How should it change? What does it say that no longer needs to be said? What does it not say that now needs to be said? Zimbabwe!: Here is a piece of currency, a dollar bill. It is from Zimbabwe. It is for $100,000,000,000,000 Zimbabwean dollars…
“The Cossacks Work for the Czar!”
…but averting the prospect of unemployment getting too low, and encouraging the election of Republican presidents–see http://utip.gov.utexas.edu/papers/utip_42.pdf. (It would be good to update that paper with another ten years of data.) The phrase ‘executive committee of the bourgeoisie’ comes to mind…
Evening Must-Read: Janet Currie: Obamacare and Long-Term Competitiveness
…the importance of early childhood health care for the least advantaged kids among us–on their future workforce productivity, their contributions to our national tax base, their educational attainment, and their declining use of government income supports…. Mirror the… research… I conducted with… Sandra Decker… and Wanchuan Lin…. Medicaid coverage for children born between 1985 and 2005 resulted in a better health trajectory for those kids as they because adolescents and young adults…. What will happen if less-well-off kids today do not get the affordable health care they need to become successful contributors to our economy over the coming decades?…. Children who gained public health insurance in the 1980s and 1990s… the federal government will have recouped at least 56 cents for each dollar spent on childhood health care…. Better public health care among low-income children in the 1980s and 1990s resulted in higher graduation rates from high school and college for these kids…. We already know the empirical long-term economic benefits of expanded health care for those least able to afford it–and can say with strong confidence that taking away health insurance for these five million now covered under Obamacare would harm our economy.
Evening Must-Read: Richard Reeves: Wealth, Inequality, and the ‘Me? I’m Not Rich!’ Problem
…The problem might be political rather than economic. The soar-away wealth of those at the pinnacle of the distribution can start to make the people just below them feel distinctly middle-class. I’ve just played the part of Straight Man Scholar in a sketch on “The Daily Show” poking fun at the struggles of those only just scraping into the top 1% with a family wealth of $4 million or more. “Daily Show” correspondent Hasan Minhaj became a faux class warrior on behalf of those struggling to get by with just one or two homes and having to share a private jet…”
Evening Must-Read: Tim Duy: Game On
…The labor market improvements are key – as long as unemployment is falling, confidence in the inflation outlook is rising. The more important message, however, is as the timing of the first rate hike draws closer, the level of uncertainty is rising. And it is not just about the timing of that rate hike. The Fed is sending a clear message that the subsequent path of rates is also very uncertain, and they don’t think that uncertainty is being taken seriously by market participants. In their view, financial markets are too complacent about the likely path of interest rates.
Obamacare and long-term U.S. economic competitiveness
The legal arguments before the U.S. Supreme Court this week in King vs. Burwell may well decide whether a key provision of the Affordable Care Act remains in effect for millions of Americans who now rely on Obamacare for affordable health insurance. But if this elite jury of nine judges is still out on the legal question before the court, the long-term economic consequences of uninsuring the many children now insured under the new health law are clear.
Several new research papers document the importance of early childhood health care for the least advantaged kids among us—on their future workforce productivity, their contributions to our national tax base, their educational attainment, and their declining use of government income supports. These robust findings mirror the results of research that I conducted with economists Sandra Decker of the National Center for Health Statistics and Wanchuan Lin of Peking University. We found that Medicaid coverage for children born between 1985 and 2005 resulted in a better health trajectory for those kids as they because adolescents and young adults, and thus improved their ability to be productive contributors to our economy.
What will happen if less-well-off kids today do not get the affordable health care they need to become successful contributors to our economy over the coming decades? Well, the best economic research shows that current government health care programs, including those recently expanded under Obamacare, already ensure many of these kids will be better and more productive citizens. So lets parse the data.
The first paper, by economists David Brown and Ithai Lurie of the U.S. Treasury Department, and economics professor Amanda Kowalski of Yale University finds that children who gained public health insurance in the 1980s and 1990s under the expanded Medicaid and the Children’s Health Insurance Program paid more in cumulative taxes by age 28, collected less in payments from the Earned Income Tax Credit, and (among the women in the group) attained higher cumulative wages. The three authors estimate that when these now young adults reach the age of 60 the federal government will have recouped at least 56 cents for each dollar spent on childhood health care.
