian based group, some of whom were thought to be followers of Michal Kalecki, and probably Joan Robinson, some of whom made efforts to overcome the sharp split between these other two.  The most important leader of that group was probably Geoff Harcourt, he of the “different horses for different courses,” how open-minded of him.  Anyway, those summer schools fell apart, with each of the more sharply opposed groups not attending the seminars of the other, and after this the Americans all but expelling the Italian Sraffian-neo-Ricardians from Post Keynesianism, even if they were still counted by others.

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People Killed by Police, 2016

As a follow up to my post on homicides in 2016, I decided to combine homicide data from the FBI with figures from the police shooting database from the Washington Post. The only difficulty is that the FBI classifies people as being from Black, White, Other, or Unknown races, whereas the Washington Post breaks out other groups, such as Hispanic. Because Hispanic people can be Black, White, or Other (as per FBI classfication), it is necessary to assign Hispanic deaths at the hand of the police to Black, White, or Other to match the FBI figures.

One approach would be based on the percentage of Hispanic people who are Black, White, etc. According to the Census, 2.5% of Hispanics are Black. On the other hand, it has been noted that Black people are disproportionately likely to have negative interactions with Police. In the past few years, that has been the subject of protests. Lacking a perfect way to allocate the Hispanic figures, I assigned them to Black, White, and Other based on their share of the population that were victims of homicides. Its not perfect, and would, if anything, inflate the number of Black people killed by police. But… given the magnitude of the numbers involved, the choice of how to allocate Hispanic deaths among Black and White people will not have much of an effect on the graphs below.

With that said, here is a graph showing the percentage of Black people killed by police v. the percentage of Black people killed by someone other than the police.

(click to embiggen)

Here’s the equivalent graph for White people.

(click to embiggen)

 

Edit:  9:29/2017, 4:07 AM – added “(click to embiggen)” under each graph.

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Wow! Yellin confirms 2% inflation is the Fed’s ceiling

Wow! Yellin confirms 2% inflation is the Fed’s ceiling

You may have already seen this elsewhere, but in case you didn’t, Janet Yellin all but officially confirmed the other day that 2% isn’t in fact the Fed’s target, it’s their ceiling. Per the New York Times:

Given that monetary policy affects economic activity and inflation with a substantial lag, it would be imprudent to keep monetary policy on hold until inflation is back to 2 percent,” Ms. Yellen told the National Association for Business Economics .

Let me just remind you one more time that in the past 50 years, during recessions the inflation rate has typically fallen by more than 2%.   That means that if the Fed is “successful,” the next recession will tip over into outright deflation, including deflation in even nominal wages.

Now imagine a wage-price deflationary spiral beginning with Donald Trump as president and the GOP in control of both houses of Congress.

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2016 Homicides

The FBI just released data on homicides for 2016. In light of the various protests by the BLM and now football players, I thought I’d provide a a graph.  It breaks out population, homicide perpetrators and homicide victims by race.

(click to embiggen)

Note… the number of offenders exceeds the number of victims. This is a result of some homicides involving multiple perpetrators. This can happen, for example, if both the shooter and the getaway driver in a drive-by shooting are charged with the crime. The race breakdown comes from the FBI, and the population comes from the Census. Data sources are shown in the graph itself.

The key driver of the graph is the large percentage of perpetrators of unknown race. This happens because not all jurisdictions report on the race of offenders, but perhaps more importantly, because many crimes are not officially solved. I believe this is particularly true in urban areas with a lot of homicides where nobody wants to cooperate with the police. For example, through August of 2016, the clearance rate for homicides in Chicago was 21 percent. In Baltimore, its about a third. Nationally, its about two thirds.

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Will October 1 Bring Another Repeal Effort?

It could . . .

With the Senate vote tomorrow canceled on the Graham – Cassidy ACA defunding bill, the effort to defund and repeal the ACA will cease for the rest of this budget year ending September 30, 2017. With the passage of a new budget and a new resolution the effort could go onward in an attempt to repeal the ACA.

