Eight years of Governor Sam Brownback has seen Kansas lose 8% of its jobs relative to the national average. Now Kansas is Ground Zero for Trump’s trade war. Joshua Green: Chinese Sorghum Tariffs Will Hit Hard in Trump-friendly Kansas: “Trump’s Trade War Hits Another Red State: What’s the matter with Kansas? It’ll be hardest hit by new Chinese tariffs…

…Retaliatory tariffs… soybeans… will hit… Iowa, Indiana, North Dakota, and Nebraska…. Sorghum… China… announced it would impose a 178.6 percent duty on sorghum imports from the U.S. that will take effect almost immediately…. Kansas is the largest sorghum producer in the U.S., and its senior senator, Pat Roberts, chairs the Senate Agriculture Committee…. “Half of Kansas sorghum or more was going to China, and that probably stops, at least for now.” The new Chinese measure is a response to the tariffs Trump slapped on solar panels and washing machines earlier this year…. Trump’s campaign-trail protectionism and attacks on China were a big part of his appeal to Republican voters in 2016. But as he’s begun implementing those policies as president, the economic fallout has landed heavily on his own voters. Hardest hit by the new tariffs will be Roberts’s old congressional district (KS-01), known as “The Big First” for its sprawling, agriculture-intensive acreage. In the last election, Kansas’s first district voted for Trump over Hillary Clinton by 45 points. Kansans such as Winter wish Trump would keep that in mind—but don’t hold out much hope…

I don’t understand why these smart authors are playing such small ball. More colleges, less NIMBYism. FDR didn’t provide subsidies to people to move to where there was electricity, did he? And it is not just recent college graduates who have such difficulty moving to opportunity, is it?: Abigail Wozniak and Jay Shambaugh: Why We Need to Help Kids Go to College Wherever They Want: “Previous generations of young adults were much more likely to move for career opportunities….

…20- to 24- year-olds moves across state or county lines declined from 16% in 1965 to about 8% in 2016…. Meanwhile, employment and earnings opportunities continue to diverge…. Labor force participation in rural counties has fallen sharply since the recession, while it has been flat or modestly falling in metropolitan counties. But cities with more educated workers have been growing faster and paying higher wages for decades. This has contributed to a rising concentration of skilled workers in larger cities…. Recent college graduates face a more difficult path to finding a first job that is best for them….

We need to remove geographic barriers to college access and careers…. Large supplements to the Pell Grant… of up to $5,000 for students from counties without a degree-granting college within their borders could help these students afford the high cost of relocating…. Offer an automatic, full-year student loan grace period for graduating college students if they are working or seeking work in a job market outside of their commuting zone…. Greater mobility when graduating from college can help workers improve their early career job matches, this is critical for achieving higher lifetime earnings. College attendance plays an incredibly important role in increasing lifetime earnings, and early career conditions can have persistent effects on those earnings…

More and more it looks as though minimum wage laws—and unions—are positive second-best interventions that raise societal wellbeing by blunting the impact of employer monopsony: Kevin Rinz and John Voorheis: The Distributional Effects of Minimum Wages: “States and localities are increasingly experimenting with higher minimum wages in response to rising income inequality and stagnant economic mobility…

…but commonly used public datasets offer limited opportunities to evaluate the extent to which such changes affect earnings growth. We use administrative earnings data from the Social Security Administration linked to the Current Population Survey…. Raising the minimum wage increases earnings growth at the bottom of the distribution, and those effects persist and indeed grow in magnitude over several years. This finding is robust to a variety of specifications, including alternatives commonly used in the literature on employment effects of the minimum wage. Instrumental variables and subsample analyses indicate that geographic mobility likely contributes to the effects we identify. Extrapolating from our estimates suggests that a minimum wage increase comparable in magnitude to the increase experienced in Seattle between 2013 and 2016 would have blunted some, but not nearly all, of the worst income losses suffered at the bottom of the income distribution during the Great Recession…

The most extremely weird thing about credulous business-friendly reporters is their willingness to publish cries of “labor shortage” without any evidence of rising wages, or even any inquiry into how a “labor shortage” is to be defined. This seems to—rightly—annoy FRBM head Neel Kashkari: Neel Kashkari: “The extreme emotions around the labor market: “‘historic, severe worker shortages’. Sounds like a real crisis. Is it?…
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…By several measures, wage growth remains muted (around 2.7%)-much lower than historical episodes with “extreme worker shortages.” Usually the price is the best indicator between supply and demand. Price growth for labor is low. Where’s the “extreme shortage?” Interestingly, the price of oil has doubled over the past few years from around $30 to $60. I haven’t heard anyone declare oil “shortage.” Why not? Should we tap the Strategic Petroleum Reserve? No because it’s the price responding to supply and demand…. Far fewer teens are choosing to be in the labor force today than 20 years ago. How many might choose to enter with higher wages? Our economists @MinneapolisFed always remind me about “sticky prices” – firms are reluctant to lower prices and wages in recessions. These hyperbolic headlines remind me the reluctance to adjust prices is in both directions. There’s something very emotional for firms about wages. Paying more for oil, or steel, or corn is no big deal. That’s just the market. But if they can’t find workers at the wages they are used to paying, that’s a historic worker shortage…