The second paper, by economists Laura Wherry at the University of California-Los Angeles, Sarah Miller at the University of Michigan, Rober Kaestner at the University of Illinois, and Bruce Meyer at the University of Chicago, shows that providing public health insurance to low-income children results in fewer hospitalizations and emergency room visits in adolescence and adulthood. Their findings strongly suggest that substantial health care savings are in the cards for this group of Americans—a welcome boon as the U.S. economy struggles with reducing the cost of health care in our society.
The third paper, by economists Sarah Cohodes of Harvard University and Cornell University’s Samuel Kleiner, Michael Lovenheim, and Daniel Grossman, shows that better public health care among low-income children in the 1980s and 1990s resulted in higher graduation rates from high school and college for these kids, again indicating that the long-run economic benefits of public health insurance are substantial.
None of these studies examined the health of kids enrolled in public health programs due to Obamacare specifically—the program is too new for these kinds of long-term studies—but the further expansion of eligibility for low-income children through Medicaid and the Children’s Health Care Program is one of the things at stake in the Supreme Court’s oral arguments in King vs Burwell next week and the final decision sometime this summer.
What could happen should the Supreme Court decide in effect to shut down the federal health insurance exchange operating in 34 states without their own exchanges? Among the results could be more than 5 million enrollees in the joint state-federal Children’s Health Insurance Program without health insurance, estimates the Children’s Health Fund, a provider of mobile health care for homeless and low-income children. We already know the empirical long-term economic benefits of expanded health care for those least able to afford it—and can say with strong confidence that taking away health insurance for these five million now covered under Obamacare would harm our economy.
—Janet Currie is the Henry Putnam Professor of Economics and Public Affairs at Princeton University and directs the Program on Families and Children at the National Bureau of Economic Research. Her views expressed in this column are her own.
The steep path forward for unionization
The decades-long decline of unions in the United States is a long-studied phenomenon, but now several academics are wondering whether past research underestimated the role of the decline of unions in the rise of economic inequality. The new research also raises the ancillary question of how could unions rise again to prominence to help reduce inequality.
A variety of research shows that the decline in unionization was a significant factor in the rise in income inequality in high-income countries. A recent paper by sociologists Bruce Western of Harvard University and Jake Rosenfeld of the University of Washington is widely cited. Their research finds that about one-fifth to one-third of the increase in wage inequality can be explained by declining union membership.
Similarly, a recent essay by International Monetary Fund economists Florence Jaumotte and Carolina Osorio Buitron previews their new research that finds the decline in unionization also affects top-level inequality in the industrialized economies. According to Jaumotte and Buitron, “the decline in unionization explains about half of the 5 percentage point rise in the top 10 percent income share” in these nations.
But Adam Ozimek, an economist at Moody’s Analytics, makes a very important observation. How exactly will unions return to prominence? Ozimek cites a variety of research that shows employment growth at unionized firms is slower than employment at nonunionized firms. Specifically he cites a paper by Harvard University economist Richard Freeman that makes this point—for the unionization rate to increase, employment at unionized firms would have to increase faster than employment at non-unionized firms.
So what could make employment at unionized firms grow relatively faster compared to non-union firms? The results Freeman cites would have us believe that such an outcome is unlikely. A steady increase in the unionization rate seems unlikely.
Yet in the same paper, Freeman notes that increases in unionization rates in the past have come from large and sudden increases in union membership. So a sudden reform of labor law might make unionization much easier. Or a sharp increase in demand for unionization might happen. Or a combination of both—a more likely scenario—could happen.
In the mid-20th century, labor union were an integral part of the U.S. economy. More than 30 percent of private-sector workers were members of unions and some of the most successful industries of the time, namely the auto industry, were highly unionized. Early in the 21st century, the status of unions isn’t so strong. Less than 7 percent of private-sector workers are members of unions and once highly unionized sectors have seen their heydays.
But one advantage that unions do have moving forward is that the growing industries in the U.S. economy are seemingly less likely to move abroad in the same way heavily unionized manufacturing jobs did over the past several decades. In this regard, service-sector jobs may be more likely to stick around.