As I have said, there can only be one resolution per year. Let me clarify the one reconciliation per budget year statement. Unless the Senate passes more than one budget resolution, there can be only one Reconciliation per year for each of three subjects; spending, revenues, and debt limit in one or multiple bills. Since there was no budget passed last year, the Republicans had a unique opportunity to do two Reconciliations . . . one to defund the ACA and the 2nd one to do Tax Reform. The present Reconciliation affected Spending and Revenues thereby killing those two subjects for Reconciliation in 2017.

If one bill covers spending and revenue, Reconciliation using a budget resolution is expended for those two subjects. Budgets end September 30 of each year.

2018 is a different year and again Congress could take up the repeal of the ACA. And why not when they can get 49 votes to pass it any time they wish to do so. Maybe one of the remaining three Republican Senators will side with them or a Dem may have a weak moment. Since Republicans want to do tax reform, they will use Reconciliation again as it only requires a majority vote and defund the ACA to provide the revenue for it. The opportunity to do two Reconciliations due to two budget resolutions will not be available for Republicans. It may end up being both ACA and Tax Reform in one Reconciliation of just one meaning the ACA or Tax Reform.

Martin Longman at Washington Monthly does a good job of explaining Reconciliation. I believe I beat him in predicting a new run at Reconciliation which can be found in the comments section in early September. I was happy he did write on it as few people have done so till the very end. If still interested, here is a detailed primer on the topic also.

Did the effort to repeal the ACA hurt it going forward? Trump’s threats to kill the CSR which funds out-of-pocket expenses for those between 100% FPL and 250% FPL would not be impacted by this move. For those between 100% and 250% FPL, healthcare insurance premium increases would be picked up by the ACA. Those above 250% to 400% FPL would have premiums limited by the a ratio of ~9% of income. Above 400% FPL, some of our readers and everyone else would take on the full impact of the premium increase. Trump has done everything possible to cause issues with the ACA and this would include lying to the public as well.

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Worse Than The Usual Hypocrisy: Trump, Puerto Rico, And The Jones Act

Worse Than The Usual Hypocrisy: Trump, Puerto Rico, And The Jones Act

The Jones Act was passed 97 years ago to protect US shipping within the US from foreign-made ships.  I doubt I ever would have supported such an act, but at least back then there were plenty of US-made ships to fulfill the demand. Despite the Jones Act, the US shipping industry has collapsed in the last century so that the number of such ships is far below demand in normal circumstances, so that intra-US shipping costs are far higher than those outside the US.  Puerto Rico was covered by he Jones Act and remains so.

After Hurricanes Harvey and Irma the Jones Act was temporarily suspended for Texas, Louisiana, and Florida on orders of President Trump, going through the Department of Homeland Security.  The Jones Act is not being suspended for Puerto Rico in the wake of Hurrican Maria, although damage to PR seems to be far greater than what happened on the mainland during Harvey and Irma (with those areas also accessible to supplies and aid by ground transportation, not relying nearly as much on ocean shipping).  The supposed reason is that PR’s ports are damaged, which is certainly the case, but even if suspending the Jones Act will only slightly speed up deliveries, it will certainly reduce the costs of supplies, allowing cheaper natural gas from Pennsylvania in place of more expensive oil from Venezuela, for example.

Which brings us to the worse then usual hypocrisy on the part of our president.  While he has been all worked up over football players kneeling and moved to get aid to Texas and Florida as rapidly as possible while expressing lots of sympathetic sentiments for the victims in those states, his initial reaction to Hurricane Maria, after several days delay, was to talk about how bad their infrastructure was before the hurricane and how they have a massive debt situation.  Of course, if he were really concerned about helping them, he could suspend their debt, but at a minimum, given that he is aware that they are poor and debt ridden, on top of having 80% of their crops destroyed and all their power out among other problems, he is insisting that they pay top dollar on supplies brought in by water, where almost all supplies will come.  His refusal to suspend the Jones Act for Puerto Rico after having done so for mainland US territories is far worse than the usual hypocrisy from any president, even this far more hypocritical than pretty much all others one.

Barkley Rosser

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