The most interesting thing in retrospect is how insistent Marty is here that “BAD BIG GOVERNMENT” arrived suddenly and discontinuously in 1967—that the U.S. economy was fine up until then, but that afterwards things fell off a cliff with “government policies… deserv[ing] substantial blame for the adverse experience[s] of the past decade”. Plus an awful lot of cherry-picking—like assessing corporate America based on the ten large firms whose stock prices plunged the most. And, of course, it was Marty’s guy Ronnie whose policies wound up imposing much larger drags on societal wellbeing, from income maldistribution through draining the pool of productive savings to slow-walking equal opportunity: Martin Feldstein (1979): Introduction to The American Economy in Transition: “The post-[World] War [II] period began in an atmosphere of doubt and fear…

Many economists believed that the nation would slip back into the deep recession from which it had escaped only as the war began…. [But the first two decades of the postwar period were a time of unsurpassed economic prosperity, stability, and optimism. The contrast between the strength and achievement of the economy during those years and its poor record since then signals a major change in the performance of the economy over the postwar period…. Real GNP growth slowed from an annual rate of 3.9 percent between 1947 and 1967 to only 2.9 percent between 1967 and 1979…. The average unemployment rate rose from 4.7 percent of the labor force to 5.8 percent. The average rate of consumer price index (CPI) inflation jumped from 2 percent to 6.7 percent (since 1967) with an acceleration to an average of nearly 9 percent since 1973 and over 13 percent in 1979….

Some of the poor record of the 1970s has undoubtedly been due to inappropriate macroeconomic policies adopted during the Vietnam War, to the change in the production policy of the OPEC cartel, and to other disturbances whose impacts will eventually fade away. But the deteriorating performance of the economy may also have more fundamental causes… so deeply rooted in our social and political system that they cannot be eliminated even when the causes of the problem become better understood…. Many of the papers and comments in this volume point to the expanded role of government as a major reason, perhaps the major reason, for the deterioration of our economic performance. The government’s mismanagement of monetary and fiscal policy has contributed to the instability of aggregate output and to the rapid rise in inflation. Government regulations are a principal cause of lower productivity growth and of the decline in research and development. The growth of government income-transfer programs has exacerbated the instability of family life and perhaps the decline in the birthrate. The low rate of saving and the slow growth of the capital stock reflect tax rules, macroeconomic policies, and the growth of social insurance programs.

The expanded role of government has undoubtedly been the most important change in the structure of the American economy in the post-war period…. There can be no doubt that government policies do deserve substantial blame for the adverse experience of the past decade…. The adverse consequences of government policies have been largely the unintended and unexpected by-products of well-meaning policies that were adopted without looking beyond their immediate purpose or understanding the magnitudes of their adverse long-run consequences. Expansionary monetary and fiscal policies were adopted throughout the past fifteen years in the hope of lowering the unemployment rate but without anticipating the higher inflation rate that would eventually follow. High tax rates on investment income were enacted and the social security retirement benefits were increased without considering the subsequent impact on investment and saving. Regulations were imposed to protect health and safety without evaluating the reduction in productivity that would result or the effect of an uncertain regulatory future on long-term R&D activities…. The government never considered that raising the amount and duration of unemployment benefits to the current high levels to avoid hardship among the unemployed would encourage layoffs and discourage reemployment; that Medicare and Medicaid, introduced to help the elderly and the poor, might lead to an explosion in health care costs; that welfare programs, introduced and expanded to help poor families, might weaken family structures; or that federal aid through the tax laws and through special credit programs to encourage homeownership would have such adverse effects on the cities, precipitating the relocation of business and consequent poverty and other problems for those who remained behind. The list of well-meaning policies with unintended adverse consequences could be extended almost without limit….

Unfortunately, even when the inappropriateness of old policies is recognized, change is difficult to achieve. Existing programs are maintained even though the same programs would not be adopted today. These programs survive and grow with the help of sympathetic bureaucrats and well-organized beneficiary groups. Loyalties develop to the form of public programs rather than to their basic purpose…. The government in its decision-making is inherently myopic, more myopic than either households or firms. Political accountability means that a policy will be judged on its apparent effects within as little as two years….

President Lyndon Johnson rejected the warnings of his economic advisors that taxes had to be raised in order to avoid an accelerating rate of inflation. Johnson chose to accept an increased long-run inflation rate in order to avoid the short-run political cost of a tax increase. His choice, while perhaps politically rational, was economically myopic. During the 1970s, the government and the monetary authorities focused on the short-run goal of reducing unemployment through expansionary policies that served only to exacerbate the inflationary situation. If escaping from the current high rate of inflation requires a sustained period of increased unemployment and economic slack, the shortsightedness of the political process may make this very difficult to achieve….