The take-away is this: Increased unionization in the United States would almost certainly reduce wage and income inequality. But the pathway to a higher rate is steep. A sudden jump seems the only way up. But what will cause or even allow such an increase? That remains to be seen.
Nighttime Must-Read: Paul Krugman: The Strange Urge to Raise Rates
…The obsession with raising interest rates among economists who used to seem sensible…. Up to a point, Feldstein has followed the now-usual arc…. We’re talking about conservatives with vast faith in the wisdom of markets, who somehow are completely sure that markets will make terrible decisions due to low interest rates, and require paternalistic monetary policy to keep them on the strait and narrow. What really strikes me about Marty’s latest… is the muttering that there must be some sinister hidden agenda…. that central banks are operating under… a desire to help finance budget deficits. It’s very, very strange, and distressing.
Things to Read on the Afternoon of March 1, 2015
Must- and Shall-Reads:
-
: The Deflation Bogeyman: “The world’s major central banks are currently obsessed with… raising their national inflation rates to… 2% per year…. But is this a real problem?… Fortunately, we have relatively little experience with deflation to test the downward-spiral theory…. [Perhaps] they are concerned about the loss of credibility implied by setting an inflation target of 2% and then failing to come close to it…. [Perhaps] are actually more concerned about real growth and employment, and are using low inflation rates as an excuse…. [Perhaps they] want to keep interest rates low in order to reduce the budget cost of large government debts. None of this might matter were it not for the fact that extremely low interest rates have fueled increased risk-taking by borrowers and yield-hungry lenders. The result has been a massive mispricing of financial assets. And that has created a growing risk of serious adverse effects on the real economy when monetary policy normalizes and asset prices correct.” -
: A Final Interview: “I have no doubt that the struggle for the revival of Russians will be tough. People see what this crazy politics led to, they see widespread corruption, they have firsthand experience with the inadequacy of the state. But they still believe in the leader because for the past several years, the leader was doing one thing very well: He was brainwashing the Russians. He implanted them with a virus of inferiority complex towards the West, the belief that the only thing we can do to amaze the world is use force, violence and aggression. [Putin] programmed my countrymen to hate strangers. He persuaded them that we need to rebuild the former Soviet order, and that the position of Russia in the world depends entirely on how much the world is afraid of us. He managed to do all these things with Goebbels-style propaganda…. The responsibility for spilling both Russian and Ukrainian blood… lies not only with Putin, but also with such gentlemen as Konstantin Ernst [director general of Channel One] or Dmitry Kiselyov [head of the new, Russian-government-owned news agency Rossiya Segodnya]. They operate in accordance with the simple principles of Joseph Goebbels: Play on the emotions; the bigger the lie, the better; lies should be repeated many times. This propaganda is directed to the simple men; there is no room for any questions, nuances. Unfortunately, it works…. We need to work as quickly as possible to show the Russians that there is an alternative, that Putin’s policy leads to degradation and a suicide of the state. There is less and less time to wake up…” -
: The Regrettable Man: “CNN: ‘Lonegan also said Friday that in conjunction with the Fed’s annual Jackson Hole symposium in Wyoming this year, a group of conservative economists are planning to hold a meeting of their own ‘directly across the street’ featuring former Federal Reserve Chair Alan Greenspan as the keynote speaker.’ I guess we wait for confirmation before adding this to the file of examples establishing Maestrodamus as the worst ex-Fed chairman in history. But consider the notion that this group regards AG as an authority figure. Never mind the bubble denial; almost five years have passed since Greenspan declared that we were on the verge of becoming Greece, Greece I tell you, and wrote one of the most awesomely terrible passages in the history of economic policy: ‘Despite the surge in federal debt to the public during the past 18 months–to $8.6 trillion from $5.5 trillion–inflation and long-term interest rates, the typical symptoms of fiscal excess, have remained remarkably subdued. This is regrettable, because it is fostering a sense of complacency that can have dire consequences.’ Yep: he was annoyed at the markets for failing to deliver the crisis he was expecting, and considered it ‘regrettable’ that the crisis had not arrived. Actually, though, this isn’t too different from the sentiment expressed by Paul Ryan and John Taylor, denouncing the Fed’s actions because they were preventing a fiscal crisis. Anyway, the saga of the inflation cult continues.” <–continuing to watch the persistence of the inflation cult…
-
: Modelling as a Method of Enquiry: “Despite the ubiquity of modelling in modern economics, it is not easy to say how this way of doing science works. Scientific models are not self-evident things, and it is not obvious how such research objects are made, nor how a scientist reasons with them, nor to what purpose. These difficulties of definition and understanding are exhibited in a most concrete fashion in an example that lays claim to being the first such research object in economics.” <–I am of the school who holds that if Malthus could have built economic models, he would have done so…
-
: Radical Rage at the Resilience of the Right: “Tariq Ali… if read as an examination of the frustrations of the radical left, The Extreme Centre is informative…. [For] it is the ideas of the right that have prevailed…. This book does a better job of describing Ali’s sadness at the failure of the left than expanding on why. The closest thing to a consistent explanation is human corruptibility before the temptations of money. But the book never explains why perennially incompetent capitalists always have enough of the folding stuff to keep the system going…. The other consistent theme is admiration for the Bolivarian heroes of South America… each of [whom] needed a tide of oil and gas to stay afloat…” <–Since 1970, one of the major themes has been the inability of left-of-center politics to produce a strong-enough book to support a further advance of social democracy. Not that right-of-center politics has delivered better outcomes, mind you…
Should Be Aware of:
- : “How, why and when did Putin decide to build a Kleptocratic and Authoritarian Regime in Russia and what is its Future?” <–political coalition-building and seisin in a failing state…
- **: “In the hands of most… Spock would have been a one-note joke character: the guy who spouts off formulas and equations in a monotone…. But Nimoy imbued Spock with a life and complexity that were impossible to deny…. From his inner torment to his quiet amusement at the humans around him to his occasional flashes of anger, Spock was a constantly surprising mystery…” <–Spock: not just for adolescent male nerds hoping that intelligence and quiet humor could help them be loved and make them insiders even though they were outsiders…
-
: Star Trek is great, and Leonard Nimoy’s Spock was the greatest thing about it: “[Spock was] raised from a young age to valorize logic over emotion, but serving on a ship overwhelmingly populated by all-too-fallible humans. A stranger in a land that was strange to him, but familiar to everyone else. An outsider struggling to fit it, but also not entirely sure that he wanted to fit in. A figure of fun, but often in many ways superior to the more conventional characters surrounding him. He had difficulty relating to people, but always came through when needed. And his crewmates always came through for him. In short, a perfect stand-in for a nerdy audience–more socially awkward than we would ever be and yet exactly as indispensable as we hoped we would prove to be…” <–a good start on thinking about perhaps the greatest character of the TV era…
-
: After Boris Nemtsov’s Assassination, ‘There Are No Longer Any Limits’: “Already, the Kremlin is muddying the waters. Immediately after the shooting, Putin’s press secretary called the killing ‘a provocation.’ This morning, he clarified that there was no political motive behind the murder. LifeNews, a publication with close ties to Russia’s security agencies, has suggested three possible theories that are under investigation: The killing might have been revenge for forcing Duritskaya to get an abortion; it might have had something to do with money Nemtsov was receiving from allies abroad; or it might have been an attempt to smear the Kremlin. By afternoon, the government’s Investigative Committee had issued a statement saying it believed Nemtsov may have been killed by someone from his own opposition movement who wanted to create a martyr. There was even a suggestion that the assassination was connected to the Charlie Hebdo killings…” <–Moscow’s downward spiral continues…
Afternoon Must-Read: Giles Wilkes: Radical Rage at the Resilience of the Right
…[For] it is the ideas of the right that have prevailed…. This book does a better job of describing Ali’s sadness at the failure of the left than expanding on why. The closest thing to a consistent explanation is human corruptibility before the temptations of money. But the book never explains why perennially incompetent capitalists always have enough of the folding stuff to keep the system going…. The other consistent theme is admiration for the Bolivarian heroes of South America… each of [whom] needed a tide of oil and gas to stay afloat…