Of course, politicians do not have a monopoly on myopia. But although some of the political shortsightedness is undoubtedly a response to constituent pressures, the myopia of the political process actually encourages voters to be impatient…. To the extent that the poor economic performance of the past decade can be traced to the growing role of government and the inherent myopia of the political process, improvement of our performance will be difficult to achieve. Difficult but not impossible…. If the public begins to see more clearly the links between current policies and future consequences, there will be less reason to fear the unexpected consequences of myopic decisions.

The 1970s have been a decade of frustrated expectations. The size and influence of the government have grown rapidly, but the public’s distrust of government has grown even more rapidly. The economics profession has discovered a new humility as the economy’s performance has worsened. As the 1980s begin, there is widespread anxiety about the future. Will this decade be a period of severe economic problems with a major recession, accelerating inflation, or both? Or can the poor economic performance of the 1970s be reversed? The current data on the developing state of the economy are not clear. And, while some events may be outside our control, the success of the economy in the current decade and in the remainder of this century will depend also on whether we choose wisely as we reevaluate and restructure our major economic policies.

Alessandro Nicita, Marcelo Olarreaga, and Peri da Silva: [A trade war will increase average tariffs by 32 percentage points(https://voxeu.org/article/trade-war-will-increase-average-tariffs-32-percentage-points): “A trade war will increase average tariffs by 32 percentage points…

…There are growing signs that a trade war is possible, and that the multilateral trading system may not be able to prevent it. This column asks what would happen with tariffs around the world if countries were to move from cooperative tariff setting within the WTO to non-cooperative tariff setting outside the WTO. It argues that that the resulting trade war with countries exploiting their market power would lead to a 32-percentage point increase in the tariff protection faced by the average world exporter…

“If getting China to pay what it owes for technology were the goal, you’d expect the U.S…. to make specific demands… and… build a coalition”, a Tran-Pacific Partnership, so to speak: Paul Krugman: The Art of the Flail: “Whenever investors suspect that Donald Trump will really go through with his threats of big tariff increases… stocks plunge…

…Incoherence rules: The administration lashes out, then tries to calm markets by saying that it might not carry through…. If getting better protection of patent rights and so on were the goal, America should be trying to build a coalition with other advanced countries to pressure the Chinese; instead, we’ve been alienating everyone in sight. Anyway, what seems to really bother Trump aren’t China’s genuine policy sins, but its trade surplus with the United States, which he has repeatedly said is $500 billion a year. (It’s actually less than $340 billion, but who’s counting?)… This is junk economics. Except at times of mass unemployment, trade deficits aren’t a subtraction from the economies that run them, nor are trade surpluses an addition to the economies on the other side of the imbalance…..

Now, Trump himself might be O.K. with large-scale deglobalization. But as we’ve seen, his beloved stock market hates the idea, and with good reason: Businesses have invested heavily on the assumption that a closely integrated global economy is here to stay, and a trade war would leave many of those investments stranded. Oh, and a trade war would also devastate much of pro-Trump rural America, since a large share of our agricultural production—including almost two-thirds of food grains—is exported. And that’s why things seem so incoherent…

The idea that the collapse of the aristocratic Roman Free State into the Roman Empire was due to wild dissipative partying—luxus, a vice caught from the Greeks and “Asiatics”, giving rise to avaritia, which then leads to ambitio and cupido imperii—was originally a meme put forward by those I regard as the true villains—plutocrats and political norm breakers—to avoid responsibility: A.W. Lintott (1972): Imperial Expansion and Moral Decline in the Roman Republic: “Imperial expansion in general did of course have divisive economic and political effects…

…This discord should not necessarily be interpreted as moral decline. In particular, radical politicians, who wished to be patrons of the plebs tried to use the profits of empire to satisfy plebeian grievances. By ancient standards there was nothing either new or wrong in this distribution of praeda, though the actual measures clashed with senatorial tradition. What was new was the determination with which politicians pursued their aims, which in turn reflected the strength of socio-economic pressures and greater competition in the Roman governing class. Affluence, new social customs and intenser political strife in the second century were all changes brought about at least in part by empire, but are not sufficient explanations of each other. They should not be wrapped up together and labelled ‘moral decline’.

In my view the tradition which ascribed the political failure of the Republic to moral corruption derived from wealth and foreign conquest, developed from the propaganda of the Gracchan period. Faced with the catstrophe of 133, some people claimed that Scipio Nasica Corculum was vindicated, the elimination of Carthage had brought ambitious demagogues and would-be tyrants. The destroyer of Carthage, Aemilianus, had to find another scapegoat. Disliking Greek luxury and effeminacy, he put the blame on Gracchus’ association with Pergamum and Manlius Vulso’s triumph. This view was reproduced by his contemporary Piso in his annales, while Nasica’s view was eventually incorporated in Poseidonius’ work. The views have become intermingled and confused in Sallust and later historians. They should not distract us now when we try to understand what changes, if any, in polit- ical mores were involved in the Republic’s collapse…